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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

Filed by the Registrant  ☒                             Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

  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

PRGX Global, Inc.

(Name of Registrant as Specified In Its Charter)

N/A

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

  No fee required.
  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:

 

Common Stock, no par value (the “common stock”)

  (2)  

Aggregate number of securities to which transaction applies:

 

As of the close of business on January 11, 2021, there were 22,915,178 shares of common stock; 716,609 shares of common stock subject to time-vesting restrictions (each, a “Restricted Stock”); 1,222,348 shares of common stock issuable upon the exercise of stock options with an exercise price less than $7.71 per share (each, an “Option”); 182,160 shares of common stock underlying Company restricted stock units (each, an “RSU”); 1,152,301 shares of common stock underlying Company restricted stock units subject to performance-based vesting restrictions (each, a “PBU”); and 156,980 shares of common stock otherwise distributable under the terms of the PRGX Global, Inc. Deferred Compensation Plan for Non-Employee Directors (the “Directors Plan”) (each, a “Deferred Compensation Stock Unit”).

  (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 maximum aggregate value was determined based upon the sum of: (A) $176,676,022 for shares of common stock multiplied by the cash merger consideration of $7.71 per share; (B) $5,525,055 for shares of Restricted Stock multiplied by the cash merger consideration of $7.71 per share, (C) (i) $1,632,022 for shares of common stock underlying Options multiplied by (ii) the cash merger consideration of $7.71 per share minus the exercise price per share of such Option; (D) $1,404,454 for shares of common stock underlying RSUs multiplied by the cash merger consideration of $7.71 per share, (E) $8,884,241 for shares of common stock underlying PBUs multiplied by the cash merger consideration of $7.71 per share, and (F) $1,210,316 for shares of common stock otherwise distributable under the Directors Plan multiplied by the cash merger consideration of $7.71 per share.

  (4)  

Proposed maximum aggregate value of transaction:

 

$195,332,110

  (5)  

Total fee paid:

 

$21,310.73

  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:

 

     

 

 

 


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PRELIMINARY PROXY MATERIAL SUBJECT TO COMPLETION

 

LOGO

PRGX GLOBAL, INC.

600 GALLERIA PARKWAY, SUITE 100

ATLANTA, GA 30339

Dear Shareholder:

On behalf of the board of directors of PRGX Global, Inc. (“PRGX,” the “Company,” “we,” “our” or “us”), I cordially invite you to attend a special meeting of shareholders of PRGX, to be held on [—], 2021 at [—] Eastern Standard Time, exclusively through remote communication in a virtual meeting format. You will not be able to attend the special meeting in person.

On December 24, 2020, PRGX entered into a definitive merger agreement to be acquired by an affiliate of Ardian North America Fund II, L.P. The special meeting is being held in connection with the transactions contemplated by the merger agreement. If the transactions contemplated by the merger agreement are completed, you will be entitled to receive $7.71 in cash, without interest, less any required withholding taxes, for each share of our common stock, no par value per share (“common stock”), that you own (unless you have properly exercised your dissenters’ rights with respect to such shares). At the special meeting, you will be asked to consider and vote upon the following proposals:

 

  1.

To adopt the Agreement and Plan of Merger, dated as of December 24, 2020, by and among Pluto Acquisitionco Inc., a Delaware corporation (the “Parent”), Pluto Merger Sub Inc., a Georgia corporation and a wholly owned subsidiary of Parent (the “Merger Sub”), and the Company, as it may be amended from time to time (the “Merger Agreement”);

 

  2.

To adjourn the special meeting, if necessary or appropriate, to solicit additional votes in favor of the proposal to adopt the Merger Agreement, if there are insufficient votes to adopt the Merger Agreement at the time of the special meeting; and

 

  3.

To approve, on an advisory (non-binding) basis, specified compensation that may become payable to our named executive officers in connection with the merger contemplated by the Merger Agreement (the “Merger”).

After due and careful discussion and consideration, the Company’s board of directors (i) determined that the Merger Agreement, the Support Agreements (as defined below) and the transactions contemplated thereby are advisable to, fair to, and in the best interests of the Company and its shareholders, (ii) approved the execution, delivery and performance by the Company of the Merger Agreement and the consummation of the transactions contemplated thereby, and (iii) resolved to recommend that the Company’s shareholders vote in favor of the adoption and approval of the Merger Agreement and the Merger. In addition, one Company director that was unable to attend the meeting at which the foregoing were approved contacted a representative of the Company’s outside legal counsel to express the director’s support for the Merger. Accordingly, the Company’s board of directors unanimously recommends that you vote “FOR” the proposal to adopt the Merger Agreement, “FOR” the proposal to adjourn the special meeting to solicit additional proxies, if necessary or appropriate, to solicit additional proxies and “FOR” the advisory (non-binding) proposal to approve specified compensation that may become payable to our named executive officers in connection with the Merger.

Approval of the proposal to adopt the Merger Agreement requires the affirmative vote of holders of a majority of the outstanding shares of our common stock entitled to vote thereon. Approval of the proposal to adjourn the special meeting, if necessary or appropriate, for the purpose of soliciting additional proxies requires, whether or


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not a quorum is present at the special meeting, the holders of a majority of the shares of common stock present at the special meeting via the Internet or represented by proxy at the special meeting to vote in favor of the proposal. The advisory (non-binding) proposal to approve the specified compensation that may become payable to our named executive officers in connection with the Merger will be approved if, assuming a quorum is present, the votes cast by holders of shares of common stock present, via the Internet or by proxy, at the special meeting in favor of the proposal exceed the votes cast against the proposal.

Certain shareholders of the Company, including each member of our board of directors and each of our executive officers, have agreed, among other things, to vote at the special meeting and vote in favor of the proposal to adopt the Merger Agreement pursuant to support agreements entered into with the Company, Parent and Merger Sub (each a “Support Agreement” and, collectively, the “Support Agreements”). As of January 11, 2021, these shareholders hold approximately 13.08% of our outstanding common stock.

Your vote is very important, regardless of the number of shares of Company common stock you own. Whether or not you plan to attend the special meeting, please complete, date, sign and return, as promptly as possible, the enclosed proxy card in the accompanying prepaid reply envelope, or submit your vote by telephone or the Internet. If you attend and vote at the special meeting via the Internet, your vote by ballot will revoke any proxy previously submitted. If you sign, date and return your proxy card without indicating how you wish to vote, your proxy will be voted in favor of the adoption of the Merger Agreement and the advisory (non-binding) proposal to approve specified compensation that may be payable to the named executive officers of PRGX in connection with the Merger and the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies. The failure to vote your shares of our common stock with respect to the adoption of the Merger Agreement will have the same effect as a vote “AGAINST” approval of the proposal to adopt the Merger Agreement.

If your shares of our common stock are held in “street name” by your bank, brokerage firm or other nominee, your bank, brokerage firm or other nominee will be unable to vote your shares of our common stock without instructions from you. You should instruct your bank, brokerage firm or other nominee to vote your shares of our common stock in accordance with the procedures provided by your bank, brokerage firm or other nominee. The failure to instruct your bank, brokerage firm or other nominee to vote your shares of our common stock “FOR” approval of the proposal to adopt the Merger Agreement will have the same effect as voting “AGAINST” the proposal to adopt the Merger Agreement.

The accompanying proxy statement provides you with detailed information about the special meeting, the Merger Agreement and the Merger. A copy of the Merger Agreement is attached as Annex A to the proxy statement. We encourage you to read the entire proxy statement and its annexes, including the Merger Agreement, carefully. You may also obtain additional information about the Company from documents we have filed with the Securities and Exchange Commission.

 

Best regards,
Name: [—]
Title: [—]

Atlanta, Georgia

[—], 2021

The proxy statement is dated [—], 2021, and is first being mailed to our shareholders on or about [—], 2021.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THE MERGER, PASSED UPON THE MERITS OR FAIRNESS OF THE MERGER AGREEMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE PROPOSED MERGER, OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE INFORMATION DISCLOSED IN THE ACCOMPANYING PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.


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PRELIMINARY PROXY MATERIAL SUBJECT TO COMPLETION

PRGX GLOBAL, INC.

600 GALLERIA PARKWAY, SUITE 100

ATLANTA, GA 30339

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

TO BE HELD [—], 2021

A special meeting of shareholders (the “Special Meeting”) of PRGX Global, Inc., a Georgia corporation (“PRGX,” the “Company,” “we,” “our” or “us”), will be held on [—], 2021, at [—] a.m. Eastern Standard Time, exclusively through remote communication in a virtual meeting format. You will not be able to attend the special meeting in person.

The meeting will be held for the following purposes:

1. To consider and vote on a proposal to adopt the Agreement and Plan of Merger, dated as of December 24, 2020, by and among Pluto Acquisitionco Inc., a Delaware corporation (the “Parent”), Pluto Merger Sub Inc., a Georgia corporation and a wholly owned subsidiary of Parent (the “Merger Sub”), and the Company, as it may be amended from time to time (the “Merger Agreement”). A copy of the Merger Agreement is attached as Annex A to the accompanying proxy statement.

2. To consider and vote on a proposal to adjourn the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the Special Meeting to approve the proposal to adopt the Merger Agreement (the “Merger”).

3. To consider and approve an advisory (non-binding) proposal to approve the specified compensation that may become payable to our named executive officers in connection with the Merger.

The board of directors has fixed the close of business on [—], 2021 as the record date for determining shareholders entitled to notice of and to vote at the meeting.

Your vote is very important, regardless of the number of shares of our common stock, no par value per share (“common stock”) you own. The Merger cannot be completed unless the Merger Agreement is adopted by the affirmative vote of the holders of a majority of the outstanding shares of common stock entitled to vote thereon. Approval of the proposal to adjourn the Special Meeting, if necessary or appropriate, for the purpose of soliciting additional proxies requires, whether or not a quorum is present at the Special Meeting, the holders of a majority of the shares of common stock present at the special meeting via the Internet or represented by proxy at the Special Meeting to vote in favor of the proposal. The advisory (non-binding) proposal to approve the specified compensation that may become payable to our named executive officers in connection with the Merger will be approved if, assuming a quorum is present, the votes cast by holders of shares of common stock present, at the special meeting via the Internet or by proxy, at the Special Meeting in favor of the proposal exceeds the votes cast against the proposal. Certain shareholders of the Company, including each member of our board of directors and each of our executive officers, have agreed, among other things, to vote at the Special Meeting and vote in favor of the proposal to adopt the Merger Agreement pursuant to support agreements entered into with the Company, Parent and Merger Sub (each a “Support Agreement” and, collectively, the “Support Agreements”). As of January 11, 2021, these shareholders hold approximately 13.08% of our outstanding common stock.

Even if you plan to attend the Special Meeting via the Internet, we request that you complete, sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying prepaid reply envelope or submit your vote by telephone or the Internet prior to the Special Meeting to ensure that your shares of common stock will be represented at the Special Meeting if you are unable to attend. If you sign, date and return your proxy card without indicating how you wish to vote, your proxy will be voted in favor of the adoption of the Merger Agreement and the advisory (non-binding) proposal to approve specified compensation that may become payable to the named executive officers of PRGX in connection with the Merger and the proposal to adjourn the Special Meeting, if necessary or appropriate, to solicit additional proxies. If you do not attend and vote your shares at the Special Meeting and you fail to return your proxy card or fail to submit your proxy by phone or the Internet, your shares of common stock will not be counted for purposes of determining whether a quorum is present at the Special Meeting and, if a quorum is present, will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement.


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After due and careful discussion and consideration, the Company’s board of directors (i) determined that the Merger Agreement, the Support Agreements and the transactions contemplated thereby are advisable to, fair to, and in the best interests of the Company and its shareholders, (ii) approved the execution, delivery and performance by the Company of the Merger Agreement and the consummation of the transactions contemplated thereby and (iii) resolved to recommend that the Company’s shareholders vote in favor of the adoption and approval of the Merger Agreement and the Merger. In addition, one Company director that was unable to attend the meeting at which the foregoing were approved, contacted a representative of the Company’s outside legal counsel to express the director’s support for the Merger. Accordingly, the Company’s board of directors unanimously recommends that you vote “FOR” the proposal to adopt the Merger Agreement, “FOR” the proposal to adjourn the Special Meeting, if necessary or appropriate, to solicit additional proxies, and “FOR” the advisory (non-binding) proposal to approve the specified compensation that may become payable to our named executive officers in connection with the Merger.

WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN, AS PROMPTLY AS POSSIBLE, THE ENCLOSED PROXY CARD IN THE ACCOMPANYING PREPAID REPLY ENVELOPE, OR SUBMIT YOUR VOTE BY TELEPHONE OR THE INTERNET. IF YOU ATTEND AND VOTE AT THE SPECIAL MEETING VIA THE INTERNET, YOUR VOTE BY BALLOT WILL REVOKE ANY PROXY PREVIOUSLY SUBMITTED.

 

By Order of the Board of Directors,
Gregory J. Owens, Executive Chairman

Atlanta, Georgia

[—], 2021

 


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TABLE OF CONTENTS

 

     Page(s)  

SUMMARY

     1  

Parties to the Merger

     1  

The Special Meeting

     2  

The Merger

     3  

Merger Consideration

     3  

Recommendation of the Board of Directors; Reasons for the Transaction

     5  

Opinion of the Company’s Financial Advisor

     5  

Financing of the Merger

     5  

Interests of Certain Persons in the Merger

     6  

Material United States Federal Income Tax Consequences

     6  

Regulatory Approvals and Notices

     7  

The Merger Agreement

     7  

The Support Agreements

     10  

Market Price of Company Common Stock

     10  

Dissenters’ Rights

     10  

Delisting and Deregistration of Company Common Stock

     11  

QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER

     12  

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION

     20  

THE SPECIAL MEETING

     21  

Time, Place and Purpose of the Special Meeting

     21  

Purpose of the Special Meeting

     21  

Record Date and Quorum

     21  

Attendance

     21  

Vote Required

     22  

Proxies and Revocation

     23  

Technical Difficulties or Issues Accessing the Virtual Meeting Website

     24  

Adjournments and Postponements

     24  

Anticipated Date of Completion of the Merger

     24  

Dissenters’ Rights

     24  

Payment of Solicitation Expenses

     25  

Householding of Special Meeting Materials

     25  

Questions and Additional Information

     25  

THE MERGER

     26  

Parties to the Merger

     26  

Effect of the Merger

     27  

Merger Consideration

     27  

Background of the Merger

     27  

Recommendation of Our Board of Directors; Reasons for the Transactions

     32  

Certain Unaudited Prospective Financial Information

     36  

Opinion of the Company’s Financial Advisor

     38  

Financing of the Merger

     42  

Closing and Effective Time of Merger

     43  

Payment of Merger Consideration and Surrender of Stock Certificates

     43  

Interests of Certain Persons in the Merger

     44  

Material United States Federal Income Tax Consequences

     56  

 

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Regulatory Approvals and Notices

     60  

PROPOSAL 1 ADOPTION OF THE MERGER AGREEMENT

     61  

Effects of the Merger

     61  

Articles of Incorporation; Bylaws; Directors and Officers of the Surviving Corporation

     61  

Closing and Effective Time

     62  

Merger Consideration

     62  

Payment for Shares

     63  

Representations and Warranties

     64  

Conduct of Business of the Company

     68  

No Solicitation

     70  

The Board’s Recommendation; Company Board Recommendation Change; Entry into Alternative Acquisition Agreement

     71  

Financing Efforts

     73  

Marketing Period

     75  

Efforts to Close the Merger; Antitrust Filings

     75  

Takeover Statute

     77  

Indemnification, Exculpation and Insurance

     77  

Employee Benefits

     78  

Transaction Litigation

     79  

Delisting and Deregistration of Common Shares of the Company

     79  

Other Covenants

     79  

Conditions to the Merger

     79  

Termination of the Merger Agreement

     81  

Termination Fees

     83  

Expense Reimbursement

     85  

Non-Recourse Parties; Limitations of Liability

     85  

Specific Performance

     86  

Fees and Expenses

     86  

No Third Party Beneficiaries

     87  

Amendment

     87  

Governing Law

     87  

The Support Agreements

     87  

Board of Directors Recommendation

     87  

PROPOSAL 2 AUTHORITY TO ADJOURN THE SPECIAL MEETING

     88  

Board of Directors Recommendation

     88  

PROPOSAL 3 ADVISORY VOTE REGARDING GOLDEN PARACHUTE COMPENSATION

     89  

Board of Directors Recommendation

     89  

MARKET PRICE OF COMPANY COMMON STOCK AND DIVIDEND INFORMATION

     90  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     91  

DISSENTERS’ RIGHTS

     94  

DELISTING AND DEREGISTRATION OF COMPANY COMMON STOCK

     96  

OTHER MATTERS

     97  

Other Matters for Action at the Special Meeting

     97  

Shareholder Proposals and Nominations for 2021 Annual Meeting

     97  

Inclusion of Proposals in the Company’s Proxy Statement and Proxy Card under the SEC Rules; Advance Notice Requirements

     97  

WHERE YOU CAN FIND MORE INFORMATION

     98  

ANNEX A AGREEMENT AND PLAN OF MERGER

     A-1  

ANNEX B OPINION OF TRUIST SECURITIES, INC.

     B-1  

ANNEX C GEORGIA DISSENTERS’ RIGHTS STATUTE

     C-1  

 

 

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SUMMARY

This summary highlights selected information from this proxy statement related to the proposed merger of Pluto Merger Sub Inc. with and into PRGX Global, Inc. (the “Merger”), and may not contain all of the information that is important to you. To understand the Merger more fully and for a more complete description of the legal terms of the Merger, you should carefully read and consider this entire proxy statement and the annexes to this proxy statement, including the Merger Agreement (as defined below), along with all of the documents to which we refer in this proxy statement, as they contain important information about, among other things, the Merger and how it affects you. You may obtain the information incorporated by reference in this proxy statement without charge by following the instructions under the caption, “Where You Can Find More Information” beginning on page 98. The Merger Agreement is attached as Annex A to this proxy statement. You should carefully read and consider the entire Merger Agreement, which is the legal document that governs the Merger.

Except as otherwise specifically noted in this proxy statement, “PRGX,” “the Company,” “we,” “our,” “us” and similar words refer to PRGX Global, Inc., including, in certain cases, our subsidiaries. Throughout this proxy statement, we refer to Pluto Acquisitionco Inc. as “Parent” and Pluto Merger Sub Inc. as “Merger Sub.” In addition, throughout this proxy statement we refer to the Agreement and Plan of Merger, dated December 24, 2020, by and among the Company, Parent and Merger Sub, as it may be amended from time to time, as the “Merger Agreement,” our common stock, no par value per share as “common stock” or “Company common stock” and the holders of our common stock as “shareholders.” Unless indicated otherwise, any other capitalized term used herein but not otherwise defined herein has the meaning assigned to such term in the Merger Agreement.

Parties to the Merger (Page 26)

PRGX Global, Inc.

600 Galleria Parkway, Suite 100

Atlanta, Georgia 30339

(770) 779-3900

PRGX Global, Inc. (Nasdaq: PRGX), a Georgia corporation, which we refer to in this proxy statement as “PRGX,” the “Company,” “we,” “our,” or “us,” together with its subsidiaries, is a global leader in recovery audit and spend analytics, providing a suite of services targeted at our clients’ source-to-pay business processes. At the heart of our services suite is the core capability of mining client data to deliver “actionable insights.” Actionable insights allow our clients to improve their cash flow and profitability by reducing costs, improving business processes and managing risks.

For additional information about the Company and our business, see “Where You Can Find More Information” on page 98.

Pluto Merger Sub Inc.

1370 Avenue of the Americas, 22nd Floor

New York, NY 10019

(212) 641-8604

Pluto Merger Sub Inc., a Georgia corporation (which we refer to in this proxy statement as “Merger Sub”) and wholly owned direct subsidiary of Pluto Acquisitionco Inc., was formed on December 22, 2020 solely for the purpose of engaging in the transactions contemplated by the Merger Agreement and has not engaged in any business activities other than in connection with the transactions contemplated by the Merger Agreement and arranging of the equity financing and debt financing in connection with the Merger.

Pluto Acquisitionco Inc.

1370 Avenue of the Americas, 22nd Floor

New York, NY 10019

(212) 641-8604

 

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Pluto Acquisitionco Inc., a Delaware corporation (which we refer to in this proxy statement as “Parent”), was formed on December 21, 2020 solely for the purpose of engaging in the transactions contemplated by the Merger Agreement and has not engaged in any business activities other than in connection with the transactions contemplated by the Merger Agreement and arranging of the equity financing and debt financing in connection with the Merger.

Merger Sub and Parent are affiliates of Ardian North America Fund II GP, LLC (“Ardian”). Ardian North America Fund II, L.P., Ardian NA Fund II Coinvest 2 LP, and Ardian Co-Investment Fund V North America S.L.P., affiliates of Ardian, have collectively provided to Parent an equity commitment up to $89.7 million (subject to adjustments as described in the Equity Commitment Letter). After giving effect to the Merger, the Company, as the surviving corporation, will be affiliated with Ardian. Ardian is a global private investment house with assets of US$103 billion managed or advised in Europe, the Americas and Asia. The company is majority-owned by its employees. It manages funds on behalf of around 1,000 clients through five pillars of investment expertise: Fund of Funds, Direct Funds, Infrastructure, Real Estate and Private Debt. Ardian maintains a global network, with more than 700 employees working from fifteen offices across Europe (Frankfurt, Jersey, London, Luxembourg, Madrid, Milan, Paris and Zurich), the Americas (New York, San Francisco and Santiago) and Asia (Beijing, Singapore, Tokyo and Seoul).

The Special Meeting (Page 21)

Time, Place and Purpose of the Special Meeting (Page 21)

The special meeting will be held on [—], 2021 at [—] Eastern Standard Time, exclusively through remote communication in a virtual meeting format.

At the special meeting, holders of Company common stock will be asked to approve the proposal to adopt the Merger Agreement and to approve the proposal to adjourn the special meeting, if necessary or appropriate, for the purpose of soliciting additional proxies if there are insufficient votes at the time of the special meeting to approve the proposal to adopt the Merger Agreement. In addition, holders of Company common stock will be asked to approve, on an advisory (non-binding) basis, the existing compensatory arrangements between the Company and its named executive officers providing for specified compensation as may become payable in connection with the Merger.

Record Date and Quorum (Page 21)

You are entitled to receive notice of, and to vote at, the special meeting if you owned shares of Company common stock at the close of business on [—], 2021, which the Company has set as the record date for the special meeting and which we refer to as the “record date.” You will have one vote for each share of Company common stock that you owned on the record date.

The presence at the special meeting, via the Internet or by proxy, of the holders of a majority of the shares of Company common stock outstanding at the close of business on the record date and entitled to vote at the special meeting constitutes a quorum for the purposes of the special meeting

Vote Required (Page 22)

Approval of the proposal to adopt the Merger Agreement requires the affirmative vote of the holders of a majority of the outstanding shares of Company common stock entitled to vote thereon (the “Shareholder Approval”). Failure to vote, by proxy or via the Internet, broker non-votes and abstentions will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement.

Approval of the proposal to adjourn the special meeting, if necessary or appropriate, for the purpose of soliciting additional proxies requires, whether or not a quorum is present at the special meeting, the holders of a majority of the shares of Company common stock present at the special meeting to vote in favor of the proposal. For purposes of this proposal, if you attend the meeting or give a proxy, an abstention on this proposal will have the same effect as if you voted “AGAINST” the proposal. If your shares of Company common stock are present at the special meeting but are not voted on this proposal, it will not have any effect on the proposal to adjourn the special meeting. Broker non-votes will not have any effect on the proposal to adjourn the special meeting. Failure to submit a proxy or vote via the Internet at the special meeting will also not have any effect on the proposal to adjourn the special meeting.

 

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The non-binding advisory proposal to approve the golden parachute compensation payable to our named executive officers in connection with the Merger will be approved if, assuming a quorum is present, the votes cast by holders of shares of Company common stock present, via the Internet or by proxy, at the special meeting in favor of the proposal exceed the votes cast against the proposal. For purposes of this proposal, if your shares of Company common stock are present at the special meeting but are not voted on this proposal, or if you have given a proxy and abstained on this proposal, this will have no effect on the proposal. Failure to submit a proxy or vote via the Internet at the special meeting and broker non-votes will also not, assuming a quorum is present, have any effect on the non-binding advisory proposal to approve the golden parachute compensation payable to our named executive officers in connection with the Merger.

As of the record date, the directors and executive officers of the Company beneficially owned and were entitled to vote, in the aggregate, [—] shares of Company common stock (excluding shares issuable upon the vesting and exercise of stock options or the vesting of restricted stock units and performance-based restricted stock awards as of such date (collectively representing [—]% of the outstanding shares of Company common stock on the record date). Certain shareholders of the Company, including each member of our board of directors and each of our executive officers, have agreed, among other things, to vote at the special meeting and vote in favor of the proposal to adopt the Merger Agreement pursuant to support agreements entered into with the Company, Parent and Merger Sub (each a “Support Agreement” and, collectively, the “Support Agreements”). As of January 11, 2021, these shareholders hold approximately 13.08% of our outstanding common stock.

Proxies and Revocation (Page 23)

Any shareholder of record entitled to vote at the special meeting may submit a proxy by telephone, over the Internet, by returning the enclosed proxy card in the accompanying prepaid reply envelope, or may vote via the Internet by appearing at the special meeting. If your shares of Company common stock are held in “street name” through a bank, brokerage firm or other nominee, you should instruct your bank, brokerage firm or other nominee on how to vote your shares of Company common stock using the instructions provided by your bank, brokerage firm or other nominee.

You may change your vote or revoke your proxy at any time before it is voted at the special meeting by:

 

   

submitting a new proxy by telephone or via the Internet after the date of the earlier voted proxy;

 

   

signing another proxy card with a later date and returning it to us prior to the special meeting; or

 

   

attending the special meeting and voting via the Internet.

The Merger (Page 26)

The Merger Agreement provides that, subject to the terms and conditions of the Merger Agreement, and in accordance with the Georgia Business Corporation Code (“GBCC”), upon consummation of the Merger pursuant to the terms of the Merger Agreement and the filing of the Certificate of Merger with the Secretary of State of the State of Georgia (the “Effective Time”), Merger Sub will be merged with and into the Company. As a result of the Merger, the separate corporate existence of Merger Sub will cease, the Company will be the surviving corporation in the Merger (which we refer to as the “Surviving Corporation”) and will become a wholly-owned subsidiary of Parent. The Surviving Corporation will continue to do business following the Merger. As a result of the Merger, the Company will cease to be a publicly traded company. If the Merger is completed, you will not own any shares of the capital stock of the Surviving Corporation.

Merger Consideration (Page 27)

At the Effective Time, each outstanding share of Company common stock (excluding shares held (i) directly by the Company, Parent or Merger Sub, (ii) by any direct or indirect wholly-owned subsidiary of the Company or Parent (other than Merger Sub) and (iii) by any shareholder of the Company who or which is entitled to dissenters’ rights under Article 13 of the GBCC and properly exercises and perfects dissenters’ rights of such shares

 

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pursuant to, and complies in all respects with, the applicable provisions of the GBCC and has not withdrawn a demand for dissenters’ rights or otherwise lost dissenters’ rights under the GBCC with respect to such shares) will be converted into the right to receive $7.71 in cash per share, without interest and less any required withholding taxes, which amount we refer to as the “Per Share Price” or the “Merger Consideration.” All shares converted into the right to receive the Per Share Price shall automatically be canceled and cease to exist.

Treatment of Outstanding Equity Awards (Page 46)

 

   

Company Stock Options. Parent will not assume any Company Stock Options. At the Effective Time, all outstanding Company Stock Options, whether vested or unvested, will be cancelled and converted into the right to receive a cash payment, without interest, equal to (i) the amount of the Per Share Price, less the exercise price per share attributable to such Company Stock Options multiplied by (ii) the total number of shares of Company common stock then issuable upon exercise in full of such Company Stock Options, less any required withholding taxes. With respect to Company Stock Options which have an exercise price equal to or greater than the Per Share Price, such Company Options will be cancelled without any cash payment being made in respect thereof.

 

   

Company RSUs. Parent will not assume any Company RSUs. At the Effective Time, all outstanding Company RSU awards whether vested or unvested, will be cancelled and converted into the right to receive a cash payment, without interest, equal to (i) the amount of the Per Share Price multiplied by (ii) the total number of shares of Company common stock subject to such Company RSU award, less any required withholding taxes.

 

   

Company SARs. Parent will not assume any Company SARs. At the Effective Time, all outstanding Company SAR awards for which the exercise price per share is less than the Per Share Price whether vested or unvested, will be cancelled and converted into the right to receive a cash payment, without interest, equal to (i) the amount of the Per Share Price (less the exercise price per share attributable to such Company SAR) multiplied by (ii) the total number of shares of Company common stock to which such Company SAR award relates, less any required withholding taxes.

 

   

Company PBUs. Parent will not assume any Company PBUs. At the Effective Time, each outstanding Company PBU award, whether vested or unvested, will be cancelled and converted into the right to receive a cash payment, without interest, equal to (i) the amount of the Per Share Price multiplied by (ii) the total number of shares of Company common stock subject to such Company PBU award, less any required withholding taxes. The number of shares of Company common stock subject to a PBU with performance-based vesting will be deemed to be the number of shares eligible to vest assuming target performance.

 

   

Company Restricted Stock. Parent will not assume any Company Restricted Stock. At the Effective Time, all outstanding awards of Company Restricted Stock, whether vested or unvested, will vest in full and be converted into the right to receive a cash payment, without interest, equal to (i) the amount of the Per Share Price multiplied by (ii) the total number of shares of Company common stock to which such Company Restricted Stock award relates, less any required withholding taxes.

 

   

Company Deferred Compensation Stock Unit. As of the Effective Time, in accordance with the terms of the Directors Plan, the Company will take all actions reasonably necessary to provide that (i) the Directors Plan is terminated as of the Effective Time, (ii) no director will be eligible to participate in the Directors Plan after the Effective Time, and (iii) the Deferral Account (as defined in the Directors Plan) of each director participating in the Directors Plan will be distributed to each such director, including each Company Deferred Compensation Stock Unit (the value of which shall be determined based on the Per Share Price), provided that such termination and all the related foregoing actions will be contingent upon the occurrence of the Effective Time.

 

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Additionally, if any outstanding Company RSUs granted to a director of the Company prior to the Effective Time are subject to a deferral election under the Directors Plan, such Company RSUs will be deemed to have been deferred into the Directors Plan in accordance with the applicable deferral election and then distributed to the director in payment of his or her Deferral Account as of the Effective Time.

Recommendation of the Board of Directors; Reasons for the Transaction (Page 32)

After due and careful discussion and consideration of various factors described in the section entitled “The Merger—Recommendation of Our Board of Directors; Reasons for the Transactions,” the board of directors of the Company (the “Board”) (i) determined that the Merger Agreement, the Support Agreements and the Merger are advisable to, fair to, and in the best interest of, PRGX and its shareholders, (ii) approved the execution, delivery and performance by PRGX of the Merger Agreement and the consummation of the Merger, and (iii) resolved to recommend that the shareholders of PRGX approve the adoption of the Merger Agreement and the Merger.

The Board unanimously recommends that you vote “FOR” the proposal to adopt the Merger Agreement, “FOR” the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies, and “FOR” the advisory (non-binding) proposal to approve the specified compensation that may become payable to our named executive officers in connection with the Merger.

To review the factors that our Board considered when deciding whether to approve the Merger Agreement and the transactions contemplated thereby, see “The Merger—Recommendation of Our Board of Directors; Reasons for the Transactions.”

Opinion of the Company’s Financial Advisor (Page 38)

On December 22, 2020, Truist Securities, Inc., which we refer to as Truist Securities, rendered its oral opinion to the Board (which was subsequently confirmed in writing by delivery of Truist Securities’ written opinion dated December 22, 2020) as to, as of December 22, 2020, the fairness, from a financial point of view, to the holders of Company common stock (other than to holders of (i) shares of Company common stock held directly by the Company, Parent or Merger Sub as of immediately prior to the Effective Time and (ii) by any direct or indirect wholly-owned subsidiary of the Company or Parent (other than Merger Sub) as of immediately prior to the Effective Time (such holders, collectively, the “Excluded Holders”)) of the Merger Consideration to be received by such holders in the Merger pursuant to the Merger Agreement.

Truist Securities’ opinion was directed to the Board (in its capacity as such) and only addressed the fairness, from a financial point of view, to the holders of Company common stock (other than the Excluded Holders) of the Merger Consideration to be received by such holders in the Merger pursuant to the Merger Agreement and did not address any other terms, conditions, aspects or implications of the Merger. The summary of Truist Securities’ opinion in this proxy statement is qualified in its entirety by reference to the full text of its written opinion, which is included as Annex B to this proxy statement and sets forth the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Truist Securities in preparing its opinion. However, neither Truist Securities’ written opinion nor the summary of its opinion and the related analyses set forth in this proxy statement is intended to be, and they do not constitute, advice or a recommendation as to, or otherwise address, how the Board or any security holder of the Company should act or vote with respect to any matter relating to the Merger or otherwise.

Financing of the Merger (Page 42)

Parent estimates that it will need up to approximately $240 million to finance the Merger and to pay related fees and expenses.

 

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Debt Financing (Page 42)

Parent has received a debt commitment letter (which we refer to as the “Debt Commitment Letter”) from Oaktree Capital Management, L.P. and LBC Credit Partners, Inc. (collectively, the “Financing Sources”) to provide, subject to the conditions set forth in the Debt Commitment Letter, a senior secured first lien credit facility in the aggregate principal amount of $149.0 million (the “Credit Facilities”) comprised of (i) $134.0 million aggregate principal amount of term loans to be drawn at the closing of the Merger for the purposes of financing the Merger and paying related fees and expenses and (ii) a revolving credit facility in an aggregate principal amount of $15.0 million. We refer to the financing contemplated by the Debt Commitment Letter as the “Debt Financing.”

Equity Financing (Page 42)

Parent has received an equity commitment letter from Ardian North America Fund II, L.P., Ardian NA Fund II Coinvest 2 LP, and Ardian Co-Investment Fund V North America S.L.P. (together, the “Investors”) (which we refer to as the “Equity Commitment Letter”), pursuant to which the Investors have committed, subject to the terms and conditions of the Equity Commitment Letter, to invest in Parent, directly or indirectly, cash in an aggregate amount equal to $89.7 million (subject to adjustment as set forth in the Equity Commitment Letter) solely for the purposes of funding, and to the extent necessary to fund, the merger consideration upon the closing of the Merger. We refer to the financing contemplated by the Equity Commitment Letter, as may be amended, restated, supplemented or otherwise modified from time to time, as the “Equity Financing.” The funding of the Equity Financing is subject to (i) the terms of the Equity Commitment Letter (including the satisfaction or waiver of the conditions to Parent’s, Merger Sub’s and the Company’s obligations to consummate the transactions contemplated by the Merger Agreement), (ii) the substantially contemporaneous funding of the Debt Financing, and (iii) the consummation of the Merger in accordance with the Merger Agreement. The Company is an express third party beneficiary of the Equity Commitment Letter for the limited purposes provided in the Equity Commitment Letter, which include the right of the Company (subject to the Company being entitled under the Merger Agreement to the remedy of specific performance to enforce Parent’s obligation to cause the Equity Financing to be funded and to fund the closing of the Merger) to require Parent to seek specific performance of each Investor’s obligation to fund its committed portion of the Equity Financing in accordance with the terms of the Equity Commitment Letter and the Merger Agreement.

Guarantee (Page 43)

Concurrently with the execution and delivery of the Merger Agreement, and as a condition and inducement to the Company’s willingness to enter into the Merger Agreement, Parent and Merger Sub delivered a guarantee (the “Guarantee”) from Ardian North America Fund II, L.P. (“Guarantor”), in favor of the Company and pursuant to which, subject to the terms and conditions of the Guarantee, Guarantor guaranteed certain obligations of Parent in connection with the Merger Agreement.

Interests of Certain Persons in the Merger (Page 44)

In considering the recommendation of the Board with respect to the proposal to adopt the Merger Agreement, you should be aware that our directors and executive officers have interests in the Merger that are different from, or in addition to, yours. These interests include the acceleration and “cash-out” of certain equity and the right to continued indemnification and insurance coverage by the Surviving Corporation after the Merger. The Board was aware of and considered these interests, among other matters, in evaluating and negotiating the Merger Agreement and the Merger, and in recommending that the Merger Agreement be adopted by the shareholders of the Company.

Material United States Federal Income Tax Consequences (Page 56)

The exchange of shares of Company common stock for cash pursuant to the Merger will be a taxable transaction to U.S. holders (as defined in the section entitled “The Merger—Material United States Federal Income Tax Consequences” beginning on page 56 of this proxy statement) for U.S. federal income tax purposes. In general, a U.S. holder whose shares of Company common stock are converted into the right to receive cash in the merger will recognize gain or loss for U.S. federal income tax purposes in an amount equal to the difference, if any, between the amount of cash received with respect to such shares of Company common stock and such U.S. holder’s adjusted tax basis in such shares. Backup withholding may also apply to the cash payments made pursuant to the

 

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merger unless the U.S. holder or other payee provides a valid taxpayer identification number and complies with certain certification procedures (generally, by providing a properly completed and executed Internal Revenue Service (“IRS”) Form W-9) or otherwise establishes an exemption from backup withholding. Payments made to a non-U.S. holder (as defined in the section entitled “The Merger—Material United States Federal Income Tax Consequences” beginning on page 56 of this proxy statement) with respect to shares of Company common stock exchanged for cash pursuant to the Merger generally will not be subject to U.S. federal income tax, subject to certain exceptions (as discussed in the section entitled “The Merger—Material United States Federal Income Tax Consequences” beginning on page 56 of this proxy statement). A non-U.S. holder may, however, be subject to backup withholding with respect to the cash payments made pursuant to the Merger, unless the non-U.S. holder certifies on an appropriate IRS Form W-8 that such non-U.S. holder is not a United States person or otherwise establishes an exemption from backup withholding. You should read the section entitled “The Merger—Material United States Federal Income Tax Consequences” beginning on page 56 of this proxy statement for a more detailed discussion of the United States federal income tax consequences of the merger. You should also consult your tax advisor with respect to the specific tax consequences to you in connection with the merger in light of your own particular circumstances, including U.S. federal estate, gift and other non-income tax consequences, and tax consequences under state, local or non-U.S. tax laws and under any applicable income tax treaties.

Regulatory Approvals and Notices (Page 60)

Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”), and the related rules and regulations that have been issued by the Federal Trade Commission (the “FTC”), certain acquisition transactions may not be consummated until required information and documentary material has been furnished for review by the FTC and the Antitrust Division of the Department of Justice (the “DOJ”) and applicable waiting period requirements have been satisfied. These requirements apply to Parent’s acquisition of the shares of Company common stock in the Merger.

The Merger Agreement (Page 61)

Conditions to the Merger (Page 79)

The obligations of Parent and Merger Sub, on the one hand, and the Company, on the other hand, to complete the Merger are each subject to the satisfaction or (to the extent permitted by applicable law) the waiver of customary conditions, including (among other conditions) the following:

 

   

the receipt by the Company of an affirmative vote by holders of a majority of shares of Company common stock entitled to vote at the special meeting to adopt the Merger Agreement (the “Shareholder Approval”);

 

   

the waiting periods (and any extensions thereof) applicable to the Merger pursuant to the HSR Act shall have expired or otherwise been terminated; and

 

   

the absence of any Legal Restraint (as defined in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Termination of the Merger Agreement”).

The respective obligations of Parent and Merger Sub, on the one hand, and the Company, on the other hand, to complete the Merger shall be subject to the satisfaction or the waiver (to the extent permitted pursuant to applicable law) of certain additional conditions as set forth in the Merger Agreement regarding:

 

   

in the case of Parent and Merger Sub:

 

   

the accuracy of the representations and warranties of the Company, other than the representations and warranties described in the following three bullets, without giving effect to any materiality or Company Material Adverse Effect (as defined in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Representations and Warranties”) qualifications as of the date of the Merger

 

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Agreement and as of the date on which the consummation of the Merger actually occurs (the “Closing Date”), except for such failures to be so true and correct that, individually or in the aggregate, would not have, or would not reasonably be expected to have, a Company Material Adverse Effect;

 

   

the accuracy of the representations and warranties of the Company relating to organization, good standing, corporate power, enforceability, anti-takeover laws, requisite shareholder approval, Company common stock available for issuance pursuant to the Company’s equity compensation plans, certain aspects of the Company’s securities and brokers, (A) that are not qualified by Company Material Adverse Effect or other materiality qualifiers, in all material respects as of the date of the Merger Agreement and as of the Closing Date, and (B) that are qualified by Company Material Adverse Effect or other materiality qualifiers, in all respects as of the date of the Merger Agreement and as of the Closing Date;

 

   

the accuracy of the representations and warranties of the Company relating to the absence of certain changes, including changes to the business conducted by the Company and its subsidiaries and certain forbearance covenants of the Company, and the absence of a Company Material Adverse Effect, in all respects as of the Closing Date;

 

   

the accuracy of the representations and warranties of the Company relating to certain aspects of the Company’s capitalization as of December 8, 2020, except for such inaccuracies that result in de minimis additional cost, expense or liability to the Company, Parent and their Affiliates (as defined in the Merger Agreement), individually or in the aggregate;

 

   

the Company having performed and complied in all material respects with the covenants, obligations and conditions of the Merger Agreement required to be performed and complied with by it at or prior to the closing of the Merger;

 

   

the delivery of an officer’s certificate by the Company, certifying that the conditions as described in the preceding five bullets have been satisfied;

 

   

the absence of any Company Material Adverse Effect having occurred after the date of Merger Agreement that is continuing;

 

   

the Company having delivered to Parent a tax certification; and

 

   

the Company and its subsidiaries having performed and complied in all respects with certain obligations regarding amendments of certain tax returns of certain Company subsidiaries and certain intercompany transactions.

 

   

In the case of the Company:

 

   

the accuracy of the representations and warranties of Parent and Merger Sub in the Merger Agreement, subject to certain materiality qualifiers, as of the Closing Date, except for failures that would not, individually or in the aggregate, reasonably be expected to prevent or materially delay the consummation of the transactions contemplated by the Merger Agreement or the ability of Parent and Merger Sub to fully perform their respective covenants and obligations pursuant to the Merger Agreement;

 

   

the performance and compliance in all material respects by the Company, Parent and Merger Sub of their respective covenants, obligations and conditions required to be performed and complied with by them under the Merger Agreement at or prior to the closing of the Merger; and

 

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the delivery of an officer’s certificate by each of Parent and Merger Sub, certifying that the conditions as described in the preceding bullets have been satisfied.

No Solicitation (Page 70)

From the date of the Merger Agreement until the earlier to occur of the valid termination of the Merger Agreement and the Effective Time, the Company has agreed not to, and to cause its subsidiaries and its and their respective directors, officers, employees, investment banks, attorneys, accountants, consultants and other advisors or representatives (collectively, “Representatives”) not to, directly or indirectly:

 

   

solicit, initiate, propose or induce the making, submission or announcement of, or knowingly encourage, facilitate or assist, any proposal or offer that is or could reasonably be expected to constitute an Acquisition Proposal (as defined in the section entitled “Proposal 1: Adoption of the Merger Agreement—The Board’s Recommendation; Company Board Recommendation Change; Entry into Alternative Acquisition Agreement”);

 

   

furnish to any person (other than Parent, Merger Sub or any designees of Parent or Merger Sub) any non-public information relating to the Company or any of its subsidiaries or afford to any person access to the business, properties, assets, books, records or other non-public information, or to any personnel, of the Company or any of its subsidiaries (other than Parent, Merger Sub or any designees of Parent or Merger Sub), in any such case with the intent to induce the making, submission or announcement of, or to knowingly encourage, facilitate or assist, any proposal or offer that is or could reasonably be expected to constitute an Acquisition Proposal or any inquiries or the making of any proposal that could reasonably be expected to lead to an Acquisition Proposal;

 

   

participate or engage in discussions or negotiations with any person with respect to an Acquisition Proposal (subject to certain exceptions);

 

   

approve, endorse or recommend an Acquisition Proposal (or any offer or proposal that could reasonably be expected to lead to an Acquisition Proposal); or

 

   

authorize or enter into any letter of intent, memorandum of understanding, merger agreement, acquisition agreement or other contract relating to an Acquisition Proposal (or any offer or proposal that could reasonably be expected to lead to an Acquisition Proposal), other than an Acceptable Confidentiality Agreement (as defined below) (any such letter of intent, memorandum of understanding, merger agreement, acquisition agreement or other contract relating to an Acquisition Transaction, an “Alternative Acquisition Agreement”).

