PREM14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.     )

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 under §240.14a-12

NAVIGANT CONSULTING, INC.

(Name of Registrant as Specified In Its Charter)

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

Payment of Filing Fee (Check the appropriate box):

 

  No fee required.
  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, par value $0.001 per share, of Navigant Consulting, Inc. (which we refer to as “Company common stock”)

  (2)   

Aggregate number of securities to which transaction applies:

 

40,218,710 shares of Company common stock, which consist of (a) 38,294,004 shares of Company common stock outstanding, net of treasury shares, as of August 26, 2019, (b) 379,403 shares of Company common stock subject to outstanding Company stock options as of August 26, 2019 and (c) 1,545,303 shares of Company common stock with respect to outstanding awards of restricted stock units as of August 26, 2019.

  (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):

 

In accordance with Exchange Act Rule 0-11, the filing fee of $135,780.83 was determined by multiplying 0.0001212 by the proposed maximum aggregate value of the transaction. The proposed maximum aggregate value of the transaction was calculated as the sum of (a) 38,294,004 shares of Company common stock multiplied by the maximum per share merger consideration contemplated by the merger agreement, (b) 379,403 shares of Company common stock subject to outstanding Company stock options, multiplied by the difference between the maximum per share merger consideration contemplated by the merger agreement and the weighted average exercise price per share of $15.34 and (c) 1,545,303 shares of Company common stock with respect to outstanding awards of restricted stock units, multiplied by $28.00, the maximum per share merger consideration contemplated by the merger agreement.

  (4)   

Proposed maximum aggregate value of transaction:

 

$1,120,303,838

  (5)   

Total fee paid:

 

$135,780.83

  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 STATEMENT, SUBJECT TO COMPLETION, DATED AUGUST 29, 2019

 

 

LOGO

[●]

Dear Stockholder:

A special meeting of stockholders of Navigant Consulting, Inc., a Delaware corporation (which we refer to as the “Company”), will be held on [●], at [●] local time, at [●]. You are cordially invited to attend. The purpose of the meeting is to consider and vote on proposals relating to the proposed acquisition of the Company by Guidehouse LLP, a Delaware limited liability partnership (which we refer to as “Parent”), for $28.00 in cash per share, without interest thereon, subject to any applicable withholding taxes. Regardless of whether you plan to attend the meeting, we encourage you to vote your shares by mail, by telephone or through the Internet by following the procedures outlined below.

On August 2, 2019, the Company, Parent and Isaac Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Parent (which we refer to as “Sub”), entered into an Agreement and Plan of Merger (as may be amended from time to time, the “merger agreement”). The merger agreement provides for, subject to the satisfaction or waiver of specified conditions, the acquisition of the Company by Parent at a price of $28.00 per share in cash, without interest thereon, subject to any applicable withholding taxes. Subject to the terms and conditions of the merger agreement, Sub will be merged with and into the Company (which we refer to as the “merger”), with the Company continuing as the surviving corporation in the merger. As a result of the merger, the Company will become a wholly-owned subsidiary of Parent. At the special meeting, the Company will ask you to adopt the merger agreement.

At the effective time of the merger (which we refer to as the “effective time”), each share of common stock, par value $0.001 per share, of the Company (which we refer to as “Company common stock”) issued and outstanding immediately prior to the effective time (other than (i) shares of Company common stock that are held in the treasury of the Company or owned of record by the Company or any subsidiary of the Company and all shares owned of record by Parent, Sub or any of their respective subsidiaries, in each case immediately prior to the effective time and (ii) shares of Company common stock held by stockholders who have not voted in favor of, or consented to the adoption of, the merger agreement and who have properly demanded appraisal of such shares and complied in all respects with all the provisions of the Delaware General Corporation Law concerning the right of holders of shares to request appraisal of their shares) will be cancelled and cease to exist and will be automatically converted into the right to receive $28.00 in cash per share, without interest thereon, subject to any applicable withholding taxes.

The proxy statement accompanying this letter provides you with more specific information concerning the special meeting, the merger agreement, the merger and the other transactions contemplated by the merger agreement. We encourage you to carefully read the accompanying proxy statement and the copy of the merger agreement attached as Annex A to the proxy statement.

The board of directors of the Company (which we refer to as the “Board”) carefully reviewed and considered the terms and conditions of the merger agreement, the merger and the other transactions contemplated by the merger agreement. By a unanimous vote, the Board (i) determined that the transactions contemplated by the merger agreement, including the merger, are in the best interests of the Company and its stockholders, (ii) approved and declared advisable the execution, delivery and performance of the merger agreement, and, subject to receiving the Company stockholder approval, the consummation by the Company of the transactions contemplated by the merger agreement, including the merger, (iii) directed that the merger agreement be submitted to a vote of the stockholders of the Company to be adopted and (iv) resolved to recommend the adoption of the merger agreement by the stockholders of the Company. Accordingly, the Board unanimously recommends a vote “FOR” the proposal to adopt the merger agreement and the other proposals set forth in the accompanying proxy statement.


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Your vote is important. Whether or not you plan to attend the special meeting and regardless of the number of shares you own, your careful consideration of, and vote on, the proposal to adopt the merger agreement is important, and we encourage you to vote promptly. The merger cannot be completed unless the merger agreement is adopted by stockholders holding at least a majority of the outstanding shares of Company common stock entitled to vote on such matter. The failure to vote will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement.

After reading the accompanying proxy statement, please make sure to vote your shares promptly by completing, signing and dating the accompanying proxy card and returning it in the enclosed prepaid envelope or by voting by telephone or through the Internet by following the instructions on the accompanying proxy card. Instructions regarding all three methods of voting are provided on the proxy card. If you hold shares through an account with a bank, broker, trust or other nominee, please follow the instructions you receive from it to vote your shares.

Thank you in advance for your continued support and your consideration of this matter.

Sincerely,

Julie M. Howard

Chairman and Chief Executive Officer

Neither the United States Securities and Exchange Commission nor any state securities regulatory agency has approved or disapproved the merger, passed upon the merits or fairness of the merger or passed upon the adequacy or accuracy of the disclosure in this document. Any representation to the contrary is a criminal offense.

The accompanying proxy statement is dated [●] and is being mailed to Company stockholders on [●].


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PRELIMINARY PROXY STATEMENT, SUBJECT TO COMPLETION, DATED AUGUST 29, 2019

Navigant Consulting, Inc.

150 North Riverside Plaza, Suite 2100

Chicago, Illinois 60606

 

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

 

 

To Be Held on [●]

To the Stockholders of Navigant Consulting, Inc.:

A special meeting of the stockholders of Navigant Consulting, Inc. (which we refer to as the “Company”) will be held on [●], at [●] local time, at [●], for the following purposes:

 

  1.

To consider and vote on a proposal to adopt the Agreement and Plan of Merger, dated as of August 2, 2019 (as may be amended from time to time, the “merger agreement”), by and among the Company, Guidehouse LLP, a Delaware limited liability partnership (which we refer to as “Parent”), and Isaac Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Parent (which we refer to as “Sub”);

 

  2.

To consider and vote on a proposal to approve, by a non-binding advisory vote, the compensation that may be paid or become payable to the Company’s named executive officers and that is based on, or otherwise relates to, the merger of Sub with and into the Company, as contemplated by the merger agreement (which we refer to as the “merger”); and

 

  3.

To consider and vote on a proposal to adjourn the special meeting from time to time to a later date or time if necessary or appropriate, including to solicit additional proxies in favor of the proposal to adopt the merger agreement if there are insufficient votes at the time of the special meeting to adopt the merger agreement.

Stockholders of record at the close of business on September 4, 2019 are entitled to notice of, and to vote at, the special meeting and any adjournments or postponements thereof.

For more information concerning the special meeting, the merger agreement, the merger and the other transactions contemplated by the merger agreement, please review the accompanying proxy statement and the copy of the merger agreement attached as Annex A to the proxy statement.

The board of directors of the Company (which we refer to as the “Board”) carefully reviewed and considered the terms and conditions of the merger agreement, the merger and the other transactions contemplated by the merger agreement. By a unanimous vote, the Board (i) determined that the transactions contemplated by the merger agreement, including the merger, are in the best interests of the Company and its stockholders, (ii) approved and declared advisable the execution, delivery and performance of the merger agreement, and, subject to receiving the Company stockholder approval, the consummation by the Company of the transactions contemplated by the merger agreement, including the merger, (iii) directed that the merger agreement be submitted to a vote of the stockholders of the Company to be adopted and (iv) resolved to recommend the adoption of the merger agreement by the stockholders of the Company.

The Board unanimously recommends that at the special meeting you vote “FOR” the proposal to adopt the merger agreement, “FOR” the approval, by a non-binding advisory vote, of the compensation that may be paid or become payable to the Company’s named executive officers and that is based on, or


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otherwise relates to, the merger and “FOR” the proposal to adjourn the special meeting from time to time if necessary or appropriate, including to solicit additional proxies.

To assure that your shares are represented at the special meeting, regardless of whether you plan to attend the special meeting in person, please fill in your vote, sign and mail the enclosed proxy card as soon as possible. We have enclosed a return envelope, which requires no postage if mailed in the United States. Alternatively, you may vote by telephone or through the Internet. Instructions regarding each of the methods of voting are provided on the enclosed proxy card. If you are voting by telephone or through the Internet, then your voting instructions must be received by 11:59 p.m. Eastern Time on the day before the special meeting. If your shares are held in “street name” through a bank, broker, trust or other nominee, please instruct your bank, broker, trust or other nominee on how to vote your shares using the voting instructions furnished by your bank, broker, trust or other nominee as soon as possible. Your proxy is being solicited by the Board.

If you have any questions about the merger or how to submit your proxy, or if you need additional copies of the proxy statement or the enclosed proxy card or voting instructions, please call our proxy solicitor, MacKenzie Partners, Inc. (which we refer to as “MacKenzie Partners”), toll-free at (800) 322-2855 or (212) 959-5500 (call collect).

If you fail to return your proxy, vote by telephone or through the Internet or attend the special meeting in person, your shares will not be counted for purposes of determining whether a quorum is present at the special meeting and will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement.

By order of the Board,

Monica M. Weed

Executive Vice President, General Counsel and

Corporate Secretary

Chicago, Illinois

[●]

Please Vote—Your Vote is Important


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TABLE OF CONTENTS

 

     Page  

SUMMARY TERM SHEET

     1  

The Parties

     1  

The Merger

     1  

The Special Meeting

     2  

Stockholders Entitled to Vote; Vote Required for Approval

     2  

How to Vote

     2  

Recommendation of the Board; Reasons for Recommending the Adoption of the Merger Agreement

     3  

Opinion of Our Financial Advisor

     3  

Market Price and Dividend Data

     3  

Certain Effects of the Merger

     4  

Consequences if the Merger is Not Completed

     4  

Treatment of Outstanding Equity Awards and Equity Plans

     4  

Interests of Directors and Executive Officers in the Merger

     5  

Conditions to the Merger

     5  

Regulatory Approvals

     6  

Financing of the Merger

     6  

Limited Guarantee

     7  

Restriction on Solicitation of Competing Proposals

     7  

Termination of the Merger Agreement

     8  

Termination Fees

     9  

Appraisal Rights

     9  

Material U.S. Federal Income Tax Consequences of the Merger

     10  

Where You Can Find More Information

     10  

QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER

     11  

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     18  

PARTIES TO THE MERGER

     20  

Navigant

     20  

Guidehouse

     20  

Isaac Merger Sub, Inc.

     20  

THE SPECIAL MEETING

     21  

Date, Time and Place of the Special Meeting

     21  

Purpose of the Special Meeting

     21  

 

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Recommendation of the Board

     21  

Record Date and Quorum

     21  

Vote Required for Approval

     22  

Effect of Abstentions and Broker Non-Votes

     22  

How to Vote

     23  

Revocation of Proxies

     24  

Adjournments and Postponements

     24  

Solicitation of Proxies

     24  

Stockholder List

     25  

Questions and Additional Information

     25  

PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT

     26  

PROPOSAL 2: NON-BINDING ADVISORY MERGER-RELATED COMPENSATION PROPOSAL

     27  

PROPOSAL 3: AUTHORITY TO ADJOURN THE SPECIAL MEETING

     28  

THE MERGER

     29  

Overview

     29  

Background of the Merger

     29  

Recommendation of the Board

     41  

Reasons for Recommending the Adoption of the Merger Agreement

     41  

Opinion of Our Financial Advisor

     47  

Forward-Looking Financial Information

     53  

Financial Projections

     55  

Interests of Directors and Executive Officers in the Merger

     57  

Certain Effects of the Merger

     65  

Consequences if the Merger is Not Completed

     66  

Financing of the Merger

     66  

Limited Guarantee

     68  

Material U.S. Federal Income Tax Consequences of the Merger

     68  

Regulatory Approvals

     71  

THE AGREEMENT AND PLAN OF MERGER

     73  

Explanatory Note Regarding the Merger Agreement

     73  

Date of the Merger Agreement

     73  

The Merger

     73  

Closing; Effective Time of the Merger

     73  

Organizational Documents; Directors and Officers

     74  

 

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Merger Consideration

     74  

Treatment of Outstanding Equity Awards and Equity Plans

     75  

Exchange Procedures

     76  

Representations and Warranties

     78  

Covenants Regarding Conduct of Business by the Company Prior to the Merger

     81  

Restriction on Solicitation of Competing Proposals

     83  

Obligations of the Board with Respect to Its Recommendation

     85  

Efforts to Complete the Merger

     87  

Obligations with Respect to this Proxy Statement and the Special Meeting

     88  

Access to Information

     88  

Director and Officer Indemnification and Insurance Information

     89  

Employee Benefits

     90  

Financing

     90  

Limited Guarantee

     91  

Other Covenants and Agreements

     91  

Conditions to the Merger

     92  

Termination of the Merger Agreement

     93  

Effect of Termination

     95  

Expenses; Termination Fees

     95  

Miscellaneous

     96  

APPRAISAL RIGHTS

     98  

Written Demand by the Record Holder

     99  

Filing a Petition for Appraisal

     99  

Determination of Fair Value

     100  

MARKET PRICE AND DIVIDEND DATA

     103  

STOCK OWNERSHIP

     104  

OTHER MATTERS

     105  

Other Matters for Action at the Special Meeting

     105  

FUTURE STOCKHOLDER PROPOSALS

     105  

HOUSEHOLDING OF PROXY MATERIAL

     106  

WHERE YOU CAN FIND MORE INFORMATION

     107  

ANNEX A — AGREEMENT AND PLAN OF MERGER

     A-1  

ANNEX B — OPINION OF JEFFERIES LLC

     B-1  

ANNEX C — SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW

     C-1  

 

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SUMMARY TERM SHEET

This summary highlights certain information in this proxy statement, but may not contain all of the information that may be important to you. You should carefully read this entire proxy statement and the attached Annexes and the other documents to which this proxy statement refers you for a more complete understanding of the matters being considered at the special meeting. In addition, this proxy statement incorporates by reference important business and financial information about Navigant Consulting, Inc. You may obtain the information incorporated by reference in this proxy statement without charge by following the instructions in the section entitled “Where You Can Find More Information” on page []. Unless the context otherwise indicates, we refer to Navigant Consulting, Inc. as “Navigant,” the “Company,” “we,” “us” or “our.”

The Parties

Navigant Consulting, Inc., a Delaware corporation, is a specialized, global professional services firm that helps clients take control of their future. The Company’s professionals apply deep industry knowledge, substantive technical expertise, and an enterprising approach to help clients build, manage, and protect their business interests. With a focus on markets and clients facing transformational change and significant regulatory or legal pressures, Navigant primarily serves clients in the healthcare, energy, and financial services industries. Across a range of advisory, consulting, outsourcing, and technology/analytics services, we believe our practitioners bring sharp insight that pinpoints opportunities and delivers powerful results. Our executive office is located at 150 North Riverside Plaza, Suite 2100, Chicago, Illinois, 60606. Our telephone number is (312) 573-5600.

Guidehouse LLP, a privately-held Delaware limited liability partnership (which we refer to as “Parent”) and an affiliate of Veritas Capital Fund Management, L.L.C. (which we refer to as “Veritas”), with 2,000 professionals in over 20 locations, is a leading provider of strategic advisory services to customers such as the Department of Defense, Homeland Security, Veterans Affairs, Health and Human Services and the Department of State, as well as numerous state and local governments and multilateral agencies. Parent is led by professionals with deep commercial and public sector expertise and helps clients solve their toughest challenges. Its executive office is located at 1800 Tysons Boulevard, 7th Floor, McLean, Virginia, 22102. Its telephone number is (571) 633-1711.

Isaac Merger Sub, Inc., a Delaware corporation (which we refer to as “Sub”), is a wholly-owned subsidiary of Parent, formed on July 29, 2019, solely for the purpose of engaging in the transactions contemplated by the merger agreement. Sub has not carried on any activities on or prior to the date of this proxy statement, except for activities incidental to its formation and activities undertaken in connection with Parent’s proposed acquisition of the Company. Sub’s principal executive offices are located at c/o Veritas Capital Fund Management, L.L.C., 9 West 57th Street, 29th Floor, New York, New York, 10019. Its telephone number is (212) 415-6700.

The Merger

On August 2, 2019, the Company, Parent and Sub entered into an Agreement and Plan of Merger (as may be amended from time to time, which we refer to as the “merger agreement”).

Under the terms of the merger agreement, subject to the satisfaction or waiver of specified conditions, Sub will merge with and into the Company (which we refer to as the “merger”), whereupon the separate existence of Sub will cease and the Company will continue as the surviving corporation (which we refer to as the “surviving corporation”) and a wholly-owned subsidiary of Parent.

At the effective time of the merger (which we refer to as the “effective time”) each share of common stock, par value $0.001 per share, of the Company (which we refer to as “Company common stock”) issued and



 

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outstanding immediately prior to the effective time (other than (i) shares of Company common stock that are held in the treasury of the Company or owned of record by the Company or any subsidiary of the Company and all shares owned of record by Parent, Sub or any of their respective subsidiaries, in each case immediately prior to the effective time, and (ii) shares of Company common stock held by stockholders who have not voted in favor of, or consented to the adoption of, the merger agreement and who have properly demanded appraisal of such shares and complied in all respects with all the provisions of the Delaware General Corporation Law (which we refer to as the “DGCL”) concerning the right of holders of shares to request appraisal of their shares) will be cancelled and cease to exist and will be automatically converted into the right to receive $28.00 per share in cash, without interest thereon, subject to any applicable withholding taxes. The consideration to be paid by Parent in the merger as described in this paragraph is referred to herein as the “merger consideration.”

Following the completion of the merger, the Company will cease to be a publicly traded company and will become a wholly-owned subsidiary of Parent.

The Special Meeting

The special meeting will be held on [●], at [●] local time, at [●]. At the special meeting, you will be asked to, among other things, vote for the proposal to adopt the merger agreement. See the section entitled “The Special Meeting,” beginning on page [●], for additional information on the special meeting, including how to vote your shares of Company common stock.

Stockholders Entitled to Vote; Vote Required for Approval

You may vote at the special meeting if you were a holder of record of shares of Company common stock as of the close of business on September 4, 2019, which is the record date for the special meeting (which we refer to as the “record date”). You will be entitled to one vote for each share of Company common stock that you owned on the record date. As of the record date, there were [●] shares of Company common stock issued and outstanding and entitled to vote at the special meeting. 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 on such matter.

How to Vote

Stockholders of record have a choice of voting by proxy by completing a proxy card and mailing it in the prepaid envelope provided, by calling a toll-free telephone number or through the Internet. Please refer to your proxy card to see which options are available to you. The telephone and Internet voting facilities for stockholders of record will close at 11:59 p.m. Eastern Time on the day before the special meeting.

If you wish to vote by proxy and your shares are held by a bank, broker, trust or other nominee, you must follow the voting instructions provided to you by your bank, broker, trust or other nominee. Unless you give your bank, broker, trust or other nominee instructions on how to vote your shares of Company common stock, your bank, broker, trust or other nominee will not be able to vote your shares on any of the proposals.

If you wish to vote in person at the special meeting and your shares are held in the name of a bank, broker or other holder of record, you must obtain a legal proxy, executed in your favor, from such bank, broker or other holder of record authorizing you to vote at the special meeting.

YOU SHOULD NOT SEND IN YOUR STOCK CERTIFICATE(S) WITH YOUR PROXY CARD. A letter of transmittal with instructions for the surrender of certificates representing shares of Company common stock will be mailed to stockholders if the merger is completed.



 

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For additional information regarding the procedure for delivering your proxy, see the sections entitled “The Special Meeting—How to Vote,” beginning on page [●], and “The Special Meeting—Solicitation of Proxies,” on page [●]. 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, MacKenzie Partners, toll-free at (800) 322-2855 or (212) 959-5500 (call collect).

Recommendation of the Board; Reasons for Recommending the Adoption of the Merger Agreement

After careful consideration, the Board unanimously declared the merger agreement and the transactions contemplated thereby, including the merger, to be advisable and in the best interests of the Company and its stockholders. Accordingly, the Board unanimously recommends that at the special meeting you vote “FOR” the proposal to adopt the merger agreement, “FOR” the approval, by a non-binding advisory vote, of compensation that may be paid or become payable to the Company’s named executive officers and that is based on, or otherwise relates to, the merger and “FOR” the proposal to adjourn the special meeting from time to time if necessary or appropriate, including to solicit additional proxies.

For a discussion of the material factors considered by the Board in reaching its conclusions, see the section entitled “The Merger—Reasons for Recommending the Adoption of the Merger Agreement,” beginning on page [●]. In addition, in considering the recommendation of the Board with respect to the merger agreement, you should be aware that members of the Board and our executive officers have certain interests in the merger that may be in addition to, or different from, the interests of Company stockholders generally. See the section entitled “The Merger—Interests of Directors and Executive Officers in the Merger,” beginning on page [●].

Opinion of Our Financial Advisor

The Company has engaged Jefferies LLC (which we refer to as “Jefferies”) as its financial advisor in connection with the merger. As part of this engagement, Jefferies delivered a written opinion, dated August 2, 2019, to the Board as to the fairness, from a financial point of view and as of such date, of the merger consideration to be received by holders of Company common stock (other than, to the extent applicable, Veritas Capital (as contemplated in Jefferies’ opinion, “Veritas Capital”), Sponsor (as defined below), Parent, Sub and their respective affiliates) pursuant to the merger agreement. The full text of Jefferies’ opinion, which describes various assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken by Jefferies, is attached as Annex B to this proxy statement and is incorporated herein by reference. Jefferies’ opinion was provided for the use and benefit of the Board (in its capacity as such) in its evaluation of the merger consideration from a financial point of view and did not address any other aspect of the merger or any other matter. Jefferies’ opinion did not address the relative merits of the transactions contemplated by the merger agreement as compared to any alternative transaction or opportunity that might be available to the Company, nor did it address the underlying business decision by the Company to engage in the merger. Jefferies’ opinion did not constitute a recommendation as to how the Board, and does not constitute a recommendation as to how any securityholder, should vote or act with respect to the merger or any other matter. See the section entitled “The Merger—Opinion of Our Financial Advisor,” beginning on page [●]. The summary of Jefferies’ opinion is qualified in its entirety by reference to the full text of Jefferies’ opinion.

Market Price and Dividend Data

Company common stock is traded on the New York Stock Exchange (which we refer to as the “NYSE”) under the symbol “NCI.” On August 1, 2019, the last full trading day prior to the public announcement of the entry into the merger agreement, the closing price for Company common stock was $24.04 per share. On [●], the last full trading day prior to the date of this proxy statement, the closing price for Company common stock was $[●] per share.



 

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Certain Effects of the Merger

Upon completion of the merger, Sub will be merged with and into the Company upon the terms set forth in the merger agreement, whereby the separate corporate existence of Sub will thereupon cease and the Company will continue as the surviving corporation of the merger. The Company will continue to exist following the merger as a wholly-owned subsidiary of Parent.

Following the completion of the merger, shares of Company common stock will no longer be traded on the NYSE or any other public market. In addition, the registration of shares of Company common stock under the Securities Exchange Act of 1934 (as amended, the “Exchange Act”) will be terminated.

Consequences if the Merger is Not Completed

If the proposal to adopt the merger agreement does not receive the required approval from Company stockholders, or if the merger is not completed for any other reason, you will not receive any consideration from Parent or Sub for your shares of Company common stock. Instead, the Company will remain a public company and Company common stock will continue to be listed and traded on the NYSE.

In addition, if the merger agreement is terminated under specified circumstances, the Company is required to pay Parent a termination fee of $30.9 million (which we refer to as the “Company termination fee”). Upon termination of the merger agreement under certain specified circumstances, Parent is obligated to pay the Company a termination fee of $67.5 million (which we refer to as the “Parent termination fee”). See the section entitled “The Agreement and Plan of Merger—Expenses; Termination Fees,” beginning on page [●].

Treatment of Outstanding Equity Awards and Equity Plans

The merger agreement provides that, as of immediately prior to the effective time:

 

   

each outstanding Company stock option will be fully vested and cancelled, and each holder of a cancelled company stock option will receive a payment in cash, without interest, equal to the product of (i) the total number of shares subject to the cancelled company stock option and (ii) the excess, if any, of (A) the merger consideration over (B) the exercise price per share subject to the cancelled Company stock option, less any applicable withholding taxes;

 

   

each outstanding and unvested Company restricted stock unit award (other than any restricted stock unit award held by the Company’s non-employee directors) will be assumed by the surviving corporation and converted into a replacement restricted cash award representing the right to receive an amount in cash, without interest, equal to (i) with respect to restricted stock unit awards subject to performance conditions (A) that have ended prior to the effective time, the product of (1) the merger consideration and (2) the number of restricted stock units subject to the Company restricted stock unit award as of immediately prior to the effective time based on actual performance and (B) that have not ended prior to the effective time, the product of (1) the merger consideration and (2) the number of restricted stock units subject to the Company restricted stock unit award assuming performance at 100% of target levels and (ii) with respect to restricted stock unit awards subject solely to time-based vesting, the product of (A) the merger consideration and (B) the number of restricted stock units subject to the Company restricted stock unit award, in each case, subject to the same time-based vesting conditions and settlement dates as in effect as of immediately prior to the effective time and accelerated vesting in the event of the holder’s qualifying termination of employment within two years following the merger (collectively, the “replacement restricted cash awards”); and

 

   

each outstanding and unvested Company restricted stock unit award held by non-employee directors of the Company will be fully vested and cancelled, and each holder of a cancelled restricted stock unit



 

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award will receive a payment in cash, without interest, equal to the product of (i) the merger consideration and (ii) the total number of shares subject to the cancelled restricted stock unit award.

The merger agreement provides that (i) as of the effective time, the Company’s 2017 Long-Term Incentive Plan and the Company’s Amended and Restated 2012 Long-Term Incentive Plan will be terminated and (ii) as of immediately prior to the effective time, the Company’s Employee Stock Purchase Plan (which we refer to as the “ESPP”) will be terminated.

Interests of Directors and Executive Officers in the Merger

Members of the Board and the Company’s executive officers have various interests in the merger described in this section that may be in addition to, or different from, the interests of the Company stockholders generally. You should keep this in mind when considering the recommendation of the Board that you vote “FOR” the proposal to adopt the merger agreement. The members of the Board were aware of these interests and considered them at the time they approved the merger agreement and in making their recommendation that the Company stockholders vote “FOR” the proposal to adopt the merger agreement. See the section entitled “The Merger—Interests of Directors and Executive Officers in the Merger,” beginning on page [●].

Conditions to the Merger

The Company’s, Parent’s and Sub’s respective obligations to complete the merger are subject to the satisfaction (or mutual waiver by each of Parent and the Company where permitted under applicable law) of the following conditions:

 

   

receipt of the affirmative vote of the holders of a majority of the outstanding shares of Company common stock entitled to vote thereon to adopt the merger agreement (which we refer to as the “Company stockholder approval”);

 

   

any applicable waiting period (or any extensions thereof) applicable to the merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (as amended, the “HSR Act”) having expired or been terminated; and

 

   

no governmental entity of competent jurisdiction having issued, entered, enforced or promulgated any law or order that is in effect and renders the consummation of the merger illegal, or prohibits, enjoins, restrains or otherwise prevents the consummation of the merger.

The obligations of Parent and Sub to effect the merger are also subject to the satisfaction or waiver by Parent at or prior to the effective time of the following additional conditions:

 

   

subject to materiality qualifiers in certain instances, the accuracy of the representations and warranties of the Company contained in the merger agreement;

 

   

the Company having performed or complied in all material respects with all obligations and covenants as required by the merger agreement to be performed or complied with by the Company at or prior to the effective time;

 

   

the absence of any Company material adverse effect (as described in the section entitled “The Agreement and Plan of Merger—Representations and Warranties—Representations and Warranties of the Company,” beginning on page [●]); and

 

   

Parent having received a certificate signed on behalf of the Company by an executive officer of the Company as to the satisfaction of the conditions described above.



 

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The obligations of the Company to effect the merger are also subject to the satisfaction or waiver by the Company at or prior to the effective time of the following additional conditions:

 

   

subject to materiality qualifiers in certain instances, the accuracy of the representations and warranties of Parent and Sub contained in the merger agreement;

 

   

each of Parent and Sub having performed or complied in all material respects with all obligations and covenants as required by the merger agreement to be performed or complied with by the Parent or Sub at or prior to the effective time; and

 

   

the Company having received a certificate signed on behalf of Parent and Sub by an executive officer of each of Parent and Sub as to the satisfaction of the conditions described above.

Regulatory Approvals

Under the merger agreement, the respective obligations of the Company, Parent and Sub to complete the merger are subject to, among other things, (i) the expiration or termination of any applicable waiting period (and any extension thereof) applicable to the completion of the merger under the HSR Act and (ii) the absence of any law or order issued, entered, enforced or promulgated by a governmental entity of competent jurisdiction that is in effect and renders the consummation of the merger illegal, or prohibits, enjoins, restrains or otherwise prevents the consummation of the merger. For a description of the Company’s and Parent’s respective obligations under the merger agreement with respect to regulatory approvals, see the section entitled “The Agreement and Plan of Merger—Efforts to Complete the Merger,” beginning on page [●].

Financing of the Merger

We anticipate that the total funds needed to complete the merger, including the funds needed to pay Company stockholders and holders of other equity-based interests the amounts due to them under the merger agreement, which would be approximately $1.12 billion based upon the number of shares of Company common stock (and our other equity-based interests) outstanding as of August 26, 2019, will be funded through a portion of the proceeds from up to $840 million of debt financing (in addition to an incremental revolving line commitment, which Parent does not anticipate to be a source of funds for financing the merger consideration payable under the merger agreement) and a portion of the proceeds from up to $320 million of equity financing. Parent has entered into a financing commitment letter, dated as of August 2, 2019 (which we refer to as the “equity financing commitment letter”), from The Veritas Capital Fund VI, L.P. (which we refer to as “Sponsor”), which obligates Sponsor to fund to Parent an aggregate amount up to $320 million, subject to the terms and conditions set forth in the equity financing commitment letter, for the purpose of enabling Parent to fund a portion of the merger consideration. The Company is an express third party beneficiary of the equity financing commitment letter for purposes of enforcing Sponsor’s obligations under the equity financing commitment letter and has the ability to specifically enforce the equity financing commitment letter, provided that the debt financing has been funded or will be funded if the equity funds and all the conditions to closing are satisfied, and subject to the other terms and conditions of the equity financing commitment letter. Parent has also entered into a debt commitment letter, dated as of August 2, 2019 (as supplemented through the joinder dated as of August 23, 2019, which we refer to as the “debt commitment letter”), with Royal Bank of Canada, UBS AG, UBS Securities LLC, Macquarie Capital (USA) Inc., Macquarie Capital Funding LLC, Credit Suisse Loan Funding LLC, Credit Suisse AG and Chain Bridge Opportunistic Funding LLC (collectively, the “debt commitment parties”) as commitment parties thereunder. Pursuant to and subject to the terms of the debt commitment letter, the debt commitment parties committed to provide, among other things, a $640 million incremental senior secured first lien term loan facility, a $200 million incremental senior secured second lien term loan facility under Parent’s existing credit facility and an incremental increase to Parent’s existing revolving loan (which we refer to as the “debt financing”). The obligations of Parent and Sub to complete the merger under the merger agreement are not subject to any financing condition. However, if Parent does not close because the



 

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debt financing does not fund (and Parent has not been able to secure alternative financing), the Company’s sole remedy will be the Parent termination fee. Although the debt financing is not subject to a due diligence or “market out,” the obligations of the debt commitment parties to fund the debt financing under the debt commitment letter at closing of the transactions contemplated under the merger agreement are subject to Parent not being in payment default of its existing credit agreements, expiration of the marketing period, the solvency of the surviving company and satisfaction of certain other customary conditions.

Limited Guarantee

Pursuant to the limited guarantee delivered by Sponsor, as guarantor, in favor of the Company, dated as of August 2, 2019 (which we refer to as the “limited guarantee”), Sponsor has guaranteed the due and punctual payment to the Company of the Parent termination fee, certain reimbursement and indemnification obligations related to the debt financing and certain payment and reimbursement obligations specified in the merger agreement that may be owed by Parent pursuant to the merger agreement, subject to a maximum aggregate liability equal to $67.5 million. For more information, see the section entitled “The Agreement and Plan of Merger—Limited Guarantee,” beginning on page [●].

Restriction on Solicitation of Competing Proposals

Until the earlier of the effective time or termination of the merger agreement (if any), the Company has agreed that it will not, and will cause its subsidiaries and its and their respective directors, officers and employees not to, and use reasonable best efforts to cause its and their respective investment bankers, accountants, counsel and other advisors (which, together with the directors, officers and employees of the Company and its subsidiaries, we refer to as the “Company representatives”) not to:

 

   

initiate, solicit or knowingly encourage or knowingly facilitate any inquiry or the making or submission of any proposal or offer that constitutes, or would reasonably be expected to lead to, a competing proposal (as described in the section entitled “The Agreement and Plan of Merger—Restriction on Solicitation of Competing Proposals,” beginning on page [●]);

 

   

furnish any non-public information regarding the Company or any of its subsidiaries to any third person in connection with or in response to, or in a manner that would reasonably be expected to lead to, a competing proposal, including terminating access granted to any such person and its representatives to any physical or electronic dataroom;

 

   

enter into, participate in or continue to participate in any discussions or negotiations with any third person with respect to, or that would reasonably be expected to lead to, a competing proposal made by such third person;

 

   

approve, endorse, recommend or enter into, any definitive agreement with respect to a competing proposal; or

 

   

agree, propose or resolve to take, or take, any of the actions described above.

Notwithstanding the non-solicitation provisions described above, under certain limited circumstances and prior to the receipt of the Company stockholder approval, if the Company receives a competing proposal that did not result from a breach of the non-solicitation provisions described above (other than any breach that is immaterial and unintentional) and the Board determines in good faith that such proposal is or could be reasonably likely to lead to a superior proposal and the failure to take such action would be reasonably likely to be inconsistent with the Board’s fiduciary duties under applicable law, then the Company can engage in discussions and negotiations with a person with respect to such competing proposals (as described in the section entitled “The Agreement and Plan of Merger—Restriction on Solicitation of Competing Proposals,” beginning on page [●]).



 

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The Board is required to recommend that the Company stockholders adopt the merger agreement and not change its recommendation or recommend other transactions (which, such recommendation, we refer to as the “Board recommendation”). However, at any time prior to the receipt of the Company stockholder approval, the Board or any committee thereof may change its recommendation in favor of the merger if and only if a competing proposal that did not result from a breach of the non-solicitation provisions described above (other than any breach that is immaterial and unintentional) is made to the Company by a third person and the Board or any committee thereof determines in good faith, after consultation with the Company’s independent financial advisors and outside legal counsel, that such competing proposal constitutes a superior proposal or could reasonably be expected to lead to a superior proposal (as described in the section entitled “The Agreement and Plan of Merger—Restriction on Solicitation of Competing Proposals,” beginning on page [●]) and after consultation with the Company’s outside legal counsel, that failure to take such action would be reasonably likely to be inconsistent with the fiduciary duties of the Board under applicable law. The Company is required to notify Parent of such determination and Parent has three business days to match such superior proposal. If Parent does not match, prior to the stockholders meeting, the Company can terminate the merger agreement to accept the superior proposal and pay Parent the Company termination fee. Note that if the party making the competing proposal makes any material amendment to its proposal, prior to termination of the merger agreement, Parent has another two business days to match the revised proposal.

The Board may also change its recommendation in response to certain other limited intervening events, as described in the section entitled “The Agreement and Plan of Merger—Obligations of the Board with Respect to its Recommendation,” beginning on page [●].

Termination of the Merger Agreement

The merger agreement may be terminated at any time prior to the effective time, whether before or after receipt of the Company stockholder approval and whether before or after adoption of the merger agreement by Parent as sole stockholder of Sub, by either the Company or Parent:

 

   

by mutual written consent of Parent and the Company;

 

   

if the effective time does not occur on or before December 30, 2019 (which we refer to as the “outside date”), provided, however, that this right to terminate the merger agreement shall not be available to any party whose material breach, inaccuracy or failure to perform or comply with any of its representations, warranties, covenants or obligations under the merger agreement was the proximate cause of the failure to consummate the merger by the outside date;

 

   

if the special meeting of the Company stockholders, held for the purpose of voting on, among other things, the approval and adoption of the merger agreement (including any adjournments or postponements thereof) (which we refer to as the “stockholder meeting”) was held and concluded without obtaining the Company stockholder approval; and

 

   

if any governmental entity of competent jurisdiction issues, enters, or promulgates any law or order restraining, enjoining or otherwise prohibiting the consummation of merger and such law or order becomes final and non-appealable, provided that this right to terminate the merger agreement will not be available to any party who has failed in any material respect to comply with those provisions of the merger agreement described under “The Agreement and Plan of Merger—Efforts to Complete the Merger” before asserting such right to terminate and such failure was the proximate cause of such law or order.

The Company may also terminate the merger agreement:

 

   

if, at any time prior to the receipt of the Company stockholder approval, the Board or any committee thereof effects a Board recommendation change (as described in “The Agreement and Plan of



 

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Merger—Obligations of the Board with Respect to its Recommendation,” beginning on page [●]) in accordance with the terms of the merger agreement in order to accept a superior proposal and enter into a definitive agreement with respect thereto; but only if the Company has complied with its obligations under the merger agreement (other than any breach that was immaterial and unintentional) and pays Parent the Company termination fee prior to or simultaneously therewith;

 

   

if (i) Parent or Sub breaches or fails to perform any of its representations, warranties, covenants or agreements contained in the merger agreement, in any case such that an applicable condition to the merger described above would not be satisfied and (ii) either such breach or failure to perform is not capable of cure or at least 30 days elapse after the date of delivery of written notice to Parent without such breach or failure to perform having been cured; provided, however, that such right to terminate the merger agreement is not available if the Company breaches or fails to perform any of its representations, warranties, covenants or agreements contained in the merger agreement, in any case such that an applicable condition to the merger described above would not be satisfied; and

 

   

if (i) all of the applicable conditions to the merger described above (other than those conditions that by their nature are to be satisfied at the closing of the merger, provided, that such conditions would have been satisfied if the closing were to occur) have been satisfied or waived, (ii) the Company has irrevocably notified the Parent in writing that (A) all of the applicable conditions to the merger described above (other than those conditions that by their nature are to be satisfied at the closing of the merger, provided, that such conditions would have been satisfied if the closing were to occur) have been satisfied or waived and (B) the Company is ready, willing and able to consummate the closing of the merger and (iii) Parent and Sub have failed to consummate the closing within the latter of (X) the date by which the closing of the merger is required to have occurred pursuant to the terms of the merger agreement and (Y) the earlier of (1) three business days following the receipt of such written notice and (2) the outside date.

Parent may also terminate the merger agreement:

 

   

if, at any time prior to the Company’s receipt of the Company stockholder approval, the Board or any committee thereof effects a Board recommendation change; and

 

   

if (i) the Company breaches or fails to perform any of its representations, warranties, covenants or agreements contained in the merger agreement, in any case such that an applicable condition to the merger described above would not be satisfied and (ii) either such breach or failure to perform is not capable of cure or at least 30 days elapse after the date of delivery of written notice to the Company without such breach or failure to perform having been cured; provided, however, that such right to terminate the merger agreement is not available if Parent or Sub breach or fail to perform any of their representations, warranties, covenants or agreements contained in the merger agreement, in any case such that an applicable condition to the merger described above would not be satisfied.

