UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934

 

 

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Filed by a Party other than the Registrant ☐

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☐	Preliminary Proxy Statement

 

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☒	Definitive Proxy Statement

 

☐	Soliciting Material under Rule 14a-12

 

 

Fathom Digital Manufacturing Corporation

(Name of Registrant as Specified in Its Charter)

 

 

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☒	Fee paid previously with preliminary materials

 

☐	Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

 

 

Fathom Digital Manufacturing Corporation

1050 Walnut Ridge Drive

Hartland, Wisconsin 53029

April 19, 2024

Dear Stockholders:

 

You are cordially invited to attend a special meeting (such meeting, including any adjournments or postponements thereof, the “Special Meeting”) of the stockholders of Fathom Digital Manufacturing Corporation, a Delaware corporation (the “Company” or “Fathom”), which will be held entirely online in virtual meeting format at https://www.virtualshareholdermeeting.com/FATH2024SM, on May 17, 2024, at 10:00 a.m. Central time. You may submit questions and vote online during the online Special Meeting. We believe a virtual meeting provides expanded access, improves communication, enables increased stockholder attendance and participation and provides cost savings for our stockholders and the Company. Details regarding the business to be conducted at the Special Meeting are described in the accompanying proxy statement and the accompanying notice of Special Meeting (the “Notice of Special Meeting”). For purposes of attendance at the Special Meeting, all references in the accompanying proxy statement to “present in person” or “in person” shall mean virtually present at the Special Meeting.

At the Special Meeting you will be asked to consider and vote upon a proposal to approve and adopt the Agreement and Plan of Merger, dated as of February 16, 2024 (as may be amended from time to time in accordance with its terms, the “Merger Agreement”), by and among Fathom Digital Manufacturing Intermediate, LLC, a Delaware limited liability company (“Parent”), Fathom Digital Manufacturing Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Parent (“Company Merger Sub”), Fathom Digital Manufacturing Merger Sub 2, LLC, a Delaware limited liability company and a wholly-owned subsidiary of Company Merger Sub (“LLC Merger Sub”), Fathom Holdco, LLC, a Delaware limited liability company and the partially-owned operating subsidiary of Fathom (“OpCo”), and Fathom, pursuant to which Company Merger Sub will merge with and into the Company, with the Company as the surviving corporation (the “Merger”). A copy of the Merger Agreement is attached as Annex A to the accompanying proxy statement. On the date of the closing of the Merger and immediately prior to completion of the LLC Merger, the Class A Units of Opco (other than those held by the Company) will be automatically exchanged for an equal number of shares of Class A Common Stock and each paired share of Class B Common Stock will be cancelled.

Parent, Company Merger Sub and LLC Merger Sub are affiliates of CORE Industrial Partners Fund I, L.P. (“CORE Fund I”), CORE Industrial Partners Fund I Parallel L.P. (“CORE Fund I Parallel”) and CORE Industrial Partners GP I, LLC (the general partner of CORE Fund I and CORE Fund I Parallel) and are collectively the holders of a majority of the outstanding capital stock of the Company (collectively with certain other funds managed by CORE Industrial Partners, LLC, the “CORE Funds”).

If the Merger is completed, each share of Fathom’s Class A common stock, par value $0.0001 per share (the “Class A Common Stock”), issued and outstanding immediately prior to the effective time of the Merger, other than certain excluded shares pursuant to the terms of the Merger Agreement, shall be cancelled and extinguished and automatically converted into and shall thereafter represent only the right to receive an amount in cash equal to $4.75 per share of Class A Common Stock (the “Merger Consideration”), payable to the holder thereof, without interest, subject to and in accordance with the terms and conditions of the Merger Agreement. Upon completion of the Merger, Fathom will become a private company and Fathom will no longer be required to file periodic and other reports with the SEC with respect to its Class A Common Stock. After the completion of the Merger, if you are an Unaffiliated Stockholder (as defined below), you will no longer have an equity interest in Fathom and will not participate in any potential future earnings of Fathom. The Merger Agreement and the Merger are described further in the accompanying proxy statement.

Whether or not you plan to attend the Special Meeting, you are urged to submit a proxy to vote your shares as promptly as possible to ensure your representation at the Special Meeting. Please review the instructions in the accompanying Notice of Special Meeting and proxy statement regarding the submission of proxies and voting.

The proposed transactions constitute a “going-private transaction” under the rules of the SEC. The CORE Funds hold approximately 63% of the voting power of Fathom’s outstanding capital stock.

The Fathom Board of Directors (the “Fathom Board”) formed a special committee (the “Special Committee”) consisting solely of independent and disinterested directors of Fathom to, among other things, review, evaluate and negotiate the Merger Agreement and the Merger, and other alternatives available to Fathom. After careful consideration, the Special Committee, pursuant to resolutions adopted at a meeting of the Special Committee held on February 15, 2024, (i) determined the terms and conditions of the Merger Agreement and the transactions contemplated thereby (the “Transactions”), including the Merger, to be advisable and fair to, and in the best interests of, the Company and the Company’s stockholders, including the Unaffiliated Stockholders (as defined below), and (ii) recommended that the Fathom Board approve the Merger Agreement and the Transactions, including the Merger, and submit and recommend the Merger Agreement to the Company’s stockholders for approval and adoption thereby. As part of its evaluation of the Merger Agreement and the Transactions, including the Merger, the Special Committee received advice from the Special Committee’s independent legal and financial advisors, consulted with Fathom’s management and considered various material factors, including those summarized in the accompanying proxy statement.

Based on the unanimous recommendation of the Special Committee, the Fathom Board, pursuant to resolutions adopted at a meeting of the Fathom Board held on February 15, 2024, (i) determined the terms and conditions of the Merger Agreement and the Transactions, including the Merger, to be advisable and fair to, and in the best interests of, the Company and the Company’s stockholders, including the Unaffiliated Stockholders, (ii) approved and declared advisable the Merger Agreement and the Transactions, including the Merger, (iii) resolved to recommend that the stockholders of the Company vote to adopt and approve the Merger Agreement in accordance with the DGCL and (iv) directed that the Merger Agreement be submitted to the stockholders of the Company for adoption thereby.

The Fathom Board, acting upon the unanimous recommendation of the Special Committee, recommends that you vote “FOR” the proposal to approve and adopt the Merger Agreement and the Merger.

Your vote is very important, regardless of the number of shares of Company stock you own. The approval of the proposal to adopt the Merger Agreement requires the affirmative vote of the holders of at least a majority of the voting power of the outstanding shares of Class A Common Stock and the outstanding shares of the Company’s non-economic, vote-only Class B common stock, par value $0.0001 per share (together with the Class A Common Stock, the “Company Common Stock”), in each case entitled to vote in accordance with the DGCL and voting together as a single class. Each record holder of Company Common Stock is entitled to one (1) vote for each share of Company Common Stock owned of record on the Record Date. If you fail to vote on the proposal to adopt the Merger Agreement and the Merger, the effect will be the same as a vote against the proposal.

You will also be asked to vote at the Special Meeting on one or more proposals to adjourn the Special Meeting, if necessary or appropriate, including adjournments to solicit additional proxies if there are insufficient votes at the time of the Special Meeting to adopt the Merger Agreement, which requires the affirmative vote of the holders of a majority of the voting power of the shares of Company Common Stock present in person or represented by proxy at the virtual Special Meeting and entitled to vote thereon, assuming that a quorum is present.

For each of the foregoing proposals, each record holder of Company Common Stock is entitled to one (1) vote for each outstanding share of Company Common Stock owned of record on the Record Date.

The Fathom Board, acting upon the unanimous recommendation of the Special Committee, recommends that you vote “FOR” the proposal to adjourn the Special Meeting, if necessary or appropriate.

In considering the recommendations of the Fathom Board, Fathom’s stockholders should be aware that the executive officers and directors have certain interests in the Merger that may be different from, or in addition to, the interests of Fathom’s stockholders generally. Those interests are more fully described in the accompanying proxy statement. The Special Committee and the Fathom Board were aware of these interests and considered them, among other matters, in making their recommendations.

The CORE Funds, which hold approximately 63% of the voting power of Fathom’s outstanding capital stock, entered into a Support Agreement with Fathom and Parent pursuant to which, among other things, the CORE Funds have agreed, subject to the terms, conditions and limitations set forth therein, to (i) vote all shares of Company Common Stock beneficially owned by the CORE Funds in favor of the Merger Agreement and the Merger, (ii) not exercise dissenters’ rights, appraisal rights or vote in favor of an alternative proposal or other action that would reasonably be expected to prevent, interfere with, adversely affect or delay the Merger and (iii) not sell, assign, transfer, encumber or otherwise dispose of any shares of Fathom held by the CORE Funds, or enter into any contract, option or other arrangement or understanding with respect to the sale, assignment, transfer, encumbrance or other disposition of any shares of Company Common Stock held by the CORE Funds, other than as provided under certain customary exceptions contained therein. A copy of the Support Agreement is attached as Annex B to the accompanying proxy statement. Accordingly, subject to the terms and conditions contained therein, the required vote by the CORE Funds at the Special Meeting pursuant to the Support Agreement is expected to result in a majority of outstanding shares of Company Common Stock being voted in favor of the proposal to approve and adopt the Merger Agreement, with the result that such proposal will be adopted.

Completion of the Merger is subject to the satisfaction or waiver of certain conditions set forth in the Merger Agreement. The accompanying proxy statement provides you with more detailed information about the Special Meeting, the Merger Agreement and the Merger. We encourage you to carefully read the entire proxy statement and its annexes, including the Merger Agreement and the documents referred to or incorporated by reference in the accompanying proxy statement in their entirety. You may also obtain additional information about Fathom from other documents we have filed with the SEC and incorporated by reference in the accompanying proxy statement in their entirety, for risks relating to our business and for a discussion of the risks you should consider in evaluating the proposed transactions and how they may affect you.

Thank you in advance for your continued support.

 

The accompanying proxy statement is dated April 19, 2024, and is first being mailed to Fathom’s stockholders on or about April 19, 2024. Capitalized terms used, but not defined, in this letter to stockholders have the meanings given to such terms in the accompanying proxy statement.

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

1050 Walnut Ridge Drive

Hartland, Wisconsin 53029

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

Dear Stockholders:

You are cordially invited to attend a special meeting (such meeting, including any adjournments or postponements thereof, the “Special Meeting”) of the stockholders of Fathom Digital Manufacturing Corporation, a Delaware corporation, which we refer to as the “Company” or “Fathom,” to be held on May 17, 2024, at 10:00 a.m. Central time. The Special Meeting will be held entirely online in virtual meeting format. You will be able to attend the Special Meeting, submit your questions and vote online during the meeting by visiting https://www.virtualshareholdermeeting.com/FATH2024SM. For purposes of attendance at the Special Meeting, all references in the accompanying proxy statement to “present in person” or “in person” shall mean virtually present at the Special Meeting.

The Special Meeting is being held to consider and vote on the following proposals:

1. a proposal to approve and adopt the Agreement and Plan of Merger, dated as of February 16, 2024 (as may be amended from time to time in accordance with its terms, the “Merger Agreement”), by and among Fathom Digital Manufacturing Intermediate, LLC, a Delaware limited liability company (“Parent”), Fathom Digital Manufacturing Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Parent (“Company Merger Sub”), Fathom Digital Manufacturing Merger Sub 2, LLC, a Delaware limited liability company and a wholly-owned subsidiary of Company Merger Sub, Fathom Holdco, LLC, a Delaware limited liability company and the partially-owned operating subsidiary of Fathom (“OpCo”), and Fathom, pursuant to which Company Merger Sub will merge with and into the Company, with the Company as the surviving corporation (the “Merger,”) and approve the transactions contemplated thereby, including the Merger (the “Merger Agreement Proposal”) (a copy of the Merger Agreement is attached as Annex A to the accompanying proxy statement); and

2. a proposal to approve one or more proposals to adjourn the Special Meeting, if necessary or appropriate, including adjournments to solicit additional proxies if there are insufficient votes at the time of the Special Meeting to approve the Merger Agreement Proposal (the “Adjournment Proposal”).

Parent, Company Merger Sub and LLC Merger Sub are affiliates of CORE Industrial Partners Fund I, L.P. (“CORE Fund I”), CORE Industrial Partners Fund I Parallel L.P. (“CORE Fund I Parallel”) and CORE Industrial Partners GP I, LLC (the general partner of CORE Fund I and CORE Fund I Parallel) and are collectively the holders of a majority of the outstanding capital stock of the Company (collectively with certain other funds managed by CORE Industrial Partners, LLC, the “CORE Funds”).

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

The record date for the Special Meeting is April 19, 2024 (the “Record Date”). Only stockholders of record at the close of business on that date are entitled to notice of, and to attend and vote at, the Special Meeting or any adjournment or postponement thereof. Any stockholder entitled to attend and vote at the Special Meeting is entitled to appoint a proxy to attend and act on such stockholder’s behalf. Such proxy need not be a stockholder of Fathom. You may submit a proxy to vote your shares on the Internet, by telephone or by mail or you may attend the virtual Special Meeting and vote in person.

The Fathom Board of Directors, acting upon the unanimous recommendation of the Special Committee, has approved the Merger Agreement and the Merger, and recommends that you vote “FOR” the Merger Agreement Proposal and “FOR” the Adjournment Proposal.

The proposed transactions constitute a “going-private transaction” under the rules of the SEC. The CORE Funds hold approximately 63% of the voting power of Fathom’s outstanding capital stock.

Your vote is very important, regardless of the number of shares of Fathom Class A common stock, par value $0.0001 per share, and non-economic, vote-only Class B common stock, par value $0.0001 per share (collectively, “Company Common Stock”), you own. The approval of the Merger Agreement Proposal requires the affirmative vote of the holders of at least a majority of the voting power of the outstanding shares of Company Common Stock entitled to vote in accordance with the DGCL, as described in the accompanying proxy statement. If you fail to vote on the Merger Agreement Proposal, the effect will be the same as a vote against the Merger Agreement Proposal.

For each of the Merger Agreement Proposal and the Adjournment Proposal, each record holder of Company Common Stock is entitled to one (1) vote for each outstanding share of Company Common Stock owned of record on the Record Date.

To ensure your representation at the Special Meeting, it is important that you submit a proxy for your shares of Company Common Stock promptly, whether or not you plan to attend the virtual Special Meeting in person. As promptly as possible, please complete, date, sign and return the enclosed proxy card in the accompanying prepaid reply envelope, or submit your proxy over the Internet or by telephone by following the instructions set forth on the enclosed proxy card. Stockholders who attend the virtual Special Meeting may revoke their proxies and vote in person.

 

Fathom Digital Manufacturing Corporation

1050 Walnut Ridge Drive, Hartland, Wisconsin 53029

Dated: April 19, 2024

TABLE OF CONTENTS

 

				Page
DEFINED TERMS					1
SUMMARY TERM SHEET					6
		Special Factors (page 22)			6
		The Merger Agreement (page 77)			9
		Parties to the Merger (page 97)			10
		The Special Meeting (page 99)			11
		Other Important Information Regarding Fathom (page 115)			11
QUESTIONS AND ANSWERS ABOUT THE PROPOSALS AND THE SPECIAL MEETING					12
SPECIAL FACTORS					22
		Background of the Merger			22
		Recommendation of the Board and Special Committee			38
		Reasons for the Merger			39
		Certain Unaudited Prospective Financial Information			45
		Opinion of the Special Committee’s Financial Advisor			49
		Position of the Parent Entities as to the Fairness of the Merger			58
		Purpose and Reasons of the Parent Entities for the Merger			61
		Plans for the Company After the Merger			62
		Certain Effects of the Merger			63
		Benefits of the Merger for Fathom’s Unaffiliated Security Holders			64
		Detriments of the Merger to Fathom’s Unaffiliated Security Holders			65
		Certain Effects of the Merger for the Parent Entities			65
		Certain Effects on Fathom if the Merger is Not Completed			65
		Interests of Executive Officers and Directors of Fathom in the Merger			65
		Intent of the Directors and Executive Officers to Vote in Favor of the Merger			68
		Intent of the CORE Funds to Vote in Favor of the Merger			68
		Material U.S. Federal Income Tax Consequences of the Merger			69
		Accounting Treatment			72
		Financing of the Merger			72
		Fees and Expenses			72
		Regulatory Approvals			72
		Litigation Relating to the Merger			73
		Appraisal Rights			73
		Support Agreement			74
		Effective Time of the Merger			74
		Payment of Merger Consideration			75
THE MERGER AGREEMENT					77
		The Merger Agreement			77
		Exchange; Rollover			77
		Form of Mergers			78
		Consummation and Effectiveness of the Merger			78
		Consideration to be Received in the Merger			78
		Procedures for Receiving Merger Consideration			80
		Organizational Documents			81
		Directors and Officers of the Surviving LLC and the Surviving Corporation			81
		Representations and Warranties			81

 

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				Page
		Conduct of Business by Fathom Prior to Consummation of the Merger			85
		Required Action; Efforts			86
		Fathom Stockholder Approval			87
		No Solicitation; Superior Proposal and Change of Recommendation			87
		Indemnification and Insurance			91
		Other Covenants			91
		Amendments to OpCo’s LLC Agreement, the Amended and Restated Tax Receivable Agreement and Fathom’s Credit Agreement			92
		Conditions to Consummation of the Merger			92
		Termination of the Merger Agreement			93
		Termination Fees and Expenses			94
		Amendment; Extension and Waiver			95
		Specific Performance			95
		Governing Law; Jurisdiction			95
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION					96
PARTIES TO THE MERGER					97
		The Company			97
		The Parent Entities			97
THE SPECIAL MEETING					99
		Date, Time and Place			99
		Purpose of the Special Meeting			99
		Recommendation of Fathom Board			99
		Record Date and Quorum			99
		Vote Required			100
		Voting Intentions of Fathom’s Directors and Executive Officers			100
		Voting			101
		Abstentions			102
		How to Vote			102
		Proxies and Revocation			103
		Technical Support			104
		Questions			104
		Adjournments and Postponements			104
		Anticipated Date of Completion of the Merger			104
		Provisions for Unaffiliated Stockholders			104
		Appraisal Rights			105
		Solicitation of Proxies; Payment of Solicitation Expenses			111
THE MERGER (THE MERGER AGREEMENT PROPOSAL — PROPOSAL 1)					112
		The Proposal			112
		General			112
		Vote Required			112
		Appraisal Rights			112
		Vote Recommendation			113
ADJOURNMENT OF THE SPECIAL MEETING (THE ADJOURNMENT PROPOSAL — PROPOSAL 2)					114
		The Proposal			114
		General			114
		Vote Required			114
		Vote Recommendation			114

 

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				Page
OTHER IMPORTANT INFORMATION REGARDING FATHOM					115
		Directors and Executive Officers of Fathom			115
		Book Value per Share			118
		Market Price of Shares of Class A Common Stock and Dividends			119
		Security Ownership of Certain Beneficial Owners and Management			119
		Prior Public Offerings			121
		Certain Transactions in the Shares of Class A Common Stock			121
		Recent Information			122
OTHER IMPORTANT INFORMATION REGARDING THE PARENT ENTITIES					123
		The Parent Entities			123
		Directors, Executive Officers and Controlling Persons			124
DELISTING AND DEREGISTRATION OF THE CLASS A COMMON STOCK					125
STOCKHOLDER PROPOSALS AND NOMINATIONS					125
		Requirements for Stockholder Proposals to be Considered for Inclusion in Fathom’s Proxy Materials			125
		Requirements for Stockholder Proposals to be Brought before the Annual Meeting			125
		Requirements for Stockholder Nominations for Fathom Board Directors			125
WHERE YOU CAN FIND MORE INFORMATION					127
Annex A		Agreement and Plan of Merger, dated as of February  16, 2024, by and among Fathom Digital Manufacturing Intermediate, LLC, Fathom Digital Manufacturing Merger Sub, Inc., Fathom Digital Manufacturing Merger Sub 2, LLC, Fathom Holdco, LLC and Fathom Digital Manufacturing Corporation			A-1
Annex B		Support Agreement, dated as of February 16, 2024, by and among Fathom Digital Manufacturing Corporation, Fathom Digital Manufacturing Intermediate, LLC and the other parties thereto			B-1
Annex C		Opinion of Duff & Phelps, dated as of February 15, 2024			C-1
Annex D		Section 262 of the Delaware General Corporation Law of the State of Delaware			D-1

 

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DEFINED TERMS

Certain defined terms used in this proxy statement have the meanings given to them in the Merger Agreement, a copy of which is attached to this proxy statement as Annex A and which is incorporated by reference into this proxy statement in its entirety. Unless specified otherwise, whenever used in this proxy statement, the following terms have the meanings set forth below:

Acquisition Proposal has the meaning set forth in the Merger Agreement.