Notwithstanding the restrictions described above, from the date of the Merger Agreement continuing until the Company’s receipt of the required Shareholder Approval, the Company and the Board may, after giving Parent reasonably prompt notice of its intent to do so, directly or indirectly through one or more Representatives (including Truist Securities), participate or engage in discussions or negotiations with, furnish any non-public information relating to the Company or any of its subsidiaries to, or afford access to the business, properties, assets, books, records or other non-public information, or to any personnel, of the Company or any of its subsidiaries pursuant to an Acceptable Confidentiality Agreement (as defined below) to any person or its Representatives that has made, renewed or delivered to the Company a written Acquisition Proposal after the date of the Merger Agreement that did not result from any material breach of the negotiation and solicitation restrictions set forth in the Merger Agreement, and otherwise facilitate such Acquisition Proposal or assist such person (and its Representatives and financing sources) with such Acquisition Proposal (in each case, if requested by such person), if and only if the Board has determined in good faith (after consultation with its financial advisor and outside legal counsel) that such Acquisition Proposal either constitutes a Superior Proposal (as defined in the section entitled “Proposal 1: Adoption of the Merger Agreement—The Board’s Recommendation; Company Board Recommendation Change; Entry into Alternative Acquisition Agreement”) or is reasonably likely to lead to a Superior Proposal. The Company must promptly make available to Parent any material non-public information concerning the Company and its subsidiaries that was not previously made available to Parent, and in any event twenty-four (24) hours after, making such information available to such person or its Representatives.

 

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Termination of the Merger Agreement (Page 81)

In addition to the circumstances described above, Parent and the Company have certain rights to terminate the Merger Agreement under customary circumstances, including by mutual agreement, the imposition of laws or non-appealable court orders that make the Merger illegal or otherwise prohibit the Merger, certain uncured breaches of the Merger Agreement by the other party, if the Merger has not been consummated by 11:59 p.m. Eastern Standard Time on April 30, 2021, and if the shareholders fail to adopt the Merger Agreement at the Special Meeting (or any adjournment or postponement thereof). Under certain specified circumstances, the Company or Parent may be required to pay the other party a termination fee in connection with the termination of the Merger Agreement. The termination provisions of the Merger Agreement are more fully described in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Termination of the Merger Agreement”.

The Support Agreements (Page 87)

Concurrently with the execution of the Merger Agreement, certain of the Company’s shareholders, including each member of the Board and each executive officer of the Company (each a “Supporting Shareholder and, collectively, the “Supporting Shareholders”), entered into voting and support agreements with the Company, Parent and Merger Sub (each a “Support Agreement” and, collectively, the “Support Agreements”), pursuant to which each Supporting Shareholder agreed, among other things and subject to the termination of the Support Agreements, to vote all of the common stock held by each of the Supporting Shareholders in favor of (i) the adoption of the Merger Agreement and (ii) the approval of the transactions contemplated thereby, including the Merger.

As of January 11, 2021, the common stock subject to the Support Agreements comprise approximately 13.08% of the outstanding shares of our common stock.

Market Price of Company Common Stock and Dividend Information (Page 90)

Our common stock is listed on The Nasdaq Global Select Market, or Nasdaq, under the symbol “PRGX.” On December 23, 2020, the last trading day prior to the announcement of the Merger, our common stock closed at $7.36 per share. On [—], 2021, the latest practicable trading day before the printing of this proxy statement, our common stock closed at $[—].

We have never declared or paid any cash dividend on our common stock. Following the Merger, there will be no further market for our common stock.

Dissenters’ Rights (Page 94)

Shareholders are entitled to dissenters’ rights under Article 13 of the GBCC in connection with the Merger, provided that shareholders meet all of the conditions set forth in Article 13 of the GBCC. This means that you are entitled to have the fair value of your shares of Company common stock determined by the Superior Court of Gwinnett County, Georgia and to receive payment based on that valuation. The ultimate amount you receive in a dissenters’ rights proceeding may be less than, equal to or more than the amount you would have received under the Merger Agreement.

To exercise your dissenters’ rights, you must submit a written notice of an intent to demand payment for your shares of Company common stock to the Company before the vote is taken on the Merger Agreement and you must not submit a proxy or otherwise vote in favor of the proposal to adopt the Merger Agreement. Your failure to follow exactly the procedures specified under the GBCC will result in the loss of your dissenters’ rights. See “Dissenters’ Rights” beginning on page 94 and the text of Article 13 of the GBCC (the Georgia dissenters’ rights statute) reproduced in its entirety as Annex C to this proxy statement. If you hold your shares of Company common stock through a bank, brokerage firm or other nominee and you wish to exercise dissenters’ rights, you should

 

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consult with your bank, brokerage firm or other nominee to determine the appropriate procedures for the making of a demand for dissenters’ rights by such bank, brokerage firm or nominee. In view of the complexity of the GBCC, shareholders who may wish to pursue dissenters’ rights should consult their legal and financial advisors promptly.

Delisting and Deregistration of Company Common Stock (Page 96)

If the Merger is completed, the Company common stock will be delisted from Nasdaq, and deregistered under the Securities Exchange Act of 1934, as amended, or the “Exchange Act.” As such, we would no longer file periodic reports with the Securities and Exchange Commission (“SEC”).

 

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QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER

The following questions and answers are intended to address briefly some commonly asked questions regarding the Merger, the Merger Agreement and the special meeting. These questions and answers may not address all questions that may be important to you as a shareholder of the Company. Please refer to the “Summary” and the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents incorporated by reference or referred to in this proxy statement, which you should read carefully and in their entirety. You may obtain the information incorporated by reference in this proxy statement without charge by following the instructions under “Where You Can Find More Information” beginning on page 98.

 

Q.

Why am I receiving this proxy statement?

 

A.

On December 24, 2020, PRGX entered into the Merger Agreement providing for, upon the terms and subject to the conditions set forth therein, the merger of Merger Sub, a wholly owned direct subsidiary of Parent, with and into PRGX, with PRGX surviving the merger as a wholly owned subsidiary of Parent (the “Surviving Corporation”). You are receiving this proxy statement and voting instruction form because you own shares of Company common stock. The proxy statement describes matters on which we urge you to vote, including the Merger, and is intended to assist you in deciding how to vote your shares of Company common stock with respect to such matters.

 

Q.

What is the proposed transaction and what effects will it have on the Company?

 

A.

The proposed transaction is the acquisition of the Company by Parent and Merger Sub pursuant to the Merger Agreement. If the proposal to adopt the Merger Agreement is approved by our shareholders and the other closing conditions under the Merger Agreement have been satisfied or waived, Merger Sub will merge with and into the Company. Upon completion of the Merger, Merger Sub will cease to exist and the Company will continue as the Surviving Corporation. As a result of the Merger, the Company will become a wholly owned direct subsidiary of Parent and will no longer be a publicly traded corporation, and you will no longer have any interest in our future earnings or growth. In addition, the Company common stock will be delisted from Nasdaq and deregistered under the Exchange Act, and we will no longer be required to file periodic reports with the SEC on account of Company common stock.

 

Q.

What will I receive if the Merger is completed?

 

A.

Upon completion of the Merger, you will be entitled to receive the Per Share Price of $7.71 in cash, without interest and less any required withholding taxes, for each share of Company common stock that you own, unless you have properly exercised and not lost or withdrawn your dissenters’ rights under the GBCC with respect to such shares. For example, if you own 100 shares of Company common stock, you will receive $771.00 in cash in exchange for your shares of Company common stock, less any required withholding taxes. If the Merger is completed, you will not own any shares of the capital stock in the Surviving Corporation.

 

Q.

When do you expect the Merger to be completed?

 

A.

We are working towards completing the Merger as soon as possible. If the Merger is approved at the special meeting then, assuming timely satisfaction of the other necessary closing conditions, we anticipate that the Merger will be completed promptly thereafter.

 

Q.

When will I receive the cash payment for my shares of Company common stock?

 

A.

Assuming that you do not elect to exercise your dissenters’ rights, shortly after the Effective Time of the Merger, American Stock Transfer & Trust Company will send to you a letter of transmittal with instructions regarding the surrender of your shares in exchange for the Merger Consideration. Once you have delivered an executed copy of the letter of transmittal together with any other required documentation to American Stock Transfer & Trust Company, it will promptly pay, on behalf of Parent, the Merger

 

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  Consideration owing to you, less any required withholding taxes. If your shares are held in “street name” through a bank, broker or other nominee, you will receive instructions from your bank, broker or other nominee as to how to effect the surrender of your “street name” shares of Company common stock in exchange for the Merger Consideration.

 

Q.

What happens if the Merger is not completed?

 

A.

If the Merger Agreement is not adopted by the shareholders of the Company or if the Merger is not completed for any other reason, the shareholders of the Company will not receive any payment for their shares of Company common stock. Instead, the Company will remain an independent public company, and Company common stock will continue to be listed and traded on Nasdaq. Under specified circumstances, the Company may be required to pay to Parent, or may be entitled to receive from Parent, a fee with respect to the termination of the Merger Agreement, as described under “Proposal 1: Adoption of the Merger Agreement—Termination Fees” beginning on page 61.

 

Q.

Is the Merger expected to be taxable to me?

 

A.

The exchange of shares of Company common stock for cash pursuant to the Merger will be a taxable transaction to U.S. holders (as defined in the section entitled “The Merger—Material United States Federal Income Tax Consequences” beginning on page 56 of this proxy statement) for U.S. federal income tax purposes. In general, a U.S. holder whose shares of Company common stock are converted into the right to receive cash in the merger will recognize gain or loss for U.S. federal income tax purposes in an amount equal to the difference, if any, between the amount of cash received with respect to such shares of Company common stock and such U.S. holder’s adjusted tax basis in such shares. Backup withholding may also apply to the cash payments made pursuant to the Merger unless the U.S. holder or other payee provides a valid taxpayer identification number and complies with certain certification procedures (generally, by providing a properly completed and executed IRS Form W-9) or otherwise establishes an exemption from backup withholding. Payments made to a non-U.S. holder (as defined in the section entitled “The Merger—Material United States Federal Income Tax Consequences” beginning on page 56 of this proxy statement) with respect to shares of Company common stock exchanged for cash pursuant to the Merger generally will not be subject U.S. federal income tax, subject to certain exceptions (as discussed in the section entitled “The Merger—Material United States Federal Income Tax Consequences” beginning on page 56 of this proxy statement). A non-U.S. holder may, however, be subject to backup withholding with respect to the cash payments made pursuant to the Merger, unless the non-U.S. holder certifies on an appropriate IRS Form W-8 that such non-U.S. holder is not a United States person or otherwise establishes an exemption from backup withholding. You should read the section entitled “The Merger—Material United States Federal Income Tax Consequences” beginning on page 56 of this proxy statement for a more detailed discussion of the U.S. federal income tax consequences of the Merger. You should also consult your own tax advisor with respect to the specific tax consequences to you in connection with the Merger in light of your own particular circumstances, including U.S. federal estate, gift and other non-income tax consequences, and tax consequences under state, local or non-U.S. tax laws and under any applicable income tax treaties.

 

Q.

Do any of the Company’s directors or officers have interests in the Merger that may differ from or be in addition to my interests as a shareholder?

 

A.

Yes. In considering the recommendation of the Board with respect to the proposal to adopt the Merger Agreement, you should be aware that our directors and executive officers have interests in the Merger that are different from, or in addition to, the interests of our shareholders generally. The Board was aware of and considered these interests, among other matters, in evaluating and negotiating the Merger Agreement and the Merger, and in recommending that the Merger Agreement be adopted by the shareholders of the Company. See “The Merger—Interests of Certain Persons in the Merger” beginning on page 44.

 

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Q.

When and where is the special meeting?

 

A.

The special meeting of shareholders of the Company will be held on [—], at [—] Eastern Standard Time, exclusively through remote communication in a virtual meeting format. You will not be able to attend the special meeting in person. This proxy statement for the special meeting will be mailed to shareholders on or about [—].

 

Q.

Will the special meeting be held virtually due to concerns about the COVID-19 pandemic?

 

A.

Yes. Due to the public health impact of the ongoing coronavirus (COVID-19) pandemic and in accordance with Executive Order 03.20.20.02 issued by the Governor of the State of Georgia and subsequent Executive Orders extending the Public Health State of Emergency in Georgia the special meeting will be held only through a remote communication in a virtual meeting format and will not be held at a physical location. Therefore, you will not be able to attend the special meeting in-person. To be admitted electronically to the special meeting, you must go to the meeting website at www.virtualshareholdermeeting.com/PRGX2021SM and enter the control number found on your proxy card or your voting instruction form. Attendance at the virtual special meeting is limited to shareholders of record or their legal proxy holder and beneficial owners as of [—], 2021, and invited guests of PRGX. We encourage you to access the special meeting prior to its start time.

 

Q.

What if during the check-in time or during the special meeting I have technical difficulties or trouble accessing the virtual meeting website?

 

A.

If we experience technical difficulties during the virtual special meeting (e.g., a temporary or prolonged power outage), we will determine whether the virtual special meeting can be promptly reconvened (if the technical difficulty is temporary) or whether the virtual special meeting will need to be reconvened on a later day (if the technical difficulty is more prolonged). In any such situation, we will promptly notify shareholders of the decision via www.virtualshareholdermeeting.com/PRGX2021SM.

Broadridge Investor Communication Solutions, Inc. will have technicians ready to assist you with any individual technical difficulties you may have accessing the virtual meeting website. If you encounter any difficulties accessing the virtual meeting website during the check-in or meeting time for the special meeting, please call the technical support number that will be posted on the virtual meeting website log-in page at www.virtualshareholdermeeting.com/PRGX2021SM.

 

Q.

Who may attend the special meeting?

 

A.

All shareholders of record at the close of business on [—], 2021, or the record date, or their duly appointed proxies, and our invited guests may attend the special meeting. To be admitted electronically to the special meeting, you must go to the meeting website at www.virtualshareholdermeeting.com/PRGX2021SM, and enter the control number found on your proxy card or your voting instruction form.

 

Q.

When will the shareholders’ list be available for examination?

 

A.

A complete list of the shareholders of record as of the record date will be available for examination by shareholders of record beginning on [—], 2021 at the Company’s headquarters and will continue to be available through and during the meeting at [—].

 

Q.

Who may vote?

 

A.

You may vote if you owned Company common stock as of the close of business on the record date. Each share of Company common stock is entitled to one vote. As of the record date, there were [—] shares of Company common stock outstanding and entitled to vote at the special meeting.

 

Q.

What will I be voting on?

 

A.

You will be voting on the following:

 

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A proposal to adopt the Merger Agreement;

 

   

A proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the proposal to adopt the Merger Agreement; and

 

   

An advisory (non-binding) proposal to approve the specified compensation that may become payable to our named executive officers in connection with the Merger.

 

Q.

What are the voting recommendations of the Board of Directors?

 

A.

The Board unanimously recommends that you vote your shares of Company common stock “FOR” the proposal to adopt the Merger Agreement, “FOR” the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies, and “FOR” the advisory (non-binding) proposal to approve the specified compensation that may become payable to our named executive officers in connection with the Merger.

 

Q.

How do I vote?

 

A.

If you are a shareholder of record (that is, if your shares of Company common stock are registered in your name with American Stock Transfer & Trust Company, our transfer agent), there are four ways to vote:

Telephone Voting: You may vote by calling the toll-free telephone number indicated on your proxy card. Please follow the voice prompts that allow you to vote your shares of Company common stock and confirm that your instructions have been properly recorded.

Internet Voting: You may vote by logging on to the website indicated on your proxy card. Please follow the website prompts that allow you to vote your shares of Company common stock and confirm that your instructions have been properly recorded.

Return Your Proxy Card By Mail: You may vote by completing, signing and returning the proxy card in the postage-paid envelope provided with this proxy statement. The proxy holders will vote your shares of Company common stock according to your directions. If you sign and return your proxy card without specifying choices, your shares of Company common stock will be voted by the persons named in the proxy in accordance with the recommendations of the Board as set forth in this proxy statement. If you vote by returning your proxy card by mail, your proxy card must be received by us before 11:59 p.m. Eastern Standard Time on [—], 2021. If you send the proxy by mail, there may be unexpected delays in mail processing times as a result of the COVID-19 pandemic. You should allow a sufficient number of days to ensure delivery.

Vote at the Special Meeting: You may cast your vote during the virtual special meeting. To be admitted electronically to the special meeting, you must go to the meeting website at www.virtualshareholdermeeting.com/PRGX2021SM and enter the control number found on your proxy card or your voting instruction form. We encourage you to access the special meeting prior to its start time.

Telephone and Internet voting for shareholders of record will be available 24 hours a day and will close at 11:59 p.m. Eastern Standard Time on [—], 2021. Telephone and Internet voting is convenient, provides postage and mailing cost savings and is recorded immediately, minimizing the risk that postal delays may cause votes to arrive late and therefore not be counted.

Even if you plan to attend the special meeting virtually, you are encouraged to vote your shares of Company common stock by proxy. You may still vote your shares of Company common stock virtually at the special meeting even if you have previously voted by proxy. If you are present at the special meeting and vote virtually, any previous vote by proxy will be revoked.

 

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Q.

What if I hold my shares of Company common stock in “street name”?

 

A.

You should follow the voting directions provided by your bank, brokerage firm or other nominee. You may complete and mail a voting instruction card to your bank, brokerage firm or other nominee or, in most cases, submit voting instructions by telephone or the Internet to your bank, brokerage firm or other nominee. If you provide specific voting instructions by mail, telephone or the Internet, your bank, brokerage firm or other nominee will vote your shares of Company common stock as you have directed. Please note that if you wish to vote via the Internet at the special meeting, you must provide a legal proxy from your bank, brokerage firm or other nominee at the special meeting.

If you do not instruct your bank, brokerage firm or other nominee to vote your shares of Company common stock, your shares will not be voted and the effect will be the same as a vote “AGAINST” the proposal to adopt the Merger Agreement, and your shares of Company common stock will not have an effect on the proposal to adjourn the special meeting or the non-binding advisory proposal to approve the golden parachute compensation payable to our named executive officers in connection with the Merger.

 

Q.

Can I change my mind after I vote?

 

A.

Yes. If you are a shareholder of record, you may change your vote or revoke your proxy at any time before it is voted at the special meeting by:

 

   

submitting a new proxy by telephone or via the Internet after the date of the earlier voted proxy;

 

   

signing another proxy card with a later date and returning it to us prior to the special meeting; or

 

   

attending the special meeting and voting via the Internet.

If you hold your shares of Company common stock in street name, you may submit new voting instructions by contacting your bank, brokerage firm or other nominee. You may also vote via the Internet at the special meeting if you obtain a legal proxy from your bank, brokerage firm or other nominee.

 

Q.

Who will count the votes?

 

A.

A representative of Broadridge will count the votes and will serve as the independent inspector of elections.

 

Q.

What does it mean if I receive more than one proxy card?

 

A.

It means that you have multiple accounts with brokers or our transfer agent. Please vote all of these shares. We encourage you to register all of your shares of Company common stock in the same name and address. You may do this by contacting your broker or our transfer agent. Our transfer agent, American Stock Transfer & Trust Company, may be reached at (718) 921-8124 or at the following address:

American Stock Transfer & Trust Company

6201 15th Avenue

Brooklyn, New York 11219

 

Q.

Will my shares of Company common stock be voted if I do not provide my proxy?

 

A.

If you are the shareholder of record and you do not vote or provide a proxy, your shares of Company common stock will not be voted. If your shares of Company common stock are held in street name, they may not be voted if you do not provide the bank, brokerage firm or other nominee with voting instructions.

 

Q.

May shareholders ask questions at the special meeting?

 

A.

Yes. Our representatives will answer shareholders’ questions of general interest following the special meeting consistent with the rules distributed at the special meeting.

 

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Q.

How many votes must be present to hold the special meeting?

 

A.

A majority of the outstanding shares of Company common stock entitled to vote at the special meeting, represented via the Internet or by proxy, will constitute a quorum. Shares of Company common stock represented via the Internet or by proxy, including abstentions, will be counted for purposes of determining whether a quorum is present. However, if your shares of Company common stock are held in “street name” and you do not issue instructions to your broker, bank or other nominee, your shares will not be counted for purposes of determining whether a quorum exists.

 

Q.

What vote is required to approve each proposal?

 

A.

The adoption of the Merger Agreement requires the affirmative vote of the holders of a majority of the outstanding shares of Company common stock entitled to vote thereon. Because the affirmative vote required to approve the proposal to adopt the Merger Agreement is based upon the total number of outstanding shares of Company common stock, if you fail to submit a proxy or vote via the Internet at the special meeting, or abstain, or you do not provide your bank, brokerage firm or other nominee with voting instructions, as applicable, this will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement.

Approval of the proposal to adjourn the special meeting, if necessary or appropriate, for the purpose of soliciting additional proxies requires, whether or not a quorum is present at the special meeting, the holders of a majority of the shares of Company common stock present via the Internet or represented by proxy at the special meeting to vote in favor of the proposal. Abstaining will have the same effect as a vote “AGAINST” the proposal to adjourn the special meeting, if necessary or appropriate. If you fail to submit a proxy or to vote via the Internet at the special meeting or if your shares of Company common stock are held through a bank, brokerage firm or other nominee and you do not instruct your bank, brokerage firm or other nominee on how to vote your shares of Company common stock, your shares of Company common stock will not be voted, but this will not have an effect on the proposal to adjourn the special meeting.

Approval of the advisory (non-binding) proposal to approve the specified compensation that may become payable to our named executive officers in connection with the Merger requires the vote cast by holders of shares of our common stock present via the Internet or represented by proxy and entitled to vote on the matter at the special meeting to exceed the votes cast against the proposal. Abstaining will have no effect on the advisory (non-binding) proposal to approve the specified compensation. If you fail to submit a proxy or to vote via the Internet at the special meeting or if your shares of Company common stock are held through a bank, brokerage firm or other nominee and you do not instruct your bank, brokerage firm or other nominee on how to vote your shares of Company common stock, your shares of our common stock will not be voted, but this will not have an effect on the advisory (non-binding) proposal to approve the specified compensation that may become payable to our named executive officers in connection with the Merger.

 

Q.

How are votes counted?

 

A.

On the proposal to adopt the Merger Agreement, you may vote “FOR,” “AGAINST” or “ABSTAIN.” Abstentions and broker non-votes will have the same effect as votes “AGAINST” the proposal to adopt the Merger Agreement.

On the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies, you may vote “FOR,” “AGAINST” or “ABSTAIN.” Abstentions will have the same effect as if you voted “AGAINST” the proposal, but broker non-votes will not have an effect on the proposal.

On the advisory (non-binding) proposal to approve the specified compensation, you may vote “FOR,” “AGAINSTorABSTAIN.” Abstentions and broker non-votes will not have an effect on the proposal.

 

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Q.

Why am I being asked to cast a vote on an advisory (non-binding) proposal to approve the specified compensation that may become payable to our named executive officers in connection with the Merger?

 

A.

In accordance with the rules promulgated by the SEC, under Section 14A of the Exchange Act, we are providing our shareholders with the opportunity to cast a vote on a non-binding advisory proposal to approve the golden parachute compensation payable to our named executive officers in connection with the Merger. See “Proposal 3: Advisory Vote Regarding Executive Compensation.”

 

Q.

What will happen if shareholders do not approve the advisory proposal on executive compensation payable to our named executive officers in connection with the Merger?

 

A.

Approval of this proposal is not a condition to the completion of the Merger. The vote on this proposal is an advisory vote and will not be binding on us or Parent. Further, the underlying plans and arrangements are contractual in nature and not, by their terms, subject to shareholder approval. Accordingly, regardless of the outcome of the non-binding advisory vote, if the Merger Agreement is adopted by the shareholders and completed, the specified compensation that may become payable to our named executive officers in connection with the Merger may be paid even if shareholders do not approve this proposal.

 

Q.

Will any other matters be voted on at the special meeting?

 

A.

As of the date of this proxy statement, our management knows of no other matter that will be presented for consideration at the special meeting other than those matters discussed in this proxy statement.

 

Q.

What is the Company’s website address?

 

A.

Our corporate website address is www.prgx.com. We make this proxy statement, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act available on our website in the Investors section, as soon as reasonably practicable after electronically filing such material with the SEC.

This information is also available free of charge at www.sec.gov, an Internet site maintained by the SEC that contains reports, proxy and information statements, and other information regarding issuers that is filed electronically with the SEC. In addition, shareholders may obtain free copies of the documents filed with the SEC by contacting PRGX’s Investor Relations at (770) 779-3011 or by emailing investor-relations@prgx.com. Our SEC filings are available in print to any shareholder who requests a copy at the phone number or address listed above.

The references to our website address and the SEC’s website address do not constitute incorporation by reference of the information contained in these websites and should not be considered part of this document.

 

Q.

What happens if I sell my shares of Company common stock before the special meeting?

 

A.

The record date for shareholders entitled to vote at the special meeting is earlier than both the date of the special meeting and the consummation of the Merger. If you transfer your shares of Company common stock after the record date but before the special meeting, unless special arrangements (such as provision of a proxy) are made between you and the person to whom you transfer your shares and each of you notifies the Company in writing of such special arrangements, you will retain your right to vote such shares at the special meeting but will transfer the right to receive the Merger Consideration to the person to whom you transfer your shares.

 

Q.

Who will pay for this proxy solicitation?

 

A.

We will bear the cost of preparing, assembling and mailing the proxy material and of reimbursing brokers, nominees, fiduciaries and other custodians for out-of-pocket and clerical expenses of transmitting copies of the proxy material to the beneficial owners of shares of Company common stock.

 

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Q.

Who will solicit and pay the cost of soliciting proxies?

 

A.

The Company is paying the cost of soliciting these proxies. Upon request, we will reimburse brokers and other nominees for their reasonable out-of-pocket expenses for forwarding these proxy materials to the beneficial owners of Company common stock and in obtaining voting instructions from those owners. Our directors, officers and employees may solicit proxies in person or by telephone, mail, facsimile, email or otherwise, but they will not receive additional compensation for their services.

We have engaged Innisfree M&A Incorporated to assist in the solicitation of proxies and provide related advice and informational support. We agreed to pay Innisfree M&A Incorporated a fee of approximately $15,000 for its services and to reimburse reasonable out of pocket expenses.

 

Q.

What do I need to do now?

 

A.

Even if you plan to attend the special meeting, after carefully reading and considering the information contained in this proxy statement, please vote promptly to ensure that your shares are represented at the special meeting. If you hold your shares of Company common stock in your own name as the shareholder of record, please vote your shares of Company common stock by (i) completing, signing, dating and returning the enclosed proxy card in the accompanying prepaid reply envelope, (ii) using the telephone number printed on your proxy card or (iii) using the Internet voting instructions printed on your proxy card. If you decide to attend the special meeting and vote via the Internet, your vote by ballot will revoke any proxy previously submitted. If you are a beneficial owner, please refer to the instructions provided by your bank, brokerage firm or other nominee to see which of the above choices are available to you.

 

Q.

Should I send in my stock certificates now?

 

A.

No. You will be sent a letter of transmittal as soon as reasonably practicable after the completion of the Merger, describing how you may exchange your shares of Company common stock for the Merger Consideration. If your shares of Company common stock are held in “street name” by your bank, brokerage firm or other nominee, you will receive instructions from your bank, brokerage firm or other nominee as to how to effect the surrender of your “street name” shares of Company common stock in exchange for the Merger Consideration. Please do NOT return your stock certificate(s) with your proxy.

 

Q.

Am I entitled to exercise dissenters’ rights under the GBCC instead of receiving the Merger Consideration for my shares of Company common stock?

 

A.

Yes. As a holder of Company common stock, you are entitled to exercise dissenters’ rights under the GBCC in connection with the Merger if you take certain actions and meet certain conditions. See “Dissenters’ Rights” beginning on page 94.

 

Q.

Who can help answer my other questions?

 

A.

If you have additional questions about the Merger, need assistance in submitting your proxy or voting your shares of Company common stock, or need additional copies of the proxy statement or the enclosed proxy card, please call our proxy solicitor, Innisfree M&A Incorporated, toll-free at (877) 750-8338.

 

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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION

This proxy statement, and the documents to which we refer you in this proxy statement, as well as information included in oral statements or other written statements made or to be made by us, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which include statements regarding information regarding the intent, belief or current expectation of the Company and members of its senior management team. These forward-looking statements involve significant risks and uncertainties.

All statements other than statements of historical fact are statements that could be deemed forward-looking statements. Forward-looking statements include, without limitation, statements regarding prospective performance and opportunities and the outlook for the Company’s businesses, performance and opportunities and regulatory approvals, the anticipated timing of filings and approvals relating to the transactions contemplated by the Merger Agreement (collectively, the “Transactions”); the expected timing of the completion of the Transactions; the ability to complete the Transactions considering the various closing conditions; and any assumptions underlying any of the foregoing.

Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties and are cautioned not to place undue reliance on these forward-looking statements. Actual results may differ materially from those currently anticipated due to a number of risks and uncertainties. Risks and uncertainties that could cause the actual results to differ from expectations contemplated by forward looking statements include: uncertainties as to the timing of the Merger; the possibility that competing offers will be made; the possibility that various closing conditions for the Transactions may not be satisfied or waived, including that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of the Transactions; the occurrence of any event, change or other circumstance that could give rise to the termination of the Merger Agreement; the effects of disruption from the Transactions making it more difficult to maintain relationships with employees, customers, other business partners or governmental entities; other business effects, including the effects of industry, economic or political conditions outside of the Company’s control; transaction costs; actual or contingent liabilities; and other risks and uncertainties discussed in this proxy statement, the Company’s filings with the SEC, including its Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed with the SEC on March 12, 2020, its Quarterly Reports on Form 10-Q and its Current Reports on Form 8-K, which filings are available at no charge from the SEC through its website at www.sec.gov. Investors and security holders may also obtain free copies of the documents filed with the SEC by contacting PRGX’s Investor Relations at (770) 779-3011 or by email through PRGX’s investor relations page at https://investors.prgx.com/investor-relations/.

You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We do not undertake any obligation to update any forward-looking statements as a result of new information, future developments or otherwise, except as expressly required by law.

 

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THE SPECIAL MEETING

Time, Place and Purpose of the Special Meeting

This proxy statement is being furnished to our shareholders as part of the solicitation of proxies by the board of directors of the Company (the “Board”) for use at the special meeting to be held on [—], 2021, starting at [—], Eastern Standard Time, or at any postponement or adjournment thereof. Due to the public health impact of the ongoing coronavirus (COVID-19) pandemic and in accordance with Executive Order 03.20.20.02 issued by the Governor of the State of Georgia and subsequent Executive Orders extending the Public Health State of Emergency in Georgia, the special meeting will be held only through a remote communication in a virtual meeting format and will not be held at a physical location. Therefore, you will not be able to attend the special meeting in-person. To be admitted electronically to the special meeting, you must go to the meeting website at www.virtualshareholdermeeting.com/PRGX2021SM and enter the control number found on your proxy card or your voting instruction form. We encourage you to access the special meeting prior to its start time.

Purpose of the Special Meeting

At the special meeting, holders of Company common stock will be asked to approve the proposal to adopt the Merger Agreement, to approve the proposal to adjourn the special meeting, if necessary or appropriate, for the purpose of soliciting additional proxies if there are insufficient votes at the time of the special meeting to approve the proposal to adopt the Merger Agreement, and to approve an advisory (non-binding) proposal to approve the specified compensation that may become payable to our named executive officers in connection with the Merger.

If our shareholders fail to approve the proposal to adopt the Merger Agreement, the Merger will not occur. A copy of the Merger Agreement is attached as Annex A to this proxy statement, which we encourage you to read carefully in its entirety.

Record Date and Quorum

We have fixed the close of business on [—], 2021 as the record date for the special meeting, and only holders of record of Company common stock on the record date are entitled to vote at the special meeting. You are entitled to receive notice of, and to vote at, the special meeting if you owned shares of Company common stock at the close of business on the record date. On the record date, there were [—] shares of Company common stock outstanding and entitled to vote. Each share of Company common stock entitles its holder to one vote on all matters properly coming before the special meeting.

The presence at the special meeting, via the Internet or by proxy, of the holders of a majority of the shares of Company common stock outstanding at the close of business on the record date and entitled to vote at the special meeting constitutes a quorum for the purposes of the special meeting. Shares of Company common stock represented at the special meeting but not voted, or shares of Company common stock for which a shareholder directs an “abstention” from voting, will be counted for purposes of establishing a quorum. If your shares of Company common stock are held in “street name” and you do not issue instructions to your broker, bank or other nominee, your shares will not be counted for purposes of determining whether a quorum exists. A quorum is necessary to transact business at the special meeting. Once a share of Company common stock is represented at the special meeting, it will be counted for the purpose of determining a quorum at the special meeting and any adjournment of the special meeting. However, if a new record date is set for the adjourned special meeting, then a new quorum will have to be established. In the event that a quorum is not present at the special meeting, it is expected that the special meeting will be adjourned or postponed.

Attendance

Only shareholders of record or their duly authorized proxies have the right to attend the special meeting. An authorized proxy must present proof that he or she is an authorized proxy of a shareholder. The special meeting will be held only through a remote communication in a virtual meeting format and will not be held at a physical location. Therefore, you will not be able to attend the special meeting in-person.

 

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Vote Required

Approval of the proposal to adopt the Merger Agreement requires the affirmative vote of the holders of a majority of the outstanding shares of Company common stock entitled to vote thereon. On the proposal to adopt the Merger Agreement, you may vote FOR, AGAINST or ABSTAIN. Abstentions will not be counted as votes cast in favor of the proposal to adopt the Merger Agreement but will count for the purpose of determining whether a quorum is present. If you fail to submit a proxy or to vote via the Internet at the special meeting, or vote “ABSTAIN,” it will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement.

If your shares of Company common stock are registered directly in your name with our transfer agent, American Stock Transfer & Trust Company, you are considered, with respect to those shares of Company common stock, the “shareholder of record.” This proxy statement and proxy card have been sent directly to you by the Company.

If your shares of Company common stock are held through a bank, brokerage firm or other nominee, you are considered the “beneficial owner” of shares of Company common stock held in street name. In that case, this proxy statement has been forwarded to you by your bank, brokerage firm or other nominee who is considered, with respect to those shares of Company common stock, the shareholder of record. As the beneficial owner, you have the right to direct your bank, brokerage firm or other nominee how to vote your shares by following their instructions for voting.

Under Nasdaq rules, banks, brokerage firms or other nominees who hold shares in street name for customers do not have the authority to vote on proposals when they have not received instructions from beneficial owners, and, as a result, absent specific instructions from the beneficial owner of such shares of Company common stock, banks, brokerage firms or other nominees are not empowered to vote those shares of Company common stock. If your shares of Company common stock are held in “street name” and you do not issue instructions to your broker, bank or other nominee, your shares will not be counted for purposes of determining whether a quorum exists, but will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement.

Approval of the proposal to adjourn the special meeting, if necessary or appropriate, for the purpose of soliciting additional proxies requires, whether or not a quorum is present at the special meeting, the holders of a majority of the shares of Company common stock present via the Internet or represented by proxy at the special meeting to vote in favor of the proposal. On the proposal to adjourn the special meeting, if necessary or appropriate, you may vote FOR, AGAINST or ABSTAIN. For purposes of this proposal, if you attend the meeting or give a proxy and abstained on this proposal, this will have the same effect as if you voted “AGAINST” the proposal. If your shares of Company common stock are present at the special meeting but are not voted on this proposal, it will not have any effect on the proposal to adjourn the special meeting. Broker non-votes will not have any effect on the proposal to adjourn the special meeting. Failure to submit a proxy or vote via the Internet at the special meeting will also not have any effect on the proposal to adjourn the special meeting.

The advisory (non-binding) proposal to approve the specified compensation that may become payable to our named executive officers in connection with the Merger will be approved if, assuming a quorum is present, the votes cast by holders of shares of Company common stock present at the special meeting via the Internet or by proxy at the special meeting in favor of the proposal exceed the votes cast against the proposal. On the non-binding proposal to approve the specified compensation, you may vote FOR, AGAINST or ABSTAIN. For purposes of this proposal, if your shares of Company common stock are present at the special meeting but are not voted on this proposal, or if you have given a proxy and abstained on this proposal, this will have no effect on the proposal. Failure to submit a proxy or vote via the Internet at the special meeting and broker non-votes will also not, assuming a quorum is present, have any effect on the non-binding advisory proposal to approve the golden parachute compensation payable to our named executive officers in connection with the Merger.

Certain shareholders of the Company, including each member of our Board and each of our executive officers, have agreed, among other things, to vote at the special meeting and vote in favor of the proposal to adopt the Merger Agreement pursuant to the Support Agreements. As of January 11, 2021, these shareholders hold approximately 13.08% of our outstanding common stock.

 

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Most of our shareholders have three options for submitting their votes: (i) by telephone, (ii) via the Internet, or (iii) by mail. If your stock is held by a broker, bank or other nominee (i.e., in street name), you will receive instructions from the registered holder that you must follow in order to have your shares voted. If you hold your shares in your own name (i.e., as a holder of record), you may instruct the persons named as proxies how to vote your shares by signing, dating and mailing the proxy card in the envelope provided. Of course, you are always welcome to attend the special meeting and vote your shares virtually.

If you are a beneficial owner, you will receive instructions from your bank, brokerage firm or other nominee that you must follow in order to have your shares of Company common stock voted. Those instructions will identify which of the above choices are available to you in order to have your shares voted. Please note that if you are a beneficial owner and wish to vote virtually at the special meeting, you must provide a legal proxy from your bank, brokerage firm or other nominee.

Please refer to the instructions on your proxy or voting instruction card to determine the deadlines for voting over the Internet or by telephone. If you choose to vote by mailing a proxy card, your proxy card must be filed with our General Counsel and Corporate Secretary by the time the special meeting begins. Please do not send in your stock certificates with your proxy card. When the Merger is completed, a separate letter of transmittal will be mailed to you that will enable you to receive the Merger Consideration in exchange for your stock certificates.

If you vote by proxy, regardless of the method you choose to vote, the individuals named on the enclosed proxy card, and each of them with full power of substitution, or your proxies, will vote your shares of Company common stock in the way that you indicate. When completing the Internet or telephone processes or the proxy card, you may specify whether your shares of Company common stock should be voted “FOR” or “AGAINST” or “ABSTAIN” on all, some or none of the specific items of business to come before the special meeting.

If you properly sign your proxy card but do not mark the boxes showing how your shares of Company common stock should be voted on a matter, the shares of Company common stock represented by your properly signed proxy will be voted “FOR” the proposal to adopt the Merger Agreement, “FOR” the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies, and “FOR” the non-binding proposal to approve the golden parachute compensation.

If you have any questions or need assistance voting your shares, please call Innisfree M&A Incorporated toll-free at (877)750-8338.

IT IS IMPORTANT THAT YOU VOTE YOUR SHARES OF COMPANY COMMON STOCK PROMPTLY. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING VIA THE INTERNET, PLEASE COMPLETE, DATE, SIGN AND RETURN, AS PROMPTLY AS POSSIBLE, THE ENCLOSED PROXY CARD IN THE ACCOMPANYING PREPAID REPLY ENVELOPE, OR SUBMIT YOUR PROXY BY TELEPHONE OR THE INTERNET. SHAREHOLDERS WHO ATTEND THE SPECIAL MEETING MAY REVOKE THEIR PROXIES BY VOTING AT THE SPECIAL MEETING VIA THE INTERNET.

As of [—], 2021, the record date, the directors and executive officers of the Company beneficially owned and were entitled to vote, in the aggregate, [—] shares of Company common stock (excluding any shares of Company common stock deliverable upon exercise or conversion of any options or restricted stock units), representing [—]% of the outstanding shares of Company common stock on the record date. The directors and executive officers have informed the Company that they currently intend to vote all of their shares of Company common stock “FOR” the proposal to adopt the Merger Agreement, “FOR” the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies, and “FOR” the advisory (non-binding) proposal to approve the specified compensation.

Proxies and Revocation

Any shareholder of record entitled to vote at the special meeting may vote by telephone, over the Internet, by returning the enclosed proxy card in the accompanying prepaid reply envelope, or may vote via the Internet at the special meeting. If your shares of Company common stock are held in “street name” by your bank, brokerage firm

 

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or other nominee, you should instruct your bank, brokerage firm or other nominee on how to vote your shares of Company common stock using the instructions provided by your bank, brokerage firm or other nominee. If you fail to submit a proxy or vote via the Internet at the special meeting, or abstain, or do not provide your bank, brokerage firm or other nominee with voting instructions, as applicable, your shares of Company common stock will not be voted on the proposal to adopt the Merger Agreement, which will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement.

If you are a shareholder of record, you have the right to revoke a proxy, whether delivered over the Internet, by telephone or by mail, at any time before it is voted at the special meeting by:

 

   

submitting a new proxy by telephone or via the Internet after the date of the earlier voted proxy:

 

   

signing another proxy card with a later date and returning it to us prior to the special meeting; or

 

   

attending the special meeting and voting via the Internet.

If you hold your shares in street name, you may submit new voting instructions by contacting your bank, brokerage firm or other nominee. You may also vote via the Internet at the special meeting if you obtain a legal proxy from your bank, brokerage firm or other nominee.

Technical Difficulties or Issues Accessing the Virtual Meeting Website

If we experience technical difficulties during the virtual special meeting (e.g., a temporary or prolonged power outage), we will determine whether the virtual special meeting can be promptly reconvened (if the technical difficulty is temporary) or whether the virtual special meeting will need to be reconvened on a later day (if the technical difficulty is more prolonged). In any such situation, we will promptly notify shareholders of the decision via www.virtualshareholdermeeting.com/PRGX2021SM.

Broadridge Investor Communication Solutions, Inc. will have technicians ready to assist you with any individual technical difficulties you may have accessing the virtual meeting website. If you encounter any difficulties accessing the virtual meeting website during the check-in or meeting time for the special meeting, please call the technical support number that will be posted on the virtual meeting website log-in page at www.virtualshareholdermeeting.com/PRGX2021SM.

Adjournments and Postponements

Although it is not currently expected, the special meeting may be adjourned or postponed, including for the purpose of soliciting additional proxies, if there are insufficient votes at the time of the special meeting to approve the proposal to adopt the Merger Agreement or if a quorum is not present at the special meeting.

Any adjournment or postponement of the special meeting for the purpose of soliciting additional proxies will allow the Company’s shareholders who have already sent in their proxies to revoke them at any time prior to their use at the special meeting as adjourned or postponed.

Anticipated Date of Completion of the Merger

We are working towards completing the Merger as soon as possible. If the Merger is approved at the special meeting, then, assuming timely satisfaction of the other necessary closing conditions, we anticipate that the Merger will be completed promptly thereafter.

Dissenters’ Rights

Shareholders that do not vote for the adoption of the Merger Agreement, and who precisely comply with the procedures specified under Article 13 of the GBCC, are entitled to dissenters’ rights under Article 13 of the GBCC in connection with the Merger. This means that you are entitled to have the fair value of your shares of Company common stock determined by the Superior Court of Gwinnett County, Georgia and to receive payment

 

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based on that valuation in lieu of the right to receive $7.71 per share of Company common stock in cash, without interest and less any required withholding taxes. The ultimate amount you receive in an dissenters’ proceeding may be less than, equal to or more than the amount you would have received under the Merger Agreement.