Termination Fees

Upon termination of the merger agreement under specified circumstances, the Company will be required to pay Parent a termination fee of $30.9 million. Upon termination of the merger agreement under certain specified circumstances, Parent will be obligated to pay the Company a termination fee of $67.5 million. For more information, see the section entitled “The Agreement and Plan of Merger—Expenses; Termination Fees,” beginning on page [●].

Appraisal Rights

Under Delaware law, holders of shares of Company common stock are entitled to appraisal rights in connection with the merger, provided that such holders meet all of the conditions set forth in Section 262 of the



 

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DGCL. A holder of Company common stock who properly seeks appraisal and complies with the applicable requirements under Delaware law, and does not thereafter lose his, her or its right to, or properly withdraw his, her or its demand for, appraisal rights (which we refer to as “dissenting stockholders”) will forego the merger consideration and instead receive a cash payment equal to the fair value of his, her or its shares of Company common stock in connection with the merger. Fair value will be determined by the Court of Chancery of the State of Delaware (which we refer to as the “Court of Chancery”) following an appraisal proceeding. Dissenting stockholders will not know the appraised fair value at the time such holders must elect whether to seek appraisal. The ultimate amount dissenting stockholders receive in an appraisal proceeding may be more or less than, or the same as, the amount such holders would have received under the merger agreement. A detailed description of the appraisal rights available to holders of Company common stock and procedures required to exercise statutory appraisal rights is included in the section entitled “Appraisal Rights,” beginning on page [●].

To seek appraisal, a Company stockholder of record must deliver a written demand for appraisal to the Company before the vote on the merger agreement at the special meeting, not vote in favor of the proposal to adopt the merger agreement, continuously hold the shares of Company common stock through the effective time and otherwise comply with the procedures set forth in Section 262 of the DGCL. Failure to follow exactly the procedures specified under Delaware law may result in the loss of appraisal rights. Pursuant to Section 262 of the DGCL, assuming that immediately prior to the merger shares of Company common stock continue to be listed on the NYSE, the Court of Chancery will dismiss the appraisal proceedings as to all holders of shares who are otherwise entitled to appraisal rights unless (i) the total number of shares entitled to appraisal rights exceeds 1% of the outstanding shares of Company common stock eligible for appraisal, or (ii) the value of the merger consideration provided in the merger for such total number of shares exceeds $1,000,000.

Material U.S. Federal Income Tax Consequences of the Merger

The receipt of cash in exchange for shares of Company common stock pursuant to the merger generally will be a taxable transaction for U.S. federal income tax purposes. A U.S. holder (as described in the section entitled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger,” beginning on page [●]) who receives cash in exchange for shares of Company common stock in the merger will recognize gain or loss equal to the difference, if any, between the cash received and the U.S. holder’s adjusted tax basis in the shares converted into the right to receive cash in the merger. Gain or loss will be determined separately for each block of shares of Company common stock (that is, shares acquired for the same cost in a single transaction). You should refer to the discussion in the section entitled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger,” beginning on page [●], and consult your tax advisor with respect to the U.S. federal, state, local and foreign tax consequences of the merger.

Where You Can Find More Information

You can find more information about the Company in the periodic reports and other information we file with the U.S. Securities and Exchange Commission (which we refer to as the “SEC”). The information is available at the website maintained by the SEC at www.sec.gov.



 

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QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER

The following questions and answers are intended to briefly address some commonly asked questions regarding the special meeting of stockholders and the merger. These questions and answers do not address all questions that may be important to you as a Company stockholder. Please refer to the more detailed information contained elsewhere in this proxy statement, the Annexes to this proxy statement and the documents referred to in this proxy statement.

 

Q:

Why am I receiving this proxy statement?

 

A:

On August 2, 2019, the Company, Parent and Sub entered into the merger agreement. You are receiving this proxy statement in connection with the solicitation of proxies by the Company in favor of the proposal to adopt the merger agreement and the other proposals described in this proxy statement.

 

Q:

As a stockholder, what will I receive in the merger?

 

A:

At the effective time, except as described below, each share of Company common stock issued and outstanding immediately prior to the effective time (other than (i) shares of Company common stock that are held in the treasury of the Company or owned of record by the Company or any subsidiary of the Company and all shares owned of record by Parent, Sub or any of their respective subsidiaries, in each case immediately prior to the effective time and (ii) shares of Company common stock held by stockholders who have not voted in favor of, or consented to the adoption of, the merger agreement and who have properly demanded appraisal of such shares and complied in all respects with all the provisions of the DGCL concerning the right of holders of shares to request appraisal of their shares) will be cancelled and automatically converted into the right to receive $28.00 in cash, without interest thereon, subject to any applicable withholding taxes.

The receipt of cash in exchange for shares of Company common stock pursuant to the merger generally will be a taxable transaction for U.S. federal income tax purposes. Please see the discussion in the section entitled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger,” beginning on page [●], for a more detailed description of the U.S. federal income tax consequences of the merger. You should consult your own tax advisor for a full understanding of how the merger will affect your U.S. federal, state, local and foreign taxes.

 

Q:

What will happen to outstanding Company equity awards and the Company’s equity plans in the merger?

 

A:

For information regarding the treatment of outstanding Company equity awards and the Company’s equity plans, see the section entitled “The Agreement and Plan of Merger—Treatment of Outstanding Equity Awards and Equity Plans,” beginning on page [●].

 

Q:

Where and when will the special meeting of stockholders be held?

 

A:

The special meeting of Company stockholders will be held at [●], on [●], at [●] local time.

 

Q:

Who is entitled to vote at the special meeting?

 

A:

Only holders of record of Company common stock as of the close of business on September 4, 2019, the record date for the special meeting, are entitled to vote at the special meeting. You will be entitled to one vote on each of the proposals presented in this proxy statement for each share of Company common stock that you held on the record date.

 

Q:

What proposals will be considered at the special meeting?

At the special meeting, you will be asked to consider and vote on:

 

   

a proposal to adopt the merger agreement;

 

   

a proposal to approve, by a non-binding advisory vote, the compensation that may be paid or become payable to the Company’s named executive officers that is based on or otherwise relates to the merger,

 

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as discussed in the section entitled “The Merger—Interests of Directors and Executive Officers in the Merger,” beginning on page [●]; and

 

   

a proposal to adjourn the special meeting from time to time to a later date or time if necessary or appropriate, including to solicit additional proxies in favor of the proposal to adopt the merger agreement if there are insufficient votes at the time of the special meeting to adopt the merger agreement.

 

Q:

What vote is required to approve each of the proposals?

 

A:

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 on such matter. Abstentions and failures to vote will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement.

The approval of the non-binding compensation advisory proposal requires the affirmative vote of a majority of the shares having voting power present in person or represented by proxy at the special meeting. Although the Board intends to consider the vote resulting from this proposal, the vote is advisory only and, therefore, is not binding on the Company or Parent or any of their respective subsidiaries, and, if the merger agreement is adopted by Company stockholders and the merger is completed, the compensation that is based on or otherwise relates to the merger will be payable to our named executive officers even if this proposal is not approved. The abstention from voting will have the same effect as a vote “AGAINST” the proposal.

The approval of the proposal to adjourn the special meeting from time to time if necessary or appropriate requires the affirmative vote of a majority of the shares having voting power present in person or represented by proxy at the special meeting. In addition, even if a quorum is not present at the special meeting, either the chairman of the Board or the affirmative vote of a majority of the shares having voting power present in person or represented by proxy at the special meeting may adjourn the meeting to another place, date or time. In each case, the abstention from voting will have the same effect as a vote “AGAINST” the proposal.

 

Q:

How does the Board recommend that I vote on the proposals?

 

A:

Upon careful consideration, the Board has unanimously determined that the merger agreement and the transactions contemplated thereby, including the merger, are in the best interests of the Company and its stockholders, and unanimously recommends that you vote “FOR” the proposal to adopt the merger agreement, “FOR” the non-binding advisory merger-related compensation proposal and “FOR” the proposal to adjourn the special meeting from time to time if necessary or appropriate.

For a discussion of the factors the Board considered in determining to recommend the adoption of the merger agreement, please see the section entitled “The Merger—Reasons for Recommending the Adoption of the Merger Agreement,” beginning on page [●]. In addition, in considering the recommendation of the Board with respect to the merger agreement, you should be aware that members of the Board and our executive officers have various interests in the merger that may be in addition to, or different from, the interests of Company stockholders generally. See the section entitled “The Merger—Interests of Directors and Executive Officers in the Merger,” beginning on page [●].

 

Q:

Do I need to attend the special meeting in person?

 

A:

No. It is not necessary for you to attend the special meeting in order to vote your shares. You may vote by mail, by telephone or through the Internet, as described in more detail in the section entitled “The Special Meeting—How to Vote,” beginning on page [●].

 

Q:

Are there any requirements if I plan on attending the special meeting?

 

A:

If you wish to attend the special meeting, you may be asked to present valid photo identification. Please note that if your shares of Company common stock are held in the name of a bank, broker, trust or other nominee, you are considered the “beneficial holder” of such shares held for you in what we refer to as “street name.” If you hold your shares in “street name,” you will need to bring a copy of your voting

 

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  instruction card or brokerage statement reflecting your Company common stock ownership as of the record date and check in at the registration desk at the special meeting. Cameras, sound or video recording devices or any similar equipment, or the distribution of any printed materials, will not be permitted at the special meeting without the approval of the Company.

 

Q:

How many shares need to be represented at the special meeting?

 

A:

The presence at the special meeting, in person or by proxy, of the holders of a majority of the shares of Company common stock issued and outstanding and entitled to vote at the special meeting constitutes a quorum for the purpose of considering the proposals. As of the close of business on the record date, there were [●] shares of Company common stock outstanding. If you are a Company stockholder of record (i.e., your shares of Company common stock are registered in your name with the Company’s transfer agent) as of the close of business on the record date and you vote by mail, by telephone, through the Internet or in person at the special meeting, you will be considered part of the quorum. If you are a “street name” holder of shares of Company common stock (i.e., you hold your shares in the name of a bank, broker, trust or other nominee and these proxy materials are being forwarded to you by that entity) and you provide your bank, broker, trust or other nominee with voting instructions, then your shares will be counted in determining the presence of a quorum. If you are a “street name” holder of shares and you do not provide your bank, broker, trust or other nominee with voting instructions, then your shares will not be counted as present in determining the presence of a quorum.

All shares of Company common stock held by stockholders that are present in person, or represented by proxy, and entitled to vote at the special meeting, regardless of how such shares are voted or whether such stockholders have indicated on their proxy that they are abstaining from voting, will be counted in determining the presence of a quorum. In the absence of a quorum, the special meeting may be adjourned.

 

Q:

Why am I being asked to consider and cast a non-binding advisory vote to approve the compensation that may be paid or become payable to the Company’s named executive officers and that is based on, or otherwise relates to, the merger?

 

A:

In 2010, the SEC adopted rules that require companies to seek a non-binding advisory vote to approve certain compensation that may be paid or become payable to their named executive officers that is based on or otherwise relates to corporate transactions, such as the merger. In accordance with the rules promulgated under Section 14A of the Exchange Act, the Company is providing its stockholders with the opportunity to cast a non-binding advisory vote on compensation that may be paid or become payable to the Company’s named executive officers in connection with the merger. For additional information, see the section entitled “Proposal 2: Non-Binding Advisory Merger-Related Compensation Proposal,” on page [●].

 

Q:

What will happen if Company stockholders do not approve the non-binding advisory merger-related compensation proposal?

 

A:

The vote to approve the non-binding advisory merger-related compensation proposal is a vote separate and apart from the vote to adopt the merger agreement. Approval of the non-binding advisory merger-related compensation proposal is not a condition to completion of the merger, and it is advisory in nature only, meaning that it will not be binding on the Company or Parent or any of their respective subsidiaries. Accordingly, if the merger agreement is adopted by the Company stockholders and the merger is completed, the compensation subject to the non-binding merger-related compensation proposal will be paid to our named executive officers even if the proposal is not approved.

 

Q:

What do I need to do now?

 

A:

After carefully reading and considering the information contained in this proxy statement and the Annexes attached to this proxy statement, please vote your shares of Company common stock in one of the ways described below as soon as possible. You will be entitled to one vote for each share of Company common stock that you owned on the record date.

 

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Q:

How do I vote if I am a stockholder of record?

 

A:

You may vote by:

 

   

submitting your proxy by completing, signing and dating each proxy card you receive and returning it by mail in the enclosed prepaid envelope;

 

   

submitting your proxy by using the telephone number printed on each proxy card you receive;

 

   

submitting your proxy through the Internet voting instructions printed on each proxy card you receive; or

 

   

by appearing in person at the special meeting and voting by ballot.

If you are submitting your proxy by telephone or through the Internet, your voting instructions must be received by 11:59 p.m. Eastern Time on the day before the special meeting.

Submitting your proxy by mail, by telephone or through the Internet will not prevent you from voting in person at the special meeting. You are encouraged to submit a proxy by mail, by telephone or through the Internet even if you plan to attend the special meeting in person to ensure that your shares of Company common stock are represented at the special meeting. If you vote in person at the special meeting, such vote will automatically revoke any proxy you previously submitted.

If you return your signed and dated proxy card, but do not mark the boxes showing how you wish to vote, your shares of Company common stock will be voted “FOR” the proposal to adopt the merger agreement, “FOR” the approval of the non-binding compensation advisory proposal and “FOR” the approval of the proposal to adjourn the special meeting from time to time if necessary or appropriate.

 

Q:

What if my shares of Company common stock are held for me in “street name” by a bank, broker, trust or other nominee; will my bank, broker, trust or other nominee vote those shares for me with respect to the proposals without my direction?

 

A:

No. If your shares of Company common stock are held in “street name,” you are not the “stockholder of record” of such shares. If this is the case, this proxy statement has been forwarded to you by your bank, broker, trust or other nominee. You, as the beneficial holder, generally have the right to direct your bank, broker, trust or other nominee as to how to vote your shares of Company common stock. Your bank, broker, trust or other nominee will NOT have the power to vote your shares of Company common stock at the special meeting unless you provide instructions to your bank, broker, trust or other nominee on how to vote. You should instruct your bank, broker, trust or other nominee on how to vote your shares with respect to the proposals, using the instructions provided by your bank, broker, trust or other nominee. You may be able to vote by telephone or through the Internet if your bank, broker, trust or other nominee offers these options.

 

Q:

What if I fail to instruct my bank, broker, trust or other nominee how to vote?

 

A:

Your bank, broker, trust or other nominee will NOT be able to vote your shares of Company common stock unless you have properly instructed your bank, broker, trust or other nominee on how to vote. Under applicable stock exchange rules, banks, brokers, trusts and other nominees have the discretion to vote your shares of Company common stock on routine matters if you fail to instruct your bank, broker, trust or other nominee on how to vote your shares of Company common stock with respect to such matters. The proposals in this proxy statement are non-routine matters, and banks, brokers, trusts and other nominees therefore cannot vote on these proposals without your instructions. It is important that you instruct your bank, broker, trust or other nominee on how to vote your shares with respect to the proposals, using the instructions provided by your bank, broker, trust or other nominee. You may be able to vote by telephone or through the Internet if your bank, broker, trust or other nominee offers these options. You are invited to attend the special meeting even if you are not a stockholder of record; however, if you are not a stockholder of record, you may not vote your shares in person at the special meeting unless you obtain a legal proxy, executed in your favor, from such bank, broker or other holder of record authorizing you to vote at the special meeting.

 

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Q:

May I change my vote after I have mailed my proxy card or after I have submitted my proxy by telephone or through the Internet?

 

A:

Yes. You may revoke your proxy or change your vote at any time before it is voted at the special meeting. If you are a stockholder of record, you may revoke your proxy by delivering a signed written notice of revocation stating that the proxy is revoked and bearing a date later than the date of the proxy to our Corporate Secretary at Navigant Consulting, Inc., 150 North Riverside Plaza, Suite 2100, Chicago, Illinois 60606. You may also revoke your proxy or change your vote by submitting another proxy by telephone or through the Internet in accordance with the instructions on the enclosed proxy card. You may also submit a later-dated proxy card relating to the same shares of Company common stock. If you voted by completing, signing, dating and returning the enclosed proxy card, you should retain a copy of the voter control number found on the proxy card in the event that you later decide to revoke your proxy or change your vote by telephone or through the Internet. Alternatively, your proxy may be revoked or changed by attending the special meeting and voting in person. However, simply attending the special meeting without voting will not revoke or change your proxy.

“Street name” holders of shares of Company common stock should contact their bank, broker, trust or other nominee to obtain instructions as to how to revoke or change their proxies. If you have instructed a bank, broker, trust or other nominee to vote your shares, you must follow the instructions received from your bank, broker, trust or other nominee to change your vote.

All properly submitted proxies received by us before the special meeting that are not revoked or changed prior to being exercised at the special meeting will be voted at the special meeting in accordance with the instructions indicated on the proxies or, if no instructions were provided, “FOR” each of the proposals.

 

Q:

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

 

A:

If you receive more than one proxy card, it means that you hold shares of Company common stock that are registered in more than one account. For example, if you own your shares in various registered forms, such as jointly with your spouse, as trustee of a trust or as custodian for a minor, you will receive, and you will need to sign and return, a separate proxy card for those shares because they are held in a different form of record ownership. Therefore, to ensure that all of your shares of Company common stock are voted, you will need to submit your proxies by properly completing and mailing each proxy card you receive or by telephone or through the Internet by using the different voter control numbers on each proxy card.

 

Q:

What happens if I sell or otherwise transfer my shares of Company common stock after the record date but before the special meeting? What happens if I sell or otherwise transfer my shares of Company common stock after the special meeting but before the effective time?

 

A:

The record date for the special meeting is earlier than the date of the special meeting and earlier than the expected date of the merger. If you own shares of Company common stock as of the close of business on the record date, but transfer your shares prior to the special meeting, unless special arrangements (such as provision of a proxy) are made between you and the person to whom you sell or transfer your shares, you will retain your right to vote at the special meeting, but the right to receive the merger consideration will pass to the person who holds your shares as of immediately prior to the effective time. If you sell or transfer your shares of Company common stock after the special meeting but before the effective time, the right to receive the merger consideration will pass to the person who holds your shares as of immediately prior to the effective time. In order to receive the merger consideration, you must hold your shares of Company common stock through the completion of the merger.

Even if you sell or otherwise transfer your shares of Company common stock after the record date, we encourage you to sign, date and return the enclosed proxy or submit your proxy to vote via the Internet or by telephone, or, if your shares are held in “street name” through a bank, broker, trust or other nominee, instruct your bank, broker, trust or other nominee on how to vote your shares using the instructions provided by your bank, broker, trust or other nominee.

 

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Q:

May I exercise dissenters’ rights or rights of appraisal in connection with the merger?

 

A:

Yes. In order to exercise your appraisal rights, you must follow the requirements set forth in Section 262 of the DGCL. Under Delaware law, holders of record of Company common stock who do not vote in favor of adopting the merger agreement will have the right to seek appraisal of the fair value of their shares as determined by the Court of Chancery if the merger is completed. Appraisal rights will only be available to holders of shares of Company common stock who properly deliver, and do not properly withdraw, a written demand for an appraisal to the Company prior to the vote on the proposal to adopt the merger agreement at the special meeting and who comply with the procedures and requirements set forth in Section 262 of the DGCL, which are summarized in this proxy statement. The appraisal amount could be more than, the same as or less than the amount a stockholder would be entitled to receive under the terms of the merger agreement. A copy of Section 262 of the DGCL is included as Annex C to this proxy statement. For additional information, see the section entitled “Appraisal Rights,” beginning on page [●].

 

Q:

If I hold my shares in certificated form, should I send in my stock certificates now?

 

A:

No. Shortly after the merger is completed, stockholders holding certificated shares of Company common stock will be sent a letter of transmittal that includes detailed written instructions on how to return such stock certificates. You must return your stock certificates in accordance with such instructions in order to receive the merger consideration. PLEASE DO NOT SEND IN YOUR STOCK CERTIFICATE(S) NOW.

 

Q:

Should I do anything with respect to my Company stock options or restricted stock unit awards now?

 

A:

No. There is no need for you to do anything with respect to your Company stock options or restricted stock unit awards at this time. Shortly after the merger is completed, your Company stock options and restricted stock unit awards will either be automatically exchanged for the applicable consideration, or you will receive further instructions regarding such exchange.

 

Q:

When is the merger expected to be completed?

 

A:

We and Parent are working toward completing the merger as quickly as possible. We currently anticipate that the merger will be completed during the fourth quarter of 2019, subject to the receipt of required regulatory approvals and the satisfaction of other closing conditions, but we cannot be certain when or if the conditions to the merger will be satisfied or, to the extent permitted, waived. The merger cannot be completed until the conditions to closing are satisfied (or, to the extent permitted, waived), including the adoption of the merger agreement by Company stockholders and the receipt of certain regulatory approvals. For additional information, see the section entitled “The Agreement and Plan of Merger—Conditions to the Merger,” beginning on page [●].

 

Q:

What happens if the merger is not completed?

 

A:

If the proposal to adopt the merger agreement is not approved by the holders of a majority of the outstanding shares of Company common stock entitled to vote on the matter or if the merger is not completed for any other reason, you will not receive any consideration from Parent or Sub for your shares of Company common stock. Instead, the Company will remain a public company, and Company common stock will continue to be registered under the Exchange Act and listed and traded on the NYSE. We expect that holders of shares of Company common stock would continue to be subject to the same risks to which they are currently subject with respect to their ownership of Company common stock. Under certain circumstances, if the merger is not completed, we may be obligated to pay Parent the Company termination fee. For additional information, see the section entitled “The Merger—Consequences if the Merger is Not Completed,” on page [●].

 

Q:

Who will count the votes?

 

A:

The votes will be counted by the inspector of elections appointed for the special meeting.

 

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Q:

Where can I find the voting results of the special meeting?

 

A:

The Company intends to announce preliminary results at the special meeting and publish final results in a Current Report on Form 8-K that will be filed with the SEC following the special meeting. All reports that the Company files with the SEC are publicly available when filed. See “Where You Can Find More Information,” on page [●].

 

Q:

Where can I find more information about the Company?

 

A:

The Company files periodic reports, proxy statements and other information with the SEC. Our SEC filings are available to the public at the SEC’s website at www.sec.gov. For a more detailed description of the information available, see the section entitled “Where You Can Find More Information,” on page [●].

 

Q:

Who can help answer my questions?

 

A:

For additional questions about the merger, assistance in submitting proxies or voting shares of Company common stock, or additional copies of the proxy statement or the enclosed proxy card(s), please contact our proxy solicitor:

 

 

LOGO

1407 Broadway – 27th Fl.

New York, New York 10018

(212) 929-5500 (Call Collect)

or

Call Toll-Free (800) 322-2885

Email: proxy@mackenziepartners.com

If your shares of Company common stock are held for you by a bank, broker, trust or other nominee, you should also call your bank, broker, trust or other nominee for additional information.

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Statements included in this proxy statement which are not historical in nature are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements may generally be identified by words such as “anticipate,” “believe,” “may,” “should,” “could,” “intend,” “estimate,” “expect,” “likely,” “continue,” “plan,” “projects,” “positioned,” “outlook” and similar expressions. These statements are based upon management’s current expectations and speak only as of the date of this proxy statement. The Company cautions readers that there may be events in the future that the Company is not able to accurately predict or control and the information contained in the forward-looking statements is inherently uncertain and subject to a number of risks that could cause actual results to differ materially from those contained in or implied by the forward-looking statements including, without limitation:

 

   

the satisfaction of the conditions precedent to the consummation of the proposed merger, including, without limitation, the receipt of stockholder and regulatory approvals;

 

   

unanticipated difficulties or expenditures relating to the proposed merger;

 

   

legal proceedings, judgments or settlements, including those that may be instituted against the Company, the Company’s board of directors, executive officers and others following the announcement of the proposed merger;

 

   

disruptions of current plans and operations caused by the announcement and pendency of the proposed merger;

 

   

potential difficulties in employee retention due to the announcement and pendency of the proposed merger;

 

   

the response of customers, distributors, suppliers, business partners and regulators to the announcement of the proposed merger;

 

   

the risk of unanticipated costs, liabilities or an adverse impact on the Company’s business operations arising from the Company’s provision of post-divestiture transition services and support in connection with the sale of the Company’s Disputes, Forensics and Legal Technology segment and the transaction advisory services practice;

 

   

the execution of the Company’s long-term growth objectives and margin improvement initiatives;

 

   

risks inherent in international operations, including foreign currency fluctuations;

 

   

ability to make acquisitions and divestitures and complete such acquisitions and divestitures in the time anticipated;

 

   

pace, timing and integration of acquisitions;

 

   

operational risks associated with new or expanded service areas, including business process management services;

 

   

impairments;

 

   

changes in accounting standards or tax rates, laws or regulations; management of professional staff, including dependence on key personnel, recruiting, retention, attrition and the ability to successfully integrate new consultants into the Company’s practices;

 

   

utilization rates;

 

   

conflicts of interest;

 

   

potential loss of clients or large engagements and the Company’s ability to attract new business;

 

   

brand equity;

 

   

competition;

 

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accurate pricing of engagements, particularly fixed fee and multi-year engagements;

 

   

clients’ financial condition and their ability to make payments to the Company;

 

   

risks inherent with litigation;

 

   

higher risk client assignments;

 

   

government contracting;

 

   

professional liability;

 

   

information security;

 

   

the adequacy of our business, financial and information systems and technology; maintenance of effective internal controls;

 

   

potential legislative and regulatory changes;

 

   

continued and sufficient access to capital;

 

   

compliance with covenants in our credit agreement;

 

   

interest rate risk;

 

   

market and general economic and political conditions; and

 

   

other factors described in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2018, which was filed with the SEC on February 28, 2019, the Company’s quarterly reports on Form 10-Q for the quarterly period ended March 31, 2019, which was filed with the SEC on April 26, 2019, and for the quarterly period ended June 30, 2019, which was filed with the SEC on August 2, 2019 and Current Reports on Form 8-K filed with the SEC (see the section entitled “Where You Can Find More Information,” on page [●]).

The Company can give no assurance that the expectations expressed or implied in the forward-looking statements contained herein will be attained. The forward-looking statements are made as of the date of this proxy statement, and the Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date of this proxy statement.

 

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PARTIES TO THE MERGER

Navigant

Navigant Consulting, Inc., a Delaware corporation, is a specialized, global professional services firm that helps clients take control of their future. Navigant’s professionals apply deep industry knowledge, substantive technical expertise, and an enterprising approach to help clients build, manage, and protect their business interests. With a focus on markets and clients facing transformational change and significant regulatory or legal pressures, Navigant primarily serves clients in the healthcare, energy, and financial services industries. Across a range of advisory, consulting, outsourcing, and technology/analytics services, we believe our practitioners bring sharp insight that pinpoints opportunities and delivers powerful results. Our executive office is located at 150 North Riverside Plaza, Suite 2100, Chicago, Illinois, 60606. Our telephone number is (312) 573-5600.

The Company became a publicly traded company in 1996. Shares of the Company common stock are listed on the NYSE and trade under the symbol “NCI.”

The Company’s executive offices are located at 150 North Riverside Plaza, Suite 2100, Chicago, Illinois 60606, and our telephone number is (312) 573-5600. Our website address is www.navigant.com. The information provided on our website is not part of this proxy statement and is not incorporated by reference in this proxy statement by this or any other reference to our website in this proxy statement.

Additional information about the Company is contained in our public filings, which are incorporated by reference in this proxy statement. See the section entitled “Where You Can Find More Information,” on page  [●], for more information.

Guidehouse

Guidehouse LLP, a privately-held Delaware limited liability partnership and an affiliate of Veritas Capital Fund Management, L.L.C., with 2,000 professionals in over 20 locations, is a leading provider of strategic advisory services to customers such as the Department of Defense, Homeland Security, Veterans Affairs, Health and Human Services, and the Department of State, as well as numerous state and local governments and multilateral agencies. Parent is led by professionals with deep commercial and public sector expertise and helps clients solve their toughest challenges. Its executive office is located at 1800 Tysons Boulevard, 7th Floor, McLean, Virginia, 22102.  Its telephone number is (571) 633-1711.

Isaac Merger Sub, Inc.

Isaac Merger Sub, Inc., a Delaware corporation, is a wholly-owned subsidiary of Parent, formed on July 29, 2019, solely for the purpose of engaging in the transactions contemplated by the merger agreement. Sub has not carried on any activities on or prior to the date of this proxy statement, except for activities incidental to its formation and activities undertaken in connection with Parent’s proposed acquisition of the Company. Upon completion of the merger, Sub will have been merged with and into the Company, and Sub will cease to exist. Sub’s principal executive offices are located at c/o Veritas Capital Fund Management, L.L.C., 9 West 57th Street, 29th Floor, New York, New York, 10019. Its telephone number is (212) 415-6700.

 

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THE SPECIAL MEETING

We are furnishing this proxy statement as part of the solicitation of proxies by the Company for use at the special meeting of the Company stockholders, any postponement thereof, and at any properly reconvened meeting following an adjournment of the special meeting.

Date, Time and Place of the Special Meeting

The special meeting will be held on [●], at [●] local time, at [●].

Company stockholders who wish to attend the special meeting may be asked to present valid photo identification. Please note that, if you hold your shares of Company common stock in “street name,” you will need to bring a copy of your voting instruction card or brokerage statement reflecting your stock ownership as of the record date and check in at the registration desk at the meeting. Cameras, sound or video recording devices or any similar equipment, or the distribution of any printed materials, will not be permitted at the meeting without the approval of the Company.

Purpose of the Special Meeting

At the special meeting, Company stockholders of record will be asked to consider and vote on:

 

   

a proposal to adopt the merger agreement, pursuant to which, subject to the satisfaction or waiver of certain specified conditions, Sub will merge with and into the Company, with the Company continuing as the surviving corporation;

 

   

a proposal to approve, by a non-binding advisory vote, the compensation that may be paid or become payable to the Company’s named executive officers that is based on or otherwise relates to the merger, as discussed in the section entitled “The Merger—Interests of Directors and Executive Officers in the Merger,” beginning on page [●]; and

 

   

a proposal to adjourn the special meeting from time to time to a later date or time if necessary or appropriate, including to solicit additional proxies in favor of the proposal to adopt the merger agreement if there are insufficient votes at the time of the special meeting to adopt the merger agreement.

Recommendation of the Board

The Board carefully reviewed and considered the terms and conditions of the merger agreement, the merger and the other transactions contemplated by the merger agreement. By a unanimous vote, the Board (i) determined that the transactions contemplated by the merger agreement, including the merger, are in the best interests of the Company and its stockholders, (ii) approved and declared advisable the execution, delivery and performance of the merger agreement, and, subject to receiving the Company stockholder approval, the consummation by the Company of the transactions contemplated by the merger agreement, including the merger, (iii) directed that the merger agreement be submitted to a vote of the stockholders of the Company to be adopted and (iv) resolved to recommend the adoption of the merger agreement by the stockholders of the Company. Accordingly, the Board unanimously recommends a vote “FOR” the proposal to adopt the merger agreement.

The Board also unanimously recommends a vote “FOR” the non-binding advisory merger-related compensation proposal and “FOR” the approval of the proposal to adjourn the special meeting from time to time, if necessary or appropriate, to solicit additional proxies in favor of the proposal to adopt the merger agreement if there are insufficient votes at the time of the special meeting to adopt the merger agreement.

Record Date and Quorum

Each holder of record of shares of Company common stock as of the close of business on September 4, 2019, which is the record date for the special meeting, is entitled to receive notice of, and to vote at, the special meeting. You will be entitled to one vote for each share of Company common stock that you owned on the record

 

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date. If you sell or transfer your shares of Company common stock after the record date but before the special meeting, you will transfer the right to receive merger consideration, if the merger is completed, to the person to whom you sell or transfer your shares of Company common stock, but you will retain your right to vote those shares at the special meeting. As of the record date, there were [●] shares of Company common stock issued and outstanding and entitled to vote at the special meeting. The presence at the special meeting, in person or by proxy, of the holders of [●] shares of Company common stock (a majority of the shares of Company common stock issued and outstanding and entitled to vote at the special meeting) constitutes a quorum for the special meeting.

If you are a Company stockholder of record and you vote by mail, by telephone or through the Internet or in person at the special meeting, then your shares of Company common stock will be counted as part of the quorum. If you are a “street name” holder of shares of Company common stock and you provide your bank, broker, trust or other nominee with voting instructions, then your shares will be counted in determining the presence of a quorum. If you are a “street name” holder of shares and you do not provide your bank, broker, trust or other nominee with voting instructions, then your shares will not be counted as present in determining the presence of a quorum.

All shares of Company common stock held by stockholders of record that are present in person or represented by proxy and entitled to vote at the special meeting, regardless of how such shares are voted or whether such stockholders abstain from voting, will be counted in determining the presence of a quorum. In the absence of a quorum, the special meeting may be adjourned.

Vote Required for Approval

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 on such matter.

The approval of the non-binding compensation advisory proposal requires the affirmative vote of a majority of the shares having voting power present in person or represented by proxy at the special meeting. The vote is advisory only and, therefore, is not binding on the Company or Parent or any of their respective subsidiaries, and, if the merger agreement is adopted by Company stockholders and the merger is completed, the compensation that is based on or otherwise relates to the merger will be payable to our named executive officers even if this proposal is not approved.

The approval of the proposal to adjourn the special meeting from time to time if necessary or appropriate requires the affirmative vote of a majority of the shares having voting power present in person or represented by proxy at the special meeting. In addition, even if a quorum is not present at the special meeting, either the chairman of the Board or the affirmative vote of a majority of the shares having voting power present in person or represented by proxy at the special meeting may adjourn the meeting to another place, date or time.

Effect of Abstentions and Broker Non-Votes

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 on such matter. Therefore, the failure to vote or the abstention from voting will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement.

The approval of the non-binding compensation advisory proposal requires the affirmative vote of a majority of the shares having voting power present in person or represented by proxy at the special meeting. Consequently, the abstention from voting will have the same effect as a vote “AGAINST” the proposal.

The proposal to adjourn the special meeting from time to time if necessary or appropriate requires the affirmative vote of a majority of the shares having voting power present in person or represented by proxy at the special meeting. Consequently, the abstention from voting will have the same effect as a vote “AGAINST” the proposal. In addition, even if a quorum is not present at the special meeting, either the chairman of the Board or

 

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the affirmative vote of a majority of the shares having voting power present in person or represented by proxy at the special meeting may adjourn the meeting to another place, date or time. In each case, the abstention from voting will have the same effect as a vote “AGAINST” the proposal.

Under applicable stock exchange rules, all of the proposals in this proxy statement are non-routine matters, so there can be no broker non-votes at the special meeting. A broker non-vote occurs when shares held by a bank, broker, trust or other nominee are represented at a meeting, but the bank, broker, trust or other nominee has not received voting instructions from the beneficial owner and does not have the discretion to direct the voting of the shares on a particular proposal, but has discretionary voting power on other proposals at such meeting. Accordingly, if your shares are held in “street name,” your bank, broker, trust or other nominee will NOT be able to vote your shares of Company common stock on any of the proposals, and your shares will not be counted as present in determining the presence of a quorum, unless you have properly instructed your bank, broker, trust or other nominee on how to vote. Because the proposal to adopt the merger agreement requires the affirmative vote of a majority of the outstanding shares of Company common stock, the failure to provide your bank, broker, trust or other nominee with voting instructions will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement. Because the approval of each of (i) the non-binding compensation advisory proposal and (ii) the proposal to adjourn the special meeting from time to time if necessary or appropriate requires the affirmative vote of a majority of the shares having voting power present in person or represented by proxy at the special meeting, and because your bank, broker, trust or other nominee does not have discretionary authority to vote on either proposal, the failure to provide your bank, broker, trust or other nominee with voting instructions will have no effect on approval of each such proposal.

How to Vote

Stockholders of record have a choice of voting by proxy by completing a proxy card and mailing it in the prepaid envelope provided, by calling a toll-free telephone number or through the Internet. Please refer to your proxy card to see which options are available to you. The telephone and Internet voting facilities for stockholders of record will close at 11:59 p.m. Eastern Time on the day before the special meeting. If your shares are held in “street name,” please refer to the information forwarded by your bank, broker, trust or other nominee to see which voting options are available to you.

If you submit your proxy by mail, by telephone or through the Internet voting procedures, but do not include “FOR,” “AGAINST” or “ABSTAIN” on a proposal to be voted, your shares of Company common stock will be voted in favor of that proposal. If you indicate “ABSTAIN” on a proposal to be voted, it will have the same effect as a vote “AGAINST” that proposal. If you wish to vote by proxy and your shares are held by a bank, broker, trust or other nominee, you must follow the voting instructions provided to you by your bank, broker, trust or other nominee. Unless you give your bank, broker, trust or other nominee instructions on how to vote your shares of Company common stock, your bank, broker, trust or other nominee will NOT be able to vote your shares on any of the proposals.

If you wish to vote in person at the special meeting and your shares are held in the name of a bank, broker or other holder of record, you must obtain a legal proxy, executed in your favor, from the bank, broker or other holder of record authorizing you to vote at the special meeting.

If you do not submit a proxy or otherwise vote your shares of Company common stock in any of the ways described above, it will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement, but will have no effect on approval of the non-binding compensation advisory proposal or the approval of the proposal to adjourn the special meeting from time to time if necessary or appropriate.

If you have any questions about how to vote or direct a vote in respect of your shares of Company common stock, you may contact our proxy solicitor, MacKenzie Partners, toll-free at (800) 322-2885 or (212) 929-5500 (call collect).

 

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YOU SHOULD NOT SEND IN YOUR STOCK CERTIFICATE(S) WITH YOUR PROXY CARD. A letter of transmittal with instructions for the surrender of certificates representing shares of Company common stock will be mailed to those stockholders who hold certificated shares if the merger is completed.

Revocation of Proxies

Any proxy given by a Company stockholder of record may be revoked at any time before it is voted at the special meeting by doing any of the following:

 

   

by submitting another proxy by telephone or through the Internet, in accordance with the instructions on the proxy card;

 

   

by delivering a signed written notice of revocation bearing a date later than the date of the proxy to the Company’s Corporate Secretary at Navigant Consulting, Inc., 150 North Riverside Plaza, Suite 2100, Chicago, Illinois 60606, stating that the proxy is revoked;

 

   

by submitting a later-dated proxy card relating to the same shares of Company common stock; or

 

   

by attending the special meeting and voting in person (your attendance at the special meeting will not, by itself, revoke your proxy; you must vote in person at the special meeting).

“Street name” holders of shares of Company common stock should contact their bank, broker, trust or other nominee to obtain instructions as to how to revoke or change their proxies.

Adjournments and Postponements

Although it is not currently expected, the special meeting may be adjourned or postponed from time to time to a later day or time if necessary or appropriate, including to solicit additional proxies in favor of the proposal to adopt the merger agreement. Your shares will be voted on any adjournment proposal submitted to stockholders in accordance with the instructions indicated in your proxy or, if no instructions were provided, “FOR” the proposal.

If a quorum is present at the special meeting, the special meeting may be adjourned if there is an affirmative vote of shares representing a majority of the voting power of the shares present in person or represented by proxy at the special meeting entitled to vote on such matter. In addition, even if a quorum is not present at the special meeting, either the chairman of the Board or the affirmative vote of shares representing a majority of the voting power of the shares present in person or represented by proxy at the special meeting entitled to vote on such matter may adjourn the meeting to another place, date or time. In either case, the adjourned meeting may take place without further notice other than by an announcement made at the special meeting, unless the adjournment is for more than 30 days or if, after the adjournment, a new record date is fixed for the adjourned meeting, in which case a notice of the adjourned meeting will be given to each stockholder of record entitled to vote at the special meeting. If a quorum is not present at the special meeting, or if a quorum is present at the special meeting but there are insufficient votes at the time of the special meeting to adopt the merger agreement, then the Company may seek to adjourn the special meeting from time to time. In addition, the Board may, after consultation with Parent, postpone the special meeting upon public announcement made prior to the date previously scheduled for the special meeting for the purpose of soliciting additional proxies or as otherwise permitted under the merger agreement.