Adjournment Proposal means the proposal to approve one or more proposals to adjourn the Special Meeting, if necessary or appropriate, including adjournments to solicit additional proxies if there are insufficient votes at the time of the Special Meeting to adopt the Merger Agreement Proposal.

Affiliate has the meaning set forth in the Merger Agreement.

Alternative Acquisition Agreement has the meaning set forth in the Merger Agreement.

Business Day has the meaning set forth in the Merger Agreement.

Class A Common Stock means the Company’s Class A common stock, par value $0.0001 per share.

Class A Unit Exchange has the meaning set forth in the Merger Agreement.

Class B Common Stock means the Company’s non-economic, vote-only Class B common stock, par value $0.0001 per share.

Closing has the meaning set forth in the Merger Agreement.

Closing Date has the meaning set forth in the Merger Agreement. See “Special Factors — Effective Time of the Merger.”

Code has the meaning set forth in the Merger Agreement.

Company means Fathom Digital Manufacturing Corporation (which also includes references to “Fathom,” “our,” “us” and “we”).

Company Board Recommendation Change has the meaning set forth in the Merger Agreement.

Company Common Stock means the Company’s Class A Common Stock and Class B Common Stock.

Company Disclosure Letter means the disclosure letter delivered by the Company to Parent and the Merger Subs in connection with the execution of the Merger Agreement.

Company ESPP means the Company’s 2021 Employee Stock Purchase Plan.

Company Material Adverse Effect has the meaning set forth in the Merger Agreement.

Company Merger Sub means Fathom Digital Manufacturing Merger Sub, Inc., a Delaware corporation.

Company Option has the meaning set forth in the Merger Agreement.

Company Restricted Stock Unit Award has the meaning set forth in the Merger Agreement.

 

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Company Termination Fee means a cash amount equal to $813,771.

Company Warrants means those outstanding Public Warrants (as defined in the Warrant Agreement) and Private Placement Warrants (as defined in the Warrant Agreement) of the Company exercisable for shares of Class A Common Stock pursuant to the terms of the Warrant Agreement.

Continuing Employees has the meaning set forth in the Merger Agreement.

CORE Funds means, collectively, CORE Industrial Partners Fund I, L.P. (“CORE Fund I”), CORE Industrial Partners Fund I Parallel L.P. (“CORE Fund I Parallel”) and CORE Industrial Partners GP I, LLC (the general partner of CORE Fund I and CORE Fund I Parallel) and, solely for purposes of their equity commitment to Parent in accordance with the terms of the Equity Commitment Letter, CORE Industrial Partners Fund III, L.P. (“CORE Fund III”), CORE Industrial Partners Fund III Parallel, L.P. (“CORE Fund III Parallel”) and CORE Industrial Partners GP III, L.P. (the general partner of CORE Fund III and CORE Fund III Parallel).

COVID-19 means SARS-CoV-2 or COVID-19, and any evolutions or mutations thereof.

Credit Agreement Amendment means the Fourth Amendment, dated as of February 16, 2024, to the Credit Agreement, dated as of December 23, 2021, as previously amended by the First Amendment, Second Amendment and Third Amendment thereto, by and among Fathom Guarantor, LLC, Fathom Manufacturing, LLC, the Lenders from time to time party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent, and as more fully described below under, “The Merger Agreement – Amendments to OpCo’s LLC Agreement, the Amended and Restated Tax Receivable Agreement and Fathom’s Credit Agreement.”

Delaware Certificate of Merger means a certificate of merger in such form as required by and in accordance with the applicable provisions of the DGCL.

DGCL means the General Corporation Law of the State of Delaware, as amended.

Dissenting Shares means shares of Class A Common Stock that are issued and outstanding as of immediately prior to the Merger Effective Time and held by stockholders who have not voted in favor of the adoption of the Merger Agreement and who have properly demanded appraisal of such shares in accordance with, and who have otherwise complied with, Section 262 of the DGCL.

Effective Time means the time at which the Merger becomes effective, being the time at which the Company Certificate of Merger is filed with the Office of the Secretary of State of the State of Delaware, or at such later time and date as may be agreed upon in writing by Parent, the Merger Subs and the Company and stated in the Company Certificate of Merger, as described in “Special Factors — Effective Time of the Merger” and “The Merger Agreement — Effective Time of the Merger.”

Equity Commitment Letter means the equity commitment letter, dated February 16, 2024, entered into by and between Parent and the CORE Funds.

Equity Securities means, with respect to any Person, (i) any shares of capital or capital stock (including any ordinary shares) or other voting securities of, or other ownership interest in, such Person, (ii) any securities of such Person convertible into or exchangeable for cash or shares of capital or capital stock or other voting securities of, or other ownership interests in, such Person or any of its Subsidiaries, (iii) any warrants, calls, options or other rights to acquire from such Person, or other obligations of such Person to issue, any shares of capital or capital stock or other voting securities of, or other ownership interests in, or securities convertible into or exchangeable for shares of capital or capital stock or other voting securities of, or other ownership interests in, such Person or any of its Subsidiaries or (iv) any restricted shares, stock appreciation rights, restricted units, performance units, contingent value rights, “phantom” stock or similar securities or rights issued by or with the

 

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approval of such Person that are derivative of, or provide economic benefits based, directly or indirectly, on the value or price of, any shares of capital or capital stock or other voting securities of, or other ownership interests in, or any business, products or assets of, such Person or any of its Subsidiaries.

Exchange Act means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

Excluded Shares means the Owned Company Shares and any Dissenting Shares.

Fathom Board means the board of directors of Fathom Digital Manufacturing Corporation.

GAAP means generally accepted accounting principles, consistently applied, in the United States.

Governmental Authority has the meaning set forth in the Merger Agreement.

Intervening Event has the meaning set forth in the Merger Agreement.

Law has the meaning set forth in the Merger Agreement.

LLC Merger means the proposed merger of LLC Merger Sub with and into OpCo with OpCo surviving the merger as a partially-owned subsidiary of the Company and a partially-owned subsidiary of Company Merger Sub.

LLC Merger Sub means Fathom Digital Manufacturing Merger Sub 2, LLC, a Delaware limited liability company.

Material Contract has the meaning set forth in the Merger Agreement.

Merger means the proposed merger of Company Merger Sub with and into the Company pursuant to the Merger Agreement in accordance with the applicable provisions of the DGCL, with the Company surviving the Merger as the surviving corporation and a wholly-owned subsidiary of Parent (and as a result of the Merger, OpCo, presently a partially-owned subsidiary of the Company, shall become a wholly-owned subsidiary of the Company).

Merger Agreement means the Agreement and Plan of Merger, dated as of February 16, 2024, by and among the Company, Parent and Merger Subs, as it may be amended from time to time.

Merger Agreement Proposal means the proposal to approve and adopt the Merger Agreement and the Transactions, including the Merger. A copy of the Merger Agreement is attached as Annex A to this proxy statement and is incorporated by reference in this proxy statement in its entirety.

Merger Consideration means $4.75 per share of Class A Common Stock in cash, without interest, less any applicable withholding taxes, subject to and in accordance with the terms and conditions of the Merger Agreement.

Merger Subs means, together, Company Merger Sub and LLC Merger Sub.

NYSE means the New York Stock Exchange.

OpCo means Fathom Holdco, LLC, a Delaware limited liability company and the partially-owned consolidated operating subsidiary of the Company.

 

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OpCo Class A Units means the outstanding Class A Units of OpCo.

OpCo LLC Agreement Amendment means Amendment No. 1, dated as of February 16, 2024, to the Second Amended and Restated Limited Liability Company Agreement of OpCo, dated as of December 23, 2021, by and among the Company, OpCo and the other parties signatory thereto, and as more fully described below under, “The Merger Agreement – Amendments to OpCo’s LLC Agreement, the Amended and Restated Tax Receivable Agreement and Fathom’s Credit Agreement.”

Order has the meaning set forth in the Merger Agreement.

Owned Company Shares means each share of Class A Common Stock that, immediately before the Merger Effective Time, is (i) held by the Company as treasury stock, (ii) owned by Parent or Merger Subs or any of their Affiliates (including, for the avoidance of doubt, the Rollover Shares) and (iii) owned, directly or indirectly, by the CORE Funds.

Parent means Fathom Digital Manufacturing Intermediate LLC, a Delaware limited liability company.

Parent Entities means Topco, Parent, Company Merger Sub, LLC Merger Sub and the CORE Funds.

Payment Agent has the meaning set forth in the Merger Agreement.

Person has the meaning set forth in the Merger Agreement.

Record Date means April 19, 2024, being the record date for the Special Meeting.

Representatives has the meaning set forth in the Merger Agreement.

Rollover Shares has the meaning set forth in the Merger Agreement.

Securities Act means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

Software has the meaning set forth in the Merger Agreement.

Special Committee means a committee established by the Fathom Board consisting of the independent and disinterested members of the Fathom Board.

Special Meeting means the special meeting of the stockholders of the Company to be held on May 17, 2024, at 10:00 a.m. Central time in a virtual meeting format via live webcast, including any adjournment or postponement thereof.

Subsidiary has the meaning set forth in the Merger Agreement.

Superior Proposal has the meaning set forth in the Merger Agreement.

Support Agreement means the support agreement dated as of February 16, 2024, by and among the Company, Parent and the CORE Funds. A copy of the Support Agreement is attached as Annex B to this proxy statement and is incorporated by reference in the proxy statement in its entirety.

Surviving Corporation means the surviving corporation in the Company Merger in accordance with the Merger Agreement, as described in “The Merger Agreement — The Merger.”

Tax or Taxes has the meaning set forth in the Merger Agreement.

Third Person has the meaning set forth in the Merger Agreement.

 

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Topco means Fathom Digital Manufacturing Topco, LLC, a Delaware limited liability company.

TRA Amendment means Amendment No. 1, dated as of February 16, 2024, to the Amended and Restated Tax Receivable Agreement dated as of April 4, 2023, by and among the Company, OpCo and the other parties thereto, as more fully described below under, “The Merger Agreement – Amendments to OpCo’s LLC Agreement, the Amended and Restated Tax Receivable Agreement and Fathom’s Credit Agreement.”

Transactions means the transactions contemplated by the Merger Agreement, including the Merger.

Unaffiliated Stockholders has the meaning set forth in the Merger Agreement.

Warrant Agreement means that certain Warrant Agreement, dated as of February 4, 2021, by and between the Company (formerly known as Altimar Acquisition Corporation II) and Continental Stock Transfer & Trust Company, a New York limited purpose trust company, as warrant agent.

Willful Breach has the meaning set forth in the Merger Agreement.

 

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QUESTIONS AND ANSWERS ABOUT THE PROPOSALS AND

THE SPECIAL MEETING

The following questions and answers are intended to address briefly some commonly asked questions regarding the Special Meeting, the Merger Agreement and the Transactions, including the Merger. These questions and answers may not address all questions that may be important to you as a stockholder of Fathom. Please refer to the “Summary Term Sheet” and the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents referred to or incorporated by reference in this proxy statement, all of which you should read carefully in their entirety. See “Where You Can Find More Information.”

 

Q.	Why am I receiving this document?

 

A.	You are receiving this proxy statement because you own shares of Company Common Stock and Fathom is soliciting proxies for the Special Meeting. Fathom is holding the Special Meeting so that our stockholders may vote to approve the Merger Agreement Proposal and the Adjournment Proposal.

This proxy statement contains important information about the Merger Agreement and the Transactions, including the Merger, and the Special Meeting, and you should read it carefully. The enclosed proxy card allows you to submit a proxy to vote your shares of Company Common Stock without attending the virtual Special Meeting in person.

Your vote is important, and we encourage you to submit your proxy as soon as possible. For more information on how to vote your shares of Company Common Stock, please see the section of this proxy statement titled “The Special Meeting.”

 

Q.	What is the proposed transaction and what effects will it have on Fathom?

 

A.

On February 16, 2024, Fathom entered into the Merger Agreement, a copy of which is attached to this proxy statement as Annex A and is incorporated herein by reference in its entirety. Pursuant to the Merger Agreement, subject to the satisfaction or waiver of certain conditions, Company Merger Sub will merge with and into Fathom, with Fathom surviving the Merger as a wholly-owned subsidiary of Parent. If the Merger is completed, the holders of the shares of Class A Common Stock outstanding as of immediately prior to the Merger, other than the Excluded Shares, will have only the right to receive the Merger Consideration of $4.75 per share of Class A Common Stock in cash, without interest, less any applicable withholding taxes, subject to and in accordance with the terms and conditions set forth in the Merger Agreement.

In addition, following completion of the Merger, there will be no further market for the shares of Class A Common Stock and, as promptly as practicable following the Effective Time and in compliance with applicable law, the Class A Common Stock will be delisted from the NYSE and deregistered under the Exchange Act, upon application to the SEC. As a result of the Merger, Fathom will no longer be a public company, the shares of Class A Common Stock will no longer be listed on any exchange or quotation system, price quotations will no longer be available and Fathom’s registration and reporting obligations under the Exchange Act will cease.

Following completion of the Merger, your shares of Class A Common Stock will represent only the right to receive the Merger Consideration subject to and in accordance with the terms and conditions of the Merger Agreement, and you will no longer have any interest in Fathom’s future earnings, growth or value.

For more information about the Merger Agreement and the Transactions, including the Merger, see “The Merger Agreement.”

 

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Q:	What did the Special Committee determine and recommend to the Board?

 

A:	The Special Committee unanimously:

 

•

determined that the Merger Agreement and the Transactions, including the Merger, are advisable, fair to and in the best interests of the Company and the Company’s Stockholders, including the Unaffiliated Stockholders;

 

•

recommended that the Board:

 

•

approve and declare advisable the Merger Agreement and the Transactions, including the Merger; and

 

•

submit the Merger Agreement to the Company’s Stockholders for adoption and recommend that the Company’s stockholders, including the Unaffiliated Stockholders, vote in favor of the adoption of the Merger Agreement.

 

Q:	Did the Board approve and recommend the Merger Agreement?

 

A:	Yes. Among other things, the Board (acting on the unanimous recommendation of the Special Committee) resolved:

 

•

that the Merger Agreement and the Transactions, including the Merger, on the terms and subject to the conditions set forth in the Merger Agreement, and the TRA Amendment, the LLC Agreement Amendment and the Credit Agreement Amendment, are advisable and in the best interests of the Company and the Company’s stockholders, including the Unaffiliated Stockholders;

 

•

to approve the Merger Agreement and the Transactions, including the Merger, on the terms and subject to the conditions set forth in the Merger Agreement, and the TRA Amendment, the LLC Agreement Amendment and the Credit Agreement Amendment;

 

•

to recommend adoption and approval of the Merger Agreement and the Transactions, including the Merger, to the Company’s stockholders, including the Unaffiliated Stockholders; and

 

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to authorize the execution and delivery of the agreements to which the Company or OpCo, as applicable, is a party and the performance by the Company or OpCo, as applicable, of all of its obligations under the Merger Agreement and the TRA Amendment, the LLC Agreement Amendment and the Credit Agreement Amendment.

 

Q.	What happens if the Merger is not completed?

 

A.

If the Merger Agreement Proposal is not approved by Fathom’s stockholders or if the Merger is not completed for any other reason, Fathom’s stockholders will not receive any payment for their shares of Class A Common Stock in connection with the Merger. Instead, unless Fathom is sold to a third party, Fathom will remain a public company, and shares of Class A Common Stock will continue to be listed and traded on the NYSE, so long as Fathom continues to meet the applicable listing requirements. In addition, if the Merger is not completed, Fathom expects that management will operate Fathom’s business in a manner similar to that in which it is being operated today and that Fathom’s stockholders will continue to be subject to the same risks and opportunities to which they are currently subject. There is no assurance as to the effect of these risks and opportunities on the future value of your shares of Class A Common Stock, including the risk that the market price of Class A Common Stock may decline to the extent that the current market price of Class A Common Stock reflects a market assumption that the Merger will be completed. For more information about what happens if the Merger is not completed, see “Special Factors — Certain Effects on Fathom if the Merger is Not Completed.”

Under certain circumstances, if the Merger is not completed, Fathom would be required to pay Parent a Company Termination Fee of $813,771 in cash. For more information about termination fees, see “The Merger Agreement - Termination Fees and Expenses.”

 

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Q.	When and where is the Special Meeting?

 

A.

The webcast of the Special Meeting will begin promptly at 10:00 a.m. Central time on May 17, 2024. We encourage you to access the meeting prior to the start time. Online check-in will begin at 9:45 a.m. Central time on May 17, 2024, and you should allow reasonable time for the check-in procedures. To attend the Special Meeting, stockholders will need to log in to https://www.virtualshareholdermeeting.com/FATH2024SM using the 16-digit control number on the proxy card or voting instruction form. For more information about the Special Meeting, see “The Special Meeting.”

 

Q.	Who can vote at the Special Meeting?

 

A.

All record holders of the shares of Company Common Stock as of the close of business on April 19, 2024, the Record Date for the Special Meeting, are entitled to notice of, and to attend and vote at, the Special Meeting or any adjournment or postponement thereof. You are entitled to receive notice of, and to attend and vote at, the Special Meeting if you are a record holder of the shares of Company Common Stock at the close of business on the Record Date.

Each record holder of Company Common Stock is entitled to one (1) vote for each outstanding share of Company Common Stock owned of record on the Record Date on each matter properly brought before the Special Meeting.

For more information about who can vote at the Special Meeting, see “The Special Meeting - Voting.”

 

Q.	What is the difference between being a “stockholder of record” and a “beneficial owner” of shares of Class A Common Stock held in “street name”?

 

A.

If your shares of Company Common Stock (that is, Class A Common Stock or Class B Common Stock, as applicable) are registered directly in your name with our transfer agent, Continental Stock Transfer & Trust Company (“Continental”), you are considered, with respect to those shares of Company Common Stock, the “stockholder of record” or “record holder.” In that case, this proxy statement and proxy card have been sent directly to you by Fathom. As the stockholder of record, you have the right to grant your voting proxy directly to us or to another proxyholder to vote in person (which means presence virtually at the Special Meeting) at the Special Meeting. (Note: If you own shares of the non-economic, vote-only Class B Common Stock, such shares are exclusively registered directly in your name with Continental.)

