Unassociated Document

SCHEDULE 14A INFORMATION
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
¨
 

Check the appropriate box:
 
x
Preliminary Proxy Statement
¨
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
¨
Definitive Proxy Statement
¨
Definitive Additional Materials
¨
Soliciting Material Pursuant to § 240.14a-12
 
Web.com Group, Inc.

(Name of Registrant as Specified In Its Charter)
 

(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
 
Payment of Filing Fee (Check the appropriate box)
 
¨
No fee required.
 
x
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
 
1.
Title of each class of securities to which transaction applies:
 
Membership interest in GA-Net Sol Parent LLC, a privately held limited liability company


2.
Aggregate number of securities to which transaction applies:
 
One (100%)


3.
Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined):
 
The market value of the membership interest in GA-Net Sol Parent LLC to be received by Web.com Group, Inc., solely for purposes of calculating the filing fee, was determined by calculating the book value of the membership interest in GA-Net Sol Parent LLC at June 30, 2011. In accordance with Section 14(g) of the Securities Exchange Act of 1934, as amended, the filing fee was then determined by multiplying 0.00011610 by such value.


4.
Proposed maximum aggregate value of transaction:
 
$355,689,000.00


5.
Total fee paid:
 
$41,295.49

 
¨
Fee paid previously with preliminary materials.
 
¨
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
 
1.
Amount Previously Paid:
 

 
2.
Form, Schedule or Registration Statement No.:
 

 
3.
Filing Party:
 

 
4.
Date Filed:
 

 
 
 

 

PRELIMINARY COPY
WEB.COM GROUP, INC.
12808 Gran Bay Parkway West
Jacksonville, Florida 32258
 
Dear Web.com Stockholder:
 
Web.com has entered into an agreement to acquire privately-held Network Solutions, the original domain name registrar, which now provides domain names and web services to two million small and medium-sized businesses. Headquartered in Virginia, with offices in Pennsylvania, Illinois and Argentina, Network Solutions is a complementary business to Web.com’s full suite of Internet and online marketing services, and the combination of our two companies is expected to result in significant revenue and cost synergies as we gain new scale and prominence in the marketplace.
 
We believe acquiring Network Solutions provides us with a distinctive opportunity to achieve one of Web.com’s key strategic objectives to be a market leader in providing end-to-end web solutions for small and medium-sized businesses. Together, we will have nearly three million customers and more than nine million domains under management, which we believe will allow us to compete more effectively as mass adoption of the Internet continues for small business, an opportunity estimated at $19 billion. We expect to be able to use our increased scale for heightened visibility as we compete with other retail providers of domain names as well as the myriad of smaller competitors that provide web services to small businesses. Very importantly, we believe the acquisition of Network Solutions will mean we can invest significantly greater resources in marketing our products and services, particularly to small businesses, and, for the first time ever, embark on a major branding initiative for Web.com. We anticipate that in the very near future our combined organization will be far more visible than either of our individual companies could be on their own.
 
The proposed acquisition requires that our stockholders approve the issuance of up to 18 million shares of Web.com common stock to the current owner of Network Solutions, all as more fully described in the attached proxy statement, which we refer to as the “proxy statement.” Pending regulatory and stockholder approvals, we anticipate the transaction will close in the fourth quarter of 2011.
 
The attached proxy statement contains a description of this acquisition, as well as information regarding Network Solutions and Web.com. Please give this material your careful consideration.
 
The board of directors of Web.com unanimously recommends that stockholders vote in favor of the issuance of Web.com common stock to the current owner of Network Solutions. We invite you to attend our meeting, details of which are included in the enclosed Notice of Special Meeting and Proxy Statement. Regardless of the number of shares you own or whether you plan to attend the meeting, it is important that your shares be represented and voted. Voting instructions are included.
 
On behalf of your management team and board of directors, I thank you for your support and urge you to vote “FOR” approval of the issuance of Web.com common stock in the acquisition.
 
The date, time and place of the special meeting of stockholders are as follows:
 
[·], 2011
[10:30 a.m.] local time
Web.com’s headquarters
12808 Gran Bay Parkway West
Jacksonville, Florida 32258
 
Your vote is very important. Whether or not you plan to attend the special meeting of stockholders, please take the time to vote by completing and mailing to us the enclosed proxy card or grant your proxy by telephone or through the Internet. You may also cast your vote in person at the special meeting to be held on [·], 2011. If your shares are held in “street name,” you must instruct your broker, bank or other nominee to vote.
 
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THIS TRANSACTION. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
 
This proxy statement is dated [·], 2011 and is first being mailed to stockholders on or about [·], 2011.
 
Sincerely,

David L. Brown
Chairman, President and CEO
 
 
 

 

ADDITIONAL INFORMATION

This proxy statement incorporates important business and financial information about Web.com from documents that Web.com has filed with the Securities and Exchange Commission, or the SEC, that are not included in or delivered with this proxy statement. This information is available to you without charge upon your written or oral request. You can obtain the documents incorporated by reference in this proxy statement through the SEC website at http://www.sec.gov or by submitting an oral or written request to:
 
Web.com Group, Inc.
12808 Gran Bay Parkway West
Jacksonville, Florida 32258
Attention: Investor Relations
Telephone: (904) 650-6600
 
PLEASE REQUEST DOCUMENTS FROM WEB.COM NO LATER THAN [·], 2011 TO RECEIVE THEM BEFORE THE MEETING. UPON REQUEST, WEB.COM WILL MAIL ANY DOCUMENTS TO YOU BY FIRST CLASS MAIL PROMPTLY.
 
In addition, you may obtain copies of this information from Web.com’s website, http://www.web.com, or by mail, without charge, upon written request to: Secretary, Web.com Group, Inc., 12808 Gran Bay Parkway West, Jacksonville, Florida 32258. Information contained on Web.com’s website does not constitute part of this proxy statement. See the section entitled “Where You Can Find Additional Information” beginning on page [·] of this proxy statement for more information about the documents incorporated by reference into this proxy statement.
 
You should rely only on the information contained in, or incorporated by reference into, this proxy statement in deciding how to vote on each of the proposals. No one has been authorized to provide you with information that is different from that contained in, or incorporated by reference into, this proxy statement. This proxy statement is dated [·], 2011. You should not assume that the information contained in, or incorporated by reference into, this proxy statement is accurate as of any date other than that date.
 
This proxy statement does not constitute the solicitation of a proxy in any jurisdiction to or from any person to whom it is unlawful to make any such solicitation in such jurisdiction. Information contained in this proxy statement regarding Network Solutions has been provided by Network Solutions and information contained in this proxy statement regarding Web.com has been provided by us.
 
VOTING ELECTRONICALLY, BY TELEPHONE OR BY MAIL
 
Stockholders of record at the close of business on [·], 2011, the record date for the special meeting of stockholders, may submit their proxies:
 
 • through the Internet by visiting a website established for that purpose at www.proxyvote.com and following the instructions;
 
 • by telephone by calling the toll-free number 1-800-690-6903 in the United States, Puerto Rico or Canada on a touch-tone phone and following the recorded instructions; or

• by returning the enclosed proxy card in the provided return envelope (which is postage paid if mailed in the United States).

To vote via the telephone or Internet, please have in front of you either your proxy card, or if you have consented to receive your materials electronically, your email notification advising that materials are available online. A phone number and an Internet website address are contained on each of the documents. Upon entering either the phone number or the Internet website address, you will be instructed on how to proceed.
 
If a stockholder holds shares registered in the name of a broker, bank or other nominee, that broker, bank or other nominee will enclose or provide a voting instruction card for use in directing that broker, bank or other nominee how to vote those shares.

 
 

 

WEB.COM GROUP, INC.
12808 Gran Bay Parkway West
Jacksonville, Florida 32258

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

To Be Held On [·], 2011

Dear Stockholder:

On August 3, 2011, Web.com Group, Inc., a Delaware corporation (the “Company”), entered into a Purchase Agreement (the “Acquisition Agreement”) with GA-Net Sol Parent LLC, a Delaware limited liability company (“Network Solutions”), and Net Sol Holdings LLC, a Delaware limited liability company (the “Seller”), pursuant to which the Company will acquire Network Solutions (the “Acquisition”) in exchange for (i) $405 million in cash and (ii) the issuance of up to 18 million shares of the Company’s common stock, which number may be reduced under certain circumstances at the election of the Company by the payment of additional cash through sources other than debt. Concurrent with the closing of the Acquisition, the Company will be required to fund the payment by Network Solutions of certain of its liabilities. The consummation of the Acquisition is subject to customary closing conditions, including the approval of the Company’s stockholders of the issuance of the Company’s common stock to the Seller.

You are cordially invited to attend a Special Meeting of Stockholders of the Company (the “Special Meeting”), to be held on [·], 2011 at [10:30 a.m.] local time, at the Company’s offices located at 12808 Gran Bay Parkway West, Jacksonville, Florida 32258, to vote on the following proposals:

 
1.
A proposal to approve the issuance of up to 18 million shares of the Company’s common stock to the Seller in connection with the Acquisition;

 
2.
If necessary, an adjournment of the Special Meeting, including for the purpose of soliciting additional proxies if a quorum is not present or if there are not sufficient votes in favor of the proposal referred to in clause (1); and

 
3.
Transaction of such other business as may properly come before the Special Meeting or any adjournment or postponement thereof.

The Company’s board of directors recommends that the stockholders vote “FOR” the proposal to approve the issuance of up to 18 million shares of the Company’s common stock to the Seller in connection with the Acquisition and, if necessary, “FOR” the proposal for an adjournment of the Special Meeting. Approval of the issuance of the Company’s common stock in connection with the Acquisition is necessary to complete the Acquisition.

These items of business are more fully described in the proxy statement accompanying this Notice.

The record date for the Special Meeting is [·], 2011. Only stockholders of record at the close of business on that date may vote at the meeting or any adjournment thereof.

Important notice regarding the availability of proxy materials for the Special Meeting of Stockholders to be held on [·], 2011 at [10:30 a.m.] local time at the Company’s offices located at 12808 Gran Bay Parkway West, Jacksonville, Florida 32258: The proxy statement is available at www.proxyvote.com

By Order of the Board of Directors
 
Matthew P. McClure
Secretary

Jacksonville, Florida
[·], 2011

 
 

 

You are cordially invited to attend the meeting in person. Whether or not you expect to attend the meeting, please complete, date, sign and return the enclosed proxy card, or vote over the telephone or the Internet as instructed in these materials, as promptly as possible to ensure your representation at the meeting. A return envelope (which is postage prepaid if mailed in the United States) is enclosed for your convenience. Even if you have voted by proxy, you may still vote in person if you attend the meeting. Please note, however, that if your shares are held of record by a broker, bank or other nominee and you wish to vote at the meeting, you must obtain a proxy issued in your name from that record holder.

 
 

 

TABLE OF CONTENTS
 
QUESTIONS AND ANSWERS ABOUT THE ACQUISITION AND THE SPECIAL MEETING
1
SUMMARY
5
SUMMARY CONSOLIDATED FINANCIAL DATA OF NETWORK SOLUTIONS
10
SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
12
RISK FACTORS
13
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
18
THE SPECIAL MEETING
19
THE PROPOSALS
24
THE ACQUISITION
25
THE ACQUISITION AGREEMENT
45
THE DEBT FINANCING
60
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF THE COMPANY
63
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF NETWORK SOLUTIONS
64
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
66
COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA
73
COMPARATIVE MARKET PRICE DATA AND DIVIDEND INFORMATION
75
INFORMATION ABOUT THE COMPANIES
76
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF NETWORK SOLUTIONS
77
MANAGEMENT FOLLOWING THE ACQUISITION
91
INTERESTS OF CERTAIN PERSONS IN THE ACQUISITION
92
SECURITY OWNERSHIP BY CERTAIN BENEFICIAL OWNERS
92
FUTURE STOCKHOLDER PROPOSALS
92
WHERE YOU CAN FIND ADDITIONAL INFORMATION
93
INDEX TO NETWORK SOLUTIONS’ FINANCIAL STATEMENTS
F-1
NETWORK SOLUTIONS' FINANCIAL STATEMENTS
F-2

 
 

 

QUESTIONS AND ANSWERS ABOUT THE ACQUISITION AND THE SPECIAL MEETING
 
The following are some questions that you, as a stockholder of the Company, may have regarding the Acquisition and the Special Meeting, together with brief answers to those questions. We urge you to read carefully the remainder of this proxy statement, including the annexes and other documents referred to in this proxy statement, because the information in this section may not provide all of the information that might be important to you with respect to the Acquisition or the Special Meeting.
 
Q:
What is the Acquisition?
 
A:
The Company has entered into a Purchase Agreement (the “Acquisition Agreement”) with GA-Net Sol Parent LLC, a Delaware limited liability company (“Network Solutions”), and Net Sol Holdings LLC, a Delaware limited liability company (the “Seller”), pursuant to which the Company will acquire Network Solutions (the “Acquisition”) in exchange for (i) $405 million in cash and (ii) the issuance of up to 18 million shares of the Company’s common stock, which number may be reduced under certain circumstances at the election of the Company by the payment of additional cash through sources other than debt. Concurrent with the closing of the Acquisition, the Company will be required to fund the payment by Network Solutions of certain of its liabilities. Following the consummation of the Acquisition, Network Solutions will become a wholly-owned subsidiary of the Company, and the Seller will become a stockholder of the Company. For a more complete discussion of the Acquisition Agreement, see the section entitled “The Acquisition Agreement” beginning on page [·]. A full copy of the Acquisition Agreement is attached as Annex A to this proxy statement.
 
Q:
Why is the Company proposing to acquire Network Solutions?
 
A:
The Company believes that acquiring Network Solutions will (i) provide the Company with the foundation to capitalize on the estimated $19 billion small- to medium-sized business market opportunity, (ii) help the Company become an online web services market leader with significant scale, (iii) provide the Company with significant cross-selling opportunities for the end-to-end solution set tailored for small- to medium-sized businesses, (iv) create opportunities for operating cost synergies through the integration of the two companies, and (v) clear the path to accelerating growth and improving profitability for the Company.
 
Q:
Why am I receiving these materials?
 
A:
The Company is sending these materials to its stockholders to help them decide how to vote their shares of common stock with respect to the issuance of the Company’s common stock to the Seller in connection with the proposed Acquisition. This document contains important information about the Acquisition and the Special Meeting and you should read it carefully.
 
Q:
What stockholder approvals are required to complete the Acquisition?
 
A:
To complete the Acquisition, the Company’s stockholders must approve the issuance of up to 18 million shares of the Company’s common stock in connection with the Acquisition (the “Share Issuance Proposal”), which approval requires the affirmative vote of the holders of a majority of the shares of the Company’s common stock present and entitled to vote either in person or by proxy at the Special Meeting (assuming a quorum is present). In addition to the receipt of the foregoing stockholder approval, each of the other conditions to the completion of the Acquisition contained in the Acquisition Agreement must be satisfied or waived. For a more complete discussion of the conditions to the completion of the Acquisition under the Acquisition Agreement, see the section entitled “The Acquisition Agreement—Conditions to Completion of the Acquisition” beginning on page [·].
 
Q:
What stockholder approvals are required for the adjournment of the Special Meeting, if necessary, to solicit additional proxies if a quorum is not present or if there are not sufficient votes in favor of the Share Issuance Proposal?
 
A:
The holders of a majority of the shares of the Company’s common stock present and entitled to vote either in person or by proxy at the Special Meeting must vote in favor of any adjournment of the Special Meeting.
 
 
1

 

Q:
How will the Company’s stockholders be affected by the Acquisition and the issuance of shares of common stock to the Seller in connection with the Acquisition?
 
A:
After the completion of the Acquisition, each stockholder will have the same number of shares of the Company’s common stock that such stockholder held immediately prior to the completion of the Acquisition. However, upon issuance of the shares of the Company’s common stock to the Seller in connection with the Acquisition, each share of the Company’s common stock outstanding immediately prior to the completion of the Acquisition will represent a smaller percentage of the aggregate number of shares of the Company’s common stock outstanding after the completion of the Acquisition.
 
Q:
When does the Company expect to complete the Acquisition?
 
A:
The Company currently expects to complete the Acquisition in the fourth quarter of 2011. Completion of the Acquisition will only be possible, however, after all conditions to the completion of the Acquisition contained in the Acquisition Agreement are satisfied or waived, including stockholder approval of the Share Issuance Proposal, and all required regulatory approvals. It is possible, therefore, that factors outside of the Company’s control could require it to complete the Acquisition at a later time or not complete it at all.
 
Q:
How does the Company’s board of directors recommend that the Company’s stockholders vote with respect to the Share Issuance Proposal and the adjournment of the Special Meeting?
 
A:
The Company’s board of directors recommends that the Company’s stockholders vote “FOR” the Company’s Share Issuance Proposal, and, if necessary, “FOR” the adjournment of the Special Meeting, including for the purpose of soliciting additional proxies if a quorum is not present or if there are not sufficient votes in favor of the Share Issuance Proposal.
 
Q:
What risks should I consider in deciding whether to vote in favor of the Share Issuance Proposal?
 
A:
You should carefully review the section of this proxy statement entitled “Risk Factors” beginning on page [·], which presents risks and uncertainties related to the Acquisition, the combined company, and the business and operations of the Company, as well as the risk factors set forth in our filings with the SEC, which are incorporated by reference into this proxy statement. See the section entitled “Where You Can Find Additional Information” beginning on page [·].
 
Q:
Do I have appraisal rights in connection with the Acquisition?
 
A:
No. Under Delaware law, the Company’s stockholders will not be entitled to exercise any appraisal rights in connection with the Acquisition.
 
Q:
When and where will the Special Meeting take place?
 
A:
The Special Meeting will be held on [·], 2011 at [10:30 a.m.], local time, at the Company’s offices located at 12808 Gran Bay Parkway West, Jacksonville, Florida 32258.
 
Q:
Who can attend and vote at the Special Meeting?
 
A:
All the Company’s stockholders of record as of the close of business on [·], 2011, the record date for the Special Meeting, are entitled to receive notice of, attend, and vote at the Special Meeting.
 
Q:
What do I need to do now and how do I vote?
 
A:
The Company urges you to read this proxy statement carefully, including its annexes, and to consider how the Acquisition may affect you and the Company as a whole.
 
 
2

 

To vote, you may provide your proxy instructions in three different ways. First, you can mail your signed proxy card in the enclosed return envelope. Alternatively, you can provide your proxy instructions by calling the toll-free call center set up for this purpose indicated on the enclosed proxy card and following the instructions provided. Please have your proxy card available when you call. Finally, you can provide your proxy instructions over the Internet by accessing the website indicated on the enclosed proxy card and following the instructions provided. Please have your proxy card available when you access the web page. Please provide your proxy instructions only once and as soon as possible so that your shares can be voted at the Special Meeting.
 
Q:
What happens if I do not return a proxy card or otherwise provide proxy instructions or if I elect to abstain from voting?
 
A:
If you do not submit a proxy card, provide proxy instructions by telephone or over the Internet or vote at the Special Meeting, your shares will not be counted as present for the purpose of determining the presence of a quorum, which is required to transact business at the Special Meeting, and your actions will have no effect on the outcome of the Company’s Proposal No. 1 (the Share Issuance Proposal), Proposal No. 2 (adjournment) or Proposal No. 3 (other business).
 
If you sign, date and mail your proxy card without indicating how you wish to vote, your proxy will be counted as present for the purpose of determining the presence of a quorum for the Special Meeting and all of your shares will be voted “FOR” the Company’s Proposals Nos. 1 and 2. However, if you submit a proxy card or provide proxy instructions by telephone or over the Internet and affirmatively elect to abstain from voting, your proxy will be counted as present for the purpose of determining the presence of a quorum for the Special Meeting, but will not be voted at the Special Meeting. As a result, your abstention will have the same effect as voting “AGAINST” the Company’s Proposals Nos. 1 and 2.
 
Q:
If my shares are held in “street name” by a broker or other nominee, will my broker or nominee vote my shares for me?
 
A:
If your shares are held in “street name” in a stock brokerage account or by another nominee, you must provide the record holder of your shares with instructions on how to vote your shares. Please follow the voting instructions provided by your broker or other nominee. Please note that you may not vote shares held in street name by returning a proxy card directly to the Company or by voting in person at the Special Meeting unless you provide a “legal proxy,” which you must obtain from your broker or other nominee.
 
 
If you do not give instructions to your broker, your broker can vote your shares with respect to “discretionary” items, but not with respect to “non-discretionary” items. Non-discretionary matters include director elections and other matters like those involving a contest or a matter that may substantially affect the rights or privileges of shareholders, such as mergers or shareholder proposals. On non-discretionary items for which you do not give your broker instructions, the shares will be treated as broker non-votes. Discretionary items are proposals considered routine under the rules of the New York Stock Exchange on which your broker may vote shares held in street name in the absence of your voting instructions.
 
The Share Issuance Proposal is a non-discretionary matter. Therefore, if you do not instruct your broker or other nominee on how to vote your shares then:
 
 
your broker or other nominee may not vote your shares on the Share Issuance Proposal, and the resulting broker non-vote will have no effect on this proposal; and
 
 
your broker or other nominee may vote your shares on the proposal to adjourn the Special Meeting.
 
Q:
May I vote in person?
 
A:
If your shares of the Company’s common stock are registered directly in your name with the Company’s transfer agent, you are considered, with respect to those shares, the “stockholder of record,” and the proxy materials and proxy card are being sent directly to you. If you are the stockholder of record, you may attend the Special Meeting and vote your shares in person, rather than signing and returning your proxy card or otherwise providing proxy instructions by telephone or over the Internet.
 
 
3

 

If your shares of the Company’s common stock are held in a brokerage account or by another nominee, you are considered the beneficial owner of shares held in “street name,” and these proxy materials are being forwarded to you together with a voting instruction card. As the beneficial owner, you are also invited to attend the Special Meeting. However, since a beneficial owner is not the stockholder of record, you may not vote these shares in person at the Special Meeting unless you obtain a “legal proxy” from the broker or other nominee that holds your shares giving you the right to vote the shares in person at the Special Meeting.
 
Q:
May I revoke or change my vote after I have provided proxy instructions?
 
A:
Yes. You may revoke or change your vote at any time before your proxy is voted at the Special Meeting. You can do this in one of three ways. First, you can send a written notice to the Company stating that you would like to revoke your proxy. Second, you can submit new proxy instructions either on a new proxy card, by telephone or over the Internet, as and if applicable. Third, you can attend the Special Meeting and vote in person. Your attendance alone at the Special Meeting will not revoke your proxy. If you have instructed a broker or other nominee to vote your shares, you must follow directions received from your broker or other nominee to change those instructions.
 
Q:
What constitutes a quorum?
 
A:
Stockholders who hold a majority of the shares of the Company’s common stock outstanding as of the close of business on the record date for the Special Meeting must be present either in person or by proxy to constitute a quorum to conduct business at the Special Meeting.
 
Q:
Who is paying for this proxy solicitation?
 
A:
The Company will pay for the cost and expense of preparing, filing, assembling, printing and mailing this proxy statement, and any amendments thereto, the proxy card and any additional information furnished to the Company’s stockholders. The Company may also reimburse brokerage houses and other custodians, nominees and fiduciaries for their costs of soliciting and obtaining proxies from beneficial owners, including the costs of reimbursing brokerage houses and other custodians, nominees and fiduciaries for their costs of forwarding this proxy statement and other solicitation materials to beneficial owners. In addition, proxies may be solicited without extra compensation by directors, officers and employees of the Company by mail, telephone, fax, or other methods of communication. We have retained [·] to assist in the solicitation of proxies for a fee estimated to be approximately $[·] plus reasonable out-of-pocket expenses.
 
Q:
Whom should I contact if I have any questions about the Acquisition or the Special Meeting?
 
A:
If you have any questions about the Acquisition or the Special Meeting, or if you need assistance in submitting your proxy or voting your shares or need additional copies of this proxy statement or the enclosed proxy card, you should contact Matthew P. McClure, Secretary of the Company, at (904) 680-6600.
 
Q:
What happens if I sell my shares after the record date but before the Special Meeting?
 
A:
If you transfer any of your shares of the Company’s common stock after the record date but before the date of the Special Meeting, you will retain your right to vote at the Special Meeting.
 
Q:
What do I do if I receive more than one proxy statement or set of voting instructions?
 
A:
If you hold shares directly as a record holder and also in “street name” or otherwise through a nominee, you may receive more than one proxy statement and/or set of voting instructions relating to the Special Meeting. These should each be voted and/or returned separately to ensure that all of your shares are voted.
 
 
4

 
 

 
SUMMARY
 
This summary highlights selected information from this proxy statement. It may not contain all of the information that is important to you with respect to the Share Issuance Proposal or any other matter described in this proxy statement. We urge you to read carefully this proxy statement, as well as the documents attached to and referenced in this proxy statement, to fully understand the Acquisition. In particular, you should read the Acquisition Agreement described elsewhere in this proxy statement and attached as Annex A. In addition, we encourage you to read the information incorporated by reference into this proxy statement, which includes important business and financial information about the Company that has been filed with the SEC. You may obtain the information incorporated by reference into this proxy statement without charge by following the instructions in the section entitled “Where You Can Find Additional Information” beginning on page [·].
 