Solicitation of Proxies

The Company is soliciting the enclosed proxy card on behalf of the Board, and the Company will bear the expenses in connection with the solicitation of proxies. In addition to solicitation by mail, the Company and its directors, officers and employees may solicit proxies in person, by telephone or by electronic means. These persons will not be specifically compensated for doing this.

 

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The Company has retained MacKenzie Partners to assist in the solicitation process. The Company will pay MacKenzie Partners a fee of approximately $25,000 plus reimbursement of certain specified out-of-pocket expenses. The Company also has agreed to indemnify MacKenzie Partners against various liabilities and expenses that relate to, or arise out of, its solicitation of proxies (subject to certain exceptions).

The Company will ask banks, brokers, trusts and other nominees to forward the Company’s proxy solicitation materials to the beneficial owners of shares of Company common stock held of record by such banks, brokers, trusts or other nominees. The Company will reimburse these banks, brokers, trusts or other nominees for their customary clerical and mailing expenses incurred in forwarding the proxy solicitation materials to the beneficial owners.

Stockholder List

A list of Company stockholders entitled to vote at the special meeting will be available for examination by any Company stockholder at the special meeting. At least ten days prior to the date of the special meeting, this stockholder list will be available for inspection by Company stockholders, subject to compliance with applicable provisions of Delaware law, in accordance with Delaware law and the Company’s amended and restated by-laws.

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, MacKenzie Partners, toll-free at (800) 322-2885 or (212) 929-5500 (call collect).

 

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PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT

As discussed elsewhere in this proxy statement, Company stockholders will consider and vote on a proposal to adopt the merger agreement. You should carefully read this proxy statement in its entirety for more detailed information concerning the merger agreement and the merger. In particular, you should read in its entirety the merger agreement, which is attached as Annex A to this proxy statement. In addition, see the sections entitled “The Merger,” beginning on page [●], and “The Agreement and Plan of Merger,” beginning on page [●].

The Board unanimously recommends that Company stockholders vote “FOR” the proposal to adopt the merger agreement.

If you return a properly executed proxy card, but do not indicate instructions on your proxy card, your shares of Company common stock represented by such proxy card will be voted “FOR” the proposal to adopt the merger agreement.

The 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 on such proposal.

 

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PROPOSAL 2: NON-BINDING ADVISORY MERGER-RELATED COMPENSATION PROPOSAL

Under Section 14A of the Exchange Act, which was enacted as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, we are required to provide stockholders the opportunity to vote to approve, on a non-binding advisory basis, the compensation that may be paid or become payable to the Company’s named executive officers that is based on or otherwise relates to the merger, as disclosed in the section entitled “The Merger—Interests of Directors and Executive Officers in the Merger—Golden Parachute Compensation,” beginning on page [●], including the table entitled “Golden Parachute Compensation” and accompanying footnotes. Accordingly, Company stockholders are being provided with the opportunity to cast a non-binding advisory vote on such payments.

As an advisory vote, this proposal is not binding upon the Company or the Board, approval of this proposal is not a condition to completion of the merger, and the merger-related named executive officer compensation subject to this non-binding advisory vote will not be affected by the outcome of this non-binding advisory vote. However, the Company seeks your support and believes that your support is appropriate because the Company has a comprehensive executive compensation program designed to link the compensation of the Company’s executive officers with the Company’s performance and the interests of Company stockholders. Accordingly, we ask that you vote on the following resolution:

“RESOLVED, that the stockholders of Navigant Consulting, Inc. approve, on an advisory, non-binding basis, the compensation that may be paid or become payable to the named executive officers of Navigant Consulting, Inc. that is based on or otherwise relates to the merger, as disclosed pursuant to Item 402(t) of Regulation S-K under the heading “The Merger—Interests of Directors and Executive Officers in the Merger—Golden Parachute Compensation,” beginning on page [●] of its proxy statement (which disclosure includes the Golden Parachute Compensation Table required pursuant to Item 402(t) of Regulation S-K).”

The Board unanimously recommends that Company stockholders vote “FOR” the non-binding advisory merger-related compensation proposal.

If you return a properly executed proxy card, but do not indicate instructions on your proxy card, your shares of Company common stock represented by such proxy card will be voted “FOR” the non-binding advisory merger-related compensation proposal.

The approval of the non-binding advisory merger-related compensation proposal requires the affirmative vote of a majority of the shares having voting power present in person or represented by proxy at the special meeting. The approval of the non-binding advisory merger-related compensation proposal is a vote separate and apart from the vote to approve the proposal to adopt the merger agreement, and does not affect whether the proposal to adopt the merger agreement is approved. The vote is advisory only and, therefore, is not binding on the Company or Parent or any of their respective subsidiaries, and, if the merger agreement is adopted by Company stockholders and the merger is completed, the compensation subject to this non-binding advisory vote will be payable, subject to the terms of the underlying agreements and plans, to the Company’s named executive officers even if this proposal is not approved.

 

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PROPOSAL 3: AUTHORITY TO ADJOURN THE SPECIAL MEETING

The Company may seek to adjourn the special meeting from time to time to a later date or time if necessary or appropriate, including to solicit additional proxies in favor of the proposal to adopt the merger agreement if there are insufficient votes at the time of the special meeting to adopt the merger agreement.

The Board unanimously recommends that stockholders vote “FOR” the proposal to adjourn the special meeting from time to time to a later date or time if necessary or appropriate, including to solicit additional proxies in favor of the proposal to adopt the merger agreement if there are insufficient votes at the time of the special meeting to adopt the merger agreement.

If you return a properly executed proxy card, but do not indicate instructions on your proxy card, your shares of Company common stock represented by such proxy card will be voted “FOR” the proposal to adjourn the special meeting from time to time to a later date or time if necessary or appropriate.

The approval of the proposal to adjourn the special meeting from time to time if necessary or appropriate requires the affirmative vote of a majority of the shares having voting power present in person or represented by proxy at the special meeting. In addition, even if a quorum is not present at the special meeting, either the chairman of the Board or the affirmative vote of a majority of the shares having voting power present in person or represented by proxy at the special meeting may adjourn the meeting to another place, date or time.

 

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THE MERGER

Overview

The Company is seeking the adoption by Company stockholders of the Agreement and Plan of Merger (as may be amended from time to time, the “merger agreement”), by and among the Company, Parent and Sub entered into by the Company on August 2, 2019. Under the terms of the merger agreement, subject to the satisfaction or waiver of specified conditions, Sub will be merged with and into the Company (which we refer to as the “merger”). The Company will continue as the surviving corporation (which we refer to as the “surviving corporation”) and will succeed to and assume all the rights and obligations of Sub and the Company in accordance with the Delaware General Corporation Law (which we refer to as the “DGCL”), and will continue in existence as a wholly-owned subsidiary of Parent. The Board has unanimously approved the merger agreement and unanimously recommends that Company stockholders vote “FOR” the proposal to adopt the merger agreement.

Upon the effective time, each share of Company common stock issued and outstanding immediately prior to the effective time will be cancelled and cease to exist and will be automatically converted into the right to receive $28.00 in cash, without interest thereon (which we refer to as the “merger consideration”), subject to any applicable withholding taxes, other than (i) shares of Company common stock that are held in the treasury of the Company or owned of record by the Company or any subsidiary of the Company, (ii) shares owned of record by Parent, Sub or any of their respective subsidiaries, and (iii) shares of Company common stock held by stockholders who have not voted in favor of, or consented to the adoption of, the merger agreement and who have properly demanded appraisal of such shares and complied in all respects with all the provisions of the DGCL concerning the right of holders of shares to require appraisal of their shares.

Following the completion of the merger, the Company will cease to be a publicly traded company.

Background of the Merger

The Board frequently reviews potential financial and strategic alternatives to enhance stockholder value. Over the years, the Board has considered acquisitions, leveraged recapitalizations, the sale or other separation of one or more business units or segments, business combinations and the sale of the Company. In late 2017, the Board authorized the exploration of the sale of the Disputes, Forensics and Legal Technology segment and the Transaction Advisory Services business (collectively, “DFLT”). During the first half of 2018, the Company conducted an auction for the DFLT business that resulted in the ultimate sale of the DFLT business which was consummated on August 24, 2018. During the course of the auction process for the DFLT business, a private equity firm (not Veritas (as defined below)) involved in the DFLT auction process indicated that it might be interested in exploring an acquisition of the entire Company following the completion of the sale of the DFLT business. Management of the Company informed the Board of this indication from such private equity firm.

In January of 2018, Veritas Capital Fund Management, L.L.C. (which we refer to as “Veritas”) contacted the Company to inquire about the Company’s interest in exploring a sale of the Company to an affiliate of Veritas. On February 1, 2018, Ms. Julie Howard, Chair and Chief Executive Officer of the Company, and Mr. Stephen Lieberman, Executive Vice President and Chief Financial Officer of the Company, met with representatives of Veritas in response to a request from Veritas for a meeting. Ms. Howard informed Veritas that she would inform the Board of Veritas’ inquiry. At the February 2, 2018 meeting of the Board, Ms. Howard informed the Board of the discussions with Veritas. Following discussion, the Board determined that the Company should continue to focus on the potential disposition of the DFLT business and not pursue a sale of the Company. Ms. Howard informed Veritas of the Board’s decision, noting that the Company was currently focused on exploring a sale of its DFLT business and that Veritas was welcome to participate in that sale process. On February 15, 2018, Veritas and the Company signed a confidentiality agreement relating to exploring the potential sale of the DFLT business and, if the Company invited Veritas to do so, the acquisition of the Company by an affiliate of Veritas or one of its affiliates. The Company did not invite Veritas to make any proposal regarding an acquisition of the Company in 2018.

 

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In February of 2018, a strategic party referred to as “Party A” contacted Ms. Howard regarding the Company’s interest in exploring potential strategic opportunities with Party A. During the Board’s February 16, 2018 meeting, Ms. Howard informed the Board of the outreach from Party A and discussed potential next steps with respect to Party A. Following discussion, the Board determined that the Company should continue to focus on the potential disposition of the DFLT business and not pursue a sale of the Company but would allow discussions with Party A to see if there were other potential strategic opportunities. On March 30, 2018, the Company and Party A signed a mutual confidentiality agreement to facilitate discussions regarding potential strategic opportunities. The confidentiality agreement contained a “standstill” agreement with a “fall away” provision allowing a party to make private proposals to the other party following the time such other party entered into a definitive agreement for a change of control or similar transaction. From time to time, the Company and Party A held discussions regarding potential strategic opportunities but they did not advance in any meaningful way in 2018.

During the Board’s April 23, 2018 meeting, the Board and members of senior management, together with representatives of Jefferies, which had been invited to attend the meeting, discussed potential strategic alternatives the Board could explore following the sale of the DFLT business.

In May of 2018, another industry participant referred to as “Party B” contacted Ms. Howard to see if she would be interested in meeting with the Chief Executive Officer of Party B to discuss potential strategic opportunities. On June 7, 2018, Ms. Howard met with the Chief Executive Officer and another representative of Party B. At the meeting the Party B representatives gave an overview of Party B’s business. The parties held further discussions on August 22 and September 26, 2018 during which discussions Party B suggested it may be interested in exploring strategic opportunities with the Company but the parties did not exchange any confidential information or discuss the specifics of any potential strategic opportunities.

On August 10, 2018, Ms. Howard met with the Chief Executive Officer of another industry participant referred to as “Party C” at Party C’s request. During the meeting, Party C expressed interest in exploring a potential business combination with the Company. Ms. Howard noted that the Company was focused on closing the sale of the DFLT business but she would relay Party C’s interest to the Board at the appropriate time. On September 27, 2018, Party C contacted Ms. Howard to reiterate its interest in engaging in exploratory discussions.

On September 28, 2018, the Board held a special meeting. Senior management also participated in the meeting. Ms. Howard and other members of senior management reviewed with the Board the Company’s current competitive landscape and discussed possible strategic opportunities the Company could pursue, including potential growth opportunities. During this discussion, Ms. Howard described for the Board the recent communications with Party B, Party C and a participant in a different industry (referred to as “Party D”) regarding potential strategic opportunities. The Board discussed the potential strategic rationale for a transaction with each of the parties, including the fact that Party D was in a business that did not appear to have a compelling strategic fit with the Company. Ms. Howard recommended that the Company have exploratory conversations with Party B and Party C regarding potential strategic opportunities. Following discussion, the Board concurred with Ms. Howard’s recommendation and authorized the Company to have exploratory discussions with Party B and Party C regarding potential strategic opportunities and at the same time to continue to explore strategic growth opportunities for the Company.

On October 12, 2018, the Company and Party B entered into a confidentiality agreement in order to facilitate the exchange of information. Over the course of the fall and November 2018, the Company and Party B had discussions and exchanged information from time to time regarding a potential business combination. In early December 2018, Party B informed the Company that while Party B remained interested in exploring a potential transaction with the Company, Party B was focused on other matters at that time and would likely not engage further with the Company until sometime in 2019. On October 9, 2018, the Company and Party C entered into a confidentiality agreement in order to facilitate the exchange of information. Over the course of the fall and

 

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early 2019, the Company and Party C had discussions and exchanged information from time to time regarding a potential business combination.

During the executive session of the Board’s October 14, 2018 meeting, Ms. Howard discussed with the Board the interest expressed by the leader of the Financial Services Advisory and Compliance segment (“FSAC”) in exploring a potential sale of FSAC. The Board discussed the Company’s strategic plan and FSAC’s role in that plan. Following discussion, the Board determined that it did not believe the exploration of a sale of FSAC was in the best interest of the stockholders of the Company.

On December 14, 2018, the Board held a regularly scheduled meeting. Members of senior management as well as Sidley Austin LLP, counsel to the Company (which we refer to as “Sidley”), were present for portions of the meeting. During the meeting, Ms. Howard informed the Board that a private equity sponsor had inquired about the Company’s interest in selling FSAC. Ms. Howard noted that, consistent with the Board’s prior discussions, she informed the private equity sponsor that the Company was not interested in selling FSAC in a stand-alone transaction. Ms. Howard also updated the Board on the discussions that had occurred since the last Board meeting with Party B and Party C. Ms. Howard stated it was management’s recommendation that the Company engage Jefferies to assist the Company with evaluating whether to explore potential strategic alternatives, including a potential sale of the Company or a business combination. Following discussion, the Board authorized management to engage Jefferies to assist the Company in such matters. The Company selected Jefferies as its financial advisor because of, among other things, Jefferies’ reputation, experience and familiarity with the Company and its business.

Over the course of the next several months, the Company continued to have discussions with Party C regarding a potential business combination. In January of 2019, the Chief Executive Officer of Party D contacted Ms. Howard to discuss strategic possibilities. During the discussion, each of them provided the other with a general overview of their respective businesses. Party D did not make a proposal and did not contact Ms. Howard again.

On February 12, 2019, the Board held a regularly scheduled meeting. In attendance for a portion of the meeting were members of senior management and representatives of Sidley and Jefferies. During the meeting, senior management reviewed with the Board the Company’s potential acquisition pipeline, noting that the Company was having difficulty recently acquiring attractive acquisition targets at appropriate valuations because of increased competition. Sidley discussed with the Board the directors’ fiduciary duties in considering strategic alternatives. Senior management reviewed with the Board the five-year projections for the Company prepared by management (such projections are summarized under “—Forward-Looking Financial Information” beginning on page [●] as the “February financial projections”). In response to questions from the Board, senior management noted that while the estimates for 2019 in the February financial projections were risk adjusted, the remainder of the projection years were not and that in senior management’s view there were more risks during the projection period than upside opportunities. Following discussions, the Board accepted the February financial projections. Jefferies and senior management reviewed with the Board the state of the market and industry, certain financial perspectives with respect to the Company and various potential strategic alternatives that the Company could evaluate, including a leveraged recapitalization or share repurchase, a transformative acquisition, a potential business combination, a sale of the Company or remaining as a stand-alone company and executing the Company’s strategic operating plan. As part of the review, Jefferies and senior management discussed with the Board potential counterparties for a business combination or sale of the Company, including those parties that contacted the Company in 2018 (as described above), and a potential process to solicit interest with respect to such a strategic transaction. The Board, senior management and the Company’s advisors discussed the potential strategic alternatives and various financial perspectives. Following discussion, the Board authorized senior management and the Company’s advisors to solicit interest from the counterparties reviewed with the Board that the Board and senior management believed were likely to be interested in engaging in a potential strategic transaction with the Company at an attractive valuation (such group of potential counterparties included industry participants, other strategic companies as well as private equity firms). Given its lack of strategic fit with the

 

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Company and size relative to the Company, as discussed with the Board in September of 2018, Party D was not discussed as a realistic possibility for a combination or other strategic transaction. The Board authorized senior management to expand the list to include other potentially interested parties that senior management believed would be appropriate. The Board also reviewed disclosure provided by Jefferies as to its material investment banking relationships with each of the potential counterparties discussed with the Board. Following discussion, the Board concluded that none of the disclosures caused the Board to believe that Jefferies would not be able to provide independent advice to the Company. The Board instructed the executive officers of the Company not to engage in any discussions with any counterparty regarding such officer’s potential post-closing employment with any potential counterparty.

Over the course of the next month, management, with the assistance of the Company’s advisors, made preparations for a potential process to solicit interest from the potential counterparties reviewed with the Board during the February 12, 2019 Board meeting. Senior management also reviewed whether it should suggest any additional parties to be contacted. From time to time during the months of March and April of 2019, senior management, as authorized by the Board, instructed Jefferies to contact additional potential parties to determine whether such parties were interested in exploring a strategic transaction with the Company. Jefferies continued to provide material investment banking relationships disclosures with respect to such additional potential parties and in each case the Board determined that none of the disclosures caused the Board to believe that Jefferies would not be able to provide independent advice to the Company.

On March 15, 2019, the Board held a special meeting to discuss the potential exploration process. Members of senior management and representatives of Sidley and Jefferies also participated in the meeting. The Board discussed with senior management the decline in the Company’s share price since the Company announced 2019 guidance in February, which guidance was 16% lower on an Adjusted EBITDA basis from the preliminary 2019 outlook the Company provided in August of 2018. Following discussion, the Board concluded that the Company should continue to make preparations for and should commence the exploration process.

During the months of March and April of 2019, consistent with the authorizations from the Board and with the direction of senior management, Jefferies contacted 27 parties on behalf of the Company, consisting of 12 industry participants or other operating companies and 15 private equity firms (including Sponsor, Party A, Party B, Party C and the private equity firm that expressed an interest in exploring an acquisition of the Company as part of the DFLT auction process), to determine whether they were interested in pursuing a strategic transaction with the Company. Of the 27 parties contacted, 18 entered into confidentiality agreements with the Company, (including Veritas), Party A, Party B (which replaced the previous agreement with Party B) and Party C (which replaced the previous agreement with Party C)). The confidentiality agreements included (a) customary confidentiality and non-use provisions, (b) a provision prohibiting the counterparty from (i) engaging financing sources without the Company’s consent or (ii) engaging a co-bidder, (c) a customary “standstill” provision, which provision, in addition to allowing the counterparty to make proposals to the Company with respect to a negotiated transaction, contained a “fall away” term that would permit the counterparty to make private proposals to the Company at any time after the Company entered into a definitive agreement to consummate a change of control transaction and (d) a provision requiring the Company’s consent prior to engaging in any discussions with any employee of the Company (including senior management) regarding post-closing employment with the counterparty.

On March 20, 2019, the Board held a regularly scheduled meeting. During the meeting senior management updated the Board on the status of the exploration process.

Also during March and April of 2019, 15 of the 18 parties that signed confidentiality agreements, held preliminary meetings with members of senior management of the Company at which senior management of the Company provided an overview of the Company’s business. The other three potential counterparties subsequently indicated that they were not interested in pursuing a strategic transaction with the Company. During April, Veritas indicated that it would be pursuing the opportunity through Parent, a portfolio company of funds managed by Veritas. Accordingly, the Company and Parent executed a confidentiality agreement.

 

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On April 9, 2019, the Board held a special meeting. Present for all or portions of the meeting were members of senior management, Sidley and Jefferies. Senior management reviewed with the Board the Company’s results for the first quarter of 2019 and compared them to the February financial projections. In particular, senior management noted that FSAC had performed below expectations and that the Healthcare segment had performed above expectations reflected in the February financial projections, more than offsetting the underperformance of FSAC. Senior management also reviewed with the Board an updated five-year plan for the Company reflecting the results of the first quarter of 2019 and senior management’s expectations for the remainder of the projection period given the changes in business mix of the Company, among other things. As part of the review, senior management described the major changes in assumptions and the impact of those changes on the projections. Following discussion, the Board accepted the updated five-year plan (such projections are summarized under “—Forward-Looking Financial Information” beginning on page [●] as the “April financial projections”) and authorized providing these projections to the potential counterparties. Jefferies updated the Board on the exploration process to date, including the rationale stated by each party that elected not to continue in the process for its decision, and potential next steps in the process. Following discussion, the Board authorized management and the Company’s advisors to continue the exploration process.

Following the April 9, 2019 Board meeting and throughout the remainder of April, the Company made financial, business, legal and other due diligence information available to the potential counterparties remaining in the process. In addition, management of the Company held due diligence meetings with the remaining counterparties.

On April 17 and 18, 2019, the Board held a regularly scheduled meeting. During the meeting senior management updated the Board on the status of the exploration process.

In late April, in accordance with the Board’s directives, Jefferies distributed to each of the 10 potential counterparties remaining in the process at that point the Company’s bid instruction letter directing each of such potential counterparties to submit a preliminary non-binding indication of interest to the Company no later than April 30, 2019 and informing them that potential counterparties that were selected by the Company to proceed to the next round (if any) would receive more detailed management presentations.

Between April 30 and May 2, 2019, Party A, Party C and Parent each submitted a non-binding indication of interest.

 

   

Party A’s indication of interest proposed to acquire the Company in an all-cash transaction at a price of $27.50 per share. Party A’s proposal indicated any definitive agreement would be subject to customary regulatory approvals and closing conditions but would not include any financing contingency, and that Party A expected to finance the potential transaction with available cash, unutilized lines of credit and new debt financing.

 

   

Party C’s indication of interest proposed a stock-for-stock transaction with a fixed exchange ratio set at the market prices with no premium. Party C indicated it believed based on preliminary due diligence that the combined company of Party C and the Company could achieve cost synergies, which, when capitalized could result in as much as $4.50 per share in nominal value to the former holders of Company common stock. Party C noted there may also be revenue synergies. Party C’s proposal indicated the definitive agreement would be subject to customary closing conditions, including approval of Party C’s stockholders. Party C’s proposal indicated that Party C would be willing to provide the Company due diligence on Party C at the appropriate time but only after the Company and Party C entered into an exclusivity agreement. Party C also stated its proposal was conditioned on its Chief Executive Officer and its Chairman continuing in those respective roles for the combined company.

 

   

Parent’s indication of interest proposed to acquire the Company in an all-cash transaction at a price of $27.00 per share. Parent indicated its proposal was not subject to any financing condition and it would have debt and equity commitments in place at the time of signing any definitive agreements.

 

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Each of the other remaining potential counterparties indicated that such party did not intend to submit an indication of interest or proceed in the process.

On May 3, 2019, the Board held a special meeting. Also present for all or portions of the meeting were members of senior management and representatives of Sidley and Jefferies. Sidley reviewed with the Board the fiduciary duties of the directors in considering transactions of the types proposed in the indications of interest. Jefferies updated the Board on the process and discussions to date with the potential counterparties, including the rationale stated by each party that elected not to submit an indication of interest or continue in the process for its decision, each of the indications of interest that had been received and preliminary financial perspectives regarding the Company and such indications of interest. The Board discussed with senior management and the Company’s advisors certain considerations related to each indication of interest, whether to continue the exploration process and potential next steps. Following discussion, the Board determined that the Company should continue the exploration process and permit each of Party A, Party C and Parent to continue in the process. The Board, senior management and the Company’s advisors then discussed potential messaging to each of the potential counterparties. It was discussed that, given the nature of Party C’s proposal, it would be important for the Company to conduct due diligence on Party C to assess both its views of the value of Party C and the likelihood of the achievability of the potential synergies.

Following the meeting, on May 3, 2019, in accordance with the Board’s directives, Jefferies informed each of Party A, Party C and Parent that the Board had determined to continue with the process and to include such party in the next round, that none of the potential counterparties had distinguished its bid from the bids of the others in the process and that each such potential counterparty would need to improve its proposal in the next round.

Later in May of 2019, the Company held management presentations with each of Party A, Party C and Parent, during which members of senior management of the Company and the leaders the Company’s Healthcare, FSAC and Energy segments discussed the Company, its business and prospects. In addition, throughout the months of May, June and early July, the Company provided additional due diligence materials to each of the remaining potential counterparties and participated in additional due diligence calls with each of them. From time to time during May and the first half of June, Party C was informed that, in order for Party C to be competitive, the Board would need to understand the value of Party C’s proposal and therefore would need Party C’s projections and access to due diligence information.

On June 4, 2019, the Board held a special meeting. Also present for all or portions of the meeting were members of senior management and representatives of Sidley and Jefferies. At this meeting, the Board was updated on the status of discussions with each of the potential counterparties and discussed potential next steps and timing, including sending a bid instruction letter to each of the potential counterparties requiring each to submit a final proposal during the first half of July. Following discussion, the Board authorized management and the Company’s advisors to continue with the process as outlined during the meeting.

On June 6, 2019, consistent with the Board’s instructions, Jefferies distributed to each of the potential counterparties the Company’s bid instruction letter directing each of them to submit a final, binding written proposal and final proposed markups of the draft transaction agreements no later than July 9, 2019. The instruction letter also directed each of the potential counterparties to submit preliminary markups of the auction forms of transaction agreements by June 28, 2019 to permit time for negotiation in advance of the final bid deadline.

On June 14, 2019, the Board held a special meeting. Also present for all or portions of the meeting were members of senior management and representatives of Sidley and Jefferies. Ms. Howard updated the Board on key discussions with each of the three potential counterparties since the Board’s last meeting. Ms. Howard noted that Party C, which was proposing a stock-for-stock transaction and previously had indicated it would not provide the Company access to due diligence regarding Party C until the Company signed an exclusivity

 

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agreement, had now agreed to provide the Company with due diligence information. Sidley then reviewed with the Board the key terms of the proposed auction forms of the transaction agreements. The Board, senior management and the Company’s advisors discussed positions to take on the key terms.

On June 17, 2019, the auction forms of the transaction agreements were distributed to the remaining counterparties with terms consistent with the discussions with the Board.

On June 20, 2019, Party C provided the Company with Party C’s five-year projections.

On June 25, 2019, Party C provided the Company with Party C’s support for its synergies estimates.

During the second half of June, each of Party C and Parent contacted Ms. Howard and inquired whether she would be interested in serving on the board of directors of the applicable party post-closing. Neither Party C nor Parent proposed any terms, including compensation, relating to Ms. Howard’s potential service on its board. Ms. Howard informed each of them that she would need to discuss with the Board. The Chief Executive Officer of Party A and Ms. Howard also engaged in a discussion during this timeframe regarding leadership of each of the Company’s segments following a potential transaction with Party A and the possibility of Ms. Howard joining Party A’s board of directors. No terms of such potential service, including compensation, were discussed.

On June 28, 2019, Party A indicated that it would not submit its markup of the auction forms of the transaction agreements until approximately July 2, 2019, following its upcoming meeting of its board of directors.

Also on June 28, 2019, each of Party C and Parent submitted markups of the auction forms of the transaction agreements.

On July 1, 2019, the Board held a special meeting. Also present for all or portions of the meeting were members of senior management and representatives of Sidley and Jefferies. Senior management then updated the Board on the discussions with each of the remaining counterparties. It was noted that the Company had received markups of the transaction documents from Party C and Parent and that Party A had indicated that it would not submit its markup of the transaction documents until approximately July 2, 2019, following its upcoming meeting of its board of directors. Sidley then discussed with the Board the key issues in Party C’s and Parent’s respective markups of the transaction documents. The Board, senior management and the Company’s advisors discussed potential counterproposals and next steps. As part of the discussion of next steps, Ms. Howard noted that the Company’s due diligence on Party C was moving slowly because Party C was initially unwilling to provide due diligence materials without an exclusivity agreement and then had been slower than the Company anticipated to provide the information once Party C conceded that it would provide due diligence information without an exclusivity agreement. The Board then went into executive session with Ms. Howard. During the executive session, Ms. Howard informed the Board of the discussion with each of the three potential counterparties regarding the possibility of Ms. Howard joining such party’s board of directors following completion of a potential transaction. The Board discussed the matter and determined it would discuss the matter further at a later meeting with counsel.

Over the course of the next several days, Sidley engaged in negotiations with counsel to Party C and Schulte Roth & Zabel LLP (which we refer to as “SRZ”), counsel to Sponsor, Veritas and Parent, regarding their respective markups of the transaction documents. In addition, in accordance with the Board’s instructions, representatives of Jefferies spoke with representatives of each of Parent and Party C and reiterated that the process remained competitive and the respective party would need to improve the attractiveness of its proposal if it wished to be successful. In the case of Party C, as instructed, Jefferies also noted that Party C should consider how to provide additional value certainty given the form of consideration it was proposing and to consider potential changes to the mix of consideration.

 

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Also during early July, Ms. Howard had conversations with each of the potential counterparties during which she reiterated to each that it would need to improve its proposal if it wished to be successful, including in the case of Party C, by providing additional value certainty given the form of consideration it was proposing.

On July 3, 2019, the Chief Executive Officer of Party A contacted Ms. Howard to inform her that Party A’s board of directors had determined not to continue to pursue an acquisition of the Company. Party A’s CEO stated that recent events, including macroeconomic factors that Party A’s board of directors believed could be signs that suggested an increased possibility of a recession, caused Party A’s board of directors to determine that it was not the right time to pursue an acquisition of this nature.

On July 4, 2019, Sidley distributed revised drafts of the merger agreement to each of SRZ and counsel to Party C, reflecting their respective negotiations.

On July 8, 2019, the Board held a meeting of the independent directors. Also present were representatives of Sidley. Sidley reviewed with the Board the fiduciary duties of directors in connection with evaluating transactions of the types being considered, including duties as it related to addressing potential conflicts of interest. The Board and Sidley discussed the fact that each of the remaining potential counterparties had requested Ms. Howard consider serving as a member of its board of directors. Following discussion, the Board determined that if the potential invitation was something Ms. Howard was interested in considering, the Board would need additional information to determine whether it would need to take any actions to address the matter. As of the date of this proxy statement, Ms. Howard has indicated she has not determined whether she is interested in being a member of the board of directors of Parent and she has not had any discussions with Veritas or Parent regarding potential terms of her serving as a director of Parent.

Over the course of the day on July 9, 2019, Parent had several conversations with Jefferies regarding its proposal. During these conversations, Parent initially indicated it was considering proposing a price lower than the $27.00 per share of Company common stock proposed in its May 2, 2019 indication of interest and then subsequently stated it was considering remaining at $27.00 per share.

On July 9, 2019, each of Party C and Parent submitted final proposals.

Parent’s proposal:

 

   

Provided for a price of $27.50 per share.

 

   

Stated that a condition to Parent signing a definitive agreement was having in place employment agreements with roughly 40 employees of the Company (none of whom are executive officers of the Company) that would also provide for retention payments and equity ownership in Parent. Parent’s proposal noted that the arrangements for these individuals, the three segment leaders and certain other key employees amounted to approximately $40 million.

 

   

Provided a debt commitment letter in an aggregate amount of $840 million and an equity commitment letter from Sponsor of $320 million.

 

   

Stated that it was requesting a 10 business day exclusivity period to facilitate completion of due diligence and finalize definitive agreements.

Party C’s proposal:

 

   

Provided for a no premium stock-for-stock transaction with a fixed exchange ratio priced based on a 30-day volume weighted average trading price prior to signing.

 

   

Stated that Party C believed that the combined company could achieve cost synergies that, when capitalized under various analyses could result in as much of $7.00 of value to the Company’s stockholders per share. Party C indicated it also believed potential revenue synergies could be achieved but did not quantify such potential revenue synergies.

 

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Noted that it expected the combined company’s board to be made up of a majority of directors of Party C and that the combined company’s board would also include a number of the Company’s directors equal to the ownership percentage of the combined company held by the Company’s former stockholders. Party C stated it expected Ms. Howard to be one of those directors.

 

   

Indicated it was conditioned on Party C’s Chief Executive Officer and its Chairman continuing in those respective roles for the combined company.

 

   

Stated that it was requesting an executed exclusivity agreement prior to providing the Company additional commercially sensitive information.

On July 11, 2019 the Board held a special meeting. Also present for all or portions of the meeting were members of senior management and representatives of Sidley and Jefferies. Sidley reviewed with the Board updated disclosure from Jefferies regarding its material investment banking relationships with Sponsor, Parent and Party C. Following discussion, the Board determined that none of the disclosures caused the Board to believe that Jefferies would not be able to render independent advice to the Company. Senior management reviewed with the Board the Company’s preliminary financial results for the second quarter of 2019 and senior management’s preliminary updated forecast for the remainder of 2019, noting that the Healthcare segment continued to perform in the second quarter better than senior management had previously forecasted and FSAC continued to perform in the second quarter of 2019 below senior management’s previous forecast. It was also noted that the updated preliminary forecast for the remainder of 2019 had been provided to each of Party C and Parent prior to the submission of each such party’s July 9 proposals. Senior management also reviewed with the Board the updated preliminary forecast for the remainder of 2019 relative to the 2019 forecast included in the April financial projections, comparing the assumptions in each forecast. Throughout the review, the Board asked a number of questions which management answered. The Board and management discussed whether to update the remainder of the April financial projections beyond 2019. Management stated that it did not recommend changing the consolidated results of the April financial projections beyond the changes to 2019 contemplated in the updated preliminary forecast for 2019 because some of the drivers of the Company’s actual and forecasted improved performance in 2019 were not expected to continue beyond 2019 or were uncertain as to whether they would continue beyond 2019. It was noted that the years 2020 through 2023 were not risk adjusted and did not reflect the possibility of a recession. Senior management confirmed that the remainder of the April financial projections for years 2020 through 2023 continued to represent management’s best estimates of the results for the consolidated Company during that period. Following discussion, the Board accepted senior management’s recommendation not to update the April financial projections beyond the changes to 2019 contemplated in the updated preliminary forecast for the remainder of 2019.

Ms. Howard then informed the Board that Party A had determined not to continue in the process given recent events, including macroeconomic factors that Party A’s board of directors believed could be signs that suggested an increased possibility of a recession. Ms. Howard noted that Parent had now turned its focus to employee retention and in particular transaction agreement arrangements with each of the Company’s three segment leaders. Ms. Howard noted that Party C had not provided the Company sufficient due diligence information. Senior management and Jefferies reviewed each of the proposals with the Board. Jefferies described to the Board the discussions with Parent on July 9 regarding its positioning on price. Jefferies reviewed with the Board preliminary financial perspectives with respect to the Company and each of the proposals. The Board asked a number of questions, including regarding the Company’s historical performance and its outlook, which were discussed and answered. In reviewing Party C’s proposal, management reviewed its due diligence findings to date and its estimates of the potential synergies. Jefferies noted that the estimates of the Company’s management of overall annual synergies would suggest a nominal value, when capitalized, of between approximately $4.61 per share of Company common stock (at the low end of the estimate range) and approximately $5.96 per share of Company common stock (at the high end of the estimate range), exclusive of costs to achieve these synergies. Sidley reviewed with the Board the key open issues in each of Party C’s and Parent’s markups of the transaction agreements. The Board, senior management and the Company’s advisors further discussed the Company’s potential strategic alternatives as well as each of the proposals. In discussing the

 

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proposals, the Board considered, among other things, the certainty of value delivered by an all-cash offer compared to a stock-for-stock proposal, noting that the value of the stock-for-stock proposal would depend in large part on how the combined company performed and its ability to achieve the synergies. The Board and senior management discussed execution risk with respect to the performance of the combined company and the achievement of potential synergies, including the cost to achieve those synergies. The Board and senior management also discussed the fact that Party C had not yet provided sufficient financial and business due diligence information and did not provide certain critical information, including its five-year projections, until recently and that, as a result, significant work remained to be completed before the Company could confirm that a transaction with Party C would result in the value that Party C suggested. They also noted that the preliminary review by the Company’s management of Party C’s synergies estimates suggested synergies significantly lower than those stated by Party C. Following discussion, Ms. Howard stated it was management’s recommendation that the Board authorize Jefferies to inform each of Party C and Parent that it needed to improve its proposal if it wished to be successful. In response to questions from the Board, Jefferies indicated that, although Parent had stated that it was “stretched on value,” Jefferies believed that pressing Parent to increase its valuation would not cause Parent to walk away from the process.

It was also noted that each of Party C and Parent had indicated that it would be a condition to such party signing a definitive agreement that the transaction retention agreements with the Company entered into with each of the segment leaders prior to initiating the exploration process be revised so that some of the retention and other payments were taken in the form of equity. The Board, senior management and the Company’s advisors discussed the segment leader transaction retention agreements, noting that in determining to review strategic alternatives the Board and senior management had concluded at the outset of the exploration process that it was likely critical to the success of any transaction of the nature being considered that the segment leaders be supportive of the transaction and, as a result, the Board, having considered the terms of the transaction retention agreements, authorized senior management to negotiate and have the Company enter into such agreements with the segment leaders.

The Board then went into executive session with Ms. Howard to consider whether to continue to proceed with the exploration process and, if so, what next steps should be taken. The Board discussed the potential strategic alternatives available to the Company, including continuing as a stand-alone company and executing on the Company’s long-term strategic plan. The Board considered, among other things, the Company’s recent difficulty in acquiring attractive businesses at appropriate valuations given increased competition, the Company’s five-year plan, including the fact that the years 2020 through 2023 were not risk adjusted and did not contemplate a recession, and the Company’s performance in the last recession and the volatile nature of the management consulting industry. The Board also discussed the proposals relative to the Company’s historical trading prices, including its three-year average of $21.75 per share and its five-year average of $19.08 per share. Following discussion, the Board authorized Jefferies to seek higher valuations and improved terms from each of Party C and Parent.

Later on July 11, 2019, in accordance with the Board’s directives, Jefferies contacted Parent and informed Parent that the process remained competitive, that Parent would need to increase its proposal to be successful and that it should submit its best and final offer. Consistent with such directives, Jefferies also contacted Party C and informed Party C that the process continued to remain competitive and that its proposal of an all-stock transaction at no premium was not viewed by the Board as attractive relative to other options the Board was considering and, as a result, Party C would need to improve its proposal and should consider not only premium but mix of consideration, certainty of value and other elements of its proposal. Each party was informed that the Board intended to meet again in the afternoon of July 12, 2019 and that if such party wanted the Board to consider a revised proposal, such party would need to provide it before that time.

Representatives of Party C thereafter indicated that Party C would not be able to assemble Party C’s board to discuss a revised proposal before the Board’s next meeting but might be able to do so sometime between that coming weekend and early the week of July 15 and that, if this timing was not acceptable, the Company should consider Party C’s current proposal as its final proposal.

 

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Representatives of Parent communicated to Jefferies that Parent would be submitting a revised proposal at $28.00 per share in cash and that such revised proposal represented Parent’s best and final offer. The representatives of Sponsor also expressed an urgency to move quickly and that they would only proceed if the Company were to agree to exclusivity with Parent.

Later on the evening of July 11, 2019, Parent submitted its revised proposal at $28.00 per share of Company common stock.

