KEGX Common Stock (CE)

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

To the Stockholders of Key Energy Services, Inc.:

Notice is hereby given that a Special Meeting of Stockholders (the “Special Meeting”) of Key Energy Services, Inc. (the “Company”) will be held at [●] on [●], February [●], 2020 at [●] (Central Time). As described in more detail in the accompanying proxy statement and exhibits thereto, the Special Meeting is being held in connection with a series of out-of-court transactions that will effectuate a financial restructuring of the Company’s capital structure and indebtedness and related facilities, including the conversion of approximately $241.9 million aggregate outstanding principal of the Company’s term loans (together with accrued interest thereon) into (i) shares of the Company’s common stock, par value $0.01 (“Common Stock”), and (ii) $20 million of term loans under a new approximately $51.2 million term loan facility (the “Restructuring”), contemplated by the Restructuring Support Agreement (including the exhibit thereto, the “RSA”) entered into by the Company on January 24, 2020. At the special meeting, we will ask you to consider and take action on the following matters in connection with the Restructuring:

Each of the above proposals is described in more detail in the accompanying proxy statement and the exhibits thereto, and we urge you to read the proxy statement and its exhibits carefully in their entirety.

Following consideration of the transactions contemplated by the RSA, including the Restructuring, the Board unanimously adopted, authorized, approved and declared advisable (i) the Restructuring and the RSA, and (ii) the restatement of our Existing Charter (the “Restated Charter”), which is necessary to effect the Restructuring, and resolved that the Restated Charter be submitted for consideration and approval by the stockholders of the Company and recommended that the Company’s stockholders approve the Restated Charter to take effect concurrently with the consummation of the Restructuring.

As of the Record Date (as defined below), Soter beneficially owned 10,309,609 shares of our Common Stock representing approximately 50.2% of the outstanding shares, and affiliates of Soter have appointed five of our directors. As part of the RSA, Soter has agreed to vote the shares owned by Soter in favor of the Restructuring, including each of the proposals to be presented at the Special Meeting and, accordingly, proposals ONE through THIRTEEN will be approved.

Each of proposals ONE through THIRTEEN above will be implemented automatically upon the filing of the Restated Charter with the Secretary of State of the State of Delaware.

Each outstanding share of the Company’s Common Stock entitles the owner of record at the close of business on February [●], 2020 (the “Record Date”) to receive notice of and to vote at the Special Meeting or any adjournment or postponement of the Special Meeting. A list of all stockholders entitled to vote is available for inspection during normal business hours at our principal executive offices at 1301 McKinney St., Suite 1800, Houston, Texas 77010. This list will also be available at the Special Meeting.

YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, WE ENCOURAGE YOU TO READ THIS PROXY STATEMENT AND SUBMIT YOUR PROXY SO THAT YOUR SHARES CAN BE VOTED AT THE SPECIAL MEETING AND TO HELP US ENSURE A QUORUM AT THE SPECIAL MEETING. YOU MAY NONETHELESS VOTE IN PERSON IF YOU ATTEND THE SPECIAL MEETING. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE TAKE THE TIME TO VOTE. YOU MAY VOTE YOUR SHARES BY SIGNING, DATING AND RETURNING THE ENCLOSED PAPER PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE OR VIA THE INTERNET OR BY TELEPHONE BY FOLLOWING THE INSTRUCTIONS INCLUDED IN THE ACCOMPANYING PROXY STATEMENT. IF YOU ATTEND THE SPECIAL MEETING AND WISH TO VOTE YOUR SHARES IN PERSON, YOU MAY REVOKE YOUR PROXY.

ALL STOCKHOLDERS ARE EXTENDED A CORDIAL INVITATION TO ATTEND THE MEETING.

Key Energy Services, Inc.

1301 McKinney Street, Suite 1800

Houston, Texas 77010

Houston, Texas

February [●], 2020

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KEY ENERGY SERVICES, INC.

1301 McKinney Street, Suite 1800

Houston, Texas 770101

In addition, any other matters that properly come before the Special Meeting or any adjournment or postponement thereof will be considered. The Board is presently aware of no other business to come before the Special Meeting.

Soter, the sole holder of the Series A Preferred Stock, will grant a written consent in connection with deleting the provisions in the Existing Charter designating the rights and preferences of the Series A Preferred Stock which is being redeemed and cancelled at no cost in connection with the Restructuring.

Each of proposals ONE through THIRTEEN above will be implemented automatically upon the filing of the Restated Charter with the Secretary of State of the State of Delaware substantially concurrently with the consummation of the Restructuring.

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Recommendation of the Board

The Board recommends that you vote FOR each of proposals ONE through THIRTEEN, above.

Background

The Company and its wholly owned subsidiaries provide a full range of well services to major oil companies and independent oil and natural gas production companies. Our services include rig-based and coiled tubing-based well maintenance and workover services, well completion and recompletion services, fluid management services, fishing and rental services, and other ancillary oilfield services. Additionally, certain of our rigs are capable of specialty drilling applications. We operate in most major oil and natural gas producing regions of the continental United States.

Our core businesses depend on our customers’ willingness and ability to make expenditures to produce, develop and explore for oil and natural gas in onshore U.S. basins. Industry conditions are influenced by numerous factors, such as oil and natural gas prices, the supply of and demand for oil and natural gas, domestic and worldwide economic conditions, political instability in oil producing countries, and available supply of and demand for the services we provide. Since the fourth quarter of 2018, when oil prices fell from the highs of 2018, we began to experience reductions in demand for our services, particularly our completion related services.

In 2019, oil prices began to recover from the lows experienced in late 2018. However, despite the increase in oil prices, we experienced a decline in revenue compared to the corresponding 2018 periods. Lower spending by our customers and increased competition, primarily in completion activities, also resulted in overall lower activity in 2019. These factors, coupled with our large outstanding debt obligations, diminished our cash position and capital resources and raised substantial doubt about our ability to continue as a going concern. Beginning in the fourth quarter of 2019, in an effort to address our capital structure, we took steps to reduce our labor costs and exited certain operations and areas to focus on certain markets. Despite efforts to reduce our operational footprint, our financial position continued to deteriorate which negatively affected the market prices for our securities, including our Common Stock.

In addition to the effects on our Common Stock, lower activity levels and reduced revenue impaired our ability to support our substantial debt obligations under our two credit facilities. The Company is a borrower under the Loan and Security Agreement, dated as of April 5, 2019 (as amended, the “ABL Facility”), by and among the Company, Bank of America, N.A., as administrative agent (the “Administrative Agent”), and all of the lenders party thereto (the “ABL Lenders”), providing for aggregate commitments from the ABL Lenders of $100 million. In addition, the Company is a borrower under the Term Loan and Security Agreement, dated as of December 15, 2016 (as amended, the “Term Loan Facility”), by and among the Company, Cortland Products Corp., as agent (in such capacity, the “Agent”) and the lenders party thereto (the “Term Loan Lenders”). As of September 30, 2019, the outstanding principal amount under our Term Loan Facility was approximately $243.13 million. In addition, as of September 30, 2019, we had no borrowings outstanding and $34.6 million in committed letters of credit outstanding under our ABL Facility.