When this proxy statement refers to the “combined company,” it means the Company and its subsidiaries together with Network Solutions and its subsidiaries, collectively.
 
The Companies
 
Web.com Group, Inc.
 
12808 Gran Bay Parkway West
Jacksonville, Florida 32258
 
The Company is a leading provider of online marketing for small- to medium-sized businesses (“SMBs”) and a provider of global domain name registration and complementary website design and management services. The Company meets the needs of SMBs anywhere along their lifecycle by offering a full range of online services and support, including website design, domain name registration, lead generation, logo design, search engine optimization, search engine marketing and local sales leads, general contractor leads, franchise and homeowner association websites, shopping cart software, eCommerce website design and call center services.
 
The Company was incorporated under the General Corporation Law of the State of Delaware on March 2, 1999, as Website Pros., Inc. It offered common stock to the public for the first time on November 1, 2005, as Website Pros (NASDAQ: WSPI) and began trading as Web.com Group, Inc. (NASDAQ: WWWW) following the acquisition of the legacy Web.com business in September 2007.
 
GA-Net Sol Parent, LLC
 
1386 Sunrise Valley Drive, Suite 300
Herndon, Virginia 20171
 
Network Solutions is the parent of Network Solutions, LLC, which was founded in 1979. Network Solutions is a leader of web-based services that enable SMBs, to establish, design, maintain, promote and optimize their online presence. In addition to domain name registration, Network Solutions also offers a broad range of services, such as website design and hosting, eCommerce solutions, online marketing, online security products such as SSL certificates, search engine marketing and optimization, and other related solutions designed and delivered specifically for SMBs.
 
Network Solutions targets SMBs that want to establish or enhance an online presence for their business but lack the time, technical knowledge or resources to develop an online presence on their own. Network Solutions utilizes a high volume, multi-channel customer acquisition strategy that includes call centers, online and direct marketing, and distribution partners. As of July 31, 2011, Network Solutions has over 2 million customers in 237 countries and territories, and manages more than 7 million domains, 3 million email boxes and more than 400,000 websites. In addition, as of July 31, 2011, Network Solutions has approximately 750 full time employees located in Herndon, Virginia, Hazleton, Pennsylvania, Belleville, Illinois and Buenos Aires, Argentina.

 
5

 


 
The Acquisition (See page [·])
 
The board of directors of the Company, the board of directors of the Seller, and the sole equityholder of Network Solutions have approved the Acquisition and the Acquisition Agreement, and the Company, the Seller, and Network Solutions have entered into the Acquisition Agreement, which provides that, subject to the terms and conditions of the Acquisition Agreement and, upon completion of the Acquisition, Network Solutions will become a wholly-owned subsidiary of the Company.
 
Consideration to be Paid at the Closing for the Acquisition (See page [·])
 
The purchase price to be paid by the Company for the Network Solutions membership interests being purchased consists of (i) $405 million in cash and (ii) the issuance of up to 18 million shares of the Company’s common stock, which number may be reduced under certain circumstances at the election of the Company by the payment of additional cash.

Ownership of the Company After the Completion of the Acquisition (See page [·])
 
Based on the number of shares of the Company’s common stock outstanding as of [·], 2011, the most recent practicable date before the printing of this proxy statement, if the Acquisition had been completed on such date and the Company issued to the Seller 18 million shares of the Company’s common stock (the maximum number of shares that the Seller may receive pursuant to the Acquisition Agreement), the Seller would have been entitled to receive shares of the Company’s common stock representing approximately [·]% of all shares of the Company’s common stock outstanding as of immediately following the completion of the Acquisition. The Company’s stockholders would continue to own their existing shares, and such shares would have represented approximately [·]% of all shares of the Company’s common stock outstanding as of immediately following the completion of the Acquisition (a change from [·]% without the Acquisition, as of [·], 2011).
 
What the Company’s Stockholders Will Receive in the Acquisition (See page [·])
 
The Company’s stockholders will not receive any additional shares of the Company’s common stock as a result of the Acquisition, and the rights associated with their shares of the Company’s common stock will remain unchanged, except insofar as the relative voting power associated with such shares will be diluted as a result of the issuance of additional shares of the Company’s common stock to the Seller in connection with the Acquisition.
 
Board of Directors of the Company After Completion of the Acquisition (See page [·])
 
Upon completion of the Acquisition, the size of the Company’s board of directors will be increased from six to seven directors, and pursuant to the terms of the Acquisition Agreement, the Seller may designate one member of the board of directors. Anton Levy, a member of the board of directors of the Seller and a Managing Director of global growth equity firm General Atlantic LLC, an affiliate of the principal stakeholder in the Seller (together with its affiliates, “General Atlantic”), has been designated by the Seller to join the Company’s board of directors. Subject to the Company’s compliance with applicable law, listing requirements, and the board of directors’ fiduciary duties, Mr. Levy will be appointed to hold office until the earliest of appointment of his successor, resignation or proper removal and will join the class of directors whose term will expire at the 2014 annual meeting of stockholders.
 
Recommendations of the Company’s Board of Directors and its Reasons for the Acquisition (See page [·])
 
The Company’s board of directors has approved the Acquisition Agreement and the Acquisition. The Company’s board of directors has determined that the Acquisition, pursuant to the terms of the Acquisition Agreement, is in the Company’s and the Company’s stockholders’ best interests, and therefore recommends that the Company’s stockholders vote “FOR” the Share Issuance Proposal. In reaching these decisions, the Company’s board of directors considered a number of factors.
 
 
6

 


 
Opinion of the Company’s Financial Advisor (See page [·])
 
In connection with the Acquisition, the Company’s board of directors received an opinion, dated August 3, 2011, of the Company’s financial advisor, Wells Fargo Securities, LLC (“Wells Fargo Securities”), as to the fairness, from a financial point of view and as of the date of such opinion, to the Company of the purchase price to be paid by the Company in the Acquisition. The full text of the written opinion is attached as Annex B to this proxy statement and is incorporated herein by reference. The written opinion sets forth, among other things, the assumptions made, procedures followed, factors considered and limitations on the review undertaken by Wells Fargo Securities in rendering its opinion. The opinion was addressed to the Company’s board of directors (in its capacity as such) for its information and use in connection with its evaluation of the purchase price and related only to the fairness, from a financial point of view, to the Company of the purchase price to be paid by the Company in the Acquisition. Wells Fargo Securities’ opinion did not address the merits of the underlying decision by the Company to enter into the Acquisition Agreement or the relative merits of the Acquisition compared with other business strategies or transactions available or that have been or might be considered by the Company’s management or board of directors. The opinion does not constitute a recommendation to the Company’s board of directors or any other persons in respect of the Acquisition, including as to how any stockholder of the Company should vote or act in connection with the Acquisition or any other matters.
 
Financing of the Acquisition (See page [·])
 
The Company estimates that the total amount of funds necessary to complete the Acquisition, fund the payment of certain Network Solutions’ liabilities, and refinance certain debt of the Company will be approximately $783 million. Funding of the debt financing is subject to the satisfaction of the conditions set forth in the commitment letters under which the financing will be provided. In support of the debt financing, the Company has received a debt commitment letter from JPMorgan Chase Bank, N.A., J.P. Morgan Securities LLC, Deutsche Bank Securities Inc., Deutsche Bank Trust Company Americas, Goldman Sachs Lending Partners LLC, SunTrust Bank and SunTrust Robinson Humphrey Inc. to provide up to $800 million of senior secured credit facilities. The Company has agreed to use its reasonable best efforts to consummate the debt financing at or prior to the closing of the Acquisition. The consummation of the Acquisition is not subject to any financing conditions.
 
Anticipated Accounting Treatment of the Acquisition (See page [·])
 
The Acquisition is expected to be accounted for using the acquisition method as required in Accounting Standards Codification 805, Business Combinations.
 
No Appraisal Rights (See page [·])
 
The Company’s stockholders will not be entitled to exercise any appraisal rights in connection with the Acquisition.
 
Regulatory Approvals (See page [·])
 
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder (the “HSR Act”), the Acquisition may not be completed until the required information and materials have been furnished to the Antitrust Division of the U.S. Department of Justice, or the Antitrust Division, and the U.S. Federal Trade Commission, or the FTC, and until certain waiting period requirements have expired or been earlier terminated.
 
Conditions to Completion of the Acquisition (See page [·])
 
The obligations of the Company, the Seller, and Network Solutions to complete the Acquisition are each subject to the satisfaction of a number of conditions.

 
7

 


 
No Solicitation (See page [·])
 
In the Acquisition Agreement, each of the Company, the Seller, and Network Solutions has agreed that it will not directly or indirectly:
 
 
solicit, initiate, seek, entertain, encourage, facilitate, support or induce the making, submission or announcement of any inquiry, expression of interest, proposal or offer that constitutes, or would reasonably be expected to lead to, an alternative acquisition proposal;
 
 
enter into, participate in, maintain or continue any communications (except to provide written notice as of the existence of such restrictions) or negotiations regarding, or deliver or make available to any person any nonpublic information with respect to, any inquiry, expression of interest, proposal or offer that is, or would be reasonably expected to lead to, an alternative acquisition proposal;
 
 
agree to, accept, approve, endorse or recommend any alternative acquisition proposal (or publicly propose or announce any intention to do the same); or
 
 
enter into any letter of intent or any other contract, agreement, binding commitment or other written arrangement contemplating or otherwise relating to any alternative acquisition proposal.
 
The Acquisition Agreement does not, however, prohibit the Company from considering a bona fide written alternative acquisition proposal from a third party prior to obtaining the requisite stockholder approval of the Share Issuance Proposal if specified conditions are met.
 
Termination of the Acquisition Agreement (See page [·])
 
The Acquisition Agreement may be terminated under certain circumstances at any time prior to the closing.
 
Termination Fees and Expenses (See page [·])
 
Subject to certain exceptions, all costs and expenses, including fees and disbursements of counsel, financial advisors and accountants incurred in connection with the Acquisition Agreement and the transactions contemplated thereby will be borne by the party incurring such costs and expenses.
 
The Acquisition Agreement provides that the Company will be required to pay the Seller a termination fee of $37.5 million under certain circumstances.
 
Risk Factors (See page [·])
 
In evaluating the Acquisition Agreement and the Acquisition, you should consider certain risks discussed in the section entitled “Risk Factors” beginning on page [·].
 
Matters to Be Considered at the Special Meeting (See page [·])
 
The Special Meeting will be held on [·], 2011 at [10:30 a.m.], local time, at the Company’s offices located at 12808 Gran Bay Parkway West, Jacksonville, Florida 32258.
 
Matters to be Considered at the Special Meeting. At the Special Meeting, and any adjournments or postponements thereof, the Company’s stockholders will be asked to:
 
 
approve the Share Issuance Proposal;
 
 
if necessary, approve the adjournment of the Special Meeting, including for the purpose of soliciting additional proxies if a quorum is not present or if there are not sufficient votes in favor of the Share Issuance Proposal; and
 
 
conduct any other business as may properly come before the Special Meeting or any adjournment or postponement thereof.
 
 
8

 
 

 
Record Date. The Company’s board of directors has fixed the close of business on [·], 2011 as the record date for determination of the Company’s stockholders entitled to notice of and to vote at the Special Meeting and any adjournment thereof.
 
Required Vote. Approval of the Share Issuance Proposal and, if necessary, the adjournment of the Special Meeting including for the purpose of soliciting additional proxies if a quorum is not present or if there are not sufficient votes in favor of the Share Issuance Proposal, requires the affirmative vote of the holders of a majority of the shares of the Company’s common stock present and entitled to vote either in person or by proxy at the Special Meeting. As of the close of business on the record date for the Special Meeting, there were [·] shares of the Company’s common stock outstanding.
 
 
9

 


 
SUMMARY CONSOLIDATED FINANCIAL DATA OF NETWORK SOLUTIONS
 
The following tables set forth, for the periods and as of dates indicated, the summary historical financial data of Network Solutions. The summary historical consolidated financial data as of and for the years ended December 31, 2008, 2009 and 2010 has been derived from the audited consolidated financial statements included elsewhere in this proxy statement. The summary historical financial data as of and for the six months ended June 30, 2010 and 2011 has been derived from Network Solutions’ unaudited condensed consolidated financial statements included elsewhere in this proxy statement. The unaudited condensed consolidated financial statements have been prepared on the same basis as Network Solutions’ audited consolidated financial statements and, in the opinion of management of Network Solutions, reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for those periods. The results for any interim period are not necessarily indicative of the results that may be expected for a full year. The historical results included here and elsewhere in this proxy statement are not necessarily indicative of future performance or results of operations.
 
The summary consolidated financial data presented below represents portions of the financial statements of Network Solutions and you should read this information in conjunction with “Selected Historical Consolidated Financial Data of Network Solutions,” “Management's Discussion and Analysis of Financial Condition and Results of Operations of Network Solutions” and the consolidated financial statements of Network Solutions and related notes included elsewhere in this proxy statement.
 
   
Six Months Ended
June 30,
   
Year Ended 
December 31,
 
   
2010
   
2011
   
2008
   
2009
   
2010
 
    (unaudited)                    
   
(in thousands)
 
Statement of operations data:
                             
Revenue:
                             
Domain name services
  $ 86,617     $ 88,870     $ 169,022     $ 174,786     $ 174,671  
Web services and marketing and advertising
    45,986       44,654       101,839       95,599       90,234  
Total revenue
    132,603       133,524       270,861       270,385       264,905  
                                         
Cost of revenue
    35,946       37,042       79,273       76,793       71,552  
Gross margin
    96,657       96,482       191,588       193,592       193,353  
                                         
Operating costs and expenses:
                                       
Sales and marketing
    24,435       23,683       72,168       54,445       45,043  
Technology services, excluding depreciation
    18,706       18,621       37,779       33,404       38,185  
General and administrative
    14,301       14,426       31,198       30,584       29,351  
Stock-based compensation
    777       673       1,327       2,182       1,719  
Depreciation and amortization
    11,964       11,037       34,840       26,941       24,434  
Impairment of intangible asset
                      32,700        
Total operating expenses
    70,183       68,440       177,312       180,256       138,732  
                                         
Income from operations
    26,474       28,042       14,276       13,336       54,621  
Income tax expense (benefit)
    7,463       8,098       136       9,210       (1,480 )
Interest and other expenses, net
    7,460       7,446       29,245       19,967       15,193  
Net (loss) income
  $ 11,551     $ 12,498     $ (15,105 )   $ (15,841 )   $ 40,908  

 
10

 


 
   
As of December 31,
   
As of June 30,
 
   
2009
   
2010
   
2011
 
               
(unaudited)
 
 
 
(in thousands)
 
Balance sheet data (at period end):       
Cash and cash equivalents
  $ 37,898     $ 26,931     $ 18,445  
Working capital (1)
    68,673       49,824       49,532  
Total assets
    1,044,007       1,027,691       1,020,726  
Total deferred revenue
    352,566       363,813       376,872  
Total loans payable
    339,451       280,101       242,140  
Members’ equity
    320,080       343,180       355,689  


(1) Excludes deferred revenue, current balances of $164,736, $171,238, and $177,604 as of December 31, 2009, 2010 and June 30, 2011, respectively.

 
11

 


 
SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
(in thousands, except per share data)

The following selected unaudited pro forma condensed combined financial information was prepared using the acquisition method of accounting as outlined in Financial Accounting Standards Board ASC 805, Business Combinations, with the Company considered the acquiring company. The Company and Network Solutions unaudited pro forma condensed combined balance sheet data assumes that the Acquisition of Networks Solutions took place on June 30, 2011, and combines the Company and Network Solutions historical consolidated balance sheet at June 30, 2011. The Company’s unaudited pro forma condensed combined statements of operations data assume that the Acquisition of Network Solutions took place as of January 1, 2010. The unaudited pro forma condensed combined statements of operations data for the year ended December 31, 2010 combines the Company’s and Network Solutions’ historical consolidated statements of operations data for the year then ended. The unaudited pro forma condensed combined statements of operations data for the six months ended June 30, 2011 combines the Company’s and Network Solutions’ historical consolidated statement of operations for the six months then ended.

The selected unaudited pro forma condensed combined financial data is presented for illustrative purposes only and is not necessarily indicative of the combined financial position or results of operations of future periods or the results that actually would have been realized had the entities been a single entity during these periods. The selected unaudited pro forma combined financial data as of and for the six months ended June 30, 2011 and for the fiscal year ended December 31, 2010 are derived from the unaudited pro forma condensed combined financial statements included elsewhere in this proxy statement and should be read in conjunction with those statements and the related notes. See “Unaudited Pro Forma Condensed Combined Financial Statements” beginning on page [●].

Unaudited Pro Forma Condensed Combined Statements of Operations data:

   
Six months 
ended 
June 30, 2011
   
Year ended
December 31,
2010
 
Revenue
  $ 193,651     $ 304,089  
Loss from operations
    (18,515 )     (80,733 )
Loss before income taxes
    (43,639 )     (131,137 )
Net loss from continuing operations
    (53,576 )     (135,734 )
Net loss from continuing operations per share, basic and diluted
    (1.19 )     (3.12 )
Shares used in per share calculations, basic and diluted
    45,106       43,515  

Unaudited Pro Forma Condensed Combined Balance Sheet data:

   
As of 
June 30, 2011
 
Cash and cash equivalents
  $ -  
Total current assets
    83,488  
Total assets
    1,539,692  
Total liabilities
    1,214,849  
Stockholders’ equity
    324,843  

 
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RISK FACTORS
 
In addition to the other information included and incorporated by reference into this proxy statement, including the matters addressed in the section entitled “Cautionary Statement Regarding Forward-Looking Statements” beginning on page [·], you should carefully consider the following risk factors before deciding how to vote your shares of the Company’s common stock at the Special Meeting. These factors should be considered in conjunction with the other information included by the Company in this proxy statement. If any of the risks described below or in the documents incorporated by reference into this proxy statement actually materialize, the businesses, financial condition, results of operations, prospects or stock prices of the Company and/or the combined company could be materially and adversely affected. See the section entitled “Where You Can Find Additional Information” beginning on page [·].
 
Risks Related to the Acquisition
 
The announcement and pendency of the Acquisition could have an adverse effect on the Company’s and Network Solutions’ businesses, financial conditions, results of operations or business prospects, or on the Company’s stock price.
 
The announcement and pendency of the Acquisition could disrupt the Company’s and Network Solutions’ businesses in the following ways, among others:
 
 
customers and other third-party business partners of the Company or Network Solutions may seek to terminate or renegotiate their relationships with the Company or Network Solutions as a result of the Acquisition, whether pursuant to the terms of their existing agreements with the Company and/or Network Solutions or otherwise;
 
 
the attention of the Company’s and/or Network Solutions’ management may be directed toward the completion of the Acquisition and related matters and may be diverted from the day-to-day business operations of their respective companies, including from other opportunities that might otherwise be beneficial to the Company or Network Solutions; and
 
 
current and prospective employees may experience uncertainty regarding their future roles with the combined company, which might adversely affect the Company’s and/or Network Solutions’ ability to retain, recruit and motivate key personnel.
 
Should they occur, any of these matters could adversely affect the stock price of the Company, or harm the financial condition, results of operations or business prospects of, the Company and/or Network Solutions.
 
The Acquisition Agreement contains provisions that could discourage or make it difficult for a third party to acquire the Company prior to the completion of the Acquisition.
 
The Acquisition Agreement contains provisions that make it difficult for the Company to entertain a third-party proposal for an acquisition of the Company prior to the completion of the Acquisition. These provisions include the general prohibition on the Company soliciting or engaging in discussions or negotiations regarding any alternative acquisition proposal, and the requirement that the Company pay a termination fee of $37.5 million to the Seller if the Acquisition Agreement is terminated in specified circumstances. See the sections entitled “The Acquisition Agreement—No Solicitation”, “The Acquisition Agreement—Board Recommendation and Change in Recommendation” and “The Acquisition Agreement—Termination Fees and Expenses” beginning on pages [·], [·] and [·], respectively.
 
These provisions might discourage an otherwise-interested third party from considering or proposing an acquisition of the Company or Network Solutions, even one that may be deemed of greater value than the Acquisition to the Company’s stockholders or Network Solutions’ member, as applicable. Furthermore, even if a third party elects to propose an acquisition, the requirement of the Company to pay a termination fee may result in that third party’s offering of a lower value to the Company’s stockholders than such third party might otherwise have offered.

 
13

 

Failure to complete the Acquisition could negatively impact the Company’s and Network Solutions’ respective businesses, financial conditions, results of operation or the Company’s stock price.
 
The closing of the Acquisition is subject to a number of conditions and there can be no assurance that the conditions will be satisfied. If the Acquisition is not completed, the Company and Network Solutions will be subject to several risks, including:
 
 
the current prices of the Company’s common stock may reflect a market assumption that the Acquisition will occur, meaning that a failure to complete the Acquisition could result in a decline in the price of the Company’s common stock;
 
 
in certain circumstances, the Company would be required to pay a termination fee of $37.5 million to the Seller;
 
 
the Company and Network Solutions are expected to incur substantial transaction costs in connection with the Acquisition whether or not the Acquisition is completed;
 
 
neither the Company nor Network Solutions would realize any of the anticipated benefits of having completed the Acquisition; and
 
 
under the Acquisition Agreement, each of the Company and Network Solutions is subject to certain restrictions on the conduct of its business prior to completing the Acquisition, which restrictions could adversely affect their ability to realize certain of their respective business strategies.
 
If the Acquisition is not closed, these risks and others may materialize and materially and adversely affect either or both companies’ respective businesses, financial conditions, results of operations or the Company’s stock price.
 
Obtaining required approvals necessary to satisfy the conditions to the completion of the Acquisition may delay or prevent completion of the Acquisition.
 
The completion of the Acquisition is conditioned upon the receipt of certain governmental authorizations, consents, orders or other approvals, including the expiration or termination of the waiting period under the HSR Act. The Company and Network Solutions intend to pursue all required approvals in accordance with the Acquisition Agreement. These approvals may impose conditions on or require divestitures relating to the operations or assets of the Company or Network Solutions and such conditions or divestitures may jeopardize or delay the completion of the Acquisition or may reduce the anticipated benefits of the Acquisition. Further, no assurance can be given that the required approvals will be obtained and, even if all such approvals are obtained, no assurance can be given as to the terms, conditions and timing of the approvals or that they will satisfy the terms of the Acquisition Agreement. See the sections entitled “The Acquisition Agreement—Conditions to Completion of the Acquisition” beginning on page [·] and “The Acquisition—Regulatory Approvals Required for the Acquisition” beginning on page [·].
 
Risks Related to the Combined Company if the Acquisition Is Completed
 
The failure to integrate successfully the businesses of the Company and Network Solutions in the expected timeframe would adversely affect the combined company’s future results following the completion of the Acquisition.
 
The success of the Acquisition will depend, in large part, on the ability of the combined company following the completion of the Acquisition to realize the anticipated benefits, including annual net operating synergies, from combining the businesses of the Company and Network Solutions. To realize these anticipated benefits, the combined company must successfully integrate the businesses of the Company and Network Solutions. This integration will be complex and time consuming.

 
14

 

The failure to integrate successfully and to manage successfully the challenges presented by the integration process may result in the combined company’s failure to achieve some or all of the anticipated benefits of the Acquisition.
 
Potential difficulties that may be encountered in the integration process include the following:
 
 
lost sales and customers as a result of customers of either of the two companies deciding not to do business with the combined company;
 
 
complexities associated with managing the larger, more complex, combined business;
 
 
integrating personnel from the two companies while maintaining focus on providing consistent, high quality services and products;
 
 
potential unknown liabilities and unforeseen expenses, delays or regulatory conditions associated with the Acquisition; and
 
 
performance shortfalls at one or both of the companies as a result of the diversion of management’s attention caused by completing the Acquisition and integrating the companies’ operations.
 
The combined company’s future results will suffer if the combined company does not effectively manage its expanded operations following the Acquisition.
 
Following the Acquisition, the size of the combined company’s business will be significantly larger than the current business of the Company. The combined company’s future success depends, in part, upon its ability to manage this expanded business, which will pose substantial challenges for the combined company’s management, including challenges related to the management and monitoring of new operations and associated increased costs and complexity. The Company cannot assure you that the combined company will be successful or that the combined company will realize the expected operating efficiencies, annual net operating synergies, revenue enhancements and other benefits currently anticipated to result from the Acquisition.
 
The issuance of shares of the Company’s common stock to the Seller in connection with the Acquisition will substantially dilute the voting power and economic interests of the Company’s current stockholders.
 
Pursuant to the terms of the Acquisition Agreement, it is anticipated that the Company will issue shares of the Company’s common stock to the Seller representing up to approximately 38% of the outstanding shares of common stock of the Company as of immediately following the completion of the Acquisition if the Company does not elect to reduce such number, in certain circumstances, by the payment of additional cash through sources other than debt. Accordingly, the issuance of shares of the Company’s common stock to the Seller in connection with the Acquisition will significantly reduce the relative voting power and economic interests of each share of the Company’s common stock held by current stockholders prior to the closing of the Acquisition.
 