On July 12, 2019, the Board held a special meeting. Members of senior management and representatives of Sidley and Jefferies also attended the meeting. Jefferies updated the Board on the discussions that Jefferies had with each of Parent and Party C. Jefferies then reviewed with the Board updated preliminary financial perspectives on the Company and sensitivities based on the Company’s historical performance relative to prior forecasts. The Board, senior management and the Company’s advisors then discussed next steps. The Board asked Jefferies whether Jefferies believed, based on its discussions with Party C, that Party C was likely to meaningfully improve its proposal. Jefferies noted that, during the course of its discussions with Party C, Party C had not indicated a willingness to change its current structure and position. In connection with the Board’s discussions regarding Sponsor’s proposal, Jefferies noted that Parent had stated that Parent’s $28.00 per share proposal was its best and final offer and that it would not proceed without the Company entering into exclusivity. In response to questions from the Board, Jefferies stated that, based on its discussions with Parent, Jefferies believed that Parent’s position was firm in this regard. The Board, senior management and the Company’s advisors discussed each proposal, including (a) the fact that Party C’s proposal provided significantly less certainty of value and immediate value relative to the Parent’s proposal, (b) the fact that Party C’s proposal did not offer a premium but instead depended on the combined company achieving potential synergies, (c) the additional execution risk in Party C’s proposal, both in the near and long term, (d) the state of the reverse due diligence on Party C given Party C’s timing in providing requested information to the Company and (e) the Board’s views on the likelihood of either party further modifying its proposals. The Board also considered the other strategic alternatives available to the Company, including operating as a stand-alone company. Following discussion, the Board unanimously determined to enter into exclusivity with Parent.

Later on July 12, 2019, in accordance with the Board’s directives, Jefferies informed representatives of each of Party C and Parent of the Board’s decision.

On July 13, 2019, the Company and Parent entered into an exclusivity agreement providing that the Company would not engage in discussions with other parties until the earliest of (a) the time at which Parent proposed a price less than $28.00 per share, (b) 11:59 pm on July 26, 2019 and (c) the entry into a definitive agreement to effect the potential transaction.

Over the course of the next two weeks, the parties worked to finalize the transaction. SRZ and Sidley continued to negotiate the transaction documents, Parent worked to complete its remaining due diligence, including customer due diligence and Parent worked to refine its retention proposals for key employees of the Company.

On July 23, 2019, the Board held a regularly scheduled meeting. Members of senior management and representatives of Sidley participated for all or portions of the meeting. Senior management reviewed with the Board slight modifications to the Company’s preliminary financial results for the second quarter of 2019 and the preliminary forecast for the remainder of 2019 presented at the July 11, 2019 Board meeting. Following discussion, the Board accepted such modifications. The April financial projections with such update for 2019 are summarized under “—Forward-Looking Financial Information” beginning on page [●] as the “final financial projections”). Sidley reviewed with the Board the key open issues in the transaction documents and the Board, senior management and Sidley discussed potential resolutions to such issues. Ms. Howard noted that (a) it was anticipated that senior management of the Company, together with Veritas and Parent, would be informing approximately 33 key business leaders at the Company later in the week of the potential transaction and Parent’s

 

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request that each of such employees sign an employment agreement concurrently with or prior to the execution of the merger agreement and (b) Parent was requesting an extension to exclusivity through August 2, 2019. The Board indicated that if the key open issues were resolved in a manner consistent with the Board’s earlier discussions, the Company was authorized to extend exclusivity. The Board also noted the importance of resolving key issues prior to Veritas and Parent meeting with the key business leaders.

Over the next two days, senior management of the Company and Sidley negotiated with representatives of Parent and SRZ to resolve the key issues discussed with the Board. Following resolution of such contract terms consistent with the discussion with the Board, on July 25, 2019, the Company entered into an exclusivity extension to August 2, 2019, subject to the same early termination provisions as provided in the prior exclusivity agreement.

During the period from July 25, 2019 to August 2, 2019, the parties worked to finalize the merger agreement, debt and equity commitment letters and the limited guarantee. In addition, Veritas and Parent worked with the segment leaders to modify the segment leader transaction retention agreements and worked with the other key business leaders to finalize their employment agreements and related agreements.

On July 30, 2019, the Board held a special meeting. Members of senior management and representatives of Sidley and Jefferies also participated in the meeting. Sidley reviewed with the Board the fiduciary duties of directors in considering the potential transaction. Senior management then reviewed with the Board the preliminary perspectives on the Company’s performance in July. Ms. Howard then reviewed with the Board the status of the negotiations with Parent, noting the few issues that remained to be resolved. Jefferies reviewed its preliminary financial analysis of the proposed merger consideration. Sidley then reviewed with the Board the key terms of the transaction documents. The Board, senior management and the Company’s advisors discussed the various factors that the Board had considered and weighed throughout the process. In response to questions, Ms. Howard indicated that there had not been any further developments regarding whether she would consider joining Parent’s board of directors following closing and noted that neither Veritas nor Parent had indicated what compensation or other arrangements might be involved. The Board then discussed next steps and timeline to finalizing the transaction documents.

On July 31, 2019, the Board held a special meeting. Members of senior management and representatives of Sidley and Jefferies also participated in the meeting. Ms. Howard updated the Board on the issues that remained to be resolved and anticipated timing.

Over the course of the next two days, the parties worked to resolve the remaining issues.

On August 2, 2019, the Board held a special meeting. Members of senior management and representatives of Sidley and Jefferies also participated in the meeting. Ms. Howard reviewed with the Board the final resolution of the remaining issues. Sidley reviewed with the Board the changes from the last version of the transaction documents that the Board had reviewed and discussed. Also at this meeting, Jefferies reviewed its financial analysis of the merger consideration with the Board and rendered an oral opinion, confirmed by delivery of a written opinion dated August 2, 2019, to the Board to the effect that, as of that date and based on and subject to various assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken as described in the opinion, the merger consideration to be received by holders of Company common stock (other than, to the extent applicable, Veritas Capital, Sponsor, Parent, Sub and their respective affiliates) pursuant to the merger agreement was fair, from a financial point of view, to such holders. The Board then adopted resolutions approving the merger agreement and the transaction.

Later on the morning of August 2, 2019 and prior to the open of trading on the New York Stock Exchange, the parties announced the execution of the merger agreement.

 

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Recommendation of the Board

At the special meeting of the Board on August 2, 2019, after careful consideration, the Board unanimously:

 

   

determined that the transactions contemplated by the merger agreement, including the merger, are in the best interests of the Company and its stockholders;

 

   

approved and declared advisable the execution, delivery and performance of the merger agreement, and, subject to receiving the affirmative vote of the holders of a majority of the outstanding shares of Company common stock entitled to vote thereon to adopt the merger agreement (which we refer to as the “Company stockholder approval”), the consummation by the Company of the transactions contemplated by the merger agreement, including the merger;

 

   

directed that the merger agreement be submitted to a vote of the stockholders of the Company to be adopted; and

 

   

resolved to recommend the adoption of the merger agreement by the stockholders of the Company.

Reasons for Recommending the Adoption of the Merger Agreement

In evaluating the merger agreement and the transactions contemplated thereby, the Board consulted with the Company’s senior management team and outside legal and financial advisors and, in determining that the proposed merger and other transactions contemplated by the merger agreement are advisable, and in the best interests of the Company and its stockholders, considered and evaluated numerous factors over the course of approximately 16 meetings of the Board beginning in December of 2018, including the following material factors, each of which the Board believes support its unanimous determinations:

 

   

Per Share Merger Consideration. The Board evaluated the attractiveness of the per share merger consideration and the financial terms of the merger agreement. In particular, the Board considered the following:

 

   

The per share merger consideration represented:

 

   

a 16.5% premium over the closing trading price of the Company’s common stock on August 1, 2019, the last trading day prior to the public announcement of the merger agreement; and

 

   

an 18.9% premium over the volume-weighted average closing price of the Company’s common stock reported for the 30-trading day period ending on August 1, 2019.

 

   

The Board considered that the cash consideration represents immediate and certain value and liquidity upon the closing of the merger in comparison to the risks and uncertainty that would be inherent in remaining a stand-alone company or pursuing a transaction in which all or a portion of the consideration is payable in stock.

 

   

Historical Performance, Stand-Alone Prospects and Strategic Alternatives.

 

   

The Board considered the trading price of the Company’s common stock, including its three-year average of $21.57, its five-year average of $19.08, as well as its ten-year high of $27.61.

 

   

The Board considered the Company’s recent and historical financial condition, results of operations and business, including the Company’s second quarter 2019 performance, the drivers of that performance and expectations as to the likelihood of sustainability of that performance.

 

   

The Board considered the Company’s competitive position in the industry and the Company’s recent and historical performance relative to other companies in the industry.

 

   

The Board considered management’s stand-alone plan represented by the final financial projections and the risks and uncertainties associated with the ability of the Company to achieve

 

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the results contemplated by such plan and meet such projections if the Company were to continue to operate as a stand-alone company, as well as potential upside that is not included in such plan and the risk associated with achieving that upside.

 

   

The Board also considered the Company’s historic performance relative to prior management forecasts, the Company’s financial performance since the disposition of the Company’s DFLT segment and TAS practice and the volatile nature of the management consulting industry.

 

   

The Board also took into account the current state of the economy and general industry and market trends and conditions, the impact of, and uncertainties underlying, projected macroeconomic conditions in the near term and long term on the performance of the Company as a stand-alone company, the fact that management’s stand-alone plan does not include an economic recession, and the Company’s performance and the performance of the industry in the last economic recession.

 

   

The Board considered the strategic alternatives available to the Company, including (a) a transformative acquisition and other opportunities for inorganic growth, (b) a leveraged recapitalization or return of capital through dividends or share repurchases, (c) a split-up or sale of significant assets or divisions, (d) a potential consolidation with a strategic partner and (e) continuing to operate on a stand-alone basis, and the potential stockholder value that might result from such alternatives.

 

   

The Board considered its belief that in order to be successful, the Company would need to increase its scale, and the Company’s challenges in successfully deploying capital, including proceeds the Company received from the sale of the DFLT business, including (a) the difficulty in acquiring attractive assets at an appropriate price given competition with other bidders, (b) the Company’s track record on integration of meaningful acquisitions, (c) the fact that historically the stock markets had not reacted favorably to the Company’s efforts to enhance its operations through organic investments, and (d) the Company’s challenges in enhancing its digital capabilities at a speed that is sufficient to meet client expectations and remain competitive.

 

   

The Board considered the Company’s near-term and longer-term prospects as an independent company and considered the possibility that, if the Company did not enter into a merger agreement with Parent, the value of Company common stock could be significantly lower than the value of the per share merger consideration.

 

   

The Board’s view, taking into account all of the foregoing under “Per Share Merger Consideration” and “—Historical Performance, Stand-Alone Prospects and Strategic Alternatives” and discussions with the Company’s senior management and advisors regarding potential strategic alternatives for the Company, that, on a risk-adjusted basis, the other strategic alternatives reviewed by the Board were unlikely to create greater overall value for the Company’s stockholders than the proposed merger and that, on a risk-adjusted basis, the proposed merger is the best alternative for the stockholders of the Company.

 

   

Comprehensive Transaction Process.

 

   

The Board considered that the transaction process involved direct outreach to potential financial and strategic parties, including all of the parties the Board believed were likely to be most interested in pursuing a potential strategic transaction with the Company at an attractive valuation. Of the 27 potential parties contacted in connection with the transaction process:

 

   

18 parties entered into non-disclosure agreements;

 

   

16 parties received a confidential information memorandum and had initial meetings with management of the Company;

 

   

10 parties received additional due diligence information;

 

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three parties submitted initial indications of interest; and

 

   

two parties submitted final proposals.

 

   

The Board considered its belief that the nature of the transaction process and the number of parties with which the Company had contact made it unlikely that other parties would be interested in a transaction with the Company at a valuation and certainty more attractive than that offered by Parent.

 

   

The Board also took note of the terms of the merger agreement, including that if an interested party were to submit a proposal that the Board determined was a superior proposal (as described under “—The Merger Agreement”) the Board could, prior to the stockholders adopting the merger agreement and subject to complying with the provisions of the merger agreement, including paying the termination fee of $30.9 million, terminate the merger agreement and cause the Company to enter into a definitive agreement for such superior proposal if the Board determined in its good faith judgment that the failure to do so would be reasonably likely to be inconsistent with its fiduciary duties under applicable law. The Board considered its view that the terms of the merger agreement were unlikely to deter any interested parties from making a proposal to the Company.

 

   

Other Potentially Interested Parties and Proposals.

 

   

The Board considered that the Company received initial proposals from two other potentially interested parties, including an initial indication of interest from Party A that offered $27.50 in cash per share of Company common stock, which Party A ultimately withdrew prior to submission of final proposals, and a final proposal from Party C that proposed a stock-for-stock transaction with a fixed exchange ratio reflecting current trading prices of the parties as of the timing of signing a definitive agreement. The Board considered the feasibility of Party C and the Company achieving various synergies as well as the performance prospects for the combined company of Party C and the Company, including whether the combined company was likely to achieve results consistent with or better than those projected by their respective stand-alone plans. The Board noted the execution risk with respect to the performance of the combined company and the achievement of potential synergies, including the cost to achieve those synergies, risks of key employee attrition and client attrition, as well as the Company’s and Party C’s history with respect to integration of meaningful acquisitions. The Board considered that Party C indicated it believed the combined company of Party C and the Company could achieve such synergies resulting in a nominal value, when capitalized, of approximately $7.00 per share in nominal value to the former holders of Company common stock. The Board weighed Party C’s synergies estimates against the review undertaken by the Company’s management on these estimates, which suggested synergies significantly lower than those stated by Party C, the prospects of the combined company of Party C and the Company and its potential value to the Company’s stockholders in the near and longer term, including the likelihood of achieving Party C’s synergies estimates, against Parent’s proposal of $28.00 in cash per share. The Board concluded that it was in the best interest of the stockholders of the Company to accept Parent’s proposal rather than Party C’s proposal (see the section entitled “The Merger—Background of the Merger,” beginning on page [●]).

 

   

Course of Negotiations. The Board considered the course of negotiations with Parent, including the increase in Parent’s initial proposal from $27.00 per share to $27.50 per share, the further increase in Parent’s proposal from $27.50 to $28.00 per share and Sponsor’s indication that Parent’s $28.00 per share proposal was its best and final offer. In light of the foregoing, the third-party solicitation process undertaken on behalf of the Company and discussions with, and relating to proposals received from, potential counterparties in such process, the Board believed that Parent’s $28.00 per share offer was (a) the highest price that Parent was willing to pay for the Company and (b) the highest price reasonably available for the Company.

 

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Opinion of the Company’s Financial Advisor. The Board considered the financial presentation and opinion, dated August 2, 2019, of Jefferies to the Board as to the fairness, from a financial point of view and as of such date, of the merger consideration to be received by holders of Company common stock (other than, to the extent applicable, Veritas Capital, Sponsor, Parent, Sub and their respective affiliates) pursuant to the merger agreement, which opinion was based on and subject to various assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken as further described under the heading “—Opinion of the Company’s Financial Advisor” beginning on page [●].

 

   

The Merger Agreement. The Board considered the general terms and conditions of the merger agreement and the course of extensive negotiations of the key provisions thereof with Parent, including the parties’ respective representations, warranties and covenants, the conditions to their respective obligations to consummate the merger and their ability to terminate the merger agreement (see section entitled “The Agreement and Plan of Merger,” beginning on page [●] for a more detailed discussion of the terms and conditions of the merger agreement). In particular, the Board considered the following:

 

   

Conditions to Closing the Merger; Likelihood of Closing. The Board considered that the proposed merger was likely to be consummated, including that the merger agreement is subject to limited closing conditions that are customary in nature, Parent’s obligations to use reasonable best efforts to consummate the merger and its obligation to take all actions necessary to obtain all antitrust approvals, the expectation that the proposed merger will be approved by the Company’s shareholders and that no non-governmental third party consents are conditions to the consummation of the proposed merger.

 

   

Specific Performance. The Board considered the Company’s right, pursuant and subject to the merger agreement, to seek specific performance to cause closing to occur if the debt financing is available.

 

   

No Financing Condition; Ability to Finance. The Board considered that the proposed merger is not subject to a financing condition and, in particular, that Parent has obtained committed debt financing for the transaction from reputable financial institutions and committed equity financing, the limited number and nature of the conditions to the debt and equity financing and the obligation of Parent to use reasonable best efforts to consummate the debt and equity financing, and the Company’s ability to cause the equity financing sources to fund their contributions as contemplated by the merger agreement and the equity commitment letter, provided that the debt financing has been funded or will fund if the equity funds and all the conditions to closing are satisfied. The Board also considered the requirement that, if the debt commitment is not obtained, Parent has an obligation to use reasonable best efforts to obtain alternative financing. The Board considered that Parent’s financial condition and the terms of the debt commitment letters made it reasonably likely the debt financing would be consummated.

 

   

Parent Termination Fees. The Board also considered the requirement that, if the Company terminates the merger agreement for Parent’s failure to close when required, Parent will pay the Company a termination fee of $67.5 million, or approximately 6.00% of the Company’s equity value. The Board also considered that Sponsor has delivered an executed limited guarantee to the Company guaranteeing the due and punctual payment to the Company of the Parent termination fee, certain reimbursement and indemnification obligations related to the debt financing and certain payment and reimbursement obligations specified in the merger agreement that may be owed by Parent pursuant to the merger agreement, subject to a maximum aggregate liability equal to $67.5 million. The Board also considered the fact that the merger agreement provides that Parent’s liabilities are capped at the Parent termination fee, except for certain retained claims with respect to the confidentiality agreement, Parent’s obligations to reimburse the Company for any expenses the Company incurs in connection with Parent’s financing and interest and collection costs upon a late payment of the Parent termination fee.

 

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Ability of the Board to Engage in Passive Discussions Involving Competing Proposals. The Board considered the provisions of the merger agreement that provide for the Company’s ability, under certain circumstances and subject to the merger agreement, to furnish information to and conduct negotiations with a third party, if the Board determines in good faith that such third party has made a competing proposal that is or could reasonably be expected to lead to a superior proposal (as described in the section entitled “The Agreement and Plan of Merger—Restriction on Solicitation of Competing Proposals,” beginning on page [●]) if the failure to do so would be reasonably likely to be inconsistent with the Board’s fiduciary duties under applicable law.

 

   

Ability of the Board to Change Board Recommendation; Ability to Terminate the Merger Agreement. The Board considered the provisions of the merger agreement that provide:

 

   

that, in certain circumstances and subject to the merger agreement, the Board is permitted to change the Board recommendation and is permitted to terminate the merger agreement to enter into an agreement with respect to a superior proposal if the Board concludes that failure to do so would be reasonably likely to be inconsistent with its fiduciary duties under applicable law, subject to complying with Parent’s “match rights” and payment to Parent of a termination fee of $30.9 million, or approximately 2.75% of the equity value of the merger consideration, as further described in the section entitled “The Agreement and Plan of Merger—Expenses; Termination Fees,” beginning on page [●]; and

 

   

that, in certain other circumstances not related to a superior proposal and subject to the merger agreement, the Board is permitted to change the Board recommendation in response to an intervening event (as described in the section entitled “The Agreement and Plan of Merger—Obligations of the Board with Respect to its Recommendation,” beginning on page [●]) if the Board concludes that failure to do so would be reasonably likely to be inconsistent with its fiduciary duties, which would result in Parent having the right to terminate the merger agreement at which time the Company would be required to pay Parent a termination fee of $30.9 million, or approximately 2.75% of the equity value of the merger consideration, as further described in the section entitled “The Agreement and Plan of Merger—Expenses; Termination Fees,” beginning on page [●].

 

   

Appraisal Rights. The Board considered that the merger agreement must be approved by the stockholders and that the Company’s stockholders have the right to exercise appraisal rights under Section 262 of the DGCL rather than accept the merger consideration, which Section 262 provides such stockholders who have complied with the requirements of the DGCL with an opportunity to have the Delaware Court of Chancery determine the fair value of their shares of Company common stock, which may be more than, less than or the same as the amount such stockholders would have received under the merger agreement.

 

   

The Board also considered its belief that the terms of the merger agreement were reasonable and would not discourage other potential acquirers from making an alternative proposal to acquire the Company.

In the course of its deliberations, the Board also considered certain risks and other potentially negative factors concerning the transactions contemplated by the merger agreement, including:

 

   

No Direct Ongoing Participation in the Surviving Corporation’s Potential Upside. Following the merger, the Company will no longer exist as an independent public company and existing Company stockholders would not have the opportunity to continue participating in the surviving corporation’s upside as a stand-alone company, including future earnings or growth of the surviving corporation or synergies that may result from the consummation of transactions from acquisitions or other business combinations.

 

   

Taxable Consideration. For U.S. federal income tax purposes, the merger consideration will be taxable to the Company’s stockholders who are entitled to receive such consideration.

 

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No Solicitation of Alternative Proposals. The fact that the merger agreement precludes the Company from actively soliciting alternative proposals.

 

   

Specific Performance; Cap on Damages. The Company is limited to seeking specific performance or the Parent termination fee in the event that Parent does not close when required and is not able to seek other monetary damages.

 

   

Interim Restrictions on Business. The merger agreement generally requires the Company to use commercially reasonable efforts to conduct its operations in all material respects in the ordinary course of business consistent with past practice pending consummation of the proposed merger and restricts the Company, without Parent’s consent, from taking certain specified actions until the proposed merger is completed, which restrictions may affect the Company’s ability to execute its business strategies, respond effectively to competitive pressures and industry developments, pursue alternative business opportunities, make appropriate changes to its business, attain its financial and other goals, all of which may impact the Company’s financial condition and results of operations.

 

   

Potential Failure to Consummate the Merger. The proposed merger may not be consummated in a timely manner or at all, due to a failure of certain closing conditions, many of which are not within the Company’s control, to be satisfied or (if permissible under applicable law) waived, including regulatory approvals. The Board weighed against this consideration the fact that the conditions are limited in nature as well as its views that the required antitrust approval is likely to be obtained and the remedies available to the Company if Parent does not consummate the merger when the closing conditions are satisfied.

 

   

Interests of Officers and Directors. The Company’s directors and executive officers may receive certain benefits that are different from, and in addition to, those of the Company’s stockholders (such as change in control or termination payments).

The Board concluded that the potentially negative reasons associated with the proposed merger were outweighed by the potential benefits that it expected Company stockholders would receive as a result of the proposed merger, including the belief that the proposed merger would maximize the value received by Company stockholders and eliminate the risks and uncertainties affecting the future prospects of the Company as a stand-alone company.

The foregoing discussion of the information and factors considered by the Board is not intended to be exhaustive but includes the material factors considered by the Board. In view of the wide variety of factors considered in connection with its evaluation of the proposed merger and the complexity of this matter, the 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 the Board recommendation. In addition, individual directors may have given different weights to different factors. The Board did not undertake to make any specific determination as to whether, or to what extent, any factor or any particular aspect of any factor, supported or did not support its ultimate determination. The Board based the Board recommendation on its consideration of the totality of the information presented to it, including the factors described above.

In considering the Board recommendation, the Company’s stockholders should be aware that the executive officers and directors of the Company have certain interests, including financial interests, in the proposed merger that may be different from, or in addition to, the interests of the Company’s stockholders generally. The Board was aware of these interests and considered them, among other matters, in approving the merger agreement and the transactions contemplated thereby, and in making the Board recommendation. For additional information, see the section entitled “The Merger—Interests of Directors and Executive Officers in the Merger,” beginning on page [●].

 

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Opinion of Our Financial Advisor

The Company has retained Jefferies as its financial advisor in connection with the merger. In connection with this engagement, the Board requested that Jefferies evaluate the fairness, from a financial point of view, of the merger consideration to be received by holders of Company common stock (other than, to the extent applicable, Veritas Capital, Sponsor, Parent, Sub and their respective affiliates) pursuant to the merger agreement. At a meeting of the Board held on August 2, 2019 to evaluate the merger, Jefferies rendered an oral opinion, confirmed by delivery of a written opinion dated August 2, 2019, to the Board to the effect that, as of that date and based on and subject to various assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken as described in its opinion, the merger consideration to be received by holders of Company common stock (other than, to the extent applicable, Veritas Capital, Sponsor, Parent, Sub and their respective affiliates) pursuant to the merger agreement was fair, from a financial point of view, to such holders.

The full text of Jefferies’ opinion, which describes various assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken by Jefferies, is attached as Annex B to this proxy statement and is incorporated herein by reference. Jefferies’ opinion was provided for the use and benefit of the Board (in its capacity as such) in its evaluation of the merger consideration from a financial point of view and did not address any other aspect of the merger or any other matter. Jefferies’ opinion did not address the relative merits of the transactions contemplated by the merger agreement as compared to any alternative transaction or opportunity that might be available to the Company, nor did it address the underlying business decision by the Company to engage in the merger. Jefferies’ opinion did not constitute a recommendation as to how the Board, and does not constitute a recommendation as to how any securityholder, should vote or act with respect to the merger or any other matter. The following summary is qualified in its entirety by reference to the full text of Jefferies’ opinion.

In arriving at its opinion, Jefferies, among other things:

 

   

reviewed an execution version, provided to Jefferies on August 1, 2019, of the merger agreement;

 

   

reviewed certain publicly available financial and other information regarding the Company;

 

   

reviewed certain information furnished to Jefferies by the management of the Company relating to the businesses, operations and prospects of the Company, including financial forecasts and estimates provided by the management of the Company;

 

   

held discussions with members of the senior management of the Company concerning the matters described in the second and third bullets immediately above;

 

   

considered the fact that discussions were undertaken at the direction of the Company with selected third parties to solicit indications of interest in the possible acquisition of, or combination involving, the Company;

 

   

reviewed the stock trading price history and implied trading multiples for the Company and compared them with those of certain publicly traded companies that Jefferies deemed relevant in evaluating the Company;

 

   

compared the financial terms of the merger with publicly available financial terms of certain other transactions that Jefferies deemed relevant in evaluating the merger; and

 

   

conducted such other financial studies, analyses and investigations as Jefferies deemed appropriate.

In its review and analysis and in rendering its opinion, Jefferies assumed and relied upon, but did not assume any responsibility to independently investigate or verify, the accuracy and completeness of all financial and other information that was supplied or otherwise made available by the Company or that was publicly available to Jefferies (including, without limitation, the information described above) or otherwise reviewed by

 

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Jefferies. Jefferies relied on assurances of the management and other representatives of the Company that they were not aware of any facts or circumstances that would make such information incomplete, inaccurate or misleading. In its review, Jefferies did not obtain an independent evaluation or appraisal of any of the assets or liabilities (contingent, derivative, off-balance sheet or otherwise), nor did Jefferies conduct a physical inspection of any of the properties or facilities, of the Company or any other entity and Jefferies was not furnished with, and assumed no responsibility to obtain, any such evaluations, appraisals or physical inspections.

With respect to the financial forecasts and estimates provided to and reviewed by Jefferies, Jefferies noted that projecting future results of any company is inherently subject to uncertainty. However, Jefferies was advised, and Jefferies assumed, that the financial forecasts and estimates relating to the Company that Jefferies was directed to utilize for purposes of its analyses and opinion were reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of the management of the Company as to the future financial performance of the Company and the other matters covered thereby. Jefferies expressed no opinion as to any financial forecasts or estimates or the assumptions on which they were based.

Jefferies relied upon the assessments of the management of the Company as to, among other things, (i) the potential impact on the Company of market, competitive, macroeconomic, geopolitical and other conditions, trends and developments in and prospects for, and governmental, regulatory and legislative matters relating to or affecting, the management consulting industry or the businesses of the Company’s clients, (ii) matters relating to ongoing obligations of the Company in connection with certain divestitures, including indemnification and transition services and support, (iii) the Company’s technology and intellectual property, including the validity thereof and associated risks and (iv) the Company’s existing and future agreements and other arrangements involving, and ability to attract, retain and/or replace, key employees and other commercial relationships. Jefferies assumed that there would not be any developments with respect to any such matters that would be meaningful in any respect to Jefferies’ analyses or opinion.

Jefferies’ opinion was based on economic, monetary, regulatory, market and other conditions existing and which could be evaluated as of the date of Jefferies’ opinion. Jefferies expressly disclaimed any undertaking or obligation to advise any person of any change in any fact or matter affecting its opinion of which Jefferies becomes aware after the date of its opinion. As the Board was aware, the credit, financial and stock markets, and the industry in which the Company operates, have experienced and may continue to experience volatility and Jefferies expressed no view or opinion as to any potential effects of such volatility on the Company or the merger.

Jefferies made no independent investigation of, and Jefferies expressed no view or opinion as to, any legal, regulatory, accounting or tax matters affecting or relating to the Company or the merger and Jefferies assumed the correctness in all respects meaningful to its analyses and opinion of all legal, regulatory, accounting and tax advice given to the Company and/or the Board, including, without limitation, with respect to changes in, or the impact of, accounting standards or tax and other laws, regulations and governmental and legislative policies affecting the Company or the merger and legal, regulatory, accounting and tax consequences to the Company or its securityholders of the terms of, and transactions contemplated by, the merger agreement and related documents. Jefferies assumed that the merger would be consummated in accordance with its terms without waiver, modification or amendment of any material term, condition or agreement and in compliance with all applicable laws, documents and other requirements and that, in the course of obtaining the necessary governmental, regulatory or third-party approvals, consents, waivers and releases for the merger, including with respect to any divestitures or other requirements, no delay, limitation, restriction or condition would be imposed or occur that would have an adverse effect on the Company or the merger or that otherwise would be meaningful in any respect to Jefferies’ analyses or opinion. Jefferies also assumed that the final merger agreement, when signed by the parties thereto, would not differ from the execution version reviewed by Jefferies in any respect meaningful to Jefferies’ analyses or opinion.

Jefferies’ opinion did not address the relative merits of the transactions contemplated by the merger agreement as compared to any alternative transaction or opportunity that might be available to the Company, nor

 

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did it address the underlying business decision by the Company to engage in the merger or the terms of the merger agreement or the documents referred to therein, including the form or structure of the merger or any term, aspect or implication of any guarantee or other agreements, arrangements or understandings entered into in connection with, or contemplated by or resulting from, the merger or otherwise. Jefferies’ opinion was limited to the fairness, from a financial point of view, of the merger consideration to holders of Company common stock (to the extent expressly specified in such opinion) and Jefferies was not asked to, and its opinion did not, address the fairness, financial or otherwise, of any consideration to the holders of any class of securities, creditors or other constituencies of the Company or any other party. In addition, Jefferies expressed no opinion or view with respect to, and Jefferies’ opinion did not address, the individual circumstances of, or relative fairness of the merger consideration among, holders of Company common stock or any other securities of the Company, or any rights, preferences, restrictions or limitations that may be attributable to any such securities or that may distinguish any holders thereof. Jefferies expressed no view or opinion as to the prices at which shares of Company common stock or any other securities of the Company may trade or otherwise be transferable at any time. Furthermore, Jefferies did not express any view or opinion as to the fairness, financial or otherwise, of the amount or nature of any compensation or other consideration payable to or to be received by any officers, directors or employees, or any class of such persons, in connection with the merger relative to the merger consideration or otherwise. The issuance of Jefferies’ opinion was authorized by Jefferies’ fairness committee.

In connection with rendering its opinion to the Board, Jefferies performed a variety of financial and comparative analyses, including those described below. The following summary is not a complete description of all analyses performed and factors considered by Jefferies in connection with its opinion. The preparation of a financial opinion is a complex process involving subjective judgments and is not necessarily susceptible to partial analysis or summary description. With respect to the selected public companies and selected precedent transactions analyses summarized below, no company or transaction used as a comparison was identical or directly comparable to the Company or the merger. These analyses necessarily involved complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the public trading, acquisition or other values of the companies or transactions concerned.

Jefferies believes that its analyses and the summary below must be considered as a whole and in context and that selecting portions of its analyses and factors or focusing on information presented in tabular format, without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying Jefferies’ analyses and opinion. Jefferies did not draw, in isolation, conclusions from or with regard to any one factor or method of analysis for purposes of its opinion, but rather arrived at its ultimate opinion based on the results of all analyses undertaken by it and assessed as a whole.

The estimates of the future performance of the Company in or underlying Jefferies’ analyses are not necessarily indicative of future results or values, which may be significantly more or less favorable than those estimates. In performing its analyses, Jefferies considered industry performance, general business and economic conditions and other matters, many of which are beyond the control of the Company. Estimates of the financial value of companies or businesses do not purport to be appraisals or necessarily reflect the prices at which companies, businesses or securities actually may be sold or acquired. Accordingly, the estimates used in, and the implied reference ranges resulting from, any particular analysis described below are inherently subject to substantial uncertainty and should not be taken as Jefferies’ view of the actual value of the Company or its businesses or securities.

The merger consideration payable in the merger was determined through negotiations between the Company and Parent, and the decision by the Company to enter into the merger agreement was solely that of the Board. Jefferies’ opinion and financial analyses were only one of many factors considered by the Board in its evaluation of the merger consideration and should not be viewed as determinative of the views of the Board or the Company’s management with respect to the merger or the consideration payable in the merger.

 

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Financial Analyses

The summary of the financial analyses described in this section entitled “The Merger—Opinion of Our Financial Advisor—Financial Analyses” is a summary of the material financial analyses reviewed with the Board and performed by Jefferies in connection with its opinion. The financial analyses summarized below include information presented in tabular format. In order to fully understand Jefferies’ financial analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Considering the data below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Jefferies’ financial analyses. The order in which the financial analyses summarized below appear does not necessarily reflect the relative importance or weight given to such analyses. For purposes of the financial analyses described below, the term “adjusted EBITDA” means earnings before interest, taxes, depreciation and amortization, excluding stock-based compensation expense and certain non-cash or one-time non-recurring items, as applicable, and also excluding, in the case of the Company, severance costs.

Selected Public Companies Analysis. Jefferies reviewed publicly available financial, stock market and operating information of the Company and the following three selected publicly traded companies in the specialty or technical consulting sector of the management consulting industry that Jefferies considered generally relevant for purposes of analysis, collectively referred to as the selected companies:

 

   

FTI Consulting, Inc.

   

Huron Consulting Group Inc.

   

ICF International, Inc.

Jefferies reviewed enterprise values of the selected companies, calculated as fully diluted equity values based on closing stock prices on August 1, 2019 plus total debt, preferred equity and non-controlling interests (as applicable) less cash and cash equivalents, as a multiple of calendar year 2019 estimated adjusted EBITDA. Financial data of the selected companies were based on publicly available research analysts’ estimates, public filings and other publicly available information. Financial data of the Company was based on publicly available research, analysts’ estimates and estimates of the Company’s management.

The overall low to high calendar year 2019 estimated adjusted EBITDA multiples observed for the selected companies were 12.9x to 16.2x (with a mean of 14.1x and a median of 13.1x). Jefferies noted that the fiscal year 2019 estimated adjusted EBITDA multiples observed for the Company were 11.5x (based on publicly available research analysts’ estimates) and 10.9x (based on estimates of the Company’s management). Jefferies then applied a selected range derived from the selected companies of fiscal year 2019 estimated adjusted EBITDA multiples of 11.5x to 13.1x to corresponding data of the Company based on estimates of the Company’s management. This analysis indicated the following approximate implied per share equity value reference range for the Company, as compared to the merger consideration:

 

Implied Per Share Equity Value Reference Range

  

Merger Consideration

$25.24 - $28.45

   $28.00

 

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Selected Precedent Transactions Analysis. Jefferies reviewed, among other things, financial information for the following 12 selected transactions involving target companies in the specialty or technical consulting sector of the management consulting industry that Jefferies considered generally relevant for purposes of analysis, collectively referred to as the selected transactions:

 

Announced

 

Acquiror

 

Target

June 2018  

•  Ankura Consulting Group, LLC

 

•  Disputes, forensics and legal technology segment and transaction advisory services practice of Navigant Consulting, Inc.

February 2018  

•  Veritas Capital Fund VI, L.P.

 

•  US public sector business of PricewaterhouseCoopers LLP

November 2017  

•  Permira Advisers

 

•  Duff & Phelps, LLC

January 2017  

•  Gartner, Inc.

 

•  CEB Inc.

August 2016  

•  EQT VII

 

•  Press Ganey Holdings, Inc.

November 2015  

•  Pampolona Capital Management LLC

 

•  MedAssets, Inc.

September 2015  

•  Korn/Ferry International

 

•  HG (Luxembourg) S.à.r.l.

January 2015  

•  Huron Consulting Group Inc.

 

•  Studer Holdings, Inc.

December 2014  

•  Madison Dearborn Capital Partners VI-B, L.P.

 

•  Kaufman Hall & Associates, Inc.

December 2012  

•  A consortium comprised of The Carlyle Group, Stone Point Capital LLC, Pictet & Cie and The Edmond de Rothschild Group

 

•  Duff & Phelps Corporation

July 2012  

•  The Corporate Executive Board Company

 

•  SHL Group Limited

April 2012  

•  CVC Capital Partners

 

•  AlixPartners, LLP

Jefferies reviewed transaction values of the selected transactions, calculated as the enterprise values implied for the target companies based on the consideration paid or proposed to be paid in the selected transactions, as a multiple of such target companies’ latest 12 months adjusted EBITDA as reported prior to or as of the applicable announcement dates of such transactions. Financial data of the selected transactions were based on available information. Financial data of the Company was based on estimates of the Company’s management.

The overall low to high latest 12 months adjusted EBITDA multiples observed for the selected transactions were 8.2x to 17.9x (with a mean of 11.2x and a median of 11.3x). Jefferies applied a selected range derived from the selected transactions of latest 12 months adjusted EBITDA multiples of 10.3x to 12.3x to the Company’s latest 12 months adjusted EBITDA as of June 30, 2019. This analysis indicated the following approximate implied per share equity value reference range for the Company, as compared to the merger consideration:

 

Implied Per Share Equity Value Reference Range

  

Merger Consideration

$19.43 - $22.78

   $28.00

Discounted Cash Flow Analysis. Jefferies performed a discounted cash flow analysis of the Company by calculating the estimated present value of the standalone unlevered, after-tax free cash flows that the Company was forecasted to generate during the second half of the fiscal year ending December 31, 2019 through the full fiscal year ending December 31, 2023 based on estimates of the Company’s management. For purposes of this analysis, stock-based compensation was treated as a cash expense. The implied terminal value of the Company was derived by applying a selected range of perpetuity growth rates of 2.0% to 3.0% to the Company’s normalized unlevered after-tax free cash flow for the fiscal year ending December 31, 2023. The present values (as of June 30, 2019) of the cash flows and terminal values were then calculated using a selected discount rate

 

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range of 9.2% to 11.1%. This analysis indicated the following approximate implied per share equity value reference range for the Company, as compared to the merger consideration:

 

Implied Per Share Equity Value Reference Range

 

Merger Consideration

$23.84 - $33.61

  $28.00

Certain Additional Information

Jefferies observed certain additional information that was not considered part of Jefferies’ financial analysis with respect to its opinion but was noted for informational purposes, including the implied premiums paid or proposed to be paid in selected mergers and acquisition transactions announced from January 1, 2014 through June 30, 2019 with transaction values in excess of $100 million involving target companies publicly traded in the U.S.; applying a selected range of implied premiums of approximately 13% to 36% (reflecting the overall 25th and 75th percentile implied premiums derived from such transactions based on the closing stock prices of the target companies involved in such transactions 30 calendar days prior to public announcement of such transactions) to the closing price of Company common stock on August 1, 2019 indicated an approximate implied equity value reference range for the Company of approximately $27.18 to $32.80 per share.

Miscellaneous

The Company has agreed to pay Jefferies for its financial advisory services in connection with the merger an aggregate fee currently estimated to be approximately $15.875 million, of which a portion was payable upon delivery of Jefferies’ opinion to the Board and approximately $14.625 million is payable contingent upon consummation of the merger. In addition, the Company agreed to reimburse Jefferies for expenses, including fees and expenses of counsel, incurred in connection with Jefferies’ engagement and to indemnify Jefferies and related parties against liabilities, including liabilities under federal securities laws, arising out of or in connection with the services rendered and to be rendered by Jefferies under its engagement.