To exercise your dissenters’ rights, you must submit a written notice of an intent to demand payment for your shares of Company common stock to the Company before the vote is taken on the Merger Agreement and you must not vote in favor of the proposal to adopt the Merger Agreement. Your failure to follow exactly the procedures specified under Article 13 of the GBCC may result in the loss of your dissenters’ rights. See “Dissenters’ Rights” beginning on page 94 and the text of Article 13 of the GBCC (the Georgia dissenters’ rights statute) reproduced in its entirety as Annex C to this proxy statement. If you hold your shares of Company common stock through a bank, brokerage firm or other nominee and you wish to exercise dissenters’ rights, you should consult with your bank, brokerage firm or other nominee to determine the appropriate procedures for the making of a demand for dissenters’ rights by your bank, brokerage firm or nominee. In view of the complexity of the GBCC, shareholders who may wish to pursue dissenters’ rights should consult their legal and financial advisors.

Payment of Solicitation Expenses

The Company is paying the cost of soliciting these proxies. The Company may reimburse brokers, banks and other custodians, nominees and fiduciaries representing beneficial owners of shares of Company common stock for their reasonable out-of-pocket expenses in forwarding soliciting materials to beneficial owners of Company common stock and in obtaining voting instructions from those owners. Our directors, officers and employees may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies. We have engaged Innisfree M&A Incorporated to assist in the solicitation of proxies and provide related advice and informational support. We agreed to pay Innisfree M&A Incorporated a fee of approximately $15,000 for its services and to reimburse its reasonable out of pocket expenses.

Householding of Special Meeting Materials

To reduce the expense of delivering duplicate proxy materials to shareholders who may have more than one account holding Company stock, but sharing the same address, we have adopted a procedure approved by the SEC called “householding.” Under this procedure, certain shareholders of record who have the same address and last name will receive only one copy of this proxy statement and, as applicable, any additional proxy materials that are delivered pursuant to a request by such shareholders until such time as one or more of these shareholders notifies us that they want to receive separate copies. This procedure reduces duplicate mailings and saves printing costs and postage fees, as well as natural resources. Shareholders who participate in householding will continue to have access to and utilize separate proxy voting instructions.

If you received a household mailing and you would like to have additional copies of this proxy statement mailed to you, please submit your request to PRGX’s Investor Relations at (770) 779-3011 or by emailing investor-relations@prgx.com. The Company will promptly send additional copies of the proxy statement and related materials, as applicable, upon receipt of such request.

Questions and Additional Information

If you have more questions about the Merger or how to submit your proxy, or if you need additional copies of this proxy statement or the enclosed proxy card or voting instructions, please call our proxy solicitor, Innisfree M&A Incorporated, toll-free at (877) 750-8338.

 

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THE MERGER

This discussion of the Merger is qualified in its entirety by reference to the Merger Agreement, which is attached to this proxy statement as Annex A. You should read the entire Merger Agreement carefully as it is the legal document that governs the Merger.

Parties to the Merger

PRGX Global, Inc.

600 Galleria Parkway, Suite 100

Atlanta, Georgia 30339

(770) 779-3900

PRGX Global, Inc. (Nasdaq: PRGX), a Georgia corporation, which we refer to in this proxy statement as “PRGX,” the “Company,” “we,” “our,” or “us,” together with its subsidiaries, is a global leader in recovery audit and spend analytics, providing a suite of services targeted at our clients’ source-to-pay business processes. At the heart of our services suite is the core capability of mining client data to deliver “actionable insights.” Actionable insights allow our clients to improve their cash flow and profitability by reducing costs, improving business processes and managing risks. The Company became a public company in 1996 and the Company common stock is publicly traded on Nasdaq under the symbol “PRGX.” The Company’s principal offices are located at 600 Galleria Parkway, Suite 100 Atlanta, Georgia 30339 and its telephone number is (770) 779-3900.

For additional information about the Company and our business, please visit our website at www.prgx.com. Our website address is provided as an inactive textual reference only. The information contained on our website is not incorporated into, and does not form a part of this proxy statement or any other report or document on file with or furnished to the SEC. See also “Where You Can Find More Information” on page 98.

Pluto Merger Sub Inc.

1370 Avenue of the Americas, 22nd Floor

New York, NY 10019

(212) 641-8604

Pluto Merger Sub Inc., a Georgia corporation (which we refer to in this proxy statement as “Merger Sub”) and wholly owned direct subsidiary of Pluto Acquisitionco Inc., was formed on December 22, 2020 solely for the purpose of engaging in the transactions contemplated by the Merger Agreement and has not engaged in any business activities other than in connection with the transactions contemplated by the Merger Agreement and arranging of the equity financing and debt financing in connection with the Merger.

Pluto Acquisitionco Inc.

1370 Avenue of the Americas, 22nd Floor

New York, NY 10019

(212) 641-8604

Pluto Acquisitionco Inc., a Delaware corporation (which we refer to in this proxy statement as “Parent”), was formed on December 21, 2020 solely for the purpose of engaging in the transactions contemplated by the Merger Agreement and has not engaged in any business activities other than in connection with the transactions contemplated by the Merger Agreement and arranging of the equity financing and debt financing in connection with the Merger.

Merger Sub and Parent are affiliates of Ardian North America Fund II GP, LLC (“Ardian”). The Investors, affiliates of Ardian, have collectively provided to Parent an equity commitment up to $89.7 million (subject to adjustments as described in the Equity Commitment Letter). After giving effect the Merger, the Company, as the Surviving Corporation, will be affiliated with Ardian. Ardian is a global private investment house with assets of US$103 billion managed or advised in Europe, the Americas and Asia. The company is majority-owned by its employees. It manages funds on behalf of around 1,000 clients through five pillars of investment expertise: Fund of Funds, Direct Funds, Infrastructure, Real Estate and Private Debt. Ardian maintains a global network, with more than 700 employees working from fifteen offices across Europe (Frankfurt, Jersey, London, Luxembourg, Madrid, Milan, Paris and Zurich), the Americas (New York, San Francisco and Santiago) and Asia (Beijing, Singapore, Tokyo and Seoul).

 

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Effect of the Merger

Upon the terms and subject to the conditions of the Merger Agreement, Merger Sub will merge with and into the Company. The Company will be the Surviving Corporation and will continue to do business following the Merger, as a wholly-owned subsidiary of Parent. As a result of the Merger, the Company will cease to be a publicly traded company and will delist from Nasdaq. If the Merger is completed, you will not own any shares of the capital stock of the Surviving Corporation. The Merger will become effective upon the filing of a certificate of merger with, and its acceptance by, the Secretary of State of the State of Georgia (or such later time as we, Parent and Merger Sub may agree and specify in the certificate of merger).

Merger Consideration

The Merger Agreement provides that, subject to the terms and conditions of the Merger Agreement, and in accordance with the GBCC, upon consummation of the Merger pursuant to the terms of the Merger Agreement and the filing of the Certificate of Merger with the Secretary of State of the State of Georgia (such time of filing, the “Effective Time”), each outstanding share of Company common stock (excluding shares held (i) directly by the Company (including treasury shares), Parent or Merger Sub (other than shares in trust accounts, managed accounts and the like), (ii) by any direct or indirect wholly-owned subsidiary of the Company or Parent (other than Merger Sub) and (iii) by any shareholder of the Company who or which is entitled to dissenters’ rights under Article 13 of the GBCC and properly exercises and perfects dissenters’ rights of such shares pursuant to, and complies in all respects with, the applicable provisions of Georgia law and has not withdrawn a demand for dissenters’ rights or otherwise lost dissenters’ rights under Georgia law with respect to such shares) will be converted into the right to receive the Merger Consideration of $7.71 per share in cash, without interest and less any required withholding taxes, which amount we refer to as the “Per Share Price” or the “Merger Consideration.” All shares of Company common stock converted into the right to receive the Per Share Price shall automatically be canceled and cease to exist.

Background of the Merger

The Board, with the assistance of the Company’s executive management team and its outside advisors, regularly evaluates the Company’s strategic direction and ongoing business plans in light of, among other things, the Company’s performance, competitive dynamics, economic developments and industry trends, all with a view to improving shareholder value. As part of these evaluations, the Board has from time to time considered a variety of strategic alternatives for the Company, including continuation of the Company’s business as an independent public company, the potential sale of the Company to a strategic partner or a “take private” transaction to a financial sponsor, as well as various other alternatives to improve shareholder value. The Board has also engaged in discussions with various parties that have contacted the Company or its advisors from time to time to express an interest in a potential transaction involving the Company.

In September 2019, at its regularly scheduled meeting, the Board engaged in a discussion regarding potential strategic alternatives for the Company. During this discussion, the Board determined that it would seek to engage a financial advisor to assist the Board with its evaluation of strategic alternatives. The Board also authorized Messrs. Owens, Costello and Kimble to work with Belle Farm Capital Advisors, a consultant (“Belle Farm”), and oversee the process of selecting a financial advisor, with the final engagement of a financial advisor to be approved by the full Board.

Throughout October 2019, the Board members identified above, along with a representative of Belle Farm and members of management, interviewed four investment banking firms, including a meeting with representatives of SunTrust Robinson Humphrey, now Truist Securities, Inc. (“Truist Securities”), which was held on October 22, 2019. Following this meeting and a review of the firms’ respective qualifications and experience, an engagement letter was requested from Truist Securities, which was reviewed and negotiated over the following few weeks.

In November 2019, the Board created the Transaction Committee of the Board, consisting of Messrs. Owens, Costello and Kimble. The Transaction Committee was created to assist with the evaluation of the advisability of potential transactions, interview and evaluate investment banking firms and other advisors to the Company, facilitate discussions with interested parties and negotiate the terms of a potential transaction, update the Board regularly on the status of a potential transaction, and recommend potential transactions for approval by the Board. The final authority for the approval of any transaction was retained by the full Board.

Representatives of Troutman Sanders LLP, now Troutman Pepper Hamilton Sanders LLP (“Troutman”), and a representative of Belle Farm assisted the Transaction Committee and PRGX management with the review and negotiation of the engagement letter provided by Truist Securities. On December 3, 2019, following approval by the Board, the Company executed an engagement letter with Truist Securities to act as the Company’s exclusive financial advisor in connection with the review of strategic alternatives, including a potential sale of the Company.

 

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At its regularly scheduled meeting held on December 17, 2019, following regular business and financial updates, the Board engaged in a thorough review of potential strategic alternatives. Representatives of Truist Securities, Belle Farm and Troutman, as well as members of management participated in this session of the Board meeting. A representative of Troutman reviewed with the Board the fiduciary duties of Board members in exploring and evaluating strategic alternatives as well as other legal issues associated with conducting a strategic alternatives process. A representative of Belle Farm then reviewed with the Board developments since the last Board meeting, including the interviews and selection of the Company’s financial advisor. Finally, representatives of Truist Securities reviewed with the Board various strategic alternatives and outlined an anticipated process, outreach to potential parties and a tentative timeline for the process, should the Board desire to move forward. Following discussion with the advisors, the Board determined to move forward with preparations for a potential process to be conducted early in 2020 due to a number of factors, including the costs and burdens of operating as a public company, the limited trading volume and volatility of the Company’s common stock, a perceived undervaluation of the Company in the public markets, and the potential to achieve greater value for the Company’s shareholders through a potential sale.

Throughout the months of January and February 2020, PRGX management with the assistance of Truist Securities worked to prepare a confidential information memorandum (“CIM”) for distribution to potentially interested third parties. Also during this period, PRGX management worked with the assistance of Truist Securities and PRGX’s legal team to begin preparations for populating an online data room, developing a list of potential buyers and preparing a form of non-disclosure agreement. Representatives of Truist Securities continued to correspond with the Transaction Committee regularly during this period to monitor market conditions and the Company’s financial performance for potentially launching the process in the spring. In late February and early March 2020, economic conditions in the United States and globally became increasingly affected by the COVID-19 coronavirus pandemic. At its regularly scheduled Board meeting in March 2020, the Board determined that due to the economic uncertainty associated with COVID-19, it would pause the work on the proposed process and assess market conditions for a potential launch of a process at a later time.

In early April 2020, the Company received expressions of interest from Sponsor A and another financial sponsor regarding discussions related to a potential transaction. Following execution of non-disclosure agreements, Sponsor A and the other financial sponsor conducted preliminary due diligence on the Company. Separately, in early May 2020, the Company received an expression of interest in discussions from an additional financial sponsor. This third financial sponsor also executed a non-disclosure agreement and conducted preliminary due diligence. Throughout May and early June 2020, these parties conducted preliminary due diligence through a review of materials in the online data room and telephonic diligence sessions with members of PRGX management. The Company’s reported trailing twelve month Adjusted EBITDA through the first quarter of 2020 was approximately $23.8 million (compared to approximately $32.3 million for the twelve months ending September 30, 2020). Following further discussions, two of the three parties expressed that they did not wish to continue further diligence for reasons related to their internal resources and priorities.

On June 17, 2020, Sponsor A provided an expression of interest to the Transaction Committee to purchase all of the outstanding equity securities of the Company for a purchase price of $5.25 per fully diluted share. PRGX common stock closed at $3.90 per share on Nasdaq that day. On June 18, 2020, the Board met to review the expression of interest. Representatives of management, along with representatives of Truist Securities and Belle Farm, also attended the meeting. After a review of financial information provided by Truist Securities, the Board believed that the proposed price per share was inadequate but resolved to pursue further negotiations with Sponsor A to see if Sponsor A would improve its price per share. Over the course of the following few weeks through early July, Sponsor A conducted additional diligence on the Company and representatives of Truist Securities, at the request of the Board, continued negotiations on behalf of the Company with Sponsor A. On July 7, 2020, the Board was informed that Sponsor A was willing to increase its offered price per share to $5.50 per share and determined that while such offer was still inadequate, it would continue discussions with Sponsor A.

During the week of July 6, 2020, another party, Strategic A, expressed interest in a potential transaction with the Company and executed a non-disclosure agreement with the Company on July 10, 2020 and began to conduct preliminary due diligence.

During the week of July 13, 2020, Strategic A indicated that it was no longer interested in pursuing a transaction. Separately, on or about July 17, 2020, Sponsor A indicated that it was assuming a risk-averse posture to any new transactions due to the ongoing COVID-19 pandemic and was therefore pausing discussions with the Company.

Throughout the early months of the pandemic, the Company demonstrated strong and consistent financial performance, reported strong results for the first quarter and management anticipated strong results for the second quarter. In mid-July, given this strong performance and improving M&A markets, the Transaction Committee determined to pursue a broader process through the distribution of an anonymous teaser and, to interested parties that were willing to execute a non-disclosure agreement, the CIM. In the latter weeks of July, the PRGX management team with the assistance of Truist Securities worked to refine the teaser and CIM and to prepare the list of potential parties to contact.

 

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On July 30, 2020, at the request of the Board, Truist Securities began distributing the anonymous teaser and form of non-disclosure agreement. Over the course of the next two weeks, Truist Securities, at the Board’s direction and on the Company’s behalf, contacted a total of 134 potential buyers, consisting of 15 potential strategic buyers and 119 potential financial sponsors. 49 buyers declined to execute the non-disclosure agreement. Many of these buyers cited a lack of strategic fit or concerns related to a transaction with a public company and the complexities associated with such a transaction. Upon receipt of an executed non-disclosure agreement from each of the remaining parties, Truist Securities delivered a CIM to the interested party and granted access to the online data room. Overall, Truist Securities delivered a CIM to 85 interested parties, including three potential strategic buyers and 82 financial sponsors. Over the next several weeks, representatives of the Company continued to populate the data room with additional financial and other information regarding the Company. During this same time period, representatives of Troutman began to prepare a form of bid merger agreement.

On or about August 18, 2020, Truist Securities, at the request of the Board, delivered a formal process letter to interested parties requesting initial indications of interest to be received by September 2, 2020. On or before September 4, 2020, the Company received indications of interest from 11 parties including Ardian, all financial sponsors. The preliminary indications of interest received by the Company presented valuations for the Company in different manners, some of which were based upon enterprise value of the Company and some of which were presented on a per share price basis. Truist Securities reviewed and analyzed the indications of interest and, using the same assumptions and methodologies across all indications of interest, translated the preliminary proposals to an estimated per share price offered by each financial sponsor, which preliminarily ranged from approximately $6.00 to $9.00 per share. From August 18, 2020 to September 4, 2020, the closing price of PRGX common stock on Nasdaq ranged from $5.11 to $5.68.

During the weeks of September 14 and September 21, 2020, 10 of the 11 parties submitting indications of interest attended virtual meetings with representatives of the Company’s executive management team.

On September 22, 2020, the Board met and discussed the indications of interest and next steps. Representatives of Truist Securities and Troutman attended the meeting. Representatives of Truist Securities reviewed the indications of interest and provided background on the financial sponsors that had submitted indications of interest and attended virtual management meetings. Representatives of Truist Securities and Troutman answered questions regarding next steps and the anticipated timeline. Later that day, at the request of the Board, Truist Securities distributed another process letter to the remaining interested parties requesting refreshed indications of interest to be submitted by October 5, 2020.

On or before October 6, 2020, the Company received refreshed indications of interest from five parties, including Ardian. Truist Securities, applying the same methodologies and assumptions to these five refreshed indications of interest, translated the five refreshed proposals to an estimated per share price ranging from approximately $5.30 to $9.00 per share. The remaining parties did not submit refreshed indications of interest for reasons including a lack of strategic fit, competing priorities for other opportunities and considerations regarding whether their bids remained competitive in the process. From September 22, 2020 to October 6, 2020, the closing price of PRGX common stock on Nasdaq ranged from $4.75 to $5.00.

On October 7, 2020, Truist Securities, at the Board’s direction, distributed the form of merger agreement to the remaining interested parties.

During the week of October 12, 2020, three of the remaining parties held in person meetings with members of the Company’s executive management team, which enabled them to determine whether to submit a final proposal and to refine further the amounts of their proposals. Sponsor B met with the management team in Atlanta on October 13, 2020. Sponsor C met with the management team outside of Washington, DC on October 15, 2020. Representatives of Ardian met with representatives of the PRGX management team outside of Washington, DC on October 14 and 15, 2020.

On October 15, 2020, Truist Securities, at the request of the Board, distributed another process letter requesting final indications of interest by October 23, 2020, along with a mark-up of the proposed merger agreement.

On or before October 24, 2020, the Company received final indications of interest from Sponsor B and Ardian, as well as a mark-up of the proposed form of merger agreement from each. From October 15, 2020 to October 24, 2020, the closing price of PRGX common stock on Nasdaq ranged from $4.73 to $5.25. The indication of interest from Sponsor B proposed a purchase price of $7.00 per fully diluted share. During discussions between Truist Securities and Sponsor B regarding Sponsor B’s final indication of interest, Sponsor B indicated that it might be able to increase its price slightly above $7.00 per share, but it was apparent that Sponsor B’s price would not be comparable to the price offered by Ardian in its final indication of interest.

The indication of interest from Ardian, informed by the management meetings, further due diligence conducted during October 2020 and the available levels of debt financing, proposed an enterprise value of $215 million on a debt-free and cash-free basis, after giving effect to the Company’s transaction expenses, which Truist Securities roughly estimated would translate into a price per share

 

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of approximately $8.00 per share. This represented a 72.2% premium over the closing price of PRGX common stock on Nasdaq on October 23, 2020. Ardian did not provide an estimated price per share in its indication of interest because Ardian lacked information on the Company’s transaction expenses, debt-like items and similar adjustments. Ardian also proposed (i) a buyer termination fee (payable in the event the buyer is unable to obtain financing) of 6% of the Company’s equity value, (ii) a Company termination fee (payable upon a change of recommendation or acceptance of a superior proposal) to be further discussed upon a better understanding of the Company’s marketing process, (iii) an expense reimbursement of buyer’s expenses under certain circumstances (including failure to obtain shareholder approval), and (iv) a limited guarantee from Ardian of certain obligations under the merger agreement and a cap on Ardian’s liability. Ardian also included a note in its markup of the merger agreement that Ardian intended to obtain a representation and warranty insurance policy and therefore was going to require a more comprehensive set of representations and warranties in the merger agreement.

On October 26, 2020, the members of the Transaction Committee met telephonically with representatives of Truist Securities and Troutman to discuss and compare the financial aspects of the proposals contained in the final indications of interest as well as various legal issues identified in the markups of the merger agreement.

On October 28, 2020, the Board held a telephonic meeting to discuss the final indications of interest. Representatives of Truist Securities and Troutman attended the meeting. Representatives of Truist Securities compared the financial aspects of the proposals while the representatives from Troutman explained the major differences in the markups of the merger agreements. Following discussion, the Board concluded that Ardian’s proposal was superior to Sponsor B’s proposal and while the Board was not prepared to make any final determinations regarding valuation of a transaction, the Board recommended that the Company move forward in pursuing negotiations with Ardian and authorized Mr. Owens to negotiate the terms of an exclusivity arrangement with Ardian.

On October 30, 2020, the Company entered into an exclusivity letter with Ardian granting exclusivity to Ardian through November 20, 2020 subject to a 10-day automatic extension if at that time Ardian confirmed in writing the enterprise value of the Company from its proposal on October 23, 2020 and its intention to continue to negotiate in good faith with the Company. On November 3, 2020, the Company executed an amendment to the exclusivity letter, dated November 2, 2020, to extend the initial expiration date of the exclusivity period to November 25, subject to the same 10-day extension on the conditions outline above.

On November 3, 2020, Sheppard Mullin Richter & Hampton LLP (“Sheppard Mullin”), counsel for Ardian, delivered a revised draft of the merger agreement.

During the weeks of November 2 through December 3, 2020, representatives of Sheppard Mullin conducted legal due diligence through the review of documents in the online data room and multiple diligence interview calls with various members of the Company’s management team.

On November 13, 2020, Troutman delivered a revised draft of the merger agreement to Sheppard Mullin which proposed a Company termination fee of 2.5% of the Company’s equity value payable upon a termination following a change of recommendation or acceptance of a superior proposal, an 8% reverse termination fee and no expense reimbursement for the buyer.

On November 25, 2020, Ardian delivered a letter to the Company confirming its original enterprise valuation, which resulted in an extension of the exclusivity period to December 5, 2020.

On November 27, 2020, the parties executed an amendment to the exclusivity letter extending the exclusivity period to December 14, 2020.

On December 4, 2020, Sheppard Mullin delivered a revised draft of the merger agreement to Troutman. The revised draft of the merger agreement proposed a Company termination fee of 5% of the Company’s equity value and a reverse termination fee of 6% of the Company’s equity value.

On December 10, 2020, Troutman delivered a revised draft of the merger agreement to Sheppard Mullin. The revised draft of the merger agreement proposed a Company termination fee of 4% of the Company’s equity value and a reverse termination fee of 7% of the Company’s equity value.

Leading up to the week of December 14, the parties engaged in extensive discussions and negotiations regarding the price per share, which discussions and negotiations included the amounts of adjustments to enterprise value for the cash-free and debt-free assumptions and other proposed adjustments, including estimated Company transaction expenses, restricted cash in foreign jurisdictions, an immaterial accounting reclassification, various tax liabilities and other debt-like items. On December 14, 2020, the Board met and received an update on the latest negotiations in the transaction. Representatives of Truist Securities and Troutman attended the meeting. Representatives from Truist Securities provided an update on the price per share negotiations indicating that

 

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Ardian’s position on adjustments to enterprise value for the cash-free and debt-free assumptions roughly translated to a price per share of $7.85. This price per share did not reflect Ardian’s position on certain other proposed adjustments including with respect to an immaterial accounting reclassification, various tax liabilities and the Company’s restricted cash position in foreign jurisdictions. Also on December 14, 2020, the parties executed an amendment to the exclusivity letter extending the exclusivity period to December 17, 2020.

Negotiations on the price per share continued through December 16, 2020. Ardian argued that the purchase price per share should be reduced by a further $0.27 per share to $7.58 per share to reflect certain items Ardian discovered in due diligence including the immaterial accounting reclassification, various tax liabilities and restricted cash in foreign jurisdictions. Ardian indicated that it would however agree to a higher proposed purchase price of $7.71 per share in exchange for the following: (i) a Company termination fee of 5% of the Company’s equity value, (ii) a reverse termination fee of 6% of the Company’s equity value, (iii) a reduced Company termination fee payable in the event of a failed shareholder vote and (iv) a more restrictive package of interim operating covenants designed to preserve the Company’s cash position through closing.

On December 16, 2020, the Transaction Committee met and received an update on the purchase price negotiations, at which meeting Truist Securities advised the Transaction Committee of Ardian’s proposed purchase price of $7.71 per share, subject to agreement on the additional terms described above.

On December 17, 2020, the parties executed an amendment to the exclusivity letter extending the exclusivity period to December 22, 2020.

On December 18, 2020, the Board met and received an update on the latest negotiations in the transaction. Representatives of Truist Securities and Troutman attended the meeting. Representatives from Truist Securities provided an update on the pricing negotiations resulting in a proposed purchase price of $7.71 per share. At this meeting, representatives of Truist Securities reviewed with the Board preliminary financial analyses with respect to the Company and this updated price per share. Representatives of Troutman also provided an update on the outstanding legal issues in the merger agreement. During this meeting, the Board discussed the recent increase in the Company’s stock price, as well as the limited trading volume and volatility of the Company’s common stock, the costs and burdens of operating as a public company, and the ability to lock in shareholder value through the proposed transaction with Ardian. The Board determined to move forward with the transaction with Ardian.

On December 19, 2020, the parties participated in an all hands call with representatives of PRGX, Ardian, Troutman, Sheppard Mullin and Truist Securities to discuss open issues in the merger agreement, primarily related to representations and warranties and interim operating covenants.

On December 20, 2020, Sheppard Mullin delivered a revised draft of the merger agreement to Troutman incorporating changes discussed on the all hands call the previous day. Sheppard Mullin delivered additional comments to the merger agreement on December 21, 2020.

Early on the morning of December 22, 2020, Troutman delivered a revised draft of the merger agreement, primarily addressing changes to the representations and warranties and interim operating covenants.

On December 22, 2020, the Board met to approve the merger agreement and the transactions contemplated by the merger agreement. At this meeting, representatives of Truist Securities, at the request of the Board, reviewed its financial analysis with respect to the Company and the proposed Merger and rendered its oral opinion to the Board as to, as of December 22, 2020, the fairness, from a financial point of view, to the holders of Company common stock (other than Excluded Holders) of the Merger Consideration to be received by such holders in the Merger pursuant to the Merger Agreement, and such oral opinion was subsequently confirmed in writing. Truist Securities explained to the Board that, for purposes of its opinion, it did not rely upon a comparison of certain financial data for the Company with financial and stock market data for selected companies with publicly traded equity securities or on a comparison of the financial terms of the Merger with the publicly available financial terms of other transactions because Truist Securities did not identify (i) companies with publicly traded equity securities that Truist Securities, in its professional judgment, deemed sufficiently similar to the Company for such purposes or (ii) sufficient publicly available information with respect to transactions involving target companies that Truist Securities, in its professional judgment, deemed sufficiently similar to the Company for such purposes. All of the Company’s directors present at the meeting voted to approve the transaction. In addition, prior to the meeting, one Company director that was unable to attend the meeting due to an unavoidable scheduling conflict, contacted a representative of Troutman to express the director’s support for the transaction. Accordingly, the Company’s directors were unanimously in favor of the transaction. Each member of the Board and each of the Company’s executive officers executed a voting and support agreement pursuant to which they individually agreed to vote their shares in favor of the transaction.

 

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On December 24, 2020, Ardian received financing commitment letters from its lenders and delivered an equity commitment letter committing to funding for the merger consideration as well as the other expenses associated with the transaction.

On the morning of December 24, 2020, the parties executed the merger agreement and publicly announced the transaction.

Recommendation of Our Board of Directors; Reasons for the Transactions

On December 22, 2020, our Board held a specially called meeting to approve the Merger Agreement and the transactions contemplated by the Merger Agreement. All of the Company’s directors present at the meeting, which directors were sufficient to constitute a quorum for the transaction of business, (i) determined that the Merger Agreement, Support Agreements and the Transactions, including the Merger, were advisable to, fair to, and in the best interest of, PRGX and its shareholders, (ii) approved the execution, delivery and performance by PRGX of the Merger Agreement and the consummation of the Transactions, including the Merger, and (iii) resolved to recommend that our shareholders approve the adoption of the Merger Agreement and the Merger. In addition, prior to the special meeting, one Company director that was unable to attend the meeting, contacted a representative of Troutman to express the director’s support for the Merger. Accordingly, the Company’s directors were unanimously in favor of the Merger.

In evaluating the Merger Agreement and the Transactions, our Board consulted with our senior management regarding the business and financial condition of PRGX, trends in our industry, future prospects and the terms and conditions of the Transactions. In addition, our Board consulted with our outside legal advisor, Troutman, regarding the proposed terms and conditions of the Transactions and the obligations of the members of the Board in their consideration of the Transactions, and our financial advisor, Truist Securities, regarding the fairness, from a financial point of view, of the consideration to be paid to the holders of shares of Company common stock in the proposed Transactions. In the course of reaching its determination to approve the Merger Agreement and the Transactions and to recommend that our shareholders adopt the Merger Agreement and approve the Merger, our Board carefully considered numerous factors, including the following factors (which are not listed in any relative order of importance):

 

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Cash Merger Consideration. The Board considered that the form of consideration to be paid to shareholders of the Company in the Merger will be all cash and considered the certainty of value and liquidity of such cash consideration, including that all-cash consideration would avoid long-term business risk.

Merger Consideration. The Board considered the:

 

   

historical market prices, volatility and trading information with respect to the shares of the Company’s common stock; and

 

   

fact that the Merger Consideration represents a premium of approximately 32.7% to the volume-weighted average price for the 90 trading days preceding the public announcement of the transaction with Ardian.

Standalone Business Prospects of the Company. The Board believed that the Merger Consideration was more favorable to the Company shareholders than the likely value that would result from remaining an independent public company. This belief was based on, among other things, the Board’s assessment of:

 

   

the Company’s business, operations and management and its historical, current and projected financial performance, results of operations and financial condition; .

 

   

management’s business plan for the Company, taking into account the potential benefits and risks associated with pursuing such business plan;

 

   

the uncertainty of attaining management’s internal financial projections, including those set forth in the section of this proxy statement captioned “Certain Unaudited Prospective Financial Information”;

 

   

the potential impact of industry and macroeconomic factors on the Company’s future prospects and ability to achieve its performance goals;

 

   

the challenges and risks that the Company has faced, and would likely continue to face, if we remained an independent company, including the impact of the COVID-19 pandemic on the Company or its clients, the Company’s ability to develop material sources of new revenue in addition to revenue from its core recovery audit services, changes in the market for the Company’s services, the Company’s ability to retain and attract qualified personnel, the Company’s ability to execute on its profitability improvement efforts, the Company’s ability to integrate recent and future acquisitions, uncertainty in the credit markets, the Company’s ability to maintain compliance with its financial covenants, client bankruptcies, loss of major clients, and other risks generally applicable to the Company’s business;

 

   

certainty of value and liquidity to Company shareholders of the cash Merger Consideration, including eliminating the effect of long-term business and execution risk, relative to the uncertainty that the Company’s stock price would trade at or above the Merger Consideration for any extended period in the foreseeable future based on a consideration of all of the factors above;

 

   

the limited trading volume of our common stock in the market;

 

   

the volatility in trading price of our common stock, which has at times been uncorrelated with our financial performance;

 

   

the difficulty that financial markets have in valuing the Company’s business on a consistent basis given the contingent nature of much of the Company’s revenue;

 

   

the tendency of public markets to favor short-term results, making longer term investing and planning more difficult to harmonize with preservation of shareholder value;

 

   

the additional costs and burdens involved with being a public company, which costs disproportionately affect profitability of the Company given its size;

 

   

the Company’s requirement to report publicly detailed quarterly and annually financial and business information, which tends to give a competitive advantage to the Company’s competitors, none of whom are required to report publicly at the same level of detail for the Company’s primary offerings; and

 

   

the view of the Board that the Company has benefitted from the favorable domestic and international economic conditions that have prevailed in the years since the last major economic downturn, and if the Company were to remain an independent, publicly traded company, the value of its common shares would be susceptible to future adverse financial market conditions.

 

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Strategic Alternatives. The Board considered that, prior to the execution of the Merger Agreement, it had actively sought proposals from other parties it believed were potentially interested in a transaction involving the Company (as more fully described above under the heading “The Merger—Background of the Merger”), including that:

 

   

82 financial sponsors, including Parent, and three strategic companies were contacted or came forth during the process in an effort to obtain the best price reasonably available to the Company shareholders; and

 

   

of the parties contacted, only one party other than Parent submitted a final indication of interest to the Company.

Negotiation Process. The Board considered the fact that the terms of the Merger Agreement were the result of arm’s-length negotiations conducted by the Company, with the knowledge and at the direction of the Board, and with the assistance of financial and legal advisors, as more fully described above under the heading “The Merger—Background of the Merger”), including that the Board believed that the Merger Consideration to be paid by Parent is the highest price per share that Parent was willing to pay and that the terms and conditions of the Merger Agreement were, in the view of the Board, the most favorable to the Company and the Company’s shareholders to which Parent was willing to agree.

Financing. The Board considered that Parent obtained a debt financing commitment letter and an equity financing commitment letter for the transaction.

Valuation Analysis. The valuation analyses regarding the Company prepared by Truist Securities and reviewed and discussed with the Board, including the analyses summarized in the section entitled “—Opinion of the Company’s Financial Advisor” beginning on page 38.

Financial Advisor Opinion. The Board considered the financial analyses reviewed and discussed with the Board by representatives of Truist Securities as well as the oral opinion of Truist Securities rendered to the Board on December 22, 2020 (which was subsequently confirmed in writing by delivery of Truist Securities’ written opinion dated the same date) as to, as of December 22, 2020, the fairness, from a financial point of view, to the holders of Company common stock (other than the Excluded Holders) of the Merger Consideration to be received by such holders in the Merger pursuant to the Merger Agreement.

Terms of the Merger Agreement. The Board considered the terms of the Merger Agreement, as more fully described in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement,” including the:

 

   

fact that Parent would be required to pay the Company a termination fee of $11,730,000 if the Company terminates the Merger Agreement under certain circumstances;

 

   

Company’s right to specific performance to prevent breaches of the Merger Agreement;

 

   

Company’s right to specific performance to cause the Equity Financing contemplated by the Equity Commitment Letter to be funded, subject to certain conditions;

 

   

right of the Board, subject to certain conditions, to respond to an unsolicited Acquisition Proposal that the Board determines in good faith (after consultation with its financial advisor and outside legal counsel) either constitutes a Superior Proposal or is reasonably likely to lead to a Superior Proposal;

 

   

right of the Board to change its recommendation in response to a Superior Proposal or an Intervening Event (as each such term is defined in the section entitled “Proposal 1: Adoption of the Merger Agreement—The Board’s Recommendation; Company Board Recommendation Change; Entry into Alternative Acquisition Agreement”) if the Board determines in good faith (after consultation with its financial advisor and outside legal counsel) that the failure to do so would be reasonably expected to cause the Board to violate its fiduciary duties under applicable law, subject to certain conditions;

 

   

right of the Board to terminate the Merger Agreement in order to enter into an alternative acquisition agreement that the Board determines in good faith, after consultation with its outside financial advisors and outside legal counsel, to constitute a Superior Proposal, subject to certain conditions, provided that the Company concurrently pays a $9,775,000 termination fee to Parent under circumstances as described in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Termination Fee;”

 

   

fact that the Board believed that the termination fee of $5,375,000 or $9,775,000, as applicable, is reasonable in light of, among other things, the benefits of the Merger to our shareholders, the costs incurred by Parent in connection with the Merger and the likelihood that a fee of such size would not be preclusive or unreasonably restrictive of other offers; and

 

   

fact that the Merger is not conditioned on Parent obtaining any outside financing.

 

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Support Agreements. The Board considered the terms of the Support Agreements, which will terminate upon certain circumstances, including the earliest to occur of (i) the Effective Time, (ii) the valid termination of the Merger Agreement, and (iii) the effective date of a written agreement duly executed and delivered by each of the parties to the Support Agreements terminating such agreement.

Dissenters’ Rights. The Board considered the fact that Company’s shareholders that do not vote to approve the Merger Agreement and that comply with the requirements of the GBCC will have the right to dissent from the Merger and to demand appraisal of the “fair value” of their shares of Company common stock under the GBCC, as more fully described in the section of this proxy statement captioned “Dissenters’ Rights.”

Termination Date. The Board considered its view that the Termination Date (as defined in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Termination of the Merger Agreement”) on which Parent or the Company, subject to certain exceptions, can terminate the Merger Agreement allows for sufficient time to consummate the Merger.

Other Risks, Restrictions and Uncertainties. In the course of its deliberations, the Board also considered various risks, restrictions and uncertainties related to entering into the Merger Agreement and consummating the Merger, including:

 

   

Risk of Non-Consummation. The Board considered the possibility that the Merger might not be consummated and that (i) the price of the Company’s common stock would likely decrease because the current market price may reflect a market assumption that the Merger will be consummated, (ii) the Company, in certain circumstances, may be required to pay Parent a termination fee of $5,375,000 or $9,775,000, (iii) the Company may experience difficulties in obtaining financing from changed perceptions regarding the Company’s competitive position, management, liquidity or other aspects of its business, (iv) the Company may be unable to find a partner willing to engage in a transaction on terms as favorable as those set forth in the Company’s agreements with Parent and Merger Sub, (v) Company shareholders would not realize the anticipated benefits of the Merger, (vi) the Company’s business, operations and financial results could suffer in the event that the Merger is not consummated and (vii) the announcement of the Merger Agreement and pendency of the Merger, or the failure to complete the Merger, may cause substantial harm to the Company’s relationships with its employees (including making it more difficult to attract and retain key personnel), vendors and customers.

 

   

Transaction Costs. The Board considered the fact that the Company has incurred, and will continue to incur, significant transaction costs and expenses in connection with the Merger, regardless of whether consummated and, if the Merger is not consummated, the Company may be required to pay its own expenses associated with the Merger Agreement and the Merger and the fact that the Company’s directors, senior management and other employees will have expended extensive time and effort and will have experienced significant distractions from their work prior to the execution of the Merger Agreement and during the pendency of the Merger.

 

   

Future Growth. The Board considered the fact that, subsequent to the completion of the Merger, the Company would no longer exist as an independent public company and that Company shareholders will have no ongoing equity interest in the Surviving Corporation, meaning that the Company shareholders will cease to participate in any future earnings or growth or to benefit from any potential future appreciation in value of the Company.

 

   

Non-Solicitation. The Board considered the fact that, under the terms of the Merger Agreement, the Company is unable to solicit other Acquisition Proposals.

 

   

Match Right. The Board considered the fact that the right afforded to Parent under the Merger Agreement to match Acquisition Proposals from third parties may discourage other parties that might otherwise have an interest in acquiring the Company.

 

   

Business Restrictions. The Board considered the restrictions on the conduct of the Company’s business prior to the consummation of the Merger, including the requirement that the Company conduct its business in the ordinary course, subject to specific limitations and exceptions, which may delay or prevent the Company from undertaking business opportunities that may arise before the completion of the Merger and that, absent the Merger Agreement, the Company might have pursued.

 

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Tax Consequences. The Board considered the fact that as an all-cash transaction the Merger generally would be taxable to Company shareholders that were U.S. Holders for U.S. federal income tax purposes, although the Board believed that this was mitigated by the fact that the entire consideration payable in the Merger would be cash, providing a cash amount for the payment of any taxes due.

 

   

Regulatory Approval and Risk of Pending Actions. The Board considered the fact that the completion of the Merger would require regulatory clearances and approvals and the satisfaction of certain other closing conditions, including that no Company Material Adverse Effect (as defined in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Representations and Warranties”) has occurred and that there is no Legal Restraint (as defined in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Termination of the Merger Agreement”) preventing the consummation of the Merger.

 

   

Litigation Risk. The Board considered the risk of litigation in connection with the Merger, and the fact that litigation in connection with transactions such as the Merger is common and potentially costly and distracting to the Company’s directors, management and employees.

 

   

Financing Failure. The Board considered the risk that, while the Merger Agreement is not subject to any financing condition, if Parent fails to obtain sufficient financing, the Merger is unlikely to be consummated.

 

   

Conflicts of Interest. The Board considered that our executive officers and members of our Board may be deemed to have interests in the execution and delivery of the Merger Agreement and all of the transactions contemplated thereby, including the Merger, that may be different from or in addition to those of our shareholders, generally.

 

   

Requisite Shareholder Approval. The Board considered the fact that the Merger is subject to the adoption of the Merger Agreement by the affirmative vote of the holders of at least a majority of the outstanding shares of the Company’s common stock.

Our Board concluded that the risks, uncertainties, restrictions and potentially negative factors associated with the Merger were outweighed by the potential benefits of the Merger.

The foregoing discussion of the reasons of our Board for its recommendation to adopt the Merger Agreement is not meant to be exhaustive but addresses the material information and factors considered by our Board in consideration of its recommendation. In view of the wide variety of factors considered by our Board in connection with the evaluation of the Merger and the complexity of these matters, our Board did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determination and recommendation. Rather, the directors made their determinations and recommendations based on the totality of the information presented to them, and the judgments of individual members of our Board may have been influenced to a greater or lesser degree by different factors.

Certain Unaudited Prospective Financial Information

While the Company has from time to time has provided limited financial guidance to investors, the Company has not, as a matter of course, otherwise publicly disclosed internal projections as to future performance, earnings or other results due to, among other reasons, the unpredictability of the underlying assumptions and estimates. However, in connection with the Merger, the Company’s management prepared certain non-public financial projections as to the potential future performance of the Company for the years 2020 through 2024, which were provided to the Board in connection with their evaluation of the Merger and to Truist Securities, which was authorized and directed to use and rely upon such financial projections for purposes of its financial analyses, including Truist Securities’ financial analyses described in the section of this proxy statement captioned “—Opinion of the Company’s Financial Advisor” (the “Management Projections”). The Management Projections were also provided to Parent for its use in connection with its evaluation of the Merger. For more information, see the section of this proxy statement captioned “—Background of the Merger.”

 

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The below summary of the Management Projections is included for the purpose of providing shareholders access to certain non-public information that was furnished to the Board, Truist Securities and Parent in connection with the process resulting in the Merger Agreement, and such information may not be appropriate for other purposes, and is not included to influence the voting decision of any shareholder or whether any shareholder should seek dissenters’ rights with respect to shares of common stock of the Company. The inclusion of the Management Projections should not be regarded as an indication that the Company or anyone who received the Management Projections then considered, or now considers, them a reliable prediction of future events, and the Management Projections should not be relied upon as such.

The Management Projections were not prepared with a view toward public disclosure or with a view toward complying with the published guidelines of the SEC regarding projections or accounting principles generally accepted in the United States (“GAAP”), or the guidelines established by the American Institute of Certified Public Accountants with respect to prospective financial information. Neither the Company’s independent auditor nor any other independent accountant has compiled, examined, or performed any procedures with respect to the Management Projections, nor have they expressed any opinion or any other form of assurance on such information or its achievability. The Management Projections contain projections of EBITDA and adjusted EBITDA, each of which are non-GAAP financial measures within the meaning of the applicable rules and regulations of the SEC, which are financial performance measures that are not calculated in accordance with GAAP. EBITDA refers to earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA refers to EBITDA as further adjusted to remove the effect of impairment charges, foreign currency transaction (gains) losses on short-term intercompany balances, acquisition-related adjustment income, transformation, severance and other expenses, investigation and settlement of employment matter, other loss (income) and stock-based compensation. These non-GAAP financial measures should not be viewed as a substitute for GAAP financial measures, and may be different from non-GAAP financial measures used by other companies. Accordingly, these non-GAAP financial measures should be considered together with, and not as an alternative to, financial measures prepared in accordance with GAAP.