The Acquisition will result in changes to the Company’s board of directors that may affect the combined company’s operations.
 
If the Acquisition is completed, the composition of the Company’s board of directors will change. Following the completion of the Acquisition, the combined company’s board of directors will consist of seven members, including the six current directors of the Company and one new director designated by an affiliate of the Seller. This new composition of the board of directors may affect the business strategy and operating decisions of the combined company upon completion of the Acquisition.

 
15

 

The loss of key personnel could have a material adverse effect on the combined company’s business, financial condition or results of operations.
 
The success of the Acquisition will depend, in part, on the combined company’s ability to retain key employees who continue employment with the combined company after the Acquisition is completed. It is possible that these employees might decide not to remain with the combined company after the Acquisition is completed. If these key employees terminate their employment, the combined company’s sales, marketing or development activities might be adversely affected, management’s attention might be diverted from successfully integrating Network Solutions’ operations to recruiting suitable replacements and the combined company’s business, financial condition or results of operations could be adversely affected. In addition, the combined company might not be able to locate suitable replacements for any such key employees who leave the combined company or offer employment to potential replacements on reasonable terms.
 
The success of the combined company will also depend on relationships with third parties and pre-existing customers of the Company and Network Solutions, which relationships may be affected by customer preferences or public attitudes about the Acquisition. Any adverse changes in these relationships could adversely affect the combined company’s business, financial condition or results of operations.
 
The combined company’s success will be dependent on the ability to maintain and renew relationships with pre-existing customers and other clients of both the Company and Network Solutions and to establish new client relationships. There can be no assurance that the business of the combined company will be able to maintain pre-existing customer contracts and other business relationships, or enter into or maintain new customer contracts and other business relationships, on acceptable terms, if at all. The failure to maintain important customer relationships could have a material adverse effect on the business, financial condition or results of operations of the combined company.
 
Future results of the combined company may differ materially from the unaudited pro forma financial statements presented in this proxy statement and the anticipated future performance of the combined company.
 
The future results of the combined company may be materially different from those shown in the unaudited pro forma condensed combined financial statements presented in this proxy statement, which show only a combination of the historical results of the Company and Network Solutions, and the anticipated future performance of the combined company. The Company expects to incur significant costs associated with the completion of the Acquisition and combining the operations of the two companies, the exact magnitude of which is not yet known. Furthermore, these costs may decrease the capital that the combined company could use for revenue-generating investments in the future.
 
The issuance of the Company’s Common Stock to the Seller in the Acquisition may result in a limitation on our ability to use our net operating losses and other tax attributes to reduce future income tax liabilities.
 
It is anticipated that the issuance of the Company’s common stock to the Seller in the Acquisition may cause an ownership change for purposes of Section 382 of the Internal Revenue Code. In the event of an ownership change, Section 382 of the Internal Revenue Code limits the amount of pre-change net operating losses and other tax attributes that can be used to offset post-change taxable income after the ownership change occurs.
 
Risks Related to Our Debt
 
The Company’s substantial leverage will require the Company to divert a substantial portion of its cash flow for debt service, could adversely affect its ability to raise more debt to fund its operations and could limit its ability to react to changes in the economy or our industry.
 
Following the Acquisition, the Company will have a substantial amount of debt. On a pro forma basis after giving effect to the Acquisition, as of June 30, 2011, the Company would have had approximately $750 million of debt outstanding (including the Facilities, as described on page [●] of this proxy statement). In addition, the Company would have had approximately $50 million of availability under its credit facility (excluding any letters of credit that are issued and undrawn at the closing of the Acquisition). The Company’s substantial debt could have important consequences to you, including:

 
16

 

 
limiting the Company’s ability to borrow additional amounts to fund working capital, capital expenditures, acquisitions, debt service requirements, execution of our growth strategy and other purposes;
 
 
requiring the Company to dedicate a substantial portion of its cash flow from operations to pay interest on its debt, which would reduce availability of its cash flow to fund working capital, capital expenditures, acquisitions, execution of its growth strategy and other general corporate purposes;
 
 
making the Company more vulnerable to adverse changes in general economic, industry and government regulations and in its business by limiting its flexibility in planning for, and making it more difficult for the Company to react quickly to, changing conditions; and
 
 
placing the Company at a competitive disadvantage compared with its competitors that have less debt.
 
In addition, the Company may not be able to generate sufficient cash flow from its operations to repay its debt when it becomes due and to meet its other cash needs. If the Company is not able to pay its debts as they become due, it will be required to pursue one or more alternative strategies, such as selling assets, reducing or delaying capital expenditures, refinancing or restructuring its debt, borrowing additional debt or selling equity securities. The Company may not be able to refinance or restructure its debt, borrow additional debt or sell equity securities on favorable terms, if at all, and if the Company must sell its assets, it may negatively affect its ability to generate revenues.
 
If the Company cannot make scheduled payments on its debt, it will be in default and, as a result:
 
 
its creditors could declare all outstanding principal and interest to be due and payable;
 
 
the lenders under the Facilities could terminate their commitments to lend the Company money and foreclose against the assets securing their borrowings; and
 
 
the Company could be forced into bankruptcy or liquidation, which could result in you losing your investment.
 
Restrictive covenants may adversely affect the Company’s operations.
 
The Facilities will contain various covenants that limit the Company’s ability to, among other things:
 
•      incur, assume or guarantee additional debt;
 
•      pay dividends or distributions or redeem or repurchase capital stock;
 
•      prepay, redeem or repurchase debt that is junior in right of payment to the Facilities;
 
•      make loans or investments;
 
•      incur liens;
 
•      sell or otherwise dispose of assets, including capital stock of its subsidiaries;
 
•      consolidate or merge with or into, or sell substantially all of its assets to, another person; and
 
•      enter into transactions with affiliates.
 
In addition, the restrictive covenants in the Facilities will require the Company to maintain specified financial ratios. The Company’s ability to meet those financial ratios can be affected by events beyond its control, and it cannot assure you that the Company will meet them. A breach of any of these covenants could result in a default under the Facilities. Upon the occurrence of an event of default under the Facilities, the lenders could elect to declare all amounts outstanding under the Facilities to be immediately due and payable and terminate all commitments to extend further credit. If the Company were unable to repay those amounts, the lenders under the Facilities could proceed against the collateral granted to them to secure the debt owed to them. The Company has pledged a significant portion of its assets as collateral under the Facilities. If the lenders under the Facilities accelerate the repayment of borrowings, the Company cannot assure you that it will have sufficient assets to repay the Facilities or to borrow sufficient funds to refinance the Facilities. Even if the Company is able to obtain new financing, it may not be on commercially reasonable terms, or terms that are acceptable to the Company.

 
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Variable rate debt subjects the Company to interest rate risk, which could cause our interest expense to increase significantly.
 
Borrowings under the Facilities will be at variable rates of interest and expose the Company to interest rate risk. If interest rates increase, the Company’s debt service obligations under the Facilities would increase even though the amount borrowed remained the same, and its net income would decrease. Loans under the Facilities are expected to bear interest, at the Company’s option, at a rate equal to the adjusted London interbank offer rate or an alternate base rate, in each case plus a spread. Based on $750 million of debt under the Facilities as of June 30, 2011 (on a pro forma basis after giving effect to the Acquisition), a 1.0% increase (above the interest rate floor, if applicable) in market interest rates would result in $7.5 million of additional annual interest expense.
 
Other Risks Related to the Company
 
In addition to the foregoing risks, the Company is, and will continue to be, subject to the risks described in the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 and all Quarterly Reports on Form 10-Q filed thereafter. All such reports are or will be filed with the SEC and are incorporated by reference into this proxy statement. See the section entitled “Where You Can Find Additional Information” beginning on page [·].
 
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
 
This proxy statement and the other documents incorporated by reference into this proxy statement contain or may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements can be identified by the fact that they do not relate strictly to historical or current facts. Statements that include words such as “may,” “will,” “project,” “might,” “expect,” “believe,” “anticipate,” “intend,” “could,” “would,” “estimate,” “continue,” “pursue,” “possible” or “potential” or the negative of these words or other words or expressions of similar meaning may identify forward-looking statements. These forward-looking statements are found at various places throughout this proxy statement and the other documents incorporated herein by reference and relate to a variety of matters, including but not limited to (i) the timing and anticipated completion of the proposed Acquisition, (ii) the benefits and synergies expected to result from the proposed Acquisition, (iii) the anticipated customer base of the Company and Network Solutions following the completion of the proposed Acquisition and (iv) other statements that are not purely statements of historical fact. These forward-looking statements are made on the basis of the current beliefs, expectations and assumptions of the management of the Company and Network Solutions, are not guarantees of performance and are subject to significant risks and uncertainty. These forward-looking statements should, therefore, be considered in light of various important factors, including those set forth in this proxy statement and those that are incorporated by reference into this proxy statement. In addition to the risk factors identified elsewhere, important factors that could cause actual results to differ materially from those described in forward-looking statements contained herein include, but are not limited to:
 
 
any operational or cultural difficulties associated with the integration of the businesses of the Company and Network Solutions;
 
 
potential adverse reactions or changes to business relationships resulting from the announcement or completion of the proposed Acquisition;
 
 
unexpected costs, charges or expenses resulting from the proposed Acquisition;
 
 
litigation or adverse judgments relating to the proposed Acquisition;
 
 
risks relating to the completion of the proposed Acquisition, including the risk that the required stockholder approval might not be obtained in a timely manner or at all or that other conditions to the completion of the Acquisition will not be satisfied;
 
 
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the failure to realize anticipated annual net operating synergies from the Acquisition or delay in the realization thereof;
 
 
any difficulties associated with requests or directions from governmental authorities resulting from their reviews of the Acquisition; and
 
 
any changes in general economic and/or industry-specific conditions.
 
Additional factors that could cause actual results to differ materially from those described in the forward-looking statements are set forth in the section entitled “Risk Factors” beginning on page [·], the Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2011, which was filed with the SEC on August 8, 2011, under the heading “Item 1A-Risk Factors” and in subsequent reports on Forms 10-Q and 8-K.
 
You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this proxy statement or, in the case of documents incorporated by reference, as of the date of those documents. Neither the Company nor Network Solutions undertakes any obligation to publicly update or release any revisions to these forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this proxy statement or to reflect the occurrence of unanticipated events, except as required by law.
 
THE SPECIAL MEETING
 
General
 
The Company is furnishing this proxy statement to its stockholders in connection with the solicitation of proxies by its board of directors for use at the Special Meeting of the Company’s stockholders, including any adjournment or postponement of the Special Meeting.
 
Date, Time and Place
 
The Special Meeting will be held on [·], 2011 at [10:30 a.m.], local time, at the Company’s offices located at 12808 Gran Bay Parkway West, Jacksonville, Florida 32258.
 
Purpose of the Special Meeting
 
The Special Meeting will be held for the following purposes:
 
 
1.
To approve the Share Issuance Proposal;
 
 
2.
If necessary, to approve the adjournment of the Special Meeting including for the purpose of soliciting additional proxies if a quorum is not present or if there are not sufficient votes in favor of the Share Issuance Proposal; and
 
 
3.
The transaction of any other business as may properly come before the Company’s Special Meeting or any adjournment or postponement thereof.
 
A copy of the Acquisition Agreement is attached to this proxy statement as Annex A. The Company’s stockholders are encouraged to read the Acquisition Agreement in its entirety.

 
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THE MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING ARE OF GREAT IMPORTANCE TO THE COMPANY’S STOCKHOLDERS. ACCORDINGLY, STOCKHOLDERS ARE URGED TO READ AND CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS PROXY STATEMENT AND THE OTHER INFORMATION INCORPORATED BY REFERENCE HEREIN, AND TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED PRE-ADDRESSED POSTAGE-PAID ENVELOPE OR SUBMIT THEIR PROXIES THROUGH THE INTERNET BY VISITING A WEBSITE ESTABLISHED FOR THAT PURPOSE AT WWW.PROXYVOTE.COM AND FOLLOWING THE INSTRUCTIONS; OR BY TELEPHONE BY CALLING THE TOLL-FREE NUMBER 1-800-690-6903 IN THE UNITED STATES, PUERTO RICO OR CANADA ON A TOUCH-TONE PHONE AND FOLLOWING THE RECORDED INSTRUCTIONS.

Recommendation of the Board of Directors
 
After careful consideration, the Company’s board of directors unanimously determined that the Acquisition, pursuant to the terms of the Acquisition Agreement, is in the Company’s and its stockholders’ best interests, and unanimously approved the Acquisition and the Acquisition Agreement. The Company’s board of directors unanimously recommends that the stockholders vote “FOR” the Share Issuance Proposal and, if necessary, “FOR” adjournment of the Special Meeting.
 
In considering such recommendation, stockholders should be aware that some directors and executive officers have interests in the Acquisition that are different from, or in addition to, those of stockholders generally. See the section entitled “Interests of Certain Persons in the Acquisition” beginning on page [·].
 
If your submitted proxy card does not specify how you want to vote your shares, your shares will be voted “FOR” the Share Issuance Proposal and, if necessary, “FOR” adjournment of the special meeting.
 
Record Date; Shares Entitled to Vote
 
The Company’s board of directors has fixed [·], 2011 as the record date for the determination of stockholders entitled to notice of, and to vote at, the Special Meeting and any adjournment or postponement thereof. Only holders of record of shares of the Company’s common stock at the close of business on the record date are entitled to receive notice of, attend, and vote at the Special Meeting. At the close of business on the record date, the Company had outstanding and entitled to vote [·] shares of common stock.
 
The Company’s common stock is the only class of securities entitled to vote at the Special Meeting. Each share of the Company’s common stock outstanding on the Company’s record date entitles the holder thereof to one vote on each matter properly brought before the Special Meeting, exercisable in person or by proxy through a properly executed and delivered proxy card.
 
Each stockholder is entitled to one vote for each share of common stock held as of the record date. For each matter scheduled for a vote at the Special Meeting, you may vote “For” or “Against” or you may “Abstain” from voting
 
Quorum
 
To conduct the business described above at the Special Meeting, the Company must have a quorum present. Stockholders who hold a majority of the Company’s common stock outstanding as of the close of business on the record date for the Special Meeting must be present either in person or by proxy to constitute a quorum to conduct business at the Special Meeting. As of the record date, there were [·] shares of the Company’s common stock outstanding and entitled to vote at the Special Meeting. Accordingly, the presence, in person or by proxy, of the holders of [·] shares of the Company’s common stock will be required to establish a quorum.
 
Required Vote
 
The proposals being submitted for approval by the Company’s stockholders at the Special Meeting will be approved or rejected on the basis of certain specific voting thresholds. In particular and assuming there is a quorum present:
 
 
the approval of the Share Issuance Proposal requires the affirmative vote of the holders of a majority of the shares of the Company’s common stock present and entitled to vote either in person or by proxy at the Special Meeting; and
 
 
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the approval of the adjournment of the Special Meeting, including to solicit proxies if there are not sufficient votes in favor of the Share Issuance Proposal, requires the affirmative vote of the holders of a majority of the Company’s common stock present and entitled to vote either in person or by proxy at the Special Meeting.
 
Approval of the Share Issuance Proposal is a required condition to the completion of the Acquisition. If this proposal is not approved by the holders of the Company’s common stock, the Acquisition will not be completed.
 
Counting of Votes; Treatment of Abstentions and Incomplete Proxies; Broker Non-Votes
 
If a stockholder does not submit a proxy card or vote at the Special Meeting, such stockholder’s shares will not be counted as present for the purpose of determining the presence of a quorum, which is required to transact business at the Special Meeting, and will have no effect on the outcome of the Company’s Proposal No. 1 (Share Issuance Proposal), Proposal No. 2 (adjournment), or Proposal No. 3 (other business).
 
If a stockholder submits a proxy card and affirmatively elects to abstain from voting, that proxy will be counted as present for the purpose of determining the presence of a quorum for the Special Meeting, but will not be voted at the Special Meeting. As a result, such abstention will have the same effect as voting “AGAINST” the Company’s Proposals Nos. 1 and 2.
 
If a stockholder submits a proxy card without indicating how such stockholder wishes to vote, the shares of the Company’s common stock represented by that proxy will be counted as present for the purpose of determining the presence of a quorum for the Company’s Special Meeting and all of such shares will be voted “FOR” the Company’s Proposal Nos. 1 and 2.
 
If a broker, bank, custodian, nominee or other record holder of the Company’s common stock indicates on a proxy that it does not have discretionary authority to vote certain shares on a particular proposal, then those shares will be treated as broker non-votes with respect to that proposal. Accordingly, if you own shares through a nominee, such as a broker or bank, please be sure to instruct your nominee how to vote to ensure that your vote is counted with respect to each of the proposals. Broker non-votes will be counted as present for purposes of determining the presence of a quorum, but will have no effect in determining whether the Company’s Proposals Nos. 1 and 2 are approved.
 
Stockholder of Record: Shares Registered in Your Name
 
The Company’s transfer agent is Computershare Trust Company, N.A. If, as of the record date, your shares were registered directly in your name with the transfer agent, then you are a stockholder of record.
 
If you are a stockholder of record, you may vote in person at the Special Meeting, vote by proxy by the telephone, vote by proxy over the Internet, or vote by completing and returning the enclosed proxy card. Whether or not you plan to attend the Special Meeting, the Company urges you to vote by proxy to ensure that your vote is counted. You may still attend the Special Meeting and vote in person even if you have already voted by proxy.
 
 
To vote in person, come to the Special Meeting and the Company’s will give you a ballot when you arrive.
 
 
To vote using the proxy card, simply complete, sign and date the enclosed proxy card and return it promptly in the envelope provided. If your signed proxy card is received before the Special Meeting, your proxy will be voted as you direct.
 
 
To vote by telephone, dial toll-free using a touch-tone phone and follow the recorded instructions. You will be asked to provide the company number and control number from the proxy card. Your vote must be received by [12:00 p.m. Eastern Time] on [·], 2011 to be counted.
 
 
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To vote over the Internet, go to complete an electronic proxy card. You will be asked to provide the company number and control number from the proxy card. Your vote must be received by [12:00 p.m. Eastern Time] on [·], 2011 to be counted.
 
Beneficial Owner: Shares Registered in the Name of Broker or Bank
 
If, on the record date, your shares were held in an account at a brokerage firm, bank, dealer or other similar organization, rather than in your name, then you are the beneficial owner of shares held in street name and a voting instruction card is being forwarded to you by that organization. The organization holding your account is considered to be the stockholder of record for purposes of voting at the Special Meeting. However, since you are not the stockholder of record, you may not vote your shares in person at the Special Meeting unless you request and obtain a valid proxy from your broker or other agent.
 
If you are a beneficial owner of shares registered in the name of your broker, bank or other agent, i.e., in “street name,” you should have received a voting instruction card containing voting instructions from that organization rather than from the Company. Simply follow the voting instructions in the voting instruction card to ensure your vote is counted. Alternatively, you may vote by telephone or over the Internet as instructed by your broker or bank. To vote in person at the Special Meeting, you must obtain a valid proxy from your broker, bank, or other agent. Follow the instructions from your broker or bank included with these proxy materials, or contact your broker or bank to request a proxy form.
 
Brokers or other nominees who hold shares of the Company’s common stock in street name for a beneficial owner typically have the authority to vote in their discretion on “routine” proposals, even when they have not received instructions from beneficial owners. However, brokers or other nominees are not allowed to exercise their voting discretion on matters that are determined to be “non-routine” without specific instructions from the beneficial owner. Broker non-votes are shares held by a broker or other nominee that are represented at the Special Meeting, but with respect to which the broker or other nominee is not instructed by the beneficial owner of such shares to vote on the particular proposal and the broker or other nominee does not have discretionary voting power on such proposal.
 
The Company believes that brokers or other nominees do not have discretionary authority to vote on the Share Issuance Proposal. Therefore, if you are a stockholder and you do not instruct your broker or other nominee on how to vote your shares, your broker or other nominee may not vote your shares on the Share Issuance Proposal, and the resulting broker non-vote will have no effect on this proposal but will be treated as shares present for the purpose of determining the presence of a quorum for the transaction of business at the Special Meeting.
 
Counting Votes
 
Votes will be counted by the inspector of election appointed for the Special Meeting, who will separately count “For,” “Against,” “Abstain” and broker non-votes.
 
Revoking Your Proxy
 
If you wish to change your vote with respect to any proposal, you may do so by revoking your proxy at any time prior to the commencement of voting with respect to that proposal at the Special Meeting.
 
If you are the record holder of your shares, you can revoke your proxy by:
 
 
sending a written notice stating that you would like to revoke your proxy to Matthew P. McClure, Secretary of the Company, at 12808 Gran Bay Parkway West, Jacksonville, Florida 32258;
 
 
submitting new proxy instructions either on a new proxy card with a later date;
 
 
granting a subsequent proxy by telephone or over the Internet; or
 
 
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attending the Special Meeting and voting in person (but note that your attendance alone will not revoke your proxy).
 
If you are a stockholder of record, revocation of your proxy or voting instructions by written notice must be received by [11:59 p.m., Eastern Time], on [·], 2011, although you may also revoke your proxy by attending the Special Meeting and voting in person. Simply attending the Special Meeting will not, by itself, revoke your proxy. Your most current proxy card or telephone or Internet proxy is the one that will be counted. If your shares are held in street name by your broker or bank as a nominee or agent, you should follow the instructions provided by your broker or bank to revoke your proxy.
 
Solicitation of Proxies
 
The Company will generally pay for the cost and expense of preparing, filing, assembling, printing and mailing this proxy statement, any amendments thereto, the proxy card and any additional information furnished to the Company’s stockholders, as well as any fees paid to the SEC. The Company may also reimburse brokerage houses and other custodians, nominees and fiduciaries for their costs of soliciting and obtaining proxies from beneficial owners, including the costs of reimbursing brokerage houses and other custodians, nominees and fiduciaries for their costs of forwarding this proxy statement and other solicitation materials to beneficial owners. In addition, proxies may be solicited without extra compensation by directors, officers and employees of the Company by mail, telephone, fax or other methods of communication.
 
We have retained [·] to assist in the solicitation of proxies for a fee estimated to be approximately $[·] plus reasonable out-of-pocket expenses.
 
Delivery of Proxy Materials to Households Where Two or More Stockholders Reside
 
The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy statements with respect to two or more stockholders sharing the same address by delivering a single proxy statement addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for stockholders and cost-savings for companies.
 
In connection with the Special Meeting, a number of brokers with account holders who are the Company’s stockholders will be householding the proxy materials. As a result, a single proxy statement will be delivered to multiple stockholders sharing an address unless contrary instructions have been received from the applicable stockholders. Once a stockholder receives notice from its broker that they will be householding communications to such stockholder’s address, householding will continue until such stockholder is notified otherwise or until such stockholder revokes its consent. If, at any time, a stockholder no longer wishes to participate in householding and would prefer to receive a separate proxy statement, such stockholder should notify its broker or contact the Company at (904) 680-6600. Stockholders who currently receive multiple copies of this proxy statement at their address and would like to request householding of their communications should contact their broker.
 
Attending the Special Meeting
 
All the stockholders as of the Record Date, or their duly appointed proxies, may attend the Special Meeting. If you are a registered stockholder (that is, if you hold your stock in your own name) and you wish to attend the Special Meeting, please bring your proxy and evidence of your stock ownership, such as your most recent account statement, to the Special Meeting. You should also bring valid picture identification.
 
If your shares are held in street name in a stock brokerage account or by another nominee and you wish to attend the Special Meeting, you need to bring a copy of a brokerage or bank statement to the Special Meeting reflecting your stock ownership as of the Record Date. You should also bring valid picture identification.
 
 
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THE PROPOSALS
 
Proposal No. 1: Approval of the Issuance of the Company’s Common Stock in Connection with the Acquisition
 
Under the Acquisition Agreement, part of the consideration to the Seller may be up to 18 million shares of the Company’s common stock. Under the NASDAQ Marketplace Rules, a company listed on the NASDAQ Global Select Market, such as the Company, is required to obtain stockholder approval prior to the issuance of common stock, or of securities convertible into or exercisable for common stock, in connection with the acquisition of another company if the number of shares of common stock to be issued is, or will be upon issuance, equal to or in excess of 20% of the number of shares of common stock outstanding before such issuance in connection with such proposed acquisition. If all or a substantial portion of the 18 million shares of the Company’s common stock are issued to the Seller in connection with the Acquisition, the number of shares of the Company’s common stock issued in connection with the Acquisition will exceed 20% of the shares of the Company’s common stock outstanding before such issuance. For this reason, the Company must obtain the approval of its stockholders, in accordance with the NASDAQ Marketplace Rules, for the issuance of shares of the Company’s common stock to the Seller in connection with the Acquisition. Accordingly, the Company is asking its stockholders to approve the issuance of up to 18 million shares of the Company’s common stock in connection with the Acquisition pursuant to the terms of the Acquisition Agreement.
 