As the Board was aware, Jefferies and its affiliates in the past have provided and in the future may provide financial advisory and financing services unrelated to the merger to the Company and certain of its affiliates, for which services Jefferies and its affiliates have received and would expect to receive compensation, including, during the two-year period prior to the date of Jefferies’ opinion, having acted as financial advisor to the Company in connection with certain divestitures and proxy contest matters, for which services Jefferies and its affiliates received aggregate fees of approximately $8.5 million. As the Board also was aware, Jefferies and its affiliates in the past have provided and in the future may provide financial advisory and financing services to Veritas Capital and certain of its affiliates and/or portfolio companies for which services Jefferies and its affiliates have received and would expect to receive compensation, including, during the two-year period prior to the date of Jefferies’ opinion, having acted as joint lead arranger for a credit facility to finance an acquisition by a portfolio company of Veritas Capital, for which services Jefferies and its affiliates received aggregate fees of approximately $13.5 million. Although Jefferies and its affiliates did not provide financial advisory or financing services to Parent during the two-year period prior to the date of Jefferies’ opinion for which Jefferies and its affiliates received compensation, Jefferies and its affiliates may provide such services to Parent and/or its affiliates in the future, for which services Jefferies and its affiliates would expect to receive compensation. In the ordinary course of business, Jefferies and its affiliates may trade or hold securities of the Company and certain portfolio companies of Veritas Capital and their respective affiliates for Jefferies’ own account and for the accounts of Jefferies’ customers and, accordingly, may at any time hold long or short positions in those securities.

Jefferies was selected as the Company’s financial advisor in connection with the merger because, among other things, Jefferies is an internationally recognized investment banking firm with substantial experience in merger and acquisition transactions and based on its familiarity with the Company and its business. Jefferies is

 

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regularly engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, leveraged buyouts, negotiated underwritings, competitive bids, secondary distributions of listed and unlisted securities and private placements.

Forward-Looking Financial Information

Given the unpredictability of the underlying assumptions and estimates inherent in preparing financial projections, the Company does not as a matter of general practice publicly disclose detailed projections as to its anticipated financial position or results of operations, other than providing, from time to time, estimated ranges for the then-current fiscal year of certain expected financial results in its regularly-scheduled earnings press releases and other investor materials.

In connection with the Company’s evaluation of strategic alternatives, the Company’s management prepared forward-looking financial information with respect to fiscal years 2019 through 2023. In early 2019, the Company’s management prepared and reviewed with the Board the then-current financial projections for the fiscal years 2019 through 2023 (which we refer to as the “February financial projections”). The February financial projections were provided to the Company’s financial advisor and portions thereof were provided to the potential bidders that were in the process at the time. Following the end of the first quarter, the Company’s management updated the February financial projections to reflect the Company’s performance for the first quarter and changes in expectations for 2019 and the remainder of the projection period through 2023 (we refer to these updated projections as the “April financial projections”). The April financial projections were reviewed with the Board in April of 2019 and provided to the Company’s financial advisor and to potential bidders that were in the process at that time. Following the end of the second quarter, the Company’s management updated the April financial projections for 2019 to reflect actual results for the second quarter of 2019 and changes in expectations for the remainder of the consolidated results of the Company for the remainder of fiscal year 2019. However, as noted in “—Background of the Merger,” the Board determined that the modifications to the Company’s estimates for full year 2019 did not warrant modifications to the years 2020 through 2023 from those included in the April financial projections. The update to the 2019 consolidated forecast of the Company to reflect second quarter 2019 performance and revised expectations for the remainder of fiscal year 2019 is referred to as the “second quarter 2019 update.” The April financial projections, as modified for fiscal year 2019 by the second quarter 2019 update, are referred to as the “final financial projections.” The February financial projections, together with the final financial projections, are referred to as the “financial projections.” Each of the February financial projections, the April financial projections and the final financial projections were reviewed and approved by the Board and were provided to the Company’s financial advisor and to bidders that remained in the process at the time the applicable forecasts were prepared. The final financial projections were provided to the Company’s financial advisor, Jefferies, for its use and reliance in connection with its financial analyses and opinion as described in the section entitled “The Merger—Opinion of Our Financial Advisor.”

The financial projections were prepared assuming the Company’s continued operation on a standalone basis.

None of the financial projections were intended for public disclosure. A summary of the financial projections is included in this proxy statement only because such financial projections or certain portions thereof were made available to the Board, the Company’s financial advisor and/or Parent, as applicable. The inclusion of the financial projections in this proxy statement does not constitute an admission or representation of the Company that the financial projections or the information contained therein is material.

The financial projections are unaudited and were not prepared with a view toward public disclosure or compliance with the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information or generally accepted accounting principles as applied in the U.S. (which we refer to as “GAAP”) or the published guidelines of the U.S. Securities and Exchange Commission (which we refer to as the “SEC”) regarding projections and the use of non-GAAP financial measures. Neither the Company’s independent registered public accounting firm nor any other independent accountant has compiled, examined or performed any procedures with respect to the financial

 

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projections or expressed any opinion or any other form of assurance on the financial projections or their achievability. The Company’s independent registered public accounting firm assumes no responsibility for, and disclaims any association with, the financial projections.

In the view of the Company’s management, the financial projections were prepared on a reasonable basis reflecting management’s best available estimates and judgments regarding the Company’s future financial performance at the time of their preparation. The financial projections are not facts and should not be relied upon as necessarily predictive of actual future results. You are cautioned not to place undue reliance upon the financial projections. Some or all of the assumptions that have been made in connection with the preparation of the financial projections may have changed since the date the financial projections were prepared. None of the Company, Parent or any of their respective affiliates, advisors or other representatives makes any representation to any Company stockholder regarding the validity, reasonableness, accuracy or completeness of the financial projections or the ultimate performance of the Company relative to the financial projections. Except as required by applicable law, neither the Company nor any of its affiliates intends to, and each of them disclaims any obligation to, update, correct or otherwise revise the financial projections if any or all of them have changed or change or otherwise have become, are or become inappropriate (even in the short term). These considerations should be taken into account if evaluating the financial projections, which were prepared as of an earlier date.

The financial projections do not reflect changes in general business or economic conditions since the time they were prepared, changes in the Company’s businesses or their prospects or any other transactions or events that have occurred or that may occur and that were not anticipated at the time the financial projections were prepared, and the financial projections are not necessarily indicative of current values or necessarily predictive of future performance, which may be significantly more favorable or less favorable than as set forth therein and should not be regarded as a representation that the financial forecasts, projected results or other estimates and assumptions therein will be achieved.

Because the financial projections reflect subjective judgment in many respects, they are susceptible to multiple interpretations and frequent revisions based on actual experience and business developments. The financial projections also cover multiple fiscal years, and such information by its nature becomes less predictive with each succeeding fiscal year. The financial projections constitute forward-looking information and are subject to a wide variety of significant risks and uncertainties that could cause the actual results to differ materially from the projected results, including, without limitation, the factors described in the section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, which was filed with the SEC on February 28, 2019, the Company’s Quarterly Report on Form 10-Q for the first quarter ended March 31, 2019, which was filed with the SEC on April 26, 2019, and the Company’s Quarterly Report on Form 10-Q for the second quarter ended June 30, 2019, which was filed with the SEC on August 2, 2019, and in the Company’s other public filings with the SEC. For additional information on factors that may cause the Company’s future financial results to materially vary from the projected results summarized below, see the section entitled “Cautionary Statement Regarding Forward-Looking Statements.” Accordingly, there can be no assurance that the projected results summarized below will be realized or that actual results will not differ materially from the projected results summarized below, and the financial projections cannot be considered a guarantee of future operating results and should not be relied upon as such. No representation is made by the Company or any of its affiliates, advisors or other representatives or any other person to any Company stockholder or any other person regarding the actual performance of the Company compared to the results included in the financial projections or otherwise.

The financial projections should be evaluated, if at all, in conjunction with the historical financial statements and other information regarding the Company contained in the Company’s public filings with the SEC. For a more detailed description of the information available, see the section entitled “Where You Can Find More Information,” on page [●]. The financial projections do not take into account any circumstances or events occurring after the date they were prepared, including the effect of the merger and related matters. Further, the financial projections do not take into account the effect of any failure of the merger to be consummated and should not be viewed in any manner in that context.

 

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The financial projections reflect various estimates, assumptions and methodologies of the Company, all of which are difficult to predict and many of which are beyond the Company’s control, including, among others, assumptions with respect to industry performance, general business, economic, regulatory, litigation, market and financial conditions and matters specific to the Company’s businesses.

In addition, certain of the financial projections are non-GAAP financial measures. Non-GAAP financial measures should not be considered in isolation from or as a substitute for financial information presented in compliance with GAAP, and non-GAAP financial measures as used by the Company may not be comparable to similarly titled financial measures used by other companies. Furthermore, the non-GAAP metrics are not reconciled to GAAP metrics.

Financial Projections

The following table summarizes the final financial projections:

Final Financial Projections

(U.S. dollars in millions)

 

      For 12-Month Period Ended December 31,  
   2019E(8)      2020P      2021P      2022P      2023P  

RBR(1)

   $ 775      $ 872      $ 976      $ 1,076      $ 1,172  

EBITDA(2)

   $ 78      $ 101      $ 129      $ 154      $ 174  

Adjusted EBITDA(3)

   $ 81      $ 104      $ 132      $ 158      $ 178  

EBIT(4)

   $ 55      $ 81      $ 107      $ 132      $ 147  

EBIT Excluding Non-Controlling Interest(5)

   $ 46      $ 78      $ 102      $ 124      $ 138  

Net Operating Profit After Taxes (6)(7)

   $ 32      $ 55      $ 71      $ 87      $ 97  

 

(1)

Revenue before reimbursements (“RBR”) means fees, as adjusted for fee adjustments, contractor expense adjustments, billable expense adjustments and other revenue.

 

(2)

EBITDA means earnings before interest expense, interest income, income tax expense, amortization expense and depreciation expense.

 

(3)

Adjusted EBITDA means EBITDA, adding back an amount equal to severance expenses and, with respect to fiscal year 2019, approximately $0.2 of other non-recurring expenses.

 

(4)

EBIT means earnings before interest expense, interest income and income tax expense.

 

(5)

EBIT Excluding Non-Controlling Interests means EBIT reduced by the portion of EBIT attributable to the share of the Company’s Health System Solution joint venture (“HSS”) that is not owned by the Company.

 

(6)

Net Operating Profit After Taxes is EBIT Excluding Non-Controlling Interests reduced by cash income taxes assuming a tax rate of 30%.

 

(7)

The Company’s Unlevered Free Cash Flow ($23, $40, $55, $69 and $82 for fiscal years 2019, 2020, 2021, 2022 and 2023, respectively) was arithmetically derived by Jefferies based on the Company’s final financial projections provided to Jefferies by the Company’s management. Unlevered Free Cash Flow is defined as Net Operating Profit After Taxes for each applicable period, (i) plus Depreciation and Amortization ($23, $19, $22, $22 and $27 in each of the applicable periods), (ii) less capital expenditures ($20, $22, $24, $27 and $29 in each of the applicable periods) and (iii) less increase in net working capital ($13, $12, $13, $12 and $12 in each of the applicable periods). During the preparation of this proxy statement, the Company determined that the capital expenditures amount for 2019 provided by the Company’s management to Jefferies should have been approximately $22 rather than $20, which would have resulted in 2019 Unlevered Free Cash Flow for 2019 of approximately $21.

 

(8)

The April financial projections estimated the following for full fiscal year 2019: RBR of $768, EBITDA of $71, Adjusted EBITDA of $74, EBIT of $48, EBIT Excluding Non-Controlling Interests of $44 and Net Operating Profit After Taxes of $31.

 

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The following table summarizes the original February projections:

February Financial Projections

(U.S. dollars in millions)

 

      For 12-Month Period Ended December 31,  
   2019E      2020P      2021P      2022P      2023P  

RBR

   $ 764      $ 863      $ 967      $ 1,066      $ 1,162  

EBITDA

   $ 74      $ 102      $ 128      $ 151      $ 171  

Adjusted EBITDA(1)

   $ 75        n/a        n/a        n/a        n/a  

EBIT

   $ 52      $ 82      $ 106      $ 129      $ 145  

EBIT Excluding Non-Controlling Interest

   $ 50      $ 80      $ 101      $ 122      $ 136  

Net Operating Profit After Taxes(2)

   $ 35      $ 56      $ 71      $ 85      $ 95  

 

(1)

The February financial projections included an adjustment to add back an amount equal to severance expenses for the 2019 period only.

 

(2)

Using the methodology described in footnote 7 of the Final Financial Projections table, Unlevered Free Cash Flow would have been calculated as $24, $39, $52, $65 and $78 for fiscal years 2019, 2020, 2021, 2022 and 2023, respectively, and defined as Net Operating Profit After Taxes for each applicable period: (i) plus Depreciation and Amortization ($22, $19, $21, $22 and $27 in each of the applicable periods), (ii) less capital expenditures ($22, $24, $27, $30 and $33 in each of the applicable periods) and (iii) less increase in net working capital ($11, $12, $13, $12 and $12 in each of the applicable periods).

The February financial projections:

 

   

assume organic RBR growth of 11.6%, with growth driven in particular by significant RBR growth rates in the Company’s Healthcare and FSAC managed services businesses (20.5% and 58.2%, respectively);

 

   

assume gradual margin improvement in the Healthcare Segment over the projection period as a result of new hires improving productivity, greater cross-selling opportunities, the ramp-up of the HSS joint venture and scale and productivity benefits in managed services;

 

   

assume slight improvement in margins in the Energy Segment due to scale that supports investment in larger projects, driving productivity;

 

   

assume lower margins in FSAC relative to historic levels as a result of on-going technology and data investments and a business mix shift toward more managed services;

 

   

assume no mergers and acquisition activity;

 

   

assume the overall economy continues to grow at a stable rate and there is not an economic downturn during the projection period; and

 

   

do not include any risk adjustment for years 2020 through 2023, including with respect to key employee attrition or client attrition.

The final financial projections reflected the outcome of the first and second quarters of 2019, including the fact that FSAC Segment performed below the expectations in the February financial projections and Healthcare Segment performed above expectations in the February financial projections. The final financial projections:

 

   

assume consolidated RBR growth rate of 11.8%, which is slightly higher than the 11.6% growth rate assumed in the February financial projections;

 

   

assume consolidated gross profit margin by the end of the projection period of 45.2%, consistent with the February financial projections, and EBITDA margin of 14.8%, which is slightly higher than the 14.7% assumed in the February financial projections;

 

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assume no mergers and acquisition activity;

 

   

assume the overall economy continues to grow at a stable rate and there is not an economic downturn during the projection period; and

 

   

do not include any risk adjustment for the second half of fiscal year 2019 and for fiscal years 2020 through 2023, including with respect to key employee attrition or client attrition.

NEITHER THE COMPANY NOR ANY OF ITS AFFILIATES INTENDS TO, AND EACH OF THEM DISCLAIMS ANY OBLIGATION TO, UPDATE, CORRECT OR OTHERWISE REVISE THE FINANCIAL PROJECTIONS TO REFLECT CIRCUMSTANCES EXISTING OR EVENTS OCCURRING AFTER THE RESPECTIVE DATES WHEN THE FINANCIAL PROJECTIONS WERE PREPARED OR TO REFLECT THE EXISTENCE OF FUTURE CIRCUMSTANCES OR THE OCCURRENCE OF FUTURE EVENTS, EVEN IN THE EVENT THAT ANY OR ALL OF THE ASSUMPTIONS UNDERLYING THE FINANCIAL PROJECTIONS ARE OR BECOME NO LONGER APPROPRIATE.

Interests of Directors and Executive Officers in the Merger

Members of the Board and the Company’s executive officers have various interests in the merger described in this section that may be in addition to, or different from, the interests of the Company stockholders generally. You should keep this in mind when considering the recommendation of the Board “FOR” the adoption of the merger agreement. The members of the Board were aware of these interests and considered them at the time they approved the merger agreement and in making their recommendation that Company stockholders adopt the merger agreement. These interests are described below.

Certain Assumptions

Except as otherwise specifically noted, for purposes of quantifying the potential payments and benefits described in this section, the following assumptions, as well as those described in the footnotes to the table in the section titled “—Golden Parachute Compensation” below were used:

 

   

the relevant price per share of Company common stock is $28.00 per share (which we refer to as the “merger consideration”), which is the fixed price per share to be received by our stockholders in respect of their shares of Company common stock in connection with the merger;

 

   

the effective time of the merger (which we refer to as the “effective time”) is August 26, 2019, which is the assumed date of the effective time of the merger solely for purposes of the disclosure in this section (the “assumed effective time”); and

 

   

the employment of each executive officer of the Company is terminated without “cause” or due to the executive officer’s resignation for “good reason” or on account of “constructive termination of employment” (as each such term is defined in the applicable plan and/or agreement), in each case, immediately following the assumed effective time.

Treatment of Outstanding Equity Awards

The merger agreement provides that, with respect to all outstanding stock options and restricted stock unit awards under the Company’s equity plans and held by the Company’s executive officers and directors, as a result of the merger:

 

   

each outstanding Company stock option will be fully vested and cancelled, and each holder of a cancelled company option will receive a payment in cash, without interest, equal to the product of

 

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(i) the total number of shares subject to the cancelled company stock option and (ii) the excess, if any, of (A) the merger consideration over (B) the exercise price per share subject to the cancelled company stock option, less any applicable withholding taxes;

 

   

each outstanding and unvested Company restricted stock unit award (other than any restricted stock unit award held by the Company’s non-employee directors) will be assumed by the surviving corporation and converted into a replacement restricted cash award representing the right to receive an amount in cash, without interest, equal to (i) with respect to restricted stock unit awards subject to performance conditions (A) that have ended prior to the effective time, the product of (1) the merger consideration and (2) the number of restricted stock units subject to the Company restricted stock unit award as of immediately prior to the effective time based on actual performance and (B) that have not ended prior to the effective time, the product of (1) the merger consideration and (2) the number of restricted stock units subject to the Company restricted stock unit award assuming performance at 100% of target levels and (ii) with respect to restricted stock unit awards subject solely to time-based vesting, the product of (A) the merger consideration and (B) the number of restricted stock units subject to the Company restricted stock unit award, in each case, subject to the same time-based vesting conditions and settlement dates as in effect as of immediately prior to the effective time (collectively, the “replacement restricted cash awards”); and

 

   

each outstanding and unvested Company restricted stock unit award held by non-employee directors of the Company will be fully vested and cancelled, and each holder of a cancelled restricted stock unit award will receive a payment in cash, without interest, equal to the product of (i) the merger consideration and (ii) the total number of shares subject to the cancelled restricted stock unit award.

Treatment of Outstanding Equity Awards—Summary Tables

Non-Employee Directors

The following table sets forth the outstanding restricted stock unit awards held by each of the Company’s non-employee directors as of the assumed effective time and the estimated value of such awards. Under the terms of the outstanding restricted stock unit award agreements held by the Company’s non-employee directors, the outstanding restricted stock units will vest on May 14, 2020, the first anniversary of the grant date. Depending on when the actual effective time occurs, certain of these restricted stock unit awards may vest and/or be cancelled, in each case, prior to the actual effective time in accordance with their terms and independent of the occurrence of the merger. All share numbers have been rounded to the nearest whole number.

Non-Employee Director Equity Summary Table

 

Non-Employee Directors

   Number of
Restricted
Stock Units
(#)(1)
     Value of
Restricted
Stock Units
($)(1)
 

Kevin M. Blakely(2)

     23,303        652,484  

Cynthia A. Glassman

     5,452        152,656  

Stephan A. James(2)

     33,748        944,944  

Rudina Seseri

     5,452        152,656  

Michael L. Tipsord(2)

     15,107        422,996  

Kathleen E. Walsh(2)

     9,384        262,752  

Jeffrey W. Yingling

     5,452        152,656  

Randy H. Zwirn(2)

     15,688        439,264  

 

(1)

Under the merger agreement, each outstanding restricted stock unit award held by the Company’s non-employee directors will be fully vested and cancelled, and each holder of a cancelled restricted stock unit award will receive a payment in cash, without interest, equal to the product of (i) the merger consideration and (ii) the total number of shares subject to the cancelled restricted stock unit award.

 

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(2)

Each director may elect, annually prior to the start of the calendar year, for delivery and settlement of their annual restricted stock unit award to occur (i) within two and one-half months following the vesting of the award, or (ii) upon earlier of (A) “separation from service” (within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (which we refer to as the “Code”)), (B) death and (C) a “change in control event” (within the meaning of Section 409A of the Code). The amounts above include the following fully vested restricted stock units granted prior to 2019 that are subject to deferred delivery as described in clause (ii) of the preceding sentence:

 

Kevin M. Blakely

     17,851  

Stephan A. James

     28,296  

Michael L. Tipsord

     9,655  

Kathleen E. Walsh

     3,932  

Randy H. Zwirn

     10,236  

Executive Officers

The following table sets forth the outstanding stock option awards held by each of the Company’s executive officers as of the assumed effective time and the estimated value of such stock options. All stock options held by the each of the Company’s executive officers are fully vested. No executive officer held any other stock option awards as of the assumed effective time. Depending on when the effective time occurs, certain of these stock option awards may be cancelled, in each case, prior to the actual effective time in accordance with their terms and independent of the occurrence of the merger. All share numbers have been rounded to the nearest whole number.

Executive Officer Vested Stock Option Awards Summary Table

 

Executive Officers

   Number of Stock
Options (#)(1)
     Value of Stock
Options ($)(1)
 

Julie M. Howard*

     254,660        3,283,693  

Stephen R. Lieberman

     25,423        310,923  

Lee A. Spirer

     53,599        624,348  

Monica M. Weed

     45,721        584,648  

 

*

Also a director of the Company.

 

(1)

Each outstanding vested stock option will be cancelled, and each holder of a cancelled company stock option will receive a payment in cash, without interest, equal to the product of (i) the total number of shares subject to the cancelled company stock option and (ii) the excess, if any, of (A) the merger consideration over (B) the exercise price per share subject to the cancelled company stock option.

The following table sets forth the unvested restricted stock units held by each executive officer as of the assumed effective time and the estimated value of such awards. Depending on when the effective time occurs, certain of these restricted stock units may vest and/or be cancelled, in each case, prior to the actual effective time in accordance with their terms and independent of the occurrence of the merger. All share numbers have been rounded to the nearest whole number.

 

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Executive Officer Unvested Restricted Stock Unit Awards Summary Table

 

Executive Officers

   Number of
Restricted
Stock Units
(#)(1)
     Value of
Restricted
Stock Units
($)(1)
 

Julie M. Howard*

     302,415        8,467,620  

Stephen R. Lieberman

     70,409        1,971,452  

Lee A. Spirer

     72,003        2,016,084  

Monica M. Weed

     54,437        1,524,236  

 

*

Also a director of the Company.

 

(1)

Each outstanding and unvested Company restricted stock unit award held by an executive officer will be assumed by the surviving corporation and converted into a replacement restricted cash award representing the right to receive an amount in cash, without interest, equal to (i) with respect to restricted stock unit awards subject to performance conditions (A) that have ended prior to the effective time, the product of (1) the merger consideration and (2) the number of restricted stock units subject to the Company restricted stock unit award as of immediately prior to the effective time based on actual performance and (B) that have not ended prior to the effective time, the product of (1) the merger consideration and (2) the number of restricted stock units subject to the Company restricted stock unit award assuming performance at 100% of target levels and (ii) with respect to restricted stock unit awards subject solely to time-based vesting, the product of (A) the merger consideration and (B) the number of restricted stock units subject to the Company restricted stock unit award, in each case, subject to the same time-based vesting conditions and settlement dates as in effect as of immediately prior to the closing of the merger. Under the terms of the applicable award agreements, outstanding restricted stock unit awards will vest in full in the event the executive officer’s employment is terminated by the Company without cause or by the executive officer due to good reason within 24 months following a change in control of the Company. The merger will constitute a change in control under the executive officer’s employment agreements.

Change in Control Severance Benefits for Executive Officers

The Company previously entered into offer letters, employment agreements, or employment letter agreements (each of which we refer to as an “employment agreement” and, collectively, the “employment agreements”) with each of its executive officers specifying certain compensation and benefits payable to such executive officers in the event of a qualifying termination of employment. Under the terms of the employment agreements, severance payments are enhanced if the qualifying termination occurs within a specified time period before or following a change in control.

Under her employment agreement, Ms. Howard will become entitled, subject to the execution and non-revocation of a general release of claims in favor of the Company, to the following termination payments and benefits if her employment with the Company is terminated (i) by the Company during the one-year period prior to and in anticipation of a change in control transaction that the Board is actively considering and that is ultimately consummated or within the one-year period following a change in control other than for “cause” (as defined in her employment agreement), death, or “disability” (as defined in her employment agreement), or (ii) by her during the one-year period following a change in control for “good reason” (as defined in her employment agreement):

 

   

a lump sum cash payment in an amount equal to (i) three times her annual base salary, plus (ii) three times the average of her annual incentive awards for the three most recently completed years, plus (iii) a pro-rata portion of her annual incentive for the year of termination (based on an estimate of company performance for the period before the date of termination, as determined by the compensation committee of the Board); and

 

   

payments for the monthly cost of maintaining health benefits, less the amount of her portion of such monthly premiums immediately prior to termination, for her (and her spouse and dependents) under the

 

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Company’s group health plan for a period of 24 months following termination of employment (or, if earlier, until she obtains substantially similar healthcare coverage).

Under the employment agreements for Ms. Weed and Messrs. Lieberman and Spirer, each such executive officer will become entitled, subject to his or her execution and non-revocation of a general release of claims in favor of the Company and his or her continued compliance with restrictive covenants, to the following termination payments and benefits if his or her employment with the Company is terminated (i) by the Company during the six-month period prior to and in anticipation of a change in control transaction that the Board is actively considering and that is ultimately consummated or within the one-year period following a change in control other than for “cause” (as defined in the employment agreements), death, or “disability” (as defined in the employment agreements) or (ii) by the executive during the one-year period following a change in control in circumstances constituting a “constructive termination of employment” (as defined in the employment agreements):

 

   

a lump sum cash payment in an amount equal to (i) two times his or her annual base salary, plus (ii) two times the average of his or her annual incentive awards for the three most recently completed years, plus (iii) a pro-rata portion of his or her annual incentive for the year of termination (based on an estimate of company performance for the period before the date of termination, as determined by the compensation committee of the Board); and

 

   

to the extent the executive timely elects COBRA coverage, the payments for the monthly cost of maintaining health benefits, less the amount of his or her portion of such monthly premiums immediately prior to termination, for him or her (and his or her spouse and dependents) under the Company’s group health plan for a period of 12 months following termination of employment (or, if earlier, until he or she obtains substantially similar healthcare coverage).

Each of the employment agreements provides that if the total payments to the executive officer under the employment agreement or any other Company plan or program would exceed the applicable threshold under Section 280G of the Code, then those payments will be reduced to the applicable Section 280G threshold to avoid the imposition of excise taxes under Section 4999 of the Code in the event, and only to the extent, such reduction would result in a better after-tax result for the executive officer.

Pursuant to the employment agreements, each executive officer is subject to restrictive covenants related to the non-competition and non-solicitation of our employees and customers. The term of the non-competition and non-solicitation covenants is one year following a termination of employment. An executive officer’s material breach of any of the restrictive covenants contained in an employment agreement entitles the Company to injunctive relief and the return of any severance payments, in addition to any other remedies to which the Company may be entitled.

Under the employment agreements, “cause” generally means the executive’s willful misconduct, dishonesty or other willful actions (or willful failures to act) which are materially and demonstrably injurious to the Company, or a material breach by the executive of one or more terms of the employment agreement (or for Ms. Weed and Messrs. Lieberman and Spirer, any agreement between the executive and the Company), which includes the executive’s habitual neglect of the material duties required of him or her under the employment agreement.

Under Ms. Howard’s employment agreement, in connection with a change in control, “good reason” generally means Ms. Howard’s resignation from employment after the occurrence of one or more of the following events without Ms. Howard’s consent: (i) removal by the Company of Ms. Howard’s title of Chief Executive Officer, or a change such that Ms. Howard no longer reports to the Board; (ii) any material changes by the Company in Ms. Howard’s title, functions, duties, or responsibilities which changes would cause Ms. Howard’s position with the Company to become of significantly less responsibility, importance or scope as compared to the position and attributes that applied to Ms. Howard as of March 1, 2012; (iii) any material failure

 

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by the Company to comply with any of the provisions of the employment agreement; or (iv) the requirement made by the Company that Ms. Howard relocate her residence; provided that in any event, Ms. Howard notifies the Board of the event constituting “good reason” within 90 days of the initial existence of the event and gives the Company 30 days to cure.

Under the employment agreements for Ms. Weed and Messrs. Lieberman and Spirer, “constructive termination of employment” generally means the executive officer’s resignation from employment after the occurrence of one or more of the following events without the executive officer’s consent (i) a material diminution in executive’s base salary (excluding a reduction in compensation similarly affecting all or substantially all of the Company’s executive officers); (ii) a material diminution in executive’s authority, duties or responsibilities; (iii) relocation of executive’s base office to an office that is more than 50 miles from executive’s base office prior to such relocation; or (iv) the failure of the Company to obtain the assumption of the employment agreement by any successor; provided that in any event, the executive officer notifies the Company of his or her intention to terminate his or her employment by written notice within 90 calendar days of the initial existence of such event, gives the Company 30 calendar days to cure such event after receipt of such notice and, if uncured, terminates his or her employment within six months following the initial existence of such event.

See the section titled “—Golden Parachute Compensation” below for an estimate of the amounts that would become payable to each of the Company’s executive officers under their respective employment agreements.

Golden Parachute Compensation

The information set forth in the table below is intended to comply with Item 402(t) of Regulation S-K, which requires disclosure of compensation that each named executive officer could receive that is based on or otherwise relates to the merger. This compensation is referred to as “golden parachute” compensation by the applicable SEC disclosure rules, and in this section we use such term to describe the merger-related compensation payable to the Company’s named executive officers. For additional details regarding the terms of the payments and benefits described below, see the discussion above. This merger-related compensation is subject to a non-binding advisory vote of the Company stockholders, as set forth in Proposal 2 to this proxy statement. See the section entitled “Proposal 2: Non-Binding Advisory Merger-Related Compensation Proposal” on page [●].

The amounts set forth below are estimates of amounts that would be payable to the named executive officers using the assumptions described above under “—Certain Assumptions.” These estimates are based on multiple assumptions that may or may not actually occur, including assumptions described in this proxy statement. Some of the assumptions are based on information not currently available, and as a result the actual amounts, if any, to be received by a named executive officer may differ in material respects from the amounts set forth below. All dollar amounts set forth below have been rounded to the nearest whole number.

 

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Golden Parachute Payments (1)

 

Name

  Cash(2)     Equity(3)     Pension/
NQDC(4)
    Perquisites/
Benefits(5)
    Tax
Reimbursement(6)
    Other     Total  

Julie M. Howard

  $ 7,162,000     $ 8,467,620             $12,947                   $15,642,567  

Chairman and Chief Executive Officer

             

Stephen R. Lieberman

  $ 2,147,570     $ 1,971,452                               $4,119,022  

Executive Vice President and Chief Financial Officer

             

Lee A. Spirer

  $ 3,286,333     $ 2,016,084             $9,022                   $5,311,439  

Executive Vice President and Chief Growth and Transformation Officer

             

Monica M. Weed

  $ 2,038,875     $ 1,524,236             $10,421                   $3,573,532  

Executive Vice President, General Counsel, and Secretary

             

 

(1)

The amounts reported in the “Cash,” “Equity” and “Perquisites/Benefits” columns are attributable to double-trigger arrangements (i.e., the amounts are triggered by the change in control that will occur upon completion of the merger and payment is conditioned upon the named executive officer’s qualifying termination of employment within one year following the change in control).

 

(2)

Amounts reflect cash severance benefits under the employment agreements that would be payable in a lump sum, assuming a termination of the named executive officer’s employment for any reason other than cause, resignation under circumstances not constituting a constructive termination of employment (or resignation without good reason, in the case of Ms. Howard), death or disability, as described in the employment agreements, in each case, within one year following a change in control and subject to the named executive officer’s execution and non-revocation of a general release of claims in favor of Company and continued compliance with any restrictive covenants, as follows: (i) two times (or, in the case of Ms. Howard, three times) the named executive officer’s annual base salary (Ms. Howard $2,700,000, Mr. Lieberman $1,000,000, Mr. Spirer $1,300,000, and Ms. Weed $950,000), (ii) two times (or, in the case of Ms. Howard, three times) the named executive officer’s average annual incentive for the three most recently completed years (Ms. Howard $3,562,000, Mr. Lieberman $834,264, Mr. Spirer $1,444,667, and Ms. Weed $792,000), and (iii) a pro-rata annual incentive for the year in which the termination occurs, (based on an estimate of company performance for the period before the date of termination, as determined by the compensation committee of the Company’s board), which we have assumed for these purposes to be the target annual incentives awarded to each named executive officer for 2019 (Ms. Howard $900,000, Mr. Lieberman $312,500, Mr. Spirer $541,667, and Ms. Weed $296,875).

 

(3)

Amounts reflect the acceleration value of the unvested restricted stock unit awards held by each named executive officer, as described in more detail above in the section entitled “The Agreement and Plan of Merger—Treatment of Outstanding Equity Awards and Equity Plans.” As of the assumed effective time, none of the named executive officers held unvested stock option awards. Each outstanding and unvested Company restricted stock unit award held by an executive officer will be assumed by the surviving corporation and converted into a replacement restricted cash award representing the right to receive an amount in cash, without interest, equal to (i) with respect to restricted stock unit awards subject to performance conditions (A) that have ended prior to the effective time, the product of (1) the merger consideration and (2) the number of restricted stock units subject to the Company restricted stock unit award as of immediately prior to the effective time based on actual performance and (B) that have not ended prior to the effective time, the product of (1) the merger consideration and (2) the number of restricted stock units subject to the Company restricted stock unit award assuming performance at 100% of target levels and

 

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  (ii) with respect to restricted stock unit awards subject solely to time-based vesting, the product of (A) the merger consideration and (B) the number of restricted stock units subject to the Company restricted stock unit award, in each case subject to the same time-based vesting conditions and settlement dates as in effect as of immediately prior to the closing of the merger. Under the terms of the applicable award agreements, outstanding restricted stock unit awards will vest in full in the event the executive officer’s employment is terminated by the Company without cause or by the executive officer due to good reason within 24 months following a change in control of the Company.

 

(4)

As of the assumed effective time, none of the Company’s named executive officers participate in or have account balances in a qualified or non-qualified defined benefit plan or a non-qualified deferred compensation plan sponsored or maintained by the Company.

 

(5)

Amounts reflect payments, as provided for under the employment agreements, in respect of the monthly cost of maintaining health benefits under COBRA for the named executive officer (and his or her spouse and dependents) under the Company’s group health plan, based on the insurance premiums in effect as of the assumed effective time, for a period of 12 months (or, in the case of Ms. Howard, 24 months) following termination of employment.

 

(6)

None of the named executive officers are eligible to receive a tax reimbursement based on or otherwise related to the merger. The employment agreements provide that the change in control benefits payable to the named executive officers are subject to reduction to avoid the imposition of excise taxes under Section 4999 of the Code in the event such reduction would result in a better after-tax result for the named executive officer. The amounts above do not reflect any possible reductions under that provision.

Director and Officer Indemnification and Insurance Information

Pursuant to the merger agreement, from and after the effective time, Parent is obligated to cause the surviving corporation to, to the fullest extent permitted by applicable law, indemnify, defend and hold harmless each current or former director, officer or employee of the Company or any of the Company’s subsidiaries and each fiduciary under benefit plans of the Company or any of its subsidiaries and each person who performed services at the request of the Company or any of its subsidiaries (we refer to each as an “indemnified party”), against (i) all losses, expenses (including reasonable attorneys’ fees and expenses), judgments, fines, claims, damages or liabilities or, subject to the proviso of the next sentence, amounts paid in settlement, arising out of actions or omissions occurring at or prior to the effective time (and whether asserted or claimed prior to, at or after the effective time) to the extent that they are based on or arise out of the fact that such person is or was a director, officer, employee or fiduciary under benefit plans prior to the effective time (which we refer to as “indemnified liabilities”), and (ii) all indemnified liabilities to the extent they are based on or arise out of or pertain to the transactions contemplated by the merger agreement, whether asserted or claimed prior to, at or after the effective time, and including any expenses incurred in enforcing such person’s rights. In the event of any indemnified liability (whether or not asserted before the effective time), the surviving corporation will promptly pay the reasonable fees and expenses of counsel selected by the indemnified parties promptly after statements therefor are received and otherwise advance to such indemnified party upon request, reimbursement of documented expenses reasonably incurred (provided that the person to whom expenses are advanced provides an undertaking to repay such advance if it is determined by a final and non-appealable judgment of a court of competent jurisdiction that such person is not legally entitled to indemnification under the applicable law).

Also, the Company will be permitted to, prior to the effective time (and, if the Company fails to do so, Parent will cause the surviving corporation to), obtain and fully pay the premium for a “tail” insurance and indemnification policy that provides coverage for a period of six years from and after the effective time for events occurring prior to the effective time (which we refer to as the “D&O insurance”) that is substantially equivalent to and in any event not less favorable in the aggregate to the intended beneficiaries thereof than the Company’s existing directors’ and officers’ liability insurance policy. If the Company and the surviving corporation for any reason fail to obtain such “tail” insurance policy as of the effective time, the surviving corporation will, and Parent will cause the surviving corporation to, continue to maintain in effect for a period of

 

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at least six years from and after the effective time the D&O insurance in place as of the date of the merger agreement with terms, conditions, retentions and limits of liability that are at least as favorable as provided in the Company’s existing policies as of the date of the merger agreement, or the surviving corporation will, and Parent will cause the surviving corporation to, purchase comparable D&O insurance for such six year period (and for so long thereafter as any claims brought before the end of such six year period thereunder are being adjudicated) with terms, conditions, retentions and limits of liability that are at least as favorable as provided in the Company’s existing policies as of the date of the merger agreement.

In addition, for not less than six years following the effective time, Parent and the surviving corporation must maintain provisions in the organizational documents of the surviving corporation and its subsidiaries with respect to exculpation, indemnification and advancement of expenses that are no less favorable than the analogous provisions contained in the organizational documents of the Company and its subsidiaries in effect immediately prior to the effective time. The contractual indemnification rights of the directors and officers of the Company will be assumed by the surviving corporation by virtue of the merger and will continue in full force and effect in accordance with their terms following the effective time.

For additional information, see the section entitled “The Agreement and Plan of Merger—Director and Officer Indemnification and Insurance Information,” beginning on page [●].

New Employment Arrangements

As of the date of this proxy statement, none of the members of our Board or our executive officers has entered into any agreement, arrangement or understanding with Sponsor, Parent or any of its or their respective executive officers, directors or affiliates regarding employment with, or the right to purchase or participate in the equity of, Parent, the surviving corporation or any of their affiliates. Although no such agreement, arrangement or understanding exists as of the date of this proxy statement, (i) certain of our executive officers may, prior to the completion of the merger, enter into new arrangements with Parent or its affiliates regarding employment with, or the right to purchase or participate in the equity of, Parent or certain of its affiliates, including the surviving corporation, and (ii) as noted in the section entitled “The Merger—Background of the Merger,” beginning on page [●], Sponsor has inquired as to whether Ms. Howard would be interested in serving on the board of directors of Parent, without proposing or discussing any terms, including compensation, relating to Ms. Howard’s service on Parent’s board, and Ms. Howard has indicated she has not determined whether she is interested in being a member of the board of directors of Parent.

Certain Effects of the Merger

If the proposal to adopt the merger agreement is approved by the holders of shares of Company common stock representing a majority of the outstanding shares of Company common stock entitled to vote on such matter and the other conditions to the closing of the merger are either satisfied or (to the extent permitted by applicable law) waived, Sub will be merged with and into the Company upon the terms set forth in the merger agreement. As the surviving corporation in the merger, the Company will continue to exist following the merger as a wholly-owned subsidiary of Parent.

Following the completion of the merger, all of the Company’s equity interests will be beneficially owned by Parent, and, by virtue of the merger, none of the Company’s current stockholders will have any ownership interest in, or be a stockholder of, the Company, the surviving corporation or Parent. As a result, the Company’s current stockholders will no longer benefit from any increase in the value, nor will they bear the risk of any decrease in the value, of Company common stock. Following the merger, Parent will benefit from any increase in the Company’s value and also will bear the risk of any decrease in the Company’s value.