Although the Management Projections are presented with numerical specificity, they reflect numerous estimates and assumptions made by the Company’s management with respect to industry performance, general business, economic, regulatory, market and financial conditions and other future events, as well as matters specific to the Company’s business, all of which are difficult or impossible to predict accurately and many of which are beyond the Company’s control. The Management Projections reflect subjective judgment in many respects and thus are susceptible to multiple interpretations and periodic revisions based on actual experience and business developments. As such, the Management Projections constitute forward-looking information and are subject to many risks and uncertainties that could cause actual results to differ materially from the results forecasted in the Management Projections. See “Cautionary Statement Regarding Forward-Looking Information.” There can be no assurance that the Management Projections will be realized or that actual results will not be significantly higher or lower than forecast. The Management Projections cover several years and such information by its nature becomes less reliable with each successive year.

The Management Projections were developed by the Company’s management without giving effect to the Merger or the other transactions contemplated by the Merger Agreement or any changes to the Company’s operations or strategy that may be implemented after the consummation of the Merger, including any costs incurred in connection with the Merger or costs related to other transactions contemplated by the Merger Agreement. Further, the Management Projections do not take into account the effect of any possible failure of the Merger to occur. In addition, the Management Projections will be affected by the Company’s ability to achieve strategic goals, objectives and targets over the applicable periods. The Management Projections reflect assumptions as to certain business decisions that are subject to change. The Management Projections cannot, therefore, be considered a guarantee of future operating results, and this information should not be relied on as such.

In addition, the Management Projections have not been updated or revised to reflect information, circumstances, events or results after the date they were prepared. Except as required by applicable securities laws, the Company does not intend to update or otherwise revise the Management Projections or the specific portions presented to reflect circumstances existing after the date when made or to reflect the occurrence of future events, even in the event that any or all of the underlying assumptions are shown to be in error.

 

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The inclusion of the Management Projections herein should not be deemed an admission or representation by the Company that the Company views such Management Projections as material information, particularly in light of the inherent risks and uncertainties associated with such long-range forecasts. No representation is made by the Company or any other person regarding the Management Projections or the Company’s ultimate performance compared to such information. In light of the foregoing factors, and the uncertainties inherent in the Management Projections, shareholders are cautioned not to place undue, if any, reliance on the Management Projections. The Management Projections should be evaluated, if at all, in conjunction with the historical consolidated financial statements and other information contained in the Company public filings with the SEC.

 

Financial Summary

                              
     Projected  

($ in MM)

   2020E     2021E     2022E     2023E     2024E  

Total Revenue

   $ 163.5     $ 169.0     $ 179.5     $ 191.6     $ 204.9  

% Growth

     (3.7 %)      3.4     6.2     6.7     6.9

Cost of Revenue

   $ 87.2     $ 88.7     $ 93.3     $ 97.3     $ 102.3  

Gross Profit

   $ 76.3     $ 80.3     $ 86.2     $ 94.3     $ 102.6  

% Growth

     13.6     5.3     7.3     9.4     8.9

Margin %

     46.7     47.5     48.0     49.2     50.1

Operating Expense

   $ 54.3     $ 47.1     $ 49.3     $ 50.8     $ 52.5  

% of Revenue

     33.2 %      27.9 %      27.4 %      26.5 %      25.6 % 

Depreciation & Amortization

   $ 12.7     $ 12.3     $ 10.6     $ 9.0     $ 8.2  

EBITDA

   $ 22.0     $ 33.2     $ 36.9     $ 43.4     $ 50.1  

% Growth

     nm       51.2     11.1     17.6     15.5

Margin %

     13.4     19.7     20.6     22.7     24.5

Adj. EBITDA

   $ 31.6     $ 33.2     $ 36.9     $ 43.4     $ 50.1  

% Growth

     43.2     5.1     11.1     17.6     15.5

Margin %

     19.3     19.7     20.6     22.7     24.5

Capital Expenditures

   $ 10.0     $ 10.4     $ 7.6     $ 6.5     $ 6.5  

Adj. EBITDA – CapEx

   $ 21.6     $ 22.9     $ 29.3     $ 36.9     $ 43.6  

% Growth

     206.4     5.9     28.2     26.0     18.0

Margin %

     13.2     13.5     16.3     19.3     21.3

Increase/(Decrease) in Net Working Capital

   ($ 0.9   $ 0.8     $ 1.6     $ 1.8     $ 2.0  

Unlevered Free Cash Flow(1)

     —       $ 15.3     $ 19.3     $ 24.1     $ 28.2  

Notes:

 

(1)

Reflects calculations by Truist Securities based on the Management Projections prepared and provided by and discussion with, PRGX management and which were approved for Truist Securities’ use by PRGX. Unlevered free cash flows are calculated as earnings before interest and taxes, less taxes, plus depreciation and amortization, less capital expenditures and less the amount of any increase or plus the amount of any decrease in net working capital.

Opinion of the Company’s Financial Advisor

On December 22, 2020, Truist Securities rendered its oral opinion to the Board (which was subsequently confirmed in writing by delivery of Truist Securities’ written opinion dated December 22, 2020) as to, as of December 22, 2020, the fairness, from a financial point of view, to the holders of Company Common Stock (other than the Excluded Holders) of the Merger Consideration to be received by such holders in the Merger pursuant to the Merger Agreement.

 

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Truist Securities’ opinion was directed to the Board (in its capacity as such) and only addressed the fairness, from a financial point of view, to the holders of Company common stock (other than the Excluded Holders) of the Merger Consideration to be received by such holders in the Merger pursuant to the Merger Agreement and did not address any other terms, conditions, aspects or implications of the Merger. The summary of Truist Securities’ opinion in this proxy statement is qualified in its entirety by reference to the full text of its written opinion, which is included as Annex B to this proxy statement and sets forth the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Truist Securities in preparing its opinion. However, neither Truist Securities’ written opinion nor the summary of its opinion and the related analyses set forth in this proxy statement is intended to be, and they do not constitute, advice or a recommendation as to, or otherwise address, how the Board or any security holder of the Company should act or vote with respect to any matter relating to the Merger or otherwise.

In connection with its opinion, Truist Securities conducted such reviews, analyses and inquiries as it deemed necessary and appropriate under the circumstances. In arriving at its opinion, Truist Securities reviewed:

 

   

a draft, dated December 22, 2020, of the Merger Agreement;

 

   

certain publicly available business and financial information relating to the Company;

 

   

certain other information relating to the historical, current and future business, financial condition, results of operations and prospects of the Company made available to Truist Securities by the Company, including the Management Projections; and

 

   

the current and historical market prices and trading volume for certain of the Company’s publicly traded securities.

Truist Securities also had discussions with certain members of the management of the Company and with certain of the Company’s representatives and advisors regarding the business, financial condition, results of operations, and prospects of the Company and the Merger and undertook such other studies, analyses and investigations as Truist Securities deemed appropriate, including considering the results of its efforts on behalf of the Company to solicit, at the direction of the Company, indications of interest from third parties with respect to a possible acquisition of all or a portion of the Company.

Truist Securities noted that, for purposes of its opinion, it did not rely upon a comparison of certain financial data for the Company with financial and stock market data for selected companies with publicly traded equity securities or on a comparison of the financial terms of the Merger with the publicly available financial terms of other transactions, because Truist Securities did not identify (i) companies with publicly traded equity securities that Truist Securities, in its professional judgment, deemed sufficiently similar to the Company for such purposes or (ii) sufficient publicly available information with respect to transactions involving target companies that Truist Securities, in its professional judgment, deemed sufficiently similar to the Company for such purposes.

Truist Securities relied upon and assumed, without independent verification, the accuracy and completeness of all data, material and other information furnished, or otherwise made available, to it, discussed with or reviewed by it, or publicly available, and did not assume any responsibility with respect to such data, material and other information. Truist Securities’ role in reviewing such data, material and other information was limited solely to performing such review as Truist Securities deemed necessary and appropriate to support its opinion, and such review was not conducted on behalf of the Board or any other person.

Management of the Company advised Truist Securities, and Truist Securities assumed, that the Management Projections were reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of such management as to the future financial results and condition of the Company, including, without limitation, the direct and indirect potential business, financial, economic and market implications of the COVID-19 pandemic and related illnesses, and provided a reasonable basis on which to evaluate the Company. Truist Securities expressed no view or opinion with respect to the Management Projections or the assumptions on which they were based. Truist Securities further relied

 

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upon and assumed, without independent verification, that there had been no change in the business, assets, liabilities, financial condition, results of operations, cash flows or prospects of the Company since the dates of the information, financial or otherwise, provided to Truist Securities except for such changes as would not be material to its analyses or opinion and that there was no information or any facts that would make any of the information discussed with or reviewed by Truist Securities incomplete or misleading.

Truist Securities also relied upon and assumed without independent verification that (i) the representations and warranties of all parties to the Merger Agreement and all of the documents and agreements referred to therein were true and correct; (ii) each party to the Merger Agreement and all of the documents and agreements referred to therein would fully and timely perform all of the covenants and agreements required to be performed by such party under the Merger Agreement and such other documents and agreements, as applicable; (iii) all conditions to the consummation of the Merger would be satisfied without waiver thereof; (iv) the Merger would be consummated in accordance with the terms of the Merger Agreement without waiver, modification or amendment of any term, condition or agreement therein; and (v) in the course of obtaining any regulatory or third party consents, approvals or agreements in connection with the Merger, no delay, limitation, restriction or condition would be imposed that would have an adverse effect on the Company or the expected benefits of the Merger. Truist Securities also assumed that the Merger Agreement, when executed by the parties thereto, would conform to the draft reviewed by it in all respects material to its analyses and opinion.

Furthermore, in connection with its opinion, Truist Securities was not requested to, and did not, make any physical inspection or independent appraisal or evaluation of any of the assets, properties or liabilities (fixed, contingent, derivative, off-balance-sheet or otherwise) of or relating to the Company or any other party to the Merger, nor was Truist Securities provided with any such appraisal or evaluation. Truist Securities did not undertake any independent analysis of any potential or actual litigation, regulatory action, possible unasserted claims or other contingent liabilities relating to the Company or of any governmental investigation of any possible unasserted claims or other contingent liabilities relating to the Company. Truist Securities did not express any opinion as to the price or range of prices at which Company common stock may be purchased or sold at any time.

Truist Securities’ opinion was necessarily based on financial, economic, monetary, market and other conditions as in effect on, and the information made available to Truist Securities as of, the date of its opinion. Truist Securities has no obligation to update, revise, reaffirm or withdraw its opinion or otherwise comment upon events occurring or information that otherwise comes to its attention after the date its opinion. Furthermore, as the Board was aware, the credit, financial and stock markets had been experiencing significant volatility, due to, among other things, the COVID-19 pandemic and related illnesses and the direct and indirect business, financial, economic and market implications thereof, and Truist Securities expressed no opinion or view as to any potential effects of such volatility on the Company or the Merger.

Truist Securities’ opinion only addressed the fairness, from a financial point of view, to the holders of Company common stock (other than the Excluded Holders) of the Merger Consideration to be received by such holders in the Merger pursuant to the Merger Agreement, and did not address any other aspect or implication of the Merger or any agreement, arrangement or understanding entered into in connection therewith or otherwise, including, without limitation, the voting and support agreements in favor of Parent and Merger Sub to be entered into by certain beneficial owners of Company common stock.

Truist Securities was not requested to opine as to, and its opinion did not express an opinion as to or otherwise address, among other things: (i) the underlying business decision of the Board, the Company or any other party to proceed with or effect the Merger; (ii) the form, structure or any other portion or aspect of the Merger; (iii) the fairness of any portion or aspect of the Merger to the holders of any class of securities, creditors or other constituencies of any party (other than the holders of Company common stock (other than the Excluded Holders) in the manner set forth in the opinion); (iv) the relative merits of the Merger as compared to any alternative business strategies that might exist for the Company or any other party or the effect of any other transaction in which the Company or any other party might engage; (v) whether or not Parent, Merger Sub, the Company or any other party is receiving or paying reasonably equivalent value in the Merger; (vi) the fairness of any portion or aspect of the Merger to any one class or group of the Company’s or any other party’s security holders or other constituents vis-à-vis any other class or group of the Company’s or such other party’s security holders or other constituents or the fairness of the allocation of any consideration amongst or within classes or groups of security holders or other constituents; (vii) the solvency, creditworthiness or fair value of Parent, Merger Sub, the Company or any other participant in the Merger or any of their respective assets under any applicable laws relating to bankruptcy, insolvency, fraudulent conveyance or similar matters; or (viii) the fairness,

 

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financial or otherwise, of the amount, nature or any other aspect of any compensation to or consideration payable to or received by any officers, directors or employees of any party to the Merger, any class of such persons or any other party, relative to the Merger Consideration or otherwise. Furthermore, Truist Securities did not provide any opinion, counsel or interpretation in matters that require legal, regulatory, accounting, insurance, tax, environmental or other similar professional advice. Truist Securities assumed that such opinions, counsel or interpretations had been or would be obtained from appropriate professional sources. Furthermore, Truist Securities relied, with the Board’s consent, on the assessments by the Board, the Company and their respective advisors as to all legal, regulatory, accounting, insurance, tax and environmental matters with respect to the Company and the Merger.

In performing its analyses, Truist Securities considered business, economic, industry and market conditions, financial and otherwise, and other matters as they existed on, and could be evaluated as of, the date of its opinion. The implied valuation reference ranges indicated by Truist Securities’ analyses are illustrative and not necessarily indicative of actual values nor predictive of future results or values, which may be significantly more or less favorable than those suggested by the analyses. In addition, any analyses relating to the value of assets, businesses or securities do not purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold, which may depend on a variety of factors, many of which are beyond the Company’s control and the control of Truist Securities. Much of the information used in, and accordingly the results of, Truist Securities’ analyses are inherently subject to substantial uncertainty.

Truist Securities’ opinion and analyses were provided to the Board in connection with its evaluation of the proposed Merger and were among many factors considered by the Board in evaluating the proposed Merger. Neither Truist Securities’ opinion nor its analyses were determinative of the Merger Consideration or of the views of the Board with respect to the proposed Merger. Truist Securities was retained by the Company as an independent contractor, and did not act as an agent or fiduciary of the Board, the Company, the security holders or creditors of the Company or any other person or entity.

Discounted Cash Flow Analysis

The following is a summary of the discounted cash flow analysis performed by Truist Securities in connection with its opinion rendered to the Board on December 22, 2020.

Discounted cash flow analysis is a “forward looking” methodology and is based on projected future cash flows to be generated by the Company (including the terminal value of the equity) which are then discounted back to the present.

Truist Securities performed the discounted cash flow analysis of the Company by calculating the estimated net present value of the projected unlevered free cash flows (calculated as earnings before interest and taxes, less taxes, plus depreciation and amortization, less capital expenditures and less the amount of any increase or plus the amount of any decrease in net working capital) of the Company based on the Management Projections for the years 2021 to 2024. Truist Securities applied perpetuity growth rates ranging from 0.0% to 2.0%, taking into account its experience and professional judgment, to the year 2024 estimated unlevered free cash flow of the Company to calculate the terminal values of the Company. The net present values of the projected unlevered free cash flows and terminal values of the Company were then calculated using discount rates ranging from 13.0% to 14.0%, taking into account Truist Securities’ experience and professional judgment and an estimate of the Company’s weighted average cost of capital.

The discounted cash flow analysis indicated an implied value reference range of $6.93 to $8.54 per share of Company common stock, as compared to the Merger Consideration of $7.71 per share of Company Common stock.

Other Illustrative Analysis

Truist Securities also reviewed with the Board, solely for informational purposes, the 52-week high and low closing trading prices of the Company common stock as of December 16, 2020, which were $7.27 and $1.77 per share of Company common stock, respectively, and the closing trading price of the Company common stock as of December 16, 2020, which was $7.07 per share of Company common stock, in each case as compared to the Merger Consideration of $7.71 per share of Company common stock.

Other Matters

Truist Securities was retained by the Company as its financial advisor based on Truist Securities’ experience and reputation and Truist Securities’ knowledge of the Company and its industry. For its services as financial advisor to the Company, Truist Securities will receive a transaction fee based on the value of the proposed Merger, which fee is currently estimated to be approximately $3,750,000. Upon the rendering of its opinion, Truist Securities became entitled to a fee of $750,000, which is creditable to the extent previously paid against the transaction fee. In addition, the Company has agreed to reimburse certain expenses incurred by Truist Securities in connection with its engagement and to indemnify Truist Securities and certain related parties for certain liabilities arising out of its engagement.

 

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Truist Securities and its affiliates may in the future provide investment banking and other financial services to the Company, Parent, and/or certain of their respective affiliates for which Truist Securities and its affiliates would expect to receive compensation. Truist Securities is a full service securities firm engaged in securities trading and brokerage activities as well as providing investment banking and other financial services. In the ordinary course of business, Truist Securities and its affiliates may acquire, hold or sell, for its and its affiliates’ own accounts and the accounts of customers, equity, debt and other securities and financial instruments (including bank loans and other obligations) of the Company, Parent and/or certain of their respective affiliates and any other company that may be involved in the Merger, as well as provide investment banking and other financial services to such companies. In addition, Truist Securities and its affiliates (including Truist Bank and Truist Financial Corporation) may have other financing and business relationships with the Company, Parent and their respective affiliates.

Financing of the Merger

Debt Financing

Parent has received the Debt Commitment Letter from Oaktree Capital Management, L.P. and LBC Credit Partners, Inc. (collectively, the “Financing Sources”) to provide, subject to the conditions set forth in the Debt Commitment Letter, a senior secured first lien credit facility in the aggregate principal amount of $149.0 million (the “Credit Facilities”) comprised of (i) $134.0 million aggregate principal amount of term loans to be drawn at the closing of the Merger for the purposes of financing the Merger and paying related fees and expenses and (ii) a revolving credit facility in an aggregate principal amount of $15.0 million. We refer to the financing contemplated by the Debt Commitment Letter as the “Debt Financing.”

The Debt Commitment Letter will expire as provided therein if either the closing of the Credit Facilities or the funding of the initial loans thereunder has not occurred on or before April 30, 2021.

The consummation of the Debt Financing is subject to the following conditions: (1) execution and delivery of the required definitive documentation for the Credit Facilities and other customary closing documents, (2) the agent for the lenders shall have been granted perfected first priority security interests in the collateral, subject to permitted liens and encumbrances, (3) Ardian and its affiliates shall have invested a minimum of 40.0% of the total pro forma capitalization of the holding company of borrower and its subsidiaries, on the closing date, directly or indirectly, in the form of cash into the capital stock or other equity securities of the borrower (investments in preferred equity securities of the borrower must be on terms and conditions reasonably satisfactory to the lenders), (4) the Merger Agreement must be in form and substance reasonably satisfactory to the lenders and, concurrently with the funding of the initial borrowing under the Credit Facilities, the Merger shall have been consummated in accordance with the Merger Agreement (without any amendment, modification or waiver thereof that would be materially adverse to the lenders without their consent (such consent not to be unreasonably withheld, delayed or conditioned)), (5) the lenders hall have received (a) internal consolidated financial statements of the borrower (after giving effect to the Merger) as of the last date for the most recently completed month ended at least 45 days prior to the Closing Date and (b) a certificate from the chief financial officer of the borrower certifying that financial statements delivered were prepared in good faith on the basis of the assumptions stated therein, which assumptions were believed by the preparer thereof to be reasonable at the time prepared, (6) since the date of the Merger Agreement, there has not been any “Material Adverse Effect” (as defined in the Merger Agreement), (7) payment of all outstanding indebtedness of the borrower and its subsidiaries and cancellation of all credit facilities, lines of credit and other funding commitments, other than permitted debt and in any event excluding intercompany debt, (8) certification of the chief financial officer of the borrower of the solvency of the borrower and the guarantors in the form attached to the Debt Commitment Letter, (9) specified representations in the Merger Agreement shall be true and correct to the extent required in the Debt Commitment Letter and specified representations in the definitive documentation for the Credit Facilities shall be true and correct in all material respects, (10) the lenders shall have received certain information required under KYC and anti-money laundering rules and regulations and (11) payment of all fees and expenses required to be paid on the Closing Date.

Equity Financing

Parent has received the Equity Commitment Letter from the Investors, pursuant to which the Investors have committed, subject to the terms and conditions of the Equity Commitment Letter, to invest in Parent, directly or indirectly, cash in an aggregate amount equal to $89.7 million (subject to adjustment as set forth in the Equity Commitment Letter) solely for the purposes of funding, and to the extent necessary to fund, the merger

 

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consideration upon the closing of the Merger. We refer to the financing contemplated by the Equity Commitment Letter, as may be amended, restated, supplemented or otherwise modified from time to time, as the “Equity Financing.” The funding of the Equity Financing is subject to (i) the terms of the Equity Commitment Letter (including the satisfaction or waiver of the conditions to Parent’s, Merger Sub’s and the Company’s obligations to consummate the transactions contemplated by the Merger Agreement), (ii) the substantially contemporaneous funding of the Debt Financing, and (iii) the consummation of the Merger in accordance with the Merger Agreement. The Company is an express third party beneficiary of the Equity Commitment Letter for the limited purposes provided in the Equity Commitment Letter, which include the right of the Company (subject to the Company being entitled under the Merger Agreement to the remedy of specific performance to enforce Parent’s obligation to cause the Equity Financing to be funded and to fund the closing of the Merger) to require Parent to seek specific performance of each Investor’s obligation to fund its committed portion of the Equity Financing in accordance with the terms of the Equity Commitment Letter and the Merger Agreement.

Guarantee

Concurrently with the execution and delivery of the Merger Agreement, and as a condition and inducement to the Company’s willingness to enter into the Merger Agreement, Parent and Merger Sub delivered the Guarantee from Guarantor, in favor of the Company and pursuant to which, subject to the terms and conditions of the Guarantee, Guarantor guaranteed certain obligations of Parent in connection with the Merger Agreement.

Each Investor’s obligation to fund its equity commitment will expire automatically and immediately upon the earliest to occur of (a) the valid termination of the Merger Agreement in accordance with its terms, (b) the consummation of the closing of the Merger, (c) the date that the Company, any of its affiliates or its shareholders asserts in any litigation or other proceeding any claim against an Investor or certain of its related parties identified in the Equity Commitment Letter relating to Equity Commitment Letter, the Merger Agreement or any of the transactions contemplated thereby (excluding any claim for specific performance against Parent and Merger Sub as and when permitted under the Merger Agreement and the Equity Commitment Letter and any claim against Ardian North America Fund II, L.P. under the Guarantee pursuant to the terms thereof), and (d) any judgment against Parent relating to the Merger Agreement that results in the payment in full of the Parent Termination Fee pursuant to the Guarantee.

Closing and Effective Time of Merger

If the Merger is approved at the special meeting then, assuming timely satisfaction of the other necessary closing conditions, we anticipate that the Merger will be completed promptly thereafter. The Effective Time of the Merger will occur as soon as practicable following the closing of the Merger upon the filing of a certificate of Merger with the Secretary of State of the State of Georgia (or at such later time as may be agreed in writing by Parent, Merger Sub and the Company and specified in the certificate of Merger).

Payment of Merger Consideration and Surrender of Stock Certificates

At the Effective Time, each share of Company common stock issued and outstanding immediately prior to the Effective Time (excluding shares owned (i) by the Company (including treasury shares), Parent or Merger Sub and (ii) by any direct and indirect wholly-owned subsidiary of the Company or Parent (other than Merger Sub) and (iii) by shareholders who have perfected and not withdrawn a demand for dissenters’ rights or otherwise lost dissenters’ rights under Georgia law) will be converted into and become the right to receive the Merger Consideration of $7.71 per share in cash, without interest and less any required withholding taxes.

Before the Merger, but not less than ten business days prior to the closing of the Merger, Parent and the Company will jointly select a nationally recognized bank or trust company (the “Paying Agent”) to make payment of the Merger Consideration. At or prior to the closing of the Merger, Parent will irrevocably deposit, or cause to be deposited, with the Paying Agent, cash equal to the aggregate consideration to which holders of Company common stock become entitled to pursuant to the Merger Agreement.

Promptly after the Effective Time (and in any event within (3) business days), Parent and the Surviving Corporation will cause the Paying Agent to mail to each holder of record as of immediately prior to the Effective Time (other than (i) shares held directly by the Company, Parent or Merger Sub as of immediately prior to the Effective Time (collectively, the “Owned Company Shares”) and (ii) by any direct or indirect wholly-owned

 

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subsidiary of the Company or Parent (other than Merger Sub) as of immediately prior to the Effective Time (collectively, the “Converted Company Shares”)) of (i) a certificate or certificates that immediately prior to the Effective Time represented outstanding shares of Company common stock (other than Owned Company Shares or Converted Company Shares) (the “Certificates” (if any)); and (ii) uncertificated shares of Company common stock that represented outstanding shares of Company common stock (other than Owned Company Shares or Converted Company Shares) (the “Uncertificated Shares”) (A) in the case of Certificates, a letter of transmittal in customary form (which will specify that delivery will be effected, and risk of loss and title to the Certificates will pass, only upon delivery of the Certificates to the Paying Agent; and (B) in the case of Certificates and Uncertificated Shares, instructions for effecting the surrender of the Certificates and Uncertificated Shares in exchange for payment of the Merger Consideration payable in respect thereof.

Upon surrender of Certificates for cancellation to the Paying Agent, together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, the holders of such Certificates will be entitled to receive an amount in cash equal to (x) the aggregate number of shares of Company common stock represented by each such Certificate, multiplied by (y) the Per Share Price, less any required withholding taxes. Any surrendered Certificates will subsequently be cancelled.

In the case of a book-entry transfer of Uncertificated Shares, upon receipt of an “agent’s message” by the Paying Agent (or such other evidence, if any, of transfer as the Paying Agent may reasonably request), the holders of such Uncertificated Shares will be entitled to receive in exchange therefor an amount in cash equal to (1) the aggregate number of shares of Company common stock represented by such holder’s transferred Uncertificated Shares multiplied by (2) the Per Share Price, less any required withholding taxes. The transferred Uncertificated Shares so surrendered will subsequently be cancelled.

You will not be entitled to receive the Merger Consideration until you deliver all required documentation to the Paying Agent. You should not return your Certificates with the enclosed proxy card, and you should not forward your Certificates to the Paying Agent without a letter of transmittal.

Interests of Certain Persons in the Merger

Our executive officers and members of our Board may be deemed to have interests in the execution and delivery of the Merger Agreement and all of the transactions contemplated thereby, including the Merger, that may be different from or in addition to those of our shareholders, generally. These interests may create potential conflicts of interest. Our Board was aware of these interests and considered them, among other things, in reaching its decision to approve the Merger Agreement and the transactions contemplated thereby. As described in more detail below, these interests include:

 

   

the cancellation of vested and unvested Company Stock Options, Company RSUs, Company SARs, Company PBUs and Company Restricted Stock outstanding immediately prior to the Effective Time and the conversion of such Company Stock Options, Company RSUs, Company SARs, Company PBUs and Company Restricted Stock into the right to receive a cash payment as described below;

 

   

the cancellation, as of and subject to the Effective Time, of the Directors Plan, the automatic conversion of Company Deferred Compensation Stock Units into the right to receive the Per Share Price and the distribution of the Deferral Accounts (as defined in the Directors Plan) of each director participating in the Directors Plan, to each such director in the amounts credited to his or her Deferral Account in the Directors Plan;

 

   

the opportunity for officers to receive enhanced severance, a pro-rated annual bonus and other benefits in the event of a qualifying termination of employment within two years following the Effective Time under employment agreements with named executive officers (as defined below under the heading “Interests of Certain Persons in the Merger—Golden Parachute Compensation”); and

 

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the entitlement to the indemnification and exculpation benefits in favor of directors and officers of PRGX.

Outstanding Shares held by Directors and Executive Officers

The following table sets forth the number of shares of Company common stock beneficially owned as of January 11, 2021 by each of our executive officers and directors, excluding shares issuable upon the exercise of Company Stock Options, the shares issuable with respect to any Company Deferred Stock Plan Units, Company RSUs, shares issuable pursuant to Company PBUs and any shares of Company Restricted Stock that will not vest within 60 days of January 11, 2021, and the aggregate Merger Consideration that would be payable for such shares.

 

Name

   Number of
Shares
Owned
     Cash Value
of
Shares
Owned
 

Directors and Executive Officers

     

Gregory J. Owens, Executive Chairman(1)

     136,425      $ 1,051,837  

Ronald E. Stewart, President, Chief Executive Officer and Director(2)

     491,317      $ 3,788,054  

Matthew A. Drapkin, Director(3)

     2,035,548      $ 15,694,075  

William F. Kimble, Director

     31,810      $ 245,255  

Mylle H. Mangum, Director

     20,653      $ 159,235  

Kevin S. Costello, Director

     41,079      $ 316,719  

Joseph E. Whitters, Lead Director(4)

     168,153      $ 1,296,460  

Kurt Abkemeier, Executive Vice President, Chief Financial Officer and Treasurer(5)

     43,029      $ 331,754  

Victor A. Allums, Senior Vice President, General Counsel and Secretary(6)

     124,199      $ 957,574  

All of our current directors and executive officers as a group (9 persons)

     3,092,213      $ 23,840,963  

Notes:

 

(1)

Shares beneficially owned by Mr. Owens include (a) 123,687 shares of common stock held directly, (b) 4,369 shares of Company Restricted Stock that are scheduled to vest on January 16, 2021, (c) 4,369 shares of Company Restricted Stock that are scheduled to vest on February 16, 2021, and (d) 4,000 shares of common stock held indirectly.

(2)

Shares beneficially owned by Mr. Stewart include 15,000 shares of Company Restricted Stock that are scheduled to vest on February 13, 2021.

(3)

Shares beneficially owned by Mr. Drapkin include shares deemed beneficially owned indirectly by Mr. Drapkin who is a managing member of BC Advisors, LLC, which is the general partner of Northern Right Capital Management, L.P. (of which Mr. Drapkin is a limited partner). Northern Right Capital Management, L.P. is the general partner of, and investment manager for, Northern Right Capital (QP), L.P.

(4)

Shares beneficially owned by Mr. Whitters include (a) 130,653 shares of common stock held directly and (b) 37,500 shares of common stock held indirectly.

(5)

Shares beneficially owned by Mr. Abkemeier include 8,333 shares of Company Restricted Stock that are scheduled vest on February 13, 2021.

(6)

Shares beneficially owned by Mr. Allums include 6,666 shares of Company Restricted Stock that are scheduled to vest on February 13, 2021.

 

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Treatment of Outstanding Equity Awards

At the Effective Time, each Company Stock Option, Company RSU, Company SAR, Company PBU, share of Company Restricted Stock and Company Deferred Compensation Stock Unit (as each term is defined below) will be cancelled and converted into the right to receive the Merger Consideration as follows:

 

   

Company Stock Options. At the Effective Time, all outstanding options to purchase Company common stock, whether granted pursuant to any of the Company’s incentive plans or otherwise (the “Company Stock Options”), whether vested or unvested, will be cancelled and converted into the right to receive a cash payment, without interest, equal to (i) the amount of the Per Share Price, less the exercise price per share attributable to such Company Stock Options multiplied by (ii) the total number of shares of Company common stock then issuable upon exercise in full of such Company Stock Options, less any required withholding taxes. With respect to Company Stock Options which have an exercise price equal to or greater than the Per Share Price, such Company Options will be cancelled without any cash payment being made in respect thereof. Parent will not assume any Company Stock Options.

 

   

Company RSUs. At the Effective Time, all outstanding Company restricted stock unit awards subject to time-vesting restrictions granted pursuant to any of the Company’s equity incentive plans (the “Company RSUs”), whether vested or unvested, will be cancelled and converted into the right to receive a cash payment, without interest, equal to (i) the amount of the Per Share Price multiplied by (ii) the total number of shares of Company common stock subject to such Company RSU award, less any required withholding taxes. Parent will not assume any Company RSU awards.

 

   

Company SARs. At the Effective Time, all outstanding Company stock appreciation rights (the “Company SARs”), whether vested or unvested, will be cancelled and converted into the right to receive a cash payment, without interest, equal to (i) the amount of the Per Share Price (less the exercise price per share attributable to such Company SAR) multiplied by (ii) the total number of shares of Company common stock to which such Company SARs relate, less any required withholding taxes. Parent will not assume any Company SARs.

 

   

Company PBUs. At the Effective Time, all outstanding Company restricted stock units subject to performance-based vesting restrictions (the “Company PBUs”), whether vested or unvested, will be cancelled and converted into the right to receive a cash payment, without interest, equal to (i) the amount of the Per Share Price multiplied by (ii) the total number of shares of Company common stock subject to such Company PBU, less any required withholding taxes. The number of shares of Company common stock subject to a PBU with performance-based vesting will be deemed to be the number of shares eligible to vest assuming target performance. Parent will not assume any Company PBUs.

 

   

Company Restricted Stock. At the Effective Time, all outstanding awards of Company restricted stock subject to time vesting restrictions (the “Company Restricted Stock”), whether vested or unvested, will vest in full and be converted into the right to receive a cash payment, without interest, equal to (i) the amount of the Per Share Price multiplied by (ii) the total number of shares of Company Restricted Stock, less any required withholding taxes. Parent will not assume any Company Restricted Stock.

 

   

Company Deferred Compensation Stock Unit. As of the Effective Time, in accordance with the terms of the PRGX Global, Inc. Deferred Compensation Plan for Non-Employee Directors (the “Directors Plan”), the Company will take all actions reasonably necessary to provide that (i) the Directors Plan is terminated as of the Effective Time, (ii) no director will be eligible to participate in the Directors Plan after the Effective Time, and (iii) the Deferral Account (as defined in the Directors Plan) of each director participating in the Directors Plan will be distributed to each such director, including each share of Company common stock otherwise distributable under the Directors Plan (each, a “Company Deferred Compensation Stock Unit”) (the value of which shall be determined based on the Per Share Price), provided that such termination and all the related

 

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foregoing actions will be contingent upon the occurrence of the Effective Time. Additionally, if any outstanding Company RSUs granted to a director of the Company, prior to the Effective Time, are subject to a deferral election under the Directors Plan, such Company RSUs will be deemed to have been deferred into the Directors Plan in accordance with the applicable deferral election and then distributed to the director in payment of his or her Deferral Account as of the Effective Time.

The table below sets forth, for each of our executive officers and directors holding Company Stock Options, Company RSUs, Company SARs, Company PBUs, Company Restricted Stock and Company Deferred Compensation Stock Units as of January 11, 2021, (a) the aggregate number of shares of Company common stock subject to such Company Stock Options, Company RSUs, Company SARs, Company PBUs, Company Restricted Stock, and Company Deferred Compensation Stock Units and (b) the value of amounts payable in respect of such Company Stock Options, Company RSUs, Company SARs, Company PBUs, Company Restricted Stock and Company Deferred Compensation Stock Units on a pre-tax basis at the Effective Time, calculated by multiplying (i) in the case of Company RSUs, Company PBUs, Company Restricted Stock and Company Deferred Compensation Stock Units, the Per Share Price and, in the case of Company Stock Options and Company SARs, the excess, if any, of the Per Share Price over the exercise price per share of such Company Stock Option and Company SARs, by (ii) the number of shares of Company common stock subject to those Company Stock Options and Company RSUs, Company SARs, Company PBUs, Company Restricted Stock and Company Deferred Compensation Plan units.

 

Name

   Options
(#)
     RSUs
(#)
     SARs
(#)
     PBUs
(#)
     Deferred
Compensation
Stock Units

(#)
     Unvested
Restricted
Stock

(#)
     Amount
($)
 

Gregory J. Owens, Executive Chairman(1)

     95,031        —          —          —          —          8,738      $ 333,193  

Ronald E. Stewart, President, Chief Executive Officer and
Director(2)

     500,000        —          —          105,000        —          30,000      $ 1,220,850  

Matthew A. Drapkin, Director(3)

     69,053        30,769        —          —          28,599        —        $ 637,536  

William F. Kimble, Director(4)

     93,606        30,769        —          —          28,599        —        $ 719,958  

Mylle H. Mangum, Director(5)

     83,636        30,769        —          —          44,625        —        $ 805,633  

Kevin S. Costello, Director(6)

     57,386        —          —          —          —          30,769      $ 319,649  

Joseph E. Whitters, Lead Director(7)

     83,636        30,769        —          —          55,157        —        $ 886,834  

Kurt Abkemeier, Executive Vice President, Chief Financial Officer and Treasurer(8)

     100,000        —          —          213,500        —          87,335      $ 2,319,438  

Victor A. Allums, Senior Vice President, General Counsel and Secretary

     —          —          —          34,500        —          24,613      $ 455,761  

Notes:

 

(1)

Mr. Owens’ options total includes (a) 11,395 Company Stock Options at an exercise price of $4.07, (b) 35,000 Company Stock Options at an exercise price of $4.50, (c) 35,000 Company Stock Options at an exercise price of $5.04, and (d) 13,636 Company Stock Options at an exercise price of $6.35.

(2)

The 500,000 Company Stock Options granted to Mr. Stewart have an exercise price of $7.35.

(3)

Mr. Drapkin’s options total includes (a) 55,417 Company Stock Options at an exercise price of $4.80 and (b) 13,636 Company Stock Options at an exercise price of $6.35.

(4)

Mr. Kimble’s options total includes (a) 9,970 Company Stock Options at an exercise price of $3.91, (b) 35,000 Company Stock Options at an exercise price of $4.50, (c) 35,000 Company Stock Options at an exercise price of $5.04, and (d) 13,636 Company Stock Options at an exercise price of $6.35.

 

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(5)

Ms. Mangum’s options total includes (a) 35,000 Company Stock Options at an exercise price of $4.50, (b) 35,000 Company Stock Options at an exercise price of $5.04, and (c) 13,636 Company Stock Options at an exercise price of $6.35.

(6)

Mr. Costello’s options total includes (a) 43,750 Company Stock Options at an exercise price of $6.25 and (b) 13,636 Company Stock Options at an exercise price of $6.35.

(7)

Mr. Whitters’ options total includes (a) 35,000 Company Stock Options at an exercise price of $4.50, (b) 35,000 Company Stock Options at an exercise price of $5.04, and (c) 13,636 Company Stock Options at an exercise price of $6.35.

(8)

Mr. Abkemeier’s Company Stock Options were granted at an exercise price of $8.96, which is greater than the Per Share Price of the Merger Consideration. Accordingly, his 100,000 Company Stock Options are currently valued at $0.

Employment Arrangements

Our executive officers are not party to individual change in control agreements, but we have entered into employment agreements with Messrs. Stewart and Abkemeier which provide for severance benefits and obligations in connection with the termination of each named executive officer’s employment with the Company. We describe each of these agreements in more detail below.

Ronald E. Stewart. On December 13, 2013, we entered into an employment agreement with Mr. Stewart, the Company’s President and CEO. Mr. Stewart’s employment agreement provides for an annual base salary of $515,000 (subject to increase at the discretion of the compensation committee of the Board (the “Compensation Committee”)) and provides that Mr. Stewart will be eligible for an annual incentive bonus, based on the achievement of certain performance objectives to be set by the Company’s Compensation Committee. In accordance with the terms of his employment agreement, we granted Mr. Stewart a one-time equity grant of 100,000 non-qualified stock options, which vested over a period of three years from the date of the grant, and 150,000 shares of restricted stock, which vested in full on the third anniversary of the date of grant. In addition, Mr. Stewart’s employment agreement contains standard non-competition and non-solicitation provisions. Mr. Stewart is also eligible to receive additional stock options, restricted stock, stock appreciation rights and/or other equity awards under the Company’s applicable equity plans on such basis as the Compensation Committee may determine. Mr. Stewart’s employment agreement further provides for standard expense reimbursement, vacation time, and other standard executive benefits.

On April 27, 2016, we entered into an amendment to Mr. Stewart’s employment agreement, which extended the term of his agreement until December 31, 2018. The amendment also provided for the increase of Mr. Stewart’s target and maximum short-term incentive opportunities (as a percentage of base salary) from 75% and 150%, respectively, to 90% and not less than 180%, respectively, and the grant of 200,000 stock appreciation rights (each, a “SAR”), which vested and became payable in cash in a lump sum on June 30, 2018. Upon vesting of the SARs, the Company paid Mr. Stewart an amount equal to the excess of (i) $9.70, the fair market value, as of June 29, 2018 (the last trading day before June 30, 2018), of the shares of the Company common stock with respect to the SARs that became vested and payable over (ii) the aggregate initial value of such SARs. The initial value of each SAR was equal to $4.71, the closing price of the Company’s common stock on April 27, 2016.

On October 25, 2017, we entered into a second amendment to Mr. Stewart’s employment agreement which, among other things, increased Mr. Stewart’s annual base salary from $515,000 to $550,000, increased Mr. Stewart’s target and maximum short-term incentive opportunities (as a percentage of base salary and to conform to Mr. Stewart’s 2017 incentive opportunities under the Company’s 2017 Short-Term Incentive Plan) from 90% and not less than 180%, respectively, to 100% and not less than 200%, respectively, and updated the “Restricted Territory” in which Mr. Stewart will be restricted from certain activities after the termination of his employment with the Company. The second amendment to Mr. Stewart’s employment agreement further extended the term of the agreement until December 31, 2021 and provided for the grant to Mr. Stewart of stock options to acquire 500,000 shares of the common stock, no par value, of the Company, at an exercise price of $7.35 (the “2017 Stock Options”). The 2017 Stock Options have a five-year term. One-third of the 2017 Stock Options (rounded down to the nearest whole share) vested and become exercisable as of December 31, 2019, and the remaining two-thirds of the 2017 Stock Options (rounded down to the nearest whole share) will vest and become exercisable in equal installments on December 31, 2020 and December 31, 2021, subject to Mr. Stewart’s continued employment through such dates.

 

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On December 13, 2018, the Compensation Committee approved an increase in Mr. Stewart’s salary to $625,000, effective as of January 1, 2019.

Pursuant to Mr. Stewart’s amended employment agreement, other than within two years after a change of control, in the event his employment is terminated without cause, if he terminates his employment for “good reason,” or in the event of Mr. Stewart’s death or incapacity, Mr. Stewart is entitled to: (i) payment of his annual base salary for the period equal to 12 months; (ii) payment of any actual earned full-year bonus (prorated) for the year in which Mr. Stewart’s employment termination occurs; (iii) continuation of health care plan coverage, other than that under a flexible spending account, for 12 months; (iv) payment of any accrued obligations; (v) vesting of a prorated number of outstanding unvested options, restricted stock and other equity-based awards that would have vested based solely on continued employment of Mr. Stewart through the first applicable vesting date immediately following the date of termination of employment for each type of such award based on the number of months elapsed since the immediately preceding vesting date (or, if none, since the grant date) of such award, as well as the continuation of outstanding stock options until the earlier of one year after the date of termination of Mr. Stewart’s employment or the original expiration date of the options; and (vi) payment of up to $20,000 of outplacement services. If Mr. Stewart is terminated within two years of a change of control, he is entitled to receive the same payments and benefits described in the preceding sentence except that (A) the payment of his annual base salary shall be for the period equal to 18 months and (B) his health care plan coverage shall continue for 18 months. In addition, in connection with a change of control, pursuant to the respective award agreements, Mr. Stewart’s outstanding unvested options and restricted stock with service-based vesting will vest in full and unvested PBUs will vest and become payable at the target performance level. If Mr. Stewart is terminated within two years after a change of control, he would be entitled to receive the severance described below in the table titled “Potential Change in Control Payments to Named Executive Officers” and the footnotes associated therewith under the heading “—Golden Parachute Compensation.” Additionally, if the Company fails to provide written notice to Mr. Stewart, at least 120 days prior to the expiration of the term of his employment agreement, that the Company does not intend to seek an extension of his term, and Mr. Stewart terminates his employment upon expiration of the term in accordance with such agreement, Mr. Stewart also shall be entitled to receive payment of his annual base salary for a period of four months. If the Company terminates Mr. Stewart’s employment for cause or Mr. Stewart terminates his employment for other than good reason, the employment agreement terminates and Mr. Stewart forfeits all unvested equity granted to him in connection with his employment, and in the case of termination for cause, also forfeits all vested stock options.