If your shares of Class A Common Stock are held through a broker, bank or other nominee, you are considered the “beneficial owner” of those shares of Class A Common Stock held in “street name.” In that case, this proxy statement has been forwarded to you by your broker, bank or other nominee who is considered, with respect to those shares of Class A Common Stock, the stockholder of record. As the beneficial owner, you have the right to direct your broker, bank or other nominee as to how to vote your shares of Class A Common Stock by following their instructions for voting. You are also invited to attend the Special Meeting. However, since you are not the stockholder of record, you may not vote these shares of Class A Common Stock in person (which means presence virtually at the Special Meeting) at the Special Meeting unless you provide a legal proxy from your broker, bank or other nominee.

For more information about the stockholders of record and beneficial owners of shares of Class A Common Stock held “in street name,” see “The Special Meeting - Voting.”

 

Q.	What am I being asked to vote on at the Special Meeting?

 

A.	You are being asked to consider and vote on the following:

 

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Merger Agreement Proposal: A proposal to approve and adopt the Merger Agreement and the Transactions, including the Merger. A copy of the Merger Agreement is attached as Annex A to this proxy statement and is incorporated by reference in this proxy statement in its entirety; and

 

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Adjournment Proposal: One or more proposals to adjourn the Special Meeting, if necessary or appropriate, including adjournments to solicit additional proxies if there are insufficient votes at the time of the Special Meeting to adopt the Merger Agreement Proposal.

For more information each of these proposals, see “The Merger (The Merger Agreement Proposal - Proposal 1,” and “Adjournment of the Special Meeting (The Adjournment Proposal - Proposal 2).”

 

Q.	What is a quorum?

 

A.

The representation of the holders of a majority of the voting power of outstanding shares of Company Common Stock as of the Record Date must be present, in person (which means presence virtually at the Special Meeting) or represented by proxy, at the Special Meeting in order to constitute a quorum, for the purposes of holding the Special Meeting and conducting business. For more information about the quorum of the Special Meeting, see “The Special Meeting - Record Date and Quorum.”

 

Q.	What vote is required for Fathom’s stockholders to approve the Merger Agreement Proposal?

 

A.	The approval of the Merger Agreement Proposal requires the affirmative vote of the holders of at least a majority of the voting power of the outstanding shares of Company Common Stock entitled to vote in accordance with the DGCL.

The CORE Funds, which hold approximately 63% of the voting power of Fathom’s outstanding capital stock, entered into a Support Agreement with Fathom and Parent, pursuant to which, among other things, the CORE Funds have agreed to vote all shares of Company Common Stock beneficially owned by the CORE Funds in favor of the Merger Agreement and the Transactions, including the Merger. Accordingly, the Support Agreement is expected to result in a majority of outstanding shares of Company Common Stock being voted in favor of the proposal to approve and adopt the Merger Agreement and the Transactions, including the Merger, with the result that such proposal will be adopted. A copy of the Support Agreement is attached as Annex B to this proxy statement.

For more information on the Merger Agreement Proposal, see “The Merger (The Merger Agreement Proposal - Proposal 1).”

 

Q.	What vote is required for Fathom’s stockholders to approve the Adjournment Proposal?

 

A.

Approval of one or more proposals to adjourn the Special Meeting, if necessary or appropriate, including adjournments to solicit additional proxies if there are insufficient votes at the time of the Special Meeting to adopt the Merger Agreement Proposal, requires the affirmative vote of the holders of a majority of the voting power of the shares of Company Common Stock present in person (which includes presence virtually at the Special Meeting) or represented by proxy at the Special Meeting and entitled to vote thereon, assuming that a quorum is present.

For more information on The Adjournment Proposal, see “Adjournment of the Special Meeting (The Adjournment Proposal—Proposal 2).”

 

Q.	How many votes do I have?

 

A.	Each record holder of Company Common Stock is entitled to one (1) vote for each outstanding share of Company Common Stock owned of record on the Record Date on each matter properly brought before the Special Meeting.

 

Q.	How are the votes counted?

 

A.	For each of the Merger Agreement Proposal and the Adjournment Proposal, you may vote

 

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“FOR,” “AGAINST” or “ABSTAIN.” An abstention will have the same effect as an “AGAINST” vote for these proposals and will count for purposes of determining if a quorum is present at the Special Meeting. For more information, see “The Special Meeting.”

 

Q.	How does the Fathom Board recommend that I vote?

 

A.	Based in part on the unanimous recommendation of the Special Committee, the Fathom Board recommends that you vote:

 

•

“FOR” the Merger Agreement Proposal; and

 

•

“FOR” the Adjournment Proposal.

For more information, you should read “Special Factors — Purpose and Reasons of Fathom for the Merger; Recommendation of the Fathom Board and the Special Committee; Fairness of the Merger” for a discussion of the factors that the Special Committee and the Fathom Board considered in deciding to recommend the approval of the Merger Agreement. See also “Special Factors — Interests of Executive Officers and Directors of Fathom in the Merger.”

 

Q.	How will the CORE Funds vote on the Merger Agreement Proposal?

 

A.

Concurrently with the execution and delivery of the Merger Agreement, the CORE Funds, which hold approximately 63% of the voting power of Fathom’s outstanding capital stock entered into a Support Agreement with Fathom and Parent. Under the Support Agreement, the CORE Funds have agreed, subject to the terms, conditions and limitations set forth therein, to (i) vote all shares of Company Common Stock beneficially owned by the CORE Funds in favor of the Merger Agreement and the Merger; (ii) not exercise dissenters’ rights, appraisal rights or vote in favor of an alternative proposal or other action that would reasonably be expected to prevent, interfere with, adversely affect or delay the Merger; and (iii) not sell, assign, transfer, encumber or otherwise dispose of any shares of Fathom held by the CORE Funds, or enter into any contract, option or other arrangement or understanding with respect to the sale, assignment, transfer, encumbrance or other disposition of, any shares of Fathom held by the CORE Funds, other than as provided under certain customary exceptions. Accordingly, the required vote of the CORE Funds in accordance with the Support Agreement is expected to result in a majority of outstanding shares of Company Common Stock being voted in favor of the proposal to approve and adopt the Merger and the Merger Agreement, with the result that such proposal will be adopted.

A copy of the Support Agreement is attached as Annex B to this proxy statement and is incorporated by reference in this proxy statement in its entirety.

For more information about the voting intentions of the CORE Funds, see “Special Factors — Intent of the CORE Funds to Vote in Favor of the Merger” and “Special Factors — Support Agreement.”

 

Q.	How do I vote?

 

A.

If, on the Record Date, your shares were registered directly in your name with the transfer agent for Company Common Stock, Continental, then you are a “stockholder of record.” As a stockholder of record, you may vote at the virtual Special Meeting or vote by proxy by telephone, Internet or mail. Whether or not you plan to attend the Special Meeting online, please submit a proxy to vote as soon as possible to ensure your vote is counted. Even if you have submitted a proxy before the Special Meeting, you may still attend the Special Meeting online and vote online. In such case, your previously submitted proxy will be disregarded.

 

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To vote by proxy over the Internet—To vote by proxy over the Internet, follow the instructions provided on your proxy card.

 

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To vote by proxy by telephone—If you receive printed proxy materials, you may also vote by submitting a proxy via telephone by following the instructions on your proxy card.

 

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To vote by proxy by mail—If you receive printed proxy materials, you may also vote by mail: simply complete, sign and date the proxy card and return it promptly in the envelope provided. If you return your signed proxy card to us before the Special Meeting, we will vote your shares in accordance with the proxy card.

 

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To vote by attending the virtual Special Meeting—You may vote your shares at https://www.virtualshareholdermeeting.com/FATH2024SM. You will be asked to provide the 16-digit control number from your proxy card.

If, as of the Record Date, you are the “beneficial owner” of shares of Class A Common Stock held in “street name” by your broker, bank or other nominee, you will receive instructions from your broker, bank or other nominee that you must follow in order to have your shares of Class A Common Stock voted. Those instructions will identify which of the above choices are available to you in order to have your shares of Company Common Stock voted. Please note that if you are a beneficial owner and wish to vote in person (which includes presence virtually at the Special Meeting) at the Special Meeting, you must have a legal proxy from your broker, bank or other nominee naming you as the proxy. You should allow yourself enough time prior to the Special Meeting to obtain this proxy from the holder of record. (Note: If you own shares of the non-economic, vote-only Class B Common Stock, such shares are exclusively registered directly in your name with Continental.)

The control number located on your proxy card is designed to verify your identity and allow you to submit a proxy for your shares of Class A Common Stock, and to confirm that your voting instructions have been properly recorded when submitting a proxy over the Internet or by telephone.

Please refer to the instructions on your proxy card or voting instruction form to determine the deadlines for submitting a proxy over the Internet or by telephone. If you choose to submit your proxy by mailing a proxy card, your proxy card must be received by the Secretary of the Company by the time the Special Meeting begins.

For more information about voting, see “The Special Meeting - How to Vote.”

 

Q.	What is a “proxy?”

 

A.

A “proxy” is your legal designation of another person to vote your shares of Company Common Stock. This written document describing the matters to be considered and voted on at the Special Meeting is called a “proxy statement.” The document used to designate a proxy to vote your shares of Company Common Stock is called a “proxy card.” For more information about voting by proxy, see “The Special Meeting - How to Vote.”

 

Q.	If I am a stockholder of record, what happens if I do not vote or submit a proxy card?

 

A.	If you do not attend the Special Meeting and fail to vote, either in person (which means presence virtually at the Special Meeting) or by proxy, your shares of Company Common Stock will not be voted at the Special Meeting and will not be counted for purposes of determining whether a quorum exists.

Additionally, if you do not attend the Special Meeting and fail to vote, either in person (which means presence virtually at the Special Meeting) or by proxy, your failure to vote will have the effect of counting “AGAINST” the Merger Agreement Proposal with respect to the approval threshold requiring the affirmative vote of the holders of at least a majority of the voting power of the outstanding shares of Company Common Stock entitled to vote in accordance with the DGCL. For more information, see “The Special Meeting.”

 

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Q.	If my shares of Class A Common Stock are held in “street name” by my broker, bank or other nominee, will my broker, bank or other nominee vote my shares of Class A Common Stock for me?

 

A.

No. Your broker, bank or other nominee will only be permitted to vote your shares of Class A Common Stock if you instruct your broker, bank or other nominee as to how to vote. As a result, absent specific instructions from you as the beneficial owner of such shares of Class A Common Stock, your broker, bank or other nominee is not empowered to vote such shares of Class A Common Stock.

If you instruct your broker, bank or other nominee how to vote on at least one, but not all of the proposals to be considered at the Special Meeting, your shares of Class A Common Stock will be voted according to your instructions on those proposals for which you have provided instructions and will be counted as present for purposes of determining whether a quorum is present at the Special Meeting. In this scenario, a “broker non-vote” will occur with respect to each proposal for which you did not provide voting instructions to your broker, bank or other nominee.

A failure to provide instructions with respect to either of the proposals, and a broker non-vote with respect to the Merger Agreement Proposal, will have (a) the effect of a vote “AGAINST” the Merger Agreement Proposal with respect to the approval threshold requiring the affirmative vote of the holders of at least a majority of the voting power of the outstanding shares of Company Common Stock entitled to vote in accordance with the DGCL and (b) no effect on the Adjournment Proposal. For more information, see “The Special Meeting - Voting.”

 

Q.	If a stockholder gives a proxy, how are the shares of Company Common Stock voted?

 

A.

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

If you properly execute your proxy card but do not mark the boxes indicating how your shares of Company Common Stock should be voted on a matter, the shares of Company Common Stock represented by your properly execute proxy will be voted “FOR” the Merger Agreement Proposal and “FOR” the Adjournment Proposal. For more information, see “The Special Meeting - How to Vote.”

 

Q.	Can I change or revoke my vote?

 

A.

Yes. You have the right to revoke a proxy, whether delivered over the Internet, by telephone or by mail, at any time before it is exercised, by (1) submitting another proxy, including a proxy card, at a later date by telephone or on the Internet or by timely delivery of a validly executed, later-dated proxy, (2) giving written notice of revocation to the Secretary of the Company, which must be filed with the Secretary of the Company before the Special Meeting begins or (3) attending the Special Meeting and voting in person (which means presence virtually at the Special Meeting). If, as of the Record Date, you are the beneficial owner of shares of Class A Common Stock held in “street name” by your broker, bank or other nominee, please refer to the information forwarded by your broker, bank or other nominee for procedures on revoking your proxy.

Only your last submitted proxy with respect to any shares will be considered. Please cast your vote “FOR” each of the proposals, following the instructions set forth on your enclosed proxy card or voting instruction form provided by your broker, bank or other nominee, as promptly as possible. For more information, see “The Special Meeting - Proxies and Revocation.”

 

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Q.	What do I do if I receive more than one proxy or set of voting instructions?

 

A.

If, as of the Record Date, you hold shares of Class A Common Stock as the beneficial owner of shares of Class A Common Stock held in “street name,” or through more than one broker, bank or other nominee, and also directly as the stockholder of record or otherwise, you may receive more than one proxy card or voting instruction form relating to the Special Meeting. These should each be executed and returned separately in accordance with the instructions provided in this proxy statement in order to ensure that all of your shares of Class A Common Stock are voted.

 

Q.	Should I send in any evidence of ownership now?

 

A.

No. After the Merger is completed, you will be sent a letter of transmittal with detailed written instructions for exchanging your shares of Class A Common Stock for the Merger Consideration. If you are the beneficial owner of shares of Class A Common Stock held in “street name” by your broker, bank or other nominee immediately prior to the Merger, you may receive instructions from your broker, bank or other nominee as to what action, if any, you need to take to effect the surrender of your shares of Class A Common Stock in exchange for the Merger Consideration. (Note: If you own shares of the non-economic, vote-only Class B Common Stock, then, in accordance with the terms of the Merger Agreement, such shares, together with the corresponding exchangeable OpCo Class A Units held by you, will be automatically exchanged for shares of Class A Common Stock on the Closing Date immediately prior to the consummation of the LLC Merger. Such shares of Class A Common Stock issued to you in the exchange will be registered directly in your name with the transfer agent, Continental and, upon completion of the Merger, will represent only the right to receive the Merger Consideration.)

 

Q.	What happens if I sell my shares of Class A Common Stock before the Special Meeting?

 

A.

The Record Date for stockholders entitled to vote at the Special Meeting is prior to both the date of the Special Meeting and the consummation of the Merger. If you transfer your shares of Class A Common Stock before the Record Date, you will not be entitled to vote at the Special Meeting and will not be entitled to receive the Merger Consideration. If you transfer your shares of Class A Common Stock after the Record Date but before the Special Meeting, you will, unless special arrangements are made, retain your right to vote at the Special Meeting, but will transfer the right to receive the Merger Consideration to the person to whom you transfer your shares of Class A Common Stock. Unless special arrangements are made, the person to whom you transfer your shares of Class A Common Stock after the Record Date will not have a right to vote those shares of Class A Common Stock at the Special Meeting. For more information, see “The Special Meeting - How to Vote.” If you demand appraisal for any of your shares of Class A Common Stock in connection with the Merger and subsequently transfer any such shares, you will lose your right to appraisal with respect to the shares that you have so transferred. For more information about appraisal rights, see “The Special Meeting - Appraisal Rights” and Annex D to this proxy statement.

 

Q.	Who will solicit and pay the cost of soliciting proxies?

 

A.

Fathom will pay for the entire cost of soliciting proxies. Our directors, officers and employees may also solicit proxies by telephone, by facsimile, by mail, over the Internet or in person. Our directors, officers and employees will not be paid any additional amounts for soliciting proxies. For more information, see “The Special Meeting - Solicitation of Proxies; Payment of Solicitation Expenses.”

 

Q.	What is “householding” and how does it affect me?

 

A.

The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy statements and annual reports with respect to two or more stockholders sharing the same address by delivering a single proxy statement addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for stockholders and cost savings for companies.

 

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We do not “household” for any of our stockholders of record. However, brokers with account holders who or that are Fathom stockholders may be “householding” our proxy materials. A single proxy statement may be delivered to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker that it will be “householding” communications to your address, “householding” will continue until you are notified otherwise or until you notify your broker or the Company that you no longer wish to participate in “householding.”

If, at any time, you no longer wish to participate in “householding” and would prefer to receive a separate proxy statement and annual report, you may (1) notify your broker, (2) direct your written request to Fathom at: 1050 Walnut Ridge Drive, Hartland, Wisconsin 53029, Attn: Corporate Secretary. Stockholders who currently receive multiple copies of this proxy statement at their address and would like to request “householding” of their communications should contact their broker or (3) request from the Company at (262) 367-8254. In addition, the Company will promptly deliver, upon written or oral request to the address or telephone number above, a separate copy of the proxy statement or proxy card to a stockholder at a shared address to which a single copy of the documents was delivered. For more information, see “The Special Meeting—Where You Can Find More Information.”

 

Q.	What rights do I have to seek an appraisal of my shares of Class A Common Stock?

 

A.

Each holder of shares of Class A Common Stock will have the right to seek appraisal of the fair value of such holder’s shares of Class A Common Stock as determined by the Delaware Chancery Court if the Merger is completed, but only if such holder does not vote such shares of Class A Common Stock in favor of the Merger Agreement Proposal and otherwise complies with the statutory requirements and procedures for demanding and perfecting appraisal rights set forth in Section 262 of the DGCL, which is the appraisal rights statute applicable to Delaware corporations such as Fathom. Failure to follow precisely any of the statutory requirements and procedures may result in the loss of appraisal rights. A copy of Section 262 of the DGCL is included as Annex D to this proxy statement and is incorporated into this proxy statement by reference in its entirety. The requirements and procedures are also summarized in this proxy statement. For more information about appraisal rights, see “The Special Meeting - Appraisal Rights” and Annex D to this proxy statement.

 

Q.	What are the material U.S. federal income tax consequences of the Merger to me?

 

A.

If you are a U.S. Holder (as defined below in “Special Factors — Material U.S. Federal Income Tax Consequences of the Merger”), receipt of cash in exchange for shares of Class A Common Stock pursuant to the Merger generally will be a taxable transaction for U.S. federal income tax purposes. Generally, you will recognize gain or loss equal to the difference, if any, between the amount of cash you receive and the adjusted tax basis of your shares of Class A Common Stock. If you are a Non-U.S. Holder (as defined below in “Special Factors — Material U.S. Federal Income Tax Consequences of the Merger”), you generally will not be subject to U.S. federal income tax on any gain recognized in connection with the Merger unless you have certain connections to the United States. However, the tax consequences of the Merger to you will depend on your particular circumstances, and you should consult your own tax advisors to determine how the Merger will affect you. The foregoing discussion does not address the U.S. federal income tax consequences to holders of Class B Common Stock or of Rollover Shares or of the Class A Unit Exchange. For a more detailed summary of the tax consequences of the Merger, see the section below, “Special Factors — Material U.S. Federal Income Tax Consequences of the Merger.”

 

Q.	What do I need to do now?

 

A.

We urge you to read this proxy statement carefully, including its annexes and the documents referred to as incorporated by reference in this proxy statement, as well as the related Schedule 13E-3, including the exhibits thereto, filed with the SEC, and to consider how the Merger affects you. For more information, see “Where You Can Find More Information.”