Required Vote; Recommendation of the Company’s Board of Directors
 
Approval of the Share Issuance Proposal requires the affirmative vote of the holders of a majority of the shares of the Company’s common stock present and entitled to vote either in person or by proxy at the Special Meeting, assuming a quorum is present. A failure to submit a proxy card or vote at the Special Meeting will result in your shares not being counted as present for the purpose of determining the presence of a quorum, which is required to transact business at the Special Meeting, and will have no effect on the outcome of the Share Issuance Proposal. However, for purposes of this vote, an abstention will be counted as present for the purpose of determining a quorum, but will have the same effect as voting “AGAINST” the Share Issuance Proposal.
 
The Company’s board of directors recommends a vote “FOR” the Share Issuance Proposal.
 
Proposal No. 2: If Necessary, Approval of the Adjournment of the Special Meeting including to Solicit Additional Proxies if There Are Not Sufficient Votes in Favor of the Share Issuance Proposal.
 
The Company is asking its stockholders to vote on a proposal to approve the adjournment of the Special Meeting, including for the purpose of soliciting additional proxies if a quorum is not present or if there are not sufficient votes in favor of the Share Issuance Proposal.
 
Required Vote; Recommendation of the Company’s Board of Directors
 
Approval of the adjournment of the Special Meeting, if necessary, including for the purpose of soliciting additional proxies if a quorum is not present or if there are not sufficient votes in favor of the Share Issuance Proposal, requires the affirmative vote of the holders of a majority of the shares of the common stock present and entitled to vote either in person or by proxy at the Special Meeting. A failure to submit a proxy card or vote will have no effect on the outcome of the vote for this proposal. For purposes of this vote, an abstention will have the same effect as a vote “AGAINST” such proposal.
 
The Company’s board of directors recommends a vote “FOR” the adjournment of the Special Meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of the Share Issuance Proposal.
 
Proposal No. 3: Other Matters
 
As of the date of this proxy statement, the Company’s board of directors does not know of any business to be presented at the Special Meeting other than as set forth in the notice accompanying this proxy statement. If any other matters should properly come before the Special Meeting, it is intended that the shares represented by proxies will be voted with respect to such matters in accordance with the judgment of the persons voting the proxies.

 
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THE ACQUISITION
 
Structure of the Acquisition
 
In accordance with the Acquisition Agreement, at the closing of the Acquisition, the Seller will execute an instrument transferring all of its membership interests in Network Solutions to the Company, and Network Solutions will become a wholly-owned subsidiary of the Company. If the Company’s stockholders approve the Share Issuance Proposal, then the Company and Network Solutions expect the Acquisition to be completed as soon as practicable following the Special Meeting subject to obtaining regulatory approval and satisfaction or waiver of all other closing conditions.
 
Background of the Acquisition
 
Each of the Company and Network Solutions frequently considers acquisition, joint venture and business development opportunities involving other participants in the web services market. Over the years, the companies have become familiar with each other’s businesses, including their relative strengths. From August 2004 through July 2006, the Company and Network Solutions had a business relationship in which the Company sold online marketing services to certain Network Solutions customers. A previous member of the Company’s board of directors also served as a special advisor at General Atlantic, an affiliate of the principal stakeholder of the Seller. After the Company’s acquisition of Register.com, the Company became more active in industry events attended by Network Solutions representatives. These interactions provided the Company with a unique understanding and appreciation of Network Solutions.
 
During February 2011, the Company discussed potential acquisitions, including the possible purchase of Network Solutions, with its financial advisors.
 
On February 23, 2011, David Brown, the Chairman and CEO of the Company, met with Anton Levy, a member of the board of directors of the Seller and a Managing Director of General Atlantic, regarding a potential acquisition of Network Solutions by the Company. Representatives of Wells Fargo Securities, the Company’s financial advisor, also were present at this meeting.
 
On March 1, 2011, Mr. Brown emailed Mr. Levy to request information on Network Solutions to evaluate a potential acquisition and provide an acquisition proposal.
 
On March 4, 2011, Mr. Brown called Mr. Levy regarding the Company’s interest in Network Solutions. On March 9, 2011 the parties executed a Non-Disclosure Agreement to enable the parties to disclose confidential information to each other, including operational and financial information, to better value potential benefits and synergies which could be obtained by combining the Company and Network Solutions. That agreement was amended on March 14, 2011 to add a clause regarding the non-solicitation of other transactions.
 
On March 7, 2011, the board of directors of the Company, at its regularly scheduled meeting, discussed with Mr. Brown and the management of the Company the potential acquisition of Network Solutions. After this discussion, the board of directors agreed that management should continue to explore a potential acquisition with Network Solutions.
 
On March 11, 2011, Messrs. Brown and Levy exchanged emails regarding the expected timeline for information exchange and establishment of working groups.
 
On March 14, 2011, Network Solutions requested information on the Company to evaluate the transaction.
 
On March 15, 2011, Miles Reidy, Chief Financial Officer and Chief Operating Officer of Network Solutions, held a phone meeting with Greg Wong, Senior Vice President of Corporate Development of the Company, to discuss the Company’s response to Network Solutions’ information request.
 
 
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Beginning in late March 2011 and continuing through the signing of the Acquisition Agreement, the Company held discussions regarding acquisition financing for Network Solutions with potential financing sources.
 
Beginning in early April 2011 and continuing through the date hereof, Mr. Brown had multiple telephone conversations with Tim Maudlin, lead director of the board of directors of the Company, to provide updates regarding the proposed acquisition of Network Solutions.
 
On April 3, 2011, Messrs. Brown and Levy held a phone meeting to discuss the potential transaction.
 
On April 12, 2011, Network Solutions gave the Company access to a dataroom with certain documents to allow the Company to conduct due diligence on Network Solutions.
 
On April 18, 2011, Mr. Brown, Kevin Carney, the Chief Financial Officer of the Company, and Mr. Wong met with Tim Kelly, Chief Executive Officer of Network Solutions, and Mr. Reidy to conduct due diligence on their respective businesses and discuss potential benefits that could be achieved by combining the businesses of the Company and Network Solutions.
 
On April 28, 2011, the board of directors of the Company, at its regularly scheduled meeting, discussed with Mr. Brown and the management of the Company a potential acquisition of Network Solutions, including an overview of potential synergies and an outline of possible financing terms that might be expected. After this discussion, the board of directors agreed that management should continue to explore a potential acquisition with Network Solutions and authorized Mr. Brown to discuss terms and timing of a potential acquisition with Network Solutions and the Seller.
 
On May 2, 2011, Mr. Brown called Mr. Levy to discuss potential values for the transaction.
 
On May 5, 2011, Mr. Brown called Mr. Levy to discuss the potential structure and terms of an acquisition of Network Solutions. Both agreed that additional due diligence and additional discussions were warranted.
 
On May 9, 2011, the board of directors of the Company met to discuss the status of discussions with Network Solutions and the Seller and was updated on the approximate amount of financing that would be required and more detail as to cost synergies that could be expected. The board authorized management to continue with its diligence discussions.
 
On May 11, 2011, Messrs. Brown and Carney meet with Robert Callahan, Chairman of the Board of Network Solutions, and Mr. Levy as well as other representatives of Network Solutions and representatives of Network Solutions’ financial advisor, Goldman, Sachs & Co. (“Goldman Sachs”), to discuss the proposed acquisition.
 
During May 2011, management of the Company continued to conduct its due diligence review of Network Solutions and refined its estimate as to potential cost synergies and the combination of operations of the Company and Network Solutions. On May 18, 2011, management of both the Company and Network Solutions met at the Company’s headquarters in Jacksonville, Florida to discuss the businesses of the two companies in more detail. Representatives of Wells Fargo Securities also were present at this meeting.
 
On May 20, 2011, Mr. Brown called Mr. Levy to discuss potential values for the transaction.
 
On May 25, 2011, Mr. Brown held a phone discussion with Mr. Levy to discuss potential terms of an acquisition. Both agreed that further discussions were warranted.
 
On May 26, 2011, the board of directors of the Company held a telephonic meeting to discuss the status of negotiations and due diligence to date with Network Solutions. Mr. Brown outlined the difference in the positions of the two parties and the possible issuance of shares of Company common stock to the stakeholders of Network Solutions as a component of the purchase price. The board reviewed potential financing for the proposed combination, with particular emphasis on the terms and financing scenarios under which the acquisition would be accretive. The board directed management to continue with discussions, including offering equity as part of the purchase price consideration.
 
 
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On June 2, 2011, the board of directors of the Company held a telephonic meeting to discuss the status of the proposed Network Solutions acquisition, including tax aspects relating to the acquisition, detail on potential synergies expected by the Company’s management and an outline of terms that the Company was proposing to present to Network Solutions. The board authorized management to present a letter of intent to Network Solutions, which was sent that afternoon.
 
On June 2, 2011, June 3, 2011 and June 8, 2011, Mr. Brown and Mr. Levy held telephone discussions regarding the terms of the proposed Network Solutions acquisition.
 
On June 8, 2011, Mr. Levy and representatives of Network Solutions’ financial advisor spoke with Mr. Brown regarding the terms of the proposed Network Solutions acquisition.
 
Later on June 8, 2011, Mr. Levy called Mr. Brown to discuss potential values for the transaction.
 
On June 9, 2011, Mr. Brown updated Mr. Maudlin on the current status of the negotiations.
 
On June 10, 2011, the Company’s and Network Solutions’ respective financial advisors discussed the Company’s proposal relayed by Mr. Levy to Mr. Brown on June 8, 2011.
 
On June 14, 2011, Messrs. Brown and Levy held a telephone discussion regarding the terms of the proposed Network Solutions acquisition, with particular emphasis on the price being offered as well as the Company’s requirement for a period of exclusivity to negotiate a definitive agreement.
 
On June 15, 2011, the board of directors of the Company held a telephonic board meeting to discuss the status of the proposed acquisition of Network Solutions, including exclusivity negotiations, the structure of the deal and the price that the Company believed it would need to offer to acquire Network Solutions. The board agreed that management should continue with negotiations.
 
Also on June 15, 2011, Messrs. Brown and Levy held a telephone discussion in which Mr. Brown outlined the proposed transaction from the perspective of the Company.
 
On June 17, 2011, Messrs. Wong and Reidy held additional discussions regarding due diligence and operational synergies of the combined organizations.
 
On June 20, 2011 and June 21, 2011, management of the Company continued discussions with a potential financing source regarding the terms of the proposed financing.
 
On June 21, 2011, Mr. Brown had a telephone conversation with Philip Facchina, a director of the Company, regarding proposed terms of the proposed acquisition of Network Solutions.
 
On June 22, 2011, Messrs. Brown and Levy met to negotiate open issues for the proposed acquisition of Network Solutions.
 
On June 27, 2011, Mr. Wong held a telephone conversation with representatives of a potential financing source regarding financing of the proposed acquisition of Network Solutions.
 
On June 28, 2011, Messrs. Brown and Levy held a telephone discussion to negotiate open issues for the proposed acquisition of Network Solutions.
 
Also on June 28, 2011, Mr. Brown and Deborah Quazzo, a director of the Company, held a telephone conversation regarding the proposed acquisition of Network Solutions and a review of the summary of terms including standstill and exclusivity proposals.
 
 
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Also on June 28, 2011, Mr. Brown held a telephone conference with the Company’s board of directors to provide an update regarding the proposed acquisition of Network Solutions and a review of the summary of terms including standstill and exclusivity proposals. The board members present directed Mr. Brown to provide the terms to Network Solutions.
 
On June 29, 2011, the Company sent a revised summary of terms to Network Solutions.
 
On June 30, 2011, Network Solutions responded with a revised term sheet.
 
Also on June 30, 2011, Mr. Levy and Abhishek Agrawal, a representative of General Atlantic, held a phone meeting with Mr. Brown and Mr. Wong during which they agreed that the Company and Network Solutions should conduct further due diligence.
 
On July 1, 2011, the Company’s and Network Solutions’ respective financial advisors held a conference call to discuss financial matters relating to both companies.
 
Also on July 1, 2011, Network Solutions opened its full electronic dataroom to the Company to allow the Company to conduct further due diligence on Network Solutions.
 
On July 5, 2011, Messrs. Wong and Carney held a telephone conversation with representatives of a potential financing source to discuss potential terms for the financing of the proposed acquisition of Network Solutions.
 
On July 7, 2011, the Company sent a revised term sheet to Network Solutions.
 
On July 8, 2011, Messrs. Brown and Levy held a telephone discussion to finalize discussions on mutually acceptable terms for the proposed acquisition of Network Solutions in sufficient detail to permit both sides to conduct the additional diligence that would be required before a definitive agreement could be signed.
 
Also on July 8, 2011, Messrs. Wong and Carney held telephone conversations with potential financing sources regarding financing of the proposed acquisition.
 
On July 9, 2011, a Standstill and Exclusivity Agreement letter was signed by the Company, Network Solutions and General Atlantic relating to a possible acquisition of Network Solutions.
 
On July 10, 2011, Mr. Wong held a telephone conversation with representatives of Network Solutions and the Seller to discuss next steps in the due diligence process as well as timing for reaching agreement on the terms of a definitive agreement.
 
On July 11, 2011, Mr. Brown held a telephone conversation with Mr. Kelly to discuss the diligence process and the vision for the combined companies following the proposed acquisition.
 
Also on July 11, 2011, Mr. Wong held a telephone conversation with representatives of a potential financing source regarding financing of the proposed acquisition.
 
On July 12, 2011, Company representatives met with representatives of Network Solutions in Herndon, Virginia to discuss the operations of that location.
 
On July 13, 2011, Company representatives met with representatives of Network Solutions in Hazleton, Pennsylvania to discuss the operations of that location.
 
On July 14, 2011, the Company’s management met with representatives of the Seller and Network Solutions, including Mr. Callahan and representatives of Network Solutions’ financial advisor, and provided them with an overview of different platform applications that the Company provides to its customers and offered the representatives a tour of the Company’s headquarters.
 
 
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Also on July 14, 2011, Messrs. Maudlin and Levy met to discuss the proposed acquisition.
 
On July 15, 2011, Messrs. Brown, Wong and Carney held a telephone discussion with a potential financing source regarding financing for the proposed acquisition.
 
Also on July 15, 2011, representatives of Network Solutions met with representatives of the Company in Jacksonville, Florida to discuss and work on a combined financial model for the proposed acquisition.
 
On July 18, 2011, Company representatives met with representatives of Network Solutions in Buenos Aires, Argentina to discuss the operations of that location.
 
On July 17, 2011, Messrs. Brown and Levy held a phone meeting to discuss a draft purchase agreement.
 
On July 20, 2011, Mr. Brown, and Jason Teichman, the Chief Marketing Officer of the Company, held a telephone discussion with Mr. Kelly regarding the proposed acquisition, including discussing areas of the Network Solutions business that the Company would like to review in greater detail.
 
On July 21, 2011, the Company hosted a meeting in Jacksonville, Florida with representatives of potential financing sources at which meeting the Company’s management reviewed the business of the Company and its views with respect to the combined company following the proposed acquisition of Network Solutions.
 
From July 21, 2011 through July 26, 2011, management of the Company held multiple conversations with representatives of several banks regarding financing and due diligence.
 
On July 22, 2011, Messrs. Brown and Maudlin held a telephone conversation to update Mr. Maudlin on the status of the discussions and due diligence regarding the proposed acquisition of Network Solutions.
 
On July 24, 2011, Messrs. Brown and Levy held multiple telephone conversations to discuss various points of disagreement that had arisen during the drafting of a definitive agreement for the proposed acquisition of Network Solutions.
 
Also on July 24, 2011, Messrs. Brown and Kelly held a telephone conversation to discuss the due diligence process and certain personnel matters.
 
On July 25, 2011, Messrs. Brown and Levy held a telephone conversation to discuss open issues that had arisen during the drafting of a definitive agreement for the proposed acquisition of Network Solutions.
 
Also on July 25, 2011, the Company, General Atlantic and Network Solutions entered into a letter agreement extending the exclusivity period to August 3, 2011.
 
On July 26, 2011, Messrs. Brown and Levy held a telephone conversation to discuss open matters for the proposed acquisition of Network Solutions.
 
Also on July 26, 2011, Messrs. Brown and Kelly held a telephone conversation to discuss structural matters related to the proposed acquisition of Network Solutions.
 
On July 27, 2011, management of the Company and representatives of a potential financing source held a telephone conversation to discuss financing terms related to the acquisition of Network Solutions.
 
On July 28, 2011, during a regular meeting of the board of directors of the Company, the board discussed the status of the proposed financing for and acquisition of Network Solutions, including the proposed purchase price and proposed timeline for execution of a definitive agreement. The board of directors reviewed the acquisition rationale, potential revenue and cost synergies, financing and status of due diligence efforts, among other items.
 
Also on July 28, 2011, Mr. Brown and Ms. Quazzo held a telephone conversation regarding representations, warranties and escrows related to the proposed acquisition of Network Solutions.
 
 
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On July 29, 2011, management of the Company, Cooley LLP, outside counsel for the Company, and representatives of Network Solutions, the Seller, and their counsel met telephonically to discuss proposed financing terms for the acquisition.
 
Also on July 29, 2011, Messrs. Brown and Wong had a telephone conversation with Mr. Agrawal regarding acquisition timing.
 
On August 1, 2011, the board of directors of the Company held a telephone conference to review the status of the proposed transaction. Representatives of the Company’s management and legal and financial advisors also participated in the meeting. Management and Cooley LLP reviewed with the board the due diligence conducted to date. Also at this meeting, Wells Fargo Securities reviewed with the board financial aspects of the proposed acquisition and the board of directors of the Company reviewed likely financing sources.
 
Also on August 1, 2011, Messrs. Brown and Facchina held a telephone conversation regarding the proposed acquisition of Network Solutions.
 
On August 2, 2011, management of the Company and the Company’s outside counsel held a telephone conference with management of Network Solutions, the Seller and their counsel to discuss the termination fee and other outstanding matters on the transaction documents.
 
On August 3, 2011, the board of directors of the Company held a telephonic board meeting. Representatives of the Company’s management and legal and financial advisors also participated in the meeting. Cooley LLP reviewed with the board the terms of the Acquisition Agreement and the Acquisition and its duties and responsibilities to the Company’s stockholders. Wells Fargo Securities reviewed with the Company’s board of directors its financial analysis of the purchase price payable by the Company in the Acquisition and delivered to the Company’s board of directors an oral opinion, confirmed by delivery of a written opinion dated August 3, 2011, to the effect that, as of that date and based on and subject to various assumptions and limitations described in the opinion, the purchase price to be paid by the Company in the Acquisition was fair, from a financial point of view, to the Company. After discussion, the Company’s board unanimously approved the acquisition of Network Solutions, and the terms of the Acquisition Agreement, the Stockholder Agreement and the Commitment Letter.
 
Later on August 3, 2011, the Acquisition Agreement was executed by the Company, Network Solutions, and the Seller, and the Company signed the Commitment Letter and related documents for the financing of the acquisition of Network Solutions.
 
Recommendations of the Company’s Board of Directors and its Reasons for the Acquisition
 
The following discussion of the Company’s reasons for the Acquisition contains a number of forward-looking statements that reflect the current views of the Company with respect to future events that may have an effect on its future financial performance. Forward-looking statements are subject to risks and uncertainties. Actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. Cautionary statements that identify important factors that could cause or contribute to differences in results and outcomes include those discussed in sections entitled “Cautionary Statement Regarding Forward-Looking Statements” and “Risk Factors” beginning on pages [·] and [·], respectively.
 
The Company is acquiring Network Solutions because the Company’s board of directors believes that the assets and operations of Network Solutions are complementary to those of the Company. By acquiring Network Solutions, the Company’s board of directors believes that the Acquisition will provide the following benefits:
 
The Foundation to Capitalize on the $19 Billion SMB Market Opportunity. It is estimated that in 2011 SMBs will spend more than $19 billion on web services like those to be offered by the combined company. The Company is expecting to see a significant shift from traditional marketing channels to online marketing as mass adoption of the Internet by SMBs continues. SMBs are looking to grow by leveraging the growing adoption of online local search, social media and mobile devices and are looking for cost- and time-efficient solutions to do so. The combined company will be well positioned with its end-to-end solution set and experience to capitalize on the larger market opportunity of helping SMBs with their online needs.
 
 
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The Creation of an Online Web Services Market Leader with Significant Scale. The combination of the Company and Network Solutions will create a single company with over $450 million of annualized non-GAAP revenue (as of June 30, 2011). The non-GAAP revenue excludes approximately $110 million of fair value adjustments resulting from the write down of deferred revenue.
 
In addition, as of June 30, 2011, the pro forma combined company has:
 
 
·
approximately three million paying subscribers;
 
 
·
more than nine million domains under management; and
 
 
·
more than 1,900 employees worldwide.
 
Significant Cross-Selling Opportunity for the End-to-End Solution Set Tailored for SMBs. Both the Company and Network Solutions utilize a high volume, multi-channel customer acquisition strategy that includes calls centers, online and direct marketing, and distribution partners. Each of the Company and Network Solutions markets a broad range of solutions that include domain name services, web services, online marketing, eCommerce and other related solutions designed and delivered specifically for SMBs. With the infusion of Network Solutions’ two million retail and wholesale customers, the Company will have a tremendous opportunity to up-sell and cross-sell its online marketing, Facebook, mobile and web services offerings. In addition, the Company’s approximately one million current subscribers will be offered a number of Network Solutions products and services that are complementary to the Company’s product suite.
 
Cost Synergies. The companies believe there are significant opportunities for operating cost synergies through the integration of the two businesses, which is expected to result in pre-tax savings of approximately $19 million in the first year following the acquisition and approximately $30 million by the end of 2013. The merger is expected to be accretive to the combined companies’ non-GAAP diluted earnings per share in its first full year (calendar year 2012). In addition to benefiting from the growing momentum in the Company’s standalone business, the companies expect to capitalize on growth opportunities resulting from complementary products, channels, and geographic presence.
 
Clear Path to Accelerating Growth and Improving Profitability. With the proposed Network Solutions acquisition, the Company will be creating an increasingly attractive financial profile, characterized by greater scale and growth, a recurring revenue model, improved free cash flow margins and increased profitability margins. Not only does the combination reap the benefits of an immediate increase in scale, but the Company also benefits from the customer profile of the Network Solutions customer base. A majority of Network Solutions’ customers are on multi-year contracts with upfront payment terms, resulting in significant free cash flow and contributing to lower overall customer churn rates. The expected greater profitability and unlevered free cash flow of the combined company, along with significant cost savings and operational efficiencies, will enable the Company to make additional investments in the key growth initiatives. The Company will have the resources to invest in branding initiatives that it expects will have an important long-term impact on establishing the Company as a leading provider of online marketing solutions to the small business community.
 
The Company’s board of directors also considered a number of potentially negative factors in assessing the advisability of the Acquisition, including the following:
 
 
·
the significant liquidity and cash flow risks the Company might face as a result of the cash expenditures, debt and capital commitments associated with the proposed Acquisition of Network Solutions and other recent acquisitions;
 
 
·
the possibility that the actual value of the Acquisition consideration the Company will pay to the Seller could significantly exceed the nominal value specified in the Acquisition Agreement;
 
 
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·
the fact that the calculation of the Acquisition consideration as specified in the Acquisition Agreement was not subject to adjustment in the event the value of the business or assets of Network Solutions declines before the Acquisition is completed;
 
 
·
the risk that the Acquisition would not occur if the conditions to closing are not met, and the possible adverse impact on the market price of the Company’s common stock as well as its business, financial condition and results of operations;
 
 
·
the possibility that, as shares of our common stock issued in the Acquisition become eligible for resale, the sale of those shares in the public market could adversely impact our stock price;
 
 
·
the possibility that the Company may not be able to integrate Network Solutions as quickly or as cost-effectively as the Company had expected, or that the Company might be unsuccessful in integrating the two companies altogether;
 
 
·
the possibility that management’s attention will be diverted from the day-to-day operations of the combined company during the integration of the two companies;
 
 
·
the challenges inherent in assimilating two business cultures;
 
 
·
the challenges involved in attracting and retaining key personnel, particularly in light of uncertainty regarding the Acquisition;
 
 
·
the difficulties in keeping existing customers and obtaining new customers that sometimes arise in light of uncertainty regarding an Acquisition;
 
 
·
the challenges involved in combining product offerings and sales and marketing activities;
 
 
·
the possibility that the Company may be unsuccessful expanding into the markets currently served by Network Solutions and in addressing the new opportunities the Company expects to arise out of the combination; and
 
 
·
the fact that the Company and Network Solutions both face strong competition for their products.
 
Overall, and after considering many positive and negative factors, the Company’s board of directors believes that the Acquisition represents an opportunity to enhance value for its stockholders.
 