Kurt J. Abkemeier. On January 3, 2019, we entered into an employment agreement with Mr. Abkemeier, the Company’s Executive Vice President, Chief Financial Officer and Treasurer. Mr. Abkemeier’s employment agreement provides for an annual base salary of $350,000 (subject to increase at the discretion of the Compensation Committee) and provides that Mr. Abkemeier will be eligible for an annual incentive bonus, based on the achievement of certain performance objectives to be set by the Company’s Compensation Committee. In accordance with the terms of his employment agreement, we granted Mr. Abkemeier a one-time equity grant of 100,000 non-qualified stock options, which vest over a period of three years from the date of the grant, 32,000 shares of restricted stock, which vest over a period of three years from the date of the grant, and 12,000 PBUs, which vest in accordance with terms comparable to the terms of the PBUs granted to the Company’s executive officers on May 29, 2018. Pursuant to his employment agreement, Mr. Abkemeier was also granted an additional 24,000 PBUs, which will vest and become payable on substantially the same terms as the PBUs granted to other executive officers of the Company on November 15, 2019. In addition, Mr. Abkemeier’s employment agreement contains standard non-competition and non-solicitation provisions. Mr. Abkemeier is also eligible to receive additional stock options, restricted stock, stock appreciation rights and/or other equity awards under the Company’s applicable equity plans on such basis as the Compensation Committee may determine. Mr. Abkemeier’s employment agreement further provides for standard expense reimbursement, vacation time, and other standard executive benefits.

On February 13, 2020, Mr. Abkemeier was appointed Executive Vice President, Chief Financial Officer and Treasurer (previously serving as the Company’s Chief Financial Officer and Treasurer). In connection with his appointment, Mr. Abkemeier’s annual salary was increased to $400,000 and he will be eligible for an annual incentive bonus (at target equal to 75% of his annual base salary and at a maximum of not less than 150% of his annual base salary) in accordance with the terms of the Company’s Short Term Incentive Plan.

 

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Pursuant to Mr. Abkemeier’s employment agreement, other than within two years after a change of control, if the Company terminates Mr. Abkemeier’s employment without cause, Mr. Abkemeier terminates his employment for good reason, or Mr. Abkemeier’s employment terminates upon the Company’s failure to renew, Mr. Abkemeier will be entitled to: (i) payment of his annual base salary for the period equal to the greater of one year or the sum of four weeks for each full year of continuous service Mr. Abkemeier has with the Company; (ii) payment of any actual earned full-year bonus (prorated) for the year in which Mr. Abkemeier’s employment termination occurs; (iii) continuation of health care plan coverage, other than that under a flexible spending account, for the period equal to the greater of one year or the sum of four weeks for each full year of continuous service Mr. Abkemeier has with the Company; (iv) payment of any accrued obligations; (v) vesting of a prorated number of outstanding unvested options, restricted stock and other equity-based awards that would have vested based solely on continued employment through the first applicable vesting date immediately following the date of termination of employment for each type of such award based on the number of months elapsed since the immediately preceding vesting date (or, if none, since the grant date) of such award, as well as the continuation of outstanding stock options until the earlier of one year after the date of termination of employment or the original expiration date of the options; and (vi) payment of up to $20,000 of outplacement services. If Mr. Abkemeier is terminated within two years of a change of control, he is entitled to receive the same payments and benefits described in the preceding sentence except that (A) the payment of Mr. Abkemeier’s annual base salary shall be for the period equal to the greater of 18 months or the sum of four weeks for each full year of Mr. Abkemeier’s continuous service with the Company, and (B) Mr. Abkemeier’s health care plan coverage shall continue for the period equal to the greater of 18 months or the sum of four weeks for each full year of Mr. Abkemeier’s continuous service with the Company. In addition, in connection with a change of control, pursuant to the respective award agreements, Mr. Abkemeier’s outstanding unvested options and restricted stock with service-based vesting will vest in full and the PBUs granted to Mr. Abkemeier will vest and become payable at the target performance level upon a change of control of the Company. If Mr. Abkemeier is terminated within two years after a change of control, he would be entitled to receive the severance described below in the table titled “Potential Change in Control Payments to Named Executive Officers” and the footnotes associated therewith under the heading “—Golden Parachute Compensation.” If the Company terminates Mr. Abkemeier’s employment for cause or Mr. Abkemeier terminates his employment for other than good reason, the employment agreement terminates and Mr. Abkemeier forfeits all unvested equity granted to him in connection with his employment, and in the case of termination for cause, also forfeits all vested stock options.

Gregory J. Owens. In January 2019, the Board of Directors appointed Mr. Owens to serve as the Company’s Executive Chairman and the Compensation committee approved an annual base salary for Mr. Owens of $415,000. On April 16, 2019, upon consideration of the responsibilities undertaken by Mr. Owens following his appointment as Executive Chairman, the Compensation Committee granted to Mr. Owens 104,856 shares of time-vested restricted stock as follows: (i) 48,059 shares, which vest in eleven installments of 4,369 shares on each of the first through eleventh monthly anniversaries of April 16, 2019, provided that Mr. Owens continues serving as Executive Chairman on such monthly anniversary, and (ii) 56,797 shares, which vest in thirteen installments of 4,369 shares on each of the twelfth through twenty-fourth monthly anniversaries of April 16, 2019, provided that Mr. Owens continues serving as Executive Chairman on such monthly anniversary. Pursuant to the terms of the applicable restricted stock award agreements, in connection with a change of control, Mr. Owens’ outstanding unvested restricted stock would vest in full.

280G Mitigation Actions

In connection with the Merger, Kurt Abkemeier, Executive Vice President, Chief Financial Officer and Treasurer, may become entitled to payments and benefits that may be treated as “excess parachute payments” within the meaning of Section 280G (“Section 280G”) of the Internal Revenue Code of 1986, as amended (the “Code”). To mitigate the potential impact of Section 280G on the Company and Mr. Abkemeier and to preserve certain tax deductions for the Company, in accordance with the terms of the Merger Agreement, the Compensation Committee approved an early payment in December 2020 of a portion (which otherwise would have been paid in 2021) of the payment which was expected to be made to Mr. Abkemeier under the Company’s 2020 Short Term Incentive Plan, in an amount of $250,000.

Potential for Future Employment Arrangements

To our knowledge, no employment, equity contribution or other agreement, arrangement or understanding between any executive officer or director of PRGX, on the one hand, and Parent, Merger Sub, any of their affiliates or PRGX, on the other hand, existed as of the date of this proxy statement, and the Merger is not conditioned upon any executive officer or director of PRGX entering into any such agreement, arrangement or understanding.

 

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It is possible that certain members of our current management team will enter into employment arrangements with the Surviving Corporation which may become effective following the completion of the Merger. Such arrangements may include the right to purchase or participate in the equity of the Surviving Corporation or its affiliates. Any such arrangements with the existing management team are currently expected to be entered into before the Merger and will not become effective until after the Merger is completed, if at all. There can be no assurance that any parties will reach an agreement on any terms, or at all.

Golden Parachute Compensation

The table below, captioned “Potential Change in Control Payments to Named Executive Officers,” along with its footnotes, sets forth the information required by Item 402(t) of Regulation S-K regarding compensation payable to named executive officers whose compensation is subject to an advisory vote of the shareholders as described below in the section of the proxy statement captioned “Proposal 3: Advisory Vote Regarding Golden Parachute Compensation.” The named executive officers of the Company are the chief executive officer, chief financial officer, and the next other most highly compensated executive officer, as determined for purposes of its most recent annual proxy statement (each of whom we refer to as a “named executive officer”). The table assumes the consummation of the Merger occurred on January 11, 2021, the latest practicable date to determine such amounts prior to the filing of this proxy statement and the employment of the named executive officer was terminated without “cause” on such date.

Potential Change in Control Payments to Named Executive Officers

 

Name

   Cash
($)(1)
     Equity
($)(2)
     Perquisites/
Benefits

($)(3)
     Total
($)(4)(5)
 

Gregory J. Owens, Executive Chairman

     —          400,563        —          400,563  

Ronald E. Stewart, President, Chief Executive Officer and Director

     1,622,381        1,336,500        20,000        2,978,881  

Kurt Abkemeier, Executive Vice President, Chief Financial Officer and Treasurer

     678,743        2,383,685        39,477        3,101,905  

Notes:

 

(1)

The cash payment payable to Mr. Stewart consists of (i) salary continuation for a period of 18 months; (ii) any actual earned full-year bonus (prorated) for the year in which the named executive officer’s employment termination occurs; and (iii) payment of any accrued obligations. The cash payment payable to Mr. Abkemeier consists of (i) salary continuation for a period equal to the greater of 18 months or the sum of four weeks for each full year of Mr. Abkemeier’s continuous service with the Company; (ii) any actual earned full-year bonus (prorated) for the year in which the named executive officer’s employment termination occurs, inclusive of payments made under the acceleration of the 2020 Short Term Incentive Plan; and (iii) payment of any accrued obligations. The above payments are “double-trigger” in nature as they will only be payable in the event of a termination of employment without cause (as defined in the employment agreement for such named executive officer) or resignation by the named executive officer with good reason (as defined in the employment agreement for such named executive officer) within two (2) years following the completion of the Merger. For a description of the severance rights under the employment agreements of the named executive officers in the event of an employment termination without a change of control event, refer to the section under the heading “Interests of Certain Persons in the Merger—Employment Arrangements” above.

Mr. Owens does not have an employment agreement and is not entitled to receive any payment upon termination of his employment or change in control other than with respect to certain equity awards as described in Note (2) below.

The cash termination payments described in this column include the following components:

 

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Name

   Base
Salary
($)
     Prorated
Bonus
($)*
     Accrued
Obligations

($)**
     Total
($)
 

Ronald E. Stewart, President, Chief Executive Officer and Director

     937,500        18,836        666,045        1,622,381  

Kurt Abkemeier, Executive Vice President, Chief Financial Officer and Treasurer

     600,000        9,401        69,702        678,743  

 

*

These amounts reflect a prorated portion of the bonus for each of Mr. Stewart and Mr. Abkemeier assuming the consummation of the Merger occurred on January 11, 2021 and assuming target performance under the 2021 Short Term Incentive Plan. The target bonus amount for Mr. Stewart is 100% of his base salary and the target bonus amount for Mr. Abkemeier is 75% of his base salary.

**

These amounts include cash payments the Company expects to owe to Mr. Stewart and Mr. Abkemeier based on estimated performance under the Company’s 2020 Short Term Incentive Plan, excluding $250,000 of Mr. Abkemeier’s expected bonus under the 2020 Short Term Incentive Plan which was paid out to him in December 2020. These amounts do not include any accrued but unpaid base salary that would also be payable to Mr. Stewart and Mr. Abkemeier.

 

(2)

As described above in the section captioned “—Treatment of Outstanding Equity Awards,” the equity amounts consist of the cash payment amounts paid in connection with the cancellation of vested and unvested Company Options, Company RSUs, Company PBUs, Company Restricted Stock, Company SARs and Company Deferred Compensation Stock Units. The amounts shown are based on the number of such equity-based awards held by each named executive officer as of January 11, 2021, the latest practicable date to determine such amounts before the filing of this proxy statement. The amounts shown do not attempt to forecast any grants, additional issuances, dividends, additional deferrals or forfeitures of equity-based awards following the date of this proxy statement. The above payments are “single-trigger” in nature as they are payable immediately following the completion of the Merger regardless of whether a termination of employment occurs. The equity payments in this column include the following components:

 

Name

   Company
Options

($)*
     Company
RSUs

($)
     Company
Restricted
Stock

($)
     Company
PBUs

($)
     Company
SARs

($)
     Total
($)
 

Gregory J. Owens, Executive Chairman

     265,823        —          134,740        —          —          400,563  

Ronald E. Stewart, President, Chief Executive Officer and Director

     180,000        —          346,950        809,550        —          1,336,500  

Kurt Abkemeier, Executive Vice President, Chief Financial Officer and Treasurer

     —          —          737,600        1,646,085        —          2,383,685  

 

*

For the avoidance of doubt, the payment amounts with respect to Company Options include cash payment amounts paid in connection with the cancellation of both vested and unvested Company Options.

 

(3)

Mr. Stewart is entitled to receive (i) continuation of health care plan coverage for a period of 18 months and (ii) up to $20,000 of outplacement services. Mr. Abkemeier is entitled to receive (i) continuation of health care plan coverage for a period equal to the greater of 18 months or the sum of four weeks for each full year of Mr. Abkemeier’s continuous service with the Company and (ii) up to $20,000 of outplacement services. The amounts reflected in the column above reflect health benefits rates in effect as of January 11, 2021. The above payments are “double-trigger” in nature as they will only be payable in the event of a termination of employment without cause (as defined in the employment agreement for such named executive officer) or resignation by the named executive officer with good reason (as defined in the employment agreement for such named executive officer) following the completion of the Merger. For a description of the severance rights under the employment agreements of the named executive officers in the event of an employment termination without a change of control event, refer to the section under the heading “Interests of Certain Persons in the Merger—Employment Arrangements” above.

Mr. Owens does not have an employment agreement and is not entitled to receive any payment upon termination of his employment or change in control other than with respect to certain equity awards as described in Note (2) above.

 

(4)

Any amounts shown in the tables above that are subject to the golden parachute excise tax under Section 4999 of the Code may be subject to reduction to the extent such reduction would result in the named executive officer retaining a greater after-tax amount of such payment.

 

(5)

The following table provides a summary of the single-trigger and double-trigger payments payable to each of the named executive officers as described in further detail above:

 

Name

   Single-Trigger Payments
($)(A)
     Double-Trigger Payments
($)(B)
 

Gregory J. Owens, Executive Chairman

     400,563        —    

Ronald E. Stewart, President, Chief Executive Officer and Director

     1,336,500        1,682,381  

Kurt Abkemeier, Executive Vice President, Chief Financial Officer and Treasurer

     2,383,685        718,220  

 

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Notes:

 

(A)

The cash payments made to Mr. Owens, Mr. Stewart and Mr. Abkemeier in connection with the cancellation of their equity awards are single-trigger payments as they are payable immediately following the completion of the Merger regardless of whether a termination of employment occurs.

(B)

As noted above, the payment to Mr. Stewart of (i) salary continuation for a period of 18 months; (ii) any actual earned full-year bonus (prorated) for the year in which Mr. Stewart’s employment termination occurs; and (iii) any accrued obligations, as well as the payment to Mr. Abkemeier of (x) salary continuation for a period equal to the greater of 18 months or the sum of four weeks for each full year of Mr. Abkemeier’s continuous service with the Company; (y) any actual earned full-year bonus (prorated) for the year in which Mr. Abkemeier’s employment termination occurs, inclusive of payments made under the acceleration of the 2020 Short Term Incentive Plan; and (z) any accrued obligations are double-trigger payments as they will only be payable in the event of a termination of employment without cause (as defined in the employment agreement for such named executive officer) or resignation by the named executive officer with good reason (as defined in the employment agreement for such named executive officer) within two (2) years following the completion of the Merger. Similarly, the continuation of health care plan coverage and outplacement services for Mr. Stewart and Mr. Abkemeier are also double-trigger payments, payable only upon a termination of employment without cause or resignation by the named executive officer with good reason following the completion of the Merger.

 

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Employee Benefits

The Merger Agreement provides that, for a period of one year following the Effective Time, each individual who is an employee of the Company or any of its subsidiaries immediately prior to the Effective Time and continues to be an employee of Parent or one of its subsidiaries (including the Surviving Corporation) immediately following the Effective Time (each such individual, a “Continuing Employee”) will be provided with base salary or wages and health and welfare benefits (in each case, other than defined pension benefits, retiree health or other retiree welfare benefits and long-term incentive compensation (including equity incentive awards)) that, taken as a whole, are comparable in the aggregate to the base salary or wages and health and welfare benefits (in each case, other than defined pension benefits, retiree health or other retiree welfare benefits and long-term incentive compensation (including equity incentive awards)) provided to such Continuing Employee immediately prior to the Effective Time; provided, however, nothing described herein will prohibit the Surviving Corporation and its subsidiaries from providing equivalent equity-based or other incentives that are payable in cash in lieu of equity-based incentives payable in actual equity of the Surviving Corporation.

Indemnification of Directors and Officers; Insurance

The Merger Agreement provides that the Surviving Corporation and its subsidiaries will (and Parent will cause the Surviving Corporation and its subsidiaries to) honor and fulfill, in all respects, the obligations of the Company and its subsidiaries pursuant to any indemnification agreements between the Company and any of its subsidiaries or Affiliates (as defined in the Merger Agreement), on the one hand, and any of their respective current or former directors, officers, employees or agents (and any person who becomes a director, officer, employee or agent of the Company or any of its subsidiaries prior to the Effective Time), on the other hand (each, together with such person’s heirs, executors and administrators, an “Indemnified Person”) as such agreements are in effect on the date of the Merger Agreement.

Further, during the period commencing on the Effective Time and for six years thereafter, the Surviving Corporation and its subsidiaries will (and Parent will cause the Surviving Corporation and its subsidiaries to) cause the organizational documents of the Surviving Corporation and its subsidiaries to contain provisions with respect to indemnification, exculpation and the advancement of expenses that are at least as favorable as the indemnification, exculpation and advancement of expenses provisions set forth in the organizational documents of the subsidiaries of the Company as of the date of the Merger Agreement. During such six-year period, such provisions may not be repealed, amended or otherwise modified in any manner except as required by applicable law.

In addition, during the period commencing on the Effective Time and ending on the sixth anniversary of the Effective Time, the Merger Agreement provides that Parent and the Surviving Corporation will indemnify and hold harmless, to the fullest extent permitted by applicable law or pursuant to any indemnification agreements with the Company and any of its subsidiaries or Affiliates in effect on the date of the Merger Agreement, each current or former directors, officers, employees or agents of the Company or any of our subsidiaries or Affiliates against any costs, fees and expenses (including reasonable attorneys’ fees and investigation expenses), judgments, fines,

 

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penalties, losses, claims, damages, liabilities and amounts paid in settlement or compromise in connection with any legal proceeding (including civil, criminal, administrative or investigative) when such legal proceeding arises out of, or pertains to, (i) the fact that such indemnified persons is or was a director, officer, employee or agent of the Company or such subsidiary or Affiliate; and (ii) any action or omission, or alleged action or omission, occurring at or prior to the Effective Time (including in connection with the approval of the Merger Agreement and the transactions contemplated thereunder), in such indemnified person’s capacity as a director, officer, employee or agent of the Company or any of its subsidiaries or other Affiliates. The Merger Agreement also provides that the Surviving Corporation will also advance all fees and expenses (including fees and expenses of any counsel) incurred by such indemnified persons in defense of such matters for which such indemnified persons are eligible to be indemnified pursuant to the Merger Agreement.

In addition, the Merger Agreement provides that, during the six-year period commencing at the Effective Time, the Surviving Corporation will (and Parent will cause the Surviving Corporation to) indemnify and hold harmless, to the fullest extent permitted by applicable law or pursuant to any indemnification agreements with the Company and any of its subsidiaries or Affiliates in effect on the date of the Merger Agreement, each Indemnified Person from and against any costs, fees and expenses (including reasonable attorneys’ fees and investigation expenses), judgments, fines, penalties, losses, claims, damages, liabilities and amounts paid in settlement or compromise in connection with any legal proceeding, whether civil, criminal, administrative or investigative, whenever asserted, to the extent that such legal proceeding arises, directly or indirectly, out of, or pertains, directly or indirectly, to, (i) the fact that an Indemnified Person is or was a director, officer, employee or agent of the Company or such subsidiary or Affiliate; or (ii) any action or omission, or alleged action or omission, occurring at or prior to the Effective Time (including in connection with the approval of the Merger Agreement and the consummation of the Merger whether asserted or claimed prior to, at or after the Effective Time), in such Indemnified Person’s capacity as a director, officer, employee or agent of the Company or any of its subsidiaries or other Affiliates, or taken at the request of the Company or such subsidiary or Affiliate, including in connection with serving at the request of the Company or such subsidiary or Affiliate as a director, officer, employee, agent, trustee or fiduciary of another person (including any employee benefit plan), except that if, at any time prior to the sixth anniversary of the Effective Time, any Indemnified Person delivers to Parent a written notice asserting a claim for indemnification pursuant to certain applicable provisions of the Merger Agreement, then the claim asserted in such notice will survive the sixth anniversary of the Effective Time until such claim is fully and finally resolved. The Merger Agreement also provides that, in the event of any such legal proceeding, the Surviving Corporation will advance all fees and expenses (including fees and expenses of any counsel) as incurred by an Indemnified Person in the defense of such legal proceeding; provided, that any Indemnified Person to whom expenses are advanced provides an undertaking to repay such expenses if it is ultimately determined that such Person is not entitled to indemnification, and only to the extent required by applicable law or applicable organizational documents of the Company and its subsidiaries or applicable indemnification agreements. Notwithstanding anything to the contrary in the Merger Agreement, none of Parent, the Surviving Corporation nor any of their respective Affiliates will settle or otherwise compromise or consent to the entry of any judgment with respect to, or otherwise seek the termination of, any legal proceeding for which indemnification may be sought by an Indemnified Person pursuant to the Merger Agreement unless such settlement, compromise, consent or termination includes an unconditional release of all Indemnified Persons from all liability arising out of such legal proceeding. Any determination required to be made with respect to whether the conduct of any Indemnified Person complies or complied with any applicable standard will be made by independent legal counsel selected by the Surviving Corporation (which counsel will be reasonably acceptable to such Indemnified Person), the fees and expenses of which will be paid by the Surviving Corporation.

The Merger Agreement also provides that, during the six-year period commencing at the Effective Time, the Surviving Corporation will (and Parent will cause the Surviving Corporation to) maintain in effect the Company’s current directors’ and officers’ liability insurance (“D&O Insurance”) in respect to acts or omissions occurring at or prior to the Effective Time on terms (including with respect to coverage, conditions, retentions, limits and amounts) that are at least as favorable to covered persons to those of the D&O Insurance. In satisfying these obligations, the Surviving Corporation will not be obligated to pay annual premiums in excess of 300% of the amount paid by the Company for coverage for its last full fiscal year (such 300% amount, the “Maximum Annual Premium”). If the annual premiums of such insurance coverage exceed the Maximum Annual Premium, then the Surviving Corporation will be obligated to obtain a policy with the greatest coverage available for a cost not exceeding the Maximum Annual Premium from an insurance carrier with the same or better credit rating as the Company’s current directors’ and officers’ liability insurance carrier. Prior to the Effective Time, the Company may

 

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purchase a prepaid “tail” policy with respect to the D&O Insurance so long as the annual cost for such “tail” policy does not exceed the Maximum Annual Premium. If the Company elects to purchase such a tail policy prior to the Effective Time, the Surviving Corporation will (and Parent will cause the Surviving Corporation to) maintain such “tail” policy in full force and effect and continue to honor its obligations thereunder for so long as such “tail” policy is in full force and effect and the Surviving Corporation and Parent will be relieved of their obligations to maintain in effect the D&O Insurance described above. If the Company is unable to obtain the “tail” policy and Parent or the Surviving Corporation are unable to obtain the D&O Insurance for an amount less than or equal to the Maximum Annual Premium, Parent will cause the Surviving Corporation to instead obtain as much comparable insurance as possible for an annual premium equal to the Maximum Annual Premium.

Representation on the Board of Directors

At the Effective Time, the directors of Merger Sub as of immediately prior to the Effective Time will become the directors of the Surviving Corporation, each to hold office until their respective successors are duly elected or appointed and qualified or their earlier death, resignation or removal, in each case as provided in the organizational documents of the Surviving Corporation and by applicable law.

The foregoing summaries concerning the treatment of Company Stock Options, Company RSUs, Company SARs, Company PBUs, Company Deferred Compensation Stock Units and Company Restricted Stock held by our directors and officers, employee benefits, the indemnification of our directors and offers, the insurance that will be provided for our directors and officers, and the representation on the Board of the Company does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement, which has been attached hereto as Annex A and is incorporated herein by reference.

Material United States Federal Income Tax Consequences

The following discussion is a summary of certain material U.S. federal income tax consequences to holders of shares of Company common stock upon the exchange of shares of Company common stock for cash pursuant to the Merger. This summary is general in nature and does not discuss all aspects of U.S. federal income taxation that may be relevant to a holder of shares of Company common stock in light of such holder’s particular circumstances. In addition, this summary does not describe any tax consequences arising under the laws of any state, local or non-U.S. jurisdiction and does not consider any aspects of U.S. federal tax law other than income taxation. This summary deals only with shares of Company common stock held as capital assets within the meaning of Section 1221 of the Code (i.e., generally, property held for investment) and does not address tax considerations applicable to any holder of shares of Company common stock that may be subject to special treatment under the U.S. federal income tax laws, including:

 

   

a bank, insurance company, or other financial institution;

 

   

a tax-exempt organization;

 

   

a retirement plan or other tax-deferred account;

 

   

an S corporation, a partnership or other entity or arrangement treated as a partnership for U.S. federal income tax purposes (or an investor in a partnership or S corporation);

 

   

a real estate investment trust or regulated investment company;

 

   

a dealer or broker in stocks and securities, or currencies;

 

   

a trader in securities that elects mark-to-market treatment;

 

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a holder of shares of Company common stock subject to the alternative minimum tax provisions of the Code;

 

   

a holder of shares of Company common stock that received the shares of Company common stock through the exercise of an employee stock option, through a tax qualified retirement plan or otherwise as compensation;

 

   

a U.S. holder (as defined below) that has a functional currency other than the United States dollar;

 

   

“controlled foreign corporations,” “passive foreign investment companies” or corporations that accumulate earnings to avoid U.S. federal income tax;

 

   

a person that holds the shares of Company common stock as part of a hedge, straddle, constructive sale, conversion or other risk reduction strategy or integrated transaction; or

 

   

a U.S. expatriate or a former citizen or long-term resident of the United States.

This summary is based on the Code, the Treasury Regulations promulgated under the Code, and IRS rulings and judicial decisions, all as in effect as of the date hereof, and all of which are subject to change or differing interpretations at any time, with possible retroactive effect that could adversely affect a holder of Company common stock. We have not sought, and do not intend to seek, any ruling from the IRS with respect to the statements made and the conclusions reached in the following summary, and no assurance can be given that the IRS will agree with the views expressed herein, or that a court will not sustain any challenge by the IRS in the event of litigation.

THE DISCUSSION SET OUT HEREIN IS INTENDED ONLY AS A GENERAL SUMMARY OF THE MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO A HOLDER OF SHARES OF COMPANY COMMON STOCK. WE URGE YOU TO CONSULT YOUR OWN TAX ADVISOR WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES TO YOU IN CONNECTION WITH THE MERGER IN LIGHT OF YOUR OWN PARTICULAR CIRCUMSTANCES, INCLUDING U.S. FEDERAL ESTATE, GIFT AND OTHER NON-INCOME TAX CONSEQUENCES, AND TAX CONSEQUENCES UNDER STATE, LOCAL OR NON-U.S. TAX LAWS OR ANY APPLICABLE INCOME TAX TREATIES.

For purposes of this discussion, the term “U.S. holder” is a beneficial owner of shares of Company common stock that is, for U.S. federal income tax purposes:

 

   

an individual citizen or resident of the United States;

 

   

a corporation (or any other entity or arrangement treated as a corporation for United States federal income tax purposes) organized in or under the laws of the United States or any state thereof or the District of Columbia;

 

   

an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or

 

   

a trust if (a) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more “United States” persons (within the meaning of Section 7701(a)(30) of the Code) have the authority to control all substantial decisions of the trust or (b) the trust has validly elected to be treated as a United States person for U.S. federal income tax purposes.

 

   

A “non-U.S. holder” is any beneficial owner of shares of Company common stock that is neither a U.S. holder nor a partnership (or other entity treated as a partnership for U.S. federal income tax purposes).

 

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If a partnership (including any entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds shares of Company common stock, the tax treatment of a partner in the partnership generally will depend upon the status of the partner, the activities of the partnership and certain determinations made at the partner level. Accordingly, partnerships holding shares of Company common stock should consult its own tax advisor regarding the U.S. federal income tax consequences of exchanging the shares of Company common stock pursuant to the merger.

U.S. Holders

Payments with Respect to Shares of Company Common Stock

The exchange of shares of Company common stock for cash pursuant to the Merger will be a taxable transaction for U.S. federal income tax purposes. A U.S. holder who receives cash for shares of Company common stock pursuant to the Merger will recognize gain or loss, if any, equal to the difference between the amount of cash received and the U.S. holder’s adjusted tax basis in the shares of Company common stock exchanged therefor. Gain or loss will be determined separately for each block of shares of Company common stock (i.e., shares of Company common stock acquired at the same cost in a single transaction). Such gain or loss will be capital gain or loss, and will be long-term capital gain or loss if such U.S. holder’s holding period for the shares of Company common stock is more than one year at the time of the exchange. Long-term capital gain recognized by certain U.S. holders, including individuals, generally is subject to tax at a lower rate than short-term capital gain or ordinary income. There are limitations on the deductibility of capital losses.

Medicare Tax

A U.S. holder that is an individual or estate, or a trust that does not fall into a special class of trusts that is exempt from such tax, is subject to a 3.8% tax on the lesser of (1) the U.S. holder’s “net investment income” (or “undistributed net investment income” in the case of an estate or trust) for the relevant taxable year and (2) the excess of the U.S. holder’s modified adjusted gross income for the taxable year over a certain threshold (which in the case of individuals is between $125,000 and $250,000, depending on the individual’s circumstances). A holder’s net investment income generally will include net gains recognized from the disposition of shares of Company common stock in the Merger. A U.S. holder that is an individual, estate or trust is urged to consult its own tax advisors regarding the applicability of the Medicare tax to its recognized gains in respect of any shares of Company common stock such holder disposes of in the Merger.

Information Reporting and Backup Withholding

A U.S. holder may be subject to information reporting and backup withholding at the applicable rate (currently 24%) with respect to the proceeds from the disposition of shares of Company common stock pursuant to the Merger. Certain U.S. holders are exempt from backup withholding, including corporations. A U.S. holder will not be subject to backup withholding if the U.S. holder provides a valid taxpayer identification number, which for an individual is ordinarily his or her social security number, and complies with certain certification procedures (generally, by providing a properly completed and executed IRS Form W-9) or otherwise establishes an exemption from backup withholding.

Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules from a payment to a U.S. holder may be allowed as a credit against the U.S. holder’s U.S. federal income tax liability and any overpayment may entitle the U.S. holder to a refund, if the required information is timely furnished to the IRS. Each U.S. holder should complete and sign the IRS Form W-9, which will be included with the letter of transmittal to be returned to the paying agent, to provide the information and certification necessary in order for the U.S. Holder not to be subject to backup withholding, unless an exemption applies and is established in a manner satisfactory to the paying agent.

 

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Non-U.S. Holders

Payments with Respect to Shares of Company Common Stock

Payments made to a non-U.S. holder with respect to shares of Company common stock exchanged for cash pursuant to the Merger generally will not be subject to U.S. federal income tax on any gain realized upon the exchange of the shares of the Company common stock unless:

 

   

the non-U.S. holder is an individual who was present in the United States for 183 days or more during the taxable year of the exchange and certain other conditions are met;

 

   

the gain is effectively connected with the non-U.S. holder’s conduct of a trade or business in the United States, and, if required by an applicable income tax treaty, attributable to a permanent establishment maintained by the non-U.S. holder in the United States; or

 

   

the Company is or has been a United States real property holding corporation, (“USRPHC”), for U.S. federal income tax purposes at any time during the shorter of the five-year period ending on the date of exchange of the shares of Company common stock or the period that the non-U.S. holder held shares of Company common stock.

A non-U.S. holder described in the first bullet point above generally will be subject to U.S. federal income tax at a flat rate of 30% (or such lower rate as may be specified under an applicable income tax treaty) on any gain from the exchange of the shares of Company common stock, which may be offset by U.S. source losses of the non-U.S. holder, provided the non-U.S. holder has timely filed U.S. federal income tax returns with respect to such losses.

Unless an applicable income tax treaty provides otherwise, gain described in the second bullet point above will be subject to U.S. federal income tax on a net income basis in the same manner as if the non-U.S. holder were a United States person. Non-U.S. holders that are corporations also may be subject to a branch profits tax at a rate of 30% (or applicable lower rate under an applicable income tax treaty) in respect of effectively connected gains, as adjusted for certain items.

With respect to the third bullet point above, the determination of whether the Company is a USRPHC depends on the fair market value of its United States real property interests relative to the fair market value of its other trade or business assets. The Company believes it is not and has not been a USRPHC for U.S. federal income tax purposes during the time period described above; however, it has not undertaken a formal determination. If you are a non-U.S. holder and held (actually or constructively) more than five percent (5%) of the shares of Company common stock at any time during the five-year period immediately preceding the date you exchange your shares and we are a USRPHC, any gain you recognize on the exchange of your shares will be treated as income that is effectively connected to a U.S. trade or business, and subject to United States federal income tax on a net income basis in the same manner as if the non-U.S. holder were a resident of the United States. However, if you are a non-U.S. holder that owns (actually or constructively) five percent or less of the shares of Company common stock at all times during the five-year period ending on the date of disposition, because the shares of Company common stock are regularly traded on an established securities market (within the meaning of applicable Treasury Regulations), even if the Company constitutes a USRPHC, any gain realized on the receipt of cash for shares of Company common stock pursuant to the merger generally will not be subject to United States federal income tax.

Non-U.S. holders are urged to consult their own tax advisors regarding these rules and any applicable tax treaties that may provide for different results.

Information Reporting and Backup Withholding

A non-U.S. holder may be subject to information reporting and backup withholding at the applicable rate (currently 24%) with respect to the proceeds from the exchange of shares of Company common stock pursuant to the Merger. A non-U.S. holder can avoid being subject to backup withholding by certifying on an appropriate IRS Form W-8 that such non-U.S. holder is not a United States person, or by otherwise establishing an exemption in a manner satisfactory to the paying agent. Proceeds from the exchange of shares of Company common stock pursuant to the Merger conducted through a non-U.S. office of a non-U.S. broker generally will not be subject to backup withholding or information reporting. Non-U.S. holders should consult their own tax advisors regarding the certification requirements for non-United States persons.

 

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Information provided by a non-U.S. holder may be disclosed to such non-U.S. holder’s local tax authorities under an applicable tax treaty or information exchange agreement.

Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against the non-U.S. holder’s United States federal income tax liability, if the required information is timely furnished to the IRS.

Additional Withholding Tax on Payments Made to Foreign Accounts

Withholding taxes may be imposed under Sections 1471 to 1474 of the Code (such Sections commonly referred to as the Foreign Account Tax Compliance Act, or “FATCA”) on certain types of payments made to non-U.S. financial institutions and certain other non-U.S. entities. Specifically, subject to the proposed Treasury Regulations discussed below, a 30% withholding tax may be imposed on the proceeds from the exchange of shares of Company common stock pursuant to the Merger paid to a “foreign financial institution” or a “non-financial foreign entity” (each as defined in the Code), unless (1) the foreign financial institution undertakes certain diligence and reporting obligations, (2) the non-financial foreign entity either certifies it does not have any “substantial United States owners” (as defined in the Code) or furnishes identifying information regarding each substantial United States owner, or (3) the foreign financial institution or non-financial foreign entity otherwise qualifies for an exemption from these rules. If the payee is a foreign financial institution and is subject to the diligence and reporting requirements in (1) above, it must enter into an agreement with the U.S. Department of the Treasury requiring, among other things, that it undertake to identify accounts held by certain “specified United States persons” or “United States owned foreign entities” (each as defined in the Code), annually report certain information about such accounts, and withhold 30% on certain payments to non-compliant foreign financial institutions and certain other account holders. Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing FATCA may be subject to different rules.

While withholding under FATCA would have applied to payments of gross proceeds from the sale or other disposition of stock, proposed Treasury Regulations eliminate FATCA withholding on payments of gross proceeds entirely. Taxpayers generally may rely on these proposed Treasury Regulations until final Treasury Regulations are issued.

Holders of shares of Company common stock should consult their own tax advisors regarding the potential application of withholding under FATCA to the proceeds from the exchange of shares of Company common stock pursuant to the merger.

THE FOREGOING SUMMARY DOES NOT DISCUSS ALL ASPECTS OF U.S. FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO PARTICULAR HOLDERS OF SHARES OF COMPANY COMMON STOCK. HOLDERS OF SHARES OF COMPANY COMMON STOCK SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF EXCHANGING THEIR SHARES OF COMPANY COMMON STOCK FOR CASH IN THE MERGER UNDER ANY U.S. FEDERAL, STATE, LOCAL, NON-U.S. OR OTHER TAX LAWS OR ANY APPLICABLE INCOME TAX TREATIES.

Regulatory Approvals and Notices

United States Antitrust Compliance. Under the HSR Act, and the related rules and regulations that have been issued by the Federal Trade Commission (the “FTC”), certain acquisition transactions may not be consummated until required information and documentary material has been furnished for review by the FTC and the Antitrust Division of the DOJ (the “DOJ”) and applicable waiting period requirements have been satisfied. These requirements apply to Parent’s acquisition of the shares of the Company’s common stock in the Merger.

 

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PROPOSAL 1

ADOPTION OF THE MERGER AGREEMENT

The following summary describes the material provisions of the Merger Agreement. The descriptions of the Merger Agreement in this summary and elsewhere in this proxy statement are not complete and are qualified in their entirety by reference to the Merger Agreement, a copy of which is attached to this proxy statement as Annex A and incorporated into this proxy statement by reference. You should carefully read and consider the entire Merger Agreement, which is the legal document that governs the Merger, because this summary may not contain all the information about the Merger Agreement that is important to you. The rights and obligations of the parties are governed by the express terms of the Merger Agreement and not by this summary or any other information contained in this proxy statement.

The representations, warranties, covenants and agreements described below and included in the Merger Agreement (1) were made only for purposes of the Merger Agreement and as of specific dates, (2) were made for the benefit of the parties to the Merger Agreement, and (3) may be subject to important qualifications, limitations and supplemental information agreed to by the Company, Parent and Merger Sub in connection with negotiating the terms of the Merger Agreement. In addition, the representations and warranties may have been included in the Merger Agreement for the purpose of allocating contractual risk between the Company, Parent and Merger Sub rather than to establish matters as facts, and may be subject to standards of materiality applicable to such parties that differ from those applicable to investors. Shareholders are not third-party beneficiaries under the Merger Agreement and should not place undue reliance on the representations, warranties, covenants and agreements or any descriptions thereof as characterizations of the actual state of facts or condition of the Company, Parent or Merger Sub or any of their respective affiliates or businesses. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in the Company’s public disclosure. In addition, you should not place undue reliance on the covenants in the Merger Agreement as actual limitations on the respective businesses of the Company, Parent and Merger Sub, because the parties may take certain actions that are either expressly permitted in the confidential disclosure letter to the Merger Agreement or as otherwise consented to by the appropriate party, which consent may be given without prior notice to the public. The Merger Agreement is described below, and included as Annex A, only to provide you with information regarding its terms and conditions, and not to provide any other factual information regarding the Company, Parent, Merger Sub or their respective businesses. Accordingly, the representations, warranties, covenants and other agreements in the Merger Agreement should not be read alone, and you should read the information provided elsewhere in this proxy statement and in the Company’s filings with the SEC regarding the Company and its business.

Effects of the Merger

The Merger Agreement provides that, subject to the terms and conditions of the Merger Agreement, and in accordance with the GBCC, at the Effective Time, Merger Sub will be merged with and into the Company. As a result of the Merger, the separate corporate existence of Merger Sub will cease, and the Company will be the Surviving Corporation and will become a wholly-owned subsidiary of Parent. The Surviving Corporation will continue to do business following the Merger and all of the property, rights, privileges, powers and franchises of the Company and Merger Sub will vest in the Surviving Corporation and the debts, liabilities and duties of the Company and Merger Sub will become the debts, liabilities and duties of the Surviving Corporation.

Articles of Incorporation; Bylaws; Directors and Officers of the Surviving Corporation

At the Effective Time, the Company’s Amended and Restated Articles of Incorporation as in effect prior to the Effective Time will be amended and restated in their entirety to read substantially identically to the articles of incorporation of Merger Sub as in effect immediately prior to the Effective Time, and such Amended and Restated Articles of Incorporation, as amended, will become the articles of incorporation of the Surviving Corporation, provided, however, that, at the Effective Time, the articles of incorporation of the Surviving Corporation will be amended so that the name of the Surviving Corporation will be “PRGX Global, Inc.”. At the Effective Time, the bylaws of Merger Sub, as in effect immediately prior to the Effective time, will become the bylaws of the Surviving Corporation, except that all reference to Merger Sub will automatically be amended to become references to the Surviving Corporation. The directors and officers of Merger Sub immediately prior to the Effective Time will become the directors and officers of the Surviving Corporation, each holding office until their respective successors are duly elected or appointed and qualified or their earlier death, resignation or removal, in each case as provided in the organizational documents of the Surviving Corporation and by applicable law.

 

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Closing and Effective Time

The closing of the Merger will take place (1) on a date to be agreed upon by Parent, Merger Sub and the Company that is no later than the third business day after the satisfaction or waiver of all conditions to the closing of the Merger described below; provided, however, that in no event will Parent or Merger Sub be obligated to consummate the closing of the Merger if the Marketing Period (as defined in the Merger Agreement) has not ended prior to the time that the closing of the Merger would otherwise have occurred pursuant to the foregoing, in which case the closing of the Merger will not occur until the earlier to occur of (x) a date before or during the Marketing Period specified by Parent, in its sole and absolute discretion, on three (3) business days written notice to the Company and (y) three (3) business days following the expiration of the Marketing Period in accordance with its terms; or (2) such other time, location and date as Parent, Merger Sub and the Company mutually agree in writing.

Merger Consideration

Common Shares

At the Effective Time, each outstanding share of Company common stock (excluding shares (i) held directly by the Company, Parent or Merger Sub as of immediately prior to the Effective Time (collectively, the “Owned Company Shares”), (ii) owned by any direct or indirect wholly-owned subsidiary of the Company or Parent (other than Merger Sub) as of immediately prior to the Effective Time (collectively, the “Converted Company Shares”) or (iii) held by any shareholder of the Company who or which is entitled to dissenters’ rights under Article 13 of the GBCC and properly exercises and perfects dissenters’ rights of such shares pursuant to, and complies in all respects with, the applicable provisions of the GBCC) will be converted into the right to receive the Per Share Price in cash without interest and less any applicable withholding taxes. All Shares converted into the right to receive the Per Share Price shall automatically be canceled and cease to exist.

Treatment of Dissenting Common Shares

Shares of Company common stock that are issued and outstanding immediately prior to the Effective Time and are held by a shareholder who is entitled to demand, and has demanded and properly exercised dissenters’ rights with respect to such shares pursuant to, and who complies in all respects with, the provisions of the GBCC, will not be converted into the right to receive the Price Per Share. At the Effective Time, such dissenting shareholders will cease to have any rights to such shares of Company common stock except for the right to receive payment of the fair value of such shares as may be determined to be due in accordance with the GBCC, as described in the section of this proxy statement entitled “Dissenters’ Rights.” All such shares of Company common stock that are shares held by any dissenting shareholder who will have failed to perfect or who otherwise will have withdrawn, in accordance with the GBCC, or lost such dissenting shareholder’s rights to demand payment in respect of such shares of Company common stock under the GBCC, will thereupon be deemed to have been converted into the right to receive, without any interest thereon, the Price Per Share, without interest and less applicable withholding taxes.

Treatment of Equity Awards

 

   

Company Stock Options. Parent will not assume any Company Stock Options. At the Effective Time, any outstanding Company Stock Options, whether vested or unvested, will be cancelled and converted into the right to receive a cash payment, without interest, equal to (i) the amount of the Per Share Price, less the exercise price per share attributable to such Company Stock Options multiplied by (ii) the total number of shares of Company common stock then issuable upon exercise in full of such Company Stock Options, less any required withholding taxes. With respect to Company Stock Options which have an exercise price equal to or greater than the Per Share Price, such Company Options will be cancelled without any cash payment being made in respect thereof.