In connection with the factors described above, on October 31, 2019, the Company announced that we had engaged external advisors to assist the Company in analyzing various strategic financial alternatives to address its capital structure and position the Company for future success. In connection with the strategic review, the Company elected not to make a scheduled interest payment due October 18, 2019 under the Term Loan Facility. The Company’s failure to make the October interest payment resulted in a default under the Term Loan Facility and a cross default under the ABL Facility (such defaults, the “Specified Defaults”). On October 29, 2019, the Company entered into (i) a forbearance agreement (as amended on December 6, 2019, January 10, 2020 and January 24, 2020, the “Term Loan Forbearance Agreement”) with the Agent and Term Loan Lenders, collectively holding over 99.5% of the principal amount of the outstanding term loans and (ii) a forbearance agreement (as amended on December 6, 2019, December 20, 2019 and January 10, 2020, the “ABL Forbearance

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Agreement” and, together with the Term Loan Forbearance Agreement, the “Forbearance Agreements”) with the Administrative Agent and all of the ABL Lenders. Pursuant to the Forbearance Agreements, including in the case of the Term Loan Forbearance Agreement, as amended by the RSA (as defined below), the lenders party thereto agreed that such lenders would forbear from exercising any default-related rights and remedies with respect to the Specified Defaults for the periods specified therein.

Following our election to not make scheduled interests payments under the Term Loan Facility, we began active discussions with our lenders to find a solution to our capital structure and to significantly reduce our debt level. Nonetheless, since then our financial situation and liquidity position has continued to deteriorate. On November 27, 2019, the New York Stock Exchange (the “NYSE”) notified the Company that the NYSE had determined to commence proceedings to delist the Common Stock from the NYSE as a result of the Company’s failure to maintain an average global market capitalization over a consecutive 30 trading-day period of at least $15 million pursuant to NYSE listing standards, and our Common Stock was subsequently delisted. On December 20, 2019, we entered into amendments to the ABL Facility and ABL Forbearance Agreement to provide for waivers of our failure to maintain minimum availability thereunder and to reduce the minimum availability we are required to maintain under the ABL Forbearance Agreement and reduce the aggregate revolving commitments under the ABL Facility from $100 million to $80 million.

In light of the continuing deterioration of our financial condition and liquidity position, and the Company’s inability to make interest or principal payments in respect of its substantial outstanding debt obligations, the Board determined that it would be necessary to convert the Company’s substantial debt obligations to common equity. Accordingly, on January 24, 2020, the Company entered into a Restructuring Support Agreement (including the exhibit thereto, the “RSA”) with the Term Loan Lenders collectively holding over 99.5% (the “Supporting Term Lenders”) of the principal amount of the Company’s outstanding term loans. The RSA contemplates a series of out-of-court transactions that will effectuate a financial restructuring of the Company’s capital structure and indebtedness and related facilities, including the conversion of approximately $241.9 million aggregate outstanding principal of the Company’s term loans (together with accrued interest thereon) into (i) newly issued shares of our Common Stock, and (ii) $20 million of term loans under a new approximately $51.2 million term loan facility (the “Restructuring”). The Restructuring is expected to reduce the Company’s long term debt by approximately 80%.

Pursuant to the RSA, among other things, the parties thereto have agreed to support and cooperate with each other in good faith, to coordinate and to use their respective commercially reasonable best efforts to consummate the Restructuring as soon as reasonably practicable on the terms set forth in the RSA. The Company currently expects to complete the restructuring by the end of February 2020.

Material Terms of the RSA and the Restructuring

Generally, the RSA and the Restructuring contemplate, among other things, the following transactions and changes to the Company’s capital structure and governance:

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The parties to the RSA have agreed that at the completion of the Restructuring the Board will consist of seven directors, each of whom will have one vote, comprised of: the CEO, one non-independent director selected by Soter and five directors who will meet the “independent director” requirements set forth in Section 303A of the NYSE Listed Company Manual and be selected by the Supporting Term Lenders. At the closing of the Restructuring, the Company and Supporting Term Lenders will enter into the Stockholders Agreement, which, among other things, will grant the Supporting Term Lenders certain board nomination rights based on their ongoing percentage ownership. Supporting Term Lenders holding more the 25% of the Company’s outstanding shares as of the closing of the Restructuring will be entitled to nominate two directors and Supporting Term Lenders holding between 10% and 25% of the Company’s outstanding shares as of the closing of the Restructuring will be entitled to nominate one director. All future nominees of Supporting Term Lenders, other than Soter nominees, must meet the “independent director” requirements set forth in Section 303A of the NYSE Listed Company Manual. During the time that Soter holds between 10% and 25% of the Company’s outstanding shares as of the closing of the Restructuring, Soter will be entitled to nominate one non-independent director to the Board. In addition, following the Restructuring, Supporting Term Lenders will be entitled to appoint a non-voting board observer subject to specified ownership thresholds.

The RSA also contemplates that the Company will distribute to the Company’s existing common stockholders the New Warrants at the completion of the Restructuring. The New Warrants are to be issued in two series each with a four-year exercise period. The first series will entitle the holders to purchase in the aggregate up to 10% of the Company’s common shares at the closing of the Restructuring on an as-exercised basis (after giving effect to the exercise of all New Warrants, but subject to dilution by issuances under the MIP). The aggregate exercise price of the first series of New Warrants will be equal to the aggregate outstanding principal amount of term loans under the Term Loan Facility plus accrued interest thereon at the default rate. The second series of New Warrants will entitle the holders to purchase in the aggregate up to 7.5% of the Company’s common shares at the closing of the Restructuring on an as-exercised basis (after giving effect to the exercise of all New Warrants, but subject to dilution by issuances under the MIP). Pursuant to the RSA, the aggregate strike price of the second series of New Warrants will be equal to the product of (i) the aggregate outstanding principal amount of term loans under the Term Loan Facility plus accrued interest thereon at the default rate, multiplied by (ii) 1.50.

The RSA extends the forbearances and other obligations contemplated by the Term Loan Forbearance Agreement until the RSA is validly terminated in accordance with its terms. The RSA automatically terminates upon (i) the consummation of the Restructuring, (ii) the issuance of an order enjoining the Restructuring or declaring the RSA unenforceable, or (iii) the mutual agreement of the Company and Supporting Term Lenders holding 66.6% of the term loans held by Supporting Term Lenders. The Company may also terminate the RSA (i) in the event the Restructuring has not been consummated within 75 days after the effectiveness of the RSA, and (ii) upon a determination by the Board that the Restructuring would be inconsistent with their fiduciary duties. The Supporting Term Lenders holding 66.6% of the term loans may terminate the RSA (i) in the event the Restructuring has not been consummated within 75 days after the effectiveness of the RSA, (ii) upon the occurrence of certain termination events set forth in the Term Loan Forbearance Agreement, or (iii) in the event the Company files or publicly announces that it will file, join in or support any plan of reorganization, including

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any in-court bankruptcy proceeding, other than as contemplated in the RSA. In addition, the Company and Supporting Term Lenders holding 66.6% of the term loans may each also terminate the RSA upon certain breaches of the RSA by the applicable counterparties.

Voting at the Special Meeting

The Common Stock is the only class of securities that entitles holders to vote generally at meetings of the Company’s stockholders. Each share of Common Stock outstanding on February [●], 2020 (the “Record Date”) entitles the holder to one vote at the Special Meeting. In addition, the Existing Charter grants the holder of our Series A Preferred Stock the right to consent to modifications of the rights and preferences of the Series A Preferred Stock. Soter, the sole holder of the Series A Preferred Stock, will grant a written consent in connection with deleting the provisions in the Existing Charter designating the rights and preferences of the Series A Preferred Stock which is being redeemed and cancelled at no cost in connection with the Restructuring.

If on the Record Date you hold shares of our Common Stock that are represented by stock certificates or registered directly in your name with our transfer agent, American Stock Transfer & Trust Company, you are considered the stockholder of record with respect to those shares. As a stockholder of record, you may vote in person at the Special Meeting or by proxy. Whether or not you plan to attend the Special Meeting in person, we urge you to vote your shares by signing, dating and returning the enclosed proxy card in the enclosed postage-paid envelope or via the Internet or by telephone by following the instructions included in this Proxy Statement. If you submit a proxy but do not give voting instructions as to how your shares should be voted on a particular proposal at the Special Meeting, your shares will be voted in accordance with the recommendations of our Board stated in this Proxy Statement.

