Item 5.02.
Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers
(a)
On August 2, 2018, Mr. Jeffrey Hayzlett, Mr. Alan Swimmer, and Mr. Jonathan Trutter resigned as members of the Board of Directors (the “Board”) of RMG Networks Holdings Corporation (the “Company”) effective August 2, 2018. Mr. Hayzlett, Mr. Swimmer and Mr. Trutter were members of the Audit Committee, the Compensation Committee and the Special Committee of the Board, and Mr. Swimmer and Mr. Trutter were members of the Nominating and Corporate Governance Committee of the Board. Mr. Trutter was the chairperson of the Audit Committee, the Nominating and Corporate Governance Committee and the Special Committee, and Mr. Swimmer was the chairperson of the Compensation Committee.
As previously announced, the Company had received an alternative proposal from a third party, Hale Capital Partners, Inc. (“Hale”), to engage in a recapitalization transaction with the Company during the “go-shop” period provided for in the existing merger agreement (the “Merger Agreement”) between the Company and entities owned by Mr. Gregory Sachs, the Company’s executive chairman, which was modified after negotiations between the Special Committee, in consultation with its financial advisors and legal counsel, and Hale (as so modified, the “Hale Transaction”).
At a meeting held by the Special Committee on August 1, 2018, the Special Committee unanimously determined that the Hale Transaction would result in a transaction more favorable to the Company’s stockholders than the Merger Agreement and the transactions contemplated by the Merger Agreement and recommended to the Board that the Board, among other things, declare the Hale Transaction to be a “Superior Proposal” (as defined in the Merger Agreement).
Immediately following the Special Committee meeting, the Board held a meeting attended by each of the six members of the Board. At that meeting, the Board considered whether to declare the Hale Transaction to be a “Superior Proposal” (as defined in the Merger Agreement). After discussion, each member of the Special Committee, Mr. Hayzlett, Mr. Swimmer, and Mr. Trutter, voted in favor of the matter, Mr. Robert Michelson and Mr. Larry Weber voted against the matter, and Mr. Gregory Sachs abstained from voting. The Company’s bylaws provide that, with certain exceptions not applicable to this matter, approval of a matter requires the affirmative vote of a majority of the directors present at any meeting of the Board at which there is a quorum. As a result, the matter did not pass.
At the Board meeting, legal counsel to the Special Committee stated that, in the view of the Special Committee, it was inappropriate for Mr. Sachs to attend the Board meeting and participate in the Board’s discussion of the Hale Transaction; Mr. Sachs stated that it was his understanding that Delaware law permitted him to do so as a director and executive chairman of the Company and that the support of either of the two other non-committee directors in attendance would result in approval of the Hale Transaction. Following the vote on the matter, members of the Special Committee also expressed concern over the outcome of the vote. Although their letters of resignation did not express a reason for the resignations of the members of the Special Committee, the Company believes that their disagreement with Mr. Sachs’ attendance and participation in the discussion of the Hale Transaction and the outcome of the Board vote on the Hale Transaction were the reasons for their resignations.
Important Additional Information and Where to Find It
In connection with the proposed merger contemplated by the Merger Agreement, the Company filed with the Securities and Exchange Commission (“SEC”) a preliminary proxy statement and other documents relating to the proposed merger on July 27, 2018. When completed, a definitive proxy statement and a form of proxy will be filed with the SEC and mailed to the Company’s stockholders. INVESTORS AND SECURITY HOLDERS ARE ADVISED TO READ THE DEFINITIVE PROXY STATEMENT WHEN IT BECOMES AVAILABLE AND ANY OTHER DOCUMENTS TO BE FILED WITH THE SEC IN CONNECTION WITH THE PROPOSED MERGER OR INCORPORATED BY REFERENCE IN THE PROXY STATEMENT BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER AND THE PARTIES
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