 

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Company RSUs. Parent will not assume any Company RSUs. At the Effective Time, all outstanding Company RSU awards whether vested or unvested, will be cancelled and converted into the right to receive a cash payment, without interest, equal to (i) the amount of the Per Share Price multiplied by (ii) the total number of shares of Company common stock subject to such Company RSU award, less any required withholding taxes.

 

   

Company SARs. Parent will not assume any Company SARs. At the Effective Time, all outstanding Company SAR awards for which the exercise price per share is less than the Per Share Price whether vested or unvested, will be cancelled and converted into the right to receive a cash payment, without interest, equal to (i) the amount of the Per Share Price (less the exercise price per share attributable to such Company SAR) multiplied by (ii) the total number of shares of Company common stock to which such Company SAR award relates, less any required withholding taxes.

 

   

Company PBUs. Parent will not assume any Company PBUs. At the Effective Time, all outstanding Company PBU awards, whether vested or unvested, will be cancelled and converted into the right to receive a cash payment, without interest, equal to (i) the amount of the Per Share Price multiplied by (ii) the total number of shares of Company common stock subject to such Company PBU award, less any required withholding taxes. The number of shares of Company common stock subject to a PBU with performance-based vesting will be deemed to be the number of shares eligible to vest assuming target performance.

 

   

Company Restricted Stock. Parent will not assume any Company Restricted Stock. At the Effective Time, all outstanding awards of Company Restricted Stock, whether vested or unvested, will be vest in full and be converted into the right to receive a cash payment, without interest, equal to (i) the amount of the Per Share Price multiplied by (ii) the total number of shares of Company common stock to which such Company Restricted Stock award relates, less any required withholding taxes.

 

   

Company Deferred Compensation Stock Unit. As of the Effective Time, in accordance with the terms of the Directors Plan, the Company will take all actions reasonably necessary to provide that (i) the Directors Plan is terminated as of the Effective Time, (ii) no director will be eligible to participate in the Directors Plan after the Effective Time, (iii) the Deferral Account (as defined in the Directors Plan) of each director participating in the Directors Plan will be distributed to each such director, including each Company Deferred Compensation Stock Unit (the value of which shall be determined based on the Per Share Price) will be distributed to each such director, provided that such termination and all the related foregoing actions will be contingent upon the occurrence of the Effective Time. Additionally, if any outstanding Company RSUs granted to a director of the Company prior to the Effective Time are subject to a deferral election under the Directors Plan, such Company RSUs will be deemed to have been deferred into the Directors Plan in accordance with the applicable deferral election and then distributed to the director in payment of his or her Deferral Account as of the Effective Time.

Payment for Shares

Before the Effective Time, but not less than ten (10) business days prior to the date on which the consummation of the Merger actually occurs (the “Closing Date”), Parent and the Company will jointly select a Paying Agent to make payment of the Merger Consideration. At or prior to the closing of the Merger, Parent will irrevocably deposit, or cause to be deposited, with the Paying Agent, cash equal to the aggregate consideration to which holders of Company common stock become entitled to pursuant to the Merger Agreement.

Promptly after the Effective Time (and in any event within (3) business days), Parent and the Surviving Corporation will cause the Paying Agent to mail to each holder of record as of immediately prior to the Effective Time (other than holders of Owned Company Shares and Converted Company Shares) of (i) a Certificate or Certificates; and (ii) Uncertificated Shares (A) in the case of Certificates, a letter of transmittal in customary form

 

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(which will specify that delivery will be effected, and risk of loss and title to the Certificates will pass, only upon delivery of the Certificates to the Paying Agent; and (B) in the case of Certificates and Uncertificated Shares, instructions for effecting the surrender of the Certificates and Uncertificated Shares in exchange for payment of the Merger Consideration payable in respect thereof. Upon surrender of Certificates for cancellation to the Paying Agent, together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, the holders of such Certificates will be entitled to receive an amount in cash equal to (x) the aggregate number of shares of Company common stock represented by each such Certificate, multiplied by (y) the Per Share Price, less any required withholding taxes. Any surrendered Certificates will subsequently be cancelled. In the case of a book-entry transfer of Uncertificated Shares, upon receipt of an “agent’s message” by the Paying Agent (or such other evidence, if any, of transfer as the Paying Agent may reasonably request), the holders of such Uncertificated Shares will be entitled to receive in exchange therefor an amount in cash equal to (1) the aggregate number of shares of Company common stock represented by such holder’s transferred Uncertificated Shares multiplied by (2) the Per Share Price, less any required withholding taxes. The transferred Uncertificated Shares so surrendered will subsequently be cancelled.

If any cash deposited with the Payment Agent is not claimed within one (1) year after the Effective Time, such cash will be returned, upon demand, to Parent (or the Surviving Corporation as directed by Parent), together with any interest or other income received with respect to the Payment Fund, and any holders of Company common stock that were issued and outstanding immediately prior to the Merger who have not complied with the exchange procedures in the Merger Agreement will thereafter look only to Parent, as general creditors thereof, for any claim to the Merger Consideration. Any cash deposited with the Payment Agent that remains unclaimed by holders of Certificates or Uncertificated Shares immediately prior to the time at which such amounts would otherwise escheat to, or become the property of, any governmental authority, will, to the extent permitted by applicable law, become the property of the Surviving Corporation free and clear of any claims or interest of any person previously entitled thereto.

You will not be entitled to receive the Merger Consideration until you deliver all required documentation to the Paying Agent. You should not return your Certificates with the enclosed proxy card, and you should not forward your Certificates to the Paying Agent without a letter of transmittal.

Representations and Warranties

The Merger Agreement contains representations and warranties of the Company, Parent and Merger Sub.

In the Merger Agreement, the Company has made customary representations and warranties to Parent and Merger Sub that are subject, in some cases, to specified exceptions and qualifications contained in the Merger Agreement. These representations and warranties relate to, among other things:

 

   

due organization, valid existence, good standing and authority and qualification to conduct business with respect to the Company and its subsidiaries;

 

   

the organizational documents of the Company and its subsidiaries;

 

   

the Company’s power and authority to enter into and perform the Merger Agreement and to consummate the Merger;

 

   

the necessary approvals of the Board;

 

   

the rendering of Truist Securities’ fairness opinion to the Board;

 

   

the inapplicability of anti-takeover statutes to the Merger;

 

   

the necessary vote of shareholders of the Company in connection with the Merger Agreement;

 

   

the absence of any conflict or violation of organizational documents of the Company or certain subsidiaries, or existing contracts of, or laws applicable to, or permits held by, the Company or its subsidiaries, or the resulting creation of any lien upon the Company’s properties or assets (or any properties or assets of any of the Company’s subsidiaries) due to the execution and delivery of the Merger Agreement by the Company, the performance by the Company thereof and the consummation of the Merger;

 

   

required consent, approval, order or authorization of, filing or registration with, or notification to any person or governmental authority in connection with the execution and delivery of the Merger Agreement by the Company, the performance by the Company thereof and the consummation of the Merger;

 

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the capitalization and outstanding equity awards of the Company;

 

   

the absence of any undisclosed security, option, warrant or other right exchangeable for or convertible into shares of common stock (except for the Company RSUs, Company PBUs, Company SARs, Company Stock Options, Company Restricted Stock, Deferred Compensation Stock Units and the Deferral Accounts under the Directors Plan);

 

   

the absence of any contract relating to the voting of, requiring registration of, or granting any preemptive rights, anti-dilutive rights or rights of first refusal or other similar rights with respect to any of the Company’s securities and the absence of preemptive rights, anti-dilutive rights or rights of first refusal or other similar rights with respect to any Company securities;

 

   

the Company’s subsidiaries;

 

   

the accuracy, compliance with law and required filings of certain of the Company’s SEC filings and financial statements;

 

   

the Company’s financial statements;

 

   

the Company’s disclosure controls and procedures;

 

   

the Company’s internal accounting controls and procedures;

 

   

the absence of any undisclosed joint ventures, off-balance sheet partnership, or any similar contract or arrangement or any off-balance sheet arrangements;

 

   

the Company not engaging in any material transactions with respect to its, or any of its subsidiaries, business or operations, maintaining any bank account therefor or using any funds of the Company or any of its subsidiaries in the conduct thereof that are not reflected in the normally maintained books and records of the business or where all necessary corporate or company actions and/or approvals, as applicable, have not been obtained;

 

   

the Company not applying for or accepting either any loan pursuant to the Paycheck Protection Program in Sections 1102 and 1106 of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), respectively, any funds pursuant to the Economic Injury Disaster Loan program or an advance on an Economic Injury Disaster Loan pursuant to Section 1110 of the CARES Act, or any loan or funds from similar applicable laws enacted in response to the coronavirus (“COVID-19”) pandemic;

 

   

the absence of certain undisclosed liabilities;

 

   

the absence of certain changes in the conduct of the business of the Company and its subsidiaries in the ordinary course of business since December 31, 2019, the Company’s compliance with certain forbearance covenants made in the Merger Agreement since December 31, 2019 and the absence of a Company Material Adverse Effect since December 31, 2019;

 

   

the existence and validity of specified categories of the Company’s and certain of its subsidiaries’ material contracts, and absence of breach or default pursuant to any such material contracts;

 

   

relationships with certain customers and suppliers;

 

   

real property owned, leased or subleased by the Company and its subsidiaries;

 

   

personal property owned or leased by the Company and its subsidiaries;

 

   

environmental matters;

 

   

intellectual property, computer systems and data privacy matters;

 

   

tax matters;

 

   

employee benefit plans;

 

   

labor matters;

 

   

the Company’s and its subsidiaries’ compliance with laws and possession of necessary permits;

 

   

accuracy of information in this proxy statement and any other required company filing with the SEC in connection with the Merger;

 

   

litigation matters;

 

   

insurance matters;

 

   

accounts receivables of the Company and its subsidiaries;

 

   

absence of certain contracts, transactions, arrangements or understandings between the Company or any of its subsidiaries and any Affiliate or related person;

 

   

sufficiency of assets leased or owned by the by the Company and its subsidiaries;

 

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payment of fees to brokers in connection with the Merger Agreement;

 

   

anti-corruption matters and compliance with various applicable laws including the Foreign Corrupt Practices Act of 1977;

 

   

matters regarding government contracts and government bids; and

 

   

trade control matters, including compliance with all applicable statutory and regulatory requirements under export control and sanctions laws and the absence of legal proceedings pertaining to the Company’s or any of its subsidiaries’ export transactions.

Some of the representations and warranties in the Merger Agreement made by the Company are qualified as to “materiality” or “Company Material Adverse Effect.” For purposes of the Merger Agreement, “Company Material Adverse Effect” means any change, event, development, circumstance or effect (each, an “Effect”) that, individually or taken together with all other Effects that have occurred prior to the date of determination of the occurrence of the Company Material Adverse Effect, (i) has had or would reasonably be expected to have a materially adverse effect on the business, assets, financial condition or results of operations of the Company and its subsidiaries, taken as a whole; or (ii) prevents or materially impairs or delays, or would reasonably be expected to prevent or materially impair or delay, the ability of the Company to perform its material obligations under this Agreement or to consummate the Merger and the transactions contemplated hereby; provided, however, that none of the following, and no Effects arising out of or resulting from the following (in each case, by itself or when aggregated) will be deemed to be or constitute a Company Material Adverse Effect or will be taken into account when determining whether a Company Material Adverse Effect has occurred or may, would or could occur (subject to the limitations set forth below):

 

   

changes in general economic conditions, or changes in conditions in the global, international or regional economy generally;

 

   

changes in conditions in the financial markets, credit markets or capital markets in the United States or any other country or region of the world, including (A) changes in interest rates or credit ratings; (B) changes in exchange rates for the currencies of any country; or (C) any suspension of trading in securities (whether equity, debt, derivative or hybrid securities) generally on any securities exchange or over-the-counter market;

 

   

changes in conditions in the industries in which the Company and its subsidiaries conduct business;

 

   

any geopolitical conditions, outbreak of hostilities, acts of war, sabotage, cyberterrorism (including by means of cyber-attack by or sponsored by a Governmental Authority), terrorism or military actions (including any escalation or general worsening of any such hostilities, acts of war, sabotage, cyberterrorism, terrorism or military actions);

 

   

earthquakes, volcanic activity, hurricanes, tsunamis, tornadoes, floods, mudslides, wild fires or other natural disasters, force majeure events, weather conditions, epidemics, plagues, pandemics (including COVID-19 and any action taken by the Company directly in response to COVID-19, including any compliance with any quarantine, “shelter in place,” “stay at home,” social distancing, shut down, closure, sequester, safety or similar applicable law, directive, guidelines or recommendations promulgated by any Governmental Authority, including the Centers for Disease Control and Prevention and the World Health Organization) or other outbreaks of illness or public health events and other similar events in the United States or any other country or region of the world;

 

   

changes in regulatory, legislative or political conditions in the United States or any other country or region of the world;

 

   

any Effect resulting from the announcement of the Merger Agreement or the pendency or consummation of the transactions contemplated by the Merger Agreement, including the impact thereof on the relationships, contractual or otherwise, of the Company and its subsidiaries with employees, suppliers, lenders, lessors, customers, partners, regulators, governmental authorities, vendors or any other third person (provided, however, that this clause will not apply to the Company’s representation and warranty with respect to the absence of conflicts with the Company’s organizational documents and the Company’s contracts);

 

   

the compliance by any party with the terms of the Merger Agreement, including any action taken or refrained from being taken pursuant to or in accordance with the Merger Agreement;

 

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any action taken or refrained from being taken, in each case to which Parent has expressly approved, consented to or requested in writing following the date of the Merger Agreement;

 

   

changes or proposed changes in GAAP or other accounting standards or in any applicable laws (or the enforcement or interpretation of any of the foregoing);

 

   

changes in the price or trading volume of the Company common stock, in and of itself (it being understood that any cause of such change may be deemed to constitute, in and of itself, a Company Material Adverse Effect and may be taken into consideration when determining whether a Company Material Adverse Effect has occurred);

 

   

any failure, in and of itself, by the Company and its subsidiaries to meet (A) any public estimates or expectations of the Company’s revenue, earnings or other financial performance or results of operations for any period; or (B) any budgets, plans, projections or forecasts of its revenues, earnings or other financial performance or results of operations (it being understood that in the case of each of (A) and (B) any cause of any such failure may be deemed to constitute, in and of itself, a Company Material Adverse Effect and may be taken into consideration when determining whether a Company Material Adverse Effect has occurred);

 

   

the unavailability or cost of equity, debt or other financing to Parent or Merger Sub;

 

   

any shareholder litigation related to the Merger or other legal proceeding threatened, made or brought by any of the current or former shareholders of the Company (on their own behalf or on behalf of the Company) against the Company, any of its executive officers or other employees or any member of the Board arising out of the Merger (it being understood that the underlying facts related to such legal proceeding may be taken into consideration when determining whether a Company Material Adverse Effect has occurred); and

 

   

any matters expressly disclosed by the Company in its disclosure letter delivered to Parent and Merger Sub.

In the Merger Agreement, Parent and Merger Sub have made customary representations and warranties to the Company with respect to, among other things:

 

   

due organization, good standing and authority and power to conduct business with respect to Parent and Merger Sub, and availability of the organizational documents of Parent and Merger Sub;

 

   

Parent and Merger Sub’s power and authority to enter into and perform the Merger Agreement and the enforceability of the Merger Agreement;

 

   

the absence of any conflict or violation of any organizational documents, existing contracts, applicable laws or the resulting creation of any lien upon Parent’s or Merger Sub’s properties or assets due to the Merger Agreement and the performance thereof;

 

   

required governmental consents and regulatory filings in connection with the Merger Agreement;

 

   

the absence of certain litigation, orders and investigations;

 

   

ownership of common stock of the Company;

 

   

payment of fees by Parent and Merger Sub to brokers in connection with the Merger;

 

   

operations of Parent and Merger Sub;

 

   

the absence of any required consent of holders of any capital stock of, or other equity or voting interests in, Parent and the approval of Parent as the only approval of the capital stock interests of Merger Sub necessary to approve the Merger Agreement;

 

   

the Guarantee delivered by the Guarantor concurrently with the execution and delivery of the Merger Agreement;

 

   

matters with respect to Parent and Guarantor’s financing and sufficiency of funds;

 

   

the absence of any arrangements with any shareholder, director, officer, employee or other Affiliate of the Company related to the Merger;

 

   

the solvency of the Surviving Corporation and its subsidiaries following the consummation of the Merger and the transactions contemplated by the Merger Agreement;

 

   

the terms of the representations and warranties made by the Parent, Merger Sub and the Company; and

 

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accuracy of information supplied by Parent or Merger Sub for inclusion in this proxy statement or other required Company filings.

None of the representations and warranties contained in the Merger Agreement survives the consummation of the Merger.

Conduct of Business of the Company

The Merger Agreement provides that, except as (i) contemplated by the Merger Agreement, (ii) required by applicable law, (iii) set forth in the disclosure letter delivered by the Company to Parent and Merger Sub on the date of the Merger Agreement, or (iv) approved by Parent (which approval shall not be unreasonably withheld, conditioned or delayed), at all times from the date of the Merger Agreement and continuing until the earlier to occur of the valid termination of the Merger Agreement and the Effective Time, the Company shall, and shall cause its subsidiaries to:

 

   

subject to the restrictions and exceptions in the Merger Agreement, conduct its business and operations in the ordinary course of normal operations of the business of the Company and its subsidiaries, taken as a whole, consistent with past practices through the date of the Merger Agreement (“Ordinary Course of Business”);

 

   

with respect to the Company and each of its material subsidiaries, maintain its existence in good standing pursuant to applicable law;

 

   

maintain its cash management policies and practices; and

 

   

use its reasonable best efforts to preserve intact, in all material respects, its business organization, material assets and existing relationships with customers, suppliers, and governmental authorities.

The Company has also agreed that, until the Effective Time, except as (i) set forth in the disclosure schedule that the Company delivered to Parent and Merger Sub on the date of the Merger Agreement, (ii) approved in writing by Parent (which approval shall not be unreasonably withheld, conditioned or delayed), (iii) required by applicable law, or (iv) as expressly contemplated by the terms of the Merger Agreement, all times from the date of the Merger Agreement and continuing until the earlier to occur of the valid termination of the Merger Agreement and the Effective Time, the Company shall not (and shall cause each of its subsidiaries to not):

 

   

amend, modify, waive, rescind or otherwise change the Company’s charter, its bylaws or any organizational document of the Company or any of its subsidiaries;

 

   

propose or adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization;

 

   

issue, sell, deliver or agree or commit to issue, sell or deliver any Company Securities (as defined in the Merger Agreement);

 

   

acquire, repurchase or redeem any Company Securities;

 

   

adjust, split, combine or reclassify any shares of capital stock, or issue or authorize or propose the issuance of any other Company Securities in respect of, in lieu of or in substitution for, shares of its capital stock or other equity or voting interest;

 

   

declare, set aside or pay any dividend or other distribution;

 

   

pledge or encumber any shares of its capital stock or other equity or voting interest, modify the terms of any shares of its capital stock or other equity or voting interest, or enter into any agreement with respect to the voting or registration of shares of Company Securities;

 

   

incur, assume or suffer any indebtedness or issue any debt securities;

 

   

assume, guarantee, endorse or otherwise become liable or responsible for the obligations of any other person, except with respect to obligations of direct or indirect wholly owned subsidiaries of the Company;

 

   

make any loans, advances or capital contributions to, or investments in, any other person;

 

   

mortgage or pledge any assets, tangible or intangible, or create or suffer to exist any lien thereupon;

 

   

enter into, adopt, amend (including acceleration of vesting), modify, or terminate any Employee Plan or plan, agreement or arrangement that would constitute an Employee Plan if in effect as of the date of the Merger Agreement or fund or in any other way secure the payment, of compensation or benefits under any Employee Plan;

 

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increase the compensation or benefits of, or grant or provide any severance or termination payments or benefits to, any director, officer, individual independent contractor or former or current employee of the Company or of any of its subsidiaries;

 

   

grant any new equity awards, or amend or modify the terms of any outstanding equity awards (including, without limitation, any Company RSUs, Company PBUs, Company SARs, Company Restricted Stock, Company Options and Deferred Compensation Stock Units;

 

   

forgive any loans, issue any loans or advance any loans to any current or former director, officer or employee;

 

   

promote, demote, hire or engage any officer, director or employee or engage any individual independent contractor;

 

   

terminate the employment or engagement (other than for cause) of any officer, director, employee or individual independent contractor;

 

   

change any actuarial or other assumptions used to calculate funding obligations with respect to any Employee Plan that is required by applicable law to be funded by actuarial calculations or change the manner in which contributions to such plans are made or the basis on which such contributions are determined, except as may be required by GAAP;

 

   

provide any other compensation or other benefits to any current or former director, officer or employee;

 

   

revalue in any material respect any of its properties or assets, including writing off notes or accounts receivable, other than in the Ordinary Course of Business; or make any material change in any accounting principles or practices (except as required by applicable law or GAAP);

 

   

settle any pending or threatened material legal proceeding;

 

   

make, change or revoke any material tax election, settle or compromise any material tax claim, audit, proceeding or assessment, change any tax accounting period, or change any tax accounting method;

 

   

incur or commit to incur any capital expenditures;

 

   

enter into, modify in any material respect, amend in any material respect, terminate, cancel or waive any material right or claim under any (A) contract that if so entered into, modified, amended or terminated (other than any Material Contract (as defined in the Merger Agreement) that has expired in accordance with its terms) would have a Company Material Adverse Effect or (B) Material Contract, except, in each case, in the Ordinary Course of Business;

 

   

engage in any transaction with, or enter into any agreement, arrangement or understanding with, any Affiliate of the Company or other Person covered by Item 404 of Regulation S-K promulgated by the SEC that would be required to be disclosed pursuant to Item 404;

 

   

make any acquisition or disposition of a material asset or business (including by merger, consolidation or acquisition of stock or assets);

 

   

enter into any joint venture;

 

   

form or dissolve any subsidiary;

 

   

enter into any contract that restricts or limits the conduct or operations of the business of the Company or any of its subsidiaries in any material respect;

 

   

amend, modify, extend, renew or terminate any lease, or enter into any new lease, sublease, license or other agreement for the use or occupancy of any real property;

 

   

fail to maintain insurance policies in such amounts and against such risks and losses as are consistent with past practice of the Company and its subsidiaries;

 

   

enter into, amend, modify, terminate or rescind any Material Contract or otherwise waive, release or assign any of its material rights, claims or benefits with respect to any Material Contract, other than in the Ordinary Course of Business;

 

   

enter into, amend, modify, terminate or rescind any Contract pertaining to any Company System (as defined in the Merger Agreement), other than in the Ordinary Course of Business; or

 

   

agree to, authorize or enter into a Contract to take any of the actions prohibited by the Merger Agreement.

 

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No Solicitation

Subject to the procedures and terms associated with the receipt of a Superior Proposal (as defined below) set forth in the Merger Agreement, from the date of the Merger Agreement until the earlier to occur of the valid termination of the Merger Agreement and the Effective Time, the Company has agreed not to, and to cause its subsidiaries and its and their respective directors, officers, employees, investment bankers, attorneys, accountants, consultants and other advisors or representatives (collectively, “Representatives”) not to, directly or indirectly:

 

   

solicit, initiate, propose or induce the making, submission or announcement of, or knowingly encourage, facilitate or assist, any proposal or offer that is or could reasonably be expected to constitute an Acquisition Proposal (as defined below);

 

   

furnish to any person (other than Parent, Merger Sub or any designees of Parent or Merger Sub) any non-public information relating to the Company or any of its subsidiaries or afford to any person access to the business, properties, assets, books, records or other non-public information, or to any personnel, of the Company or any of its subsidiaries (other than Parent, Merger Sub or any designees of Parent or Merger Sub), in any such case with the intent to induce the making, submission or announcement of, or to knowingly encourage, facilitate or assist, any proposal or offer that is or could reasonably be expected to constitute an Acquisition Proposal or any inquiries or the making of any proposal that could reasonably be expected to lead to an Acquisition Proposal;

 

   

participate or engage in discussions or negotiations with any person with respect to an Acquisition Proposal (subject to certain exceptions);

 

   

approve, endorse or recommend an Acquisition Proposal (or any offer or proposal that could reasonably be expected to lead to an Acquisition Proposal); or

 

   

authorize or enter into any letter of intent, memorandum of understanding, merger agreement, acquisition agreement or other contract relating to an Acquisition Proposal (or any offer or proposal that could reasonably be expected to lead to an Acquisition Proposal), other than an Acceptable Confidentiality Agreement (as defined below) (any such letter of intent, memorandum of understanding, merger agreement, acquisition agreement or other contract relating to an Acquisition Transaction, an “Alternative Acquisition Agreement”).

The Company has also agreed that, from the date of the Merger Agreement until the earlier to occur of the valid termination of the Merger Agreement and the Effective Time, it will not, and will cause its subsidiaries and its and their respective directors, officers and employees not to, and will use its reasonable best efforts to cause its and its subsidiaries’ unaffiliated Representatives not to, directly or indirectly, (x) terminate, amend, release, modify or fail to enforce any provision (including any standstill or similar provision) of, or grant any permission, waiver or request under, any confidentiality, standstill or similar agreement, (y) grant any waiver, amendment or release under any takeover laws or (z) resolve, agree or propose to do any of the foregoing, in each case, except if the Board determines in good faith (after consultation with outside legal counsel) that the failure to do so would be reasonably expected to cause the Board to violate its fiduciary duties under applicable law, in which case the Company has agreed to give prompt notice to Parent of such determination, and in any event within twenty-four (24) hours, after taking any such action.

Notwithstanding the restrictions described above, from the date of the Merger Agreement continuing until the Company receipt of the required Shareholder Approval, the Company and the Board may, after giving Parent reasonably prompt notice of its intent to do so, directly or indirectly through one or more Representatives (including Truist Securities), participate or engage in discussions or negotiations with, furnish any non-public information relating to the Company or any of its subsidiaries to, or afford access to the business, properties, assets, books, records or other non-public information, or to any personnel, of the Company or any of its subsidiaries pursuant to an Acceptable Confidentiality Agreement (as defined below) to any person or its Representatives that has made, renewed or delivered to the Company a written Acquisition Proposal after the date of the Merger Agreement that did not result from any material breach of the negotiation and solicitation restrictions set forth in the Merger Agreement, and otherwise facilitate such Acquisition Proposal or assist such person (and its Representatives and financing sources) with such Acquisition Proposal (in each case, if requested by such person), if and only if the Board has determined in good faith (after consultation with its financial advisor and outside legal counsel) that such

 

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Acquisition Proposal either constitutes a Superior Proposal or is reasonably likely to lead to a Superior Proposal. The Company must promptly make available to Parent any material non-public information concerning the Company and its subsidiaries that was not previously made available to Parent, and in any event twenty-four (24) hours after, making such information available to such person or its Representatives.

The Board’s Recommendation; Company Board Recommendation Change; Entry into Alternative Acquisition Agreement

Subject to the provisions described below and after due and careful discussion and consideration, the Board is unanimously in favor of the Merger Agreement and the transactions contemplated thereby and believes that the Merger and the transactions contemplated thereby are advisable to, fair to, and in the best interests of the Company and its shareholders and has made the recommendation that shareholders of the Company vote “FOR” the Merger.

Except as permitted by the Merger Agreement, at no time after the date of the Merger Agreement may the Board take any of the following actions (any such action, a “Company Board Recommendation Change”):

 

   

withhold, withdraw, amend or modify or materially qualify the Company Board Recommendation (as defined in the Merger Agreement) in a manner adverse to Parent or make any public statement that is inconsistent with the Company Board Recommendation;

 

   

adopt, approve or recommend to the Company shareholders an Acquisition Proposal;

 

   

fail to publicly recommend against any Acquisition Proposal or fail to reaffirm upon request of Parent the Company Board Recommendation, in either case within ten (10) business days (or such fewer number of days as remain prior to the Special Meeting) after such Acquisition Proposal is made public (it being understood that a “stop, look and listen” statement by the Board to the shareholders of the Company pursuant to Rule 14d-9(f) under the Exchange Act shall not be deemed to be a Company Board Recommendation Change);

 

   

fail to include the Company Board Recommendation in this proxy statement;

 

   

publicly propose to do any of the foregoing; or

 

   

cause or permit the Company or any of its subsidiaries to enter into an Alternative Acquisition Agreement.

However, none of the determination by the Board that an Acquisition Proposal constitutes a Superior Proposal, the public disclosure by the Company of such determination with an express statement that the Company Board Recommendation has not changed, or the delivery of any notice of by the Company of a Company Board Recommendation Change required by the Merger Agreement will constitute a Company Board Recommendation Change.

Notwithstanding anything to the contrary in the Merger Agreement, at any time prior to the Company’s receipt of the required Shareholder Approval, if the Company has received a bona fide written Acquisition Proposal that the Board has determined in good faith (after consultation with its financial advisor and outside legal counsel) constitutes a Superior Proposal, then the Board may (A) effect a Company Board Recommendation Change with respect to such Acquisition Proposal or (B) authorize the Company to terminate the Merger Agreement to enter into an Alternative Acquisition Agreement with respect to such Acquisition Proposal concurrently with the termination of the Merger Agreement; provided, however, that the Board has agreed not take any action described in the foregoing clauses (A) and (B) unless:

 

   

following the Notice Period (as defined below), the Board determines in good faith (after consultation with its financial advisor and outside legal counsel) that such Acquisition Proposal continues to constitute a Superior Proposal and that, after taking into account any revisions to the Merger Agreement made or proposed by Parent in writing, the failure to take such action would be reasonably expected to cause the Board to violate its fiduciary duties under applicable law;

 

   

the Company has complied in all material respects with its obligations pursuant to the Merger Agreement with respect to such Acquisition Proposal;

 

   

(1) the Company has provided written notice to Parent at least four (4) business days in advance (the “Notice Period”) to the effect that the Board has (i) received a Superior Proposal and (ii)

 

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intends to (x) effect a Company Board Recommendation Change with respect to such Acquisition Proposal or (y) authorize the Company to terminate the Merger Agreement to enter into an Alternative Acquisition Agreement with respect to such Acquisition Proposal concurrently with the termination of the Merger Agreement absent any revision to the terms and conditions of the Merger Agreement, which notice will specify the basis for such actions, including the identity of the person or group making such Acquisition Proposal, the material terms thereof and copies of all material relevant documents relating to such Acquisition Proposal; (2) during the Notice Period, the Company and its Representatives have kept Parent and its Representatives reasonably informed of the status of such Acquisition Proposal and the material terms of any such Acquisition Proposal (including promptly, and in any event within twenty-four (24) hours, after receipt providing to Parent copies of any additional or revised Acquisition Agreements); and (3) the Company and its Representatives, during the Notice Period, must have negotiated with Parent and its Representatives in good faith (to the extent that Parent desires to so negotiate) to make such adjustments to the terms and conditions of the Merger Agreement so that the Board would no longer determine that the failure to make a Company Board Recommendation Change in response to such Acquisition Proposal would be reasonably expected to cause the Board to violate its fiduciary duties under applicable law; provided, however, that in the event of any substantive revisions to such Acquisition Proposal, the Company shall be required to deliver a new written notice to Parent and to comply with the requirements of the Merger Agreement with respect to such new written notice; and

 

   

in the event of any termination of the Merger Agreement in order to cause or permit the Company or any of its subsidiaries to enter into an Alternative Acquisition Agreement with respect to such Acquisition Proposal, the Company shall have validly terminated the Merger Agreement in accordance with the applicable terms of the Merger Agreement, including paying (or causing to be paid) the Company Termination Fee (as defined below) in accordance with Merger Agreement.

Other than in connection with a bona fide Acquisition Proposal that constitutes a Superior Proposal, the Board may effect a Company Board Recommendation Change in response to an Intervening Event if the Board determines in good faith (after consultation with its financial advisor and outside legal counsel) that the failure to do so would be reasonably expected to cause the Board to violate its fiduciary duties under applicable law, provided, however, that the Board shall not effect such a Company Board Recommendation Change unless:

 

   

the Company has provided prior written notice to Parent at least three (3) business days in advance to the effect that the Board has (A) so determined and (B) resolved to effect a Company Board Recommendation Change pursuant to the Merger Agreement, which notice will specify the applicable Intervening Event in reasonable detail; and

 

   

prior to effecting such Company Board Recommendation Change, the Company and its Representatives, during such three (3) business day period, must have negotiated with Parent and its Representatives in good faith (to the extent that Parent desires to so negotiate) to make such adjustments to the terms and conditions of the Merger Agreement so that the Board would no longer determine that the failure to make a Company Board Recommendation Change in response to such Intervening Event would be reasonably expected to cause the Board to violate its fiduciary duties under applicable law.

For purposes of this proxy statement and the Merger Agreement:

 

   

“Acceptable Confidentiality Agreement” means an agreement with the Company that is either (i) in effect as of the execution and delivery of the Merger Agreement; or (ii) executed, delivered and effective after the execution and delivery of the Merger Agreement, in either case containing provisions that require any counterparty thereto (and any of its Affiliates and representatives named therein) that receive material non-public information of, or with respect to, the Company to keep such information confidential; provided, however, that, in each case, the confidentiality and use provisions contained therein are no less restrictive in the aggregate to such counterparty (and any of its Affiliates and representatives as provided therein) than the terms of the Confidentiality Agreement (it being understood that such agreement need not contain any “standstill” or similar

 

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provisions or otherwise prohibit the making of any Acquisition Proposal). If the confidentiality and use provisions of such Acceptable Confidentiality Agreement are less restrictive in the aggregate to such counterparty (and any of its Affiliates and representatives named therein) than the terms of the Confidentiality Agreement, then, notwithstanding the foregoing, such agreement will be deemed to be an Acceptable Confidentiality Agreement if the Company offers to amend the Confidentiality Agreement so as to make the confidentiality and use provisions of the Confidentiality Agreement as restrictive in the aggregate as the confidentiality agreement signed by such counterparty.

 

   

“Acquisition Proposal” means any offer or proposal (other than an offer or proposal by Parent or Merger Sub) to engage in an Acquisition Transaction.

 

   

“Acquisition Transactions” means any transaction or series of related transactions (other than the Merger) involving: (i) any direct or indirect purchase or other acquisition by any Person or Group, whether from the Company or any other Person(s), of shares of Company common stock representing more than 20% of the Company common stock outstanding after giving effect to the consummation of such purchase or other acquisition, including pursuant to a tender offer or exchange offer by any Person or Group (as defined under Section 13(d) of the Exchange Act) that, if consummated in accordance with its terms, would result in such Person or Group beneficially owning more than 20% of the Company common stock outstanding after giving effect to the consummation of such tender or exchange offer; (ii) any direct or indirect purchase or other acquisition by any Person or Group of more than 20% of the consolidated assets of the Company and its subsidiaries taken as a whole (measured by the fair market value thereof as of the date of such purchase or acquisition); or (iii) any merger, consolidation, business combination, recapitalization, reorganization, liquidation, dissolution or other transaction involving the Company or any of its subsidiaries pursuant to which any Person or Group would, directly or indirectly, hold shares of Company common stock representing more than 20% of the Company common stock outstanding after giving effect to the consummation of such transaction.

 

   

“Intervening Event” means a material event, change, effect, development, condition, circumstance or occurrence that affects or would be reasonably likely to affect (i) the business, financial condition or results of operations of the Company and its subsidiaries, taken as a whole, or (ii) the Company shareholders, in either case that (A) is not known by the Board as of the date of the Merger Agreement or that was not reasonably foreseeable as of the date of the date of the Merger Agreement and (B) does not relate to any Acquisition Proposal; provided, however, that in no event shall any of the following constitute or be deemed an Intervening Event: (i) changes in the stock price of the Company, as such, it being understood that, subject to the other limitations set forth in this definition, one or more events underlying a change in the Company’s stock price may qualify as an Intervening Event; (ii) any event, change or circumstance relating to Parent, Merger Sub or any of their respective Affiliates; or (iii) the timing of any regulatory approvals or other action by or in respect of any Governmental Authority with respect to the Merger.

 

   

“Superior Proposal” means any bona fide written Acquisition Proposal for an Acquisition Transaction on terms that the Board has determined in good faith (after consultation with its financial advisor and outside legal counsel) would be more favorable, from a financial point of view, to the Company shareholders (in their capacity as such) than the Merger (taking into account any legal, regulatory, financial, timing, financing and other aspects of such proposal and any revisions to the Merger Agreement made or proposed in writing by Parent prior to the time of such determination). For purposes of the reference to an “Acquisition Proposal” in this definition, all references to “20%” in the definition of “Acquisition Transaction” will be deemed to be references to “50%.”

Financing Efforts

Although the obligation of Parent and Merger Sub to consummate the Merger is not subject to any financing condition, each of Parent and Merger Sub have agreed, subject to the terms and conditions of the Merger Agreement, to use their respective reasonable best efforts to take all actions and to do all things necessary, proper and advisable to arrange, consummate and obtain the Financing (as defined in the Merger Agreement) on a timely basis, but in any event no later than the closing of the Merger, on the terms and conditions (including, to the extent required, the full exercise of any “flex” provisions in any fee letter delivered in connection with the Debt

 

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Commitment Letters (any such letter, a “Fee Letter”)) described in the Debt Commitment Letter and Equity Commitment Letter and any related Fee Letter (collectively, the “Financing Letters”). The Company has also agreed that, prior to the Effective Time, it will use its reasonably best efforts, and will cause each of its subsidiaries to uses its respective reasonable best efforts, to provide Parent, in each case, at Parent’s sole expense, with all cooperation reasonably requested by Parent to assist it in causing the conditions in the Debt Commitment Letter to be satisfied or as is otherwise customary and reasonably requested by Parent in connection with the Debt Financing, including using reasonable best efforts in connection with certain actions specified in the Merger Agreement.

Notwithstanding the foregoing, neither the Company or any of its subsidiaries are required to (1) waive or amend any terms of the Merger Agreement or agree to pay any fees or reimburse any expenses prior to the Effective Time for which it has not received prior reimbursement or is not otherwise indemnified by or on behalf of Parent; (2) cause any condition with respect to the Merger to fail to be satisfied; (3) enter into any definitive agreement the effectiveness of which is not conditioned upon the Closing of the Merger; (4) give any indemnities that are effective prior to the Effective Time; or (5) take any action that, in the good faith determination of the Company, would unreasonably interfere with the conduct of the business of the Company and its subsidiaries, or breach any confidentiality obligations of the Company or any of its subsidiaries. In addition, no action, liability or obligation of the Company, any of its subsidiaries or any of their respective Representatives pursuant to any certificate, agreement, arrangement, document or instrument relating to the Debt Financing will be effective until the Effective Time, and neither the Company nor any of its subsidiaries will be required to take any action pursuant to any certificate, agreement, arrangement, document or instrument that is not contingent on the consummation of the Merger or that must be effective prior to the Effective Time, in each case other than executing customary authorization letters in bank information memoranda and/or high yield prospectuses or memoranda. Nothing in the Merger Agreement with respect to the Debt Financing will require (A) any Representative of the Company or any of its subsidiaries to deliver any certificate or opinion or take any other action with respect to the Debt Financing specified in the Merger Agreement that could reasonably be expected to result in personal liability to such Representative; or (B) the Board (or a committee thereof) to approve any financing or contracts related thereto prior to the Effective Time.

Additionally, Parent has also agreed to (1) reimburse the Company for any reasonable, documented out-of-pocket costs and expenses (including reasonable attorneys’ fees) incurred by the Company, its subsidiaries or any of their respective Representatives in connection with the cooperation or obligations of the Company, its subsidiaries and their respective Representatives described herein, promptly upon request by the Company following termination of the Merger Agreement pursuant to its terms, and (2) indemnify and hold harmless the Company, it subsidiaries and their respective Representatives from and against any and all liabilities, losses, damages, claims, costs, expenses (including attorneys’ fees), interest, awards, judgments, penalties and amounts paid in settlement suffered or incurred by them in connection with their cooperation in arranging the Debt Financing pursuant to the Merger Agreement or the provision of information utilized in connection therewith (other than arising from (A) historical financial information related to the Company and its subsidiaries provided expressly for use in connection with the Debt Financing, or (ii) the gross negligence, fraud, willful misconduct, intentional misrepresentation or intentional breach of the Merger Agreement by the Company, its subsidiaries or any of their respective Representatives).

Moreover, each of Parent, Merger Sub and Guarantor have agreed to not, without the prior written consent of the Company (such consent not to be unreasonably withheld, conditioned or delayed), permit or grant any withdrawal, rescindment, amendment, replacement, supplement, consent or modification to be made to, or any waiver of any provision or remedy pursuant to, the Financing Letters or any definitive agreement relating to the Financing if such withdrawal, rescindment, amendment, replacement, supplement, consent, modification or waiver would, or would reasonably be expected to (i) reduce the aggregate amount of the Financing, including by changing the amount of the fees to be paid or the original issue discount of the Debt Financing, below the Required Amount (as defined in the Merger Agreement); (ii) impose new or additional conditions or otherwise expand, amend or modify any of the conditions to the receipt of the Financing or any other terms to the Financing in a manner that would, when taken as a whole, reasonably be expected to (A) materially delay or prevent the Closing of the Merger; or (B) make the timely funding of the Financing, or the satisfaction of the conditions to obtaining the Financing, materially less likely to occur; or (iii) adversely impact the ability of Parent, Merger Sub or the Company, as applicable, to enforce its rights against the other parties to the Financing Letters or the definitive agreements with respect thereto; provided, that Parent and Merger Sub may (without the consent of the Company) replace, modify, waive or amend the Debt Commitment Letter (1) in accordance with the “market flex” provisions thereof, and (2) to

 

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add, replace or substitute lenders, lead arrangers, bookrunners, syndication agents or similar entities that have not executed the Debt Commitment Letter as of the date of the Merger Agreement substantially in accordance with the terms in effect on the date hereof, so long as such addition, replacement or substitution of lenders, lead arrangers, bookrunners, syndication agents or similar entities would not adversely affect the amount, timing, conditionality, availability or termination of the Debt Financing. Parent has agreed to promptly furnish to the Company a true and complete copy of any amendment, replacement, supplement, modification, consent or waiver relating to the Financing Letters. Any reference to (I) the “Financing” will include the financing contemplated by the Financing Letters as amended or modified and (II) ”Equity Commitment Letter,” “Debt Commitment Letters” or “Financing Letters” will include such documents as amended or modified. The Parent has agreed that it will not, without the consent of the Company (such consent not to be unreasonably withheld, conditioned or delayed), release or consent to the termination of any individual lender under the Debt Commitment Letters prior to the first to occur of closing of the Merger and the expiration of the Debt Commitment Letter in accordance with its terms, except for (x) assignments and replacements of an individual lender under the terms of the Debt Financing under the Debt Commitment Letters; or (y) replacements of the Debt Commitment Letters with alternative financing commitments pursuant to the terms of the Merger Agreement.

Marketing Period

In addition to the conditions of the Merger described above, the Merger is conditioned upon the completion of the Marketing Period. Under the Merger Agreement, the Company has agreed to allow Parent a period of twenty (20) consecutive business days commencing on January 18, 2021 throughout and at the end of which Parent shall have certain historical financial statements of the Company identified in the Debt Commitment Letter (the “Required Financial Information”) and the Required Financial Information will be Compliant (as defined in the Merger Agreement).

Efforts to Close the Merger; Antitrust Filings

Each of the parties has agreed to use its reasonable best efforts to take, or cause to be taken, all actions, do (or cause to be done) all things, and assist and cooperate with the other parties in doing (or causing to be done) all things, in each case as are necessary, proper or advisable pursuant to applicable law or otherwise to consummate and make effective, in the most expeditious manner applicable, the Merger, including (1) causing the closing conditions to the Merger to be satisfied, (2) obtaining all consents, waivers, approvals, order and authorizations from governmental authorities and making all registrations, declarations and filings with government authorities, in each case that are necessary or advisable to consummate the Merger, (3) using commercially reasonable efforts to obtain the consent of each counterparty to certain contracts set forth in the disclosure letter delivered by the Company to Parent and Merger Sub on the date of the Merger Agreement, and (4) executing and delivering any contracts and other instruments that are reasonably necessary to consummate the Merger.