If on the Record Date you hold shares of our Common Stock in an account with a brokerage firm, bank or other nominee, then you are a beneficial owner of the shares and hold such shares in “street name,” and these proxy materials will be forwarded to you by that organization. As a beneficial owner, you have the right to direct your broker, bank or other nominee on how to vote the shares held in their account, and the nominee has enclosed or provided voting instructions for you to use in directing it how to vote your shares. The nominee that holds your shares, however, is considered the stockholder of record for purposes of voting at the Special Meeting. Because you are not the stockholder of record, you may not vote your shares in person at the Special Meeting unless you bring to the Special Meeting a letter from your broker, bank or other nominee confirming your beneficial ownership of the shares as of the Record Date. Whether or not you plan to attend the Special Meeting, we urge you to vote by following the voting instructions provided to you to ensure that your vote is counted.

A list of stockholders entitled to vote at the Special Meeting will be available for inspection during ordinary business hours for a period of ten days before the Special Meeting at our offices located at 1301 McKinney Street, Suite 1800, Houston, Texas 77010. The list will also be available for inspection at the Special Meeting.

Effect of Broker Non-Votes and Abstentions

If you are a beneficial owner and do not vote, and your broker, bank or other nominee does not have discretionary power to vote your shares, your shares may constitute “broker non-votes.” Broker non-votes occur when shares held by a broker for a beneficial owner are not voted with respect to a particular proposal and generally occur because the broker (1) does not receive voting instructions from the beneficial owner and (2) lacks discretionary authority to vote the shares. Without voting instructions from their clients, brokers and other nominees cannot vote on “non-routine” proposals, including all of the proposals described in this Proxy Statement. Accordingly, if you do not provide voting instructions to any applicable broker or nominee, your shares will not be counted for the purpose of establishing a quorum at the Special Meeting and will have the same effect as a vote AGAINST each of the proposals described in this Proxy Statement.

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The shares of a stockholder whose ballot on any or all proposals is marked as “abstain” will be included in the number of shares present at the Special Meeting to determine whether a quorum is present. If you hold your shares in your own name and abstain from voting on a proposal, your abstention will have the same effect as a negative vote. If you hold your shares through a broker and you do not instruct the broker on how to vote on a proposal, your broker will not have authority to vote your shares.

Default Voting

A proxy that is properly completed and submitted will be voted at the Special Meeting in accordance with the instructions on the proxy. If you properly execute and submit a proxy, but do not provide any voting instructions, your shares will be voted FOR proposals ONE through THIRTEEN.

If any other business properly comes before the stockholders for a vote at the meeting, your shares will be voted in accordance with the discretion of the holders of the proxy. The Board knows of no matters, other than those previously stated, to be presented for consideration at the Special Meeting.

How to Revoke Your Proxy

Any proxy given pursuant to this solicitation may be revoked by the person giving it at any time before its use by (1) delivering a written notice of revocation addressed to Key Energy Services, Inc., Attn: General Counsel, 1301 McKinney Street, Suite 1800, Houston, Texas 77010, (2) duly executing a proxy bearing a later date, (3) voting again by Internet or by telephone or (4) attending the Special Meeting and voting in person. Your last vote or proxy will be the vote or proxy that is counted. Attendance at the Special Meeting will not cause your previously granted proxy to be revoked unless you vote or specifically so request.

Quorum Requirement for the Special Meeting

The presence at the Special Meeting, whether in person or by valid proxy, of the persons holding a majority of shares of Common Stock outstanding on the Record Date will constitute a quorum, permitting us to conduct our business at the Special Meeting. On the Record Date, there were [●] shares of Common Stock held by [●] stockholders of record. Abstentions (i.e., if you or your broker mark “abstain” on a proxy or voting instruction form, or if a stockholder of record attends the Special Meeting but does not vote (either before or during the Special Meeting)) will be considered to be shares present at the meeting for purposes of establishing a quorum. Without voting instructions from their clients, brokers and other nominees cannot vote on “non-routine” proposals, including all of the proposals described in this Proxy Statement. Accordingly, if you do not provide voting instructions to any applicable broker or nominee, your shares will not be counted for the purpose of establishing a quorum at the Special Meeting.

Required Votes

Proposal ONE – Reverse Stock Split Proposal. Approval of the proposal to amend the Existing Charter to implement a reverse stock split of our Common Stock, at a reverse split ratio of 1-for-50, requires the affirmative vote of a majority of the shares of Common Stock entitled to vote on this proposal

Proposal TWO – Increase in Number of Authorized Shares Proposal. Approval of the proposal to amend the Existing Charter to increase the number of authorized shares of stock, from 110 million to 200 million, of which 150 million will be shares of Common Stock and 50 million will be shares of our preferred stock, requires the affirmative vote of a majority of the shares of Common Stock entitled to vote on this proposal.

Proposal THREE – Board Size Proposal. Approval of the proposal to amend the Existing Charter to provide that the number of directors on the Board will initially be fixed at seven and thereafter the size of the Board will be fixed exclusively by resolution of the Board, and eliminate provisions listing the initial directors by name, requires the affirmative vote of a majority of the shares of Common Stock entitled to vote on this proposal.

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Proposal FOUR – Director Nomination Proposal. Approval of the proposal to amend the Existing Charter to provide that, subject to the Stockholders Agreement, directors will be nominated in accordance with the Company’s bylaws and to eliminate the provisions establishing the Company’s Series A Preferred Stock that entitled the holders of our Series A Preferred Stock to appoint a majority of the Board, requires the affirmative vote of a majority of the shares of Common Stock entitled to vote on this proposal.

Proposal FIVE – Board Vacancies Proposal. Approval of the proposal to amend the Existing Charter to provide that, subject to the Stockholders Agreement, vacancies on the Board resulting from death, resignation, removal or otherwise, and newly created directorships resulting from any increase in the number of directors, will be filled solely by a majority of directors then in office (although less than a quorum) or by the sole remaining director, requires the affirmative vote of a majority of the shares of Common Stock entitled to vote on this proposal.

Proposal SIX – Stockholder Written Consent Proposal. Approval of the proposal to amend the Existing Charter to permit stockholders to take action by written consent only when certain specified stockholders collectively hold more than 50% of the Common Stock, requires the affirmative vote of a majority of the shares of Common Stock entitled to vote on this proposal.

Proposal SEVEN – Special Meeting Proposal. Approval of the proposal to amend the Existing Charter to permit stockholders to call a special meeting of the stockholders only when certain specified stockholders collectively hold more than 50% of the Common Stock, requires the affirmative vote of a majority of the shares of Common Stock entitled to vote on this proposal.

Proposal EIGHT – Removal of Certain Non-Soter Stockholder Approval Rights Proposal. Approval of the proposal to amend the Existing Charter to remove the requirement that an affirmative vote of a majority of all outstanding shares of Common Stock held by stockholders of the Company other than Soter is required to approve certain amendments to the Existing Charter or the Company’s bylaws unless such amendments are approved by the Board in accordance with the Company’s bylaws, requires the affirmative vote of a majority of the shares of Common Stock entitled to vote on this proposal.

Proposal NINE – Stockholder Supermajority Approval Proposal. Approval of the proposal to amend the Existing Charter to provide that an affirmative vote of not less than 66 2/3% of the total voting power of all outstanding classes of securities of the Company generally entitled to vote in the election of directors is required to approve certain amendments to the Restated Charter, requires the affirmative vote of a majority of the shares of Common Stock entitled to vote on this proposal.