The foregoing information and factors considered by the Company’s board of directors are not intended to be exhaustive but are believed to include all of the material factors considered by the Company’s board of directors. In view of the wide variety of factors considered in connection with its evaluation of the Acquisition and the complexity of these matters, the Company’s board of directors did not find it useful, and did not attempt, to quantify, rank or otherwise assign relative weights to these factors. In considering the factors described above, individual members of the Company’s board of directors may have given different weight to different factors. The Company’s board of directors conducted an overall review of the factors described above, including discussions with the Company’s management and legal and financial advisors, and considered the factors overall to be favorable to, and to support, its determination.
 
Opinion of the Company’s Financial Advisor
 
The Company engaged Wells Fargo Securities as its financial advisor in connection with the Acquisition. At an August 3, 2011 meeting of the Company’s board of directors held to evaluate the Acquisition, Wells Fargo Securities rendered to the Company’s board of directors an oral opinion, confirmed by delivery of a written opinion dated August 3, 2011, to the effect that, as of that date and based on and subject to the qualifications, limitations and assumptions stated in such opinion, the purchase price to be paid by the Company in the Acquisition was fair, from a financial point of view, to the Company.
 
 
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The full text of Wells Fargo Securities’ written opinion, dated August 3, 2011, is attached as Annex B to this proxy statement. The written opinion sets forth, among other things, the assumptions made, procedures followed, factors considered and limitations on the review undertaken by Wells Fargo Securities in rendering its opinion. The following summary is qualified in its entirety by reference to the full text of such opinion. The opinion was addressed to the Company’s board of directors (in its capacity as such) for its information and use in connection with its evaluation of the purchase price and related only to the fairness, from a financial point of view, to the Company of the purchase price to be paid by the Company in the Acquisition. Wells Fargo Securities’ opinion did not address the merits of the underlying decision by the Company to enter into the Acquisition Agreement or the relative merits of the Acquisition compared with other business strategies or transactions available or that have been or might be considered by the Company’s management or board of directors. The opinion does not constitute a recommendation to the Company’s board of directors or any other persons in respect of the Acquisition, including as to how any stockholder of the Company should vote or act in connection with the Acquisition or any other matters.

The terms of the Acquisition were determined through negotiations among the Company, Networks Solutions and the Seller, rather than by any financial advisor, and the decision to enter into the Acquisition Agreement was made by the Company’s board of directors. Wells Fargo Securities did not recommend any specific form of consideration to the Company’s board of directors or indicate that any specific form of consideration constituted the only appropriate consideration for the Acquisition. The opinion was only one of many factors considered by the Company’s board of directors in its evaluation of the Acquisition and should not be viewed as determinative of the views of the Company’s board of directors, management or any other party with respect to the Acquisition or the purchase price payable in the Acquisition.

In arriving at its opinion, Wells Fargo Securities, among other things:

 
·
reviewed a draft, provided to Wells Fargo Securities on August 3, 2011, of the Acquisition Agreement, including the financial terms of the Acquisition Agreement;

 
·
reviewed certain business, financial and other historical information regarding the Company that was publicly available, including annual reports to stockholders and annual reports on Form 10-K of the Company for the fiscal years ended December 31, 2008, 2009 and 2010, certain interim reports to stockholders and quarterly reports on Form 10-Q of the Company for the period ended March 31, 2011 and internal draft financial statements of the Company for the period ended June 30, 2011 prepared by the Company;

 
·
reviewed certain business, financial and other historical information regarding Network Solutions furnished to Wells Fargo Securities by Network Solutions, including audited consolidated balance sheets and financial statements relating to Network Solutions and its subsidiaries for the fiscal years ended December 31, 2008, 2009 and 2010 and unaudited consolidated balance sheets and financial statements relating to Network Solutions and its subsidiaries for the period ended June 30, 2011;

 
·
reviewed certain business, financial and other information regarding the Company and Network Solutions furnished to Wells Fargo Securities by the Company and Network Solutions, including financial forecasts and estimates for the fiscal years ending December 31, 2011 through 2015 relating to the Company prepared by the Company’s management and relating to Network Solutions prepared by Networks Solutions’ management as adjusted by the Company’s management;

 
·
discussed with the managements of the Company and Network Solutions the operations and prospects of the Company and Network Solutions, including the historical financial performance and trends in the results of operations of the Company and Network Solutions;
 
 
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·
discussed with the Company’s management the strategic rationale for the Acquisition, including potential cost synergies anticipated by the Company’s management to result from the Acquisition, referred to as the synergies;

 
·
participated in discussions among representatives of the Company, Network Solutions, the Seller and their respective advisors regarding the proposed Acquisition;

 
·
reviewed reported prices and trading activity for the Company’s common stock;

 
·
compared certain financial data of the Company and Network Solutions with each other and similar data of certain publicly traded companies that Wells Fargo Securities deemed relevant;

 
·
compared the proposed financial terms of the Acquisition with the financial terms of certain business combinations and other transactions that Wells Fargo Securities deemed relevant;

 
·
analyzed the estimated present value of the future cash flows of the Company and Network Solutions based upon the financial forecasts referred to above, estimates of certain tax assets of Network Solutions prepared by Network Solutions’ management and other assumptions relating to the Company and Network Solutions discussed with and confirmed as reasonable by the managements of the Company and Network Solutions;
 
 
·
reviewed the potential pro forma financial impact of the Acquisition on the Company after giving effect to the synergies based upon the financial forecasts referred to above, estimates and other assumptions relating to the Company and Network Solutions and alternative financing terms for the Acquisition discussed with and confirmed as reasonable by the managements of the Company and Network Solutions; and

 
·
considered other information, such as financial studies, analyses, and investigations, as well as financial, economic and market criteria, which Wells Fargo Securities deemed relevant.

In connection with its review, Wells Fargo Securities assumed and relied upon the accuracy and completeness of the financial and other information provided or otherwise made available to Wells Fargo Securities and discussed with or reviewed by Wells Fargo Securities, including all accounting, tax and legal information, and Wells Fargo Securities did not make (and assumed no responsibility for) any independent verification of such information. Wells Fargo Securities relied upon assurances of the managements of the Company and Network Solutions that they were not aware of any facts or circumstances that would make such information inaccurate or misleading. With respect to the financial forecasts and estimates (including adjustments thereto) and other information, including the synergies, utilized in Wells Fargo Securities’ analyses, Wells Fargo Securities was advised by the managements of the Company and Network Solutions and, at the Company’s direction, assumed that they were reasonably prepared and reflected the best currently available estimates, judgments and assumptions of the managements of the Company and Network Solutions, as the case may be, as to the future financial performance of the Company and Network Solutions, such synergies and the other matters covered thereby. Wells Fargo Securities assumed no responsibility for, and expressed no view as to, such forecasts, estimates or other information utilized in Wells Fargo Securities’ analyses or the judgments or assumptions upon which they were based. Wells Fargo Securities also assumed that there were no material changes in the condition (financial or otherwise), results of operations, business or prospects of the Company and Network Solutions since the respective dates of the most recent financial statements and other information provided to Wells Fargo Securities. In arriving at Wells Fargo Securities’ opinion, Wells Fargo Securities did not conduct any physical inspection or assessment of the facilities or assets of the Company or Network Solutions and did not make, and was not provided with, any evaluations or appraisals of the assets or liabilities (contingent or otherwise) of the Company or Network Solutions.
 
 
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In rendering its opinion, Wells Fargo Securities assumed, at the Company’s direction, that the final form of the Acquisition Agreement, when signed by the parties thereto, would not differ from the draft reviewed by Wells Fargo Securities in any respect material to Wells Fargo Securities’ opinion, that the Acquisition would be consummated in accordance with the terms described in the Acquisition Agreement and in compliance with all applicable laws, without amendment or waiver of any material terms or conditions, and that in the course of obtaining any necessary legal, regulatory or third party consents, approvals or agreements for the Acquisition, no delay, limitation or restriction would be imposed or action would be taken that would have an adverse effect on the Company, Network Solutions or the contemplated benefits of the Acquisition. Wells Fargo Securities further assumed, at the Company’s direction, that there would be no adjustments to the purchase price (including, without limitation, with respect to Network Solutions’ estimated net debt or other amounts payable at closing or as a result of any election made by the Company) that would be material in any respect relevant to Wells Fargo Securities’ analyses or opinion. Wells Fargo Securities did not express an opinion as to what the value of the Company common stock actually would be when issued pursuant to the Acquisition, the price at which the Company common stock would trade at any time or the price at which membership interests in Network Solutions would trade (if a public trading market for such securities existed) or would otherwise be transferable at any time. Wells Fargo Securities’ opinion was necessarily based on economic, market, financial and other conditions existing, and information made available to Wells Fargo Securities, as of the date of its opinion. As the Company is aware, the credit, financial and stock markets have been experiencing unusual volatility and Wells Fargo Securities expressed no opinion or view as to any potential effects of such volatility on the Company, Network Solutions or the contemplated benefits of the Acquisition. Although subsequent developments may affect its opinion, Wells Fargo Securities does not have any obligation to update, revise or reaffirm its opinion.

Wells Fargo Securities’ opinion only addressed the fairness, from a financial point of view, to the Company of the purchase price to be paid by the Company in the Acquisition to the extent expressly specified in its opinion and did not address any other terms, aspects or implications of the Acquisition, including, without limitation, the form or structure of the purchase price (or any adjustments or election relating thereto) or the Acquisition, any terms of Network Solutions’ indebtedness or contractual or other arrangements underlying amounts payable pursuant to the Acquisition, any tax or accounting matters relating to the Acquisition or otherwise, any financings contemplated to be undertaken by the Company in connection with the Acquisition or any terms, aspects or implications of any other agreement, arrangement or understanding entered into in connection with or contemplated by the Acquisition or otherwise. In addition, Wells Fargo Securities’ opinion did not address the fairness of the amount or nature of, or any other aspects relating to, any compensation to be received by any officers, directors or employees of any parties to the Acquisition, or class of such persons, relative to the purchase price or otherwise. The issuance of Wells Fargo Securities’ opinion was approved by an authorized committee of Wells Fargo Securities. Except as described in this summary, the Company imposed no other instructions or limitations on Wells Fargo Securities with respect to the investigations made or procedures followed by Wells Fargo Securities in rendering its opinion.

In connection with rendering its opinion, Wells Fargo Securities performed certain financial, comparative and other analyses as summarized below. This summary is not a complete description of the financial analyses performed and factors considered in connection with such opinion. In arriving at its opinion, Wells Fargo Securities did not ascribe a specific range of values to Network Solutions or to shares of the Company’s common stock but rather made its determinations as to the fairness, from a financial point of view, to the Company of the purchase price to be paid by the Company in the Acquisition on the basis of various financial and comparative analyses taken as a whole. The preparation of a financial opinion is a complex process and involves various determinations as to the most appropriate and relevant methods of financial and comparative analyses and the application of those methods to the particular circumstances. Therefore, a financial opinion is not readily susceptible to summary description.

In arriving at its opinion, Wells Fargo Securities did not attribute any particular weight to any single analysis or factor considered but rather made qualitative judgments as to the significance and relevance of each analysis and factor relative to all other analyses and factors performed and considered and in the context of the circumstances of the particular transaction. Accordingly, the analyses must be considered as a whole, as considering any portion of such analyses and factors, without considering all analyses and factors as a whole, could create a misleading or incomplete view of the process underlying such opinion. The fact that any specific analysis has been referred to in the summary below is not meant to indicate that such analysis was given greater weight than any other analysis referred to in the summary. No company, business or transaction reviewed is identical to Network Solutions, the Company or the Acquisition. An evaluation of these analyses is not entirely mathematical; rather, the analyses involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the public trading or other values of the companies, business segments or transactions reviewed.
 
 
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In performing its analyses, Wells Fargo Securities considered industry performance, general business and economic conditions and other matters existing as of August 2, 2011, many of which are beyond the control of the Company, Network Solutions, the Seller or any other parties to the Acquisition. None of the Company, Network Solutions, the Seller or Wells Fargo Securities or any other person assumes responsibility if future results are different from those discussed, whether or not any such difference is material. Any estimates contained in these analyses and the ranges of valuations resulting from any particular analysis are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than as set forth below. In addition, analyses relating to the value of businesses or securities do not purport to be appraisals or necessarily reflect the prices at which businesses or securities may actually be sold or acquired. Accordingly, the assumptions and estimates used in, and the results derived from, the following analyses are inherently subject to substantial uncertainty.

The following is a summary of the material financial analyses provided on August 3, 2011 to the Company’s board of directors by Wells Fargo Securities in connection with its opinion. Certain financial analyses summarized below include information presented in tabular format. In order to fully understand the financial analyses, the tables must be read together with the text of each summary, as the tables alone do not constitute a complete description of the financial analyses. Considering the data in the tables below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of such financial analyses. For purposes of the financial analyses summarized below, the term “implied purchase price” refers to $770.0 million, assuming no cash consideration election by the Company in connection with the Acquisition and calculated as (i) the cash consideration of $405.0 million, (ii) the implied value of the stock consideration of $146.5 million based on 18.0 million shares of Company common stock and the Company’s closing stock price of $8.14 per share on August 2, 2011 (the last trading day prior to public announcement of the Acquisition) and (iii) the payment at closing of Network Solutions’ net indebtedness and certain other amounts, which the Company’s management instructed Wells Fargo Securities to assume would be $218.5 million.

Network Solutions Financial Analyses

Selected Companies Analysis. Wells Fargo Securities reviewed and compared financial and operating data relating to Network Solutions and the following seven selected publicly traded companies that provide Internet and online marketing services primarily for small businesses, referred to as the selected companies:

 
·
Constant Contact, Inc.
 
·
Digital River, Inc.
 
·
Group NBT plc
 
·
iomart Group plc
 
·
Marchex, Inc.
 
·
Melbourne IT Ltd.
 
·
Web.com Group, Inc.

Wells Fargo Securities reviewed, among other things, enterprise values of the selected companies, calculated as equity value based on closing stock prices on August 2, 2011, plus book value of net debt, capitalized leases, preferred stock and minority interest, as a multiple of calendar years 2011 and 2012 estimated earnings before interest, taxes, depreciation and amortization, referred to as EBITDA. Wells Fargo Securities then applied selected ranges of calendar years 2011 and 2012 estimated EBITDA multiples of 8.5x to 12.5x and 7.0x to 10.0x, respectively, derived from the selected companies to Network Solutions’ calendar years 2011 and 2012 estimated adjusted EBITDA and adjusted cash EBITDA, respectively. Adjusted EBITDA refers to EBITDA as adjusted for non-recurring items and excluding stock-based compensation expense and deferred revenue write-downs required in purchase accounting. Adjusted cash EBITDA refers to adjusted EBITDA based on bookings instead of revenue. Financial data of the selected companies were based on publicly available research analysts’ estimates, public filings and other publicly available information. Financial data of Network Solutions were based on internal estimates of Network Solutions’ management as adjusted by the Company’s management. This analysis indicated the following approximate implied enterprise value reference ranges for Network Solutions, as compared to the implied purchase price:

 
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Implied Enterprise Value
 Reference Ranges for Network Solutions Based on:
 
Implied Purchase Price
 2011 Adjusted EBITDA
 
2012 Adjusted EBITDA
    
$692 million - $1,018 million
 
$591 million - $844 million
   
        $770.0 million
2011 Adjusted Cash EBITDA
 
2012 Adjusted Cash EBITDA
   
$799 million - $1,176 million
 
$664 million - $949 million
   

Selected Transactions Analysis. Wells Fargo Securities reviewed financial information, to the extent publicly available, relating to the following seven selected transactions involving companies that provide Internet and online marketing services primarily for small businesses:

Announcement
Date
 
Acquiror
 
Target
June 2011
 
·     KKR & Co. L.P., Silver Lake Partners, L.P., Technology Crossover Ventures, L.P.
 
·     The Go Daddy Group, Inc.
June 2010
 
·     Web.com Group, Inc.
 
·     Register.com, Inc.
October 2008
 
·     Accel-KKR Company LLC
 
·     The Endurance International Group, Inc.
June 2008
 
·     Deluxe Corporation
 
·     Hostopia.com Inc.
June 2007
 
·     Website Pros, Inc. (predecessor to Web.com Group, Inc.)
 
·     Web.com, Inc.
February 2007
 
·     Affiliates of General Atlantic LLC
 
·     Network Solutions, LLC
August 2005
 
·     Vector Capital Corporation
 
·     Register.com, Inc.

Wells Fargo Securities reviewed, among other things, transaction values of the selected transactions, calculated as the equity value of the target company plus book value of net debt, capitalized leases, preferred stock and minority interest, as a multiple of such target company’s latest 12 months adjusted EBITDA based on publicly available information at the time of announcement of the relevant transaction. Wells Fargo Securities then applied a selected range of latest 12 months adjusted EBITDA multiples of 10.5x to 12.5x derived from the selected transactions to Network Solutions’ latest 12 months (as of September 30, 2011) adjusted EBITDA and adjusted cash EBITDA based on internal estimates of Network Solutions’ management. This analysis indicated the following approximate implied enterprise value reference ranges for Network Solutions, as compared to the implied purchase price:
 
Implied Enterprise Value
Reference Ranges for Network Solutions Based on:
 
Implied
Purchase Price
LTM Adjusted EBITDA
 
LTM Adjusted Cash EBITDA
    
$858 million - $1,022 million
 
$972 million - $1,157 million
 
$770.0 million
 
Discounted Cash Flow Analysis. Wells Fargo Securities performed a discounted cash flow analysis of Network Solutions utilizing internal estimates of Network Solutions’ management as adjusted by the Company’s management, estimates of Network Solutions’ management as to certain tax assets (excluding net operating losses) of Network Solutions and estimates of the Company’s management as to potential net synergies anticipated to result from the Acquisition. Wells Fargo Securities calculated a range of implied present values of the standalone unlevered free cash flows that Network Solutions was forecasted to generate during the fourth quarter of calendar year 2011 through the full calendar year 2015 and of terminal values for Network Solutions based on Network Solutions’ calendar year 2015 estimated unlevered free cash flows. Implied terminal values were derived by applying to Network Solutions’ calendar year 2015 unlevered free cash flows a range of perpetuity growth rates of 2.0% to 4.0%. Present values (as of September 30, 2011) of cash flows, terminal values, tax assets and potential net synergies were calculated using a discount rate range of 10.0% to 12.0%. This analysis indicated the following approximate implied enterprise value reference ranges for Network Solutions both without and with potential net synergies, as compared to the implied purchase price:

 
37

 

Implied Enterprise Value
Reference Ranges for Network Solutions
 
Implied
Purchase Price
Without Synergies
 
With Synergies
    
$739 million - $1,125 million
 
$953 million - $1,391 million
 
$770.0 million

Web.com Financial Analyses

Selected Companies Analysis. Wells Fargo Securities reviewed and compared financial and operating data relating to the Company with the selected companies referred to above under “Selected Companies Analysis” for Network Solutions, excluding the Company. Wells Fargo Securities reviewed, among other things, enterprise values of the selected companies, calculated as equity value based on closing stock prices on August 2, 2011, plus book value of net debt, capitalized leases, preferred stock and minority interest, as a multiple of calendar years 2011 and 2012 estimated EBITDA. Wells Fargo Securities then applied selected ranges of calendar years 2011 and 2012 estimated EBITDA multiples of 8.5x to 12.5x and 7.0x to 10.0x, respectively, derived from the selected companies to the Company’s calendar years 2011 and 2012 estimated adjusted EBITDA. Financial data of the selected companies were based on publicly available research analysts’ estimates, public filings and other publicly available information. Financial data of the Company were based on internal estimates of the Company’s management. This analysis indicated the following approximate implied per share equity value reference ranges for the Company, as compared to the Company’s closing stock price on August 2, 2011:
 
Implied Per Share Equity Value
 Reference Ranges for the Company Based on:
 
Company
 Closing Stock Price
 2011 Adjusted EBITDA
 
 2012 Adjusted EBITDA
   
$8.89 - $13.43
 
$9.48 - $13.84
 
$8.14
 
Discounted Cash Flow Analysis. Wells Fargo Securities performed a discounted cash flow analysis of the Company to calculate a range of implied present values of the standalone unlevered free cash flows that the Company was forecasted to generate during the fourth quarter of calendar year 2011 through the full calendar year 2015 and of terminal values for the Company based on the Company’s calendar year 2015 estimated unlevered free cash flows utilizing internal estimates of the Company’s management. Implied terminal values were derived by applying to the Company’s calendar year 2015 unlevered free cash flows a range of perpetuity growth rates of 2.0% to 4.0%. Present values (as of September 30, 2011) of cash flows and terminal values were calculated using a discount rate range of 10.0% to 12.0%. This analysis indicated the following approximate implied per share equity value reference range for the Company, as compared to the Company’s closing stock price on August 2, 2011:
 
Implied Per Share Equity Value
 Reference Range for the Company
 
Company
 Closing Stock Price
$10.28 - $16.69
 
$8.14
 
Miscellaneous

Wells Fargo Securities is the trade name for certain capital markets and investment banking services of Wells Fargo & Company and its subsidiaries, including Wells Fargo Securities, LLC. Wells Fargo Securities is an internationally recognized investment banking firm which is regularly engaged in providing financial advisory services in connection with mergers and acquisitions. The Company selected Wells Fargo Securities because of its qualifications, reputation and experience and its familiarity with the Company and its business.
 
 
38

 

As compensation for Wells Fargo Securities’ financial advisory services to the Company in connection with the Acquisition, the Company has agreed to pay Wells Fargo Securities an aggregate fee of $5.0 million, a portion of which was payable upon delivery of its opinion and $3.5 million of which will be payable upon consummation of the Acquisition. In addition, in the event that the Company exercises its cash consideration election and undertakes an equity offering, Wells Fargo Securities may participate in such equity offering and would expect to receive customary fees in connection therewith. The Company also has agreed to reimburse certain of Wells Fargo Securities’ expenses, including fees and disbursements of Wells Fargo Securities’ counsel, and to indemnify Wells Fargo Securities and certain related parties against certain liabilities that may arise out of Wells Fargo Securities’ engagement. Wells Fargo Securities and its affiliates provide a full range of investment banking and financial advisory, securities trading, brokerage and lending services in the ordinary course of business, for which Wells Fargo Securities and such affiliates receive customary fees. In connection with unrelated matters, Wells Fargo Securities and its affiliates in the past have provided, currently are providing and in the future may provide banking and financial services to the Company, for which Wells Fargo Securities and such affiliates have received and expect to receive fees, including during the two-year period prior to the date of its opinion (i) having acted as a co-financial advisor to the Company in its acquisition of Register.com in 2010 and (ii) having acted or acting as joint lead arranger, joint bookrunner and syndication agent for, and as a lender under, certain credit facilities of the Company. In addition, Wells Fargo Securities and its affiliates provide other commercial banking services (such as treasury management, investment and foreign exchange services) to the Company. In the ordinary course of business, Wells Fargo Securities and its affiliates may actively trade, hold or otherwise effect transactions, in the securities or financial instruments (including bank loans or other obligations) of the Company, General Atlantic, Network Solutions and their respective affiliates for Wells Fargo Securities’ and its affiliates’ own account and for the accounts of customers and, accordingly, may at any time hold a long or short position in such securities or financial instruments.
 
Board of Directors and Executive Officers of the Company After the Completion of the Acquisition
 
Board of Directors
 
Upon completion of the Acquisition, the Company’s board of directors will be comprised of seven members, including the six current directors of the Company and Anton Levy, a new director designated by an affiliate of the Seller. Subject to the Company’s compliance with applicable law, exchange listing requirements, and the board of directors’ fiduciary duties, Mr. Levy will be appointed as a member of the compensation committee of the Company’s board of directors. The Company’s obligations with respect to the election of a director designated by the affiliate of the Seller are described in the section entitled “The Acquisition Agreement—Stockholder Agreement” beginning on page [·].
 
Anton J. Levy, age 36, is a Managing Director at General Atlantic, where he has worked since 1998. Mr. Levy heads General Atlantic’s Global Internet and Technology practice and serves on the firm’s Executive Committee. Mr. Levy has worked closely with many of General Atlantic’s portfolio companies and is a director of several portfolio companies including Affinion Group, AKQA, Gilt Groupe, Mercado Libre (NASDAQ: MELI), Network Solutions and Red Ventures and manages a number of the firm’s other investments in the Internet, marketing services and media areas. He formerly served on the boards of Dice Holdings (NYSE: DHX) and Zantaz Corporation. Prior to joining General Atlantic, Mr. Levy was an investment banker with Morgan Stanley & Co. where he worked with the firm’s technology clients. Mr. Levy is involved in a number of educational and non-profit organizations including serving on the board of directors of WNYC, New York Public Radio, University of Virginia’s Endowment (UVIMCO) and Streetwise Partners, where he serves as Vice Chairman. Mr. Levy received a B.S. from the University of Virginia, with degrees in Finance and Computer Science, and his M.B.A. from Columbia University Graduate School of Business, graduating both with highest honors.
 
Of the six current directors of the Company, five meet the independence standards of the SEC and the NASDAQ Stock Market LLC, or NASDAQ, with respect to the Company, and one of the Company’s directors, David Brown, is employed by the Company as its Chief Executive Officer. The Company’s Nominating and Corporate Governance Committee and board of directors will determine whether Mr. Levy is independent under the rules of the SEC and listing standards of the NASDAQ.
 