At the effective time, except as described below, each share of Company common stock issued and outstanding immediately prior to the effective time (other than (i) shares of Company common stock that are held

 

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in the treasury of the Company or owned of record by any subsidiary of the Company and all shares owned of record by Parent, Sub or any of their respective subsidiaries, in each case immediately prior to the effective time and (ii) shares of Company common stock held by stockholders who have not voted in favor of, or consented to the adoption of, the merger agreement and who have properly demanded appraisal of such shares and complied in all respects with all the provisions of the DGCL concerning the right of holders of shares to request appraisal of their shares) will be cancelled and automatically converted into the right to receive $28.00 in cash, without interest thereon, subject to any applicable withholding taxes.

For information regarding the effects of the merger on the Company’s outstanding equity awards and the Company’s equity plans, please see the section entitled “The Merger—Interests of Directors and Executive Officers in the Merger,” beginning on page [●], and the section entitled “The Agreement and Plan of Merger—Treatment of Outstanding Equity Awards and Equity Plans,” beginning on page [●].

Company common stock is currently registered under the Securities Exchange Act of 1934 (as amended, the “Exchange Act”) and trades on the New York Stock Exchange (which we refer to as the “NYSE”) under the symbol “NCI.” Following the completion of the merger, shares of Company common stock will no longer be traded on the NYSE or any other public market. In addition, the registration of shares of Company common stock under the Exchange Act will be terminated, and the Company will no longer be required to file periodic and other reports with the SEC with respect to Company common stock. Termination of registration of Company common stock under the Exchange Act will reduce the information required to be furnished by the Company to the Company stockholders and the SEC, and would make certain provisions of the Exchange Act, such as the requirement to file annual and quarterly reports pursuant to Section 13(a) or 15(d) of the Exchange Act, the short-swing trading provisions of Section 16(b) of the Exchange Act and the requirement to furnish a proxy statement in connection with stockholders’ meetings pursuant to Section 14(a) of the Exchange Act, no longer applicable to the Company, to the extent that such provisions apply solely as a result of the registration of Company common stock under the Exchange Act.

Consequences if the Merger is Not Completed

If the proposal to adopt the merger agreement is not approved by the holders of shares representing a majority of the outstanding shares of Company common stock entitled to vote on such matter or if the merger is not completed for any other reason, holders of shares of Company common stock will not receive any consideration from Parent or Sub for such holder’s shares of Company common stock. Instead, the Company will remain a public company, and Company common stock will continue to be listed and traded on the NYSE. We expect that holders of shares of Company common stock would continue to be subject to the same risks to which they are currently subject with respect to their ownership of Company common stock. If the merger is not completed, there can be no assurance as to the effect of these risks and opportunities on the future value of Company common stock, including the risk that the market price of Company common stock may decline to the extent that the current market price of Company common stock reflects a market assumption that the merger will be completed. If the proposal to adopt the merger agreement is not approved by the holders of shares representing a majority of the outstanding shares of Company common stock entitled to vote on such matter, or if the merger is not completed for any other reason, there can be no assurance that any other transaction acceptable to us will be offered or that the Company’s business, prospects or results of operations will not be adversely impacted.

In addition, if the merger agreement is terminated under specified circumstances, the Company is required to pay Parent a termination fee of $30.9 million. Upon termination of the merger agreement under certain circumstances, Parent will be obligated to pay the Company a termination fee of $67.5 million. See the section entitled “The Agreement and Plan of Merger—Expenses; Termination Fees,” beginning on page [●].

Financing of the Merger

The Company anticipates that the total funds needed to complete the merger, including the funds needed to pay Company stockholders and holders of other equity-based interests the amounts due to them under the merger

 

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agreement, which would be approximately $1.12 billion based upon the number of shares of Company common stock (and the Company’s other equity-based interests) outstanding as of August 26, 2019, will be funded through a combination of up to $840 million of debt financing (in addition to an incremental revolving line commitment, which Parent does not anticipate to be a source of funds for financing the merger consideration payable under the merger agreement) and up to $320 million of equity financing.

Equity Financing

Parent has entered into an equity financing commitment letter, dated as of August 2, 2019 (which we refer to as the “equity financing commitment letter”), by and between The Veritas Capital Fund VI, L.P. (“Sponsor”) and Parent, which obligates Sponsor to fund to Parent an aggregate amount up to $320 million, subject to the terms and conditions set forth in the equity financing commitment letter, for the purpose of enabling Parent to fund a portion of the merger consideration. The Company is an express third party beneficiary of the equity financing commitment letter for purposes of enforcing Sponsor’s obligations under the equity financing commitment letter and, subject to the terms and conditions of the equity financing commitment letter, has the ability to specifically enforce the equity financing commitment letter if (i) all of the conditions to Parent’s obligation to consummate the transactions contemplated by the merger agreement (other than those conditions that by their nature are only capable of being satisfied at the closing; provided, that such conditions would have been satisfied if the closing were to occur) have been satisfied or waived, as more fully described in the section entitled “The Agreement and Plan of Merger—Conditions to the Merger,” beginning on page [●], (ii) the Company has irrevocably notified Parent in writing that (A) all of the conditions to the Company’s obligations to consummate the merger contemplated by the merger agreement (other than those conditions that by their nature are only capable of being satisfied at the closing; provided, that such conditions would have been satisfied if the closing were to occur) have been satisfied or waived and (B) the Company is ready, willing and able to consummate the closing, (iii) the debt financing has been funded or will be funded at the closing and (iv) Parent and Sub have failed to consummate the closing on the later of (X) the date by which the closing is required to have occurred pursuant to the merger agreement and (Y) the earlier of (1) three business days following the receipt of the Company’s irrevocable written notification and (2) December 30, 2019 (which we refer to as the “outside date”), in each case subject to the conditions and limitations described in the sections entitled “The Agreement and Plan of Merger—Effect of Termination” beginning on page [●] and “The Agreement and Plan of Merger—Miscellaneous—Specific Performance” beginning on page [●].

Debt Financing

Parent has entered into a debt commitment letter, dated as of August 2, 2019 (as supplemented through the joinder dated as of August 23, 2019 which we refer to as the “debt commitment letter”), with Royal Bank of Canada, UBS AG, UBS Securities LLC, Macquarie Capital (USA) Inc., Macquarie Capital Funding LLC, Credit Suisse Loan Funding LLC, Credit Suisse AG and Chain Bridge Opportunistic Funding, LLC (collectively, the “debt commitment parties”) as commitment parties thereunder. Pursuant to and subject to the terms of the debt commitment letter, the debt commitment parties committed to provide, among other things, a $640 million incremental senior secured first lien term loan facility and a $200 million incremental senior secured second lien term loan facility under Parent’s existing credit facility (in addition to an incremental revolving line commitment, which Parent does not anticipate to be a source of funds for financing the merger consideration payable under the merger agreement) (which we refer to as the “debt financing”) to, among other things, (i) pay the merger consideration payable under the merger agreement, (ii) refinance certain existing indebtedness for borrowed money and (iii) pay any and all fees and expenses in connection with the merger or the financing thereof. The debt commitment letter terminates automatically on the earliest to occur of (A) the consummation of the merger without the funding of the debt financing, (B) the closing date of the merger, (C) 5:00 p.m., Eastern time, January 7, 2020 and (D) the date of the valid termination of the merger agreement.

 

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To the knowledge of the Company, as of the date of this proxy statement, no alternative financing arrangements or alternative financing plans have been made in the event the debt financing described in this proxy statement is not available.

The completion of the merger is not conditioned upon Parent’s or Sub’s receipt of financing.

Limited Guarantee

The Company and Sponsor have entered into the limited guarantee, dated as of August 2, 2019 (which we refer to as the “limited guarantee”), under which Sponsor, as guarantor, has guaranteed the due and punctual payment to the Company of the termination fee of $67.5 million (which we refer to as the “Parent termination fee”) if and when due under the merger agreement, certain reimbursement and indemnification obligations related to the debt financing and certain payment and reimbursement obligations specified in the merger agreement that may be owed by Parent pursuant to the merger agreement, subject to a maximum aggregate liability equal to $67.5 million. The limited guarantee is binding on Sponsor until the complete and indefeasible payment and satisfaction in full of Parent’s guaranteed obligations under the merger agreement, subject to the maximum liability in the previous sentence. The limited guarantee terminates at the earliest of (i) the closing, (ii) six months following the valid termination of the merger agreement by the Company due to Parent’s breach or failure to perform under the merger agreement or Parent’s failure to consummate the merger, in each case pursuant to the merger agreement, (iii) the valid termination of the merger agreement pursuant to its terms other than by the Company as described in clause (ii) above, (iv) any modification or amendment of the merger agreement (A) that affects the termination provisions of the merger agreement or (B) that could increase any liability of or impose any obligation on, or adversely affect Sponsor in its capacity as guarantor, without Sponsor’s prior written consent; and (v) except as otherwise provided in the limited guarantee, if the Company brings a claim against a non-recourse party, claims a provision of the limited guarantee is unenforceable, or that the guarantor owes more than the maximum permitted liability as set forth in the limited guarantee.

Material U.S. Federal Income Tax Consequences of the Merger

The following is a summary of material U.S. federal income tax consequences of the merger to beneficial owners of Company common stock who receive cash for their shares of Company common stock in the merger. This summary is general in nature and does not discuss all aspects of U.S. federal income taxation that might be relevant to a beneficial owner of shares in light of such beneficial owner’s particular circumstances. In addition, this summary does not describe any tax consequences arising under the laws of any state, local or foreign jurisdiction and does not consider any aspects of U.S. federal tax law other than income taxation. This summary only addresses shares of Company common stock held as capital assets within the meaning of Section 1221 of the Code (generally, property held for investment). This summary does not address the U.S. federal income tax consequences to holders of shares who demand appraisal rights under Section 262 of the DGCL. This summary does not address all U.S. federal income tax consequences relevant to a holder’s particular circumstances, including the impact of the Medicare contribution tax on net investment income. This summary also does not address tax considerations applicable to any holder of shares 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 or governmental organization;

 

   

a retirement plan or other tax-deferred account;

 

   

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

 

   

a mutual fund;

 

   

a real estate investment trust or regulated investment company;

 

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a personal holding company;

 

   

a dealer or broker in stocks and securities or currencies;

 

   

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

 

   

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

 

   

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

 

   

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

 

   

a “controlled foreign corporation,” “passive foreign investment company” or corporation that accumulates earnings to avoid U.S. federal income tax;

 

   

a holder that holds shares 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-time resident of the United States.

This summary is based on the Code, the Treasury regulations promulgated under the Code and rulings and judicial decisions, all as in effect as of the date of this proxy statement, and all of which are subject to change or differing interpretations at any time, with possible retroactive effect. Any such change or differing interpretation may be applied retroactively in a manner that could adversely affect a holder of the shares. We have not sought, and do not intend to seek, any ruling from the U.S. Internal Revenue Service (which we refer to as the “IRS”) with respect to the statements made and the conclusions reached in the following summary. No assurance can be given that the IRS will agree with the views expressed in this summary, or that a court will not sustain any challenge by the IRS in the event of litigation.

THIS DISCUSSION 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 BENEFICIAL OWNERS OF SHARES TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES, INCLUDING FEDERAL ESTATE, GIFT AND OTHER NON-INCOME TAX CONSEQUENCES, AND TAX CONSEQUENCES UNDER STATE, LOCAL OR FOREIGN TAX LAWS, OR UNDER ANY APPLICABLE INCOME TAX TREATY, INCLUDING POSSIBLE CHANGES IN SUCH LAWS OR TREATIES.

For purposes of this discussion, we use the term “U.S. holder” to mean 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 other entity treated as a corporation for U.S. federal income tax purposes) created or organized under the laws of the United States, any state thereof or the District of Columbia;

 

   

a trust that (i) is subject to the supervision of a court within the United States and the control of one or more U.S. persons (within the meaning of Section 7701(a)(30) of the Code) or (ii) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person; or

 

   

an estate that is subject to U.S. federal income tax on its income regardless of its source.

We use the term “non-U.S. holder” to mean a beneficial owner of Company common stock (other than a partnership or other entity or arrangement treated as a partnership for U.S. federal income tax purposes) that is not a U.S. holder.

If a partnership (including an entity or arrangement treated as a partnership for U.S. federal income tax purposes) beneficially owns shares of Company common stock, the tax treatment of the partnership and its

 

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partners generally will depend on the status of the partners and the activities of the partnership. A partner in a partnership holding shares of Company common stock should consult such partner’s tax advisor.

U.S. Holders

General. A U.S. holder’s receipt of cash in exchange for shares of Company common stock pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes, and a U.S. holder who receives cash in exchange for shares of Company common stock in the merger will recognize gain or loss equal to the difference, if any, between the amount of cash received and the U.S. holder’s adjusted tax basis in the shares. A U.S. holder’s adjusted tax basis in a share generally will be equal to the amount the U.S. holder paid for the share. Gain or loss will be determined separately for each block of shares of Company common stock (that is, shares 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 the U.S. holder’s holding period for the shares is more than one year at the effective time. Long-term capital gain recognized by individuals and other non-corporate persons that are U.S. holders generally is subject to tax at a reduced rate of U.S. federal income tax. There are limitations on the deductibility of capital losses.

Information Reporting and Backup Withholding. A U.S. holder may be subject to information reporting. In addition, all payments to which a U.S. holder would be entitled pursuant to the merger will be subject to backup withholding at the statutory rate unless such holder (i) is a corporation or other exempt recipient (and, when required, demonstrates this fact), or (ii) provides a taxpayer identification number (which we refer to as a “TIN”) and certifies, under penalty of perjury, that the U.S. holder is not subject to backup withholding, and otherwise complies with applicable requirements of the backup withholding rules. A U.S. holder that does not otherwise establish exemption should complete and sign the IRS Form W-9 in order to provide the information and certification necessary to avoid backup withholding and possible penalties. If a U.S. holder does not provide a correct TIN, such U.S. holder may be subject to backup withholding and penalties imposed by the IRS.

Any amount paid as backup withholding does not constitute an additional tax and will be creditable against a U.S. holder’s U.S. federal income tax liability, provided the required information is given to the IRS in a timely manner. If backup withholding results in an overpayment of tax, a U.S. holder may obtain a refund by filing a U.S. federal income tax return in a timely manner. U.S. holders are urged to consult their tax advisors as to qualifications for exemption from backup withholding and the procedure for obtaining the exemption.

Non-U.S. Holders

General. A non-U.S. holder’s receipt of cash for shares of Company common stock pursuant to the merger generally will not be subject to U.S. federal income tax 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 merger 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 tax treaty, attributable to a permanent establishment maintained by the non-U.S. holder in the United States; or

 

   

we are or have been a United States real property holding corporation, or “USRPHC,” for U.S. federal income tax purposes at any time during the shorter of the five-year period ending on the date of the merger or the period that the non-U.S. holder held our shares and the non-U.S. holder held (actually or constructively) more than five percent of our shares at any time during the five-year period ending on the date of the merger.

Gain described in the first bullet point above generally will be subject to tax at a flat rate of 30% (or such lower rate as may be specified under an applicable income tax treaty), net of applicable U.S.-source losses from

 

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sales or exchanges of other capital assets recognized by such non-U.S. holder during the taxable year even though the individual is not considered a resident of the United States, provided the non-U.S. holder has timely filed U.S. federal income tax returns with respect to such losses. Unless a 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 U.S. holder. A non-U.S. holder that is a foreign corporation also may be subject to a 30% branch profits tax (or applicable lower treaty rate). Non-U.S. holders are urged to consult their tax advisors as to any applicable tax treaties that might provide for different rules.

With respect to the third bullet point above, the determination whether we are a USRPHC depends on the fair market value of our United States real property interests relative to the fair market value of our other trade or business assets and our United States and foreign real property interests. We believe that we have not been a USRPHC for U.S. federal income tax purposes at any time during the five-year period ending on the date of the merger.

Information Reporting and Backup Withholding. Information reporting and backup withholding will generally apply to payments made pursuant to the merger to a non-U.S. holder effected by or through the U.S. office of any broker, U.S. or foreign, unless the holder certifies its status as a non-U.S. holder and satisfies certain other requirements, or otherwise establishes an exemption. Dispositions effected through a non-U.S. office of a U.S. broker or a non-U.S. broker with substantial U.S. ownership or operations generally will be treated in a manner similar to dispositions effected through a U.S. office of a broker. A non-U.S. holder must generally submit an IRS Form W-8BEN or W-8BEN-E (or other applicable IRS Form W-8) attesting to its exempt foreign status in order to qualify as an exempt recipient. Any amount paid as backup withholding does not constitute an additional tax and will be creditable against a non-U.S. holder’s U.S. federal income tax liability, provided the required information is given to the IRS in a timely manner. If backup withholding results in an overpayment of tax, a non-U.S. holder may obtain a refund by filing a U.S. federal income tax return in a timely manner. Non-U.S. holders are urged to consult their tax advisors as to qualifications for exemption from backup withholding and the procedure for obtaining the exemption. Copies of information returns that are filed with the IRS may also be made available under an applicable tax treaty or information exchange agreement to the tax authorities of the country in which the non-U.S. holder resides or is established.

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 ARE URGED TO CONSULT THEIR TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE RECEIPT OF CASH FOR THEIR SHARES PURSUANT TO THE MERGER UNDER ANY U.S. FEDERAL, STATE, FOREIGN, LOCAL OR OTHER TAX LAWS, OR UNDER ANY APPLICABLE INCOME TAX TREATY.

Regulatory Approvals

Hart-Scott-Rodino Antitrust Improvements Act of 1976

On August 14, 2019, the Company and Parent filed their respective notification and report forms under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (as amended, the “HSR Act”) with the Antitrust Division of the Department of Justice (which we refer to as the “DOJ”) and the United States Federal Trade Commission (which we refer to as the “FTC”), which triggered the start of the HSR Act waiting period.

Regulatory Conditions to Completion of the Merger

At any time before or after the effective time, the DOJ, the FTC, antitrust authorities outside of the United States or U.S. state attorneys general could take action under applicable antitrust laws, including seeking to

 

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enjoin the completion of the merger, conditionally approving the merger upon the divestiture of the Company’s or Parent’s assets, subjecting the completion of the merger to regulatory conditions or seeking other remedies. Private parties may also seek to take legal action under the antitrust laws under certain circumstances.

Completion of the merger is conditioned on the expiration or termination of any applicable waiting period (and any extension thereof) under the HSR Act and the absence of any law or order restraining, enjoining, or otherwise prohibiting the consummation of the merger.

We currently expect to obtain during the third quarter of 2019 all antitrust and other regulatory approvals that are required for the completion of the merger, however, we cannot guarantee when any such approvals will be obtained or that they will be obtained at all.

 

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THE AGREEMENT AND PLAN OF MERGER

Explanatory Note Regarding the Merger Agreement

The summary of the material provisions of the merger agreement set forth below and elsewhere in this proxy statement is qualified in its entirety by reference to the merger agreement, a copy of which is attached to this proxy statement as Annex A, which is incorporated by reference in this proxy statement. This summary does not purport to be complete and may not contain all of the information about the merger agreement that is important to you. We encourage you to read the merger agreement carefully in its entirety.

The merger agreement is described in this proxy statement 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 or Sub or their respective businesses. Such information can be found elsewhere in this proxy statement or, in the case of the Company, in the public filings that the Company makes with the SEC, which are available without charge through the SEC’s website at www.sec.gov. See the section entitled “Where You Can Find More Information,” on page [●].

The representations, warranties and covenants made in the merger agreement by the Company, Parent and Sub are qualified and subject to important limitations agreed to by the Company, Parent and Sub in connection with negotiating the terms of the merger agreement. In particular, in your review of the representations and warranties contained in the merger agreement and described in this summary, it is important to bear in mind that the representations and warranties were negotiated with the principal purposes of establishing the circumstances in which a party to the merger agreement may have the right not to close the merger if the representations and warranties of the other party prove to be untrue due to a change in circumstance or otherwise, and allocating risk between the parties to the merger agreement. The representations and warranties may also be subject to a contractual standard of materiality different from those generally applicable to stockholders and reports and documents filed with the SEC, and in some cases were qualified by the Company disclosure letter, which such disclosures are not reflected in the text of the merger agreement. Moreover, information concerning the subject matter of the representations and warranties, which do not purport to be accurate as of the date of this proxy statement, may have changed since the date of the merger agreement and subsequent developments or new information qualifying a representation or warranty may or may not have been included in this proxy statement.

Date of the Merger Agreement

The merger agreement was executed by the Company, Parent and Sub on August 2, 2019 (the “date of the merger agreement”).

The Merger

The merger agreement provides that, upon the terms and subject to the conditions set forth in the merger agreement and the applicable provisions of the DGCL, at the effective time, Sub will be merged with and into the Company, the separate corporate existence of Sub will thereupon cease and the Company will continue as the surviving corporation of the merger. As a result of the merger, the Company, as the surviving corporation, will succeed to and assume all of the rights and obligations of Sub and the Company in accordance with the DGCL, as a wholly-owned subsidiary of Parent.

Closing; Effective Time of the Merger

The closing of the merger will take place on the third business day after each of the conditions set forth in the merger agreement are satisfied, or to the extent permitted by law, waived by the party entitled to waive such condition (other than those conditions that, by their terms, are only capable of being satisfied on the closing date, but subject to the satisfaction or, if permissible, waiver of such conditions by the party entitled to waive such

 

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conditions) or another date or place agreed to in writing by the parties to the merger agreement. However, the parties are not required to consummate the closing prior to the earlier of (i) the second business day after the end of the marketing period (as described below) and (ii) the date during the marketing period agreed to in writing by Parent and the Company (we refer to the date on which the closing occurs as the “closing date”).

The “marketing period” is the first period of fifteen consecutive business days following the Parent’s receipt the required information (as described below). Notwithstanding the foregoing, (i) the marketing period may not commence prior to September 3, 2019 and (ii) November 29, 2019 will not be considered a business day.

Required information” means (i) audited financial statements of the Company for the fiscal years ended December 31, 2018, December 31, 2017 and December 31, 2016 and subsequent fiscal years ended at least 90 days before the closing date and (ii) quarterly unaudited financial statements of the Company for each subsequent fiscal quarter other than the fourth quarter ended at least 45 days before the closing date, in each case, with comparative financial information for the equivalent period of the prior year. Parent has received audited financial statements of the Company for the fiscal years ended December 31, 2018, December 31, 2017 and December 31, 2016 and unaudited financial statements of Company for the quarters ended March 31, 2019 and June 30, 2019.

Concurrently with the closing, the Company will cause a certificate of merger with respect to the merger to be executed, acknowledged and filed with the Secretary of State of the State of Delaware as provided in the DGCL. The merger shall become effective on the date and at the time when the certificate of merger has been duly filed with the Secretary of State of the State of Delaware or at such later time as may be agreed upon by the parties to the merger agreement in writing and set forth in the certificate of merger in accordance with the DGCL.

Organizational Documents; Directors and Officers

The merger agreement provides that, at the effective time, (i) the amended and restated certificate of incorporation of the surviving corporation, as in effect immediately prior to the effective time, will be amended and restated in the form attached to the merger agreement until thereafter amended in accordance with applicable law and the applicable provisions of the amended and restated certificate of incorporation and the amended and restated by-laws of the surviving corporation, and (ii) the parties will cause the by-laws of Sub, as in effect immediately prior to the effective time, to be the by-laws of the surviving corporation (except that references to the name of Sub will be replaced by references to the name of the surviving corporation) until thereafter amended in accordance with applicable law and the applicable provisions of the amended and restated certificate of incorporation and the amended and restated by-laws of the surviving corporation.

Additionally, the merger agreement provides that the board of directors of the surviving corporation effective as of, and immediately following, the effective time will consist of the members of the board of directors of Sub immediately prior to the effective time. At the closing, the Company will deliver the resignations of each of the directors and officers of the Company that have been requested by Parent under the merger agreement. Furthermore, from and after the effective time, the officers of Sub at the effective time will be the officers of the surviving corporation. Each such director will hold office until his or her successor is duly elected or appointed and qualified or until his or her earlier death, resignation or removal in accordance with the amended and restated certificate of incorporation and the by-laws of the surviving corporation and each such officer will hold office in accordance with the amended and restated certificate of incorporation and the amended and restated by-laws of the surviving corporation.

Merger Consideration

Outstanding Company Common Stock

At the effective time, except as described below, each share of Company common stock issued and outstanding immediately prior to the effective time (other than (i) shares of Company common stock that are held

 

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in the treasury of the Company or owned of record by the Company or any subsidiary of the Company and all shares owned of record by Parent, Sub or any of their respective subsidiaries, in each case immediately prior to the effective time and (ii) shares of Company common stock held by stockholders who have not voted in favor of, or consented to the adoption of, the merger agreement and who have properly demanded appraisal of such shares and complied in all respects with all the provisions of the DGCL concerning the right of holders of shares to request appraisal of their shares) will be cancelled and automatically converted into the right to receive $28.00 in cash, without interest thereon, subject to any applicable withholding taxes and the following paragraph.

Company-Owned and Parent-Owned Company Common Stock

At the effective time, all shares of Company common stock that are held in the treasury of the Company or owned of record by any of the Company or any Company subsidiaries and all shares of Company common stock owned of record by Parent, Sub or any of their respective subsidiaries will be cancelled and will cease to exist, with no payment being made with respect thereto.

Sub Capital Stock

At the effective time, each issued and outstanding share of capital stock of Sub will be automatically converted into and become one validly issued, fully paid and nonassessable share of common stock, par value $0.01 per share, of the surviving corporation.

Dissenting Shares

All Company common stock that is issued and outstanding immediately prior to the effective time and held by a person who did not vote in favor of or consent to the adoption of the merger agreement and who properly demanded appraisal of such shares and complied in all respects with all the applicable provisions of the DGCL (which we refer to as “dissenting shares”) will not be converted into the right to receive the merger consideration, but will be converted into the right to receive fair value of such shares as determined pursuant to the procedures set forth in Section 262 of the DGCL. We refer to a holder of dissenting shares as a “dissenting stockholder.” If such dissenting stockholder withdraws its demand for appraisal or fails to perfect or otherwise loses or waives its right of appraisal, in any case pursuant to the DGCL, its shares will be deemed to be converted as of the effective time into the right to receive the merger consideration, without interest.

The merger agreement provides that the Company will give Parent prompt written notice of any demands or written threats for appraisal of shares of Company common stock received by the Company, withdrawals of such demands or threats and any other instruments served on the Company pursuant to Section 262 of the DGCL, and Parent will have the opportunity to direct all negotiations and proceedings with respect to such demands for appraisal rights. The Company will not, without the prior written consent of Parent, make any payment with respect to, or settle or offer to settle, or approve any withdrawal of, such demands.

Treatment of Outstanding Equity Awards and Equity Plans

Company Stock Options

The merger agreement provides that, as of immediately prior to the effective time and upon the terms and subject to the conditions set forth therein, each outstanding Company stock option will be fully vested and cancelled, and each holder of a cancelled company stock option will receive a payment in cash, without interest, equal to the product of (i) the total number of shares subject to the cancelled company stock option and (ii) the excess, if any, of (A) the merger consideration over (B) the exercise price per share subject to the cancelled company stock option; provided, however, that (i) any such company stock option with respect to which the exercise price per share subject thereto is equal to or greater than the merger consideration will be cancelled in exchange for no consideration and (ii) such payments will be reduced by the amount of any required tax withholdings as contemplated by the merger agreement.

 

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Restricted Stock Unit Awards

The merger agreement provides that, as of immediately prior to the effective time and upon the terms and subject to the conditions set forth therein, each outstanding and unvested Company restricted stock unit award (other than any restricted stock unit award held by the Company’s non-employee directors) will be assumed by the surviving corporation and converted into a replacement restricted cash award representing the right to receive an amount in cash, without interest, equal to (i) with respect to restricted stock unit awards subject to performance conditions (A) that have ended prior to the effective time, the product of (1) the merger consideration and (2) the number of restricted stock units subject to the Company restricted stock unit award as of immediately prior to the effective time based on actual performance and (B) that have not ended prior to the effective time, the product of (1) the merger consideration and (2) the number of restricted stock units subject to the Company restricted stock unit award assuming performance at 100% of target levels and (ii) with respect to restricted stock unit awards subject solely to time-based vesting, the product of (A) the merger consideration and (B) the number of restricted stock units subject to the Company restricted stock unit award, in each case, subject to the same time-based vesting conditions and settlement dates as in effect as of immediately prior to the effective time.

The merger agreement provides that, as of immediately prior to the effective time and upon the terms and subject to the conditions set forth therein, each outstanding and unvested Company restricted stock unit award held by non-employee directors of the Company will be fully vested and cancelled, and each holder of a cancelled restricted stock unit award will receive a payment in cash, without interest, equal to the product of (i) the merger consideration and (ii) the total number of shares subject to the cancelled restricted stock unit award.

Company Stock Plans and Employee Stock Purchase Plan

The merger agreement provides that (i) as of the effective time, the Company’s 2017 Long-Term Incentive Plan and the Company’s Amended and Restated 2012 Long-Term Incentive Plan will be terminated and (ii) as of immediately prior to the effective time, the Company’s Employee Stock Purchase Plan (which we refer to as the “ESPP”) will be terminated. As of the date of the merger agreement, no new Offering Period (as defined in the ESPP) will commence. Prior to the closing, the Company will (A) cause the Purchase Date (as defined in the ESPP) with respect to any Offering Period that would otherwise occur on or after the effective time, if any, to occur no later than one business day prior to the date on which the effective time occurs, (B) make any pro rata adjustments that may be necessary to reflect the shortened Offering Period, but otherwise treat such shortened Offering Period as a fully effective and completed Offering Period for all purposes pursuant to the ESPP, and (C) cause the exercise (as of no later than one business day prior to the effective time) of each outstanding purchase right pursuant to the ESPP. On such exercise date, if any, the Company will apply the funds credited as of such date pursuant to the ESPP within each participant’s payroll withholding account to the purchase of whole shares of Company common stock in accordance with the terms of the ESPP and will cause the remaining accumulated but unused payroll deductions to be distributed to the relevant participants without interest as promptly as practicable following such exercise date. Shares of Company common stock purchased under the ESPP will be exchanged for the merger consideration.

Exchange Procedures

The merger agreement provides that at or prior to the effective time, Parent will deposit with a U.S.-based nationally recognized financial institution designated by Parent and reasonably acceptable to the Company (which we refer to as the “paying agent”), for the benefit of the holders of shares of Company common stock to receive the merger consideration, an amount in cash equal to the aggregate merger consideration to which Company stockholders will become entitled in connection with the merger (which we refer to as the “exchange fund”). In the event the exchange fund will be insufficient to make the payments of the merger consideration, Parent is required to promptly deposit, or cause to be deposited, additional funds by wire transfer of immediately available funds with the paying agent in an amount sufficient to make such payments.

 

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As promptly as practicable after the effective time and in any event not later than the second business day following the effective time, Parent is required to cause the paying agent to mail to each holder of record of a certificate representing a share of Company common stock (which we refer to as a “certificate”) whose shares of Company common stock were converted into the right to receive the merger consideration pursuant to the merger agreement: (i) a letter of transmittal (in customary form agreed to by Parent and the Company prior to the effective time), 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 (or affidavits of loss in lieu thereof) to the paying agent, and will otherwise be in such form and have such other provisions as Parent and the Company may agree; and (ii) instructions for effecting the surrender of the certificates in exchange for payment of the merger consideration. Upon surrender of any certificates (or affidavits of loss in lieu thereof) for cancellation to the paying agent, if applicable, and upon delivery of a letter of transmittal, duly executed and in proper form, with respect to such certificates, the holder of such certificates will be entitled to receive in exchange therefor the portion of the aggregate merger consideration into which the shares formerly represented by such certificates were converted pursuant to the merger agreement, and the certificates so surrendered will forthwith be cancelled. In the event of a transfer of ownership of Company common stock that is not registered in the transfer records of the Company, payment may be made and merger consideration may be issued to a person other than the person in whose name the certificate so surrendered is registered, if such certificate will be properly endorsed or will otherwise be in proper form for transfer and the person requesting such payment will either pay to the paying agent any transfer and other similar taxes required by reason of the payment of the merger consideration to a person other than the registered holder of the certificate so surrendered or will establish to the reasonable satisfaction of the paying agent that such taxes either have been paid or are not required to be paid.

Any holder of non-certificated shares of Company common stock represented by book-entry whose shares were converted into the right to receive the merger consideration at the effective time pursuant to the merger agreement will not be required to deliver a certificate or an executed letter of transmittal to the paying agent to receive the merger consideration that such holder is entitled to receive pursuant to the merger agreement (or such other amount paid in respect of dissenting shares pursuant to the merger agreement). In lieu thereof, each such registered holder of one or more non-certificated shares of Company common stock represented by book-entry will automatically upon the effective time be entitled to receive, and the surviving corporation will cause the paying agent to pay and deliver as promptly as reasonably practicable after the effective time (but in no event more than three business days thereafter), the merger consideration for each non-certificated shares of Company common stock represented by book-entry and such shares will forthwith be cancelled. Payment of the merger consideration with respect to non-certificated shares of Company common stock represented by book-entry will only be made to the person in whose name such shares are registered.

No interest will be paid or accrue on any portion of the merger consideration payable in respect of any certificate (or affidavit of loss in lieu thereof) or non-certificated share of Company common stock represented by book-entry.

YOU SHOULD NOT SEND IN YOUR STOCK CERTIFICATE(S) WITH YOUR PROXY CARD. A LETTER OF TRANSMITTAL WITH INSTRUCTIONS FOR THE SURRENDER OF CERTIFICATES REPRESENTING SHARES OF COMPANY COMMON STOCK WILL BE MAILED TO STOCKHOLDERS HOLDING CERTIFICATED SHARES OF COMPANY COMMON STOCK IF THE MERGER IS COMPLETED.

Lost, Stolen and Destroyed Certificates

If any certificate will have been lost, stolen or destroyed, upon the marking of an affidavit in form and substance reasonably acceptable to the paying agent of that fact by the person claiming such certificate to be lost, stolen or destroyed, the paying agent or the surviving corporation, as applicable, will issue in exchange for such lost, stolen or destroyed certificate the portion of the aggregate merger consideration into which the shares formerly represented by such certificate were converted pursuant to the merger agreement. However, the paying

 

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agent may, in its reasonable discretion and as a condition precedent to the payment of such merger consideration, require the owner of such lost, stolen or destroyed Company stock certificate to provide a bond in a customary amount.

Representations and Warranties

The Company, on the one hand, and Parent and Sub, on the other hand, have each made representations and warranties to each other in the merger agreement. The representations and warranties referenced below and included in the merger agreement were made only for purposes of the merger agreement and as of specific dates, were solely for the benefit of the parties to the merger agreement, may be subject to a contractual standard of materiality different from what might be viewed as material to Company stockholders and may be subject to limitations agreed upon by the parties, including being qualified by disclosures filed with or furnished to the SEC and confidential disclosures made by the Company to Parent and Sub in the disclosure letter delivered by the Company in connection with the merger agreement (which we refer to as the “Company disclosure letter”). The representations and warranties contained in the merger agreement should not be relied upon as characterizations of the actual state of facts or conditions of the Company, Parent, Sub or any of their respective subsidiaries, affiliates or businesses. The representations and warranties of each of the parties to the merger agreement will expire at the effective time.

Representations and Warranties of the Company

The Company has made customary representations and warranties to Parent and Sub in the merger agreement regarding aspects of the Company’s business and various other matters pertinent to the merger. The topics covered by the Company’s representations and warranties include the following:

 

   

the organization, qualification to do business and good standing of the Company;

 

   

the Company’s subsidiaries, including, among other things, the organization, qualification to do business, good standing, capital structure and absence of restrictions with respect to the capital stock of such subsidiaries;

 

   

the capital structure, and the absence of restrictions with respect to the capital stock and other securities, of the Company;

 

   

the Company’s authority to enter into, and, subject to receipt of the Company stockholder approval, consummate the transactions contemplated by the merger agreement;

 

   

the absence of conflicts with, or violations of, laws, organizational documents or contracts, in each case as a result of the Company’s execution or delivery of the merger agreement or the performance by the Company of its covenants under, or the consummation by the Company of the transactions contemplated by, the merger agreement;

 

   

the governmental and regulatory approvals required to complete the merger;

 

   

the Company’s and its subsidiaries’ governmental permits and compliance with law;

 

   

the Company’s SEC filings since January 1, 2017, the financial statements contained in such filings and off-balance sheet arrangements;

 

   

the information contained in this proxy statement;

 

   

the Company’s and its subsidiaries’ systems of internal control over financial reporting and disclosure controls and procedures;

 

   

the absence of any Company material adverse effect since January 1, 2019 and the absence of certain other changes or events since March 31, 2019;

 

   

the absence of undisclosed liabilities;

 

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the absence of pending or threatened litigation, audits, inquiries or investigations or outstanding orders;

 

   

employee benefits matters related to the Company and its subsidiaries;

 

   

labor matters related to the Company and its subsidiaries;

 

   

tax matters related to the Company and its subsidiaries;

 

   

the Company’s and its subsidiaries’ owned and leased real property;

 

   

environmental matters related to the Company and its subsidiaries;

 

   

the Company’s and its subsidiaries’ intellectual property;

 

   

contracts that would be required to be filed by the Company pursuant to Item 601(b)(10) of Regulation S-K under the Securities Act of 1933, as amended, and other contracts related to the Company and its subsidiaries that are described in the material contracts representation and warranty in the merger agreement (which we refer to as “material contracts”);

 

   

insurance coverage related to the Company and its subsidiaries;

 

   

the opinion of the Company’s financial advisor;

 

   

the inapplicability of takeover statutes to the merger;

 

   

the vote of holders of Company common stock required to approve the merger;

 

   

the absence of financial advisor’s, broker’s, finder’s or investment banker’s fees, other than those payable to the Company’s financial advisor, in connection with the transactions contemplated by the merger agreement;

 

   

the Company’s compliance with the requirements of any governmental contracts or bids since January 1, 2017;

 

   

the absence of transactions between the Company or any of the subsidiaries of the Company and any affiliate of the Company or any subsidiary of the Company that would be required to be reported by the Company pursuant to Item 404 of Regulation S-K promulgated under the Securities Act;

 

   

the Company’s relationship with its largest customers and largest vendors; and

 

   

the outcomes of certain projects undertaken by the Company since June 30, 2019.

Some of the Company’s representations and warranties are qualified by the concept of a “Company material adverse effect.” Under the terms of the merger agreement, a Company material adverse effect means any change, occurrence, development, condition, circumstance, event or effect (each of which, we refer to as an “effect”) that, individually or in the aggregate, together with all other effects (i) does or would reasonably be expected to prevent or materially delay or materially impair the ability of the Company to consummate the transactions contemplated by the merger agreement (other than as a result of any material breach of the merger agreement by Parent or Sub) or (ii) has a material adverse effect on the business, financial condition or continuing results of operations of the Company and the subsidiaries of the Company, taken as a whole. However, none of the following or any effect resulting or arising from the following, alone or in combination, will be taken into account in determining whether there has been a Company material adverse effect:

 

   

the entry into, performance of, announcement of, or pendency of, the merger agreement or the transactions contemplated by the merger agreement, including any termination of, reduction in or similar adverse impact on relationships, contractual or otherwise, with any landlords, customers, suppliers, vendors, business partners or employees, of the Company or the subsidiaries of the Company (except as applied to the non-contravention representation and warranty);

 

   

any change in or effect affecting the economy or the financial, credit or securities markets in the United States or elsewhere in the world, including interest rates or exchange rates or any changes therein, or any change in or effect affecting any business or industries in which the Company and its subsidiaries operate;

 

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any change in any applicable law or GAAP or other applicable accounting rules or the interpretation of any of the foregoing;

 

   

any action taken by the Company or any of the Company’s subsidiaries that is expressly required by the merger agreement;

 

   

the commencement, occurrence or escalation of any armed hostilities or acts of war, whether or not declared, or terrorism;

 

   

the existence or occurrence of any weather-related or force majeure events, including any earthquakes, floods, hurricanes, tropical storms, fires or other natural disasters or any national, international or regional calamity; or

 

   

any changes in the market price or trading volume of the Company common stock, any changes in the ratings or the ratings outlook for the Company or any of its subsidiaries by any applicable rating agency, any changes in any analyst’s recommendations or ratings with respect to the Company or any of its subsidiaries or any failure of the Company or any of its subsidiaries to meet any internal or external projections, budgets, guidance, forecasts or estimates of revenues, earnings or other financial results or metrics for any period ending on or after the date of the merger agreement. The exceptions in this clause will not prevent or otherwise affect the underlying cause of any such change or failure referred to therein (to the extent not otherwise falling within any of the exceptions provided by the preceding clauses) from being taken into account in determining whether a material adverse effect has occurred, provided, that this clause will not be construed as implying that the Company is making any representation or warranty with respect to any internal or public projections, budgets, guidance, forecasts or estimates of revenues, earnings or other financial results or metrics for any period.