Proposal TEN – Amendment of Bylaws Proposal. Approval of the proposal to amend the Existing Charter to provide that stockholders may amend the Company’s bylaws only with the affirmative vote of the holders of not less than 50.1% of the voting power of all outstanding securities of the Company generally entitled to vote in the election of directors, requires the affirmative vote of a majority of the shares of Common Stock entitled to vote on this proposal.

Proposal ELEVEN – Forum Selection Clause Proposal. Approval of the proposal to amend the Existing Charter to include an exclusive forum selection clause with respect to certain derivative, fiduciary and similar actions, requires the affirmative vote of a majority of the shares of the Common Stock entitled to vote on this proposal.

Proposal TWELVE – Delaware Section 203 Proposal. Approval of the proposal to amend the Existing Charter to “opt out” of Section 203 of the General Corporation Law of the State of Delaware, so long as the Supporting Term Lenders collectively hold more than 50% of the Common Stock, requires the affirmative vote of a majority of the shares of the Common Stock entitled to vote on this proposal.

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Proposal THIRTEEN – Amendment and Restatement Proposal. Approval of the proposal to amend and restate the Existing Charter to implement the above changes and other incidental changes, requires the affirmative vote of a majority of the shares of Common Stock entitled to vote on this proposal.

As of the Record Date, Soter beneficially owned 10,309,609 shares of our Common Stock representing approximately 50.2% of the outstanding shares, and affiliates of Soter have appointed five of our directors. As part of the RSA, Soter has agreed to vote the shares owned by Soter in favor of the Restructuring, including each of the proposals to be presented at the Special Meeting and, accordingly, proposals ONE through THIRTEEN will be approved.

Each of proposals ONE through THIRTEEN above is cross-conditioned upon the approval by our stockholders of all of the proposals. None of proposals ONE through THIRTEEN above will be deemed approved unless all of them are approved. Each of proposals ONE through THIRTEEN above will be implemented automatically upon the filing of the Restated Charter with the Secretary of State of the State of Delaware substantially concurrently with the consummation of the Restructuring.

Interests Of Certain Persons In Matters To Be Acted Upon

As of the Record Date, Soter beneficially owned 10,309,609 shares of our Common Stock representing approximately 50.2% of the outstanding shares, and affiliates of Soter have appointed five of our directors. In addition, Soter holds approximately $29.8 million of the approximately $243.13 million outstanding principal amount of the Term Loan Facility. As a result of the Restructuring, Soter will receive approximately [●] newly issued shares of Common Stock, after giving effect to the Reverse Stock Split Proposal, and $[●] million of term loans under the New Term Facility in exchange for such existing indebtedness. Soter’s existing Common Stock will be subject to the same dilution as that of our other existing stockholders. Soter has agreed in the RSA to provide $7.5 million of the $30 million of new funding under the New Term Facility. In addition, pursuant to the RSA, Soter will have the right to appoint one director of the seven person Board post-Restructuring, as described above under “Material Terms of the RSA and the Restructuring.”

The RSA also contemplates establishment of the MIP in connection with consummation of the Restructuring. Which employees will participate in the MIP has not yet been determined. Common Stock held by our existing directors and executive officers prior to the Restructuring will be subject to the same dilution as that of our other existing stockholders as a result of the Restructuring.

No Appraisal or Dissenters’ Rights

Under Delaware law, our Existing Charter and our bylaws, no appraisal or dissenters’ rights are available to our stockholders in connection with the RSA or the Restructuring regardless how they vote (or abstain from voting on) on proposals ONE through THIRTEEN.

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QUESTIONS AND ANSWERS REGARDING THE RESTRUCTURING AND THE SPECIAL MEETING

The following questions and answers are intended to address briefly some commonly asked questions regarding the Restructuring and the Special Meeting. These questions and answers may not address all questions that may be important to you as a stockholder. Please refer to the more detailed information contained elsewhere in this Proxy Statement and the exhibits to this Proxy Statement, which you should read carefully and in their entirety.

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As of the Record Date, Soter beneficially owned 10,309,609 shares of our Common Stock representing approximately 50.2% of the outstanding shares, and affiliates of Soter have appointed five of our directors. As part of the RSA, Soter has agreed to vote the shares owned by Soter in favor of the Restructuring, including each of the proposals to be presented at the Special Meeting and, accordingly, proposals ONE through THIRTEEN will be approved.

If on the Record Date you hold shares of our Common Stock in an account with a brokerage firm, bank or other nominee, then you are a beneficial owner of the shares and hold such shares in “street name,” and these proxy materials will be forwarded to you by that organization. As a beneficial owner, you have the right to direct your broker, bank or other nominee on how to vote the shares held in their account, and the nominee has enclosed or provided voting instructions for you to use in directing it how to vote your shares. The nominee that holds your shares, however, is considered the stockholder of record for purposes of voting at the Special Meeting. Because you are not the stockholder of record, you may not vote your shares in person at the Special Meeting unless you bring to the Special Meeting a letter from your broker, bank or other nominee confirming your beneficial ownership of the shares as of the Record Date. Whether or not you plan to attend the Special Meeting, we urge you to vote by following the voting instructions provided to you to ensure that your vote is counted.

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CAUTIONARY STATEMENTS REWARDING FORWARD-LOOKING STATEMENTS

In addition to statements of historical fact, this report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that are not historical in nature or that relate to future events and conditions are, or may be deemed to be, forward-looking statements. These “forward-looking statements” are based on our current expectations, estimates and projections about the Company and its wholly owned and controlled subsidiaries, our industry and management’s beliefs and assumptions concerning future events and financial trends affecting our financial condition and results of operations. In some cases, you can identify these statements by terminology such as “may,” “will,” “should,” “predicts,” “expects,” “believes,” “anticipates,” “projects,” “potential” or “continue” or the negative of such terms and other comparable terminology. These statements are only predictions and are subject to substantial risks and uncertainties and are not guarantees of performance. Future actions, events and conditions and future results of operations may differ materially from those expressed in these statements.

We undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date of this Proxy Statement except as required by law. All of our written and oral forward-looking statements are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements.

Important factors that may affect our expectations, estimates or projections include, but are not limited to, the following:

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PROPOSAL ONE: Reverse Stock Split Proposal

Approval of the Reverse Stock Split Proposal would authorize an amendment to the Existing Charter to effect a reverse stock split of the Common Stock, at a reverse split ratio of 1-for-50 (the “Reverse Stock Split”), substantially concurrently with the consummation of the Restructuring. The Reverse Stock Split will have no effect on the par value per share of the Common Stock, but will have the effect of reducing the number of issued and outstanding shares of Common Stock by the 1-for-50 ratio. No fractional shares of Common Stock will be issued in connection with the Reverse Stock Split, and instead, the Company will issue one full share of Common Stock to any stockholder who would have been entitled to receive a fractional share of Common Stock.

The completion of the Restructuring would result in the issuance of a number of shares of Common Stock that would constitute the vast majority of our outstanding shares. Specifically, upon completion of the Restructuring, the Supporting Term Lenders are expected to own 97% of the outstanding shares of Common Stock after giving effect to such issuance, and holders of existing shares of Common Stock are expected to hold 3% of the Common Stock of the Company, in each case subject to potential dilution as a result of the New Warrants and the MIP. In addition, after giving effect to the Reverse Stock Split, the Restructuring contemplated by the RSA will require [●] shares to be reserved for issuance pursuant to the New Warrants and [●] shares to be reserved for issuance pursuant to the MIP. While the Increase in Number of Authorized Shares Proposal (described below) would give us enough authorized, unissued and unreserved shares of Common Stock for these purposes, absent the Reverse Stock Split we would be required to issue an extremely large number of shares of Common Stock.