The parties have also agreed to make certain regulatory filings as described in more detail under the section of this proxy statement captioned “The Merger—Regulatory Approvals and Notices,” including filing with the FTC and the Antitrust Division of the DOJ a Notification and Report Form relating to the Merger Agreement and the Merger as required by the HSR Act within ten (10) business days following the date of the Merger Agreement and filing such notification filings, forms and submissions, including any draft notifications in jurisdictions requiring pre-notification, with any governmental authority as are required by other applicable antitrust laws in connection with the Merger, as promptly as practicable following the date of the Merger Agreement. Each of Parent and the Company shall (1) cooperate and coordinate (and shall cause its respective Affiliates to cooperate and coordinate) with the other in the making of such filings, (2) supply the other (or shall cause the other to be supplied) with any information that may be required in order to make such filings, and (3) supply (or shall cause to be supplied) any additional information that reasonably may be required or requested by the FTC, the DOJ or other governmental authorities of any other applicable jurisdiction in which any such filing is made. Each of Parent and Merger Sub shall (and shall cause their respective Affiliates to, if applicable), on the one hand, and the Company shall (and shall cause its Affiliates to), on the other hand, promptly inform the other of any communication from any governmental authority regarding the Merger in connection with such filings. If any party or Affiliate thereof receives any comments or a request for additional information or documentary material from any governmental authority with respect to the Merger pursuant to the HSR Act or any other antitrust laws applicable to the Merger, then such party shall make (or shall cause to be made), as soon as reasonably practicable and after consultation with the other parties, an appropriate response to such request. No party may extend any waiting period or enter into any agreement or understanding with any governmental authority without the permission of the other parties, which shall not be unreasonably conditioned, withheld or delayed.

 

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In addition, each of the Parent and Merger Sub agreed to take (or cause their respective Affiliates to take) all action necessary, proper or advisable to (1) cause the expiration or termination of the applicable waiting periods pursuant to the HSR Act and any other antitrust laws applicable to the Merger; and, (2) obtain any required consents, approvals or authorizations pursuant to any antitrust laws applicable to the Merger, in each case as promptly as practicable and in any event prior to the Termination Date (as defined below). In furtherance and not in limitation of the foregoing, Parent and Merger Sub shall, and shall cause their respective Affiliates to, take all actions reasonably necessary to avoid or eliminate each and every impediment under any antitrust law so as to enable the consummation of the Merger to occur as promptly as reasonably practicable (and in any event prior to the Termination Date), including taking all actions requested by any governmental authority, or reasonably necessary to resolve any objections that may be asserted by any governmental authority with respect to the Merger under any antitrust law. Parent shall oppose fully and vigorously any request for, the entry of, and seek to have vacated or terminated, any order, judgment, decree, injunction or ruling of any governmental authority that could restrain, prevent or delay any required consents pursuant to any antitrust laws applicable to the Merger, including by defending through litigation, any action asserted by any Person in any court or before any governmental authority and by exhausting all avenues of appeal, including appealing properly any adverse decision or order by any governmental authority, it being understood that the costs and expenses of all such actions shall be borne by Parent.

Nothing in the Merger Agreement will require the Company or any of its subsidiaries or Affiliate to take, or agree to take, any action the effectiveness of which is not conditioned on the closing of the Merger occurring.

The parties shall (and shall cause their respective subsidiaries to), subject to any restrictions under applicable laws, (1) promptly notify the other parties of, and, if in writing, furnish the others with copies of (or, in the case of oral communications, advise the others of the contents of) any substantive communication received by such person from a governmental authority or a private party in connection with the Merger and permit the other parties to review and discuss in advance (and to consider in good faith any comments made by the other parties in relation to) any proposed draft notifications, formal notifications, filing, submission or other written communication (and any analyses, memoranda, white papers, presentations, correspondence or other documents submitted therewith) made in connection with the Merger to a governmental authority; (2) keep the other parties informed with respect to the status of any such submissions and filings to any governmental authority in connection with the Merger and any developments, meetings or discussions with any governmental authority in respect thereof, including with respect to (A) the receipt of any non-action, action, clearance, consent, approval or waiver, (B) the expiration of any waiting period, (C) the commencement or proposed or threatened commencement of any investigation, litigation or administrative or judicial action or proceeding under applicable laws, including any proceeding initiated by a private party, and (D) the nature and status of any objections raised or proposed or threatened to be raised by any governmental authority with respect to the Merger; and (3) not independently participate in any meeting, hearing, proceeding or discussions (whether in person, by telephone or otherwise) with or before any governmental authority in respect of the Merger without giving the other parties reasonable prior notice of such meeting or discussions and, unless prohibited by such governmental authority, the opportunity to attend or participate.

Each of the Parent and Merger Sub has agreed that between the date of the Merger Agreement and the closing of the Merger, it shall not, and shall not permit any of its subsidiaries or Affiliates to take any actions that would reasonably be expected to result in any delay in obtaining, or to result in the failure to obtain, any regulatory approvals required in connection with the Merger, or which would otherwise reasonably be expected to prevent or delay the transactions contemplated by the Merger Agreement in any material respect, including entering into or consummating any contracts or arrangements for an acquisition (by stock purchase, merger, consolidation, purchase of assets, license or otherwise) of any ownership interest, assets or rights of any person.

 

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Takeover Statute

The Company, the Board (or a committee thereof) and Parent have agreed to (a) take all reasonable actions within their power to render any “fair price”, “moratorium”, “control share acquisition,” “business combination,” “interested shareholder” or other similar provisions as in effect on the date of the Merger Agreement (each, a “Takeover Statute”) or similar statute or regulation inapplicable to the transactions contemplated by the Merger Agreement and the Support Agreements, and (b) if any Takeover Statute or similar statute or regulation becomes applicable to the transactions contemplated by the Merger Agreement and the Support Agreements, take all reasonable actions within their power to ensure that the transactions contemplated by the Merger Agreement and the Support Agreements may be consummated as promptly as practicable on the terms contemplated by the Merger Agreement and otherwise to minimize the effect of such statute or regulation on the transactions contemplated by the Merger Agreement and the Support Agreements.

Indemnification, Exculpation and Insurance

The Merger Agreement provides that the Surviving Corporation and its subsidiaries will (and Parent will cause the Surviving Corporation and its subsidiaries to) honor and fulfill, in all respects, the obligations of the Company and its subsidiaries pursuant to any indemnification agreements between the Company and any of its subsidiaries or Affiliates, on the one hand, and any of their respective current or former directors, officers, employees or agents (and any person who becomes a director, officer, employee or agent of the Company or any of its subsidiaries prior to the Effective Time), on the other hand (each, together with such person’s heirs, executors and administrators, an “Indemnified Person”) as such agreements are in effect on the date of the Merger Agreement. In addition, during the period commencing on the Effective Time and for six (6) years thereafter, the Surviving Corporation and its subsidiaries will (and Parent will cause the Surviving Corporation and its subsidiaries to) cause the organizational documents of the Surviving Corporation and its subsidiaries to contain provisions with respect to indemnification, exculpation and the advancement of expenses that are at least as favorable as the indemnification, exculpation and advancement of expenses provisions set forth in the organizational documents of the subsidiaries of the Company as of the date of the Merger Agreement. During such six-year period, such provisions may not be repealed, amended or otherwise modified in any manner except as required by applicable law.

In addition, the Merger Agreement provides that, during the six-year period commencing at the Effective Time, the Surviving Corporation will (and Parent will cause the Surviving Corporation to) indemnify and hold harmless, to the fullest extent permitted by applicable law or pursuant to any indemnification agreements with the Company and any of its subsidiaries or Affiliates in effect on the date of the Merger Agreement, each Indemnified Person from and against any costs, fees and expenses (including reasonable attorneys’ fees and investigation expenses), judgments, fines, penalties, losses, claims, damages, liabilities and amounts paid in settlement or compromise in connection with any legal proceeding, whether civil, criminal, administrative or investigative, whenever asserted, to the extent that such legal proceeding arises, directly or indirectly, out of, or pertains, directly or indirectly, to, (1) the fact that an Indemnified Person is or was a director, officer, employee or agent of the Company or such subsidiary or Affiliate; (ii) any action or omission, or alleged action or omission, occurring at or prior to the Effective Time (including in connection with the approval of the Merger Agreement and the consummation of the Merger whether asserted or claimed prior to, at or after the Effective Time), in such Indemnified Person’s capacity as a director, officer, employee or agent of the Company or any of its subsidiaries or other Affiliates, or taken at the request of the Company or such subsidiary or Affiliate, including in connection with serving at the request of the Company or such subsidiary or Affiliate as a director, officer, employee, agent, trustee or fiduciary of another person (including any employee benefit plan), except that if, at any time prior to the sixth anniversary of the Effective Time, any Indemnified Person delivers to Parent a written notice asserting a claim for indemnification pursuant to certain applicable provisions of the Merger Agreement, then the claim asserted in such notice will survive the sixth anniversary of the Effective Time until such claim is fully and finally resolved. The Merger Agreement also provides that, in the event of any such legal proceeding, the Surviving Corporation will advance all fees and expenses (including fees and expenses of any counsel) as incurred by an Indemnified Person in the defense of such legal proceeding; provided, that any Indemnified Person to whom expenses are advanced provides an undertaking to repay such expenses if it is ultimately determined that such Person is not entitled to indemnification, and only to the extent required by applicable law or applicable organizational documents of the Company and its subsidiaries or applicable indemnification agreements. Notwithstanding anything to the contrary in the Merger Agreement, none of Parent, the Surviving Corporation nor any of their respective Affiliates will settle or otherwise compromise or consent to the entry of any judgment with respect to, or otherwise seek the termination of, any legal proceeding for which indemnification may be sought by an Indemnified Person pursuant to the Merger Agreement unless such settlement, compromise, consent or termination includes an unconditional release of all Indemnified Persons from all liability arising out of such legal proceeding. Any determination required to be made

 

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with respect to whether the conduct of any Indemnified Person complies or complied with any applicable standard will be made by independent legal counsel selected by the Surviving Corporation (which counsel will be reasonably acceptable to such Indemnified Person), the fees and expenses of which will be paid by the Surviving Corporation.

The Merger Agreement also provides that, during the six-year period commencing at the Effective Time, the Surviving Corporation will (and Parent will cause the Surviving Corporation to) maintain in effect the Company’s current directors’ and officers’ liability insurance (“D&O Insurance”) in respect to acts or omissions occurring at or prior to the Effective Time on terms (including with respect to coverage, conditions, retentions, limits and amounts) that are at least as favorable to covered persons to those of the D&O Insurance. In satisfying these obligations, the Surviving Corporation will not be obligated to pay annual premiums in excess of 300% of the amount paid by the Company for coverage for its last full fiscal year (such 300% amount, the “Maximum Annual Premium”). If the annual premiums of such insurance coverage exceed the Maximum Annual Premium, then the Surviving Corporation will be obligated to obtain a policy with the greatest coverage available for a cost not exceeding the Maximum Annual Premium from an insurance carrier with the same or better credit rating as the Company’s current directors’ and officers’ liability insurance carrier. Prior to the Effective Time, the Company may purchase a prepaid “tail” policy with respect to the D&O Insurance so long as the annual cost for such “tail” policy does not exceed the Maximum Annual Premium. If the Company elects to purchase such a tail policy prior to the Effective Time, the Surviving Corporation will (and Parent will cause the Surviving Corporation to) maintain such “tail” policy in full force and effect and continue to honor its obligations thereunder for so long as such “tail” policy is in full force and effect and the Surviving Corporation and Parent will be relieved of their obligations to maintain in effect the D&O Insurance described above. If the Company is unable to obtain the “tail” policy and Parent or the Surviving Corporation are unable to obtain the D&O Insurance for an amount less than or equal to the Maximum Annual Premium, Parent will cause the Surviving Corporation to instead obtain as much comparable insurance as possible for an annual premium equal to the Maximum Annual Premium.

Employee Benefits

The Merger Agreement provides that, for a period of one (1) year following the Effective Time, each individual who is an employee of the Company or any of its subsidiaries immediately prior to the Effective Time and continues to be an employee of Parent or one of its subsidiaries (including the Surviving Corporation) immediately following the Effective Time (each such individual, a “Continuing Employee”) will be provided with base salary or wages and health and welfare benefits (in each case, other than defined pension benefits, retiree health or other retiree welfare benefits and long-term incentive compensation (including equity incentive awards)) that, taken as a whole, are comparable in the aggregate to the base salary or wages and health and welfare benefits (in each case, other than defined pension benefits, retiree health or other retiree welfare benefits and long-term incentive compensation (including equity incentive awards)) provided to such Continuing Employee immediately prior to the Effective Time; provided, however, nothing described herein will prohibit the Surviving Corporation and its subsidiaries from providing equivalent equity-based or other incentives that are payable in cash in lieu of equity-based incentives payable in actual equity of the Surviving Corporation.

To the extent that a Company Plan (as defined in the Merger Agreement) (which is not an Employee Plan (as defined in the Merger Agreement)) and which does not provide retiree welfare benefits and long-term incentive compensation (including equity incentive awards)) is made available to any Continuing Employee at or after the Effective Time, the Surviving Corporation and its subsidiaries shall (and Parent shall cause the Surviving Corporation and its subsidiaries to) cause to be granted to such Continuing Employee credit for all service with the Company and its subsidiaries prior to the Effective Time for purposes of eligibility to participate, vesting and entitlement to benefits where length of service is relevant (including for purposes of vacation accrual and severance entitlement), except where the service credit will result in duplication of coverage or benefits for the same period of service or for purposes of benefit accruals under any defined benefit pension plan. In addition, the Parent will use its best efforts to cause (i) each Continuing Employee to be immediately eligible to participate, without any waiting period (to the extent such waiting periods were satisfied under the corresponding Employee Plans), in any and all Company Plans (such plans, the “New Plans”) to the extent that coverage pursuant to any such New Plan replaces coverage pursuant to a corresponding Employee Plan; and (ii) for purposes of each New Plan providing life insurance, medical, dental, pharmaceutical, vision or disability benefits to any Continuing Employee, the Surviving Corporation and its subsidiaries will cause all waiting periods, pre-existing condition exclusions, evidence of insurability requirements and actively-at-work or similar requirements of such New Plan to be waived for such

 

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Continuing Employee and his or her covered dependents (in each case, to the extent such waiting periods, pre-existing condition exclusions, evidence of insurability requirements and actively-at-work or similar requirements were satisfied under the corresponding Employee Plans), and Parent will cause the Surviving Corporation and its subsidiaries to use commercially reasonable efforts to cause any eligible expenses incurred by such Continuing Employee and his or her covered dependents during the portion of the plan year of the corresponding Employee Plan ending on the date that such Continuing Employee’s participation in the corresponding New Plan begins to be given full credit pursuant to such New Plan for purposes of satisfying all deductible, coinsurance and maximum out-of-pocket requirements applicable to such Continuing Employee and his or her covered dependents for the applicable plan year as if such amounts had been paid according to such New Plan.

Transaction Litigation

Prior to the Effective Time, each of the Parent, Merger Sub and the Company will (1) provide the other, as applicable, with prompt notice of all legal proceedings commenced or threatened against, or otherwise affecting, a party or any of its subsidiaries or Affiliates (or any of their respective directors or executive officers) arising from or otherwise relating to the Merger; (2) keep each other reasonably informed with respect to the status thereof; (3) give the other parties the opportunity to “participate” (as such term is used in the Merger Agreement) in the defense, settlement or prosecution of any such litigation; and (4) consult with the other parties with respect to the defense, settlement and prosecution of any such litigation. No party to the Merger Agreement may compromise, settle or come to an arrangement regarding, or agree to compromise, settle or come to an arrangement regarding, any such litigation unless the other parties have consented in writing (which consent shall not be unreasonably withheld, conditioned or delayed).

Delisting and Deregistration of Common Shares of the Company

Prior to the Effective Time, the Company shall cooperate with Parent and use its reasonable best efforts to take, or cause to be taken, all actions and do, or cause to be done, all things reasonably necessary, proper or advisable on its part pursuant to applicable law and the rules and regulations of the Nasdaq to cause the delisting of the Company’s common stock from Nasdaq as promptly as practicable after the Effective Time and the deregistration of the Company’s common stock pursuant to the Exchange Act as promptly as practicable after such delisting.

Other Covenants

The Merger Agreement contains other customary covenants, including, but not limited to, covenants relating to public announcements, access to information, employee benefits, executive compensation, further assurances and confidentiality.

Conditions to the Merger

The obligations of Parent and Merger Sub, on the one hand, and the Company, on the other hand, to complete the Merger are each subject to the satisfaction or (to the extent permitted by applicable law) the waiver of the following conditions:

 

   

the affirmative vote of holders of a majority of Shares entitled to vote at a special meeting to adopt the Merger Agreement (the “Shareholder Approval”) shall have been obtained, if required by applicable law;

 

   

the waiting periods (and any extensions thereof) applicable to the Merger pursuant to the HSR Act shall have expired or otherwise been terminated; and

 

   

no governmental authority of competent jurisdiction shall have issued an order or enacted a law that prohibits, makes illegal or prevents the consummation of the transactions contemplated by the Merger Agreement.

 

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The respective obligations of Parent and Merger Sub, on the one hand, and the Company, on the other hand, to complete the Merger shall be subject to the satisfaction or the waiver (where permissible pursuant to applicable law) of certain additional conditions as set forth in the Merger Agreement regarding:

 

   

in the case of Parent and Merger Sub:

 

   

Other than certain representations and warranties discussed below, the representations and warranties of the Company set forth in the Merger Agreement being true and correct (without giving effect to any materiality or Company Material Adverse Effect qualifications set forth therein) as of the date of the Merger Agreement and as of the Closing Date as if made at and as of the Closing Date (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty will be true and correct (without giving effect to any materiality or Company Material Adverse Effect qualifications set forth therein) as of such earlier date), except for such failures to be so true and correct that, individually or in the aggregate, would not have, or would not reasonably be expected to have, a Company Material Adverse Effect;

 

   

The representations and warranties of the Company relating to organization, good standing, corporate power, enforceability, anti-takeover laws, requisite shareholder approval, Company common stock available for issuance pursuant to the Company’s equity compensation plans, certain aspects of the Company’s securities and brokers (A) that are not qualified by Company Material Adverse Effect or other materiality qualifiers being true and correct in all material respects as of the date hereof and as of the Closing Date as if made at and as of the Closing Date (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty will be true and correct in all material respects as of such earlier date); and (B) that are qualified by Company Material Adverse Effect or other materiality qualifiers being true and correct in all respects as of the date of the Merger Agreement and as of the Closing Date as if made at and as of the Closing Date (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty will be true and correct in all respects as of such date);

 

   

The representations and warranties of the Company relating to the absence of certain changes, including changes to the business conducted by the Company and its subsidiaries and certain forbearance covenants of the Company, and the absence of a Company Material Adverse Effect being true and correct in all respects as of the Closing Date as if made at and as of the Closing Date;

 

   

The representations and warranties of the Company relating to certain aspects of the Company’s capitalization being true and correct as of December 8, 2020, except for such inaccuracies that result in de minimis additional cost, expense or liability to the Company, Parent and their Affiliates (as defined in the Merger Agreement), individually or in the aggregate;

 

   

The Company having performed and complied in all material respects with the covenants, obligations and conditions of the Merger Agreement required to be performed and complied with by it at or prior to the closing of the Merger;

 

   

The receipt by Parent and Merger Sub of a certificate of the Company, validly executed for and on behalf of the Company and in its name by a duly authorized executive officer thereof, certifying that the conditions as described in the preceding five bullets have been satisfied;

 

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The absence of any Company Material Adverse Effect having occurred after the date of Merger Agreement that is continuing as of the Effective Time;

 

   

The Company having delivered to Parent a tax certification; and

 

   

The Company and its subsidiaries having performed and complied in all respects with certain obligations regarding amendments of certain tax returns of certain Company subsidiaries and certain intercompany transactions.

 

   

In the case of the Company:

 

   

The representations and warranties of Parent and Merger Sub set forth in the Merger Agreement being true and correct as of the Closing Date as if made at and as of the Closing Date, except for failures to be so true and correct that would not, individually or in the aggregate, reasonably be expected to prevent or materially delay the consummation of the transactions contemplated by the Merger Agreement or the ability of Parent and Merger Sub to fully perform their respective covenants and obligations pursuant to the Merger Agreement, and except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty will be so true and correct as of such earlier date;

 

   

Parent and Merger Sub will have performed and complied in all material respects with the covenants, obligations and conditions of the Merger Agreement required to be performed and complied with by Parent and Merger Sub at or prior to the closing of the Merger; and

 

   

The receipt by the Company of a certificate of Parent and Merger Sub, validly executed for and on behalf of the Company and in its name by a duly authorized executive officer thereof, certifying that the conditions as described in the preceding two bullets have been satisfied.

The Merger is not subject to a condition related to financing.

Termination of the Merger Agreement

The Merger Agreement may be terminated at any time prior to the Effective Time only as follows:

 

   

by mutual written agreement of Parent and the Company;

 

   

by either Parent or the Company if:

 

   

a law or injunction (whether temporary, preliminary or permanent) enacted or issued by any governmental authority of competent jurisdiction prohibiting or otherwise making illegal the consummation of the Merger has been enacted, entered, promulgated or enforced and be continuing in effect (any such law or injunction, a “Legal Restraint”) and has become final and nonappealable, except that the right to terminate the Merger Agreement for the circumstance described in this bullet point will not be available to any party to the Merger Agreement (i) that has failed to use its reasonable best efforts to resist, appeal, obtain consent pursuant to, resolve or lift, as applicable, such Legal Restraint or (ii) if such Legal Restraint was primarily caused by, or primarily resulted from, such Party’s breach of, or failure to perform or comply with, any of its covenants or agreements under the Merger Agreement;

 

   

the Merger has not been consummated by 11:59 p.m. Eastern Standard Time on April 30, 2021 (the “Termination Date”), except that the right to terminate the Merger Agreement for the circumstance described in this bullet point will not be available to any party to the Merger

 

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Agreement whose action or failure to act (which action or failure to act constitutes a breach by such party of the Merger Agreement) has been the primary cause of, or primarily resulted in, either (x) the failure to satisfy the conditions to the obligations of the terminating party to consummate the Merger set forth in the Merger Agreement prior to the Termination Date; or (y) the failure of the Effective Time to have occurred prior to the Termination Date; and for such purpose, any action or failure to act by a party (other than Parent or Merger Sub) to a Support Agreement that constitutes a breach by such party of such Support Agreement shall be deemed an act or failure to act by the Company which constitutes a breach of the Merger Agreement; or

 

   

the Company fails to obtain the required Shareholder Approval at the special meeting (or any adjournment or postponement thereof) at which a vote is taken on the Merger, except that the right to terminate the Merger Agreement for the circumstance described in this bullet point will not be available to any party whose action or failure to act (which action or failure to act constitutes a breach by such party of the Merger Agreement) has been the cause of, or resulted in, the failure to obtain the required Shareholder Approval at the special meeting (or any adjournment or postponement thereof); and for such purpose, any action or failure to act by a party (other than Parent or Merger Sub) to a Support Agreement that constitutes a breach by such party of such Support Agreement shall be deemed an act or failure to act by the Company which constitutes a breach of the Merger Agreement.

 

   

by the Company if:

 

   

Parent or Merger Sub has breached or failed to perform any of its respective representations, warranties, covenants or other agreements set forth in the Merger Agreement such that certain conditions set forth in the Merger Agreement are not satisfied, except that if such breach is capable of being cured by the Termination Date, the Company will not be entitled to terminate the Merger Agreement if Parent or Merger Sub has cured such breach or failure to perform prior to the earlier of (i) thirty (30) days after the giving of notice thereof by the Company stating the Company’s intention to terminate the Merger Agreement for the circumstance described in this bullet point and the basis for such termination and (ii) the Termination Date; provided, however, that the Company is not then in material breach of the Merger Agreement so as to cause any of the conditions set forth in the Merger Agreement relating to the breach or failure to perform the Company’s representations, warranties, covenants or other agreements set forth in the Merger Agreement not to be capable of being satisfied;

 

   

prior to receiving the required Shareholder Approval, (1) the Company has received a Superior Proposal, (2) the Board has authorized the Company to enter into an Alternative Acquisition Agreement with respect to such Superior Proposal and (3) concurrently with such termination the Company pays (or causes to be paid) the Company Termination Fee due to Parent in accordance with the terms of the Merger Agreement; or

 

   

whether prior to or after the receipt of the require Shareholder Approval, (1) all of the conditions to Parent’s obligation to consummate the Merger have been satisfied (other than those conditions that by their terms are to be satisfied at the closing of the Merger, each of which is capable of being satisfied at the closing of the Merger) or waived; (2) Parent and Merger Sub have failed to consummate the Merger on the date required by the Merger Agreement; (3) the Company has irrevocably notified Parent in writing that (A) the Company is ready, willing and able to consummate the closing of the Merger, and (B) all conditions to the Company’s obligation to consummate the Merger have been satisfied (other than those conditions that by their terms are to be satisfied at the closing of the Merger, each of which is capable of being satisfied at the closing of the Merger) or that the Company is willing to waive any unsatisfied conditions to the Company’s obligation to consummate the Merger; (4) the Company has given Parent written notice stating the Company’s intention to terminate the Merger Agreement for the circumstance described in this bullet point; and (5) Parent and Merger Sub fail to consummate the closing of the Merger within four (4) business days after delivery of such notice.

 

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by Parent if:

 

   

the Company has breached or failed to perform any of its representations, warranties, covenants or other agreements set forth in the Merger Agreement such that certain conditions set forth in the Merger Agreement are not satisfied, except that if such breach is capable of being cured by the Termination Date, Parent will not be entitled to terminate the Merger Agreement for the circumstance described in this bullet point if the Company has cured such breach or failure to perform prior to the earlier of (i) thirty (30) days after the giving notice thereof by Parent to the Company stating its intention to terminate the Merger Agreement for the circumstance described in this bullet point and the basis for such termination and (ii) the Termination Date; provided, however, that Parent is not then in material breach of the Merger Agreement so as to cause any of the conditions set forth in the Merger Agreement relating to the breach or failure to perform Parent’s representations, warranties, covenants or other agreements set forth in the Merger Agreement not to be capable of being satisfied; and

 

   

at any time the Board has effected a Company Board Recommendation Change.

If the Merger Agreement is validly terminated in accordance with its terms, the Merger Agreement will be of no further force or effect without liability of any party to the other parties, as applicable, except that certain sections of the Merger Agreement will survive the termination of the Merger Agreement and remain in full force and effect, including, among others, terms relating to confidentiality, reimbursement of expenses, indemnification and public statements and disclosure.

Notwithstanding the foregoing, subject to certain exceptions, nothing in the Merger Agreement will relieve any party from any liability for any willful and material breach of the Merger Agreement prior to the valid termination of the Merger Agreement. In addition, no termination of the Merger Agreement will affect the rights or obligations of Parent, Merger Sub or the Company pursuant to the Confidentiality Agreement or Guarantee, which rights, obligations and agreements survive the termination of the Merger Agreement in accordance with their respective terms.

Termination Fees

Parent will be entitled to receive the Company Termination Fee (as defined below) from the Company if the Merger Agreement is validly terminated:

 

   

by either Parent or the Company (as applicable) because the Effective Time has not occurred by the Termination Date or the Company has breached or failed to perform any of its representations, warranties, covenants or agreements set forth in the Merger Agreement, which breach or failure to perform would result in a failure of a condition to Parent’s obligation to consummate the Merger, subject to other terms and conditions discussed above, if (1) prior to such termination, an Acquisition Proposal was made to the Company or any of its subsidiaries and was evaluated by the Board or publicly announced; and (2) within 12 months following such termination of the Merger Agreement, either an Acquisition Transaction is consummated or the Company enters into a definitive agreement providing for the consummation of an Acquisition Transaction and such Acquisition Transaction is subsequently consummated, then the Company shall promptly (and in any event within one (1) business day of entering into or consummation of such Acquisition Transaction) pay, or cause to be paid, to Parent the Company Termination Fee by wire transfer of immediately available funds to an account or accounts designated in writing by Parent (provided, that, for purposes of the termination fee discussed in this bullet point, all references to “20%” in the definition of “Acquisition Transaction” will be deemed to be references to “50%”);

 

   

by Parent because the Board has effected a Company Board Recommendation Change, in which case the Company will promptly (an in any event within one (1) business day) of entering into or consummation of such Acquisition Transaction) pay, or cause to be paid, to Parent the Company Termination Fee by wire transfer of immediately available funds to an account or accounts designated in writing by Parent;

 

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by the Company because prior to receipt of required Shareholder Approval, (1) the Company has received a Superior Proposal and (2) the Board has authorized the Company to enter into an Alternative Acquisition Agreement with respect to such Superior Proposal, in which case the Company will concurrently with the such termination pay, or cause to be paid, to Parent the Company Termination Fee; or

 

   

by either Parent or the Company because, at any time prior to the Effective Time, the Company failed to obtain the required Shareholder Approval at the special meeting (or any adjournment or postponement thereof), subject to other terms and conditions discussed above, in which case the Company will promptly (and in any event within one (1) business day following such termination) pay, or cause to be paid, to Parent the Company Termination Fee and Parent’s actual and reasonable out-of-pocket expenses incurred in connection with the Merger Agreement and the Merger (the “Expense Reimbursement”) by wire transfer of immediately available funds to an account or accounts designated in writing by Parent.

“Company Termination Fee” means (1) an amount equal to $5,375,000 in the case of a Company Termination Fee payable in connection with the Company’s failure to obtain the required Shareholder Approval at the special meeting (or any adjournment or postponement thereof), subject to other terms and conditions discussed above, and (2) $9,775,000 in all other cases.

The Company will be entitled to receive an amount equal to $11,370,000 (the “Parent Termination Fee”), from Parent if the Merger Agreement is validly terminated:

 

   

by the Company if Parent or Merger Sub has breached or failed to perform any of its respective representations, warranties, covenants or other agreements set forth in the Merger Agreement such that certain conditions set forth in the Merger Agreement are not satisfied, subject to other terms and conditions discussed above, in which case, Parent will promptly (and in any event within one (1) business day following such termination) pay, or cause to be paid, to the Company the Parent Termination Fee by wire transfer of immediately available funds to an account or accounts designated in writing by the Company; or

 

   

by the Company, at any time prior to the Effective Time (whether prior to or after the receipt of the required Shareholder Approval), if (1) all of the conditions to Parent’s obligation to consummate the Merger have been satisfied (other than those conditions that by their terms are to be satisfied at the closing of the Merger, each of which is capable of being satisfied at the closing of the Merger) or waived; (2) Parent and Merger Sub have failed to consummate the Merger on the date required by the Merger Agreement; (3) the Company has irrevocably notified Parent in writing that (A) the Company is ready, willing and able to consummate the closing of the Merger, and (B) all conditions to the Company’s obligation to consummate the Merger have been satisfied (other than those conditions that by their terms are to be satisfied at the closing of the Merger, each of which is capable of being satisfied at the closing of the Merger) or that the Company is willing to waive any unsatisfied conditions to the Company’s obligation to consummate the Merger; (4) the Company has given Parent written notice stating the Company’s intention to terminate the Merger Agreement for the circumstance described in this bullet point; and (5) Parent and Merger Sub fail to consummate the closing of the Merger within four (4) business days after delivery of such notice, in which case, Parent will promptly (and in any event within one (1) business day following such termination) pay, or cause to be paid, to the Company the Parent Termination Fee by wire transfer of immediately available funds to an account or accounts designated in writing by the Company.

 

 

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Expense Reimbursement

If the Merger Agreement is terminated by Parent because the Company has breached or failed to perform any of its representations, warranties, covenants or other agreements set forth in the Merger Agreement such that certain conditions set forth in the Merger Agreement are not satisfied, which breach or failure to perform would result in a failure of a condition to Parent’s obligation to consummate the Merger, subject to other terms and conditions discussed above, then the Company will pay the Expense Reimbursement by wire transfer of immediately available funds on the second business day following the date of such termination of the Merger Agreement, provided, however, any Expense Reimbursement paid as a result of such termination by Parent will be credited against, and will thereby reduce, any Company Termination Fee that may be required to be paid by the Company to Parent because of such breach or failure; and provided further, that the payment by the Company of the Expense Reimbursement will not relieve the Company of any subsequent obligation to pay the Company Termination Fee pursuant to the reasons provided above.

Non-Recourse Parties; Limitations of Liability

Notwithstanding anything to the contrary in the Merger Agreement, under no circumstances will the aggregate monetary damages payable by Parent, Merger Sub, Guarantors or any of their Affiliates for breaches of the Merger Agreement, the Guarantee, or the Equity Commitment Letter exceed an amount equal to the sum of (i) the Parent Termination Fee and (ii) the amount of any out-of-pocket costs and expenses (including attorneys’ fees), and interest thereon, incurred by the Company in connection with any legal proceeding required to enforce the payment by Parent of the Parent Termination Fee, provided such amounts shall not exceed $500,000 (collectively, the “Parent Liability Limitation”). In no event, will any of the Company or any of its Affiliates seek or obtain, nor will they permit any of their Representatives or any other person acting on their behalf to seek or obtain , nor will any person be entitled to seek or obtain, any monetary recovery or award in excess of the Parent Liability Limitation against (i) Parent, Merger Sub or Guarantor; or (ii) the former, current and future holders of any equity, controlling persons, directors, officers, employees, agents, Financing Sources, Affiliates (other than Parent, Merger Sub or Guarantor), members, managers, general or limited partners and assignees of each of Parent, Merger Sub and Guarantor (the persons in clauses (i) and (ii) collectively, the “Parent Related Parties”), and in no event will the Company or any of its subsidiaries be entitled to seek or obtain any monetary damages of any kind, including consequential, special, indirect or punitive damages, in excess of the Parent Liability Limitation against the Parent Related Parties for, or with respect to, the Merger Agreement, the Guarantee, the Equity Commitment Letter (subject to the terms and conditions set forth therein and the provisions of the Merger Agreement concerning specific performance to the extent applicable) and other than obligations of Parent and Merger Sub to the extent expressly provided in the Merger Agreement and obligations of the guarantor under the Guarantee. Additionally, in no event will any Parent Related Party or any other person other than Parent and Merger Sub have any liability for monetary damages to the Company or any other person relating to or arising out of the Merger Agreement or the Merger.

Parent’s receipt of the Company Termination Fee to the extent owed pursuant to the Merger Agreement and the Expense Reimbursement to the extent owed pursuant to the Merger Agreement, Parent’s right to specific performance pursuant to the Merger Agreement and Parent’s right to seek damages for a willful and material breach will be the sole and exclusive remedies of Parent and Merger Sub and each of their respective Affiliates against (i) the Company, its subsidiaries and each of their respective Affiliates; and (ii) the former, current and future holders of any equity, controlling persons, agents, Affiliates, Representatives, members, managers, general or limited partners, shareholders and assignees of each of the Company, its subsidiaries and each of their respective Affiliates (collectively, the “Company Related Parties”) in respect of the Merger Agreement, the Merger, any agreement executed in connection with the Merger Agreement and the transactions contemplated hereby and thereby, and upon payment of such amount, none of the Company Related Parties will have any further liability or obligation to Parent or Merger Sub relating to or arising out of this Agreement, the Transactions, any agreement executed in connection herewith or the transactions contemplated thereby; provided that, that the parties to the Merger Agreement (or their Affiliates) will remain obligated with respect to, and the Company and its subsidiaries may be entitled to remedies with respect to, the Confidentiality Agreement, liability for any willful and material breach of the Merger Agreement by such party prior to the valid termination of the Merger Agreement, obligations of each party to pay its own expenses in connection with the transaction and the right to recover collection expenses as set forth in the Merger Agreement, as applicable. For the avoidance of doubt, if Parent elects to terminate the Merger Agreement and receive payment of the Company Termination Fee, other than the right to receive payment of the Company Termination Fee and collection expenses as set forth in the Merger Agreement, Parent will not be entitled to any monetary damages or other monetary remedies for any losses, damages or liabilities suffered as a result of the failure of the transactions contemplated by the Merger Agreement to be consummated or for breach or failure to perform hereunder.

 

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Specific Performance

The parties have agreed in the Merger Agreement that irreparable damage for which monetary damages, even if available, would not be an adequate remedy would occur in the event that the Parties do not perform the provisions of the Merger Agreement in accordance with its specified terms or otherwise breach such provisions. The parties have agreed that, subject to certain specified limitations in the Merger Agreement, they will be entitled, in addition to any other remedy to which they are entitled at law or in equity, to an injunction, specific performance and other equitable relief to prevent breaches (or threatened breaches) of the Merger Agreement and to enforce specifically the terms and provisions of the Merger Agreement. The parties have also agreed that (i) by seeking specific performance as permitted under the Merger Agreement, a party shall not in any respect waive its right to seek any other form of relief that may be available to such party under the Merger Agreement; and (ii) the specific performance provisions of the Merger Agreement shall not require any party to institute any proceeding for (or limit any party’s right to institute any proceeding for) specific performance under the Merger Agreement prior or as a condition to exercising any termination right under the Merger Agreement (and pursuing damages after such termination), nor shall the commencement of any legal proceeding for specific performance pursuant to the Merger Agreement restrict or limit any party’s right to terminate the Merger Agreement in accordance with the terms of Article VIII of the Merger Agreement or pursue any other remedies under the Merger Agreement that may be available.

Notwithstanding the foregoing, the Company’s right to a remedy of specific performance to enforce Parent’s obligation to cause the Equity Financing to be funded and to fund the closing of the Merger will be subject to the requirements that:

 

   

all of the conditions set forth in the Merger Agreement, including those described above under “– Conditions to the Merger,” have been satisfied (other than those conditions that by their terms are to be satisfied at the closing of the Merger, each of which is capable of being satisfied at the time the closing of the Merger would have occurred but for the failure of the Equity Financing to be funded);

 

   

the Debt Financing has been funded in accordance with the terms thereof or will be funded in accordance with the terms thereof at the closing of the Merger if the Equity Financing is funded at the closing of the Merger;

 

   

the Company has irrevocably confirmed in a written notice to Parent that if specific performance is granted and the Equity Financing and Debt Financing are funded, then it would take such actions that are required of it by the Merger Agreement to cause the closing of the Merger to occur; and

 

   

Parent and Merger Sub fail to complete the closing of the Merger within two (2) business days after its receipt of such irrevocable confirmation.

In no event will the Company be entitled to enforce or seek to enforce specifically Parent’s obligation to cause the Equity Financing to be funded or to complete the Merger if the Debt Financing has not been funded (or will not be funded at the closing of the Merger if the Equity Financing is funded at the closing of the Merger). Notwithstanding the foregoing, in no event shall the Company or any of its equityholders be entitled to seek the remedy of specific performance of the Merger Agreement directly against any Financing Source, solely in their respective capacities as lenders or arrangers in connection with the Debt Financing.

Fees and Expenses

Except in specified circumstances, whether or not the Merger is consummated, all fees and expenses incurred in connection with the Merger Agreement and the Merger will be paid by the party incurring such fees and expenses.

 

 

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No Third Party Beneficiaries

Except as set forth in the Merger Agreement, the respective representations, warranties and covenants of the parties in the Merger Agreement are solely for the benefit of the other parties in accordance with and subject to the terms of the Merger Agreement, and the Merger Agreement is not intended to, and shall not, confer upon any other person any rights or remedies thereunder, except as set forth in the Merger Agreement.

Amendment

Subject to applicable law and the other provisions of the Merger Agreement, the parties may amend the Merger Agreement at any time by execution of written agreement signed on behalf of each of Parent, Merger Sub and the Company (pursuant to authorized action by the Board), provided, however, that in the event the Company has received Shareholder Approval required for adoption of the Merger Agreement, no amendment to the Merger Agreement that requires the approval of the Company’s shareholder pursuant to the GBCC may be made without such approval. Additionally, certain provisions related to the Financing Sources in the Merger Agreement may not be amended, modified or altered without the prior written consent of the Financing Sources.

Governing Law

The Merger Agreement is governed by Georgia law.

The Support Agreements

On December 24, 2020, concurrently with the execution of the Merger Agreement, certain of the Company’s shareholders, including each of the Company’s directors and executive officers (each a “Supporting Shareholder and, collectively, the “Supporting Shareholders”), entered into voting and support agreements with the Company, Parent and Merger Sub (each a “Support Agreement” and, collectively, the “Support Agreements”), pursuant to which each Supporting Shareholder agreed, among other things and subject to the termination of the Supporting Agreements, to cause to be present and counted and to vote (or cause to be voted or acted upon by written consent with respect to) all of the common stock held by such Supporting Shareholders as follows: (a) in favor of the adoption of the Merger Agreement and approval of the transactions contemplated thereby, including the Merger; (b) in favor of any proposal to adjourn or postpone a meeting of the Company shareholders at which there is a proposal for Company shareholders to vote upon the adoption of the Merger Agreement to a later date; (c) against any Acquisition Proposal and/or Acquisition Transaction or the adoption of any agreement providing for or contemplating an Acquisition Transaction; and (d) against any amendment of the Company’s Amended and Restated Articles of Incorporation other action or agreement of the Company, in each case, for which the vote of the Company shareholders is required to authorize such action or agreement, that would reasonably be expected to (i) result in any of the conditions to the consummation of the Merger under the Merger Agreement not being fulfilled, or (ii) prevent or materially delay the consummation of the Merger and the other transactions contemplated by the Merger Agreement.

Each Support Agreement will automatically terminate and cease to be effective at the earlier to occur of (a) the Effective Time; (b) the termination of the Merger Agreement pursuant to the terms of the Merger Agreement; and (c) the effective date of a written agreement duly executed and delivered by each of the parties hereto terminating the Support Agreements; provided, however, that in the case of any termination pursuant to the foregoing clause, certain sections of the Support Agreements survive such termination.

All fees and expenses incurred in connection with the Support Agreements and the transactions contemplated thereby will be paid by the party incurring such fees or expenses.

As of January 11, 2021, an aggregate of approximately 13.08% of the outstanding shares of the Company’s common stock are subject to the Support Agreements.

Board of Directors Recommendation

Our Board of Directors unanimously recommends that you vote “FOR” the proposal to approve the Merger and the Merger Agreement.

 

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PROPOSAL 2

AUTHORITY TO ADJOURN THE SPECIAL MEETING

If at the special meeting of shareholders, our Board determines it is necessary or appropriate to adjourn the special meeting, we intend to move to adjourn the special meeting. For example, our Board may make such a determination if the number of shares of our common stock represented and voting in favor of the proposal to adopt the Merger Agreement at the special meeting is insufficient to adopt that proposal under the GBCC, in order to enable our Board to solicit additional votes in respect of such proposal. If our Board determines that it is necessary or appropriate, we will ask our shareholders to vote only upon the proposal to adjourn the special meeting, and not the proposal to adopt the Merger Agreement.

In this proposal, we are asking you to authorize the holder of any proxy solicited by our Board to vote in favor of the proposal to adjourn the special meeting to another time and place. If the shareholders approve the proposal to adjourn the special meeting, we could adjourn the special meeting and any adjourned session of the special meeting and use the additional time to solicit additional votes, including the solicitation of votes from shareholders that have previously voted. Among other things, approval of the proposal to adjourn the special meeting could mean that, even if we had received proxies representing a sufficient number of votes against the proposal to adopt the Merger Agreement to defeat that proposal, we could adjourn the special meeting without a vote on the Merger Agreement and seek to convince the holders of those shares to change their votes to votes in favor of the proposal to adopt the Merger Agreement.

Board of Directors Recommendation

Our Board of Directors unanimously recommends that you vote “FOR” the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional votes in favor of the proposal to adopt the Merger Agreement.