However, with respect to the exceptions described in the second, third, fifth, sixth and seventh bullets above, such effects will be taken into account to the extent they materially and disproportionately adversely affect the Company and its subsidiaries, taken as a whole, compared to other companies operating in the same industries in which the Company and its subsidiaries operate.

Representations and Warranties of Parent and Sub

Parent and Sub made customary representations and warranties to the Company in the merger agreement, in each case, subject to customary qualifications and limitations, including representations and warranties relating to the following:

 

   

the organization and good standing of Parent and Sub;

 

   

each of Parent’s and Sub’s authority to enter into and consummate the transactions contemplated by the merger agreement;

 

   

the absence of conflicts with, or violations of, laws, organizational documents or certain material contracts and instruments to which Parent or Sub is a party, in each case as a result of Parent’s and Sub’s execution or delivery of the merger agreement or the performance by Parent and Sub of their respective covenants under, or the consummation by Parent and Sub of the transactions contemplated by, the merger agreement;

 

   

the governmental and regulatory approvals required to complete the merger;

 

   

the information contained in this proxy statement;

 

   

the absence of pending or threatened litigation and outstanding orders which would reasonably be expected to prevent or materially delay the merger;

 

   

the ownership of Sub by Parent;

 

   

Sub’s lack of operating activities;

 

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the equity financing commitment letter and the equity financing;

 

   

the debt commitment letter and the debt financing;

 

   

the limited guarantee;

 

   

the solvency of Parent, the surviving corporation and each subsidiary of the surviving corporation at and immediately following the effective time;

 

   

the absence of broker’s, finder’s or investment banker’s fees in connection with the transactions contemplated by the merger agreement;

 

   

the absence of certain contracts or commitments to enter into a contract between Parent, Sub or any of their respective affiliates, on the one hand, and any director, officer, employee or stockholder of the Company, on the other hand; and

 

   

the absence of ownership of shares of Company common stock by Parent, Sub or any of their respective subsidiaries or their respective affiliates or associates.

Covenants Regarding Conduct of Business by the Company Prior to the Merger

Under the merger agreement, the Company agreed that, until the earlier of the effective time or the termination of the merger agreement in accordance with its terms, except as set forth in the Company disclosure letter, as required by applicable law or as expressly required by any provision of the merger agreement, as Parent may agree in writing (which agreement may not be unreasonably withheld, delayed or conditioned), the Company will use commercially reasonable efforts to, and will cause each of its subsidiaries to use commercially reasonable efforts to, conduct its operations in all material respects in the ordinary course of business consistent with past practice.

Further, the Company agreed that, until the earlier of the effective time or the termination of the merger agreement in accordance with its terms, except as set forth in the Company disclosure letter, as required by applicable law, as expressly permitted or required by any provision of the merger agreement or as Parent may agree in writing (which agreement may not be unreasonably withheld, delayed or conditioned), the Company will not, and will not permit its subsidiaries to:

 

   

amend the amended and restated certificate of incorporation or restated by-laws of the Company or the organizational documents of any subsidiary of the Company;

 

   

issue or authorize the issuance of any equity securities in the Company or any subsidiary of the Company, or securities convertible into, or exchangeable or exercisable for, any such equity securities, or any rights of any kind to acquire any such equity securities or such convertible or exchangeable securities, other than (i) the issuance of Company common stock upon the exercise of Company options and the vesting of restricted stock unit awards, in each case outstanding as of the date hereof, or the issuance of Company common stock pursuant to the terms of the Company stock purchase plan and (ii) the issuance of securities by a wholly-owned subsidiary of the Company to the Company or another wholly-owned subsidiary of the Company;

 

   

adjust, split, combine, recapitalize or reclassify any capital stock or other equity interest of the Company or any subsidiary of the Company;

 

   

sell, pledge, dispose of, transfer, assign, lease, license, abandon or encumber any material property or material assets of the Company or any of its subsidiaries, except (i) pursuant to existing contracts, (ii) sales or dispositions made in connection with any transaction between or among the Company and any wholly-owned subsidiary of the company or between or among any wholly-owned subsidiaries of the Company; (iii) for properties or assets obsolete or worthless; or (iv) for certain liens permitted pursuant to the terms of the merger agreement;

 

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declare, set aside, make or pay any dividend or other distribution with respect to the capital stock of the Company or any subsidiary of the Company, whether payable in cash, stock, property or a combination thereof, other than (i) the quarterly dividend declared by the Board on July 23, 2019 (and equivalent restricted stock unit awards for eligible unvested restricted stock units) and (ii) as between the Company and any subsidiary of the Company or between or among subsidiaries of the Company (provided that if the subsidiary of the Company is not wholly-owned, any such dividend must be pro rata among each of the holders of voting securities of such subsidiary of the Company);

 

   

reclassify, combine, split, subdivide or amend the terms of, or redeem, purchase or otherwise acquire, directly or indirectly, any of its equity securities or other voting or capital interests or any options, warrants, securities or other rights exercisable for or convertible into any such equity securities or other voting or capital interests other than (i) the payment of withholding taxes by net exercise or by tendering of shares in connection with the exercise of any Company options outstanding as of the date of the merger agreement and permitted by the terms of such Company options, (ii) tax withholdings on the vesting or payment of restricted stock unit awards outstanding as of the date hereof, or (iii) the acquisition by the Company of awards granted pursuant to the Company stock plans in connection with the forfeiture of such awards;

 

   

merge or consolidate the Company or any of its subsidiaries with any person or adopt a plan of complete or partial liquidation or resolutions providing for a complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization of the Company (other than the merger of one or more of the Company’s U.S.-based wholly-owned subsidiaries with or into one or more other the Company’s U.S.-based wholly-owned subsidiaries or the Company);

 

   

make or offer to make any acquisition of a material business, including by merger, consolidation or acquisition of stock or assets;

 

   

incur any indebtedness (as defined in the merger agreement) in the aggregate in excess of $3,000,000 aggregate principal amount (provided that the Company and its subsidiaries will not incur any indebtedness for borrowed money);

 

   

make any loans, advances or capital contributions to, or investments in, any other person that is not one of the Company’s wholly-owned subsidiaries other than (i) loans solely between the Company and a wholly-owned subsidiary of the Company or between wholly-owned subsidiaries of the Company, (ii) advances for travel and other out-of-pocket expenses to officers, directors or employees of the Company or any subsidiary of the Company in the ordinary course of business, consistent with past practice or (iii) extended payment terms granted to customers or clients in the ordinary course of business;

 

   

except to the extent required by law or the terms of any Company benefit plan or collective bargaining agreement in effect as of the date of the merger agreement or as specifically contemplated by the merger agreement: (i) increase the compensation or benefits payable or to become payable to any director, officer or employee, other than increases to compensation and benefits in the ordinary course of business below the position of employees with a title of Director (employees with a title of Director or more senior, each a “managerial employee”); (ii) hire or promote any person (or make an offer or promise to hire or promote) to a managerial employee position or terminate any managerial employee (other than promotions (but excluding any corresponding increases to compensation or benefits payable) for the September promotions cycle in the ordinary course of business consistent with the Company’s past practice); (iii) grant any rights to severance or termination pay or other termination benefit, or enter into any employment (other than employment agreements that do not provide for severance in excess of amounts required by applicable law) or severance agreement; (iv) subject to the other clauses of this provision, establish, terminate, adopt, enter into or amend any Company benefit plan (or any arrangement that, if in effect on the date of the merger agreement, would be a Company benefit plan), except for amendments to Company benefit plans in the ordinary course of business, consistent with past practice, that do not result in an increase in cost to the Company or any subsidiary

 

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of the Company, individually or in the aggregate, by $250,000; (v) take any action to amend or waive any performance or vesting criteria or accelerate vesting, exercisability or funding under any Company benefit plan; or (vi) issue any loan to any current or former employee, officer, consultant, or non-employee director;

 

   

make any material change in accounting policies or procedures (other than as required by GAAP, applicable law or any governmental entity with competent jurisdiction);

 

   

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 that would reasonably be expected to have a Company material adverse effect;

 

   

other than in the ordinary course of business consistent with past practice and other than proceedings related to the transactions contemplated by the merger agreement, (i) amend or modify in any material respect or terminate (excluding terminations upon expiration of the term thereof) any material contract of the Company, waive, release or assign any material rights, claims or benefits under any material contract of the Company or take (or fail to take) any action that would reasonably be expected to cause or result in a material breach of, or material default under, any material contract of the Company or (ii) enter into any contract that would have been a material contract of the Company had it been entered into prior to the date of the merger agreement;

 

   

make, or commit to make, any capital expenditures in excess of $5,000,000;

 

   

(i) enter into any new material line of business, or (ii) open a new office of the Company or any of the subsidiaries of the Company, in any country where the Company or such Company subsidiary does not have an office as of the date of the merger agreement;

 

   

(i) settle any proceeding before or threatened to be brought before a governmental entity, other than monetary settlements not in excess of $250,000 individually or $1,000,000 in the aggregate (provided, that such settlements do not involve any non-de minimis injunctive or equitable relief or impose non-de minimis restrictions on the business activities of the Company, the subsidiaries of the Company, Parent or any subsidiaries of Parent) or (ii) waive any material right with respect to any material claim held by the Company or any of the subsidiaries of the Company, in respect of any proceeding brought or threatened in writing to be brought before a governmental entity, in each case subject to the terms of the merger agreement;

 

   

terminate, cancel or make any material changes to the structure, limits or terms and conditions of any of the Company insurance policies, including allowing the polices to expire without renewing such policies or obtaining comparable replacement coverage, or fail to pay premiums or report known claims to its insurance carrier in a timely matter, in each case, except as would not be reasonably likely to be material to the Company and any subsidiary of the Company, taken as a whole;

 

   

(i) settle or compromise any material tax claim or liability, or enter into any closing agreement affecting any material tax liability or refund, (ii) waive or extend any statute of limitations in respect of material taxes or period within which an assessment or reassessment of material taxes may be issued, (iii) prepare or file any material amended tax return or claim for refund, (iv) file any request for a ruling in respect of any tax matter, or (v) make or change any material tax election; or

 

   

authorize, agree to do, or enter into any agreement to do, any of the foregoing.

Restriction on Solicitation of Competing Proposals

The Company has agreed that it will, and will cause its subsidiaries and its and their respective directors, officers, and employees to, and use reasonable best efforts to cause its and their respective investment bankers, accountants, counsel and other advisors (which, together with the directors, officers and employees of the Company and its subsidiaries, we refer to as the “Company representatives”) to, cease any solicitations,

 

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discussions or negotiations with any persons that may be ongoing with respect to any competing proposal (as described below), terminate all access granted to any such persons and their representatives to any physical or electronic dataroom, and request the return or destruction from such persons of non-public information concerning the Company. In addition, until the earlier of the effective time or termination of the merger agreement (if any), the Company has agreed that it will not, and will cause its subsidiaries and its and their respective directors, officers and employees not to, and will use reasonable best efforts to cause the other Company representatives not to:

 

   

initiate, solicit, knowingly encourage or knowingly facilitate any inquiries or the submission of any proposal or offer that constitutes, or would reasonably be expected to lead to, a competing proposal (as described below);

 

   

furnish any non-public information regarding the Company or any subsidiary of the Company to any third person in connection with or in response to, or in a manner that would reasonably be expected to lead to, a competing proposal;

 

   

enter into, participate in or continue to participate in any discussions or negotiations with any third person with respect to, or that would reasonably be expected to lead to, any competing proposal made by such third person;

 

   

approve, endorse, recommend or enter into, or publicly propose to approve, endorse, recommend or enter into, any alternative acquisition agreement; or

 

   

agree, propose or resolve to take, or take, any of the actions prohibited by the foregoing.

A “competing proposal” is defined in the merger agreement to mean any proposal, offer or bona fide written indication of interest from any person or group (other than Parent, Sub or any of their respective affiliates) relating to:

 

   

any direct or indirect acquisition (whether by lease, exchange, transfer, purchase or other disposition) from the Company or any of its subsidiaries, in a single transaction or a series of transactions, of (i) 20% or more (based on the fair market value, as determined by the Board or any committee of the Board in good faith) of assets (including capital stock of the Company’s subsidiaries, and by means of any merger, consolidation, business combination, recapitalization, liquidation, dissolution, binding share exchange or similar transaction to which the Company or any subsidiary of the Company is a party) of the Company and the subsidiaries of the Company, taken as a whole or (ii) 20% or more of the outstanding shares of Company common stock;

 

   

any tender offer or exchange offer that, if consummated, would result in any person or group owning, directly or indirectly, 20% or more of the outstanding shares of Company common stock; or

 

   

any merger, consolidation, business combination, recapitalization, liquidation, dissolution, joint venture, partnership, spin-off, extraordinary dividend, binding share exchange or similar transaction to which the Company or any of its subsidiaries is a party pursuant to which (i) any person or group (or the stockholders of any person) would own, directly or indirectly, 20% or more of the voting securities of the Company or of the surviving entity in a merger involving the Company or the resulting direct or indirect parent of the Company or such surviving entity or (ii) the owners of outstanding shares of Company common stock immediately prior to such transaction would own less than 80% of the voting securities of the Company or of the surviving entity in a merger involving the Company or the resulting direct or indirect parent of the Company or such surviving entity.

Notwithstanding the non-solicitation provisions described above, if, at any time following the date of the merger agreement and prior to the receipt of the Company stockholder approval, (i) the Company receives a written competing proposal from a person that did not result from a breach of the non-solicitation provisions described above (other than any breach that is immaterial and unintentional), which competing proposal was made on or after the date of the merger agreement, and (ii) the Board or any committee thereof determines in

 

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good faith, after consultation with its independent financial advisors and outside counsel, that such competing proposal constitutes or could reasonably be expected to lead to a superior proposal (as described below) and, after consultation with the Company’s outside legal counsel, that failure to take the actions described in the subsequent clauses (A) or (B) would be reasonably likely to be inconsistent with the fiduciary duties of the Board under applicable law, then the Company, its subsidiaries and the Company representatives may (A) furnish information with respect to the Company and its subsidiaries to the person making such competing proposal and its representatives and (B) participate in discussions or negotiations with the person making such competing proposal and its representatives regarding such competing proposal; provided, however, the Company will not, and will not permit its subsidiaries or representatives to, disclose any non-public information regarding the Company to such person without the Company first entering into an acceptable confidentiality agreement with such person. The Company has agreed that it will promptly (and in any event within 24 hours) advise Parent of the receipt of any competing proposal that constitutes or could reasonably be expected to lead to a superior proposal and will thereafter keep Parent reasonably informed, on a reasonably current basis as to the status of such competing proposal.

A “superior proposal” is defined in the merger agreement to mean a written competing proposal (with all percentages in the definition of “competing proposal” changed to “50%”) made by any person after the date of the merger agreement that did not result from a breach of the non-solicitation provisions described above (other than a breach that is immaterial and unintentional) on terms that the Board or any committee thereof determines in good faith, after consultation with the Company’s outside financial advisors and outside legal counsel, (i) is reasonably likely to be consummated if accepted on the terms thereof, taking into account all financial, legal, regulatory and other aspects of such competing proposal, and (ii) considering such factors as the Board or any committee thereof considers to be appropriate, including the conditionality and the timing and likelihood of consummation of such proposal, that, if consummated, would result in a transaction that is more favorable to the stockholders of the Company from a financial point of view than the transactions contemplated by the merger agreement (including taking into account any applicable Company termination fee).

Obligations of the Board with Respect to Its Recommendation

The merger agreement provides that, subject to certain exceptions described below, neither the Board nor any committee thereof will: (i) adopt, authorize or approve or recommend, or resolve to or publicly propose or announce its intention to, approve or recommend to the stockholders of the Company, any competing proposal; (ii) withhold, withdraw, modify, qualify or amend, or publicly propose or announce its intention to withhold, modify, qualify or amend, in a manner adverse to Parent, the recommendation by the Board to Company stockholders that Company stockholders adopt the merger agreement or fail to include such recommendation in the proxy statement (which, such recommendation, we refer to as the “Board recommendation”); (iii) if (A) the Company has received a competing proposal that remains outstanding (and is not a tender offer or exchange offer) and (B) such competing proposal has not been rejected by the Company, fail to reaffirm the Company recommendation within five business days of receipt of a written request from Parent to do so, provided that Parent may only request one such reaffirmation with respect to any Competing proposal (it being understood that, if and solely to the extent the Company determines in good faith, in consultation with its outside legal counsel, that the failure to do so would be reasonably likely to be inconsistent with applicable law, the Company may, in connection with such reaffirmation, state that it is continuing to negotiate with the person that made such competing proposal, and such statement will not be considered a Board recommendation change (as described below)); (iv) fail to recommend against any competing proposal that is a tender or exchange offer by a third party under the Exchange Act within 10 business days after the commencement of such tender or exchange offer (it being understood and agreed that, if and solely to the extent the Company determines in good faith, in consultation with its outside legal counsel, that the failure to do so would be reasonably likely to be inconsistent with applicable law, the Company may, in connection with such recommendation against, state that it is continuing to negotiate with the person that made such competing proposal, and such statement will not be considered a Board recommendation change) (which, any such action set forth in the foregoing clauses (i), (ii), (iii) or (iv), we refer to as a “Board recommendation change”); or (v) allow the Company or any of its

 

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subsidiaries to enter into any letter of intent, memorandum of understanding, agreement in principle, merger agreement, acquisition agreement or other similar agreement to effect any competing proposal with the person that made such competing proposal (other than a confidentiality and standstill agreement (which we refer to as an “acceptable confidentiality agreement”) that contains confidentiality and standstill provisions of the relevant person that has made such competing proposal, which provisions are no less favorable in the aggregate to the Company than those contained in the letter regarding confidentiality, dated as of April 22, 2019, by and between the Company and Parent and the letter regarding confidentiality, dated as of April 11, 2019, by and between the Company and Veritas Capital Fund Management, L.L.C., as amended (which we refer to collectively as the “confidentiality agreement”) or agreement requiring the Company to abandon, terminate or fail to consummate the transactions contemplated by the merger agreement.

Notwithstanding the obligations of the Board and its committees described above, at any time prior to the receipt of the Company stockholder approval, the Board or any committee thereof may make a Board recommendation change (and, if so desired by the Board or any committee thereof, terminate the merger agreement in order to cause the Company to enter into a definitive agreement with respect to a competing proposal) if and only if: (i)(A) a competing proposal (that did not result from a breach of the non-solicitation provisions described above (other than any breach that is immaterial and unintentional)) is made to the Company by a third person and (B) the Board or any committee thereof determines in good faith, after consultation with its outside financial advisors and outside legal counsel, that such competing proposal constitutes a superior proposal; (ii) the Company provides Parent three business days’ prior written notice of the Company’s intention to make a Board recommendation change, which notice will include (A) the material terms and conditions of the competing proposal (including the consideration offered therein and the identity of the person or group making the competing proposal) and (B)(1) an unredacted copy of the alternative acquisition agreement, (2) unredacted copies of all other agreements to be entered into between the Company and the person making such superior proposal in connection with such superior proposal and (3) any financing arrangements to finance the competing proposal if the Board or any committee thereof determined such financing arrangements were material to its decision that the competing proposal was superior to the merger (which may be redacted in a customary manner) (which such notice we refer to as a “notice of recommendation change”); (iii) if requested by Parent, the Company has negotiated in good faith, and directed any applicable Company representatives to negotiate in good faith, with Parent for at least three business days following the date of such notice of recommendation change with respect to any changes to the terms of the merger agreement proposed by Parent; and (iv) taking into account any changes to the terms of the merger agreement offered by Parent pursuant to clause (iii) above, the Board or any committee thereof has determined in good faith, (A) after consultation with its outside financial advisors and outside legal counsel, that such competing proposal would continue to constitute a superior proposal if such changes irrevocably offered in writing by Parent were to be given effect and (B) after consultation with the Company’s outside counsel, that the failure to make a Board recommendation change would be reasonably likely to be inconsistent with the Board’s fiduciary duties under applicable law. Any amendment to the amount or form of consideration contemplated by such competing proposal or any other material amendment to the terms of such competing proposal (whether or not in response to any changes proposed by Parent pursuant to clause (iii) above) will require a new notice of recommendation change and an additional two business day period from the date of such notice during which the terms of the Parent’s matching rights will apply same as set forth above.

Other than in connection with a competing proposal as described above, nothing in the merger agreement prohibits or restricts the Board or any committee thereof from effecting a Board recommendation change and thereafter terminating the merger agreement in response to the occurrence of a Company intervening event (as described below) if the Board or any committee thereof determines in good faith, after consultation with the Company’s outside legal counsel, that the failure to effect a Board recommendation change would be reasonably likely to be inconsistent with its fiduciary duties under applicable law, if and only if, (i) the Company gives Parent at least three business days’ advance notice of its intention to take such action, which notice will include a reasonably detailed summary of the relevant intervening event (such notice is not to constitute, in and of itself, a Board recommendation change); (ii) if requested by Parent, the Company has first negotiated, and caused Company and its Company representatives to negotiate, during the three business days following the date of the

 

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notice of the Company intervening event, with Parent in good faith regarding any revisions to the terms of the transactions contemplated by the merger agreement proposed by Parent in response to such Company intervening event; and (iii) following the end of the three business day period described in clause (ii) above, the Board or any committee thereof determines in good faith, after consultation with the Company’s outside legal counsel and after taking into account any changes to the terms of the merger agreement offered by Parent in a binding irrevocable written offer to the Company under clause (ii) above, that a Company intervening event continues to exist and that the failure to make a Board recommendation change would be reasonably likely to be inconsistent with the fiduciary duties of the Board under applicable law.

A “Company intervening event” is defined in the merger agreement to mean any change, occurrence, development, condition, circumstance, event or effect (other than a competing proposal) that, individually or in the aggregate, is material to the Company and the subsidiaries of the Company, taken as a whole, that is not known or reasonably foreseeable (or the magnitude of which is not known or reasonably foreseeable) to or by the Board as of the date of the merger agreement, which change, occurrence, development, condition, circumstance, event or effect (or the magnitude of which) becomes known to or by the Board prior to obtaining the Company stockholder approval.

Efforts to Complete the Merger

The merger agreement provides that (i) Parent will (and will cause Sub, the guarantor and each of its and their applicable affiliates to) and, subject to the ability of Board to change its recommendation, the Company will (and will cause its subsidiaries to) use its respective reasonable best efforts to consummate the transactions contemplated by the merger agreement and to cause the conditions to the closing in the merger agreement to be satisfied. More specifically, Parent will (and will cause Sub, the guarantor and each of their applicable affiliates to) and the Company will (and will cause each of its subsidiaries to) use its reasonable best efforts to (A) promptly obtain all actions or nonactions, consents, permits, waivers, approvals, authorizations and orders from governmental entities or other persons necessary or advisable in connection with the consummation of the transactions contemplated by the merger agreement, (B) as promptly as practicable, and in any event within 10 business days after the date of the merger agreement (solely with respect to the HSR Act), make and not withdraw (without the Company’s consent) all registrations and filings with any governmental entity or other persons necessary or advisable in connection with the consummation of the transactions contemplated by the merger agreement and promptly make any further filings pursuant thereto that may be necessary and advisable, (C) contest and defend all lawsuits or other legal, regulatory, administrative or other proceedings to which it or any of its affiliates is a party challenging or affecting the merger agreement or the consummation of the transactions contemplated by the merger agreement, in each case until the issuance of a final, non-appealable order with respect to each such proceeding; (D) seek to have lifted or rescinded any injunction or restraining order which may adversely affect the ability of the parties to consummate the merger, in each case until the issuance of a final, non-appealable order with respect thereto; (E) seek to resolve any objection or assertion by any governmental entity; and (F) execute and deliver any additional instruments necessary or advisable to consummate the merger.

The merger agreement provides that Parent will take, and will cause Sub and Sponsor, in its capacity as guarantor under the limited guarantee, and each of its and their applicable affiliates to take, any and all actions necessary or advisable in order to avoid or eliminate each impediment to the consummation of the transactions contemplated in the merger agreement and to obtain all approvals and consents (including those under any antitrust laws and that may be required by any governmental entity with competent jurisdiction) so as to enable the consummation of the transactions contemplated under the merger agreement as promptly as practicable, including operational restrictions or limitations on, and committing to or effecting, by consent decree, hold separate orders, trust or otherwise, the sale, license, disposition or holding separate of, such assets or businesses of Parent, Sub, the Company, the surviving corporation or any of their respective affiliates (and the entry into agreements with, and submission to decrees, judgments, injunctions or orders of the relevant governmental entity) as may be required or advisable to obtain such approvals or consents of such governmental entities or to

 

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avoid the entry of, or to effect the dissolution of or vacate or lift, any orders that would otherwise have the effect of preventing or materially delaying the consummation of the transactions contemplated by the merger agreement. The Company will make, subject to and conditioned on the transactions contemplated by the merger agreement actually occurring, any undertakings as are required to obtain such approvals or consents of such governmental entities or to avoid the entry of, or to lift, any injunctions or other orders that would have the effect of preventing or materially delaying the consummation of the transactions contemplated by the merger agreement. The merger agreement also provides that neither Parent nor Sub, directly or indirectly, through one or more of their respective affiliates or otherwise, will take any action, including acquiring or making any investment in any person or any division or assets thereof, that would reasonably be expected to prevent or cause a material delay in the satisfaction of the conditions to the closing in the merger agreement or the consummation of the merger.

Without limiting the generality of the obligations described above, each party agreed that it will:

 

   

give the other parties prompt notice of the making or commencement of any request, inquiry, investigation, action or legal proceeding by or before any governmental entity with respect to the merger;

 

   

keep the other parties informed as to the status of any such request, inquiry, investigation, action or legal proceeding; and

 

   

promptly inform the other parties of any communication to or from the FTC, the antitrust division or any other governmental entity regarding the merger.

Each party agreed that it will consult and cooperate with the other parties and will consider in good faith the views of the other parties in connection with any filing, analysis, appearance, presentation, memorandum, brief, argument, opinion or proposal made or submitted to any governmental entity in connection with the transactions contemplated by the merger agreement.

Obligations with Respect to this Proxy Statement and the Special Meeting

The Company agreed to, as promptly as practicable following the date of the merger agreement, prepare and file with the SEC a preliminary proxy statement containing the Board recommendation to be sent to the Company stockholders in connection with the special meeting of the Company stockholders, held for the purpose of voting on, among other things, the approval and adoption of the merger agreement (including any adjournments or postponements thereof) (which we refer to as the “stockholder meeting”). Parent is required to reasonably cooperate with the Company in the preparation of such proxy statement, among other things. The parties are required to use their respective reasonable best efforts to have the proxy statement cleared by the SEC as promptly as reasonably practicable after filing with the SEC.

The Company is further required to, as promptly as reasonably practicable after the proxy statement is cleared by the SEC for mailing to Company stockholders, establish a record date for, duly call, give notice of, convene and hold a meeting of its stockholders for the purpose of voting on, among other things, the approval and adoption of the merger agreement. Pursuant to the terms of the merger agreement, the Company agreed that the Board would recommend that Company stockholders adopt the merger agreement, and the Company is required to use its reasonable best efforts to solicit from Company stockholders proxies in favor of the adoption of the merger agreement.

Access to Information

From the date of the merger agreement to the effective time, pursuant to the terms of the merger agreement, the Company agreed that it will, and will cause each of its subsidiaries to: (i) provide to Parent and Sub and their respective representatives reasonable access during normal business hours in such a manner as not to unreasonably interfere with the operation of any business conducted by the Company or any of its subsidiaries,

 

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upon prior written notice to the Company, to the officers, employees, properties, offices and other facilities of the Company and its subsidiaries and to the books and records thereof and (ii) furnish promptly such information concerning the business, properties, contracts, assets and liabilities of the Company and its subsidiaries as Parent or its representatives may reasonably request. However, the Company will not be required to (or to cause any of its subsidiaries to) afford such access or furnish such information to the extent that doing so would, in the reasonable judgment of the Company: (A) result in the loss of attorney-client privilege; (B) violate any confidentiality obligations of the Company or any of its subsidiaries to any third party or otherwise breach, contravene or violate any then effective contract to which the Company or any of its subsidiaries is party; (C) result in a competitor of the Company or any of its subsidiaries receiving information that is competitively sensitive; or (D) breach, contravene or violate any applicable law (including the HSR Act or any other competition or antitrust law); provided that the Company will use its reasonable best efforts to allow for such access or disclosure in a manner that does not result in a loss of attorney-client privilege, violate confidentiality obligations, reveal information to a competitor or breach, contravene or violate such applicable contract or law.

Director and Officer Indemnification and Insurance Information

Pursuant to the merger agreement, from and after the effective time, Parent is obligated to cause the surviving corporation to, to the fullest extent permitted by applicable law, indemnify, defend and hold harmless each current or former director, officer or employee of the Company or any of the subsidiaries of the Company and each fiduciary under benefit plans of the Company or any of its subsidiaries and each person who performed services at the request of the Company or any of its subsidiaries (we refer to each as an “indemnified party”), against (i) all losses, expenses (including reasonable attorneys’ fees and expenses), judgments, fines, claims, damages or liabilities or, subject to the proviso of the next sentence, amounts paid in settlement, arising out of actions or omissions occurring at the effective time (and whether asserted or claimed prior to, at or after the effective time) to the extent that they are based on or arise out of the fact that such person is or was a director, officer or fiduciary under benefit plans or performed services at the request of the Company or any of its subsidiaries (which we refer to as “indemnified liabilities”), and (ii) all indemnified liabilities to the extent they are based on or arise out of or pertain to the transactions contemplated by the merger agreement, whether asserted or claimed prior to, at or after the effective time, and including any expenses incurred in enforcing such person’s rights. In the event of any such loss, expense, claim, damage or liability (whether or not asserted before the effective time), the surviving corporation will pay the reasonable fees and expenses of counsel selected by the indemnified parties promptly after statements therefor are received and otherwise advance to such indemnified party upon request, reimbursement of documented expenses reasonably incurred (provided that the person to whom expenses are advanced provides an undertaking to repay such advance if it is determined by a final and non-appealable judgment of a court of competent jurisdiction that such person is not legally entitled to indemnification under the law).

Also, the Company will be permitted to, prior to the effective time (and, if the Company fails to do so, Parent will cause the surviving corporation to), obtain and fully pay the premium for a “tail” insurance and indemnification policy that provides coverage for a period of six years from and after the effective time for events occurring prior to the effective time that is substantially equivalent to and in any event not less favorable in the aggregate to the intended beneficiaries thereof than the Company’s existing directors’ and officers’ liability insurance policy. If the Company and the surviving corporation for any reason fail to obtain such “tail” insurance policy as of the effective time, the surviving corporation will, and Parent will cause the surviving corporation to, continue to maintain in effect for a period of at least six years from and after the effective time the D&O insurance in place as of the date of the merger agreement with terms, conditions, retentions and limits of liability that are at least as favorable as provided in the Company’s existing policies as of the date of the merger agreement, or the surviving corporation will, and Parent will cause the surviving corporation to, purchase comparable D&O insurance for such six year period with terms, conditions, retentions and limits of liability that are at least as favorable as provided in the Company’s existing policies as of the date of the merger agreement.

In addition, for not less than six years following the effective time, Parent and the surviving corporation must maintain provisions in the organizational documents of the surviving corporation and its subsidiaries with

 

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respect to exculpation, indemnification and advancement of expenses that are no less favorable than the analogous provisions contained in the organizational documents of the Company and its subsidiaries in effect immediately prior to the effective time. The contractual indemnification rights of the directors and officers of the Company will be assumed by the surviving corporation and will continue in full force and effect in accordance with their terms following the effective time.

Employee Benefits

Under the merger agreement, for a period beginning on the effective time and ending on the later of (x) December 31, 2020 and (y) the twelve-month anniversary of the effective time, Parent has agreed to provide, or cause its subsidiaries (including the surviving corporation) to provide, each employee of the Company and its subsidiaries immediately prior to the effective time (each, a “company employee”) with (i) a base salary or base wage rate that is no less than the base salary or base wage rate provided to such employee immediately prior to the effective time, (ii) annual cash incentive opportunities that are substantially comparable to the annual cash incentive opportunities provided to such employee immediately prior to the effective time, (iii) severance payments and benefits that are substantially comparable to the severance payments and benefits under Company employee benefit plans immediately prior to the effective time, and (iv) employee benefits that, in the aggregate, are substantially comparable to the employee benefits (other than severance, equity and equity-based compensation and other incentive compensation opportunities) provided immediately prior to the effective time.

In addition, from and after the effective time, Parent has agreed to assume, honor and continue, or to cause its subsidiaries (including the surviving corporation) to assume, honor and continue all of the Company’s employee benefit plans (including with respect to any payments, benefits, or rights arising as a result of the merger, whether alone or in combination with any other event). For all purposes under the employee benefit plans of Parent and its subsidiaries (including the surviving corporation) (including for purposes of determining eligibility to participate, vesting and benefit accruals (except with respect to defined benefit pension benefit accruals, unless required by applicable law)), gratuities, severance and similar benefits, Parent has agreed to credit each Company employee’s service earned with the Company or its subsidiaries on or prior to the effective time as service with Parent or any of its subsidiaries (including the surviving corporation) to the same extent (i) such service was recognized under the terms of any analogous Company employee benefit plan in effect immediately prior to the effective time or (ii) an employee’s service with Parent and its subsidiaries is recognized under any applicable employee benefit plan of Parent and/or its subsidiaries to the extent such employee benefit plan of Parent and/or its subsidiaries does not replace an analogous Company employee benefit plan (in each case, assuming that such recognition would not result in any duplication of benefits). Parent has further agreed to, or to cause its subsidiaries (including the surviving corporation) to (i) waive any waiting periods and actively at work or evidence of insurability requirements and any limitations on eligibility, enrollment, and benefits relating to any preexisting medical conditions of company employees and their eligible dependents, (ii) maintain or establish benefit plans that provide for health and welfare benefits and in which the company employees will be eligible to participate as of the effective time, and (iii) recognize for purposes of annual deductible and out of pocket limits under employee benefit plans of Parent that provide health benefits, any deductible, coinsurance, copayments and out of pocket expenses paid by such company employees and their respective dependents under any Company employee benefit plans during the calendar year in which the effective time occurs (to the extent that such company employees participate in Parent employee benefit plans in such same calendar year). Parent has further agreed to, or to cause its subsidiaries (including the surviving corporation) to, maintain or establish a defined contribution plan that is intended to be tax-qualified and which company employees primarily providing services in the United States will be eligible to participate as of the effective time, subject to satisfaction of eligibility provisions thereof.

Financing

The consummation of the merger is not conditioned upon Parent’s or Sub’s receipt of financing. However, under the merger agreement, Parent and Sub are obligated to use their reasonable best efforts to arrange the financing on the terms and conditions described in the debt commitment letter and equity financing commitment

 

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letter. If any portion of the debt financing becomes unavailable on the terms and conditions contemplated in the debt commitment letter, Parent and Sub are obligated to use their reasonable best efforts to arrange for and obtain any such portion from alternative sources on terms and conditions at least as favorable to the Company as promptly as practicable following the occurrence of such event, but no later than the fifth business day immediately preceding the outside date. Parent and Sub will not permit any amendment or modification to be made to, or any waiver of any provision or remedy under, the debt commitment letter or equity financing commitment letter without the prior written consent of the Company.

Subject to certain exceptions, on or prior to the closing, the Company is obligated to, and must cause the subsidiaries of the Company to and instruct the Company representatives to, in each case, use commercially reasonable efforts to provide to Parent and Sub all customary cooperation reasonably requested by Parent in connection with the arrangement of the debt financing, at Parent’s sole expense. Parent has agreed to reimburse the Company for all reasonable and documented out-of-pocket costs and expenses incurred by the Company or any of its subsidiaries in connection with such cooperation, and to indemnify the Company, its subsidiaries and their respective representatives against losses incurred in connection with the debt financing and any information used in connection therewith (other than historical information provided in writing by the Company, its subsidiaries and their respective representatives specifically for use in connection therewith).

Limited Guarantee

To induce the Company to enter into the merger agreement, Sponsor executed the limited guarantee, dated as of August 2, 2019, in favor of the Company. Under the limited guarantee, subject to the limitations described therein, Sponsor has guaranteed the due and punctual payment to the Company of the Parent termination fee, certain reimbursement and indemnification obligations related to the debt financing and certain payment and reimbursement obligations specified in the merger agreement that may be owed by Parent pursuant to the merger agreement, subject to a maximum aggregate liability equal to $67.5 million. The guarantee is binding on Sponsor until the complete and indefeasible payment and satisfaction in full of Parent’s guaranteed obligations under the merger agreement, subject to the maximum liability in the previous sentence. The guarantee terminates at the earliest of

 

   

the closing;

 

   

six months following the valid termination of the merger agreement by the Company due to Parent’s breach or failure to perform under the merger agreement or Parent’s failure to consummate the merger, in each case pursuant to the merger agreement;

 

   

the valid termination of the merger agreement pursuant to its terms other than by the Company as described above;

 

   

any modification or amendment or waiver of the merger agreement (A) that affects the termination provisions of the merger agreement or (B) that could increase any liability of or impose any obligation on, or adversely affect, Sponsor in its capacity as guarantor, without Sponsor’s prior written consent; and

 

   

except as otherwise provided in the limited guarantee, if the Company brings a claim against a non-recourse party, claims a provision of the limited guarantee is unenforceable, or that the guarantor owes more than the maximum permitted liability as set forth in the limited guarantee.

Other Covenants and Agreements

 

   

Under the merger agreement, the Company and Parent have made certain other covenants to, and agreements with, each other regarding various other matters, including:

 

   

preparation of this proxy statement;

 

   

operating activities of Sub during the period from the date of the merger agreement to the effective time;

 

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public statements and disclosure concerning the merger agreement and the transactions contemplated by the merger agreement;

 

   

state anti-takeover or other similar laws;

 

   

the Company’s ability to take all actions as may be reasonably necessary or advisable to ensure that the dispositions of equity securities of the Company (including derivative securities) by any officer or director of the Company who is subject to Section 16 of the Exchange Act pursuant to the merger are exempt under Rule 16b-3 under the Exchange Act;

 

   

control of the defense of litigation brought by Company stockholders and any other third party litigation against the Company or its directors or officers arising out of or relating to the merger;

 

   

director resignations;

 

   

stock exchange de-listing and de-registration matters; and

 

   

confidentiality obligations of Parent and Sub under the Confidentiality Agreement.

Conditions to the Merger

Conditions to Each Party’s Obligations

The Company’s, Parent’s and Sub’s respective obligations to effect the merger are subject to the satisfaction (or, to the extent permitted by applicable law, mutual waiver by the Company and Parent) of the following conditions:

 

   

the Company having received the Company stockholder approval;

 

   

any applicable waiting period (or any extensions thereof) applicable to the merger under the HSR Act having expired or terminated; and

 

   

no governmental entity of competent jurisdiction having issued, entered, enforced or promulgated any law or order that is in effect and renders the consummation of the merger illegal, or prohibits, enjoins, restrains or otherwise prevents the consummation of the merger.