 

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Even if you plan to attend the virtual Special Meeting, after carefully reading and considering the information contained in this proxy statement, please submit your proxy promptly to ensure that your shares of Company Common Stock are represented at the Special Meeting.

If you are a stockholder of record, please submit your proxy for your shares of Company Common Stock:

 

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on the Internet, by following the Internet proxy instructions printed on the enclosed proxy card;

 

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by telephone, using the telephone number printed on the enclosed proxy card; or

 

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by mail, by marking the enclosed proxy card, dating and signing it, and returning it in the accompanying prepaid reply envelope.

If you decide to attend the Special Meeting virtually and vote in person (which means presence virtually at the Special Meeting), your vote in person (which means presence virtually at the Special Meeting) at the Special Meeting will revoke any proxy previously submitted.

If, as of the Record Date, you are the beneficial owner of shares of Class A Common Stock held in “street name” by your broker, bank or other nominee, please refer to the instructions provided by your broker, bank or other nominee to see which of the above choices are available to you in order to have your shares of Class A Common Stock voted.

For more information, see “The Special Meeting” and “Where You Can Find More Information.”

 

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SPECIAL FACTORS

The following, together with the summary of the Merger Agreement set forth under the section titled “The Merger Agreement,” is a description of the material aspects of the Merger Agreement and the Transactions, including the Merger. While we believe that the following description covers the material aspects of the Merger Agreement and the Transactions, including the Merger, the description may not contain all of the information that is important to you. We encourage you to read carefully this entire document, including the Merger Agreement attached to this proxy statement as Annex A, for a more complete understanding of the Merger Agreement and the Transactions, including the Merger. The following description is subject to, and is qualified in its entirety by reference to, the Merger Agreement. You may obtain additional information without charge as described in the section titled “Where You Can Find More Information.”

We are asking our stockholders to consider and vote on the approval and adoption of the Merger Agreement and the Transactions, including the Merger. Pursuant to the Merger Agreement, subject to the satisfaction or waiver of certain conditions, (i) LLC Merger Sub will merge with and into OpCo with OpCo surviving the merger as a partially-owned subsidiary of Fathom (the “LLC Merger”) and (ii) immediately following the LLC Merger, Company Merger Sub will merge with and into the Company, with the Company as the surviving corporation (the “Merger”). On the date of the closing of the Merger and immediately prior to the completion of the LLC Merger, the Class A Units of OpCo (other than those held by the Company), together with the shares of the non-economic, vote-only Class B Common Stock corresponding with such Class A Units, will be automatically exchanged for an equal number of shares of Class A Common Stock (the “Class A Unit Exchange”). If the Merger is completed, the holders of shares of Class A Common Stock immediately prior to the Merger, including the shares issued in the Class A Unit Exchange (other than the holders of Owned Company Shares and the Dissenting Shares (each as defined in the Merger Agreement)), will have only the right to receive the Merger Consideration of $4.75 per share of Class A Common Stock in cash, without interest, less any applicable tax withholding, subject to and in accordance with the terms and conditions set forth in the Merger Agreement.

Background of the Merger

The following chronology summarizes the key meetings and events that led to the signing of the Merger Agreement. This chronology does not purport to catalogue every conversation of or among the Board, the Special Committee, the representatives of the Company or the Special Committee, or other parties, including representatives of CORE Industrial Partners, LLC and its affiliated investment vehicles (collectively, “CORE”).

As a matter of course and in their ongoing focus on enhancing stockholder value, the board of directors of the Company (the “Board”) and the Company’s management, at times with the assistance of outside advisors, regularly review and evaluate the Company’s historical performance, future growth prospects, strategic direction and ongoing business plans with a view toward strengthening its business and enhancing stockholder value, and in light of industry conditions and developments. At times, the Board and Company management have conducted such reviews in coordination with CORE, the majority owner of the Company prior to and since the closing of the Company’s business combination with Altimar Acquisition Corp. II in December 2021 (the “Business Combination”), and its affiliates. CORE currently beneficially owns approximately 63% of the outstanding shares of Class A Common Stock (the “Class A Shares”) and approximately 95% of the outstanding shares of Class B Common Stock (the “Class B Shares”). Since the Business Combination, CORE and its affiliates also have continually reviewed, considered and evaluated CORE’s ongoing investment in the Company and potential options with respect to its investment in the Company.

The Board has, from time to time, considered a variety of potential strategic alternatives for the Company. These potential strategic alternatives have included, among others, (i) the continuation of, and potential improvements to, the Company’s current business plan, with the Company remaining an independent entity, (ii) the investment in, and development of, new business lines and services, (iii) capital raising activities, (iv) potential expansion opportunities through acquisitions, partnerships or other commercial relationships and

 

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(v) business combinations, acquisitions and other financial and strategic alternatives, including a sale of the Company.

In August 2022, a director of the Company who is also a representative of CORE received an unsolicited inquiry from a financial party (“Party A”) inquiring about CORE’s and the Company’s interest in a potential sale of the Company. No economic terms were proposed by Party A or the Company. The director notified the Board that same month of this inquiry. While, as noted above, the Board regularly evaluates the Company’s strategic alternatives, the Company’s receipt of this unsolicited inquiry resulted in the Company’s focused exploration of a potential sale through a process which did not result in any third-party offers, as described in further detail below.

In the course of reviewing such inquiry with the Board, this director conveyed to the Board his expectation that, in connection with any transaction with Party A or any other purchaser identified through a process undertaken by the Board in response to such inquiry, CORE would participate as a seller on the same terms as other stockholders of the Company. Thereafter and at the direction of the Board, the Company retained J.P. Morgan Securities LLC (“J.P. Morgan Securities”) and Stifel, Nicolaus & Company, Incorporated (“Stifel”) in November 2022 to serve as the financial advisors to the Company in connection with a formal review and exploration of a potential strategic sale transaction, which resulted in a decision to pursue a full sale of the Company (the “2022 Company Sale Process”). At the time of its engagement, J.P. Morgan Securities and Stifel were known to the Company and its management in light of past work performed on behalf of the Company in connection with the Business Combination and the respective firms’ experience in transactions similar to the one proposed, qualifications, expertise and reputation and their respective knowledge of the Company and its business and the industries in which the Company conducts its business.

Under the direction of the Board, approximately 14 parties (including Party A) were contacted by J.P. Morgan Securities and Stifel in order to explore a potential transaction. Ultimately, the parties that were contacted during the 2022 Company Sale Process were prospective financial buyers on the expectation that they would offer the most favorable terms. Overall, nine parties signed non-disclosure agreements and received management presentations in November and December 2022. Ultimately, neither Party A nor any other party submitted a formal indication of interest or verbal offer as a result of this process and the 2022 Company Sale Process ended. Following the 2022 Company Sale Process and throughout early 2023, outreach was initiated with a potential strategic buyer, and several potential strategic buyers made inquiries and engaged in introductory dialogue with the Company; however, none of these informal dialogues yielded any further interest by these parties.

On November 10, 2022, the Company entered into an amendment to its existing credit agreement under which it had outstanding a $50 million revolving credit facility and a $125 million term loan (the “Credit Agreement”). Among other things, the amendment reduced the required minimum interest coverage ratio and increased the maximum net leverage ratio for each fiscal quarter ending on or before September 30, 2024, in order to provide the Company with more financial and operating flexibility. The lenders under the Credit Agreement also agreed to a waiver of any default by the Company in exceeding the maximum net leverage ratio as of and for the three months ended September 30, 2022. In an effort to further avoid, or obtain relief from, non-compliance with these and other financial covenants as a result of the Company’s financial performance failing to meet expectations, the Company subsequently entered into three subsequent amendments to the Credit Agreement as further discussed herein.

In early March 2023, representatives of CORE informed the Board that, although no decision had been made by CORE, CORE was contemplating a review of its investment in the Company, which could result in CORE proposing to enter into one or more transactions with the Company. In light of this potential, CORE suggested that the Board form a special committee of the Board that could evaluate any potential transaction that CORE might propose in the future. Thereafter, representatives of Winston & Strawn LLP (“Winston & Strawn” or “Winston”), the Company’s outside legal counsel, met with certain directors to discuss the establishment of a special committee of the Board and the directors’ potential participation on such special committee. Prior to or during the discussions, directors disclosed and reviewed their respective relationships with CORE and the Company.

 

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On March 10, 2023, the Board held a meeting that was attended solely by the independent directors of the Board and representatives of Winston & Strawn. At the meeting, the Board discussed the establishment of a special committee of the Board. The representative of Winston & Strawn reviewed certain legal and process considerations relating to any possible transaction involving the Company and CORE, including the possibility that certain members of the Board might have actual or perceived conflicts of interest in connection with any such transaction. A discussion ensued pursuant to which the Board determined that Adam DeWitt, David Fisher and Peter Leemputte were each independent and disinterested with respect to any potential transaction with CORE and free of any relationship that, in the opinion of the Board, would interfere with their exercise of independent judgment as a member of a special committee. The Board then established a committee comprised of Mr. DeWitt, Mr. Fisher and Mr. Leemputte (the “Special Committee”) to review and evaluate (i) any potential transaction with CORE and (ii) if the Special Committee deems it appropriate, alternative transactions with other parties. The Board also resolved that it would not approve any potential transaction with CORE without a prior favorable recommendation of the Special Committee. The Board delegated to the Special Committee full power and authority to, among other things:

 

•

review, evaluate, negotiate, structure, document, and/or reject the terms and conditions of any transaction, including reject any transaction in its entirety, in the Special Committee’s sole discretion;

 

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determine whether any transaction negotiated by the Special Committee is advisable, fair to, and in the best interests of, the Company and its stockholders; and

 

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recommend to the full Board what action, if any, should be taken by the Board with respect to any transaction with any qualifications, terms or conditions the Special Committee deems appropriate or required.

The Board also authorized the Special Committee to retain and compensate, at the Company’s expense, the Special Committee’s own independent advisors, including legal and financial advisors, as the Special Committee deemed appropriate, to assist the Special Committee.

In anticipation of the possibility of further outreach from CORE regarding a possible transaction, on March 21, 2023 the Special Committee engaged Vedder Price P.C. (“Vedder Price”) as its counsel based on Vedder Price’s experience representing boards of directors, working with special committees and advising on public company mergers and acquisitions, and after representatives of Vedder Price confirmed that the firm had not performed work on behalf of CORE or the Company.

Following the establishment of the Special Committee in March 2023 and through October 2023, no proposals, verbal or written, were received by the Company or the Special Committee from representatives of CORE, and no discussions about a proposed transaction occurred between representatives of CORE and members of the Special Committee. During this time period, members of the Board unaffiliated with CORE came to understand that CORE was continuing to evaluate its investment in the Company.

On March 23, 2023, after consultation with the Board, the Company entered into a second amendment to the Credit Agreement, which, among other things, suspended the applicability of the maximum net leverage ratio and minimum interest coverage ratio covenants under the Credit Agreement through the end of fiscal 2023 and modified the ratios applicable to such covenants in fiscal 2024. The second amendment also established new financial covenants for minimum EBITDA and minimum liquidity, and the lenders provided a loan covenant waiver with respect to the Company’s failure to satisfy the net leverage ratio covenant as of and for the three months ended December 31, 2022.

On March 29, 2023, the Company was notified by the New York Stock Exchange (“NYSE”) that the average closing price of the Class A Shares, over the prior 30 consecutive trading day period, was below $1.00, which is the minimum average closing price per share required to maintain listing on the NYSE. This followed a period in which the Company’s stock price had fallen approximately 93% since the Business Combination.

 

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Under NYSE rules, the Company had six months following receipt of the notice to regain compliance with the minimum price requirement. Following the approval by the Company’s stockholders at its annual meeting on June 11, 2023 of an amendment to the Company’s Certificate of Incorporation to provide the Board with discretion to effect a reverse stock split of the Company’s Class A and Class B Shares, on September 15, 2023, the Board determined to proceed with a reverse stock split to reduce the number of outstanding Class A Shares and Class B Shares into a lesser number of shares at a ratio of 1-for-20 (the “Reverse Stock Split”). The primary purpose of the Reverse Stock Split was to enable the Company to regain compliance with the minimum price requirement of the NYSE. As a result of the Reverse Stock Split, effective on September 28, 2023, every 20 issued and outstanding Class A Shares were combined and reclassified into one issued and outstanding Class A Share and every 20 issued and outstanding Class B Shares were combined and reclassified into one issued and outstanding Class B Share.

On November 13, 2023, following consultation with the Board, the Company entered into a third amendment to the Credit Agreement that further modified the financial covenants, including reducing (a) the minimum EBITDA requirement for the three months ended September 30, 2023 and December 31, 2023 and (b) the minimum liquidity requirement for the three months ending in fiscal 2023 and for 2024. The third amendment to the Credit Agreement also required the Company to obtain qualified equity capital to make a repayment of $50 million of the outstanding principal balance of the term loan under the Credit Agreement (the “Term Loan Paydown”) no later than (a) March 31, 2024, with capital available pursuant to a binding commitment entered on or before January 31, 2024 or (b) June 30, 2024 in the event certain credit support of such obligation is obtained on or before January 31, 2024 in the form of a guaranty by CORE or another third party acceptable to the Credit Agreement lenders or letter of credit issued by a bank of recognized national reputation. The lenders under the Credit Agreement also agreed to a waiver of defaults by the Company with respect to, among other things, EBITDA covenant compliance for the fiscal quarter ended September 30, 2023 and the minimum liquidity covenant compliance with respect to the months ended September 30 and October 31, 2023.

On November 22, 2023, the Special Committee received a letter from CORE (the “November 22 Letter”) setting forth, on a non-binding basis, CORE’s interest in pursuing a take-private acquisition of the Company at a price of $4.50 per Class A Share, in cash, with an expectation that there would be no financing condition. The November 22 Letter also contemplated the expectation that there may be some rollover equity financing (but did not specify the potential amount expected). CORE stated in the November 22 Letter that it was interested in acquiring only the shares of the Company that it did not already own and that it would not expect, in its capacity as a stockholder of the Company, to vote in favor of any alternative sale, merger or other corporate transaction involving the Company nor divest or sell any portion of its ownership interest. Following the closing of trading of the Class A Shares on the NYSE on November 24, 2023, CORE publicly disclosed the November 22 Letter.

On November 24, 2023, the Special Committee formally engaged Potter Anderson & Corroon LLP (“Potter”) as its special Delaware counsel based on Potter’s experience in representing special committees and advising on public company mergers and acquisitions and after representatives of Potter confirmed that the firm had not performed work on behalf of CORE or the Company.

On November 24, 2023, the Special Committee met via videoconference to preliminarily consider the November 22 Letter. Representatives of Vedder Price and Potter also participated in the meeting, as counsel to the Special Committee. Representatives of Vedder Price and Potter discussed the mandate given to the Special Committee by the Board and reviewed the Special Committee’s fiduciary duties and obligations in connection with a potential sale to CORE of the shares of the Company not owned by CORE. The Special Committee also reviewed and discussed the experience and qualifications of potential independent financial advisors and the rendering of a fairness opinion to the Special Committee, following which discussion, the Special Committee determined to pursue an engagement with Kroll, LLC (“Duff & Phelps”), operating through its Duff & Phelps Opinions Practice, and Kroll Securities, LLC (“Kroll Securities,” and together with Duff & Phelps, “Kroll”).

 

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During the meeting, the Special Committee and its counsel also discussed certain potential conflicts of interest that could arise in connection with CORE’s offer. The Special Committee reviewed their understanding of the level of involvement by CORE-affiliated personnel with the Company’s lender relationships and involvement in the general operations and preparation of financial models, which included assisting Company management with debt covenant compliance and cash management, and in negotiations with the Company’s lenders.

In regard to the November 22 Letter, the Special Committee explored conditioning any transaction with CORE on Special Committee approval, obtaining the approval of a majority-of-the-minority (unaffiliated) stockholders of the Company (“MoM Vote Condition”), and market check or go-shop conditions, after which the Special Committee directed Vedder Price and Potter to engage with CORE’s legal counsel on these and other preliminary matters.

On November 25, 2023, representatives of Vedder Price and Potter held a call with representatives of Kirkland & Ellis LLP (“K&E”), counsel to CORE, and, as directed by the Special Committee, conveyed the Special Committee’s desire that (i) approval by the Special Committee must be an express condition to any such transaction involving CORE and (ii) any transaction with CORE should be subject to a MoM Vote Condition. As directed by the Special Committee, Vedder Price also sought to (a) discern from CORE’s counsel CORE’s willingness to consider potential transactions involving a sale of the Company to a third party or other strategic alternative, such that a go-shop or market check would be a reasonable condition to any transaction with CORE, and (b) discuss and better understand the role and level of involvement of CORE personnel in the Company’s financing and credit facility matters, currently and going forward.

On November 27, 2023, the Special Committee met via videoconference to further consider CORE’s offer and related matters. Representatives of Vedder Price and Potter also participated in the meeting, as counsel to the Special Committee, as well as representatives of Kroll for the latter part of the meeting. Representatives of Vedder Price provided an overview of their discussions with K&E regarding structuring points of any transaction with CORE. While CORE agreed to the Special Committee’s request that a favorable recommendation from and approval by the Special Committee be an express condition to any transaction with CORE, it was not willing to subject a transaction with CORE to a MoM Vote Condition. In addition, K&E affirmed to Vedder Price CORE’s unwillingness to consider alternative transactions under the current landscape.

During this meeting, the 2022 Company Sale Process was reviewed, in which, despite the active marketing of the Company by its financial advisors, no indications of interest or verbal offers to acquire the Company were received. In addition, the Special Committee considered CORE’s historical involvement in certain aspects of the Company’s operations, CORE’s understanding of the Company’s liquidity and financing issues and its relationship with the Company’s lenders, and the potential benefits to the Special Committee of gleaning further information from CORE on these matters. The Special Committee also considered potential transaction timing and other considerations around the Company’s liquidity issues, including how such considerations may impact the evaluation of a potential transaction with CORE or any alternative transactions, and concerns regarding the ability of the Company to continue as a going concern absent CORE’s involvement and support. The Special Committee discussed with its legal advisors and Kroll the limited ability to perform a go-shop or full market check in light of the Company’s upcoming obligation to obtain an equity commitment or credit support by January 31, 2024 in connection with required Term Loan Paydown.

The Special Committee also discussed the retention of Kroll as the Special Committee’s financial adviser, including fee proposals. Representatives of Vedder Price discussed information that Kroll had provided in its relationship disclosure letter, which was made available to the Special Committee prior to the meeting.

The Special Committee approved retaining Kroll as its financial advisor, subject to satisfactory completion of a conflicts review and completing the negotiation and execution of a formal engagement letter. Kroll was selected to act as financial advisor to the Special Committee due to its experience, expertise and qualifications in

 

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advising companies on M&A transactions, particularly those involving controlling holders. Kroll, and specifically Duff & Phelps, was authorized and directed to request and receive information from Company management regarding the Company, its liquidity position and other financial data needed to evaluate CORE’s proposal. The Special Committee also directed Vedder Price and Potter to further develop guidelines or “rules of the road” with respect to CORE’s ongoing involvement with the Company’s business and with Company management during the course of the possible transaction.

On November 27, 2023, following the meeting, Kroll provided its executed letter agreement finalizing the terms of Duff & Phelps’s engagement, which the Special Committee countersigned on November 28, 2023. Vedder Price and Potter also provided a draft “rules of the road” memorandum for review by the Special Committee setting forth appropriate guidelines for CORE’s involvement with the management team of the Company during the course of the possible transaction. In connection with formulating the memo, Mr. DeWitt, the Chairman of the Special Committee, reached out to a representative of CORE who was also a member of the Board (the “CORE Representative”) to discuss and obtain more specific information on CORE’s historical advisory role and assistance to the Company’s financial team.