 

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PROPOSAL 3

ADVISORY VOTE REGARDING GOLDEN PARACHUTE COMPENSATION

Section 951 of the Dodd-Frank Act and Rule 14a-21(c) under the Exchange Act require that we seek a non-binding advisory vote from our shareholders to approve the “golden parachute compensation” that will or may be payable to our named executive officers in connection with the Merger. The “golden parachute compensation” that will or may be payable to our named executive officers in connection with the Merger is described in the section captioned “The Merger—Interests of Certain Persons in the Merger— Golden Parachute Compensation.” This non-binding advisory proposal relates only to already existing contractual obligations of the Company that may result in a payment to the Company’s named executive officers in connection with the Merger and does not relate to any new compensation or other arrangements between our named executive officers, on the one hand, and Parent, Merger Sub, or the Company or, following the Merger, the Surviving Company and its subsidiaries, on the other hand. Accordingly, we are asking you to approve the following resolution:

“RESOLVED, that the shareholders approve, on an advisory (non-binding) basis, the agreements or understandings with, and items of compensation that will or may become payable to, the named executive officers of the Company that are based on or otherwise relate to the Merger, as disclosed pursuant to Item 402(t) of Regulation S-K in the sections of the Proxy Statement entitled “The Merger—Interests of Certain Persons in the Merger.”

Board of Directors Recommendation

The Board of Directors unanimously recommends that our shareholders approve the non-binding advisory proposal on the golden parachute compensation payable to our named executive officers in connection with the Merger.

Approval of this proposal is not a condition to the completion of the Merger, and the vote with respect to this proposal is advisory only and will not be binding on us or Parent. Accordingly, regardless of the outcome of the non-binding advisory vote, our named executive officers will be eligible to receive or retain the various amounts of golden parachute compensation payable to them in connection with the Merger (subject to the completion of the Merger, if required by the terms of such compensation).

 

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MARKET PRICE OF COMPANY COMMON STOCK AND DIVIDEND INFORMATION

Our common stock trades on the Nasdaq Global Select Market, or Nasdaq, under the symbol “PRGX.” As of [—], 2021, there were [—] shares of Company common stock outstanding held by approximately [—] shareholders of record. The actual number of shareholders is greater than this number of shareholders of record and includes holders who are beneficial owners, but whose shares are held in “street name” by brokers and other nominees.

On December 23, 2020 the last trading day prior to the announcement of the Merger, our common stock closed at $7.36 per share. On [—], 2021, the most recent practicable date before this proxy statement was mailed to our shareholders, the closing price for Company common stock on Nasdaq was $[—] per share of Company common stock. You are encouraged to obtain current market quotations for Company common stock in connection with voting your shares of Company common stock.

We have never declared or paid any cash dividend on our common stock. Accordingly, we do not expect to declare or pay any dividends prior to the Merger and, under the terms of the Merger Agreement, are prohibited from doing so. Following the Merger, there will be no further market for our common stock and it will be delisted from the Nasdaq and deregistered under the Exchange Act. As a result, following the Merger we will no longer file periodic or current reports with the SEC.

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information with respect to the beneficial ownership of our common stock as of January 11, 2021, subject to certain assumptions set forth in the footnotes, for:

 

   

each shareholder, or group of affiliated shareholders, who we know beneficially owns more than 5% of the outstanding shares of our common stock;

 

   

each of our current directors;

 

   

each of our named executive officers; and

 

   

all of our current directors and current executive officers as a group.

Beneficial ownership is determined in accordance with rules of the SEC and generally includes any shares over which a person exercises sole or shared voting and/or investment power. Shares of common stock subject to options and warrants currently exercisable or exercisable within 60 days are deemed outstanding for computing the percentage ownership of the person holding the options but are not deemed outstanding for computing the percentage ownership of any other person. Except as otherwise indicated, we believe the beneficial owners of the common stock listed below, based on information furnished by them, have sole voting and investment power with respect to the number of shares listed opposite their names.

The number of shares and percentages of beneficial ownership set forth below are based on 23,631,787 shares of common stock outstanding as of January 11, 2021.

Unless otherwise indicated, the address of each of the individuals and entities named in the table below under “Named Executive Officers and Directors” is PRGX Global, Inc., 600 Galleria Parkway, Suite 100, Atlanta, GA 30339.

 

Name of Beneficial Owner

   Amount and Nature
of Beneficial
Ownership(1)
     Percent
of Outstanding
Shares
 

5% Shareholders

     

Headlands Strategic Opportunities Fund, LP(2)

One Ferry Building

Suite 255

San Francisco, CA 94111

     2,949,685        12.48

Northern Right Capital Management, L.P.(3)

9 Old Kings Highway

4th Floor

Darien, CT 06820

     2,114,653        8.95

Renaissance Technologies LLC(4)

800 Third Avenue

New York, NY 10022

     1,838,160        7.78

Wellington Management Group LLP(5)
Wellington Management Group LLP
Wellington Trust Company, NA
Wellington Trust Company, National Association
    Multiple Common Trust Funds Trust, Micro Cap
    Equity Portfolio

280 Congress Street

Boston, MA 02210

     1,619,819        6.85

The Vanguard Group(6)

100 Vanguard Blvd.

Malvern, PA 19355

     1,320,496        5.59

 

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Named Executive Officers and Directors

     

Kurt J. Abkemeier

     109,695        *  

Kevin S. Costello

     98,465        *  

Matthew A. Drapkin(7)

     2,133,200        9.03

William F. Kimble(8)

     154,015        *  

Mylle H. Mangum(9)

     148,914        *  

Gregory J. Owens

     231,456        *  

Ronald E. Stewart

     824,649        3.49

Joseph E. Whitters(10)

     306,946        1.30

All directors and executive officers as a group (9 persons)(11)

     4,131,539        17.48
*

less than 1%.

Notes:

 

(1)

Applicable percentage ownership as of January 11, 2021 is based upon 23,631,787 shares of common stock outstanding, adjusted in the case of certain options and other conversion rights. Shares of common stock subject to options and rights that are currently exercisable or convertible, or will become exercisable or convertible within 60 days of January 11, 2021 are deemed outstanding for computing the percentage ownership of the person holding such options or rights, but are not deemed outstanding for computing the percentage ownership of any other persons. Beneficial ownership is determined in accordance with the rules of the SEC under which shares are beneficially owned by the person or entity that holds investment and/or voting power.

(2)

Information is based on publicly reported holdings as of the date of the most recently filed Schedule 13G/A, as filed on February 14, 2020. Headlands Strategic Opportunities Fund, LP, Headlands Capital Management, LLC, David E. Park III and David W. Cost Jr. jointly filed the Schedule 13G/A pursuant to a Joint Filing Agreement and collectively report that they may be deemed to beneficially own 2,949,685 shares.

(3)

Information is based on publicly reported holdings as of the date of the most recently filed Schedule 13D, as filed on September 9, 2019. Mr. Drapkin is a member of BC Advisors, LLC, which is the general partner of Northern Right Capital Management, L.P. (of which Mr. Drapkin is a limited partner), and Northern Right Capital Management, L.P. is the general partner of, and investment manager for, Northern Right Capital (QP), L.P.

(4)

Information is based on publicly reported holdings as of the date of the most recently filed Schedule 13G/As, as filed on February 13, 2020. Renaissance Technologies LLC and Renaissance Technologies Holdings Corporation jointly filed the Schedule 13G/A pursuant to a Joint Filing Agreement and collectively report that they may be deemed to beneficially own 1,679,700 shares.

(5)

Information is based on publicly reported holdings as of the date of the most recently filed Schedules 13G/A, as filed on January 30, 2020, January 29, 2020 and January 27, 2020, by each of (i) Wellington Trust Company, National Association Multiple Common Trust Funds Trust, Micro Cap Equity Portfolio (the “Fund”); (ii) Wellington Trust Company, NA, as investment advisor (the “Wellington Trust”); and (iii) Wellington Management Group LLP, Wellington Group Holdings LLP, Wellington Investment Advisors Holdings LLP and Wellington Management Company LLP, filing jointly pursuant to a Joint Filing Agreement (collectively, “Wellington LLP”), respectively. Wellington Trust, in its role as investment adviser, and Wellington LLP, in its role as direct or indirect owner of investment advisers, including Wellington Trust, each report the ownership of 1,838,160 shares that are held of record by their clients, and the Fund reports the ownership of 1,619,819 of such shares. According to the Schedules 13G/A, the shares are owned of record by clients of Wellington Trust and other investment advisers, and such clients have the right to receive, or the power to direct the receipt of, dividends from, or the proceeds from the sale of, such shares, and no such client is known to have the right or power with respect to more than 5% of the Company’s shares except for Wellington Trust, the Fund and Wellington Trust Company—National Association Multiple Common Trust Funds Trust—Micro Cap Equity Portfolio.

 

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(6)

Information is based on publicly reported holdings as of the date of the most recently filed Schedule 13G, as filed on February 11, 2020. The Vanguard Group is deemed to have sole voting power over 41,973 shares, sole dispositive power over 1,278,523 shares, and shared dispositive power over 41,973 shares.

(7)

Represents shares deemed beneficially owned indirectly by Mr. Drapkin who is a managing member of BC Advisors, LLC, which is the general partner of Northern Right Capital Management, L.P. (of which Mr. Drapkin is a limited partner). Northern Right Capital Management, L.P. is the general partner of, and investment manager for, Northern Right Capital (QP), L.P. Includes 28,599 stock units under the Company’s Deferred Compensation Plan for Non-Employee Directors, pursuant to which the same number of shares are issuable to Mr. Drapkin upon separation from service on the Board of Directors.

(8)

Includes 28,599 stock units under the Company’s Deferred Compensation Plan for Non-Employee Directors, pursuant to which the same number of shares are issuable to Mr. Kimble upon separation from service on the Board of Directors.

(9)

Includes 44,625 stock units under the Company’s Deferred Compensation Plan for Non-Employee Directors, pursuant to which the same number of shares are issuable to Ms. Mangum upon separation from service on the Board of Directors.

(10)

Includes 55,157 stock units under the Company’s Deferred Compensation Plan for Non-Employee Directors, pursuant to which the same number of shares are issuable to Mr. Whitters upon separation from service on the Board of Directors.

(11)

Shares beneficially owned include 882,346 shares of common stock issuable upon exercise of stock options.

 

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DISSENTERS’ RIGHTS

Under the GBCC, record holders of Company common stock will be entitled to dissent from the Merger and obtain payment in cash equal to the fair value of their shares of Company common stock. Set forth below is a summary of the procedures that must be followed by the holders of Company common stock in order to exercise their dissenters’ rights of appraisal. This summary is qualified in its entirety by reference to the text of Article 13 of the GBCC, a copy of which is attached to this proxy statement as Annex C. Shareholders who desire to exercise dissenters rights should review carefully Article 13 of the GBCC and are urged to consult a legal advisor before electing or attempting to exercise these rights.

Any record holder of Company common stock who does not vote in favor of the merger, and who fully complies with all of the provisions of Article 13 of the GBCC (but not otherwise), will be entitled to demand and receive payment of the “fair value” for all (but not less than all) of his or her shares of Company common stock if the Merger is consummated. If you hold your shares of Company common stock through a broker, bank or other nominee, you must contact your broker, bank or other nominee if you wish to exercise dissenters’ rights.

A shareholder of PRGX who does not vote in favor of the Merger and desires to receive payment of the “fair value” of his or her Company common stock: (i) must deliver to PRGX, prior to the time the shareholder vote on the Merger is taken, a written notice of such shareholder’s intent to demand payment for those shares registered in the dissenting shareholder’s name if the Merger is completed; and (ii) must not vote his or her shares in favor of the approval of the Merger Agreement.

A failure to vote against the Merger will not constitute a waiver of dissenters’ rights. A vote against the approval and adoption of the Merger Agreement alone will not constitute the separate written notice and demand for payment referred to immediately above. Dissenting shareholders must separately comply with the above conditions.

Any notice required to be given should be sent to PRGX Global, Inc., 600 Galleria Parkway, Suite 100, Atlanta, Georgia 30339, Attention: Corporate Secretary.

If the Merger Agreement is approved by the Company’s shareholders, PRGX will mail, no later than ten days after the Effective Time of the Merger, to each shareholder who has timely submitted a written notice of intent to dissent, written notice addressed to the shareholder at such address as the shareholder has furnished PRGX in writing or, if none, at the shareholder’s address as it appears on the records of PRGX. The dissenters’ notice will: (i) state where the dissenting shareholder must send a payment demand, and where and when the certificates for the dissenting shareholder’s shares, if any, are to be deposited; (ii) inform holders of uncertificated shares to what extent transfer of the shares will be restricted after the payment demand is received; (iii) set a date by which PRGX must receive the shareholder’s payment demand (which date may not be fewer than 30 nor more than 60 days after the date the dissenters’ notice is delivered); and (iv) be accompanied by a copy of Article 13 of the GBCC. Within ten days after the later of the Effective Time of the Merger, or the date on which PRGX receives a payment demand, PRGX will send a written offer to each shareholder who complied with the provisions set forth in the dissenters’ notice to pay each such shareholder an amount that PRGX estimates to be the fair value of those shares, plus accrued interest. The offer of payment will be accompanied by: (a) PRGX’s balance sheet as of the end of a fiscal year ending not more than 16 months before the date of payment, an income statement for that year, a statement of changes in shareholder’s equity for that year, and the latest available interim financial statements, if any; (b) a statement of PRGX’s estimate of the fair value of the shares; (c) an explanation of how any interest was calculated; (d) a statement of the dissenting shareholder’s right to demand payment of a different amount of payment under Section 14-2-1327 of the GBCC; and (e) a copy of Article 13 of the GBCC.

A dissenting shareholder choosing to accept PRGX’s offer of payment must do so by written notice to PRGX within 30 days after receipt of PRGX’s offer of payment. A dissenting shareholder not responding to the offer within the 30-day period will be deemed to have accepted the offer of payment. PRGX must make payment to each shareholder who accepts the offer of payment within 60 days after the making of the offer of payment, or the Effective Date of the Merger, whichever is later. Upon payment, the dissenting shareholder will cease to have any interest in such shareholder’s shares of Company common stock.

 

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If a dissenting shareholder does not accept, within 30 days after PRGX’s offer, the estimate of fair value in payment for such shares and interest due thereon and demands payment of some other estimate of the fair value of shares of the Company’s common stock and interest due thereon, then PRGX, within 60 days after receiving the payment demand of a different amount from a dissenting shareholder, must commence a proceeding in the superior court of the county where its registered office is located to determine the fair value of such dissenting shareholder’s shares of Company common stock and accrued interest. If PRGX does not commence the proceedings within the 60-day period, then it must pay each dissenter whose demand remains unsettled the amount demanded by the dissenting shareholder.

In the event of a court proceeding, the court will determine all costs of the proceeding, including the reasonable compensation and expenses of appraisers appointed by the court, but not including fees and expenses of attorneys and experts for the respective parties. The court will assess these costs against PRGX, except that the court may assess these costs against all or some of the dissenters in amounts the court finds equitable to the extent the court finds the dissenters acted arbitrarily, vexatiously or not in good faith in demanding payment under the dissenters’ provisions of the GBCC. The court may also assess the fees and expenses of attorneys and experts for the respective parties in amounts the court finds equitable: (i) against PRGX and in favor of any or all dissenters if the court finds PRGX did not substantially comply with the dissenters’ rights provisions of the GBCC; or (ii) against PRGX or a dissenter in favor of any other party if the court finds that the party against whom fees and expenses are assessed acted arbitrarily, vexatiously or not in good faith with respect to the rights provided by the dissenters’ rights provisions of the GBCC. If the court finds that the services of attorneys for any dissenter were of substantial benefit to other dissenters similarly situated and that the fees for those services should not be assessed against PRGX, the court may award these attorneys’ reasonable fees to be paid out of the amounts awarded the dissenters who were benefited.

Shareholders should be aware that cash paid to dissenting shareholders in satisfaction of the fair value of their shares of Company common stock will result in the recognition of any gain or loss realized for U.S. federal income tax purposes.

Failure by a record holder of Company common stock to follow the steps required by the GBCC for perfecting dissenters’ rights may result in the loss of such rights. In view of the complexity of these provisions and the requirement that they be strictly complied with, if you hold Company common stock and are considering dissenting from the approval of the Merger Agreement and exercising your dissenters’ rights under the GBCC, you should consult your legal advisors.

 

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DELISTING AND DEREGISTRATION OF COMPANY COMMON STOCK

If the Merger is completed, the Company common stock will be delisted from Nasdaq and deregistered under the Exchange Act and we will no longer be required to file periodic reports with the SEC on account of Company common stock.

 

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OTHER MATTERS

Other Matters for Action at the Special Meeting

As of the date of this proxy statement, our Board knows of no matters that will be presented for consideration at the special meeting other than as described in this proxy statement.

Shareholder Proposals and Nominations for 2021 Annual Meeting

Once the Merger is completed, there will be no public participation in any future meetings of the Company’s shareholders. If the Merger is not completed, our public shareholders will continue to be entitled to attend and participate in our shareholder meetings, and we would expect to hold our 2021 annual meeting of shareholders prior to the end of 2021.

Inclusion of Proposals in the Company’s Proxy Statement and Proxy Card under the SEC Rules; Advance Notice Requirements

Shareholders who, in accordance with SEC Rule 14a-8, wish to present proposals for inclusion in the Company’s proxy materials to be distributed in connection with the 2021 annual meeting of shareholders must submit their proposals so that they are received at the Company’s principal executive offices no later than the close of business on February 5, 2021. As the rules of the SEC make clear, simply submitting a proposal does not guarantee that it will be included.

In accordance with the Company’s bylaws, in order to be properly brought before the 2021 annual meeting of shareholders, a shareholder’s notice of the matter the shareholder wishes to present, or the person or persons the shareholder wishes to nominate as a director, must be delivered to the Secretary of the Company at the Company’s principal executive offices no less than 90 days, and no more than 120 days before the first anniversary of the date the Company mailed the preceding year’s proxy statement. As a result, any notice given by a shareholder pursuant to these provisions of the Company’s bylaws (and not pursuant to the SEC’s Rule 14a-8) must be received no earlier than January 6, 2021 and no later than February 5, 2021, unless the Company’s annual meeting date in 2021 is more than 30 days before or after June 18, 2021, in which case, it must be delivered to the Secretary of the Company at the Company’s principal executive offices no less than the later of (i) 90 days prior to such annual meeting or (ii) the 10 days following the day on which public announcement of the date of such meeting is first made. SEC rules permit management to vote proxies in its discretion with respect to such matters if we advise shareholders how management intends to vote. If the Company’s 2021 annual meeting of shareholders date is advanced or delayed by more than 30 days from June 18, 2021, then proposals must be received no later than the close of business on the later of the 90th day before the 20201 annual meeting of shareholders or the 10th day following the date on which the meeting date is first publicly announced.

To be in proper form, a shareholder notice must include the specified information concerning the proposal or nominee as described in the Company’s Bylaws. A shareholder who wishes to submit a proposal or nomination is encouraged to seek independent counsel about the requirements imposed by the Company’s Bylaws and SEC regulations. The Company will not consider any proposal or nomination that does not meet the Bylaw requirements and the SEC’s requirements for submitting a proposal or nomination.

NOTICES OF INTENTION TO PRESENT PROPOSALS AT THE 2021 ANNUAL MEETING OF SHAREHOLDERS SHOULD BE ADDRESSED TO SECRETARY, PRGX GLOBAL, INC., 600 GALLERIA PARKWAY, SUITE 100, ATLANTA, GEORGIA 30339. THE COMPANY RESERVES THE RIGHT TO REJECT, RULE OUT OF ORDER, OR TAKE OTHER APPROPRIATE ACTION WITH RESPECT TO ANY PROPOSAL THAT DOES NOT COMPLY WITH THESE AND OTHER APPLICABLE REQUIREMENTS.

 

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WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and current reports, proxy statements and other information with the SEC. Our SEC filings are available to the public at the SEC website at www.sec.gov. You also may obtain free copies of the documents we file with the SEC, including this proxy statement, by going to the Investor Relations page of our corporate website at www.prgx.com. Our website address is provided as an inactive textual reference only. The information provided on our website, other than copies of the documents listed below that have been filed with the SEC, is not part of this proxy statement, and therefore is not incorporated herein by reference.

Statements contained in this proxy statement, or in any document incorporated by reference in this proxy statement regarding the contents of any contract or other document, are not necessarily complete and each such statement is qualified in its entirety by reference to that contract or other document filed as an exhibit with the SEC. The SEC allows us to “incorporate by reference” into this proxy statement documents we file with the SEC. This means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be a part of this proxy statement, and later information that we file with the SEC will update and supersede that information. We incorporate by reference the documents listed below and any documents filed by us pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this proxy statement and before the date of the special meeting.

 

   

PRGX’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019;

 

   

PRGX’s Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2020, June 30, 2020, and September 30, 2020;

 

   

PRGX’s Current Reports on Form 8-K filed with the SEC on February 3, 2020, February 20, 2020, June 24, 2020, September 22, 2020 and December 28, 2020; and

 

   

PRGX’s proxy statement on Schedule 14A for our 2020 Annual Meeting filed with the SEC on April 29, 2020.

Notwithstanding the foregoing, information furnished under Items 2.02 and 7.01 of any Current Report on Form 8-K, including the related exhibits, is not incorporated by reference into this proxy statement.

Any person, including any beneficial owner, to whom this proxy statement is delivered may request copies of proxy statements and any of the documents incorporated by reference in this document or other information concerning us, without charge, by telephonic request directed to PRGX’s Investor Relations Department at (770) 779-3011 or by written request delivered to investor-relations@prgx.com or from the SEC through the SEC website at the address provided above. Documents incorporated by reference are available without charge, excluding any exhibits to those documents unless the exhibit is specifically incorporated by reference into those documents.

THIS PROXY STATEMENT DOES NOT CONSTITUTE THE SOLICITATION OF A PROXY IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM OR FROM WHOM IT IS UNLAWFUL TO MAKE SUCH PROXY SOLICITATION IN THAT JURISDICTION. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT TO VOTE YOUR SHARES OF COMPANY COMMON STOCK AT THE SPECIAL MEETING. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS PROXY STATEMENT. THIS PROXY STATEMENT IS DATED [—], 2021. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS PROXY STATEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THAT DATE, AND THE MAILING OF THIS PROXY STATEMENT TO SHAREHOLDERS DOES NOT CREATE ANY IMPLICATION TO THE CONTRARY.

 

 

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ANNEX A

 

AGREEMENT AND PLAN OF MERGER

by and among

PLUTO ACQUISITIONCO INC.,

PLUTO MERGER SUB INC.,

and

PRGX GLOBAL, INC.

Dated as of December 24, 2020

 

 


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TABLE OF CONTENTS

 

          Page  

Article I DEFINITIONS & INTERPRETATIONS

     A-2  

        1.1

   Certain Definitions      A-2  

        1.2

   Additional Definitions      A-13  

        1.3

   Certain Interpretations      A-15  

Article II THE MERGER

     A-16  

        2.1

   The Merger      A-16  

        2.2

   The Effective Time      A-16  

        2.3

   The Closing      A-16  

        2.4

   Effect of the Merger      A-17  

        2.5

   Articles of Incorporation and Bylaws      A-17  

        2.6

   Directors and Officers      A-17  

        2.7

   Effect on Capital Stock      A-17  

        2.8

   Equity Awards      A-19  

        2.9

   Exchange of Certificates      A-21  

        2.10

   No Further Ownership Rights in Company Common Stock      A-23  

        2.11

   Lost, Stolen or Destroyed Certificates      A-23  

        2.12

   Required Withholding      A-23  

Article III REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     A-23  

        3.1

   Organization; Good Standing      A-23  

        3.2

   Corporate Power; Enforceability      A-24  

        3.3

   Company Board Approval; Fairness Opinion; Anti-Takeover Laws      A-24  

        3.4

   Requisite Shareholder Approval      A-24  

        3.5

   Non-Contravention      A-25  

        3.6

   Consents      A-25  

        3.7

   Company Capitalization      A-25  

        3.8

   Subsidiaries      A-26  

        3.9

   Company SEC Reports      A-27  

        3.10

   Company Financial Statements; Internal Controls      A-27  

        3.11

   No Undisclosed Liabilities      A-28  

        3.12

   Absence of Certain Changes      A-29  

        3.13

   Material Contracts      A-29  

        3.14

   Customers and Suppliers      A-29  

        3.15

   Real Property      A-30  

        3.16

   Environmental Matters      A-30  

        3.17

   Intellectual Property      A-31  

        3.18

   Tax Matters      A-34  

        3.19

   Employee Plans      A-35  

        3.20

   Labor Matters      A-38  

        3.21

   Permits      A-40  

        3.22

   Compliance with Laws      A-40  

        3.23

   Information in the Proxy Statement      A-40  

        3.24

   Legal Proceedings; Orders      A-40  

        3.25

   Insurance      A-41  

        3.26

   Accounts Receivable      A-41  

        3.27

   Related Person Transactions      A-41  

        3.28

   Sufficiency of Assets      A-41  

 

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TABLE OF CONTENTS

(Continued)

 

          Page  

        3.29

   Brokers      A-41  

        3.30

   Anti-Corruption and FCPA Compliance      A-41  

        3.31

   Government Contracts      A-42  

        3.32

   Trade Controls      A-42  

Article IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

     A-43  

        4.1

   Organization; Good Standing      A-43  

        4.2

   Power; Enforceability      A-43  

        4.3

   Non-Contravention      A-43  

        4.4

   Requisite Governmental Approvals      A-44  

        4.5

   Legal Proceedings; Orders      A-44  

        4.6

   Ownership of Company Common Stock      A-44  

        4.7

   Brokers      A-44  

        4.8

   Operations of Parent and Merger Sub      A-44  

        4.9

   No Parent Vote or Approval Required      A-44  

        4.10

   Guarantee      A-44  

        4.11

   Financing      A-45  

        4.12

   No Shareholder or Management Arrangements      A-46  

        4.13

   Solvency      A-46  

        4.14

   Exclusivity of Representations and Warranties      A-47  

        4.15

   Information in the Proxy Statement      A-47  

Article V INTERIM OPERATIONS OF THE COMPANY

     A-48  

        5.1

   Affirmative Obligations of the Company      A-48  

        5.2

   Forbearance Covenants of the Company      A-48  

        5.3

   No Solicitation      A-50  

        5.4

   No Control of the Other Party’s Business      A-54  

Article VI ADDITIONAL COVENANTS

     A-54  

        6.1

   Required Action and Forbearance; Efforts      A-54  

        6.2

   Antitrust Filings      A-55  

        6.3

   Proxy Statement and Other Required SEC Filings      A-56  

        6.4

   Company Shareholder Meeting      A-58  

        6.5

   Financing      A-58  

        6.6

   Financing Cooperation      A-60  

        6.7

   Anti-Takeover Laws      A-63  

        6.8

   Access      A-63  

        6.9

   Section 16(b) Exemption      A-63  

        6.10

   Directors’ and Officers’ Exculpation, Indemnification and Insurance      A-64  

        6.11

   Employee Matters      A-66  

        6.12

   Obligations of Merger Sub      A-67  

        6.13

   Public Statements and Disclosure      A-67  

        6.14

   Transaction Litigation      A-67  

        6.15

   Stock Exchange Delisting; Deregistration      A-68  

        6.16

   Certain Tax Matters      A-68  

        6.17

   Certain Actions Among the Company and its Subsidiaries      A-68  

        6.18

   Additional Agreements      A-68  

 

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TABLE OF CONTENTS

(Continued)

 

          Page  

Article VII CONDITIONS TO THE MERGER

     A-68  

        7.1

   Conditions to Each Party’s Obligations to Effect the Merger      A-68  

        7.2

   Conditions to the Obligations of Parent and Merger Sub      A-68  

        7.3

   Conditions to the Company’s Obligations to Effect the Merger      A-69  

Article VIII TERMINATION

     A-70  

        8.1

   Termination      A-70  

        8.2

   Manner and Notice of Termination; Effect of Termination      A-71  

        8.3

   Fees and Expenses      A-72  

Article IX GENERAL PROVISIONS

     A-74  

        9.1

   Survival of Representations, Warranties and Covenants      A-74  

        9.2

   Notices      A-74  

        9.3

   Assignment      A-75  

        9.4

   Confidentiality      A-75  

        9.5

   Entire Agreement      A-76  

        9.6

   Third Party Beneficiaries      A-76  

        9.7

   Severability      A-76  

        9.8

   Remedies      A-76  

        9.9

   Governing Law      A-77  

        9.10

   Consent to Jurisdiction      A-78  

        9.11

   WAIVER OF JURY TRIAL      A-78  

        9.12

   No Recourse      A-79  

        9.13

   Company Disclosure Letter References      A-79  

        9.14

   Counterparts      A-79  

        9.15

   Amendment      A-79  

        9.16

   Extension; Waiver      A-79  

Annex A – Shareholders subject to Support Agreements

 

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AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER (this “Agreement”) is made and entered into as of December 24, 2020, by and among Pluto Acquisitionco Inc., a Delaware corporation (“Parent”), Pluto Merger Sub Inc, a Georgia corporation and a wholly owned subsidiary of Parent (“Merger Sub”), and PRGX Global, Inc., a Georgia corporation (the “Company”). Each of Parent, Merger Sub and the Company is sometimes referred to as a “Party.” All capitalized terms that are used in this Agreement have the respective meanings given to them in this Agreement.

RECITALS

WHEREAS, the Parties intend that, subject to the terms and conditions hereinafter set forth, Merger Sub shall merge with and into the Company (the “Merger”), with the Company continuing as the surviving corporation in the Merger, on the terms and subject to the conditions of this Agreement and in accordance with the Georgia Business Corporation Code (the “GBCC”), pursuant to which each issued and outstanding share of Company Common Stock (the “Company Shares”), other than (a) the Converted Company Shares and (b) the Dissenting Company Shares, shall be converted into the right to receive an amount equal to the Per Share Price;

WHEREAS, the board of directors of the Company (the “Company Board”) has, on the terms and subject to the conditions set forth herein, (a) determined that this Agreement and the transactions contemplated hereby, including the Merger, are fair to, and in the best interests of, the Company and the Company Shareholders; (b) approved and declared advisable this Agreement and the transactions contemplated hereby, including the Merger, in accordance with the GBCC; (c) approved the execution, delivery and performance by the Company of this Agreement and the consummation of the Merger; (d) recommended that the Company Shareholders adopt this Agreement; and (e) directed that this Agreement be submitted to the Company Shareholders for their adoption and approval;

WHEREAS, (a) the boards of directors of each of Parent and Merger Sub have (i) determined that this Agreement and the transactions contemplated hereby, including the Merger, are fair and advisable to, and in the best interests of, Parent and Merger Sub, respectively; and (ii) approved and declared advisable this Agreement and the transactions contemplated hereby, including the Merger; and (b) the board of directors of Merger Sub has (i) recommended the adoption of this Agreement by Parent, as the sole shareholder of Merger Sub; and (ii) directed that this Agreement be submitted to Parent, as the sole shareholder of Merger Sub, for adoption;

WHEREAS, concurrently with the execution and delivery of this Agreement, and as a condition and inducement to the Company’s willingness to enter into this Agreement, Parent and Merger Sub have delivered a guarantee (the “Guarantee”) from Ardian North America Fund II, L.P., a Delaware limited partnership (“Guarantor”), in favor of the Company and pursuant to which, subject to the terms and conditions contained therein, Guarantor is guaranteeing certain obligations of Parent and Merger Sub in connection with this Agreement;

WHEREAS, concurrently with the execution and delivery of this Agreement, and as a condition and inducement to Parent’s and Merger Sub’s willingness to enter into this Agreement, each of the shareholders of the Company listed on Annex A hereto, including each of the members of the Company Board, as beneficial owners of Company Shares representing, in the aggregate, 13.86% of the issued and outstanding Company Shares as of the date of this Agreement, is entering into a support agreement of even date herewith in favor of Parent (collectively, the “Support Agreements”), pursuant to which, among other things, such Persons have agreed to support the Merger, each on the terms and subject to the conditions set forth in the Support Agreements; and

WHEREAS, Parent, Merger Sub and the Company desire to (a) make certain representations, warranties, covenants and agreements in connection with this Agreement and the Merger; and (b) prescribe certain conditions with respect to the consummation of the Merger.

 

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AGREEMENT

NOW, THEREFORE, in consideration of the foregoing premises and the representations, warranties, covenants and agreements set forth herein, as well as other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and accepted, and intending to be legally bound hereby, Parent, Merger Sub and the Company agree as follows:

ARTICLE I

DEFINITIONS & INTERPRETATIONS

1.1    Certain Definitions. For all purposes of and pursuant to this Agreement, the following capitalized terms have the following respective meanings:

(a)    “Acceptable Confidentiality Agreement” means an agreement with the Company that is either (i) in effect as of the execution and delivery of this Agreement; or (ii) executed, delivered and effective after the execution and delivery of this Agreement, in either case containing provisions that require any counterparty thereto (and any of its Affiliates and representatives named therein) that receive material non-public information of, or with respect to, the Company to keep such information confidential; provided, however, that, in each case, the confidentiality and use provisions contained therein are no less restrictive in the aggregate to such counterparty (and any of its Affiliates and representatives as provided therein) than the terms of the Confidentiality Agreement (it being understood that such agreement need not contain any “standstill” or similar provisions or otherwise prohibit the making of any Acquisition Proposal). If the confidentiality and use provisions of such Acceptable Confidentiality Agreement are less restrictive in the aggregate to such counterparty (and any of its Affiliates and representatives named therein) than the terms of the Confidentiality Agreement, then, notwithstanding the foregoing, such agreement will be deemed to be an Acceptable Confidentiality Agreement if the Company offers to amend the Confidentiality Agreement so as to make the confidentiality and use provisions of the Confidentiality Agreement as restrictive in the aggregate as the confidentiality agreement signed by such counterparty.

(b)    “Acquisition Proposal” means any offer or proposal (other than an offer or proposal by Parent or Merger Sub) to engage in an Acquisition Transaction.

(c)    “Acquisition Transaction” means any transaction or series of related transactions (other than the Merger) involving:

(i)    any direct or indirect purchase or other acquisition by any Person or Group, whether from the Company or any other Person(s), of shares of Company Common Stock representing more than 20% of the Company Common Stock outstanding after giving effect to the consummation of such purchase or other acquisition, including pursuant to a tender offer or exchange offer by any Person or Group that, if consummated in accordance with its terms, would result in such Person or Group beneficially owning more than 20% of the Company Common Stock outstanding after giving effect to the consummation of such tender or exchange offer;

(ii)    any direct or indirect purchase or other acquisition by any Person or Group of more than 20% of the consolidated assets of the Company and its Subsidiaries taken as a whole (measured by the fair market value thereof as of the date of such purchase or acquisition); or

(iii)    any merger, consolidation, business combination, recapitalization, reorganization, liquidation, dissolution or other transaction involving the Company or any of its Subsidiaries pursuant to which any Person or Group would, directly or indirectly, hold shares of Company Common Stock representing more than 20% of the Company Common Stock outstanding after giving effect to the consummation of such transaction.

 

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(d)    “Affiliate” means, with respect to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person. For purposes of this definition, the term “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of that Person, whether through the ownership of voting securities or partnership or other ownership interests, by contract or otherwise.

(e)    “Antitrust Law” means the Sherman Antitrust Act, 15 U.S.C. §§ 1-7; the Clayton Antitrust Act, 15 U.S.C. §§ 12-27, 29 U.S.C. §§ 52-53; the HSR Act, the Federal Trade Commission Act, 15 U.S.C. §§ 41-58, and all other Laws that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade or significant impediments or lessening of competition or the creation or strengthening of a dominant position through merger or acquisition, in any case that are applicable to the Merger.

(f)    “Audited Company Balance Sheet” means the consolidated balance sheet (and the notes thereto) of the Company and its consolidated Subsidiaries as of December 31, 2019 set forth in the Company’s Annual Report on Form 10-K filed by the Company with the SEC for the fiscal year ended December 31, 2019.

(g)    “Business Day” means any day other than Saturday or Sunday or a day on which commercial banks are authorized or required by Law to be closed in Atlanta, Georgia.

(h)    “CARES Act” means the Coronavirus Aid, Relief, and Economic Security Act, as signed into law by the President of the United States on March 27, 2020.

(i)    “Code” means the Internal Revenue Code of 1986, as amended.

(j)    “Company Common Stock” means the common stock, no par value per share, of the Company.

(k)    “Company Material Adverse Effect” means any change, event, development, circumstance or effect (each, an “Effect”) that, individually or taken together with all other Effects that have occurred prior to the date of determination of the occurrence of the Company Material Adverse Effect, (i) has had or would reasonably be expected to have a materially adverse effect on the business, assets, financial condition or results of operations of the Company and its Subsidiaries, taken as a whole; or (ii) prevents or materially impairs or delays, or would reasonably be expected to prevent or materially impair or delay, the ability of the Company to perform its material obligations under this Agreement or to consummate the Merger and the transactions contemplated hereby; provided, however, that none of the following, and no Effects arising out of or resulting from the following (in each case, by itself or when aggregated) will be deemed to be or constitute a Company Material Adverse Effect or will be taken into account when determining whether a Company Material Adverse Effect has occurred or may, would or could occur (subject to the limitations set forth below):

(i)    changes in general economic conditions, or changes in conditions in the global, international or regional economy generally;

(ii)    changes in conditions in the financial markets, credit markets or capital markets in the United States or any other country or region of the world, including (A) changes in interest rates or credit ratings; (B) changes in exchange rates for the currencies of any country; or (C) any suspension of trading in securities (whether equity, debt, derivative or hybrid securities) generally on any securities exchange or over-the-counter market;

(iii)    changes in conditions in the industries in which the Company and its Subsidiaries conduct business;

(iv)    any geopolitical conditions, outbreak of hostilities, acts of war, sabotage, cyberterrorism (including by means of cyber-attack by or sponsored by a Governmental Authority), terrorism or military actions

 

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(including any escalation or general worsening of any such hostilities, acts of war, sabotage, cyberterrorism, terrorism or military actions);

(v)    earthquakes, volcanic activity, hurricanes, tsunamis, tornadoes, floods, mudslides, wild fires or other natural disasters, force majeure events, weather conditions, epidemics, plagues, pandemics (including COVID-19 and COVID-19 Measures) or other outbreaks of illness or public health events and other similar events in the United States or any other country or region of the world;

(vi)    changes in regulatory, legislative or political conditions in the United States or any other country or region of the world;

(vii)    any Effect resulting from the announcement of this Agreement or the pendency or consummation of the Transactions, including the impact thereof on the relationships, contractual or otherwise, of the Company and its Subsidiaries with employees, suppliers, lenders, lessors, customers, partners, regulators, Governmental Authorities, vendors or any other third Person (provided, however, that this clause (vii) shall not apply to Section 3.5);

(viii)    the compliance by any Party with the terms of this Agreement, including any action taken or refrained from being taken pursuant to or in accordance with this Agreement;

(ix)    any action taken or refrained from being taken, in each case to which Parent has expressly approved, consented to or requested in writing following the date of this Agreement;

(x)    changes or proposed changes in GAAP or other accounting standards or in any applicable Laws (or the enforcement or interpretation of any of the foregoing);

(xi)    changes in the price or trading volume of the Company Common Stock, in and of itself (it being understood that any cause of such change may be deemed to constitute, in and of itself, a Company Material Adverse Effect and may be taken into consideration when determining whether a Company Material Adverse Effect has occurred);

(xii)    any failure, in and of itself, by the Company and its Subsidiaries to meet (A) any public estimates or expectations of the Company’s revenue, earnings or other financial performance or results of operations for any period; or (B) any budgets, plans, projections or forecasts of its revenues, earnings or other financial performance or results of operations (it being understood that in the case of each of (A) and (B) any cause of any such failure may be deemed to constitute, in and of itself, a Company Material Adverse Effect and may be taken into consideration when determining whether a Company Material Adverse Effect has occurred);

(xiii)    the unavailability or cost of equity, debt or other financing to Parent or Merger Sub;

(xiv)    any Transaction Litigation or other Legal Proceeding threatened, made or brought by any of the current or former Company Shareholders (on their own behalf or on behalf of the Company) against the Company, any of its executive officers or other employees or any member of the Company Board arising out of the Transactions (it being understood that the underlying facts related to such Legal Proceedings may be taken into consideration when determining whether a Company Material Adverse Effect has occurred); and

(xv)    any matters expressly disclosed in the Company Disclosure Letter;

except, in each case of clauses (i), (ii), (iii), (iv), (v) and (vi) to the extent that such Effect has had a materially disproportionate adverse effect on the Company relative to other companies of a similar size operating in the industries in which the Company and its Subsidiaries conduct business, in which case only the incremental disproportionate adverse impact may be taken into account in determining whether a Company Material Adverse Effect has occurred.

 

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(l)    “Company Options” means any options to purchase shares of Company Common Stock, whether granted pursuant to any of the Company Stock Plans or otherwise.

(m)    “Company Owned Intellectual Property” means any Intellectual Property that is owned by, or purported to be owned by, the Company or any of its Subsidiaries.

(n)    “Company Plans” means the existing Employee Plans and other employee benefit, compensation and severance plans, programs, agreements and arrangements (including equity-based benefits or compensation) of the Parent, the Surviving Corporation or any of their Subsidiaries or Affiliates.

(o)     “Company PBUs” means restricted stock units subject to performance-based vesting restrictions, whether granted pursuant to any of the Company Stock Plans or otherwise.

(p)    “Company Preferred Stock” means the preferred stock, no par value, of the Company.

(q)    “Company Registered Intellectual Property” means all of the Company Owned Intellectual Property that is Registered Intellectual Property.

(r)    “Company Restricted Stock” means an award of Company Common Stock subject to time-vesting restrictions, whether granted pursuant to any of the Company Stock Plans or otherwise.

(s)    “Company RSUs” means restricted stock units subject to time-vesting restrictions, whether granted pursuant to any of the Company Stock Plans or otherwise.

(t)    “Company SARs” means stock appreciation rights, whether granted pursuant to any of the Company Stock Plans or otherwise.

(u)    “Company Shareholders” means the holders of shares of Company Common Stock.

(v)    “Company Stock Plans” means the Company’s 2008 Equity Incentive Plan, the Company’s 2017 Equity Incentive Compensation Plan, and each other Employee Plan that provides for, or that has provided for, the award of rights of any kind to receive shares of Company Common Stock or benefits measured in whole or in part by reference to shares of Company Common Stock.

(w)     “Company Termination Fee” means an amount equal to $5,375,000 in the case of a Company Termination Fee payable pursuant to Section 8.3(b)(iv) and $9,775,000 in all other cases.

(x)    “Compliant” means, with respect to the Required Financial Information, that (i) such Required Financial Information does not contain any untrue statement of a material fact regarding the Company or omit to state any material fact regarding the Company, in each case as applicable, necessary in order to make such Required Financial Information, in light of the circumstances under which such Required Financial Information was furnished, not misleading and (ii) the financial statements and other financial information included in such Required Financial Information would not be deemed stale for purposes of syndicating the credit facilities contemplated by the Debt Commitment Letter (it being understood and agreed that “staleness” for this purpose shall be determined by reference to the time periods referenced in Section 5 of Exhibit A to the Debt Commitment Letter and shall apply to financial statements and financial information that comprises a portion of the Required Financial Information).

(y)    “Continuing Employees” means each individual who is an employee of the Company or any of its Subsidiaries immediately prior to the Effective Time and continues to be an employee of Parent or one of its Subsidiaries (including the Surviving Corporation) immediately following the Effective Time (including, without limitation, those on vacation or approved leave of absence, disability or other approved absence with the legal right to return to employment on or after the Effective Time).

 

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(z)    “Contract” means any binding written contract, subcontract, note, bond, mortgage, indenture, lease, license, sublicense or other agreement.

(aa)    “Copyrights” has the meaning set forth in the definition of Intellectual Property.

(bb)    “COVID-19 Measures” means any action taken by the Company directly in response to COVID-19, including any compliance with any quarantine, “shelter in place,” “stay at home,” social distancing, shut down, closure, sequester, safety or similar applicable Law, directive, guidelines or recommendations promulgated by any Governmental Authority, including the Centers for Disease Control and Prevention and the World Health Organization.

(cc)    “Credit Agreement” means th