Executive Officers
 
There are currently no expected changes with regard to the Company’s executive officers following the completion of the Acquisition.
 
 
39

 

Interests of the Company’s Directors and Executive Officers in the Acquisition
 
In considering the recommendation of the Company’s board of directors to vote “FOR” the Company’s Share Issuance Proposal, the Company’s stockholders should be aware that certain members of the Company’s board of directors and certain executive officers of the Company’s have interests in the Acquisition that may be in addition to, or different from, their interests as the Company’s stockholders. These interests may create the appearance of a conflict of interest. The Company’s board of directors was aware of these potential conflicts of interest during its deliberations on the merits of the Acquisition and in making its decisions in approving the Acquisition Agreement, the Acquisition and the other transactions contemplated by the Acquisition Agreement.
 
Each of the current members of the Company’s board of directors will continue as a director of the Company following the completion of the Acquisition, and will hold office from and after the completion of the Acquisition until the end of each such director’s term and until their successor is duly elected and qualified or until their death, resignation or removal. It is expected that all of the Company’s executive officers will continue to serve in their current positions following the completion of the Acquisition.
 
 
40

 

Interests of Network Solutions’ Directors and Executive Officers in the Acquisition
 
In considering the recommendation of the Company’s board of directors to vote “FOR” the Company’s Share Issuance Proposal, the Company’s stockholders should be aware that certain members of the Seller’s board of directors and certain executive officers of Network Solutions, LLC have interests in the Acquisition that may be in addition to, or different from, the interests of the Company’s stockholders. These interests may create the appearance of a conflict of interest. The Company’s board of directors was aware of these potential conflicts of interest during its deliberations on the merits of the Acquisition and in making its decisions in approving the Acquisition Agreement, the Acquisition and the other transactions contemplated by the Acquisition Agreement.
 
Indemnification and Insurance
 
The Acquisition Agreement provides that for a period of six years after the Acquisition is completed, or such longer period as provided in any applicable agreement in effect on the date of the Acquisition Agreement, the Company will cause Network Solutions to honor (including assuming any obligations of the Seller) all rights to indemnification existing as of August 3, 2011 and permissible under applicable law for acts or omissions occurring prior to the completion of the Acquisition in favor of the employees currently indemnified by Network Solutions or any of its subsidiaries, or any current or former employee, officer, director, general partner and member of any executive committee of the Seller currently indemnified by the Seller, as provided in the organizational documents, indemnity agreements or board resolutions of the Seller, Network Solutions or such subsidiary, and not to amend, repeal or otherwise modify such obligations. The Acquisition Agreement further provides that for a period of six years after the completion of the Acquisition, the Company and Network Solutions or a subsidiary of Network Solutions, as applicable, will purchase and maintain a “tail” directors’ and officers’ policy providing liability insurance coverage for the benefit of those persons who are covered by the Seller’s or Network Solutions’ and its subsidiaries’ directors’ and officers’ liability insurance policy as of August 3, 2011 or at the completion of the Acquisition.
 
Golden Parachute Compensation
 
The information below is intended to comply with Item 402(t) of Regulation S−K. Network Solutions' named executive officers are eligible to receive compensation from the Seller, Network Solutions or a subsidiary of Network Solutions that is based on or that otherwise relates to the Acquisition (the "Golden Parachute Compensation"), described more fully below.
 
The following table sets forth the estimated amounts of Golden Parachute Compensation that each Network Solutions named executive officer could receive in connection with the Acquisition , assuming the following:
 
 
·
the Acquisition is completed on November 30, 2011; and
 
 
·
the per unit value of the restricted stock units, Class A-2 profits interests units and phantom units is $1.64 per unit.
 
The actual amounts, if any, to be received by a named executive officer may differ in material respects from the amounts set forth below. No named executive officer is entitled to any enhanced payments related to pension benefits or nonqualified deferred compensation arrangements, or tax reimbursement payments.

 
41

 

Golden Parachute Compensation
 
Name
 
Event
 
Cash
$ (1)
   
Equity
$ (2)
   
Perquisites and
Benefits $ (3)
   
Total $
 
Timothy Kelly
 
Single Trigger
          1,978,980             1,978,980  
Chief Executive Officer
 
Double Trigger
                           
Miles Reidy
 
Single Trigger
          1,063,585             1,063,585  
Chief Financial Officer and
 
Double Trigger
                           
Chief Operating Officer
                               
Bobby N. Turnage, Jr.
 
Single Trigger
    353,118       91,596             444,714  
Senior Vice President and
 
Double Trigger
    289,060               22,000       311,060  
General Counsel
                                   
Steven Olson
 
Single Trigger
    155,485       129,497               284,982  
Senior Vice President of
 
Double Trigger
    206,153               19,000       225,153  
Corporate Development
                                   
Kurt Gastrock
 
Single Trigger
    431,928       170,964               602,892  
Senior Vice President of Product
 
Double Trigger
    200,850               19,000       219,850  
Development, Enterprise Sales,
                                   
and Wholesale
                                   
 
(1) Represents payments to Messrs. Turnage, Olson, and Gastrock of (a) in the case of single trigger benefits, (i) cash transaction incentive bonuses payable as of the closing, and (ii) a pro-rata annual bonus for 2011 in the amount of $119,237 for Mr. Turnage, $113,384 for Mr. Olson and $110,468 for Mr. Gastrock, which we have assumed will be paid on March 18, 2012, and (b) in the case of double trigger benefits, cash severance payable if the executive is terminated without cause or leaves for good reason within one year following the Acquisition.
  
(2) Represents amounts payable as of closing (less applicable taxes) in respect of previously unvested restricted stock units and Class A-2 profits interests units of the Seller and phantom units of Network Solutions:
 
 
·
Mr. Kelly: $1,726,213 for 1,054,688 restricted stock units, and $252,767 for 450,000 Class A-2 profits interest units which share in appreciation above $1.075 per unit.
 
 
·
Mr. Reidy: $895,073 for 546,875 restricted stock units, and $168,512 for 300,000 Class A-2 profits interest units which share in appreciation above $1.075 per unit.
 
 
·
Mr. Turnage: $80,400 for 125,000 Class A-2 units which share in appreciation above $1.00 per unit, and $11,196 for 30,000 phantom units which share in appreciation above $1.27 per unit.
 
 
·
Mr. Olson: $109,344 for 170,000 Class A-2 units which share in appreciation above $1.00 per unit, and $20,153 for 54,000 phantom units which share in appreciation above $1.27 per unit.
 
 
·
Mr. Gastrock: $170,964 for 270,000 phantom units which share in appreciation above $1.01 per unit.
 
(3) Represents the estimated cost of continued health and welfare benefit plan coverage for each of Messrs. Turnage, Olson and Gastrock during the applicable severance period, and also includes $10,000 per executive representing the estimated cost of outplacement services.
 
Employment Agreements. The Seller and a subsidiary of Network Solutions have entered into employment agreements with Messrs. Kelly and Reidy that provide for severance payments and benefits payable upon a termination of employment without cause or for good reason (as defined in such agreements), regardless of whether such termination occurs in connection with a change of control of Network Solutions or its affiliates. Such severance payments and benefits generally include:
 
 
42

 

 
·
continued payment of base salary for a period of twelve months, payable in bi-monthly installments;
 
 
·
a lump sum payment equal to such executive’s pro rated annual bonus, calculated based on Network Solutions’ actual performance to date and assuming that any personal or subjective performance criteria shall be deemed to be satisfied at target; and
 
 
·
continued health and welfare benefits for the executive and his dependents for up to twelve months.
 
The payment of severance benefits to each such executive is conditioned upon the execution of a release of claims and continued compliance with a noncompetition restriction during the twelve month severance period. Messrs. Kelly and Reidy’s employment agreements also provide for accelerated vesting of certain equity awards, as described in more detail below under the subheading “Equity Arrangements.”
 
Transaction Incentive Arrangements. A subsidiary of Network Solutions has entered into letter agreements with each of Messrs. Turnage, Olson and Gastrock that provide for (a) severance payments and benefits, (b) transaction bonus payments (including a pro-rata annual bonus for fiscal year 2011) and (c) accelerated vesting of certain equity awards, in each case in connection with the occurrence of a qualifying change of control of Network Solutions, which includes this Acquisition.
 
The severance payments and benefits payable upon a termination of employment without cause or for good reason (each as defined in the letter agreements) within the twelve month period following the closing are as follows:
 
 
·
continued payment of base salary for a period of nine months (twelve months in the case of Mr. Turnage), payable in accordance with the current payroll practices;
 
 
·
continued health and welfare benefits for each such executive and his dependents for up to nine months (twelve months in the case of Mr. Turnage); and
 
 
·
outplacement services consistent with then-current company guidelines.
 
The pro-rata annual bonus is payable in a lump sum on the earlier of March 18, 2012 and the date of termination of the executive’s employment without cause, and is calculated based on Network Solutions’ actual performance to date. The cash transaction bonus payable to Messrs. Turnage, Olson and Gastrock will be made in a lump sum at the closing and shall equal a multiple of such individual’s base salary and target bonus as of the closing, less any amounts paid or payable pursuant to his equity or phantom equity awards, and any amount paid to such executive in December 2010 as a special cash bonus. The letter agreements also provide for accelerated vesting of certain equity awards, as described in more detail below under the subheading “Equity Arrangements.”
 
Equity Arrangements. An affiliate of the Seller has granted Class A-2 units, or “profits interests,” in the Seller to Messrs. Kelly, Reidy, Turnage and Olson. At the closing such executives will be entitled to receive from the Seller an amount in cash and stock equal to the product of the total number of vested Class A-2 units subject to such award, multiplied by the aggregate value of the excess, if any, of the value of the units at closing over the value set by the Seller on the date of grant. Under the terms of certain profits interest awards issued to Messrs. Kelly and Reidy in October 2009, 50% of the award is subject to time-based vesting, and 50% of the award is subject to performance-based vesting. As provided in the employment agreements with Messrs. Kelly and Reidy, as a result of the Acquisition (x) all of the then-unvested profits interests subject to a time-based vesting schedule shall become fully vested in connection with the Acquisition, and (y) it is expected that the remaining portion of the award subject to performance-based vesting that would have been eligible to vest as a result of the Acquisition if the targeted value of the Company’s common stock as of the closing (or the amount per share paid in cash in lieu of issuing shares of the Company’s common stock upon exercise of the cash consideration election) had been met will not vest as a result of the Acquisition. As provided in the letter agreements with Messrs. Turnage and Olson, all remaining unvested profits interest awards held by such executives will fully accelerate as of the closing of the Acquisition.
 
 
43

 

The Seller has also granted restricted stock units to Messrs. Kelly and Reidy. The number of unvested units that would otherwise have become vested through February 1, 2013 based on continued service through such date will accelerate and vest as a result of the Acquisition, and any remaining unvested restricted stock units shall be forfeited. At the closing such executives will be entitled to receive from the Seller an amount in cash and stock equal to the number of vested restricted stock units multiplied by the value of the units at closing, and less the amount of any tax withholding.
 
Network Solutions has also granted phantom units pursuant to its phantom equity incentive plan to each of Messrs. Turnage, Olson and Gastrock. Under the terms of the letter agreements entered into by Network Solutions and each of Messrs. Turnage, Olson and Gastrock, any unvested phantom units will fully accelerate as of the closing. All phantom units will be canceled at the closing in exchange for an amount in cash equal to the product of the total number of vested phantom units subject to such award, multiplied by the aggregate value of the excess, if any, of the value of the units at closing as determined by the board of directors of Network Solutions, over the value set by Network Solutions on the date of grant, and less the amount of any tax withholding.
 
Anticipated Accounting Treatment
 
The Acquisition is expected to be accounted for using the acquisition method as required in Accounting Standards Codification 805, Business Combinations. As such, fair values will be assigned to the assets and liabilities acquired and the excess of the total purchase price over the fair value of the net assets acquired will be recorded as goodwill. The Company, with the assistance of independent valuation professionals, has calculated preliminary fair values of certain intangible assets; however the allocation is based upon a valuation that has not yet been finalized. The goodwill represents business benefits the Company anticipates realizing from optimizing resources and cross-sale opportunities.
 
Regulatory Approvals Required for the Acquisition
 
Under the HSR Act and the rules promulgated thereunder, the Acquisition may not be completed until notifications have been given and information furnished to the FTC and to the Antitrust Division and the specified waiting period has been terminated or has expired. The Company and an affiliate of the Seller each filed notification and report forms under the HSR Act with the FTC and the Antitrust Division on August 12, 2011. As a result, the waiting period applicable to the Acquisition is scheduled to expire at 11:59 p.m., Eastern Time, on September 12, 2011. However, prior to such time, the FTC or the Antitrust Division may extend the waiting period by requesting additional information or documentary material relevant to the Acquisition from the Company and such affiliate of the Seller. If such a request is made, the waiting period will be extended until 11:59 p.m., Eastern Time, on the 30th day after substantial compliance by both the Company and such affiliate of the Seller with such request, or on the next business day following that date if the 30th day would fall on a weekend or federal holiday. Thereafter, such waiting period can be extended only by court order.
 
At any time before or after the completion of the Acquisition, the FTC or the Antitrust Division could take any action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the completion of the Acquisition or seeking divestiture of substantial assets of the Company or Network Solutions. The Acquisition also is subject to review under state antitrust laws and could be the subject of challenges by states or private parties under applicable antitrust laws. Neither the Company nor Network Solutions is aware of any foreign antitrust filings or approvals of foreign government agencies that are required to complete the Acquisition.
 
The Company must also comply with applicable federal and state securities laws and the rules and regulations of the NASDAQ in connection with the issuance of shares of the Company’s common stock in the Acquisition and the filing of this proxy statement with the SEC.
 
 
44

 

Restrictions on Sales of Shares of the Company’s Common Stock Received in the Acquisition
 
Restrictions on sales of the Company’s common stock to be issued to the Seller in connection with the Acquisition will be set forth in a stockholder agreement between the Company, the Seller, and certain of the Seller’s equityholders. The Company is obligated to enter into this stockholder agreement as a condition of closing. The stockholder agreement provides that the Seller may transfer shares of the Company’s common stock received in the Acquisition to certain transferees. The Seller and certain of its permitted transferees (excluding certain minority equityholders) are then prohibited from selling, or otherwise disposing of, any of those shares for six months following the closing date. During the next six months, until one year after the closing date, the Seller and its transferees are only permitted to sell up to 25% of the shares of the Company’s common stock received in the Acquisition. After the one year anniversary of the closing date, there are no restrictions under the stockholder agreement on sales of shares of the Company’s common stock received by the Seller in the Acquisition.
 
For a more complete discussion of the stockholder agreement, see the section entitled “The Acquisition Agreement—Stockholder Agreement” beginning on page [·].
 
Appraisal Rights
 
Under Delaware law, the Company’s stockholders are not entitled to appraisal rights in connection with the Acquisition.
 
NASDAQ Global Select Market Listing of the Company’s Common Stock
 
Application will be made to NASDAQ to have the shares of the Company’s common stock issued in connection with the Acquisition approved for listing on the NASDAQ Global Select Market, where the Company’s common stock currently is traded under the symbol “WWWW”.
 
THE ACQUISITION AGREEMENT
 
The following is a summary of the material provisions of the Acquisition Agreement but does not purport to describe all of the terms of the Acquisition Agreement. The following summary is qualified in its entirety by reference to the complete text of the Acquisition Agreement, a copy of which is attached as Annex A to this proxy statement and is incorporated by reference into this proxy statement. This summary may not contain all of the information about the Acquisition Agreement that is important to you. You should refer to the full text of the Acquisition Agreement for details of the transaction and the terms and conditions of the Acquisition Agreement. The Acquisition Agreement is not intended to provide any factual information about the Company, Network Solutions, the Seller or their respective businesses. Such information can be found elsewhere in this proxy statement and in the other public filings that the Company makes with the SEC, which are available without charge at www.sec.gov.
 
Structure of the Acquisition
 
The Acquisition Agreement provides for the direct purchase of all outstanding membership interests in Network Solutions by the Company from the Seller. Following the completion of the Acquisition, Network Solutions will be a wholly owned subsidiary of the Company.

Completion of the Acquisition
 
The Acquisition will be completed on the second business day following the satisfaction or waiver of all applicable conditions to the closing (as described below) by the payment by the Company of the consideration (as described below) to or on behalf of the Seller.

Acquisition Consideration
 
The purchase price to be paid by the Company for the Network Solutions membership interests being purchased consists of
 
 
45

 

 
·
cash consideration of

 
o
$405 million less the amount payable pursuant to the Network Solutions phantom equity incentive plan in respect of phantom units issued pursuant thereto, which amounts will not be received by the Seller and will be paid by the Company to Network Solutions, which will then pay those amounts directly to the holders thereof as described below, plus

 
o
if the Company exercises its cash consideration election (as described below), the amount described below, less

 
o
without duplication, the amount, if any, by which the sum of all costs and expenses incurred by Network Solutions and its subsidiaries in connection with the Acquisition Agreement and the transactions contemplated thereby (other than certain payments made for cash severance or retention, employee bonuses, transaction incentives or for benefit plans or equity interests of the Seller or Network Solutions) exceeds $11,000,000, and

 
·
stock consideration of

 
o
18 million shares of the Company’s common stock, less

 
o
if the Company exercises its cash consideration election, the number of shares described below.

The Company’s cash consideration election is the Company’s right to elect to sell up to 14 million shares of its common stock in an underwritten public offering prior to closing for net (after deducting fees and expenses incurred by the Company in such public offering) per share proceeds of no less than $11.47 and to use the net proceeds of such sale to increase the amount of cash and reduce the number of shares to be paid at closing. The Company may use less than all but not less than half of the shares sold in the public offering to increase the amount of cash and reduce the number of shares to be paid at closing. If the Company exercises its cash consideration election, the amount of cash to be paid to the Seller in lieu of shares of Company common stock shall be equal to $11.47 per share, plus all of the net per share proceeds of such sale in excess of $11.47 per share but less than $12.00 per share, plus 70% of the net per share proceeds of such sale in excess of $11.99 per share. The foregoing stock consideration and per share proceeds are subject to adjustment for any stock splits, reverse stock splits, stock dividends, stock distributions, recapitalizations, reclassifications or similar transactions effected by the Company between the date of the Acquisition Agreement and the closing of the Acquisition.

In addition to payment of the foregoing amounts, the Company is obligated to pay to Network Solutions at closing an amount equal to (i) the principal, accrued interest and certain other amounts owed by Networks Solutions and its subsidiaries under two credit agreements to which Network Solutions is a party, (ii) the costs and expenses incurred by Network Solutions and its subsidiaries in connection with the Acquisition Agreement and the transactions contemplated thereby for which notification is given at least one business day prior to closing and (iii) the amount payable pursuant to the Network Solutions phantom equity incentive plan in respect of phantom units issued pursuant thereto. Upon receipt of such payment, Network Solutions is obligated to pay such amounts to the appropriate parties. The Company may elect to advise Network Solutions that it wishes to use all or a portion of any unrestricted cash of Network Solutions or its subsidiaries on hand immediately prior to the closing towards payment of any of such amount, in which event the aggregate payment the Company is obligated to make to Network Solutions shall be correspondingly reduced. The exercise of such election by the Company would not reduce the amount of the cash payment to be made to the Seller at closing or the amount Network Solutions is obligated to pay to third parties.
 
 
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Representations and Warranties
 
The Acquisition Agreement contains representations and warranties made by the Seller and Network Solutions to the Company, and by the Company to Network Solutions and the Seller. The assertions embodied in the representations and warranties of each party contained in the Acquisition Agreement are qualified by information in the confidential disclosure schedules provided by the Company and Network Solutions in connection with the signing of the Acquisition Agreement on August 3, 2011. Each disclosure schedule contains information that modifies, qualifies and creates exceptions to the representations and warranties of each party set forth in the Acquisition Agreement. You should not rely on the representations and warranties in the Acquisition Agreement as characterizations of the actual state of facts about the Company, the Seller or Network Solutions, since they were only made as of August 3, 2011, and, with respect to the Company’s and Network Solutions’ representations and warranties, are modified in important part by the corresponding disclosure schedule. Moreover, the representations and warranties were negotiated with the principal purposes of establishing the circumstances in which a party to the Acquisition Agreement may have the right not to close the Acquisition if the representations and warranties of the other party prove to be untrue due to a change in circumstance or otherwise and of allocating risk between the Company and the Seller, rather than establishing matters as facts. In addition, information concerning the subject matter of the representations and warranties may have changed since the date they were made, which subsequent information may or may not be fully reflected in the Company’s public disclosures, and some of those representations and warranties may not be accurate or complete as of any particular date because they are subject to a contractual standard of materiality different from that generally applicable to public disclosures to stockholders and reports and documents filed with the SEC.
 
The representations and warranties made by Network Solutions to the Company are generally reciprocal to the representations and warranties made by the Company to Network Solutions and the Seller. Specifically, the representations and warranties by each of the Company and Network Solutions in the Acquisition Agreement (many of which are qualified by concepts of knowledge, materiality and/or dollar thresholds and are further modified and limited by the confidential disclosure schedules exchanged by the Company and Network Solutions on August 3, 2011, as discussed above) relate to the following subject matters, among other things:
 
 
·
organizational and similar corporate or limited liability company matters, including the qualification to do business under applicable law, good standing and corporate or limited liability company power;
 
 
·
authority to enter into and to perform obligations under, the execution and delivery of and the enforceability of, the Acquisition Agreement and certain other transaction documents;
 
 
·
the status and list of subsidiaries;
 
 
·
capitalization;
 
 
·
the absence of conflicts between the entry into and performance of the Acquisition Agreement and certain other transaction documents with the applicable party’s charter documents, applicable material law or governmental orders, and material contracts;
 
 
·
governmental and regulatory consents and approvals required in connection with the Acquisition;
 
 
·
certain financial statements and off-balance sheet arrangements;
 
 
·
disclosure controls and procedures and internal controls over financial reporting;
 
 
·
the absence of certain changes and events since June 30, 2011 (in the case of Network Solutions) or March 31, 2011 (in the case of the Company);
 
 
·
the absence of certain undisclosed liabilities;
 
 
·
certain litigations and proceedings;
 
 
·
compliance with applicable legal requirements;
 
 
·
intellectual property matters;
 
 
47

 

 
·
real property;
 
 
·
employee benefit plans;
 
 
·
labor and other employment matters;
 
 
·
certain tax matters;
 
 
·
certain material contracts, including no existing material violation or material breach of, or material default under, such material contracts;
 
 
·
environmental matters;
 
 
·
insurance;
 
 
·
certain business relationships with affiliates and related parties;
 
 
·
the absence of brokers and brokers’ fees brokers related to the Acquisition, except those fees payable to the Company’s or Network Solutions’ respective financial advisors;
 
 
·
the absence of misstatements or omissions of material facts in information provided for inclusion in this proxy statement or the Company’s registration statement (if any) to be filed in connection with its cash consideration election; and
 
 
·
the absence of reliance on any representations or warranties of the other parties to the Acquisition Agreement other than the representations and warranties expressly contained in the Acquisition Agreement.
 
The Acquisition Agreement contains additional representations and warranties of the Company regarding, among other things, the Company’s investment intent in acquiring the membership interests in Network Solutions, certain matters related to the Company’s ability to finance the cash consideration and other amounts payable pursuant to the Acquisition Agreement and related to the commitment letter from the financiers, the valid issuance of the Company’s common stock to be issued in the Acquisition, certain SEC filings, including certain financial statements contained in such filings, and the required vote of the holders of capital stock of the Company necessary to approve the issuance of shares of the Company’s common stock pursuant to the Acquisition Agreement and to approve the Acquisition Agreement and the transactions contemplated thereby.
 
Additionally, the Seller made certain representations and warranties to the Company related to the following subject matters:
 
 
·
organizational and similar limited liability company matters, including the qualification to do business under applicable law, good standing and limited liability company power;
 
 
·
authority to enter into and to perform obligations under, the execution and delivery of and the enforceability of, the Acquisition Agreement;
 
 
·
ownership of and transfer of title to the ownership interest in Network Solutions;
 
 
·
the absence of conflicts between the entry into and performance of the Acquisition Agreement and certain other transaction documents with the Seller’s charter documents, applicable material law or governmental orders;
 
 
·
governmental and regulatory consents and approvals are required in connection with the Acquisition; and
 
 
·
the absence of reliance on any representations or warranties of the other parties to the Acquisition Agreement other than the representations and warranties expressly contained in the Acquisition Agreement.
 
 
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Material Adverse Effect
 
Certain of the representations, warranties, covenants, closing conditions and termination provisions contained in the Acquisition Agreement refer to the concept of a “Material Adverse Effect.”
 