Also on November 27, 2023, at the request of the Special Committee, representatives of Duff & Phelps delivered Duff & Phelps’s initial information review request list to the management of the Company. Additionally, Company management and representatives of Duff & Phelps engaged in a videoconference to coordinate Duff & Phelps’s information review process. From this time through the delivery of its fairness opinion to the Special Committee, in response to requests from representatives of Duff & Phelps on behalf of the Special Committee, the Company provided representatives of Duff & Phelps with information on an iterative basis as requested by representatives of Duff & Phelps.

On November 30, 2023, Vedder Price shared the draft rules-of-the-road memorandum with Winston, counsel for the Company.

On December 1, 2023, representatives of the Company and Mr. DeWitt of the Special Committee, along with representatives of Vedder Price, Potter and Winston & Strawn, had a conference call to discuss the draft rules-of-the-road memorandum, and to discuss historic practice relating to CORE’s involvement with respect to the Company’s financial modeling, covenant analysis and compliance and interactions with the Company’s lenders under the Credit Agreement and the practical benefit of CORE’s continued involvement in these matters. Following this call, on December 2, 2023, Mr. DeWitt provided the draft rules-of-the-road memorandum to the CORE Representative.

On December 2, 2023, Potter circulated a draft of proposed revisions (the “Updated Resolutions”) to the March 2023 resolutions of the Board creating the Special Committee, with such changes reflecting the Special Committee’s request that, in light of the November 22 Letter, the Board re-enumerate, supplement and clarify the powers and authority of the Special Committee, and to reaffirm, ratify and confirm the disinterestedness and independence of the members of the Special Committee and address Special Committee member compensation.

On December 5, 2023, representatives of Vedder Price and K&E exchanged on the details of the rules-of-the-road memorandum, with K&E requesting more latitude for “ordinary course” discussions. Following direction from the Special Committee, representatives of Vedder Price advised that the Special Committee was unwilling to make the requested change.

Additionally, on December 5, 2023, representatives of Duff & Phelps, at the direction of the Special Committee, contacted representatives of J.P. Morgan Securities to glean and confirm information regarding the 2022 Company Sale Process. Consistent with the Special Committee’s understanding, the representatives of J.P. Morgan Securities confirmed that, despite having conducted a number of formal presentations with potential buyers, including those with experience and expertise in the industrial technology and rapid prototyping

 

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industries, the 2022 Company Sale Process did not result in any formal indications of interest or verbal offers to acquire the Company or otherwise participate in an equity recapitalization of the Company.

On December 8, 2023, the Board convened a meeting attended solely by the independent directors of the Board during which, upon recommendation of the Special Committee, the independent members of the Board approved the Updated Resolutions.

On December 11, 2023, at the direction of the Special Committee, representatives of Vedder Price and Duff & Phelps held a call with a stockholder of the Company (“Stockholder A”). Stockholder A had initially reached out to a member of Company management on November 27, 2023 and had expressed an interest in the proposed CORE transaction that had been publicly disclosed on November 24, 2023 and appeared to have an interest in making an offer with respect to the Company. During the December 11th call, however, Stockholder A stated that such stockholder’s primary interest in the transaction was to rollover Stockholder A’s equity into a post-transaction company, and that Stockholder A was not interested in making an independent bid for the Company. Representatives of Vedder Price communicated its conversations with Stockholder A to the Special Committee, and following further outreach to Vedder Price at the end of January 2024, provided Stockholder A’s contact information to K&E in light of Stockholder A’s interest in participating in a rollover transaction.

On December 12, 2023, at the direction of the Special Committee, Duff & Phelps engaged in discussions with representatives of the administrative agent under the Company’s Credit Agreement to discern the lenders’ views on alternative credit support arrangements and transaction timing. As subsequently discussed with the Special Committee, Duff & Phelps reported that it did not appear that there was any alternative credit support or equity financing that would be considered beyond the equity/credit support structure reflected in the third amendment to the Credit Agreement. Duff & Phelps also reported that representatives of the administrative agent under the Credit Agreement indicated that there likely would be some flexibility from a timing perspective relative to a January 31, 2024 equity commitment or credit support deadline only if it appeared progress had been made on a transaction. The Special Committee considered this anticipated flexibility in timing as supporting the Special Committee’s intention to further negotiate CORE’s proposal terms.

On December 13, 2023, representatives of Vedder Price, Potter and K&E held a call to discuss CORE’s position that it would not provide for a MoM Vote Condition, and representatives of Vedder Price noted that the Special Committee may revisit the issue again during negotiations. Representatives of Vedder Price expressed the Special Committee’s request that CORE consider being a seller in the event of a competing transaction, and representatives of K&E expressed on behalf of CORE that CORE was focused on its proposed transaction and would not be a seller into any alternative transaction. Representatives of Vedder Price again noted that the Special Committee may revisit the issue again during negotiations.

On December 19, 2023, K&E reached out to Vedder Price to discuss the timeline for completing a transaction with CORE. Vedder Price advised that the process was proceeding and that the Special Committee would respond at such time as it and its advisors have received and reviewed all requested information.

On December 19, 2023, management of the Company shared a version of its “5 Year Strategic Plan” (the “Original Management Projections”) with the Special Committee and its legal and financial advisors. The Original Management Projections included historical and prospective financial information through the fiscal year ending December 31, 2028. Management of the Company also separately provided information showing the Company’s fourth quarter 2023 adjusted EBITDA was expected to come in lower than the adjusted EBITDA forecast it had provided to the Credit Agreement lenders in August 2023, and lower than the Company was required to achieve in order to remain in compliance with the Credit Agreement covenants in effect at that time.

On December 20, 2023, the Special Committee held a meeting via videoconference. Representatives of Vedder Price and Potter also participated in the meeting, as well as representatives of Duff & Phelps and, at the invitation of the Special Committee for a portion of the meeting, certain members of Company management,

 

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including Carey Chen, the Company’s Chief Executive Officer, and Mark Frost, the Company’s Chief Financial Officer. The purpose of the meeting was to have Company management review the previously circulated Original Management Projections and allow for the Special Committee and its advisors to probe management as to these projections and underlying assumptions. Members of the Special Committee inquired of management as to the extent to which the Original Management Projections differed from August 2023 forecasts provided to the lenders under the Credit Agreement, the reasons for such differences and questioned the underlying assumptions.

Following management’s departure from the meeting, the Special Committee instructed Duff & Phelps to request that Company management revisit and update the forecasts contained in the Original Management Projections to account for inflation impacts on revenue growth projections that the Special Committee believed should be reflected, provide a more detailed walk-forward that bridged the management forecasts provided to the lenders under the Credit Agreement in August 2023 to the Original Management Projections and look to address the Special Committee’s questions with the narrative around capital expenditures, SG&A and additional investments and how these items could impact future growth.

On December 22, 2023, management of the Company shared an updated version of its “5 Year Strategic Plan” (the “Updated Management Projections”). The Updated Management Projections included the projections included in the Original Management Projections, which remained substantially the same (the “Scenario 1 Projections”), and also included an alternative scenario of projections (the “Scenario 2 Projections”) in response to Special Committee feedback on the Original Management Projections that assumed a rate of price increases over years 2025 through 2028 and materials cost inflation.

Duff & Phelps used the Updated Management Projections in connection with performing its financial analyses of CORE’s offer of $4.50 per Class A Share, and considered both the Scenario 1 Projections and Scenario 2 Projections in its analysis.

On December 23, 2023, the Special Committee and representatives of Vedder Price, Potter and Duff & Phelps met via videoconference, during which meeting representatives of Duff & Phelps presented Duff & Phelps’s preliminary valuation analysis contained in discussion materials, dated December 23, 2023, that had been prepared by Duff & Phelps and previously circulated to the Special Committee on December 22, 2023 (the “Initial Duff & Phelps Presentation”). Duff & Phelps found that its preliminary analysis supported a conclusion that CORE’s offer price in its November 22 Letter was a fair price from a valuation perspective. Notwithstanding this preliminary conclusion, members of the Special Committee concurred in seeking to continue to negotiate a higher offer price, in part to seek to capture more of the projected cost savings that would result from the Company no longer being publicly traded following any transaction with CORE, and in light of Duff & Phelps’s preliminary premiums-paid analysis, particularly for distressed companies. In considering CORE’s offer in light of Duff & Phelps’s preliminary valuation analysis, the Special Committee also considered the Company’s liquidity position, covenant compliance matters and the terms of the Credit Agreement in the context of the risk of bankruptcy for the Company in the event that no agreement on price was reached with CORE and the possibility that CORE could seek to buy the Company from the Company’s lenders out of bankruptcy, in which case the Company’s minority stockholders would possibly receive nothing, or substantially less than CORE’s initial proposal. Following discussion with representatives of Duff & Phelps as well as Vedder Price and Potter, the Special Committee determined to make a counterproposal to CORE’s initial proposal at a price of $5.00 per Class A Share (as compared to $4.50 per Class A Share in the November 22 Letter).

Following the Special Committee meeting on December 23, 2023, a representative of Duff & Phelps had a conference with the CORE Representative in which Duff & Phelps presented the Special Committee’s counteroffer of $5.00 per Class A Share, as well as the Special Committee’s request for the MoM Vote Condition.

Additionally, also on December 23, 2023, representatives of Vedder Price communicated the Special Committee’s counterproposal to K&E and shared the Special Committee’s rationale and reiterated the request for the MoM Vote Condition.

 

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On December 27, 2023, the Special Committee received a revised proposal from CORE (the “December 27 Letter”) setting forth, on a non-binding basis, CORE’s interest in pursuing a take-private acquisition of the Company at a price of $4.60 per Class A Share, in cash. The December 27 Letter stated that CORE did not expect there to be any financing conditions with respect to its revised proposal. The December 27 Letter also reiterated that the revised proposal was not subject to a MoM Vote Condition and that CORE would not agree to a MoM Vote Condition for any transaction. The December 27 Letter requested the Special Committee’s respond no later than 5.00 p.m. ET on Friday, December 29, 2023.

Following the receipt of the December 27 Letter, Mr. DeWitt spoke with the CORE Representative about CORE’s revised proposal. During that call, the CORE Representative communicated CORE’s rationale behind its counteroffer, including that CORE’s assumptions with respect to potential public company cost savings were lower than the annual cost savings assumptions used by the Company in the Updated Management Projections, and that CORE’s revised proposal had not taken into account that the Company’s fourth quarter 2023 results would likely underachieve earlier expectations.

Additionally, following the receipt of the December 27 Letter, representatives of Duff & Phelps separately had a discussion with the CORE Representative about CORE’s revised proposal, in which the CORE Representative reiterated CORE’s view that the Updated Management Projections assumed greater public company cost savings, including the reduction of management compensation and the elimination of management positions, than what CORE viewed would be the case.

On December 28, 2023, the Special Committee held a meeting via videoconference to discuss CORE’s counteroffer contained in the December 27 Letter. Representatives of Vedder Price, Potter and Duff & Phelps also participated in the meeting. Following discussion, the Special Committee directed Vedder Price to communicate the Special Committee’s counteroffer to CORE which was comprised of two alternatives: acceptance of CORE’s offer of $4.60 per Class A Share as set forth in the December 27 Letter only if it was coupled with CORE agreeing to a MoM Vote Condition in which a majority of the shares of common stock held by Company stockholders unaffiliated with CORE approved the CORE take-private transaction (with any rollover stockholders being excluded from such vote), or, alternatively, $4.85 per Class A Share.

On December 28, 2023, as directed by the Special Committee, Vedder Price communicated the Special Committee’s counteroffer to K&E. In a subsequent call with K&E on the morning of December 29, 2023, representatives of Vedder Price provided the Special Committee’s rationale in formulating its counterproposal, including that the Special Committee believed the premium implied by CORE’s $4.60 was low in comparison to distressed similarly situated companies. Vedder Price also noted that, in light of the Company’s near term (January 31, 2024) capital commitment deadline under the Credit Agreement, and the previous unsuccessful efforts by the Company’s financial advisors to actively sell the Company during the 2022 Company Sale Process, the Special Committee would be amenable to foregoing a go-shop or other market check process if the $4.85 proposal was accepted.

On December 29, 2023, the Special Committee received a revised proposal from CORE (the “December 29 Letter”) setting forth, on a non-binding basis, CORE’s interest in pursuing a take-private acquisition of the Company at a price of $4.75 per Class A Share, in cash, and noted that the revised proposal was CORE’s best and final offer. The December 29 Letter reiterated that CORE did not expect there to be any financing conditions with respect to its revised proposal, and that the revised proposal was not subject to a MoM Vote Condition and that CORE would not agree to a MoM Vote Condition for any transaction.

On December 29, 2023, the Special Committee and representatives of Vedder Price, Potter and Duff & Phelps met via videoconference to discuss the updated counterproposal from CORE reflected in the December 29, 2023 Letter. After discussion, the Special Committee unanimously determined to provisionally accept CORE’s counteroffer for $4.75 per Class A Share, without a MoM Vote Condition, subject to negotiation of definitive transaction documents, the receipt of Duff & Phelps’s fairness opinion and final approval. In

 

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deciding to proceed based on CORE’s revised proposal, the Special Committee considered that the revised offer price reflected a 10% premium over the closing price of the Company’s stock on the day prior to CORE’s original proposal, which was more in line with the comparable premiums for financially distressed companies noted in the Initial Duff & Phelps Presentation to the Special Committee. It also considered that the revised offer price exceeded in every case the valuation ranges under different scenarios outlined in the Initial Duff & Phelps Presentation, except in one instance in which the offer price was at the high-end of the valuation range. The Special Committee also took note of its understanding that the Company expected to be unable to satisfy the then applicable minimum EBITDA covenant under the Credit Agreement for the 2023 fourth quarter and the possibility that it would not be able to meet compliance with the Credit Agreement’s $10 million liquidity covenant. The Special Committee instructed representatives of Duff & Phelps to finalize its financial analysis of the $4.75 per Class A Share and provide an updated analysis of the valuation ranges reflected in its presentation assuming a lower amount of public company cost savings.

On December 31, 2023, representatives of K&E and Vedder Price met via telephone conference to discuss the process for handling CORE’s high priority diligence requests and structuring queries required for K&E’s initial draft of the Merger Agreement.

On January 8, 2024, Mr. DeWitt and representatives of K&E, CORE and Vedder Price met via telephone conference to emphasize CORE’s necessity to receive responses to certain diligence requests on an expedited basis, including calculations from the Company’s accountants regarding potential payments under the Amended and Restated Tax Receivable Agreement of the Company, dated as of April 4, 2023 (the “TRA”).

During the first two weeks of January, representatives of Vedder Price, K&E and Winston & Strawn held calls and exchanged correspondence regarding transaction structuring matters, diligence, operative agreements and antitrust matters in order to facilitate the transaction.

On January 8, 2024, representatives of K&E proposed a structure to representatives of Vedder Price that in summary required (i) exchange of all outstanding Class A units of Fathom Holdco, LLC, a Delaware limited liability company and the operating subsidiary of the Company (“OpCo”), for Class A Shares (the “Class A Unit Exchange”) and the simultaneous cancellation of all outstanding Class B Shares, followed by (ii) two mergers (the “Mergers”): first, a merger of OpCo with a newly formed merger subsidiary established by CORE in connection with the transaction, and second, a merger of the Company with another newly formed merger subsidiary established by CORE in connection with the transaction. CORE based its structure on the assumption that it would be able to terminate the TRA without any payments required thereunder in connection with the Mergers. Representatives of Vedder Price reviewed this structure and conducted calls and exchanged correspondence with representatives of K&E to answer questions and confirm that it is appropriate.

On January 9, 2024, representatives of K&E notified representatives of Vedder Price that CORE intended to engage in discussions with certain stockholders of the Company to rollover their shares in connection with the transactions and that any material terms or updates resulting from such discussions would promptly be made available to the Special Committee.

On January 10, 2024, representatives of K&E delivered to representatives of Vedder Price an initial draft of the Merger Agreement. The draft Merger Agreement contemplated, among other things, (i) no acquirer debt financing contingencies and a full backing of CORE’s transaction payment obligations by an equity commitment (the “Equity Financing”) from certain funds affiliated with CORE (the “CORE Funds”), (ii) a Company termination fee of three percent (3%) of the total equity value of the Company (the “Company Termination Fee”) if the Board were to exercise its fiduciary out and no termination fee payable by CORE under any circumstances, (iii) no MoM Vote Condition, (iv) a condition to the parties’ obligations to consummate the Mergers that the Board and Special Committee shall not have effected a recommendation change pursuant to the fiduciary out, (v) a requirement to hold a vote by the Company’s stockholders notwithstanding a change in recommendation by

 

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the Board or the Special Committee, (vi) a specific performance remedy for the Company in the event that CORE fails to consummate the closing of the transactions contemplated by the Merger Agreement (the “Transactions”) and related documents (such date that the Transactions are consummated, the “Closing”) and (vii) certain covenants regarding continuing employees of the Company. The initial Merger Agreement contained a placeholder for (and did not address) any necessary covenants regarding the Credit Agreement. The Merger Agreement proposed treating the Company’s equity awards such that: (A) options would be cancelled unless vested and paid only to the extent in-the-money, (B) Company restricted stock awards to employees would be converted into cash awards and remain subject to their respective vesting conditions, (C) Company restricted stock awards to non-employee directors would be cancelled without consideration, (D) performance stock awards would be converted into a right to receive cash consideration if vested and cancelled if unvested and (E) warrants of the Company would become exercisable for cash consideration of $4.75 per Class A Share if duly exercised.

On January 14-15, 2024, representatives of Vedder Price and the Special Committee engaged in discussions over e-mail regarding the key terms of the initial draft of the Merger Agreement and the proposed comments and negotiation points.

On January 15, 2024, representatives of Vedder Price sent comments to the Merger Agreement to representatives of K&E. The comments, among other things, (i) requested a support agreement to be entered into by the CORE stockholders concurrent with the signing of the Merger Agreement, (ii) requested an unconditional guaranty from CORE regarding the Company’s Term Loan paydown obligation under the Credit Agreement, (iii) added exclusions to the definition of “Company Material Adverse Effect” for defaults under the Credit Agreement (the “Credit Facility Default MAE Exclusion”), so that a default under the Credit Agreement could not be considered a Company Material Adverse Effect, and any litigation against the Company or its officers (including transaction-based litigation), (iv) included customary carve-backs to the Company’s representations and warranties and operating covenants, (v) enhanced the representations, warranties and covenants from CORE regarding the Equity Financing and the funding thereof, (vi) strengthened CORE’s efforts standards by not excluding actions brought by CORE against the CORE Funds to enforce the Equity Commitment Letter therefrom, (vii) lowered the thresholds upon which certain representations and warranties are brought down at closing, (viii) reduced the Company Termination Fee to 2% and (ix) rejected CORE and the CORE Funds not having any liability limitation in the event of a willful breach of the Merger Agreement or the Equity Commitment Letter. The comments also included a request for additional information on the rollover and any proposed covenants regarding the Term Loan Paydown.