In addition, as described above under “Background,” on December 23, 2019, our Common Stock was delisted from the NYSE. Our Common Stock is currently quoted on the over the counter (OTC) market. In order for our Common Stock to be relisted on the NYSE or another securities exchange, we would be required to satisfy various listing standards. For example, the NYSE listing standard requires companies to have a minimum stock price of $4.00. A decrease in the number of outstanding shares of our Common Stock resulting from the Reverse Stock Split and in connection with the Restructuring could, absent other factors, assist in ensuring that the per share market price of our Common Stock meets such minimum requirements.

The parties to the RSA have agreed to amend the Existing Charter to implement the Reverse Stock Split Proposal so as to lower the overall number of shares of Common Stock that we would otherwise have outstanding after the Restructuring. The changes contemplated by this proposal ONE are necessary to implement these governance changes. The proposed form of such amendment is included in the proposed Restated Charter attached as Exhibit A to this Proxy Statement.

Effect of the Reverse Stock Split on our Common Stock

As a result of the Reverse Stock Split, every fifty shares of existing Common Stock will be combined into one share of Common Stock. The approximate number of outstanding shares of Common stock that would result from the 1-for-50 reverse stock split ratio (without giving effect to fractional shares), based on [●] shares of Common Stock issued and outstanding as of the Record Date (and without giving effect to the Restructuring), would be [●]. Following the Reverse Stock Split, and after giving effect to the issuance of new shares pursuant to the Restructuring, the approximate number of outstanding shares of Common Stock will be [●], of which the Supporting Term Lenders will hold 97%.

The Reverse Stock Split will affect all existing holders of our Common Stock uniformly and will not in and of itself change any stockholder’s percentage ownership interest in the Company, except to the extent that the Reverse Stock Split would otherwise result in any of our stockholders owning a fractional share (in which case the fractional amount will be rounded up to the next whole share). Following the Reverse Stock Split, shares of our Common Stock will have the same voting rights and rights to dividends and distributions and will be identical in all other respects to Common Stock now authorized.

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While the Reverse Stock Split will result in an increase in the number of authorized but unissued shares of our Common Stock, the Reverse Stock Split is not being recommended in response to any specific effort of which we are aware to obtain to control of us, nor do we have the intention of using the additional shares for anti-takeover purposes, although we could theoretically use the additional shares to make more difficult or to discourage an attempt to acquire control of the Company.

Notwithstanding the decrease in the number of outstanding shares following the Reverse Stock Split, the Board does not intend for this transaction to be the first step in a “going private transaction” within the meaning of Rule 13e-3 of the Exchange Act. Since all fractional shares of Common Stock resulting from the Reverse Stock Split will be rounded up to the nearest whole share, there will be no reduction in the number of stockholders of record and the Company will not be purchasing fractional interests created by the Reverse Stock Split.

Procedures for Effecting the Reverse Stock Split

The Reverse Stock Split will become effective automatically upon the filing of the Restated Charter with the Secretary of State of the State of Delaware substantially concurrently with the consummation of the Restructuring (the “Effective Date”). On the Effective Date, every fifty shares of Common Stock issued and outstanding immediately prior to the Effective Date will be combined and converted, automatically and without any further action on the part of the stockholders, into one share of our Common Stock. No fractional shares of Common Stock will be issued in connection with the Reverse Stock Split, however, the Company will issue one full share of Common Stock to any stockholder who would have been entitled to receive a fractional share of Common Stock.

Vote Required

Approval of this proposal ONE requires the affirmative vote of a majority of the shares of Common Stock entitled to vote on this proposal. If you hold your shares in your own name and abstain from voting on this matter, your abstention will have the same effect as a negative vote. If you hold your shares through a broker and you do not instruct the broker on how to vote on this proposal, your broker will not have authority to vote your shares. Broker non-votes will have the same effect as a negative vote.

This proposal will be implemented automatically upon the filing of the Restated Charter with the Secretary of State of the State of Delaware substantially concurrently with the consummation of the Restructuring.

Recommendation

The Board unanimously recommends that stockholders vote FOR the Reverse Stock Split Proposal.

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PROPOSAL TWO: Increase in Number of Authorized Shares Proposal

Currently, the Existing Charter authorizes us to issue up to 110 million shares of stock, consisting of 100 million shares of Common Stock and 10 million shares of our preferred stock. As of the Record Date, [●] shares of our Common Stock and one share of our Series A Preferred Stock were issued and outstanding, and [●] shares of our Common Stock were reserved for issuance. After giving effect to the Reverse Stock Split, [●] shares of our Common Stock will be issued and outstanding and [●] shares of our Common Stock will be reserved for issuance. Soter, the sole holder of the Series A Preferred Stock, will grant a written consent in connection with deleting the provisions in the Existing Charter designating the rights and preferences of the Series A Preferred Stock which is being redeemed and cancelled at no cost in connection with the Restructuring. In connection with the Restructuring, and as consideration for the cancellation of the outstanding principal and accrued interest of the Term Loan Facility and subject to the stockholder approval contemplated hereby, we will issue to the Supporting Term Lenders [●] million shares of Common Stock, after giving effect to the Reverse Stock Split Proposal. In addition, after giving effect to the Reverse Stock Split, the Restructuring contemplated by the RSA will require [●] shares to be reserved for issuance pursuant to the New Warrants and [●] shares to be reserved for issuance pursuant to the MIP. While the Reverse Stock Split Proposal would provide us with enough authorized, unissued and unreserved shares of Common Stock for these purposes, we are asking you to approve an amendment to the Existing Charter to increase the number of authorized shares of Common Stock from 100 million to 150 million and the authorized shares of our preferred stock from 10 million to 50 million.

The availability of authorized but unissued shares beyond that required in connection with the Restructuring will provide the Company flexibility to issue additional common equity without further approval of the Company’s stockholders. The Board believes this flexibility is appropriate for the post-Restructuring needs of the Company. We have not proposed the increase in the authorized number of shares of Common Stock with the intention of using the additional shares for anti-takeover purposes, although we could theoretically use the additional shares to make more difficult or to discourage an attempt to acquire control of the Company.

The parties to the RSA agreed that the Restated Charter would provide for an increased number of authorized shares of Common Stock from 100 million to 150 million and an increased number of authorized shares of preferred stock from 10 million to 50 million. The changes contemplated by this proposal TWO are necessary to implement these governance changes. The proposed form of such amendment is included in the proposed Restated Charter attached as Exhibit A to this Proxy Statement.

Vote Required

Approval of this proposal TWO requires the affirmative vote of a majority of the shares of Common Stock entitled to vote on this proposal. If you hold your shares in your own name and abstain from voting on this matter, your abstention will have the same effect as a negative vote. If you hold your shares through a broker and you do not instruct the broker on how to vote on this proposal, your broker will not have authority to vote your shares. Broker non-votes will have the same effect as a negative vote.

This proposal will be implemented automatically upon the filing of the Restated Charter with the Secretary of State of the State of Delaware substantially concurrently with the consummation of the Restructuring.

Recommendation

The Board unanimously recommends that stockholders vote FOR the Increase in Number of Authorized Shares Proposal.

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PROPOSAL THREE: Board Size Proposal

Currently, the Existing Charter names the initial slate of directors and provides that the size of the Board is as determined pursuant to the Company’s bylaws subject to certain designation rights granted to the holder of the Series A Preferred Stock, as described below under “Proposal Four: Director Nomination Proposal”. Approval of the Board Size Proposal would authorize an amendment to the Existing Charter to provide that the number of directors on the Board will initially be fixed at seven and that thereafter the size of the Board will be fixed exclusively by resolution of the Board. In addition, the Board Size Proposal will eliminate provisions listing the initial directors by name.