For purposes of the Acquisition Agreement, a “Material Adverse Effect” means, with respect to the applicable party (either the Company or Network Solutions), any event, circumstance, change in or effect on such party that is materially adverse to the results of operations or the financial condition of the applicable party and its subsidiaries, taken as a whole; provided, however, that none of the following, either alone or in combination, shall be considered in determining whether there has been a “Material Adverse Effect” or a breach of a representation, warranty, covenant or agreement that is qualified by the term “Material Adverse Effect”: (a) events, circumstances, changes or effects that generally affect the industries or segments thereof in which the applicable party or any of its subsidiaries operates (including changes in legal and regulatory conditions), except to the extent that any such event, circumstance, change or effect adversely affects such party and its subsidiaries, taken as a whole, in a manner that is materially disproportionate to its effect on other companies operating in the same industries or segments as such party, (b) events, circumstances, changes or effects affecting or changes in the national, international or any regional economy in general, the financial, credit, securities or banking markets or conditions in general (including any disruption thereof), interest rates, currency or exchange rates or the price of any commodity, security or market index, (c) any national, international or regional political or social conditions, including any event, circumstance, change or effect caused by acts of terrorism, sabotage or war (whether or not declared), military actions or the escalation thereof or other force majeure events, (d) changes or modifications, or proposed changes or modifications, in generally accepted accounting principles, or GAAP, or applicable law or interpretations thereof, (e) the announcement, performance or existence of the Acquisition Agreement, the identity of the parties to the Acquisition Agreement or any of their respective affiliates, representatives or financing sources, or the pendency of the transactions contemplated by the Acquisition Agreement, including any actual or potential impairment of any contract, agreement, binding commitment or other written arrangement or loss of any current or prospective licensors, licensees, customers, employees, vendors or other business relations of such party due to any of the foregoing in this clause (e), (f) any failure by the applicable party or any of its subsidiaries to meet any projections, budgets, forecasts or revenue or earnings predictions for any period (it being understood that the underlying causes of such failure may, if they are not otherwise excluded from the definition of “Material Adverse Effect,” be taken into account in determining whether a “Material Adverse Effect” has occurred), or (g) any event, circumstance, change or effect to the extent set forth on the applicable disclosure schedule (provided that any future development or change with respect to any of the litigation or potential litigation referenced in Network Solutions’ disclosure schedule are not deemed to be set forth on the disclosure schedule for purposes of this clause (g)).
 
Tax Indemnification; Remedies
 
Pursuant to the Acquisition Agreement, the Company and its affiliates will be indemnified and held harmless by the Seller against losses arising out of or resulting from all taxes of Network Solutions or its subsidiaries for taxable periods ending on or before the closing date and all payroll, employee withholding, unemployment, social security and similar taxes incurred by Network Solutions or its subsidiaries in connection with any compensatory payment made under the Acquisition Agreement or otherwise in connection with the transactions contemplated by the Acquisition Agreement for a period of 15 months after the closing (the “Tax Indemnity Period”). Such indemnification obligations will be reduced by (i) any reserves, liability accruals or other provisions specifically for such losses set forth in Network Solutions’ financial statements through June 30, 2011 (or would have been set forth in the financial statements between such date and the closing in the ordinary course of business and consistent with past practice), (ii) amount received, or reasonably expected to be received, from third parties and other savings that are reasonably expected to reduce the overall impact of such losses upon the indemnified party (including insurance proceeds), and (iii) any tax benefit actually realized by the indemnified party prior to the expiration of the Tax Indemnity Period. The Seller has no obligation to indemnify until all such losses exceed $3,000,000, whereupon the Seller is liable for all such losses up to the amount described below. During the Tax Indemnity Period, the Seller is obligated to retain 3,310,000 shares of the Company’s common stock it receives upon the consummation of the Acquisition provided that if the Seller elects to sell any of the 3,310,000 shares, the Seller is obligated to retain or, at the Company’s request, place into an escrow, the greater of the proceeds from the sale or $11.47 multiplied by the number of shares sold, in each case for the duration of the Tax Indemnity Period. The retained shares, or cash from the proceeds from the sale of those shares, shall be used to settle tax indemnification claims made pursuant to the Acquisition Agreement. Except as to covenants to be performed following the closing (including certain tax matters) or in the event of fraud, the Company will not have recourse against the Seller for breaches of representations, warranties or covenants under the Agreement, and the recourse for the tax matters is limited to the retained shares (or cash from the proceeds from the sale thereof). None of the parties to the Acquisition Agreement has any liability under the Acquisition Agreement or any transaction document for any punitive, incidental, special or indirect damages relating to the breach or alleged breach of the Acquisition Agreement or any transaction document.
 
 
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Certain Covenants of the Parties
 
Network Solutions Covenants
 
The Seller and Network Solutions have undertaken customary covenants in the Acquisition Agreement relating to the conduct of the business of Network Solutions prior to the completion of the Acquisition or the earlier termination of the Acquisition Agreement. In general, the Seller and Network Solutions have agreed, among other things (subject in some cases to exceptions specified in the Acquisition Agreement or set forth in the confidential disclosure schedules to the Acquisition Agreement), unless the Company provides its prior written consent (which consent will not be unreasonably withheld, delayed or conditioned):
 
 
·
to conduct its business in the ordinary course and to use its commercially reasonable efforts to preserve intact the business organization of Network Solutions and its subsidiaries;
 
 
·
not to sell or issue any equity interests or securities convertible into equity interests of Network Solutions or any of its subsidiaries or any right to acquire any such equity interests or repurchase or redeem or otherwise acquire any equity interests of Network Solutions or any of its subsidiaries, other than certain permitted issuances or repurchases;
 
 
·
not to amend the certificate of incorporation or bylaws (or similar organizational documents) of Network Solutions or any of its subsidiaries;
 
 
·
not to declare, accrue, set aside or pay any dividend;
 
 
·
not to increase any salaries or wages of any employee with an annual base salary or annualized compensation in excess of $100,000 or of all employees collectively in the excess of $1.5 million, amend or waive any rights under benefit plans, or otherwise modify any compensation arrangements, except as contemplated by Network Solutions’ existing operating plan and subject to certain exceptions if the closing does not occur during 2011;
 
 
·
not to change accounting methods except as required by GAAP or a governmental authority;
 
 
·
not to fail to exercise any rights of renewal under leases that would otherwise expire;
 
 
·
not to settle any lawsuit for amounts of $100,000 or more per settlement (or $200,000 in the aggregate) or involving a settlement or other agreement that provides for the licensing of intellectual property to a third party or grant to a third party exclusivity with respect to the operations of the Network Solutions business;
 
 
·
not to effect or become a party to any merger, consolidation, share exchange, business combination, recapitalization, reclassification of shares, stock split, reverse stock split or similar transaction;
 
 
·
not to form any subsidiary or acquire any interest in any entity that is material to Network Solutions and its subsidiaries, taken as a whole;
 
 
·
not to incur, create, assume or otherwise become liable for any indebtedness, except for any accrual of unpaid interest on any indebtedness or any indebtedness that will be repaid or cancelled prior to the closing date;
 
 
50

 
 
 
·
not to abandon, assign or grant any security interest in, to or under any intellectual property, other than in the ordinary course of business or among wholly-owned subsidiaries of Network Solutions;
 
 
·
not to enter into, materially amend, fail to renew, cancel or terminate any material contract, other than customer or supplier contracts in the ordinary course of business;
 
 
·
not to make any capital expenditure which would exceed the capital expenditure plan, subject to certain exceptions if the closing does not occur during 2011;
 
 
·
not to cancel, terminate or fail to maintain in full force any insurance policy;
 
 
·
not to make any material tax election (other than regular, recurring elections made in the ordinary course consistent with past practice) or amend any material tax return unless required by law; and
 
 
·
not to agree to take any of the foregoing actions.
 
Company Covenants
 
The Company has undertaken customary covenants in the Acquisition Agreement relating to the conduct of its business prior to the completion of the Acquisition or the earlier termination of the Acquisition Agreement. In general, the Company has agreed, among other things (subject in some cases to exceptions specified in the Acquisition Agreement or set forth in the confidential disclosure schedules to the Acquisition Agreement), unless Network Solutions provides its prior written consent (which consent will not be unreasonably withheld, delayed or conditioned):
 
 
·
to conduct its business in the ordinary course and to use its commercially reasonable efforts to preserve intact the business organization of the Company and its subsidiaries;
 
 
·
not to sell or issue equity interests or securities convertible into equity interests of the Company or its subsidiaries or any right to acquire any such equity interests, other than certain permitted issuances or repurchases;
 
 
·
not to amend the certificate of incorporation or bylaws (or similar organizational documents) of the Company or any of its subsidiaries;
 
 
·
not to declare, accrue, set aside or pay any dividend;
 
 
·
not to change accounting methods except as required by GAAP or a governmental authority;
 
 
·
not to fail to exercise any rights of renewal under leases that would otherwise expire;
 
 
·
not to effect or become a party to any merger, consolidation, share exchange, business combination, recapitalization, reclassification of shares, stock split, reverse stock split or similar transaction;
 
 
·
not to form any subsidiary or acquire any interest in any entity that is material to the Company and its subsidiaries, taken as a whole;
 
 
·
not to incur, create, assume or otherwise become liable for any indebtedness in excess of $250,000 in the aggregate (other than as contemplated in connection with the Acquisition and except for any accrual of unpaid interest on any indebtedness or any indebtedness that will be repaid or cancelled prior to the closing date);

 
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·
not to make any material tax election (other than regular, recurring elections made in the ordinary course consistent with past practice) or amend any material tax return unless required by law; and
 
 
·
not to agree to take any of the foregoing actions.
 
The Company also agreed to file this proxy statement as promptly as practicable following signing the Acquisition Agreement on August 3, 2011, and to use reasonable best efforts to cause this proxy statement to be filed with the SEC on or before August 17, 2011. Additionally, the Company agreed that if it determines to prepare and file a Form S-3 Registration Statement with the SEC in connection with a cash consideration election, then the Company shall not file the Form S-3 Registration Statement with the SEC without the consent of Seller, such consent not to be unreasonably withheld or delayed. The Company undertook certain other procedural matters in connection with the filing of this proxy statement as well as the Company’s efforts to timely mail this proxy statement.
 
Prior to the Closing, the Company also agreed to use reasonable best efforts to obtain all regulatory approvals needed to ensure that the common stock to be issued as partial consideration in exchange for the membership interests in Network Solutions held by the Seller will (to the extent required) be qualified or exempt from registration or qualification under all applicable securities laws.
 
Stockholder Agreement
 
At the closing, the Company is obligated to enter into a stockholder agreement with the Seller and certain of the Seller’s equityholders, pursuant to which the Company will agree to file, within 90 days after the closing of the Acquisition, a registration statement on Form S-3 to register for resale the shares of the Company’s common stock to be received by the Seller in connection with the Acquisition, and will grant certain other registration rights to the Seller. The registration rights granted to the Seller will expire on the date on which all registrable securities (as defined in the stockholder agreement) held by the Seller (or any assignees of such registration rights in accordance with the stockholder agreement) may be sold pursuant to Rule 144 without volume or manner of sale restrictions, subject to the earlier expiration of Seller’s piggy-back rights on the date on which the Seller or its affiliates or permitted transferees collectively hold less than 5% of the Company’s then-outstanding capital stock.

Pursuant to the stockholder agreement, the Company will agree that its board of directors, subject to compliance with applicable law, exchange listing requirements, and the Company’s board of directors’ fiduciary duties, immediately following the closing will increase the size of the board of directors of the Company from six to seven, designate the newly created and vacant seat as part of the class of directors whose tenure expires in 2014 (the “2014 Class”), and appoint an individual designated by an affiliate of the Seller. The Company will also agree that its board of directors, subject to compliance with applicable law and its fiduciary duties, will nominate an individual nominated by such Seller affiliate to fill the seat at each annual meeting at which directors in 2014 Class are elected and recommend the election of such nominee. These obligations terminate at such time as the Seller and its affiliates and permitted transferees hold less than 10% of the Company’s capital stock. Subject to compliance with applicable law and the Company’s fiduciary duties, the Company will appoint such individual nominated by the Seller affiliate to the compensation committee of its Board of Directors. The Company also agreed to provide expense reimbursement and certain rights of indemnification with respect to such director.

The stockholder agreement will provide for restrictions on the Seller’s ability to acquire shares and take certain other corporate actions until the earlier of two years following the closing or such time as the Seller and its affiliates and permitted transferees own less than 10% of the Company’s capital stock. The stockholder agreement also will provide for certain limitations on the transfer by the Seller of the shares acquired by it in the Acquisition as described in “The Acquisition—Restrictions on Sales of Shares of the Company’s Common Stock” beginning on page [Ÿ],and other matters related to the foregoing rights and obligations.

Employees and Employee Benefits
 
The Acquisition Agreement provides that with respect to health, welfare, vacation and savings and profit-sharing plans, subject to certain requirements, the Company will either continue such Network Solutions plans or arrange for continuing Network Solutions employees and their eligible dependents to participate in the plans sponsored by the Company and its subsidiaries.
 
 
52

 
 
Following the Acquisition, each continuing Network Solutions employee will receive service credit to the extent credited under Network Solutions benefit plans prior to the Acquisition for purposes of determining eligibility to participate and vesting for the same purposes under comparable employee benefit plans of the Company and Network Solutions in which the employee participates following the merger. Except with respect to health and welfare, vacation, and savings and profit-sharing plans, no service credit will be given for any other purpose. In addition, the Company will use commercially reasonable best efforts to waive all limitations as to pre-existing conditions, evidence of insurability, exclusions and waiting periods with respect to participation and coverage requirements, and provide each continuing Network Solutions employee with credit for any co-payments and deductibles paid prior to the completion of the Acquisition in satisfying any analogous deductible or out-of-pocket requirements to the extent required under any such plan.
 
Pursuant to the Acquisition Agreement, Network Solutions is required to terminate its 401(k) plan and all other qualified benefit plans immediately prior to the completion of the Acquisition. Subject to certain restrictions and limitations, the Company will permit continuing Network Solutions employees to rollover their 401(k) plan account balances, including loan accounts, into the Company’s 401(k) plan.
 
The Company will also honor all obligations arising after the closing of the Acquisition under certain employment and employee benefit contracts, agreements, plans and commitments of Network Solutions and its subsidiaries in existence on the date of the Acquisition Agreement.
 
Financing Matters
 
For a complete discussion of the financing of the Acquisition, see the section entitled “The Debt Financing” beginning on page [·].
 
Regulatory Matters
 
Under the HSR Act, and the rules that have been promulgated thereunder, certain acquisitions of voting securities, noncorporate interests, or of assets may not be consummated unless Premerger Notification and Report Forms have been filed with the Antitrust Division of the Department of Justice (the “Antitrust Division”) and the Federal Trade Commission (the “FTC”), and certain waiting period requirements have been satisfied. These requirements apply to the Company’s acquisition of all outstanding membership interests in Network Solutions and the receipt by the Seller of the Company’s common stock as a portion of the consideration to acquire those membership interests.
 
The Acquisition Agreement requires the Company and the Seller to use reasonable best efforts to prepare any merger notifications and to respond promptly to inquiries or requests received from the FTC or the Antitrust Division for additional information or documentation under the HSR Act and to take other necessary, proper or advisable actions, with qualifications as set forth in Section 6.07 of the Acquisition Agreement, to close the Acquisition.
 
The Company and an affiliate of the Seller each filed the required notification on August 12, 2011. The waiting period under the HSR Act is set to expire at 11:59 p.m. Eastern time on September 12, 2011, unless earlier terminated by the FTC and the Antitrust Division, or the parties receive a request for additional information or documentary material prior to that time.
 
If within the 30-calendar day waiting period either the FTC or the Antitrust Division requests additional information or documentary material from the parties, the waiting period with respect to the Acquisition would be extended for an additional period of 30-calendar days following the date of the parties’ substantial compliance with that request. If any HSR Act waiting period would otherwise expire on a Saturday, Sunday or legal public holiday, then the period is extended until 11:59 p.m., Eastern time, the next day that is not a Saturday, Sunday or legal public holiday. Expiration or termination of the HSR Act’s waiting period is a condition to closing for the parties.

 
53

 
 
Only one extension of the waiting period pursuant to a request for additional information is authorized by the HSR Act rules. After that time, the waiting period may be extended only by court order. The FTC or the Antitrust Division may terminate the additional 30-calendar day waiting period before its expiration. In practice, complying with a request for additional information and documentary material can take a significant period of time.
 
The Antitrust Division and the FTC routinely evaluate the legality under the antitrust laws of proposed acquisitions. At any time before or after the consummation of the Acquisition, the Antitrust Division or the FTC could take such action under the antitrust laws as it deems necessary or desirable in the public interest, such as seeking to enjoin the Acquisition, seeking the divestiture of assets or imposing other conditions. Private parties and state attorneys generals may also bring legal actions under the antitrust laws seeking similar remedies. There can be no assurance that a challenge to the Acquisition on antitrust grounds will not be made or, if such a challenge is made, what the result will be.
 
In addition, under the merger control rules of jurisdictions outside the United States where the Company or Network Solutions and our respective subsidiaries conduct business, filings may be required and it may be necessary to obtain authorizations, consents, orders or approvals of, declarations, or expirations of waiting periods before consummating the Acquisition. The Company has determined that, at this time, no such filings are required but foreign competition authorities retain the ability to challenge the legality of the transaction on the basis of its effects on competition or otherwise on the public interest, to seek divestitures or impose other conditions. At any time before or after consummation of the transaction, foreign competition authorities may seek to enjoin the Acquisition, seek divestiture of assets, or impose other conditions. There can be no assurance that a challenge to the Acquisition under foreign merger control rules will not be made, or, if such a challenge is made, what the result will be.
 
No Solicitation
 
In the Acquisition Agreement, each of the Company, the Seller and Network Solutions has agreed that it will not directly or indirectly:
 
 
solicit, initiate, seek, entertain, encourage, facilitate, support or induce the making, submission or announcement of any inquiry, expression of interest, proposal or offer that constitutes, or would reasonably be expected to lead to, an alternative acquisition proposal;
 
 
enter into, participate in, maintain or continue any communications (except solely to provide written notice as to the existence of such restrictions) or negotiations regarding, or deliver or make available to any person any nonpublic information with respect to, any inquiry, expression of interest, proposal or offer that is, or would reasonably be expected to lead to, an alternative acquisition proposal;
 
 
agree to, accept, approve, endorse or recommend any alternative acquisition proposal (or publicly propose or announce any intention to do the same); or
 
 
enter into any letter of intent or any other contract, agreement, binding commitment or other written arrangement contemplating or otherwise relating to any alternative acquisition proposal.
 
Each of the Company, the Seller and Network Solutions were obligated upon the execution of the Acquisition Agreement immediately to cease and cause to be terminated any and all existing activities, discussions or negotiations with any person conducted on or prior to the date of the Acquisition with respect to any alternative acquisition proposal.

The Acquisition Agreement does not prohibit the Company from furnishing information regarding the Company or entering into discussions and negotiations with any person for a Company alternative acquisition proposal prior to obtaining the requisite stockholder approval of the Share Issuance Proposal if specified conditions are met.

 
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Board Recommendation and Change in Recommendation
 
Under the Acquisition Agreement, subject to the exceptions described below, this proxy statement is required to include a statement that the Company’s board of directors recommends that the Company’s stockholders vote to approve the issuance of shares of the Company’s common stock in the Acquisition (the “Board Recommendation”). Subject to the exceptions described below, the Acquisition Agreement provides that the Board Recommendation shall not be withheld, withdrawn, qualified, modified or amended in a manner adverse to the Seller or Network Solutions. The Acquisition Agreement further provides that the Company’s board of directors or any committee shall not fail to reaffirm the Board Recommendation, or fail to publicly state that the Acquisition and the Acquisition Agreement are in the best interest of the Company’s stockholders within 10 business days after Network Solutions’ request to so state, or fail to publicly announce, within 10 business days after a tender offer or exchange offer relating to the Company’s securities shall have been commenced or after any material increase in the consideration being offered thereunder, a statement disclosing that the board of directors recommends rejection of such tender or exchange offer, or fail to issue a press release announcing its opposition to a Company acquisition proposal (as described below) within 10 business days, or recommend, adopt or approve a Company acquisition proposal, or make any disclosure that has the intent or direct effect of causing the Company’s stockholders not to vote to approve the Share Issuance Proposal or, in each case, publicly propose or resolve to take any action with respect to the foregoing (each of the foregoing actions, a “Change in Recommendation”).
 
Prior to obtaining the requisite stockholder approval of the Share Issuance Proposal, the restrictions set forth above will not prohibit the Company’s board of directors from effecting a Change in Recommendation if:
 
 
all of the following conditions are met:
 
 
o
the Company has not breached its obligations described under the section entitled “The Acquisition Agreement—No Solicitation” beginning on page [·] above in connection with an offer referred to in the following bullet point;
 
 
o
after August 3, 2011, an unsolicited, bona fide, offer to acquire (i) more than a 10% interest in the total outstanding voting securities of the Company or any of its subsidiaries; (ii) any sale, lease, mortgage, pledge, exchange, transfer, license (other than in the ordinary course of business), acquisition, or disposition of more than 10% of the assets of the Company or any of its subsidiaries; or (iii) any liquidation, dissolution, recapitalization or other significant corporate reorganization of the Company, or any extraordinary dividend, whether of cash or other property, in each case of clauses (i), (ii) and (iii), whether in any single transaction or series of related transactions or through any merger, consolidation, business combination or similar transaction (each, a “Company acquisition proposal”) is made to the Company and not withdrawn;
 
 
o
such Company acquisition proposal requires termination of the transactions contemplated by the Acquisition Agreement, and the Company’s board of directors determines in its good faith judgment, after consulting with a nationally recognized financial advisor and outside legal counsel and after taking into account all legal, regulatory, financial and other aspects of the proposal and the identity of the person or entity making such Company acquisition proposal, to be (i) more favorable from a financial point of view to the Company’s stockholders than the Acquisition determined on a basis of long-term value (taking into account the likelihood and anticipated timing of consummation and after giving effect to all adjustments offered by the Seller to the Company and the possible payment of any termination fee (as described below) and (ii) reasonably likely to be consummated (if accepted) on a timely basis in accordance with its terms, except that for this purpose all references to 10% in the term Company acquisition proposal shall be deemed a reference to 50% (any such proposal referred to as a “superior offer” herein);
 
 
o
the Company’s board of directors does not effect, or cause the Company to effect, a Change in Recommendation within four business days after the Company notifies Network Solutions that the Company’s board of directors has determined that the Company acquisition proposal is a superior offer;

 
55

 
 
 
o
if requested by Network Solutions, the Company engages in good faith negotiations with Network Solutions, during the four business day period referenced above, to amend the Acquisition Agreement in a manner such that the Company acquisition proposal would no longer be a superior offer;
 
 
o
at the end of the four business day period referenced above, the Company acquisition proposal has not been withdrawn and continues to be a superior offer (taking into account, among other things, any changes to the Acquisition Agreement that have been proposed by Network Solutions as a result of the negotiations described in the foregoing bullet point); and
 
 
o
at the end of the four business day period referenced above, the Company’s board of directors determines in good faith, after consultation with outside legal counsel that, in light of the superior offer, a failure to make a Change in Recommendation would reasonably be expected to constitute a breach of the fiduciary duties of the Company’s board of directors to the Company’s stockholders under applicable laws; provided that in the event of any material revisions to the Company acquisition proposal, the Company will be required to deliver a new written notice to Network Solutions and again comply with the above conditions with respect to a Change in Recommendation; or
 
 
all of the following conditions are met:
 
 
o
a material development or change in circumstance that was neither known to nor reasonably foreseeable by the Company or its representatives occurs or arises after August 3, 2011 and prior to the completion of the Acquisition (other than as contemplated in the foregoing bullet points with regard to a superior offer, but excluding the mere existence of a Company acquisition proposal in the absence of the other conditions set forth above) (the events described in this bullet point are referred to hereafter as a “Company intervening event”);
 
 
o
provide at least four advance business days’ written notice of any meeting of the Company’s board of directors at which the Company’s board of directors will consider whether a Company intervening event has occurred and requires the Company’s board of directors to effect a Change in Recommendation;
 
 
o
if requested by Network Solutions, the Company engages in good faith negotiations with Network Solutions regarding amendments to the Acquisition Agreement that would obviate the need for a Change in Recommendation as a result of the Company intervening event; and
 
 
o
at the end of the four business day period referenced above, the board of directors of the Company determines in good faith, after consultation with outside legal counsel that, in light of such Company intervening event, a failure to make a Change in Recommendation would reasonably be expected to constitute a breach of the fiduciary duties of the Company’s board of directors to the Company’s stockholders under applicable law.
 
The Company is required to ensure that any Change of Recommendation shall not (1) affect the validity of the original approval of this Agreement as of the date the Acquisition Agreement was signed (August 3, 2011) or any other approval of the Company’s board of directors; and (2) have the effect of causing any state (including Delaware) corporate takeover statute or other similar statute to be applicable to the Acquisition or any of the other transactions contemplated by the Acquisition Agreement. Unless the Acquisition Agreement is terminated in accordance with its terms, the Company must submit the Share Issuance Proposal for approval by the Company’s stockholders in accordance with the section entitled “Stockholder Meeting” below.