On January 17, 2024, representatives of Vedder Price and Winston & Strawn discussed the Company’s proposed approach for its outstanding equity awards that agreed with the initial Merger Agreement treatment thereof other than with respect to the restricted stock awards to non-employee directors, which the Company felt should be accelerated to be consistent with the restricted stock awards to employees because vesting would have occurred on May 4, 2024 but for the resignations of such non-employee directors as a consequence of the Transactions. Representatives of Vedder Price updated the Special Committee of such plan and the Special Committee did not object to the Company’s approach as communicated by representatives of Winston & Strawn.

On January 18, 2024, representatives of K&E delivered to representatives of Vedder Price an initial draft of an amendment to the Second Amended and Restated Limited Liability Company Agreement of OpCo (the “LLC Agreement Amendment”), which would provide for the Class A Unit Exchange mechanics.

On January 18, 2024, representatives of K&E and Winston & Strawn discussed the proposed approach for the Company’s outstanding equity awards under the Merger Agreement, in accordance with the discussions from January 17, 2024.

On January 19, 2024, representatives of Vedder Price delivered to representatives of K&E an initial draft Support Agreement (the “Support Agreement”) pursuant to which CORE would agree to vote its shares in favor of the adoption and approval of the Merger Agreement and the Transactions. The initial draft Support Agreement

 

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contained (i) a proxy granted to the Company by CORE and (ii) a ratcheting down provision that lowered the voting power of the CORE shares covered by the Support Agreement in the event of a change in the recommendation of the Board or the Special Committee.

Also on January 19, 2024, representatives of K&E delivered to representatives of Vedder Price an initial draft of the Equity Commitment Letter (the “Equity Commitment Letter”), which set forth the terms and conditions of the CORE Funds providing the Equity Financing at the Closing and the Company’s remedy to seek specific performance against the CORE Funds as an express third-party beneficiary thereto in the event that the Equity Financing is not funded. The initial draft of the Equity Commitment Letter provided that the CORE Funds would fund their respective obligations severally up to specified maximum amounts, which in total equaled the full amount of the required Equity Financing under the Merger Agreement.

Also on January 19, 2024, representatives of K&E delivered to representatives of Vedder Price an initial draft of the Rollover Agreement (the “Rollover Agreement”), which set forth the terms, conditions and mechanics of any potential rollover stockholders, and would be attached as an exhibit to the Merger Agreement.

On January 20, 2024, representatives of Vedder Price delivered comments to representatives of K&E regarding the initial draft Rollover Agreement, which included a request for CORE to provide the economic terms of any contemplated rollover.

Also on January 20, 2024, representatives of K&E delivered to representatives of Vedder Price a revised draft of the Merger Agreement. The revised draft, among other things, (i) accepted the Support Agreement concept, (ii) accepted an exclusion for transaction-based litigation from the definition of “Company Material Adverse Effect,” (iii) rejected the Credit Facility Default MAE Exclusion, (iv) removed the employee matters covenant, (v) restored the provision that CORE would not be required to bring any actions against the CORE Funds to enforce the Equity Commitment Letter unless all closing conditions were fully satisfied, (vi) restored the Company Termination Fee to 3%, (vii) added a 6% liability limitation for CORE (the “Parent Liability Limitation”) for the total amount of damages that CORE would be responsible for in the event that the Merger Agreement was terminated and the Company sought damages for such termination rather than specific performance of the Merger Agreement and (viii) rejected willful breaches of the Equity Commitment Letter and claims against the CORE Funds for willful breaches of the Merger Agreement or Equity Commitment Letter from the exclusions to CORE’s liability limitations.

On January 21-22, 2024, representatives of Vedder Price and the Special Committee engaged in detailed correspondence over e-mail regarding the key terms of the revised draft of the Merger Agreement and the proposed comments.

On January 22, 2024, representatives of Vedder Price delivered to representatives of K&E comments to the initial draft Equity Commitment Letter and incremental comments to the LLC Agreement Amendment and Rollover Agreement. The comments to the Equity Commitment Letter included (i) a request that the CORE Funds commit to the full Equity Financing on a joint and several basis, (ii) removal of any limitation on monetary liability for the CORE Funds in the event of a breach of the Merger Agreement or Equity Commitment Letter and (iii) strengthened anti-assignment and protections around termination of the Equity Commitment Letter.

On January 23, 2024, representatives of K&E delivered to representatives of Vedder Price an initial draft of an amendment to the TRA (the “TRA Amendment”), which provided for the automatic termination of the Amended and Restated Tax Receivable Agreement in full upon the consummation of the Mergers.

Also on January 23, 2024, representatives of Vedder Price delivered comments to the revised draft of the Merger Agreement to representatives of K&E. The comments, among other things, (i) restored the Credit Facility Default MAE Exclusion, (ii) added that the required Equity Financing must be sufficient to cover the directors

 

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and officers tail policy, any fees owed to the Special Committee and any amounts owed in respect of the Term Loan Paydown, (iii) added an affirmative covenant for the Company to pay all fees of the Special Committee and its third-party advisors during the period between signing and Closing as such fees may become due, (iv) restored the employee matters covenant, (v) rejected CORE’s efforts standards excluding actions brought by CORE against the CORE Funds to enforce the Equity Commitment Letter, (vi) rejected the Parent Liability Limitation and (vii) restored willful breaches of the Equity Commitment Letter and claims against the CORE Funds for willful breaches of the Merger Agreement or Equity Commitment Letter to the exclusions to CORE’s liability limitations.

Also on January 23, 2024, representatives of K&E delivered to representatives of Vedder Price a revised draft of the LLC Agreement Amendment.

On January 24, 2024, representatives of K&E delivered to representatives of Vedder Price a revised draft of the Equity Commitment Letter and the Rollover Agreement. The revised draft Equity Commitment Letter contemplated, among other things, (i) rejecting joint and several equity commitments from the CORE Funds and (ii) restoring the damages cap consistent with the Parent Liability Limitation in the January 20, 2024 draft of the Merger Agreement. The revised draft of the Rollover Agreement made minor tax-related revisions and was deemed to be in final form, however, representatives of Vedder Price repeated the need for the Special Committee to review the economic terms of any contemplated rollover and the general status of rollover discussions.

Also on January 24, 2024, representatives of K&E and Vedder Price discussed via telephone conference the revised form of LLC Agreement Amendment.

On January 25, 2024, representatives of K&E delivered to representatives of Vedder Price a revised draft of the LLC Agreement Amendment, which was substantially in final form.

On January 26, 2024, representatives of Winston & Strawn delivered to representatives of Vedder Price an initial draft of the Company Disclosure Letter, who then delivered such draft to representatives of K&E.

For the next week, representatives of K&E, Winston & Strawn and Vedder Price continued to have multiple correspondences regarding updated CORE diligence requests and the calculations of potential payment obligations under the TRA.

On January 29, 2024, representatives of K&E delivered comments to the initial draft Support Agreement that, among other things, rejected the proxy from the initial draft and certain other covenants relating to non-solicitation by CORE that were deemed by the parties to be not applicable given that CORE is the proposed acquirer of the Company.

On January 30, 2024, representatives of Vedder Price delivered to representatives of K&E a revised draft of the Support Agreement clarifying certain of CORE’s representations and warranties.

On January 31, 2024, the lenders under the Credit Agreement agreed to extend the date by which the Company was required to obtain a binding commitment or credit support in respect of the Term Loan Paydown, from January 31, 2024 to February 16, 2024. Such extension was facilitated by the lender’s understanding of the progress that was being made toward reaching a definitive agreement relating to a transaction with CORE.

Also on January 31, 2024, representatives of K&E delivered to representatives of Vedder Price a revised draft of the Merger Agreement. The revised draft, among other things, (i) rejected the Credit Facility Default MAE Exclusion, (ii) rejected the affirmative covenant for the Company to pay Special Committee and third-party advisor fees during the period between signing and Closing as they became due, (iii) removed the employee matters covenant, (iv) restored the Company Termination Fee to 3%, (v) restored the Parent Liability Limitation

 

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of 6% and (vi) rejected willful breaches of the Equity Commitment Letter and claims against the CORE Funds for willful breaches of the Merger Agreement or Equity Commitment Letter from the exclusions to CORE’s liability limitations.

On February 1, 2024, representatives of Vedder Price and the Special Committee engaged in detailed correspondence over e-mail regarding the key terms of the revised draft of the Merger Agreement and the Equity Commitment Letter, which included (i) the lack of specificity in the Merger Agreement on any covenants related to the Credit Agreement, (ii) the continued rejection of the Credit Facility Default MAE Exclusion, (iii) the continued restoration of the Parent Liability Limitation, (iv) the continued restoration of the Company Termination Fee to 3%, (v) the lack of disclosure of the financial terms for any contemplated rollover and (vi) the continued rejection of willful breaches of the Equity Commitment Letter and claims against the CORE Funds for willful breaches of the Merger Agreement or Equity Commitment Letter from the exclusions to CORE’s liability limitations. The Special Committee instructed representatives of Vedder Price to discuss the key remaining open items with representatives from K&E on a telephone conference, and then to schedule a meeting of the Special Committee promptly thereafter to discuss any remaining open items.

On February 2, 2024, representatives of K&E delivered to representatives of Vedder Price comments on the initial draft Company Disclosure Letter and representatives of K&E, Vedder Price and Winston & Strawn engaged in detailed correspondence for the next two weeks in order to satisfy any remaining documentation requests from CORE and open matters to finalize the Company Disclosure Letter.

Also on February 2, 2024, representatives of K&E, Vedder Price and the Company’s outside tax advisor met via telephone conference to discuss the TRA and determined that the TRA may be amended pursuant to the TRA Amendment if executed by both CORE and affiliates of Siguler Guff.

On February 4, 2024, representatives of K&E and Vedder Price met via telephone conference to discuss the issues list delivered on February 1, 2024 and CORE’s views on such matters. The representatives of K&E indicated that (i) no additional covenants were anticipated regarding the Credit Agreement, (ii) CORE was no longer looking to finalize the terms of any equity rollover prior to signing the Merger Agreement, (iii) CORE would agree to a Company Termination Fee of 2.5% and (iv) CORE would not agree to the Credit Facility Default MAE Exclusion, would not agree to eliminate the Parent Liability Limitation and would not agree to the issue relating to willful breaches.

On February 4-5, 2024, representatives of Vedder Price updated the Special Committee on the outcome of the open issues discussion with representatives of K&E and engaged in further e-mail correspondence with representatives of K&E to reiterate that the contemplated fourth amendment to the Credit Agreement (the “Fourth Credit Agreement Amendment”) must limit the risk of defaults thereunder to the maximum extent possible.

On February 5, 2024, representatives of K&E, Vedder Price and the Company’s outside tax advisor met via telephone conference to discuss the TRA Amendment.

On February 6, 2024, the Special Committee held a meeting via videoconference. Representatives of Vedder Price and Potter also participated in the meeting. The purpose of the meeting was to discuss the remaining open issues in the Merger Agreement and related transaction documents, and CORE’s established positions thereon. Members of the Special Committee and representatives of Vedder Price discussed the risks presented by the Credit Agreement in relation of the Credit Facility Default MAE Exclusion and determined that the risk cannot be completely assessed until the terms of the Fourth Credit Agreement Amendment are finalized.

The Special Committee and representatives of both Vedder Price and Potter then discussed the Parent Liability Limitation, liability of CORE and the CORE Funds for willful breaches of the Merger Agreement and Equity Commitment Letter and the covenant regarding payment of third-party advisor fees. The Special

 

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Committee agreed that (i) a Parent Liability Limitation is acceptable given its prevalence in the market provided that such amount is increased from CORE’s proposal to a meaningful dollar amount, (ii) CORE’s and the CORE Funds’ liability should not be limited in the case of intentional common law fraud and (iii) the covenant regarding payment of third-party advisor fees should be restored in the Merger Agreement as the Company must not be hindered in fulfilling its timely payment obligations to such third parties. The Special Committee instructed representatives of Vedder Price to communicate these positions to representatives of K&E.

On February 7-8, 2024, representatives of Vedder Price and K&E engaged in detailed e-mail correspondence regarding positions of the Special Committee from its February 6, 2024 meeting. In such correspondence, CORE accepted increasing the Parent Liability Limitation to 12%, after representatives from Vedder Price had proposed 18%, but continued to reject all other requests.

On February 7-9, 2024, representatives of Vedder Price, K&E and Winston & Strawn engaged in multiple telephone conferences and detailed correspondence to discuss confirmatory questions from Cravath, Swaine & Moore LLP (“Cravath”), counsel to the administrative agent under the Credit Agreement, regarding, among other things, the closing certainty and their proposed comments to the Merger Agreement and Equity Commitment Letter that it had communicated over e-mail to representatives of Vedder Price on February 7, 2024. Representatives of Vedder Price responded to all of the points raised by representatives of Cravath on February 9, 2024.

Also on February 11, 2024, representatives of Cravath delivered to representatives of K&E and Vedder Price comments to the Equity Commitment Letter draft from January 24, 2024 that, among other things, provided additional specificity to the circumstances upon which the Equity Commitment Letter may be terminated, amended or waived as well as to the portion relating to payment of amounts required in connection with the Term Loan Paydown.

Also on February 11, 2024, representatives of Vedder Price delivered to representatives of K&E comments to the Merger Agreement and Equity Commitment Letter, which, among other things, implemented comments from Cravath and expressly prevented CORE from terminating if there were a breach under the Equity Commitment Letter.

On February 12, 2024, (i) representatives of K&E delivered to representatives of Vedder Price, Cravath and Winston & Strawn a revised draft of the Equity Commitment Letter, (ii) representatives of Vedder Price delivered updated comments to the Merger Agreement to representatives of K&E and Cravath that contained de minimis clarifications to the draft provided on February 11, 2024 and (iii) representatives of Cravath delivered to representatives of K&E, Vedder Price and Winston & Strawn comments to the K&E draft of the Equity Commitment Letter from February 12, 2024.

On February 13, 2024, K&E delivered to representatives of Vedder Price a revised draft of the Merger Agreement. The draft Merger Agreement did not indicate any change in CORE’s positions and rejected the Cravath revisions that were not mechanical clarifications in nature.

On February 14, 2024, representatives of Cravath delivered comments to the revised draft of the Merger Agreement from February 12, 2024 and the revised draft of the Company Disclosure Letter from February 12, 2024 to representatives of K&E, Vedder Price and Winston & Strawn. The comments included additional clarifications around the Credit Agreement-related matters and representatives from Vedder Price requested that the representatives from K&E incorporate the revisions proposed by the representatives of Cravath. The representatives from K&E accepted the comments other than with respect to a modification of the bringdown standard for breaches of certain portions of the capitalization representation and warranty. Representatives of K&E and Vedder Price engaged in correspondence over e-mail to revise the Merger Agreement over the course of the evening until it was deemed to be in substantially final form subject to comments from the Special Committee.

 

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Also on February 14, 2024, representatives of K&E delivered to representatives of Vedder Price, Winston & Strawn and Cravath a revised Equity Commitment Letter that accepted the comments proposed by the representatives of Cravath on February 12, 2024.

In the afternoon on February 14, 2024, the Special Committee and representatives of Vedder Price and Potter met via videoconference to discuss the draft of the Merger Agreement received from K&E earlier that day and the draft of the Fourth Credit Agreement Amendment reviewed by the Special Committee in advance of the meeting. The members of the Special Committee discussed the risks related to defaults under the Credit Agreement and instructed representatives of Vedder Price to request the Credit Facility Default MAE Exclusion again on the understanding that the remaining portions of the Merger Agreement were acceptable to the Special Committee. The members of the Special Committee agreed that if CORE were unwilling to accept the Credit Facility Default MAE Exclusion, then CORE should be required to covenant in the Support Agreement that it will not take any actions after the signing of the Merger Agreement that would cause a default under the Credit Agreement.

After the meeting of the Special Committee on February 14, 2024, representatives of Vedder Price met with representatives of K&E via telephone conference and requested the Credit Facility Default MAE Exclusion as instructed by the Special Committee. Upon such request once again being rejected by CORE, representatives of Vedder Price proposed including a covenant in the Support Agreement as requested by the Special Committee, which was accepted by CORE.

On February 15, 2024, representatives of K&E delivered to representatives of Vedder Price an updated Support Agreement that included a covenant that CORE, among other things, would not intentionally cause the Company to default under the Credit Agreement and would use its reasonable best efforts to assist the Company in avoiding defaults under the Credit Agreement, subject to certain limitations. The proposed covenant was acceptable to the Special Committee and the Support Agreement was deemed to be in agreed form.

On February 15, 2024, the Special Committee held a meeting via videoconference, attended by representatives of Vedder Price, Potter and Duff & Phelps to discuss and review the draft Merger Agreement and related transaction documents and to consider the Transactions. Representatives of Duff & Phelps reviewed with the Special Committee Duff & Phelps’s financial analysis of the consideration proposed in the Merger to be paid to the public stockholders. Representatives of Vedder Price reviewed the terms of the draft transaction agreements. Representatives of Duff & Phelps then rendered Duff & Phelps’s oral opinion, which was subsequently confirmed in writing, to the Special Committee to the effect that, as of the date of and subject to the assumptions, limitations, qualifications and other conditions set forth in such opinion, the per share price paid in connection with the transaction, is fair, from a financial point of view, to the public stockholders. See “Special Factors — Opinion of the Special Committee’s Financial Advisor.” Following additional discussion, including of the factors summarized in “Special Factors — Reasons for the Merger; Recommendation of the Special Committee; Recommendation of the Board; Fairness of the Merger,” the members of the Special Committee unanimously (i) determined that the Merger Agreement and the Transactions, including the Mergers, are fair to, advisable, and in the best interests of, the Company and its stockholders, including stockholders (the “Unaffiliated Stockholders”) who are (A) not affiliated with CORE, (B) not a member of the Board, (C) not a person determined to be an officer under the Securities Exchange Act of 1934, as amended, and (D) not a person who is rolling over shares in the Company (understanding that there were no such stockholders as of the date of the Merger Agreement), (ii) approved and declared advisable the Merger Agreement and the Transactions, including the Mergers, (iii) recommended that the Board approve and declare advisable the Merger Agreement and the Transactions, including the Mergers, and determine that the Merger Agreement and the Transactions, including the Mergers, are fair to, advisable, and in the best interests of, the Company and its stockholders, including the Unaffiliated Stockholders, and (iv) recommended that, subject to Board approval, the Board submit the Merger Agreement to the Company’s stockholders for their adoption and recommend that the Company’s stockholders vote in favor of the adoption of the Merger Agreement.

 

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Later on February 15, 2024, following the Special Committee’s meeting, the Board held a meeting by videoconference, attended by representatives of Winston & Strawn and Vedder Price and certain members of Company management, to discuss and review the draft Merger Agreement, to receive the recommendation of the Special Committee and to consider the Transactions. Due to a scheduling conflict, the CORE Representative (as a member of the Board) did not attend the meeting. Following this discussion, representatives of Vedder Price and Winston & Strawn described the process undertaken by the Special Committee and its financial advisor, the receipt of Duff & Phelps’s opinion and the Special Committee’s recommendation that the Merger Agreement be approved. Following such discussion, the Board (i) determined that it is in the best interests of the Company, and declared it advisable, to enter into the Merger Agreement and consummate the Merger upon the terms and subject to the conditions set forth therein; (ii) approved the execution and delivery of the Merger Agreement by the Company, the performance by the Company of its covenants and other obligations thereunder, and the consummation of the Merger upon the terms and conditions set forth therein; (iii) directed that the Merger Agreement submitted to the Company stockholders for approval; and (iv) resolved to recommend that the Company Stockholders vote in favor of the adoption of the Merger Agreement.