The parties to the RSA have agreed that at the completion of the Restructuring the Board will consist of seven directors, comprised of: the CEO, one non-independent director selected by Soter and five directors who will meet the “independent director” requirements set forth in Section 303A of the NYSE Listed Company Manual and be selected by the Supporting Term Lenders. The changes contemplated by this proposal THREE are necessary to implement these governance changes. The proposed form of such amendments is included in the proposed Restated Charter attached as Exhibit A to this Proxy Statement.

Vote Required

Approval of this proposal THREE requires the affirmative vote of a majority of the shares of Common Stock entitled to vote on this proposal. If you hold your shares in your own name and abstain from voting on this matter, your abstention will have the same effect as a negative vote. If you hold your shares through a broker and you do not instruct the broker on how to vote on this proposal, your broker will not have authority to vote your shares. Broker non-votes will have the same effect as a negative vote.

This proposal will be implemented automatically upon the filing of the Restated Charter with the Secretary of State of the State of Delaware substantially concurrently with the consummation of the Restructuring.

Recommendation

The Board unanimously recommends that stockholders vote FOR the Board Size Proposal.

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PROPOSAL FOUR: Director Nomination Proposal

Currently, the Existing Charter establishes the Company’s Series A Preferred Stock which gives Soter the ability to appoint a majority of the Board and further provides that Soter-appointed “Super Voting Directors” may cast two votes, rather than one vote in all manners. Approval of the Director Nomination Proposal would authorize an amendment to the Existing Charter to provide that, subject to the Stockholders Agreement, directors will be nominated in accordance with the Company’s bylaws and to eliminate the provisions establishing the Company’s Series A Preferred Stock and the concept of Super Voting Directors.

Pursuant to the RSA, the parties have agreed to enter into the Stockholders Agreement which will grant the Supporting Term Lenders certain board nomination rights based on their ongoing percentage ownership. Supporting Term Lenders holding more the 25% of the Company’s outstanding shares as of the closing of the Restructuring will be entitled to nominate two directors and Supporting Term Lenders holding between 10% and 25% of the Company’s outstanding shares as of the closing of the Restructuring will be entitled to nominate one director, each of whom will have one vote. All future nominees of Supporting Term Lenders, other than Soter nominees, must meet the “independent director” requirements set forth in Section 303A of the NYSE Listed Company Manual. During the time that Soter holds between 10% and 25% of the Company’s outstanding shares as of the closing of the Restructuring, Soter will be entitled to nominate one non-independent director to the Board. The changes contemplated by this proposal FOUR are necessary to implement these governance changes. The proposed form of such amendments is included in the proposed Restated Charter attached as Exhibit A to this Proxy Statement.

Vote Required

Approval of this proposal FOUR requires the affirmative vote of a majority of the shares of Common Stock entitled to vote on this proposal. If you hold your shares in your own name and abstain from voting on this matter, your abstention will have the same effect as a negative vote. If you hold your shares through a broker and you do not instruct the broker on how to vote on this proposal, your broker will not have authority to vote your shares. Broker non-votes will have the same effect as a negative vote.

This proposal will be implemented automatically upon the filing of the Restated Charter with the Secretary of State of the State of Delaware substantially concurrently with the consummation of the Restructuring.

Recommendation

The Board unanimously recommends that stockholders vote FOR the Director Nomination Proposal.

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PROPOSAL FIVE: Board Vacancies Proposal

Currently, the Company’s bylaws provide that vacancies on the Board may be filled by directors holding a majority of the total votes held by directors then in office (although less than a quorum). Approval of the Board Vacancies Proposal would authorize an amendment to the Existing Charter to provide that, subject to the Stockholders Agreement, vacancies on the Board resulting from death, resignation, removal or otherwise, and newly created directorships resulting from any increase in the number of directors, will be filled solely by a majority of directors then in office (although less than a quorum) or by the sole remaining director. The Stockholders Agreement is expected to provide that any vacancies left by any director designated or nominated by a Supporting Term Lender will be filled such Supporting Term Lender. Under Delaware law, bylaws can be amended by stockholders without action of the board of directors. Because vacancies will be governed by the Revised Charter and not the Company’s bylaws, the implementation of the Board Vacancies Proposal would prevent stockholders from filling vacancies without the approval of the Board. As such, this proposal may have an anti-takeover effect in that a person seeking to increase the size of the Board and add directors supportive of an acquisition of the Company may not unilaterally do so.

The parties to the RSA agreed that the Restated Charter would provide that, subject to the Stockholders Agreement, vacancies on the Board resulting from death, resignation, removal or otherwise, and newly created directorships resulting from any increase in the number of directors, will be filled solely by a majority of directors then in office (although less than a quorum) or by the sole remaining director. The changes contemplated by this proposal FIVE are necessary to implement these governance changes. The proposed form of such amendments is included in the proposed Restated Charter attached as Exhibit A to this Proxy Statement.

Vote Required

Approval of this proposal FIVE requires the affirmative vote of a majority of the shares of Common Stock entitled to vote on this proposal. If you hold your shares in your own name and abstain from voting on this matter, your abstention will have the same effect as a negative vote. If you hold your shares through a broker and you do not instruct the broker on how to vote on this proposal, your broker will not have authority to vote your shares. Broker non-votes will have the same effect as a negative vote.

This proposal will be implemented automatically upon the filing of the Restated Charter with the Secretary of State of the State of Delaware substantially concurrently with the consummation of the Restructuring.

Recommendation

The Board unanimously recommends that stockholders vote FOR the Board Vacancies Proposal.

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PROPOSAL SIX: Stockholder Written Consent Proposal

Currently, any action required by law to be taken at any annual or special meeting of stockholders of the Company, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting if consents in writing, setting forth such action so taken, are signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Approval of the Stockholder Written Consent Proposal would authorize an amendment to the Existing Charter that would provide that stockholders may act by written consent only when the Supporting Term Lenders and their Permitted Transferees (to be defined in the Stockholders Agreement) collectively hold more than 50% of the Company’s outstanding shares of Common Stock. The implementation of the Stockholder Written Consent Proposal may have an anti-takeover effect in that, following such time as the Supporting Term Lenders and their Permitted Transferees cease to hold the requisite percentages of shares, a person seeking to change the composition of the Board to include directors supportive of an acquisition of the Company or to implement other changes to the Restated Charter conducive to an acquisition of the Company may be required to wait until our next annual meeting before presenting such action to our stockholders.

The parties to the RSA agreed that the Restated Charter would permit stockholders to act by written consent only when Supporting Term Lenders and their Permitted Transferees collectively hold more than 50% of the Company’s outstanding shares of Common Stock. The changes contemplated by this proposal SIX are necessary to implement such governance changes. The proposed form of such amendment is included in the proposed Restated Charter attached as Exhibit A to this Proxy Statement.

Vote Required

Approval of this proposal SIX requires the affirmative vote of a majority of the shares of Common Stock entitled to vote on this proposal. If you hold your shares in your own name and abstain from voting on this matter, your abstention will have the same effect as a negative vote. If you hold your shares through a broker and you do not instruct the broker on how to vote on this proposal, your broker will not have authority to vote your shares. Broker non-votes will have the same effect as a negative vote.

This proposal will be implemented automatically upon the filing of the Restated Charter with the Secretary of State of the State of Delaware substantially concurrently with the consummation of the Restructuring.

Recommendation

The Board unanimously recommends that stockholders vote FOR the Stockholder Written Consent Proposal.