 
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Stockholder Meeting
 
The Company has agreed to take all action necessary to hold, as promptly as practicable after August 3, 2011, a meeting of its stockholders for the purpose of obtaining the required stockholder approval of the Share Issuance Proposal. The Company may adjourn or postpone the meeting of its stockholders after consultation with Network Solutions only (i) to the extent necessary to ensure that any supplement or amendment to this proxy statement that is required by applicable legal requirements is timely provided to the Company’s stockholders, (ii) if as of the time for which the stockholders’ meeting is originally scheduled there are insufficient shares of the Company’s common stock represented (either in person or by proxy) to constitute a quorum necessary to conduct the business to be conducted at the stockholders’ meeting, or (iii) if additional time is reasonably required to solicit proxies in favor of the Share Issuance Proposal.
 
Indemnification of Directors and Officers; Directors’ and Officers’ Insurance
 
The Company agrees to honor (including assuming any obligations of the Seller) all rights to indemnification existing as of August 3, 2011 and permissible under applicable law for acts or omissions occurring prior to the closing in favor of the employees currently indemnified by Network Solutions or any of its subsidiaries, or any current or former employee, officer, director, general partner and member of any executive committee of the Seller currently indemnified by the Seller, as provided in the organizational documents, indemnity agreements or board resolutions of the Seller, Network Solutions or such subsidiary, and not to amend, repeal or otherwise modify such obligations for a period of 6 years from the closing (or, if longer, for such period as set forth in any applicable agreement in effect as of August 3, 2011). The Company and Network Solutions will purchase a “tail” directors’ and officers’ policy providing liability insurance coverage for the benefit of those persons who are covered by the Seller’s, Network Solutions’ and its subsidiaries’ directors’ and officers’ liability insurance policies as of August 3, 2011 or the closing with respect to matters occurring prior to closing that is at least equal to the coverage provided under the current policies, and will maintain such policy for six years.
 
Conditions to Completion of the Acquisition
 
The obligations of the Company, the Seller and Network Solutions to complete the Acquisition are each subject to the satisfaction of the following conditions, subject, in some cases, to the exceptions or limitations contained in confidential disclosure schedules delivered to each party by the other:
 
 
accuracy of a number of representations and warranties made by the Company (in the case of the Seller and Network Solutions) or the Seller and Network Solutions (in the case of the Company) in the Acquisition Agreement (without giving effect to materiality qualifications), provided that inaccuracies will be disregarded so long as such inaccuracies (considered collectively) would not have a material adverse effect on the other party;
 
 
performance by the Company (in the case of the Seller and Network Solutions) or the Seller and Network Solutions (in the case of the Company), in all material respects, of all of such party’s obligations under the Acquisition Agreement;
 
 
approval by the Company’s stockholders of the issuance of up to 18 million shares of the Company’s common stock in the Acquisition;
 
 
for the Seller and Network Solutions, since August 3, 2011 there shall not have occurred any material adverse effect on the Company which has not been cured, and no event shall have occurred or circumstance shall exist that, in combination with any other events or circumstances, would reasonably be expected to have or result in a material adverse effect on the Company and no material adverse effect on the Company and Network Solutions and their respective subsidiaries combined shall have occurred;
 
 
for the Company, since August 3, 2011, there shall not have occurred any material adverse effect on Network Solutions which has not been cured, and no event shall have occurred or circumstance shall exist that, in combination with any other events or circumstances, would reasonably be expected to have or result in a material adverse effect on Network Solutions and no material adverse effect on the Company and Network Solutions and their respective subsidiaries combined shall have occurred;
 
 
receipt of a certificate executed by a duly authorized officer of the Company (in the case of the Seller and Network Solutions) or the Seller and Network Solutions (in the case of the Company) as to the satisfaction of certain conditions;

 
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expiration or termination of any waiting period applicable to the consummation of the Acquisition under the HSR Act, and receipt of certain other required regulatory approvals or consents;
 
 
absence of restraining orders or injunctions or other orders and absence of any legal requirement applicable to the Acquisition, in each case, that makes consummation of the Acquisition illegal or otherwise prohibits the consummation of the Acquisition;
 
 
for the Seller and Network Solutions, the availability of an exemption under all applicable securities laws for the issuance of the Company’s shares to the Seller as part of the closing consideration;
 
 
for the Seller and Network Solutions, the filing by the Company of all statements, reports, schedules, forms, exhibits and other documents required to be filed pursuant to Section 13(a) of the Exchange Act with the SEC since August 3, 2011;
 
 
for the Company, delivery of specified financial statements of Network Solutions to certain lenders providing financing to the Company; and
 
 
the delivery by the Company of the closing payments and the delivery by each party of specified closing deliverables.
 
Termination of the Acquisition Agreement
 
The Acquisition Agreement may be terminated, at any time prior to closing:
 
 
·
By either Network Solutions or the Company if the closing has not occurred by December 22, 2011 (the “end date termination provision”); provided, however, that:
 
 
o
if the conditions to closing relating to governmental approvals, absence of governmental orders making the transaction illegal or approval of the Share Issuance Proposal have not been satisfied by such date, but the conditions relating to accuracy of Network Solutions’ and the Seller’s respective representations and warranties, compliance with their respective covenants and the absence of a material adverse effect on Network Solutions and on Network Solutions and the Company and their respective subsidiaries combined have been satisfied or are capable of being satisfied by such date, then Network Solutions may elect to extend the end date to February 3, 2012; and
 
 
o
if the conditions to closing relating to governmental approvals and absence of governmental orders making the transaction illegal have not been satisfied by such date, but the conditions relating to accuracy of the Company’s representations and warranties, compliance with its covenants, the absence of a material adverse effect on the Company and on the Company and Network Solutions and their respective subsidiaries combined, the availability of a securities exemption for the offer and sale of the Company’s common stock, and the Company’s compliance with its SEC filing requirements under the Exchange Act have been satisfied or are capable of being satisfied by such date, then Company may elect to extend the end date to February 3, 2012; and
 
 
o
a party may not terminate the Acquisition Agreement or extend the end date pursuant to this provision if the failure to fulfill any obligation under the Acquisition Agreement was the cause of, or resulted in, the failure of the closing to occur on or prior to such date.
 
 
·
by either Network Solutions or the Company in the event that any governmental order restraining, enjoining or otherwise prohibiting the Acquisition shall have become final and nonappealable;
 
 
·
by Network Solutions if a failure to perform any covenant or agreement on the part of the Company set forth in the Acquisition Agreement has occurred that would, if occurring or continuing on the closing date, cause the closing conditions relating to accuracy of the Company’s representations and warranties and compliance with its covenants not to be satisfied, and such condition is not cured or is incapable of being cured within 30 days of notice by Network Solutions to the Company;

 
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·
by the Company if a failure to perform any covenant or agreement on the part of Network Solutions or the Seller set forth in the Acquisition Agreement has occurred that would, if occurring or continuing on the closing date, cause the closing conditions relating to accuracy of Network Solutions’ and the Seller’s respective representations and warranties and compliance with their respective covenants not to be satisfied, and such conditions are not cured or is incapable of being cured within 30 days of notice by the Company to Network Solutions;
 
 
·
by mutual written consent of Network Solutions and the Company;
 
 
·
by Network Solutions, if the Company’s board of directors has made a Change in Recommendation, as described above;
 
 
·
by either the Company or Network Solutions if: (i) the Special Meeting of stockholders described in this proxy statement (including any adjournments and postponements thereof) has been held and completed and the Company’s stockholders shall have taken a final vote on the Share Issuance Proposal; and (ii) the Share Issuance Proposal is not approved at the Special Meeting (and was not approved at any adjournment or postponement thereof) by the requisite vote; provided, however, that a party shall not be permitted to terminate the Acquisition Agreement pursuant to this provision if the failure to have the Share Issuance Proposal approved is attributable to a failure on the part of such party to perform any covenant or obligation in the Acquisition Agreement required to be performed by such party at or prior to the closing (the “stockholder vote termination provision”).
 
If the Acquisition Agreement is terminated for any reason, the Acquisition Agreement will become void and of no further force or effect with no liability on the part of any party or related party thereto, except as provided under the section entitled “Termination Fees and Expenses” below and for provisions relating to confidentiality matters and certain miscellaneous provisions.
 
Termination Fees and Expenses
 
The Acquisition Agreement provides that, except as otherwise specified in the agreement, all costs and expenses, including fees and disbursements of counsel, financial advisors and accountants incurred in connection with the Acquisition Agreement and the transactions contemplated thereby will be borne by the party incurring such costs and expenses.
 
The Acquisition Agreement provides that the Company will be required to pay the Seller a termination fee of $37.5 million in the following circumstances:
 
 
·
if the Acquisition Agreement is (A) terminated by Network Solutions because the Company’s board of directors has made a Change in Recommendation, as described above, or (B) terminated by either Network Solutions or the Company pursuant to the end date termination provision or pursuant to the stockholder vote termination provision, each as described above, and at such time of termination Network Solutions would have been entitled to terminate the Acquisition Agreement due to a Change in Recommendation; or
 
 
·
if (A) the Acquisition Agreement is terminated by the Company or Network Solutions pursuant to the end date termination provision or the stockholder vote termination provision or due to the failure of the Company to perform its covenants, each as described above, (B) prior to such termination, a Company acquisition proposal shall have been made public or otherwise disclosed and not publicly withdrawn, and (C) within twelve months following the termination of the purchase under the foregoing circumstances, the Company consummates a Company acquisition proposal or enters into a definitive agreement providing for a transaction with respect to a Company acquisition proposal and subsequently consummates a transaction that constitutes a Company acquisition proposal, substituting for purposes of clause (C) only the figure 50% in lieu of references to 10% in the definition of the term Company acquisition proposal.

 
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If the termination fee is paid to the Seller as described above, the Company and the Seller have agreed that (i) receipt of such payment of the termination fee described above will be the sole and exclusive remedy (whether at law, in equity, in contract, in tort or otherwise) of the Seller, any parent entity of Seller, Network Solutions or any of its subsidiaries with respect to any damages suffered or incurred by such persons or any of their respective affiliates in connection with the Acquisition Agreement or definitive agreements entered into by the Company with respect to the financing described under the “Debt Financing” below (and the termination thereof) and any matter forming the basis of such termination and (ii) none of the Seller, Network Solutions or any of its subsidiaries, any of their respective affiliates or any other person will be entitled to bring or maintain any claim, action or proceeding against the Company or any debt financing source arising out of or in connection with the Acquisition Agreement or the definitive agreements entered into with respect to the financing, any of the transactions contemplated hereby (or the abandonment or termination thereof) or any matters forming the basis for such termination. The foregoing does not limit liability of the Company with respect to any intentional breach of the Acquisition Agreement occurring prior to such termination (claims with respect to which survive any termination of the Acquisition Agreement and, in the case of the Seller, may be based on the consideration that would have otherwise been payable to the Seller pursuant to the Acquisition Agreement and distributed to the direct and indirect equityholders of the Seller, or based on loss of market value of Network Solutions).
 
Amendments and Waivers
 
The Acquisition Agreement may be amended at any time by written agreement between the Company, the Seller and Network Solutions. In addition, any party to the Acquisition Agreement may extend the time for performance of the obligations of the other parties, waive any inaccuracies in the representations and warranties of the other parties, or waive compliance with any of the agreements of the other parties or conditions to the obligations of the other parties, provided that such extensions or waivers be set forth in writing and signed by the party being bound thereby.
 
Governing Law
 
The Acquisition Agreement is governed in all respects by the laws of the State of Delaware.

THE DEBT FINANCING
 
The Debt Financing Commitments
 
The Company estimates that the total amount of funds necessary to complete the Acquisition, fund the payment of certain Network Solutions’ liabilities, and refinance certain debt of the Company will be approximately $783 million. This amount will be funded through borrowings under a first lien senior secured credit facility, a second lien senior secured credit facility, and cash on hand.
 
The Company has obtained debt financing commitments described more fully below. The funding under those commitment letters is subject to certain conditions, including conditions that do not relate directly to the conditions to closing in the Acquisition Agreement. Although obtaining the proceeds of any financing, including the financing under the commitment letters, is not a condition to the Company’s obligation to complete the Acquisition under the Acquisition Agreement, the failure of the Company to obtain any portion of the committed financing (or alternative or substitute financing) is likely to result in the failure of the Acquisition to be completed.
 
Pursuant to the debt commitment letter dated August 3, 2011, JPMorgan Chase Bank, N.A., J.P. Morgan Securities LLC, Deutsche Bank Securities Inc., Deutsche Bank Trust Company Americas, Goldman Sachs Lending Partners LLC, SunTrust Bank and SunTrust Robinson Humphrey Inc., or collectively, the “Commitment Parties”, have committed to provide the Company with a $650 million first lien senior secured credit facility, consisting of a $600 million term loan facility and a $50 million revolving credit facility, and a $150 million second lien senior secured credit facility on the terms and subject to the conditions set forth in the debt commitment letter.

The first lien term loan facility and the second lien facility will be available in a single drawing on the closing date. Loans under the first lien revolving facility will be made available on the closing date to finance the transactions and fees and expenses related to the transactions and to fund original issue discount or upfront fees in connection with the first lien facilities on the closing date. After the closing date, the revolving credit facility will be used for working capital needs.

 
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The commitment of the Commitment Parties with respect to the first lien senior secured credit facilities and the second lien senior secured credit facilities (each as described below) will terminate if (a) the initial borrowing under the facilities does not occur on or before December 22, 2011 (subject to extension to February 3, 2012 if the Termination Date (as defined in the Acquisition Agreement) is extended to such date, (b) the Acquisition Agreement is validly terminated prior to the Acquisition or (c) the Acquisition is consummated without borrowings under the facilities to be provided by the Commitment Parties. The documentation governing the debt financings has not been finalized and, accordingly, their actual terms may differ from those described in this proxy statement.
 
Although the debt financing described in this proxy statement is not subject to a due diligence or “market out,” such financing may not be considered assured. As of the date of this proxy statement, no alternative or substitute financing arrangements or alternative or substitute financing plans have been made in the event the debt financing described herein is not available as anticipated.
 
The Senior Secured Credit Facilities
 
The obligations of the Commitment Parties to provide the senior secured credit facilities under the debt commitment letter are subject to a number of customary conditions, including (i) consummation of the Acquisition in accordance with the Acquisition Agreement (without giving effect to amendments, modification, waiver or consent that are materially adverse to the lenders without the consent of the Commitment Parties), (ii) that since June 30, 2011 no “material adverse effect” (as defined in the Merger Agreement, but applied to the Company, Network Solutions and their respective subsidiaries on a consolidated basis) has occurred, (iii) as of August 2, 2011 consummation of the equity contributions in an amount equal to at least 33% of the total pro forma debt and equity capitalization of the Company and its subsidiaries (after giving effect to the Acquisition), (iv) consummation of the refinancings of the existing credit facilities of each of the Company and Network Solutions, (v) receipt of customary annual and quarterly financing statements of Network Solutions and receipt of customary pro forma financial statements, (vi) receipt of execution and delivery of the definitive credit agreements and delivery of customary closing documents and legal opinions, including a solvency certificate, (vii) payment of required fees and expenses, (viii) the execution of certain guarantees and the creation of security interests and (ix) expiration of a 20 consecutive calendar day marketing period (with customary blackout periods) after receipt of a confidential information memorandum to syndicate the facilities.
 
General. The senior secured credit facilities are expected to consist of (1) a $600 million first lien term loan facility with a term of seven years (the “First Lien Term Loan Facility”), (2) a $50 million first lien revolving facility with a term of five years (the “Revolving Facility” and, together with the “First Lien Term Loan Facility, the “First Lien Facilities”) and (3) a $150 million second lien term loan facility with a term of eight years (the “Second Lien Facility” and, together with the First Lien Facilities, the “Facilities”). The borrower (the “Borrower”) under the Facilities will be the Company.
 
Roles. J.P. Morgan Securities LLC (“JPMorgan”), Deutsche Bank Securities Inc (“DBSI”), Goldman Sachs Lending Partners LLC (“GSLP”) and SunTrust Robinson Humphrey Inc. (“STRH”) have been appointed as joint lead arrangers for the Facilities. JPMorgan Chase Bank, N.A. has been appointed as administrative agent, JPMorgan and DBSI have been appointed as co-syndication agents and GSLP and STRH have been appointed as co-documentation agents for the Facilities.
 
Interest Rate. Loans under the Facilities are expected to bear interest, at the Company’s option, at a rate equal to the adjusted London interbank offer rate or an alternate base rate, in each case plus a spread. After the Borrower’s delivery of financial statements with respect to at least one full fiscal quarter ending after the effective date of the Acquisition, interest rates under the Facilities are expected to be subject to decreases based on a first lien senior secured leverage ratio in the case of the First Lien Facilities or a second lien senior secured leverage ratio in the case of the Second Lien Facility, and in each case shall be as defined and at levels to be agreed upon between the Borrower and the Commitment Parties.
 
Prepayments and Amortization. Borrower will be permitted to make voluntary prepayments with respect to the First Lien Facilities at any time, without premium or penalty (other than LIBOR breakage costs, if applicable). Voluntary prepayments with respect to the Second Lien Facility are expected to be subject to a premium of 2% during the first year, 1% during the second year and no premium thereafter. The First Lien Term Loan Facility will amortize 1% per annum in equal quarterly installments until the final maturity date. The Second Lien Facility will not be subject to amortization.

 
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Guarantors. All obligations under the Facilities will be unconditionally guaranteed jointly and severally by the Company and each of the existing and future direct and indirect, wholly-owned domestic subsidiaries of the Company (other than certain immaterial subsidiaries to be mutually agreed upon).
 
Security. The obligations of the Borrower and the guarantors under the Facilities and the guarantees will be secured, subject to permitted liens and other agreed upon exceptions, by a perfected pledge of all capital stock directly held by the Borrower and the guarantors (limited, in the case of foreign subsidiaries, to 65% of the stock of such subsidiaries), and by perfected security interests in substantially all present and future assets of the Borrower and each guarantor (subject to certain exceptions). If certain security is not provided at closing despite the use of commercially reasonable efforts to do so, the delivery of such security will not be a condition precedent to the availability of the Facilities on the closing date, but instead will be required to be delivered following the closing date.
 
Other Terms. The Facilities will contain customary representations and warranties and customary affirmative and negative covenants, including, among other things, restrictions on indebtedness, investments, sales of assets, mergers and consolidations, prepayments of subordinated indebtedness, liens and dividends and other distributions. The Facilities will also include customary events of default, including a change of control (defined in a manner to be mutually agreed upon).

 
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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF THE COMPANY
(in thousands, except per share data)
 
The tables below present the selected historical consolidated financial data of the Company for the five years ended December 31, 2010 derived from its audited consolidated financial statements for those years. The summary of operations for the years ended December 31, 2010, 2009, and 2008, and the balance sheet data as of December 31, 2010 and 2009 have been derived from the Company’s audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, which is incorporated into this proxy statement by reference. The summary of operations data for the years ended December 31, 2007 and 2006, and the balance sheet data as of December 31, 2008, 2007, and 2006 have been derived from the Company’s audited financial statements, which have not been incorporated by reference in this proxy statement. The tables below also present the selected historical consolidated financial data of the Company for the six months ended June 30, 2011 and 2010 derived from the Company’s unaudited consolidated financial statements from those periods, included in the Quarterly Report on Form 10-Q for the Company for the six months ended June 30, 2011, which is incorporated into this proxy statement by reference. The unaudited consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management of the Company, reflect all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the results of those periods. The results for any interim period are not necessarily indicative of the results that may be expected for a full year.

The following tables should be read in conjunction with the consolidated financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010 and Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, which are incorporated by reference in this proxy statement. Historical results are not necessarily indicative of the results to be expected in the future.

Historical Consolidated Statement of Operations Data:

    
(unaudited)
       
   
Six months ended 
June 30,
   
Year ended December 31,
 
   
2011(1)(4)
   
2010
   
2010(1)(2)(4)
   
2009(2)
   
2008(3)
   
2007(5)
   
2006(2)
 
Revenue
  $ 81,722     $ 49,906     $ 120,289     $ 106,489     $ 120,114     $ 80,084     $ 48,456  
Operating costs and expenses
    (85,854 )     (51,870 )     (134,825 )     (106,582 )     (217,191 )     (78,466 )     (46,974 )
Income (loss) from operations
    (4,132 )     (1,964 )     (14,536 )     (93 )     (97,077 )     1,618       1,482  
Net income (loss) from continuing operations
    (7,707 )     (2,553 )     (6,648 )     1,569       (96,380 )     1,479       7,082  
Net income (loss) from discontinued operations
    250       116       116       1,040       170       (121 )     1,515  
Net income (loss) attributable to common stockholders
    (7,457 )     (2,437 )     (6,532 )     2,609       (96,210 )     1,358       8,597  
Net income (loss) from continuing operations per share
                                                       
Basic
    (0.28 )     (0.10 )     (0.26 )     0.06       (3.52 )     0.08       0.42  
Diluted
    (0.28 )     (0.10 )     (0.26 )     0.06       (3.52 )     0.07       0.36  
Net income (loss) from discontinued operations per share
                                                       
Basic
    0.01                   0.04       0.01       (0.01 )     0.09  
Diluted
    0.01                   0.04       0.01       (0.01 )     0.08  
Weighted average common shares outstanding
                                                       
Basic
    27,106       25,433       25,515       25,312       27,398       19,802       16,778  
Diluted
    27,106       25,433       25,515       26,985       27,398       22,224       19,430  

 
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Historical Consolidated Balance Sheet Data:
 
    
(unaudited)
       
   
As of June 30,
   
As of December 31,
 
   
2011(1)(4)
   
2010
   
2010(1)(2)(4)
   
2009(2)
   
2008(3)
   
2007(5)
   
2006(2)
 
Cash and cash equivalents
  $ 15,972     $ 42,809     $ 16,307     $ 39,427     $ 34,127     $ 29,746     $ 42,155  
Working capital (deficiency) surplus (4)
    (20,422 )     36,294       (22,133 )     32,171       23,971       16,525       39,534  
Total assets
    291,315       119,894       299,489       122,885       122,495       235,013       93,360  
Long-term note payable and obligations under capital leases
    79,757       133       93,623       198             59       194  
Accumulated deficit
    (165,394 )     (153,842 )     (157,937 )     (151,405 )     (154,014 )     (57,804 )     (59,162 )
Total stockholders’ equity
    107,203       103,503       103,607       103,696       99,293       196,431       83,956  

 
(1)
The Consolidated Statement of Operations for the six months ended June 30, 2011 includes the acquisition of Register.com (Cayman) LP. The Consolidated Statement of Operations for the year ended December 31, 2010 includes the acquisition of Register.com (Cayman) LP for the period from July 30, 2010 through December 31, 2010. The Consolidated Balance Sheet data includes the acquisition of Register.com (Cayman) LP as of June 30, 2011 and December 31, 2010.

 
(2)
Included in the net income (loss) for the year ended December 31, 2006, 2009, and 2010 is a tax benefit of $3.2 million, $1.4 million, and $16.6 million, respectively, which was the result of a reduction in the deferred tax asset valuation allowance.

 
(3)
Included in the net loss for the year ended December 31, 2008 is a goodwill and intangible asset impairment charge of $102.6 million. The primary reason for the impairment charge was the decline of the Company’s stock price during the fourth quarter of 2008.

 
(4)
The working capital deficiency at June 30, 2011 and December 31, 2010 is primarily due to the increase in the current portion of deferred revenue arising from the acquisition of Register.com LP on July 30, 2010.

 
(5)
The Consolidated Statement of Operations and Consolidated Balance Sheet data above includes the acquisition of Web.com, Inc. from October 1, 2007 through December 31, 2007 and as of December 31, 2007, respectively.

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF NETWORK SOLUTIONS
(in thousands)
 
The following table sets forth the selected historical consolidated financial data as of the dates and for the periods indicated. On March 7, 2007, Network Solutions acquired Network Solutions, LLC. We refer to Network Solutions, LLC prior to such acquisition as the Predecessor, and we refer to Network Solutions, formed as part of the acquisition, as the Successor. For the Successor period from March 8, 2007 through December 31, 2007, the consolidated financial data reflects the consolidated audited financial statements of Net Sol Holdings, LLC, of which Network Solutions is a wholly-owned, direct subsidiary. Accordingly, the selected historical consolidated financial data as of and for the period from March 8 through December 31, 2007 have been derived from the audited consolidated financial statements of Net Sol Holdings, LLC, included elsewhere in this proxy statement. The selected historical consolidated financial data as of and for the years ended December 31, 2008, 2009 and 2010 have been derived from the audited consolidated financial statements of Network Solutions included elsewhere in this proxy statement. The historical financial data as of and for the six months ended June 30, 2010 and 2011 have been derived from the unaudited condensed consolidated financial statements of Network Solutions included elsewhere in this proxy statement. The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management of Network Solutions, reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for those periods. The results for any interim period are not necessarily indicative of the results that may be expected for a full year