Also on February 15, 2024, representatives of K&E delivered to representatives of Vedder Price, Winston & Strawn and Cravath an updated Equity Commitment Letter that finalized any remaining missing information and it was deemed to be in agreed form.

Following such meetings and the finalization of the Equity Commitment Letter, in the evening of February 16, 2024, the Company and CORE executed the Merger Agreement and related transaction documents.

Also on February 16, 2024, the Company entered into the Fourth Credit Agreement Amendment, pursuant to which the lenders thereunder agreed to, among other things (i) extend the deadline for the Term Loan Paydown until the earlier of (A) July 31, 2024, (B) the date on which the Merger Agreement, the Equity Commitment Letter, the TRA Amendment, the LLC Agreement Amendment and/or the Support Agreement is terminated and (C) the Closing, and (ii) waive any defaults under the Credit Agreement in respect of, among other things, compliance with minimum liquidity and EBITDA covenants.

Prior to the opening of trading of the Class A Shares on the NYSE on February 20, 2024, the Company filed a Form 8-K to report the execution of the Merger Agreement and related transactions.

Recommendation of the Board and Special Committee

The Board formed the Special Committee consisting solely of directors of the Company who are not directly or indirectly affiliated with, and who are otherwise independent from, CORE and who are not members of the Company’s management to, among other things, review, evaluate and negotiate the Merger Agreement and the Transactions, including the Merger. The Special Committee evaluated the Merger, in consultation with the Company’s management and its own independent legal and financial advisors and considered various relevant factors. After careful consideration, the Special Committee unanimously (i) determined that the Merger Agreement and the Transactions, including the Mergers, are fair to, advisable, and in the best interests of, the Company and the Company Stockholders, including the Unaffiliated Stockholders, (ii) approved and declared advisable the Merger Agreement and the Transactions, including the Mergers, (iii) recommended that the Board approve and declare advisable the Merger Agreement and the Transactions, including the Mergers, and determine that the Merger Agreement and the Transactions, including the Mergers, are fair to, advisable, and in the best interests of, the Company and the Company Stockholders, including the Unaffiliated Stockholders, and (iv) recommended that, subject to Board approval, the Board submit the Merger Agreement to the Company Stockholders for their adoption and recommend that the Company Stockholders vote in favor of the adoption of the Merger Agreement.

At a meeting of the Board on February 15, 2024, the Board, based in part on the unanimous recommendation of the Special Committee, (i) found that the Merger Agreement and the Transactions are fair to,

 

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advisable, and in the best interests of, the Company and its stockholders, including the Unaffiliated Stockholders, (ii) approved and declared advisable the Merger Agreement and the Transactions and (iii) approved the execution and delivery of the Merger Agreement by the Company, the performance by the Company of its covenants and other obligations thereunder and the consummation of the Merger of the Company upon the terms and conditions set forth therein, (vi) directed that the Merger Agreement and the Plan of Merger be submitted to the Company’s stockholders for approval and (v) recommended that the Company’s stockholders authorize the Plan of Merger in accordance with the Company’s organizational documents and the DGCL at the special meeting of the stockholders.

Accordingly, the Board recommends that the Company’s stockholders vote “FOR” the Merger Proposal (Proposal 1).

See “Special Factors — Reasons for the Merger” for additional information related to the factors considered by the Board in authorizing the Merger, the Merger Agreement, Plan of Merger and the Transactions and recommending that the Company’s stockholders vote “FOR” the Merger Proposal.

Reasons for the Merger

Recommendation of the Special Committee

In recommending the Merger Agreement and evaluating the Transactions, including the Mergers, the Special Committee consulted with the Special Committee’s financial and legal advisors and considered the following factors as being generally supportive of their determinations and recommendations, which are not intended to be exhaustive and are not presented in any relative order of importance nor in the order the Special Committee considered such factors:

 

•

the merger consideration for the minority stockholders of $4.75 per Class A Share represented a premium of 13.1% over the closing price of the Class A Shares on November 24, 2023, the last full trading day before CORE publicly disclosed its non-binding acquisition proposal to the Board;

 

•

information available to the Special Committee with respect to the Company’s business, operations, financial condition, liquidity, earnings and prospects, the Company’s long-range plans, and the risks in achieving those prospects and plans, including the information further described in the section herein entitled “Certain Unaudited Prospective Financial Information” beginning on page 45 of this proxy statement;

 

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ongoing market volatility related to the evolving and continuing macroeconomic headwinds facing the Company and the digital manufacturing industry more generally;

 

•

the fact that the Company was actively marketed in a formal process in late 2022 by the Company’s financial advisors, with further outreach to and discussions with potentially interested partners during early 2023, and that such process did not result in the receipt of any indications of interest or other offers to purchase or invest in the Company or its assets;

 

•

the Special Committee’s belief that the Merger Agreement and the Transactions, including the Mergers, were more favorable to the Company and the Unaffiliated Stockholders, when compared with the Company’s stand-alone business plan and long-term prospects, and the associated benefits and risks;

 

•

the fact that the Special Committee was able to negotiate an increase in the offer price from the $4.50 per Class A Share consideration offered in the November 22, 2024 Letter to $4.75 per Class A Share on behalf of the Unaffiliated Stockholders, representing an increase of approximately 5.5%;

 

•

the belief by the Special Committee, after discussions with the Special Committee’s advisors and negotiations with CORE, that the consideration of $4.75 per Class A Share for the minority stockholders was likely the highest price per Class A Share that CORE was willing to pay;

 

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•

the Special Committee’s belief that the Company’s prospects for resolving its liquidity issues organically in order to continue as an independent company were too remote, that there would be a very significant risk of bankruptcy if the Company were to proceed without the Transactions and that further or prolonged negotiations would create a risk of causing CORE to abandon the Transactions altogether;

 

•

the financial and other terms and conditions of the Merger Agreement (including the consideration of $4.75 per Class A Share, in cash, without interest and subject to any withholding taxes) and the Transactions, including the Mergers, resulting from extensive arm’s-length negotiations conducted at the direction of the Special Committee, with the assistance of experienced legal and financial advisors;

 

•

the current and historical market prices of the Class A Shares;

 

•

that the merger consideration consists solely of cash, providing the Unaffiliated Stockholders with certainty of value and liquidity, while eliminating long-term business and execution risk;

 

•

the oral opinion of Duff & Phelps, which was subsequently confirmed by delivery of a written opinion, dated February 15, 2024, to the Special Committee to the effect that, as of that date and based on and subject to the assumptions, procedures, factors, qualifications and limitations set forth in its opinion, the Merger Consideration is fair, from a financial point of view, to the holders of Class A Shares (other than CORE and its affiliates, those members of the Board who are employees of CORE, persons deemed to be executive officers of the Company, holders who are participating in the rollover of their shares and holders of Excluded Shares (as defined in Duff & Phelps’s written option) (as more fully described under “Special Factors — Opinion of the Special Committee’s Financial Advisor”), and which analyses and conclusions were expressly adopted by the Special Committee;

 

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the fact that Company stockholders who properly exercise their appraisal rights in accordance with and pursuant to Section 262 of the DGCL will be entitled to such appraisal rights in connection with the Merger;

 

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the likelihood of the Merger being completed, based on, among other matters:

 

•

the limited nature of the conditions to completion of the Merger as provided by the Merger Agreement, including the absence of a financing condition;

 

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the requirement that CORE take certain actions, subject to the terms of the Merger Agreement, to obtain the regulatory approvals required to consummate the Merger, subject to and in accordance with the terms and conditions of the Merger Agreement;

 

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the fact that CORE, which holds approximately 63% of the voting power of the Company’s outstanding capital stock, has duly executed and entered into the Support Agreement, as further described under “Special Factors — Support Agreement,” pursuant to which it has agreed to vote its shares in favor of the Merger Proposal, subject to, and in accordance with, the terms and conditions of the Support Agreement; and

 

•

the availability of the remedy of specific performance to the Company under the Merger Agreement in certain circumstances, including the Company’s right under the Equity Commitment Letter to cause the Equity Financing to be funded if, among other things, the conditions to closing are satisfied (or would be satisfied at the Closing);

 

•

the terms and conditions of the Merger Agreement, including:

 

•

the Company’s right, in response to an unsolicited written bona fide acquisition proposal and subject to compliance with certain procedural requirements (including the Board’s, acting upon the recommendation of the Special Committee, or the Special Committee’s good faith belief (after consultation with its financial advisors and outside legal counsel) that such proposal constitutes or could be reasonably expected to lead to a Superior Proposal (as defined in the Merger Agreement), (i) to furnish information with respect to the Company to a person making such

 

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acquisition proposal and (ii) to engage in negotiations or discussions with the person making such acquisition proposal;

 

•

the ability of the Board or the Special Committee to change or withdraw the Board’s recommendation in certain instances, subject to compliance with certain procedural requirements, that the Unaffiliated Stockholders vote in favor of the Merger Proposal in connection with (i) an unsolicited written bona fide acquisition proposal that the Special Committee has determined in good faith (after consultation with its financial advisors and outside legal counsel) is a Superior Proposal or (ii) a specified Intervening Event, if the Board, acting upon the recommendation of the Special Committee, or the Special Committee determines that the failure to change or withdraw its recommendation would be inconsistent with its fiduciary duties;

 

•

the ability of the Company, at the Special Committee’s direction, to terminate the Merger Agreement, among other times, to enter into a definitive agreement to consummate a Superior Proposal, subject to compliance with certain procedural requirements, including payment of the Company Termination Fee;

 

•

the terms of the Merger Agreement providing the Company sufficient operating flexibility to conduct its business in the ordinary course until the consummation of the Merger or the termination of the Merger Agreement;

 

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the Special Committee’s belief that it was fully informed about the extent to which the interests of CORE in the Merger differ from those of the Unaffiliated Stockholders; and

 

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material risks to the Company’s ability to pursue and execute long-term strategic objectives and growth plans as a public company, including, without limitation, an elevated risk of bankruptcy.

The Special Committee believes that sufficient procedural safeguards were, and are, present to ensure the fairness of the Merger and to permit the Special Committee to represent effectively the interests of the Unaffiliated Stockholders. These procedural safeguards include the following:

 

•

that, from its formation, the Special Committee was granted authority to, among other things, review, evaluate and negotiate the terms and conditions, and to determine the advisability of, the Merger Agreement and the Transactions, including the Mergers, to recommend to the Board what action, if any, should be taken by the Board with respect to the Transactions (including recommending not to pursue the Transactions), and the fact that the Board agreed that it would not approve the Merger Proposal without the prior favorable recommendation of the Special Committee;

 

•

that the members of the Special Committee are not employees of, or otherwise affiliated with CORE, and are not expected to have an economic interest in the Company or the surviving company following the completion of the Merger;

 

•

that the Special Committee received the advice and assistance of experienced independent legal and financial advisors;

 

•

the various terms and conditions of the Merger Agreement, including the fact that the Merger Agreement provides that it cannot be amended, nor may any provision be waived by the Company, without the approval and at the direction of the Special Committee;

 

•

that, at the direction of the Special Committee, with the assistance of legal and financial advisors, extensive negotiations occurred with CORE regarding the consideration to be paid pursuant to the Merger Agreement that resulted in an increase in such consideration from CORE’s original offer price proposal on November 22, 2023 of $4.50 per Class A Share to $4.75 per Class A Share price for the minority stockholders;

 

•

that the members of the Special Committee met on numerous occasions, and were actively engaged outside of formal meetings, during the course of approximately three months (with its legal and

 

41

financial advisors present or copied) to discuss the potential acquisition, the ongoing negotiations with CORE, financial information relating to the Company, as well as to review and negotiate the terms and conditions of the Merger; and

 

•

that the Special Committee and Board made their evaluation of the Merger Agreement and the Merger based upon the factors discussed in this proxy statement and with the full knowledge of the interests of CORE in the Merger.

The Special Committee also considered the following uncertainties, risks and potentially countervailing factors in their deliberations concerning the Merger, which are not intended to be exhaustive and are not presented in any relative order of importance:

 

•

that, following the completion of the Merger, the Company will no longer exist as a publicly traded company and that the consummation of the Merger and receipt of the Merger Consideration in the Merger, while providing relative certainty of value, will not allow the Unaffiliated Stockholders to participate in potential further growth in the Company’s assets, future earnings growth, future appreciation in value of the Class A Shares or any future dividends after the Merger;

 

•

the risk that the Transactions, including the Mergers, may not be consummated in a timely manner or at all, and the consequences thereof, including (i) the potential loss of value to the Company’s stockholders, (ii) the potential negative impact on the operations and prospects of the Company, including the risk of loss of key personnel, and (iii) the market’s perception of the Company’s prospects could be adversely affected if such transactions were delayed or were not consummated;

 

•

the fact that the Merger Consideration for the minority stockholders of $4.75 per Class A Share represented a decrease of approximately 98% from the $200 per share deemed value (as adjusted to reflect the Reverse Stock Split) at which Class A Shares were issued to Company shareholders in the Business Combination, noting however that the market, economic and industry conditions and Company’s prospects had each changed materially since that time;

 

•

the restrictions imposed by the Merger Agreement on the Company’s solicitation of acquisition proposals from third parties;

 

•

the understanding that some of the Company’s directors and executive officers have other interests in the Merger in addition to their interests as stockholders of the Company, including the manner in which they would be affected by the Merger (as discussed under “Special Factors — Interests of the Company’s Directors and Executive Officers in the Merger”);

 

•

the possible effects of the pendency or consummation of the Transactions, including the potential for suits, actions or proceedings in respect of the Merger Agreement or the Transactions, the risk of any loss or change in the relationship of the Company and its subsidiaries with their respective employees, agents, customers and other business relationships, and any possible effect on the Company’s ability to attract and retain key employees, including that employees might choose not to remain employed with the Company prior to the completion of the Merger;

 

•

the restrictions placed on the conduct of the Company’s business prior to the completion of the Merger pursuant to the terms of the Merger Agreement, which could delay or prevent the Company from undertaking business opportunities that may arise or any other action it would otherwise take with respect to the operations of the Company absent the pending completion of the Merger;

 

•

that the receipt of cash in exchange for Class A Shares pursuant to the Merger will be a taxable transaction for U.S. federal income tax purposes;

 

•

the fact that the Merger Agreement (i) does not include a MoM Vote Condition or (ii) expressly provide for the opportunity for the Unaffiliated Stockholders to participate in any ongoing equity investment in the surviving company following the Mergers, and despite the Special Committee’s attempts to include a MoM Vote Condition as a condition to the Mergers, there is no such condition to the consummation of the Mergers;

 

42

•

the fact that, notwithstanding the provisions in the Merger Agreement permitting the Special Committee and the Company to respond to and pursue a Superior Proposal under the circumstances specified in the Merger Agreement, CORE’s majority ownership of the Company and its assertions that it did not expect, in its capacity as a stockholder of the Company, to vote in favor of any alternative sale, merger or other corporate transaction involving the Company nor divest or sell any portion of its ownership interest in the Company, could thwart any attempt to effectuate a Superior Proposal;

 

•

that the Company’s directors, officers and employees have expended and will expend extensive efforts attempting to complete the Transactions and such persons have experienced and will experience significant distractions from their work during the pendency of such transactions; and

 

•

that the Company has incurred and will incur substantial costs in connection with the Transactions, even if such Transactions are not consummated.

The Special Committee concluded that the uncertainties, risks and potentially negative factors relevant to the Merger Agreement and the Mergers were outweighed by the potential benefits of the Merger Agreement and the Mergers.

In considering the fairness of the Merger to the Unaffiliated Stockholders, the Special Committee considered, among other things, market value and the financial analysis and opinion of Duff & Phelps, and did not consider the liquidation value or net book value of the Company. The liquidation value was not considered because the Special Committee viewed the Company as a viable going concern and did not believe that an orderly sale of the Company’s assets for cash and the subsequent distribution of proceeds from such sale would be a practical alternative to the Transactions. Further, net book value, which is an accounting concept, was not considered as a factor because net book value was not seen as a material indicator of the value of the Company as a going concern but rather is indicative of historical costs. The Special Committee is not aware of any firm offers made by any other person (other than CORE) for a merger or consolidation of the Company with another company, the sale or transfer of all or substantially all of the Company’s assets or a purchase of the Company’s securities that would enable such person to exercise control of the Company during the past two years. In addition, the Special Committee did not seek to establish a pre-Merger going concern value for the Company as such. Rather, the Special Committee believed that the financial analyses presented by Duff & Phelps, as more fully summarized under the caption “Special Factors — Opinion of the Special Committee’s Financial Advisor,” on which the Special Committee relied in making its recommendation to the Board, represented potential valuations of the Company as it continues to operate its business. The Special Committee considered each of the analyses performed by Duff & Phelps in the context of the opinion provided by Duff & Phelps as well as various additional factors, as discussed above.

The foregoing discussion is not exhaustive but is intended to summarize the material information and factors considered by the Special Committee in its consideration of the Transactions, including the Mergers. The Special Committee reached the unanimous decision to recommend that the Board approve the Company’s entry into the Merger Agreement, considering the factors described above and other factors that the Special Committee believed were appropriate. In view of the variety of factors and the quality and amount of information considered, the Special Committee did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determinations. In addition, each individual member of the Special Committee may have given different weight to different factors. The Special Committee conducted an overall review of the factors described above, including thorough discussions with the Special Committee’s legal and financial advisors, and considered the factors overall to be favorable to, and to support, its’ determinations.

Recommendation of the Fathom Board

The Board, on behalf of the Company, believes, based on the factors described below, that the Merger is fair to the “unaffiliated security holders,” as such term is defined in Rule 13e-3 under the Exchange Act.

 

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Based on the unanimous recommendation of the Special Committee (discussed further below) and on the basis of the other factors described above and below, the Board: (i) found that the Merger Agreement and the Transactions are fair to, advisable, and in the best interests of, the Company and its stockholders, including the Unaffiliated Stockholders, (ii) approved and declared advisable the Merger Agreement and the Transactions and (iii) approved the execution and delivery of the Merger Agreement by the Company, the performance by the Company of its covenants and other obligations thereunder and the consummation of the Merger of the Company upon the terms and conditions set forth therein, (iv) directed that the Merger Agreement and the Plan of Merger be submitted to the Company’s stockholders for approval and (v) recommended that the Company’s stockholders authorize the Plan of Merger in accordance with the Company’s organizational documents and the DGCL at the special meeting of the stockholders.

In the course of reaching its determination and making its recommendations, the Board considered the following non-exhaustive list of material factors and countervailing factors, which are not presented in any relative order of importance:

 

•

the Special Committee’s analysis (as to both substantive and procedural aspects of the Merger), conclusions and unanimous determination, which the Board adopted, that the Merger Agreement and the Transactions, including the Mergers, are advisable, fair to and in the best interests of the Company and the Unaffiliated Stockholders (and, as described in this proxy statement, the “unaffiliated security holders,” as such term is defined in Rule 13e-3 of the Exchange Act). The Board also considered the Special Committee’s unanimous recommendation that (i) found that the Merger Agreement and the Transactions are fair to, advisable, and in the best interests of, the Company and its stockholders, including the Unaffiliated Stockholders, (ii) approved and declared advisable the Merger Agreement and the Transactions and (iii) approved the execution and delivery of the Merger Agreement by the Company, the performance by the Company of its covenants and other obligations thereunder and the consummation of the Merger of the Company upon the terms and conditions set forth therein, (iv) directed that the Merger Agreement and the Plan of Merger be submitted to the Company’s stockholders for approval and (v) recommended that the Company’s stockholders authorize the Plan of Merger in accordance with the Company’s organizational documents and the DGCL at the special meeting of the stockholders;

 

•

the procedural fairness of the Merger, including that (i) it was negotiated by the Special Committee consisting solely of independent and disinterested directors that are not affiliated with, and are independent of, CORE and management of the Company and were otherwise disinterested and independent with respect to a potential acquisition of the Company, other than as discussed in the section entitled “Special Factors — Interests of the Company’s Directors and Executive Officers in the Merger”; and (ii) the Special Committee had the authority to negotiate the Merger Agreement, determine the advisability of the Transactions, to recommend to the Board what action should be taken with respect to the Transactions and to select and engage, and was advised by, its own independent legal and financial advisors; and

 

•

the other material factors and countervailing factors considered by the Special Committee and listed above.