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PROPOSAL SEVEN: Special Meeting Proposal

Currently, the Existing Charter expressly provides that stockholders are not entitled to call, or to require that the Board call, a special meeting of the stockholders. Approval of the Special Meeting Proposal would authorize an amendment to the Existing Charter that would provide that stockholders could call a special meeting only when the Supporting Term Lenders and their Permitted Transferees collectively hold more than 50% of the Company’s outstanding shares of Common Stock.

The parties to the RSA agreed that the Restated Charter would permit stockholders to call a special meeting so long as Supporting Term Lenders and their Permitted Transferees collectively hold more than 50% of the Company’s outstanding shares of Common Stock. The changes contemplated by this proposal SEVEN are necessary to implement such governance changes. The proposed form of such amendment is included in the proposed Restated Charter attached as Exhibit A to this Proxy Statement.

Vote Required

Approval of this proposal SEVEN requires the affirmative vote of a majority of the shares of Common Stock entitled to vote on this proposal. If you hold your shares in your own name and abstain from voting on this matter, your abstention will have the same effect as a negative vote. If you hold your shares through a broker and you do not instruct the broker on how to vote on this proposal, your broker will not have authority to vote your shares. Broker non-votes will have the same effect as a negative vote.

This proposal will be implemented automatically upon the filing of the Restated Charter with the Secretary of State of the State of Delaware substantially concurrently with the consummation of the Restructuring.

Recommendation

The Board unanimously recommends that stockholders vote FOR the Special Meeting Proposal.

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PROPOSAL EIGHT: Removal of Certain Non-Soter Stockholder Approval Rights Proposal

Currently, the Existing Charter provides that the affirmative vote of a majority of all outstanding shares of Common Stock held by stockholders of the Company other than Soter is required to approve certain amendments to the Existing Charter or our bylaws unless such amendments are approved by the Board in accordance with our bylaws. Approval of the Removal of Certain Non-Soter Stockholder Approval Rights Proposal would authorize an amendment to the Existing Charter that would remove these special stockholder approval rights. Upon consummation of the Restructuring, Soter will hold [●]% of the outstanding Common Stock, and thus, the protections for non-Soter stockholders are no longer necessary. If the changes contemplated by this proposal are implemented, amendments to our charter and bylaws will be governed by Delaware law and as described below under “Proposal Nine: Supermajority Stockholder Approval Rights Proposal” and “Proposal Ten: Amendment of Bylaws Proposal”.

The parties to the RSA agreed that the Restated Charter would eliminate these protections for non-Soter stockholders. The changes contemplated by this proposal EIGHT are necessary to implement such governance changes. The proposed form of such amendment is included in the proposed Restated Charter attached as Exhibit A to this Proxy Statement.

Vote Required

Approval of this proposal EIGHT requires the affirmative vote of a majority of the shares of Common Stock entitled to vote on this proposal. If you hold your shares in your own name and abstain from voting on this matter, your abstention will have the same effect as a negative vote. If you hold your shares through a broker and you do not instruct the broker on how to vote on this proposal, your broker will not have authority to vote your shares. Broker non-votes will have the same effect as a negative vote.

This proposal will be implemented automatically upon the filing of the Restated Charter with the Secretary of State of the State of Delaware substantially concurrently with the consummation of the Restructuring.

Recommendation

The Board unanimously recommends that stockholders vote FOR the Removal of Certain Non-Soter Stockholder Approval Rights.

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PROPOSAL NINE: Stockholder Supermajority Approval Proposal

Currently, Delaware law and the Company’s bylaws govern the vote of stockholders required to amend our Existing Charter. These provisions generally provide that the Existing Charter may be amended upon the affirmative vote of a majority of the shares of Common Stock entitled to vote on such amendment, subject to certain non-Soter approval rights described under “Proposal Eight: Removal of Certain Non-Soter Stockholder Approval Rights Proposal” and certain provisions requiring supermajority Board action under the Company’s bylaws. Approval of the Stockholder Supermajority Approval Proposal would authorize an amendment to the Existing Charter that would provide that the provisions set forth in the following Articles of the Restated Charter may not be repealed or amended in any respect, and no other provision may be adopted, amended or repealed which would have the effect of modifying or permitting the circumvention of such provisions, unless such action is approved by the affirmative vote of not less than 66 2/3% of the total voting power of all outstanding classes of securities of the Company generally entitled to vote in the election of directors, voting together as one class:

The supermajority vote provisions will enhance the likelihood of continued stability in the composition of our Board and its policies and may discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to reduce our vulnerability to hostile takeovers and to discourage certain tactics that may be used in proxy fights. However, such provisions could have the effect of discouraging others from making tender offers for our shares and may have the effect of delaying changes in our control or management.

The parties to the RSA agreed that the Restated Charter would require a super-majority vote of the stockholders to amend the applicable provisions of the Restated Charter. The changes contemplated by this proposal NINE are necessary to implement such governance changes. The proposed form of such amendment is included in the proposed Restated Charter attached as Exhibit A to this Proxy Statement.

Vote Required

Approval of this proposal NINE requires the affirmative vote of a majority of the shares of Common Stock entitled to vote on this proposal. If you hold your shares in your own name and abstain from voting on this matter, your abstention will have the same effect as a negative vote. If you hold your shares through a broker and you do not instruct the broker on how to vote on this proposal, your broker will not have authority to vote your shares. Broker non-votes will have the same effect as a negative vote.

This proposal will be implemented automatically upon the filing of the Restated Charter with the Secretary of State of the State of Delaware substantially concurrently with the consummation of the Restructuring.

Recommendation

The Board unanimously recommends that stockholders vote FOR the Stockholder Supermajority Approval Proposal.

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PROPOSAL TEN: Amendment of Bylaws Proposal

Currently, subject to certain non-Soter approval rights described above under “Proposal Eight: Removal of Certain Non-Soter Stockholder Approval Rights Proposal” and certain provisions requiring supermajority Board action under the Company’s bylaws, stockholders may amend the Company’s bylaws by the majority vote of the stockholders present in person or represented by proxy at a meeting where a quorum is present. Upon consummation of the Restructuring, Soter will hold [●]% of the outstanding Common Stock, and thus, the protections for non-Soter stockholders and the supermajority requirement are no longer necessary. Approval of the Amendment of Bylaws Proposal would authorize an amendment to the Existing Charter that would provide that stockholders may amend the Company’s bylaws only with the affirmative vote of the holders of not less than 50.1% of the voting power of all outstanding securities of the Company generally entitled to vote in the election of directors. This change would have the effect of increasing the vote required for stockholder amendments to the Company’s bylaws and, by including the provision in the Restated Charter instead of the Company’s bylaws, preventing the stockholders from changing the required voting threshold without action of the Board. This change may have an anti-takeover effect in that a person seeking to amend the Company’s bylaws in a manner designed to facilitate a takeover of the Company must achieve a higher level of support from the Company’s stockholders to approve such amendment and the stockholders may not lower this required threshold without action by the Board.

The parties to the RSA agreed that the Restated Charter would provide that stockholders may amend the Company’s bylaws only with the affirmative vote of the holders of not less than 50.1% of the voting power of all outstanding securities of the Company generally entitled to vote in the election of directors. The changes contemplated by this proposal TEN are necessary to implement such governance changes. The proposed form of such amendment is included in the proposed Restated Charter attached as Exhibit A to this Proxy Statement.

Vote Required

Approval of this proposal TEN requires the affirmative vote of a majority of the shares of Common Stock entitled to vote on this proposal. If you hold your shares in your own name and abstain from voting on this matter, your abstention will have the same effect as a negative vote. If you hold your shares through a broker and you do not instruct the broker on how to vote on this proposal, your broker will not have authority to vote your shares. Broker non-votes will have the same effect as a negative vote.