Conditions to Parent’s and Sub’s Obligations

The obligations of Parent and Sub to effect the merger are also subject to the satisfaction or waiver by Parent at or prior to the effective time of the following additional conditions:

 

   

each of the Company’s representations and warranties contained in the merger agreement (other than those representations and warranties related to (i) the organization, qualification to do business and good standing of the Company, to the extent addressed below; (ii) the capital structure, to the extent addressed below; (iii) the Company’s authority to enter into, and, subject to Company stockholder approval, consummate the transactions contemplated by the merger agreement; (iv) the absence of a Company material adverse effect on the Company; (v) the vote of holders of Company common stock required to approve the merger; and (vi) the absence of financial advisor’s, broker’s, finder’s or investment banker’s fees, other than those payable to the Company’s financial advisor, in connection with the transactions contemplated by the merger agreement), without regard to materiality or material adverse effect qualifiers contained within such representations and warranties, being true and correct except for any failure of such representations and warranties to be true and correct that would not, individually or in the aggregate, reasonably be expected to have a Company material adverse effect as of the date of the merger agreement and as of the effective time as though made on and as of the effective time (except to the extent expressly made as of a specific date or expressly covering a specified period, in which case as of such specific date or such specified period);

 

   

each of the Company’s representations and warranties contained in the merger agreement related to (i) the organization, qualification to do business and good standing of the Company’s subsidiaries which are significant subsidiaries (excluding (A) the organization and good standing of the Company and (B) issuances in compliance with law); (ii) the Company’s authority to enter into, and, subject to Company stockholder approval, consummate the transactions contemplated by the merger agreement;

 

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(iii) the vote of holders of Company common stock required to approve the merger; and (iv) the absence of financial advisor’s, broker’s, finder’s or investment banker’s fees, other than those payable to the Company’s financial advisor in connection with the transactions contemplated by the merger agreement, being true and correct in all material respects as of the date of the merger agreement and as of the effective time as though made on and as of the effective time (except to the extent expressly made as of a specific date or expressly covering a specified period, in which case as of such specific date or such specified period);

 

   

each of the Company’s representations and warranties contained in the merger agreement related to (i) the organization and good standing of the Company and (ii) the absence of a Company material adverse effect on the Company, being true and correct in all respects as of the date of the merger agreement and as of the effective time as though made on and as of the effective time;

 

   

the Company’s representation and warranty contained in the merger agreement related to the capital structure of the Company (solely with respect to the capitalization of the Company (and not any of its subsidiaries) and excluding issuances in compliance with law) being true and correct in all respects as of the date of the merger agreement and as of the effective time as though made on and as of the effective time (other than inaccuracies that are de minimis in amount);

 

   

the Company having performed or complied in all material respects with all obligations and covenants as required to be performed or complied with by the Company under the merger agreement at or prior to the effective time;

 

   

there having not occurred a Company material adverse effect since the date of the merger agreement; and

 

   

Parent having received a certificate signed on behalf of the Company by an executive officer of the Company as to the satisfaction of the conditions described above.

Conditions to the Company’s Obligations

The obligations of the Company to effect the merger are also subject to the satisfaction or waiver by the Company at or prior to the effective time of the following additional conditions:

 

   

each of the representations and warranties of Parent and Sub contained in the merger agreement being true and correct in all material respects as of the date of the merger agreement and as of the effective time as though made on and as of the effective time (except to the extent expressly made as of a specific date or expressly covering a specified period, in which case as of such specific date or such specified period) other than failures to be true and correct that, individually or in the aggregate, would not reasonably be expected to prevent or materially delay the ability of Parent or Sub to consummate the transactions contemplated by the merger agreement;

 

   

each of Parent and Sub having performed or complied in all material respects with all obligations and covenants as required to be performed or complied with by Parent or Sub under the merger agreement at or prior to the effective time; and

 

   

the Company having received a certificate signed on behalf of Parent and Sub by an executive officer of each of Parent and Sub as to the satisfaction of the conditions described above.

Termination of the Merger Agreement

Termination Rights Exercisable by the Company and Parent

The merger agreement may be terminated at any time prior to the effective time, whether before or after receipt of the Company stockholder approval and whether before or after adoption of the merger agreement by Parent as sole stockholder of Sub, by either the Company or Parent:

 

   

by mutual written consent of Parent and the Company;

 

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if the merger is not consummated on or before the outside date; provided, however, that Parent or the Company, as the case may be, is not permitted to terminate the merger agreement for failure to consummate the merger by the outside date if the material breach, inaccuracy or failure to perform or comply by such person of any of its respective representations, warranties, covenants or obligations contained in the merger agreement is the proximate cause of the failure to consummate the merger by the outside date;

 

   

if the Company did not obtain the Company stockholder approval upon a vote taken at the stockholder meeting, including any adjournments or postponements thereof; or

 

   

if any governmental entity of competent jurisdiction issues, enters, enforces or promulgates any law or order restraining, enjoining or otherwise prohibiting the consummation of the merger and such law or order becomes final and non-appealable, provided that this right to terminate the merger agreement will not be available to any party who has failed in any material respect to comply with those provisions of the merger agreement described under “The Agreement and Plan of Merger—Efforts to Complete the Merger” before asserting such right to terminate and such failure was the proximate cause of any such law or order.

Termination Rights Exercisable by the Company

The Company may also terminate the merger agreement:

 

   

if, at any time prior to the receipt of the Company stockholder approval, the Board or any committee thereof effects a Board recommendation change in accordance with the terms of the merger agreement in order to accept a superior proposal and enter into a definitive agreement with respect thereto; but only if the Company has complied in all respects with its non-solicitation obligations and obligations with respect to accepting a superior proposal under the merger agreement (in each case, other than any breach that was immaterial and unintentional) and pays Parent a termination fee of $30.9 million (which we refer to as the “Company termination fee”) prior to or simultaneously therewith;

 

   

if (i) Parent or Sub breaches or fails to perform any of its representations, warranties, covenants or agreements contained in the merger agreement, in any case such that an applicable condition to the merger described above would not be satisfied and (ii) either such breach or failure to perform is not capable of cure or at least 30 days elapse after the date of delivery of written notice to Parent without such breach or failure to perform having been cured; provided, however, that such right to terminate the merger agreement is not available if the Company breaches or fails to perform any of its representations, warranties, covenants or agreements contained in the merger agreement, in any case such that an applicable condition to the merger described above would not be satisfied; and

 

   

if (i) all of the applicable conditions to the merger described above (other than those conditions that by their nature are to be satisfied at the closing of the merger, provided, that such conditions would have been satisfied if the closing were to occur) have been satisfied or waived, (ii) the Company has irrevocably notified the Parent in writing that (A) all of the applicable conditions to the merger described above (other than those conditions that by their nature are to be satisfied at the closing of the merger, provided, that such conditions would have been satisfied if the closing were to occur) have been satisfied or waived and (B) the Company is ready, willing and able to consummate the closing of the merger and (iii) Parent and Sub have failed to consummate the closing within the latter of (X) the date by which the closing of the merger is required to have occurred pursuant to the terms of the merger agreement and (Y) the earlier of (1) three business days following the receipt of such written notice and (2) the outside date.

Termination Rights Exercisable by Parent

Parent may also terminate the merger agreement:

 

   

if, at any time prior to the Company’s receipt of the Company stockholder approval, the Board effects a Board recommendation change; and

 

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if (i) the Company breaches or fails to perform any of its representations, warranties, covenants or agreements contained in the merger agreement, in any case such that an applicable condition to the merger described above would not be satisfied, (ii) either such breach or failure to perform is not capable of cure or at least 30 days elapse after the date of delivery of written notice to the Company without such breach or failure to perform having been cured; provided, however, that such right to terminate the merger agreement is not available if the Parent breaches or fails to perform any of its representations, warranties, covenants or agreements contained in the merger agreement, in any case such that an applicable condition to the merger described above would not be satisfied.

Effect of Termination

If the merger agreement is terminated by the Company or Parent, the merger agreement will become void and there will be no liability or obligations on the part of Parent, Sub or the Company or their respective subsidiaries, officers or directors, except that the following obligations would survive such termination:

 

   

Parent and Sub’s agreement to comply, and to cause their respective representatives accessing the business or property sites of the Company or any of the Company subsidiaries to comply, in all material respects with all applicable laws and all of the Company’s and the Company’s subsidiaries’ safety and security procedures in connection with Parent and Sub’s right in the merger agreement to access information and facilities of the Company and the Company subsidiaries;

 

   

the restrictions on the Company and Parent with respect to public announcements;

 

   

Parent’s agreement to indemnify and hold harmless the Company, its subsidiaries and the Company representatives from and against any and all liabilities, losses, claims, costs, expenses, interest, awards, judgment and penalties suffered or incurred by them in connection with the financing;

 

   

the parties’ agreement regarding costs and expenses incurred in connection with the merger agreement and the merger;

 

   

the respective obligations of Company and Parent to pay a termination fee (as applicable);

 

   

the limited guarantee and the confidentiality agreement;

 

   

the terms of certain miscellaneous provisions; and

 

   

except as otherwise provided in the merger agreement in the event of a payment of certain termination fees, any liabilities or damages incurred or suffered by Parent as a result of the intentional breach by the Company that materially contributed to the failure of the Closing to occur.

Expenses; Termination Fees

Except as otherwise provided in the merger agreement, all costs and expenses incurred in connection with the merger agreement and the merger will be paid by the party incurring such expense.

The Company has agreed to pay Parent the Company termination fee if:

 

   

Parent validly terminates the merger agreement as described in the first bullet in the section entitled “The Agreement and Plan of Merger—Termination of the Merger Agreement—Termination Rights Exercisable by Parent,” above;

 

   

the Company validly terminates the merger agreement as described in the first bullet in the section entitled “The Agreement and Plan of Merger—Termination of the Merger Agreement—Termination Rights Exercisable by the Company,” above; or

 

   

(i) Parent or the Company validly terminates the merger agreement as described in the second or third bullets in the section entitled “The Agreement and Plan of Merger—Termination of the Merger

 

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Agreement—Termination Rights Exercisable by the Company and Parent,” above; or (ii) Parent validly terminates the merger agreement as described in the second bullet in the section entitled “The Agreement and Plan of Merger—Termination of the Merger Agreement—Termination Rights Exercisable by Parent,” above if (A) following the execution of the merger agreement a competing proposal was publicly disclosed or made known to the Company or any of its Subsidiaries or has been made directly to the Company’s stockholders generally and not withdrawn prior to such termination and (B) concurrently or within 12 months after such termination of the merger agreement, (1) the Company has entered into a definitive agreement to effect any competing proposal (regardless of when made or the counterparty thereto) or (2) any competing proposal (regardless of when made or the counterparty thereto) is consummated, then the Company is to pay Parent or its designee the Company termination fee concurrently with the consummation of such competing proposal; provided that for purposes of this bullet, all percentages in the definition “competing proposal” above are increased to “50%”.

Parent has agreed to pay the Company the Parent termination fee if the Company validly terminates the merger agreement as described in the second or third bullets in the section entitled “The Agreement and Plan of Merger—Termination of the Merger Agreement—Termination Rights Exercisable by the Company,” above.

While the Company termination fee and the Parent termination fee are generally the parties’ sole and exclusive remedies under the merger agreement in the event of termination of the merger agreement, Parent or Sub may seek damages from the Company in excess of the Company termination fee in the event the Company commits an act or omission with respect to any intentional breach by the Company of the merger agreement.

Miscellaneous

Specific Performance

The parties are entitled to seek an injunction, specific performance or other equitable relief to prevent breaches or threatened breaches of the merger agreement and to seek to enforce specifically the terms and provisions of the merger agreement, in addition to any other remedy to which they are entitled under the merger agreement. However, the Company is only entitled to specific performance of Parent’s obligations to cause the equity financing to be funded and to consummate the merger in the event that each of the following conditions has been satisfied: (i) all of the applicable conditions to the merger (other than those conditions that by their terms are to be satisfied at the closing of the merger, provided, that such conditions would have been satisfied if the closing were to occur) have been satisfied or waived; (ii) the debt financing has been funded or will be funded at the closing of the merger if the equity financing is funded at the closing of the merger; (iii) the Company has irrevocably confirmed in writing to Parent that (A) all of the applicable conditions to the merger (other than those conditions that by their terms are to be satisfied at the closing of the merger, provided, that such conditions would have been satisfied if the closing were to occur) have been satisfied or waived and (B) the Company is ready, willing and able to consummate the closing; and (iv) Parent and Sub fail to consummate the merger on the later of (A) the date by which the closing is required to have occurred pursuant to the merger agreement and (B) the earlier of (1) three business days following the receipt of the Company’s irrevocable written notification and (2) the outside date.

Amendment of the Merger Agreement

Except in certain circumstances with respect to certain provisions to which the debt financing sources are third party beneficiaries, the merger agreement may be further amended by the parties at any time before or after receipt of the Company stockholder approval (but prior to the consummation of the merger) by an instrument in writing signed on behalf of each of the parties. However, after receipt of the Company stockholder approval, there may not be any amendment of the merger agreement that requires further approvable by the stockholders of the Company without the further approval of such stockholders.

 

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Governing Law; Consent to Jurisdiction; Waiver of Trial by Jury

The merger agreement is governed by Delaware law. Each of the parties has irrevocably agreed that any legal action or proceeding arising out of or relating to the merger agreement brought by any other party or its successors or assigns will be brought and determined in the Court of Chancery of the State of Delaware (which we refer to as the “Court of Chancery”) and any state appellate court therefrom within the State of Delaware (unless such court will decline to accept jurisdiction over a particular matter, in which case, in any Delaware state or federal court within the State of Delaware). Notwithstanding the foregoing, actions against the debt commitment parties must generally be brought exclusively in the Supreme Court of the State of New York, County of New York, or, if under applicable law exclusive jurisdiction is vested in the federal courts, the United States District Court for the Southern District of New York (and appellate courts thereof). In addition, each of the parties to the merger agreement has irrevocably and unconditionally waived any right it may have to a trial by jury in respect of any litigation directly or indirectly arising out of or relating to the merger agreement or the merger.

 

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APPRAISAL RIGHTS

Under Delaware law, holders of shares of Company common stock are entitled to appraisal rights in connection with the merger, provided that such holders meet all of the conditions set forth in Section 262 of the DGCL. If the merger is completed, holders of record of shares of Company common stock who continuously hold shares through the effective time who did not vote in favor of the merger and who otherwise complied with the applicable statutory procedures under Section 262 of the DGCL will be entitled to appraisal rights in connection with the merger under Section 262 of the DGCL.

The following discussion is not a complete statement of the law pertaining to appraisal rights under the DGCL and is qualified in its entirety by the full text of Section 262 of the DGCL, which is attached to this proxy statement as Annex C. All references in Section 262 of the DGCL and in this summary to a “stockholder” are to the record holder of shares of Company common stock as to which appraisal rights are asserted. A person having a beneficial interest in shares held of record in the name of another person, such as a broker or nominee, must act promptly to cause the record holder to follow the steps summarized below properly and in a timely manner to demand and perfect appraisal rights. Stockholders should carefully review the full text of Section 262 of the DGCL as well as the information discussed below.

Under the DGCL, if the merger is effected, holders of shares of Company common stock who (i) did not cast their vote in favor of the merger, (ii) follow the procedures set forth in Section 262 of the DGCL and (iii) do not thereafter properly withdraw their demand for appraisal of such shares or otherwise lose their appraisal rights, in each case, in accordance with the DGCL, will be entitled to have such shares appraised by the Court of Chancery and to receive payment of the “fair value” of such shares, exclusive of any element of value arising from the accomplishment or expectation of the merger, as determined by such court, together with interest, if any, to be paid upon the amount determined to be the fair value. The “fair value” could be greater than, less than or the same as the merger consideration of $28.00 per share.

Under Section 262 of the DGCL, the Company is required not less than 20 days before the special meeting to vote on the merger to notify each of the holders of Company common stock who are entitled to appraisal rights that appraisal rights are available for any or all of such shares, and is required to include in such notice a copy of Section 262 of the DGCL. This proxy statement constitutes a formal notice of appraisal rights under Section 262 of the DGCL. Any holder of shares of Company common stock who wishes to exercise such appraisal rights, or who wishes to preserve such holder’s right to do so, should review the following discussion and Annex C carefully because failure to timely and properly comply with the procedures specified may result in the loss of appraisal rights under the DGCL.

Any stockholder wishing to exercise appraisal rights should consider consulting legal counsel before attempting to exercise such rights.

If you wish to exercise your appraisal rights, you should carefully review the text of Section 262 of the DGCL set forth in Annex C to this proxy statement and consider consulting your legal advisor. If you fail to timely and properly comply with the requirements of Section 262 of the DGCL, your appraisal rights may be lost. To exercise appraisal rights with respect to your shares of Company common stock, you must:

 

   

NOT vote your shares of Company common stock in favor of the merger;

 

   

deliver to the Company a written demand for appraisal of your shares before the taking of the vote on the proposal to adopt the merger agreement at the special meeting, as described further below under “—Written Demand by the Record Holder”;

 

   

continuously hold your shares of Company common stock through the effective time; and

 

   

otherwise comply with the procedures set forth in Section 262 of the DGCL.

 

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Written Demand by the Record Holder

All written demands for appraisal should be addressed to Navigant Consulting, Inc., 150 North Riverside Plaza, Suite 2100, Chicago, Illinois 60606, Attention: Corporate Secretary. Such demand will be sufficient if it reasonably informs the Company of the identity of the stockholder and that the stockholder intends thereby to demand appraisal of such stockholder’s shares. Under Section 262 of the DGCL, a proxy or vote against the merger does not constitute such a demand.

The written demand for appraisal must be executed by or for the record holder of shares, fully and correctly, as such holder’s name appears on the stock records of the Company. If the shares are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, execution of the demand must be made in that capacity, and if the shares are owned of record by more than one person, such as in a joint tenancy or a tenancy in common, the demand must be executed by or for all joint owners. An authorized agent, including one of two or more joint owners, may execute the demand for appraisal for a stockholder of record. However, the agent must identify the record owner(s) and expressly disclose the fact that, in executing the demand, the agent is acting as agent for the record owner(s).

A beneficial owner of shares of Company common stock held in “street name” who wishes to exercise appraisal rights should take such actions as may be necessary to ensure that a timely and proper demand for appraisal is made by the record holder of the shares. If the shares are held through a brokerage firm, bank or other nominee who in turn holds the shares through a central securities depository nominee, such as Cede & Co., a demand for appraisal of such shares must be made by or on behalf of the depository nominee and must identify the depository nominee as the record stockholder. Any beneficial owner who wishes to exercise appraisal rights and holds shares through a nominee holder is responsible for ensuring that the demand for appraisal is timely made by the record stockholder. The beneficial holder of the shares should instruct the nominee holder that the demand for appraisal should be made by the record holder of the shares, which may be a central securities depository nominee if the shares have been so deposited.

Filing a Petition for Appraisal

Within 120 days after the effective time, but not thereafter, the surviving corporation (which, in this case, will be the Company), or any holder of shares of Company common stock who has complied with Section 262 of the DGCL and is entitled to appraisal rights under Section 262, may commence an appraisal proceeding by filing a petition in the Court of Chancery, with a copy served on the Company in the case of a petition filed by a stockholder, demanding a determination of the fair value of the shares held by all holders who did not adopt the merger and properly demanded appraisal of such shares. If no such petition is filed within that 120-day period, appraisal rights will be lost for all dissenting stockholders. The Company is under no obligation to, and has no present intention to, file a petition, and holders should not assume that the Company will file a petition or that it will initiate any negotiations with respect to the fair value of shares of Company common stock. Accordingly, it is the obligation of the holders of shares of Company common stock to initiate all necessary action to perfect their appraisal rights in respect of the shares within the period prescribed in Section 262 of the DGCL.

Within 120 days after the effective time, any holder of shares of Company common stock who has complied with the requirements for exercise of appraisal rights will be entitled, upon written request, to receive from the surviving corporation a statement setting forth the aggregate number of shares not voted in favor of the merger and with respect to which demands for appraisal have been received and the aggregate number of holders of such shares. Such statement must be mailed within ten days after a written request therefor has been received by the surviving corporation or within ten days after the expiration of the period for delivery of demands for appraisal, whichever is later. Notwithstanding the requirement that a demand for appraisal must be made by or on behalf of the record owner of shares, a person who is the beneficial owner of shares held either in a voting trust or by a nominee on behalf of such person, and as to which demand has been properly made and not effectively withdrawn, may, in such person’s own name, file a petition for appraisal or request from the surviving corporation the statement described in this paragraph.

 

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Upon the filing of such petition by any such holder of shares, service of a copy thereof must be made upon the surviving corporation, which will then be obligated within 20 days after such service to file with the Register in Chancery of the Court of Chancery (which we refer to as the “Delaware Register in Chancery”) a duly verified list (which we refer to as the “verified list”) containing the names and addresses of all stockholders who have demanded payment for their shares and with whom agreements as to the value of their shares have not been reached. Upon the filing of any such petition, the Court of Chancery may order the Delaware Register in Chancery to provide notice of the time and place fixed for the hearing on the petition be mailed to the surviving corporation and all of the stockholders shown on the verified list. Such notice will also be published at least one week before the day of the hearing in a newspaper of general circulation published in the City of Wilmington, Delaware or in another publication determined by the Court of Chancery. The costs of these notices are borne by the surviving corporation.

After notice to the stockholders as required by the Court of Chancery, the Court of Chancery is empowered to conduct a hearing on the petition to determine those stockholders who have complied with Section 262 of the DGCL and who have become entitled to appraisal rights thereunder. The Court of Chancery may require the stockholders who demanded appraisal for their shares of Company common stock and who hold shares represented by certificates to submit their stock certificates to the Delaware Register in Chancery for notation thereon of the pendency of the appraisal proceeding, and, if any such stockholder fails to comply with the direction, the Court of Chancery may dismiss the proceedings as to that stockholder. Pursuant to Section 262 of the DGCL, assuming that immediately prior to the merger shares of Company common stock continue to be listed on the NYSE, the Court of Chancery will dismiss the appraisal proceedings as to all holders of shares who are otherwise entitled to appraisal rights unless (i) the total number of shares entitled to appraisal rights exceeds 1% of the outstanding shares of Company common stock eligible for appraisal, or (ii) the value of the merger consideration provided in the merger for such total number of shares exceeds $1,000,000.

Determination of Fair Value

After the Court of Chancery determines which stockholders are entitled to appraisal, the appraisal proceeding will be conducted in accordance with the rules of the Court of Chancery, including any rules specifically governing appraisal proceedings. Through the appraisal proceeding, the Court of Chancery will determine the fair value of the shares, exclusive of any element of value arising from the accomplishment or expectation of the merger, together with interest, if any, to be paid upon the amount determined to be the fair value. Unless the Court of Chancery in its discretion determines otherwise for good cause shown, and except as otherwise provided in Section 262 of the DGCL, interest from the effective time through the date of payment of the judgment will be compounded quarterly and will accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the effective time and the date of payment of the judgment. At any time before the entry of judgment in the proceedings, the surviving corporation may pay to each stockholder entitled to appraisal an amount in cash, in which case interest shall accrue thereafter as provided in Section 262 of the DGCL only upon the sum of (i) the difference, if any, between the amount so paid and the fair value of the shares as determined by the Court of Chancery, and (ii) interest theretofore accrued, unless paid at that time.

In determining fair value, the Court of Chancery will take into account all relevant factors. In Weinberger v. UOP, Inc., the Supreme Court of Delaware discussed the factors that could be considered in determining fair value in an appraisal proceeding, stating that “proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court” should be considered and that “[f]air price obviously requires consideration of all relevant factors involving the value of a company.” The Delaware Supreme Court stated that, in making this determination of fair value, the Court of Chancery must consider market value, asset value, dividends, earnings prospects, the nature of the enterprise and any other facts that could be ascertained as of the date of the merger that throw any light on future prospects of the merged corporation. Section 262 of the DGCL provides that fair value is to be “exclusive of any element of value arising from the accomplishment or expectation of the merger[.]” In Cede & Co. v. Technicolor, Inc., the Delaware

 

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Supreme Court stated that such exclusion is a “narrow exclusion [that] does not encompass known elements of value,” but which rather applies only to the speculative elements of value arising from such accomplishment or expectation. In Weinberger, the Supreme Court of Delaware also stated that “elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the merger and not the product of speculation, may be considered.”

Stockholders considering appraisal should be aware that the fair value of their shares of Company common stock as so determined could be more than, the same as or less than the merger consideration of $28.00 per share and that an investment banking opinion as to the fairness, from a financial point of view, of the consideration payable in a sale transaction, such as the merger, is not an opinion as to, and does not otherwise address, “fair value” under Section 262 of the DGCL. Although the Company believes that the merger consideration is fair, no representation is made as to the outcome of the appraisal of fair value as determined by the Court of Chancery. Neither Parent nor the Company anticipates offering more than the merger consideration to any stockholder exercising appraisal rights, and Parent and the Company reserve the right to assert, in any appraisal proceeding, that for purposes of Section 262 of the DGCL, the fair value of a share of Company common stock is less than the merger consideration.

Upon application by the surviving corporation or by any holder of shares of Company common stock entitled to participate in the appraisal proceeding, the Court of Chancery may, in its discretion, proceed to trial upon the appraisal prior to the final determination of the stockholders entitled to an appraisal. Any holder of shares of Company common stock whose name appears on the verified list and, if such shares are represented by certificates and if so required, who has submitted such stockholder’s certificates of stock to the Delaware Register in Chancery, may participate fully in all proceedings until it is finally determined that such stockholder is not entitled to appraisal rights. The Court of Chancery will direct the payment of the fair value of the shares of Company common stock, together with interest, if any, by the surviving corporation to the stockholders entitled thereto. Payment will be so made to each such stockholder, in the case of holders of uncertificated stock, forthwith, and, in the case of holders of shares represented by certificates, upon the surrender to the surviving corporation of such stockholder’s certificates. The Court of Chancery’s decree may be enforced as other decrees in such Court may be enforced.

The costs of the action (which do not include attorneys’ fees or the fees and expenses of experts) may be determined by the Court of Chancery and taxed upon the parties as the Court of Chancery deems equitable. Upon application of a stockholder, the Court of Chancery may order all or a portion of the expenses incurred by a stockholder in connection with an appraisal proceeding, including, without limitation, reasonable attorneys’ fees and the fees and expenses of experts utilized in the appraisal proceeding, to be charged pro rata against the value of all the shares of Company common stock entitled to appraisal. In the absence of an order, each party bears its own expenses.

Any stockholder who has duly demanded appraisal rights for shares of Company common stock in compliance with Section 262 of the DGCL will not, after the effective time, be entitled to vote such shares for any purpose or be entitled to the payment of dividends or other distributions thereon, except dividends or other distributions payable to holders of record of shares of Company common stock as of a date or time prior to the effective time.

At any time within 60 days after the effective time, any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party will have the right to withdraw such stockholder’s demand for appraisal and to accept the terms offered in the merger; after this period, the stockholder may withdraw such stockholder’s demand for appraisal only with the consent of the Company. If no petition for appraisal is filed with the Court of Chancery within 120 days after the effective time, stockholders’ rights to appraisal shall cease, and all holders of shares of Company common stock will be entitled to receive the merger consideration. Inasmuch as the Company has no obligation to file such a petition and has no present intention to do so, any holder of shares of Company common stock who desires such a petition to be filed is advised to file it on a timely

 

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basis. Any stockholder may withdraw such stockholder’s demand for appraisal by delivering to the Company a written withdrawal of its demand for appraisal and acceptance of the merger consideration, except that (i) any such attempt to withdraw made more than 60 days after the effective time will require written approval of the Company and (ii) no appraisal proceeding in the Court of Chancery shall be dismissed as to any stockholder without the approval of the Court of Chancery, and such approval may be conditioned upon such terms as the Court of Chancery deems just. Notwithstanding the foregoing, any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party may withdraw such stockholder’s demand for appraisal and accept the terms offered upon the merger within 60 days after the effective time.

If you wish to exercise your appraisal rights, you must not vote your shares of Company common stock in favor of the merger, and you must comply with the procedures set forth in Section 262 of the DGCL. If you fail to take any required step in connection with the exercise of appraisal rights, it will result in the termination or waiver of your appraisal rights.

The foregoing summary of the rights of Company stockholders to seek appraisal rights under Delaware law does not purport to be a complete statement of the procedures to be followed by Company stockholders desiring to exercise any appraisal rights available thereunder and is qualified in its entirety by reference to Section 262 of the DGCL. The proper exercise of appraisal rights requires adherence to the applicable provisions of the DGCL. A copy of Section 262 of the DGCL is included as Annex C to this proxy statement.

 

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MARKET PRICE AND DIVIDEND DATA

Company common stock is traded on the NYSE under the symbol “NCI.” As of the close of business on [●], 2019, the latest practicable trading day prior to the date of this proxy statement, there were [●] shares of Company common stock outstanding and entitled to vote, held by approximately [●] holders of record of Company common stock. The following table presents the high and low sale prices of Company common stock for the period indicated in published financial sources:

 

     High      Low  

Fiscal 2017

     

First quarter ended March 31, 2017

   $ 26.45      $ 22.04  

Second quarter ended June 30, 2017

   $ 24.47      $ 18.99  

Third quarter ended September 30, 2017

   $ 20.39      $ 14.62  

Fourth quarter ended December 31, 2017

   $ 19.89      $ 15.23  

Fiscal 2018

     

First quarter ended March 31, 2018

   $ 21.83      $ 18.14  

Second quarter ended June 30, 2018

   $ 25.25      $ 18.66  

Third quarter ended September 30, 2018

   $ 25.85      $ 20.81  

Fourth quarter ended December 31, 2018

   $ 26.10      $ 20.68  

Fiscal 2019

     

First quarter ended March 31, 2019

   $ 27.40      $ 18.85  

Second quarter ended June 30, 2019

   $ 23.78      $ 18.38  

Third quarter through [●], 2019

   $ [●]      $ [●]  

The following table presents the closing per share sales price of Company common stock, as reported on the NYSE on August 1, 2019, the last full trading day prior to the public announcement of the merger agreement, and on [●], 2019, the last full trading day prior to the date of this proxy statement:

 

Date

  

Closing per Share Price

August 1, 2019

   $24.04

[●], 2019

   $[●]

You are encouraged to obtain current market prices of Company common stock in connection with voting your shares. Following the merger, there will be no further market for Company common stock, and Company common stock will be delisted from the NYSE and deregistered under the Exchange Act.

The Board declared a quarterly dividend on July 23, 2019 (which we refer to as the “July dividend”). The merger agreement prohibits declaring, setting aside, making or paying any other dividend or distribution with respect to the capital stock of the Company or any Company subsidiary, other than (a) the July dividend (including any restricted stock unit awards for eligible unvested restricted stock units in connection with the July dividend) and (b) as between the Company and any Company subsidiary or between or among Company subsidiaries (provided that, if a Company subsidiary is not wholly owned, any such dividends must be pro rata among each of the holders of voting securities of such Company subsidiary).

 

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STOCK OWNERSHIP

We have listed below, as of September 4, 2019 (except as otherwise indicated), the beneficial ownership of Company common stock by (i) each of our directors, (ii) each of our “named executive officers,” (iii) all of our directors and executive officers as a group and (iv) each person known by us to be the beneficial owner of more than five percent of the number of outstanding shares of Company common stock. The table is based on information we received from the directors and executive officers and filings made with the SEC. We are not aware of any other beneficial owner of more than five percent of the number of outstanding shares of Company common stock as of September 4, 2019. Unless otherwise indicated, each of our directors and “named executive officers” has the same business address as the Company. All share numbers have been rounded to the nearest whole number.

We have determined beneficial ownership in accordance with the rules of the SEC. Except as otherwise indicated in the footnotes to the table below, we believe that the beneficial owners of Company common stock listed below, based on the information furnished by such owners, have sole voting power and investment power with respect to such shares, subject to applicable community property laws. We have based our calculation of the percentage of beneficial ownership on [●] shares of Company common stock issued and outstanding as of September 4, 2019. In computing the number of shares of Company common stock beneficially owned by a person and the percentage ownership of that person, we deemed outstanding any shares of Company common stock as to which the person has the right to acquire beneficial ownership within 60 days of [●], 2019, through the exercise of any option, conversion rights, or other rights. We did not deem these shares outstanding for purposes of computing the percentage ownership of any other person.

 

Name

   Amount and Nature of
Beneficial Ownership of
Company

Common Stock
    Percent of
Class
 

5% Shareholders:

    

BlackRock, Inc.

     [ ●]      [ ●] 

The Vanguard Group, Inc.

     [ ●]      [ ●] 

Dimensional Fund Advisors LP

     [ ●]      [ ●] 

Wellington Management Group LLP

     [ ●]      [ ●] 

Directors and Named Executive Officers

     [ ●]      [ ●] 

Kevin M. Blakely

     [ ●]      [ ●] 

Cynthia A. Glassman

     [ ●]      [ ●] 

Julie M. Howard

     [ ●]      [ ●] 

Stephan A. James

     [ ●]      [ ●] 

Rudina Seseri

     [ ●]      [ ●] 

Michael L. Tipsord

     [ ●]      [ ●] 

Kathleen E. Walsh

     [ ●]      [ ●] 

Jeffrey W. Yingling

     [ ●]      [ ●] 

Randy H. Zwirn

     [ ●]      [ ●] 

Stephen R. Lieberman

     [ ●]      [ ●] 

Lee A. Spirer

     [ ●]      [ ●] 

Monica M. Weed

     [ ●]      [ ●] 

All directors and executive officers as a group (12 persons)(19)

     [ ●]      [ ●] 

 

* 

Less than 1%.

 

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OTHER MATTERS

Other Matters for Action at the Special Meeting

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

FUTURE STOCKHOLDER PROPOSALS

If the merger is consummated, the Company will not have public stockholders and there will be no public participation in any future meeting of stockholders. However, if the merger is not completed, the Company would hold an annual meeting of stockholders in 2020.

To be submitted for inclusion in the proxy statement for any 2020 annual meeting of stockholders, stockholder proposals must have satisfied all applicable requirements of Rule 14a-8 and must have been received by the Corporate Secretary of the Company no later than December 11, 2019. Nothing in this paragraph shall be deemed to require the Company to include in its proxy statement and proxy relating to the 2020 annual meeting any stockholder proposal that may be omitted from the proxy materials of the Company under applicable regulations of the Exchange Act in effect at the time such proposal is received.

Our amended and restated by-laws provide that for a proposal to be properly brought by a stockholder before the annual meeting of stockholders to be held during calendar year 2020, notice of such proposal must generally be delivered to, or mailed and received at, the principal executive offices of the Company not less than 120 days nor more than 150 days prior to the first anniversary of the 2019 annual meeting of stockholders. As a result, notice of any stockholder proposal with respect to the 2020 annual meeting of stockholders submitted pursuant to these provisions of our by-laws, and containing the information required by our by-laws, must have been delivered to the Corporate Secretary of the Company no earlier than November 11, 2019 and no later than December 11, 2019.

Stockholder proposals and nominations should be sent to:

Corporate Secretary

Navigant Consulting, Inc.

150 North Riverside Plaza, Suite 2100

Chicago, Illinois 60606

 

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HOUSEHOLDING OF PROXY MATERIAL

If you and other residents at your mailing address own shares of Company common stock in “street name,” your bank, broker, trust or other nominee may have sent you a notice that your household will receive only one annual report and proxy statement or notice of Internet availability of proxy for each company in which you hold stock through that broker or bank. This practice, known as “householding,” is designed to reduce our printing and postage costs. If you did not respond that you did not want to participate in householding, the bank, broker, trust or other nominee will assume that you have consented and will send only one copy of our annual report and proxy statement or notice of Internet availability of proxy to your address. If you desire to revoke your consent to householding, please contact your bank, broker, trust, or other nominee. In any event, if you did not receive an individual copy of this proxy statement or if you wish to receive individual copies of our proxy statements, annual reports or notices of Internet availability of proxy, as applicable, for future meetings, we will send a copy to you if you write our Corporate Secretary at Navigant Consulting, Inc., 150 North Riverside Plaza, Suite 2100, Chicago, Illinois 60606 or call (312) 573-5600.

If you and other residents at your mailing address are registered stockholders and you received more than one copy of this proxy statement, but you wish to receive only one copy of our annual report and proxy statement or notice of Internet availability of proxy, you may request, in writing, that the Company eliminate these duplicate mailings. To request the elimination of duplicate copies, please write to our Corporate Secretary at Navigant Consulting, Inc., 150 North Riverside Plaza, Suite 2100, Chicago, Illinois 60606.

 

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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 also available to the public at the SEC’s website at www.sec.gov.

Statements contained in this proxy statement, or in any document incorporated in this proxy statement by reference, 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. This proxy statement and the information that we later file with the SEC may update and supersede the information incorporated by reference. Similarly, the information that we later file with the SEC may update and supersede the information in this proxy statement. We also 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 (provided that we are not incorporating by reference any information furnished to, but not filed with, the SEC):

 

   

the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, which was filed with the SEC on February 28, 2019;

 

   

the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2019, which was filed with the SEC on April 26, 2019;

 

   

the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2019, which was filed with the SEC on August 2, 2019;

 

   

the Company’s Definitive Proxy Statement on Schedule 14A, filed with the SEC on April 9, 2019; and

 

   

the Company’s Current Reports on Form 8-K filed with the SEC on May 16, 2019 and August 2, 2019 (in the case of the Current Reports filed on Form 8-K with the SEC on August 2, 2019, only the Current Reports filed under Items 1.01, 8.01 and 9.01).

Copies of any of the documents we file with the SEC may be obtained free of charge either on our website, by contacting our Corporate Secretary at Navigant Consulting, Inc., 150 North Riverside Plaza, Suite 2100, Chicago, Illinois 60606, Attention: Corporate Secretary or by calling (312) 573-5600.

If you would like to request documents from us, please do so at least five business days before the date of the special meeting in order to receive timely delivery of those documents prior to the special meeting.

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 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 [●]. 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 STOCKHOLDERS SHALL NOT CREATE ANY IMPLICATION TO THE CONTRARY.

 

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ANNEX A – AGREEMENT AND PLAN OF MERGER

EXECUTION VERSION

AGREEMENT AND PLAN OF MERGER

among

GUIDEHOUSE LLP,

ISAAC MERGER SUB, INC.

and

NAVIGANT CONSULTING, INC.

Dated as of August 2, 2019

 

 


Table of Contents

ARTICLE I THE MERGER

     A-1  

Section 1.01

     The Merger      A-1  

Section 1.02

     Closing      A-2  

Section 1.03

     Effective Time      A-2  

Section 1.04

     Organizational Documents, Directors and Officers of the Surviving Corporation      A-2  

ARTICLE II EFFECT OF THE MERGER ON CAPITAL STOCK

     A-3  

Section 2.01

     Conversion of Securities      A-3  

Section 2.02

     Exchange of Certificates; Payment for Shares      A-4  

Section 2.03

     Treatment of Company Options and Equity Plans      A-5  

Section 2.04

     Dissenting Shares      A-7  

Section 2.05

     Withholding Taxes      A-7  

ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     A-8  

Section 3.01

     Organization and Qualification; Subsidiaries      A-8  

Section 3.02

     Capitalization      A-9  

Section 3.03

     Authority      A-10  

Section 3.04

     No Conflict; Required Filings and Consents      A-10  

Section 3.05

     Permits; Compliance with Laws      A-11  

Section 3.06

     Company SEC Documents; Financial Statements      A-12  

Section 3.07

     Information Supplied      A-13  

Section 3.08

     Internal Controls and Disclosure Controls      A-13  

Section 3.09

     Absence of Certain Changes      A-14  

Section 3.10

     Undisclosed Liabilities      A-14  

Section 3.11

     Litigation; Investigation; Audits      A-14  

Section 3.12

     Employee Benefits      A-15  

Section 3.13

     Labor      A-16  

Section 3.14

     Tax Matters      A-16  

Section 3.15

     Properties      A-18  

Section 3.16

     Environmental Matters      A-19  

Section 3.17

     Intellectual Property; Information Technology; Data Privacy and Data Security      A-19  

Section 3.18

     Company Material Contracts      A-21  

Section 3.19

     Insurance      A-24  

Section 3.20

     Opinion of Financial Advisor      A-24  

Section 3.21

     Takeover Statutes      A-24  

Section 3.22

     Vote Required      A-24  

Section 3.23

     Brokers      A-25  

Section 3.24

     Government Contracts and Bids      A-25  

Section 3.25

     Affiliate Transactions      A-25  

Section 3.26

     Top Customers; Top Vendors      A-25  

Section 3.27

     Project Margin Losses      A-26  

Section 3.28

     Acknowledgement of No Other Representations or Warranties      A-26  

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB

     A-26  

Section 4.01

     Organization