This proposal will be implemented automatically upon the filing of the Restated Charter with the Secretary of State of the State of Delaware substantially concurrently with the consummation of the Restructuring.

Recommendation

The Board unanimously recommends that stockholders vote FOR the Amendment of Bylaws Proposal.

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PROPOSAL ELEVEN: Forum Selection Clause Proposal

Currently, the Company’s bylaws, rather than the Existing Charter, provide that the Chancery Court of the State of Delaware will be the exclusive forum for certain derivative, fiduciary and similar actions. The parties to the RSA have agreed to amend the Existing Charter to add a similar exclusive forum selection provision with respect to certain derivative, fiduciary and similar actions. Approval of the Forum Selection Proposal would authorize an amendment to the Existing Charter that would provide that, unless the Company consents to an alternative forum, the exclusive forum for specific legal actions in which the Company is involved will be in the Chancery Court of the State of Delaware. The specified actions include:

This provision would not apply to suits brought to enforce a duty or liability created by the Securities Exchange Act of 1934, as amended, or any other claim for which the U.S. federal courts have exclusive jurisdiction. These provisions will provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States will be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended, subject to and contingent upon a final adjudication in the State of Delaware of the enforceability of such exclusive-forum provision.

The DGCL specifically authorizes Delaware corporations to adopt exclusive forum provisions in their charters or bylaws. The Board believes that the Company and its stockholders benefit from having intra-corporate disputes litigated in Delaware, where the Company is incorporated and whose laws govern such disputes. A forum selection provision is intended to provide a streamlined, efficient and organized process for resolution of such disputes, and addresses plaintiff forum shopping and the related practice of filing parallel lawsuits in multiple jurisdictions. However, a forum selection provision may have the effect of limiting a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or employees, which may discourage lawsuits against us and our directors, officers and employees. In addition, because the Company’s exclusive forum provision will be governed by the Revised Charter and not the Company’s bylaws, the implementation of the Forum Selection Clause Proposal would prevent stockholders from amending this provision without the approval of the Board.

The parties to the RSA agreed that the forum selection provision will be included in the Revised Charter. The changes contemplated by this proposal ELEVEN are necessary to implement these governance changes. The proposed form of such amendment is included in the proposed Restated Charter attached as Exhibit A to this Proxy Statement.

Vote Required

Approval of this proposal ELEVEN requires the affirmative vote of a majority of the shares of Common Stock entitled to vote on this proposal. If you hold your shares in your own name and abstain from voting on this matter, your abstention will have the same effect as a negative vote. If you hold your shares through a broker and you do not instruct the broker on how to vote on this proposal, your broker will not have authority to vote your shares. Broker non-votes will have the same effect as a negative vote.

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This proposal will be implemented automatically upon the filing of the Restated Charter with the Secretary of State of the State of Delaware substantially concurrently with the consummation of the Restructuring.

Recommendation

The Board unanimously recommends that stockholders vote FOR the Forum Selection Clause Proposal.

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PROPOSAL TWELVE: Delaware Section 203 Proposal

Currently, the Company is subject to Section 203 of the DGCL (“Section 203”). Section 203 generally prohibits certain public companies from entering into a business combination (including a merger, sale of assets or transfer of stock) with an “interested stockholder” for a period of three years after the person becomes an interested stockholder, unless certain conditions apply. An “interested stockholder” is defined as a person or group of persons who beneficially acquire 15% or more of the outstanding voting stock of the corporation. Section 203 does not apply if the corporation’s board of directors preapproves the transaction by which a stockholder becomes an interested stockholder, or if, at or subsequent to the time the business combination with an interested stockholder is approved by the board of directors and it is authorized at a stockholder meeting by an affirmative two-thirds vote of the corporation’s outstanding voting stock of a corporation (excluding the stock held by the interested stockholder). Further, a stockholder who acquires 85% or more of the voting stock of a corporation (subject to certain exceptions) in the first transaction in which it becomes an interested stockholder is not subject to the three-year waiting period for any subsequent business combination. A Delaware corporation may amend its certificate of incorporation to “opt out” of Section 203’s anti-takeover protection.

Approval of the Delaware Section 203 Proposal would authorize an amendment to the Existing Charter that would provide that the Company elects to not be governed by Section 203, so long as the Supporting Term Lenders and their Permitted Transferees collectively hold more than 50% of the Common Stock of the Company. Accordingly, the protections provided by Section 203 with respect to transactions with interested stockholders would not apply, so long as the Supporting Term Lenders and their Permitted Transferees collectively hold more than 50% of the Common Stock of the Company, including in connection with a transaction with a Supporting Term Lender.

The parties to the RSA agreed that the Company would elect not to be governed by Section 203, so long as the Supporting Term Lenders and their Permitted Transferees collectively hold more than 50% of the Common Stock of the Company. The changes contemplated by this proposal TWELVE are necessary to implement these governance changes. The proposed form of such amendment is included in the proposed Restated Charter attached as Exhibit A to this Proxy Statement.

Vote Required

Approval of this proposal TWELVE requires the affirmative vote of a majority of the shares of Common Stock entitled to vote on this proposal. If you hold your shares in your own name and abstain from voting on this matter, your abstention will have the same effect as a negative vote. If you hold your shares through a broker and you do not instruct the broker on how to vote on this proposal, your broker will not have authority to vote your shares. Broker non-votes will have the same effect as a negative vote.

This proposal will be implemented automatically upon the filing of the Restated Charter with the Secretary of State of the State of Delaware substantially concurrently with the consummation of the Restructuring.

Recommendation

The Board unanimously recommends that stockholders vote FOR the Delaware Section 203 Proposal.

PROPOSAL THIRTEEN: Amendment and Restatement Proposal

In addition to the other proposed amendments to the Existing Charter described in Proposals ONE through TWELVE, we are also proposing to amend and restate the Existing Charter to implement other incidental changes in connection with the Restructuring contemplated by the RSA, as reflected in the form of Restated Charter attached hereto as Exhibit A. We believe that none of these additional amendments would materially affect the rights or preferences of our stockholders.

Vote Required

Approval of this proposal THIRTEEN requires the affirmative vote of a majority of the shares of Common Stock entitled to vote on this proposal. If you hold your shares in your own name and abstain from voting on this matter, your abstention will have the same effect as a negative vote. If you hold your shares through a broker and you do not instruct the broker on how to vote on this proposal, your broker will not have authority to vote your shares. Broker non-votes will have the same effect as a negative vote.

This proposal will be implemented automatically upon the filing of the Restated Charter with the Secretary of State of the State of Delaware substantially concurrently with the consummation of the Restructuring.

Recommendation

The Board unanimously recommends that stockholders vote FOR the Amendment and Restatement Proposal.

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If you hold your shares in street name and reside in a household that received only one copy of the proxy materials, you can request to receive a separate copy in the future by making a written or oral request to our General Counsel at the address above, or by calling (713) 651-4300. If your household is receiving multiple copies of the proxy materials, you may request that only a single set of materials be sent.

Important Notice Regarding the Availability of Proxy Materials for the Special Meeting of Stockholders to be held February [●], 2020. The Proxy Statement is available at: [●]

Other Matters

As of the date of this Proxy Statement, the Board does not intend to present any matters other than those described herein at the Special Meeting and is unaware of any matters to be presented by other parties. If other matters are properly brought before the meeting for action by the stockholders, proxies will be voted in accordance with the recommendation of the Board or, in the absence of such a recommendation, in accordance with the judgment of the proxy holder.

Directions to Annual Meeting

The Special Meeting of Stockholders will be held at [●].

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