The Board concluded that the uncertainties, risks and potentially negative factors relevant to the Merger Agreement and the Mergers were outweighed by the potential benefits of the Merger Agreement and the Mergers.

In considering the fairness of the Merger, the Board did not consider the liquidation value or net book value of the Company. The liquidation value was not considered because the Board considered the Company to be a viable going concern and did not believe that the orderly sale of the Company’s assets for cash and the subsequent distribution of proceeds from such sale would be a practical alternative to the Transactions. Further, the Board did not consider net book value, which is an accounting concept, as a factor because net book value

 

44

was not viewed as a material indicator of the value of the Company as a going concern. The Board is not aware of any firm offers made by any person (other than CORE) for a merger or consolidation of the Company with another company, the sale or transfer of all or substantially all of the Company’s assets or a purchase of the Company’s securities that would enable such person to exercise control of the Company during the past two years.

The foregoing discussion is not exhaustive but is intended to summarize the material information and factors considered by the Board in its consideration of the Transactions, including the Mergers. The Board reached the unanimous decision to recommend the Company’s entry into the Merger Agreement, considering the factors described above and other factors that it believed were appropriate. In view of the variety of factors and the quality and amount of information considered, 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 determinations. In addition, each individual member of the Board may have given different weight to different factors. The Board conducted an overall review of the factors described above, and considered the factors overall to be favorable to, and to support, their determinations.

In considering the fairness of the Merger, the Board did not consider the historical purchase prices of the Class A Common Stock relating to the issuance and sale of such securities by the Company because the Company did not issue or sell any securities during the past two years in transactions that would be relevant for the Board’s fairness determination.

It should be noted that certain aspects of this explanation of the reasoning of both the Special Committee and the Board and certain information presented in this section is forward-looking in nature and should be read in light of the factors set forth in the section entitled “Cautionary Statement Concerning Forward-Looking Information.”

Certain Unaudited Prospective Financial Information

The Company does not, as a matter of course, publicly disclose long-term consolidated forecasts as to future performance, earnings or other results given, among other reasons, the uncertainty, unpredictability and subjectivity of the underlying assumptions and estimates. However, the Company is including a summary of certain previously nonpublic, unaudited prospective financial information for the fiscal year ending December 31, 2024 through the fiscal year ending December 31, 2028 that members of the Company’s management provided to the Special Committee and the Special Committee’s advisors in connection with their evaluation of the Merger. The Management Projections (as defined below) were prepared on a stand-alone basis and do not take into account any of the transactions contemplated by the Merger Agreement, including any costs incurred in connection with the Merger, or any changes to the Company’s operations or strategy that may be implemented after the completion of the Merger. As a result, actual results likely will differ, and may differ materially, from those contained in the Management Projections. You should note that Management Projections constitute forward-looking statements.

The Company’s management provided the Original Management Projections to the Special Committee and its legal and financial advisors on December 19, 2023, and at the direction of the Special Committee, provided the Special Committee and its legal and financial advisors the Updated Management Projections on December 22, 2023. The Updated Management Projections included the projections included in the Original Management Projections, which remained substantially the same and are referred to as the “Scenario 1 Projections”, and also included an alternative scenario of projections (referred to as the “Scenario 2 Projections”) in response to Special Committee feedback on the Original Management Projections that assumed incremental price increases over years 2025 through 2028, respectively, and incremental materials cost increases over the same period. See “Special Factors — Background of the Merger.” The Original Management Projections and the Updated Management Projections are referred to collectively as the “Management Projections” and the Special Committee directed Duff & Phelps to use the Management Projections in connection with performing certain of its financial analyses in connection with its opinion, as described in more detail in the section of this proxy

 

45

statement entitled “Special Factors — Opinion of the Special Committee’s Financial Advisor.” The summaries of these projections are being included in this proxy statement solely to give Company stockholders access to non-public information that was provided to Duff & Phelps in the course of evaluating the Merger and are not included in this proxy statement to influence any Company stockholder to vote for the Merger Proposal, to vote against the Merger Proposal, or for any other purpose. The inclusion of this information should not be regarded as an indication that any of the Company, its advisors or other representatives or any other recipient of this information considered, or now considers, it to be predictive of actual future performance or events, or that it should be construed as financial guidance, and such summary projections set forth below should not be relied on as such.

While presented with numeric specificity, the Management Projections reflect numerous estimates and assumptions that are inherently uncertain and may be beyond the control of the Company, including, among others, the Company’s assumptions about revenue growth, net benefits from the anticipated 2024 closing of the Company’s Miami Lakes, FL operations, material inflation being offset by price increases, increases in compensation, capital expenditures, headcount, operations productivity, term debt paydown, interest rates and working capital, as well as the other matters described in the section entitled “Cautionary Factors Regarding Forward-Looking Statements.” The Management Projections reflect both assumptions as to certain business decisions that are subject to change and, in many respects, subjective judgment, and thus are susceptible to multiple interpretations and periodic revisions based on actual experience and business developments. The Company can give no assurance that the Management Projections and the underlying estimates and assumptions will be realized. In addition, since the Management Projections cover multiple years, such information by its nature becomes more speculative with each successive year. This information constitutes “forward-looking statements” and actual results may differ materially and adversely from those projected. See “Cautionary Factors Regarding Forward-Looking Statements.”

The Management Projections were not prepared with a view toward public disclosure, nor were they prepared with a view toward compliance with U.S. generally accepted accounting principles (“GAAP”), published guidelines of the SEC or the guidelines established by the Public Company Accounting Oversight Board for preparation and presentation of prospective financial information.

The Management Projections included non GAAP financial measures, which should not be viewed as a substitute for GAAP financial measures and may be different from similarly titled non-GAAP financial measures used by other companies. Furthermore, there are limitations inherent in non-GAAP financial measures because they exclude charges and credits that are required to be included in a GAAP presentation. Accordingly, these non-GAAP financial measures should be considered together with, and not as an alternative to, financial measures prepared in accordance with GAAP. Financial measures included in forecasts provided to a financial advisor and a board of directors in connection with a business combination transaction, such as the Management Projections, are excluded from the definition of “non GAAP financial measures” under applicable SEC rules and regulations. As a result, the Management Projections are not subject to SEC rules regarding disclosures of non-GAAP financial measures, which would otherwise require a reconciliation of a non-GAAP financial measure to a GAAP financial measure. Neither the Company’s independent registered public accounting firm, nor any other independent accountants, have compiled, examined or performed any procedures with respect to the Management Projections, nor have they expressed any opinion or any other form of assurance on such information or its achievability.

Furthermore, the Management Projections do not take into account any circumstances or events occurring after the date they were prepared. The Company can give no assurance that, had the Management Projections been prepared as of the date of this proxy statement, similar estimates and assumptions would be used. Except as required by applicable securities laws, the Company does not intend to, and disclaims any obligation to, make publicly available any update or other revision to the Management Projections to reflect circumstances existing since their preparation or to reflect the occurrence of unanticipated events, even in the event that any or all of the underlying assumptions are shown to be in error or to reflect changes in general economic or industry conditions.

 

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The Management Projections do not take into account all the possible financial and other effects on the Company of the Merger, the effect on the Company of any business or strategic decision or action that has been or will be taken as a result of the Merger Agreement having been executed, or the effect of any business or strategic decisions or actions that would likely have been taken if the Merger Agreement had not been executed, but which were instead altered, accelerated, postponed or not taken in anticipation of the Merger. Further, the Management Projections do not take into account the effect on the Company of any possible failure of consummation of the Merger and should not be viewed as accurate or continuing in that context. None of the Company or its affiliates, officers, directors, advisors, or other representatives has made, makes, or is authorized in the future to make any representation to any Company stockholder or other person regarding the Company’s ultimate performance compared to the information contained in the Management Projections or to the effect that the forecasted results will be achieved. The inclusion of the Management Projections herein should not be deemed an admission or representation by the Company or its advisors or any other person that it is viewed as material information of the Company, particularly in light of the inherent risks and uncertainties associated with such forecasts. The financial forecasts included in the Management Projections also cover multiple years and such information by its nature becomes subject to greater uncertainty with each successive year. In light of the foregoing, as well as the uncertainties inherent in any forecasted information, Company stockholders are cautioned not to place undue reliance on such information, and the Company urges all of its stockholders to review the Company’s most recent SEC filings for a description of the Company’s reported financial results.

Certain Assumptions

In preparing the Management Projections described below, the Company’s management team used various assumptions, including, but not limited to, the following principal assumptions:

 

•

revenue growth for each year presented;

 

•

net benefits of approximately $850,000 per year from the anticipated 2024 closing of our Miami Lakes, FL operations;

 

•

material inflation being offset by price increases;

 

•

solely in respect of Scenario 2, incremental price increases of 1%, 2%, 3% and 3% over years 2025-2028 and incremental materials cost increases of approximately 0.7% over the same period.

 

•

increases in compensation of 3.5% in 2024 and 3% each year thereafter, including restoration of bonus payments to 100% payout throughout periods covered;

 

•

capital expenditure at 3% in 2024 increasing to 6% by 2028;

 

•

flat headcount;

 

•

operations productivity of 0.5% increasing to 2.0% by 2028;

 

•

term debt paydown of $50 million in June 2024;

 

•

interest rate at current rates; and

 

•

modest improvements in working capital

 

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The following tables summarize the Management Projections for Scenario 1 and Scenario 2 for the fiscal years 2024 through 2028 ($ in thousands, unless otherwise stated):

Summary Financials – Scenario 1⁽¹⁾

 

		Scenario 1 Projections
		2023E				2024P				2025P				2026P				2027P				2028P
Revenue		$	131,292			$	134,248			$	140,961			$	149,407			$	158,435			$	165,036
Growth			(18.5	%)			2.3	%			5.0	%			6.0	%			6.0	%			4.2	%
Gross Profit		$	37,692			$	42,976			$	48,308			$	53,612			$	60,178			$	64,286
Margin			28.7	%			32.0	%			34.3	%			35.9	%			38.0	%			39.0	%
EBITDA(2)		$	10,595			$	8,228			$	16,733			$	21.223			$	26,122			$	29,425
Plus: Management Adjustments(3)			2,488				7,215				3,767				3,838				3,911				3,987
Management Adj. EBITDA(3)		$	13,083			$	15,443			$	20,500			$	25,061			$	30,033			$	33,412
Less: Board Fees			(16	)			(410	)			(400	)			(400	)			(400	)			(400	)
Less: Normalized Stock Based Compensation			(2,000	)			(2,000	)			(2,060	)			(2,122	)			(2,185	)			(2,251	)
Adjusted EBITDA(4)		$	11,067			$	13,033			$	18,040			$	22,539			$	27,448			$	30,761
Margin			8.4	%			9.7	%			12.8	%			15.1	%			17.3	%			18.6	%
Growth			(45.9	%)			17.8	%			38.4	%			24.9	%			21.8	%			12.1	%
Capital Expenditures		$	5,010			$	4,110			$	5,808			$	7,695			$	9,792			$	10,200
as % of Revenue			3.8	%			3.1	%			4.1	%			5.2	%			6.2	%			6.2	%
Net Working Capital		$	14,333			$	11,990			$	16,163			$	17,154			$	18,108			$	18,719
as % of Revenue			10.9	%			8.9	%			11.5	%			11.5	%			11.4	%			11.3	%

Summary Financials – Scenario 2⁽¹⁾

 

						Scenario 2 Projections
		2023E				2024P				2025P				2026P				2027P				2028P
Revenue		$	131,292			$	134,248			$	142,370			$	153,804			$	167,586			$	179,138
Growth			(18.5	%)			2.3	%			6.1	%			8.0	%			9.0	%			6.9	%
Gross Profit		$	37,692			$	42,976			$	48,675			$	54,975			$	63,014			$	68,658
Margin			28.7	%			32.0	%			34.2	%			35.7	%			37.6	%			38.3	%
EBITDA(2)		$	10,595			$	8,228			$	17,085			$	22,543			$	28,869			$	33,659
Plus: Management Adjustments(3)			2,488				7,215				3,767				3,838				3,911				3,987
Management Adj. EBITDA(3)		$	13,083			$	15,443			$	20,852			$	26,381			$	32,780			$	37,645
Less: Board Fees			(16	)			(410	)			(400	)			(400	)			(400	)			(400	)
Less: Normalized Stock Based Compensation			(2,000	)			(2,000	)			(2,060	)			(2,122	)			(2,185	)			(2,251	)
Adjusted EBITDA(4)		$	11,067			$	13,033			$	18,392			$	23,860			$	30,195			$	34,994
Margin			8.4	%			9.7	%			12.9	%			15.5	%			18.0	%			19.5	%
Growth			(45.9	%)			17.8	%			41.1	%			29.7	%			26.6	%			15.9	%
Capital Expenditures		$	5,010			$	4,110			$	5,866			$	7,922			$	10,358			$	11,072
as % of Revenue			3.8	%			3.1	%			4.1	%			5.2	%			6.2	%			6.2	%
Net Working Capital		$	14,333			$	11.990			$	16,123			$	17,056			$	17,938			$	18,457
as % of Revenue			10.9	%			8.9	%			11.3	%			11.1	%			10.7	%			10.3	%

 

(1)	The assumptions for Scenarios 1 and 2 are identical except that Scenario 2 assumes incremental price increases of 1%, 2%, 3% and 3% over years 2025-2028 and incremental materials cost increases of approximately 0.7% over the same period.

(2)	We define EBITDA as net income (loss) before the impact of interest income or expense, income tax expense and depreciation and amortization.

 

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(3)

We define and calculate Management Adjusted EBITDA as EBITDA, as further adjusted for the following items: change in the estimated fair value of the company’s warrants or earnout shares, optimization plan expenses, goodwill impairment, stock-based compensation, and certain other non-cash and non-core items. Such further adjustments for each of the periods presented are as follows

 

Item		2023				2024				2025				2026				2027				2028
Estimated change in fair value of warrants and earnout shares			(8,199	)			—				—				—				—				—
Optimization plan expenses			4,855				3,517				—				—				—				—
Goodwill impairment			—				—				—				—				—				—
Stock-based compensation			4,127				3,298				3,367				3,438				3,511				3,587
Other non-cash items			(506	)			—				—				—				—				—
Other non-core items			2,211				400				400				400				400				400
			2,488				7,215				3,767				3,838				3,911				3,987

(4)	We define and calculate Adjusted EBITDA as Management Adjusted EBITDA, as further adjusted for board fees and a normalized level of stock-based compensation. Adjusted EBITDA margin represents Adjusted EBITDA divided by total revenue.

THE COMPANY DOES NOT INTEND TO UPDATE OR OTHERWISE REVISE THE ABOVE MANAGEMENT PROJECTIONS TO REFLECT CIRCUMSTANCES EXISTING AFTER THE DATE WHEN MADE OR TO REFLECT THE OCCURRENCE OF FUTURE EVENTS, EVEN IN THE EVENT THAT ANY OR ALL OF THE ASSUMPTIONS UNDERLYING SUCH MANAGEMENT PROJECTIONS ARE NO LONGER APPROPRIATE, EXCEPT AS MAY BE REQUIRED BY APPLICABLE LAW.

Opinion of the Special Committee’s Financial Advisor

The Special Committee retained Kroll, LLC (“Duff & Phelps”), operating through its Duff & Phelps Opinions Practice, to serve as an independent financial advisor to the Special Committee to provide an opinion as to the fairness, from a financial point of view, to the holders of Company Class A Common Stock (other than CORE Industrial Partners, LLC and its affiliates (“CORE”), those members of the Board of Directors who are employees of CORE, any person that the Company has determined to be an “officer” of the Company within the meaning of Rule 16a-1(f) of the Exchange Act, those Persons holding Rollover Shares and the holders of Excluded Shares) (collectively, the “Public Stockholders”) of the Per Share Price (as defined in such opinion) to be received by such stockholders in the Merger. The Special Committee selected Duff & Phelps to act in this capacity based, among other things, on Duff & Phelps’s qualifications, expertise and reputation, and its knowledge of the business and affairs of the Company. Duff & Phelps is regularly engaged in the valuation of businesses and their securities and the provision of fairness opinions in connect with various transactions. On February 15, 2024, Duff & Phelps delivered an oral opinion to the Special Committee and the Board of Directors (in their capacities as such), which was later confirmed by delivery of a written opinion, dated February 15, 2024, addressed to the Special Committee to the effect that, subject to and based on the assumptions made, procedures followed, matters considered, limitations of the review undertaken and qualifications contained in the opinion, as of the date of such opinion, the Per Share Price is fair, from a financial point of view, to the Public Stockholders.

The full text of the written opinion of Duff & Phelps, dated as of February 15, 2024, is attached to this Proxy Statement as Annex C. You are encouraged to read the opinion in its entirety for a discussion of the assumptions made, procedures followed, matters considered, and qualifications and limitations of the review undertaken by Duff & Phelps in rendering its opinion. We further encourage you to read the entire opinion and the summary of Duff & Phelps’s opinion below carefully and in their entirety. The summary of the opinion of Duff & Phelps set forth in this Proxy Statement is qualified in its entirety by reference to the full text of the opinion.

Duff & Phelps’s opinion was provided for the information of, and directed to, the Special Committee and the Board of Directors, in their capacities as such, for its information and assistance in connection with its consideration of the financial terms of the Merger, and did not address any other term, aspect or implication of the Merger or any other agreement, arrangement or understanding. Neither Duff & Phelps’s opinion nor the summary of its opinion and the related analyses set forth in this Proxy Statement is intended to be or constitutes

 

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advice or a recommendation to the Special Committee, the Board of Directors, any stockholder of the Company or any other person as to how to act or vote with respect to any matter relating to the Merger.

Duff & Phelps’s opinion was approved by its fairness opinion committee.

Scope of Duff & Phelps’s Analysis

In connection with its opinion, Duff & Phelps conducted such reviews, analyses and inquiries as it deemed necessary and appropriate under the circumstances. Duff & Phelps also took into account its assessment of general economic, market and financial conditions, as well as its experience in securities and business valuation, in general, and with respect to similar transactions, in particular. Duff & Phelps’s procedures, investigations and financial analysis with respect to the preparation of its opinion included, but were not limited to, the items summarized below:

 

•

Review of the following documents:

 

•

The Company’s registration statement on Form S-1 dated and filed with the Securities and Exchange Commission (“SEC”) on January 14, 2022, as amended and supplemented, audited financial statements included in the Company’s annual report on Form 10-K filed with the SEC for the year ended December 31, 2022, and the Company’s unaudited interim financial statements for the nine months ended September 30, 2023 included in the Company’s quarterly report on Form 10-Q filed with the SEC for the quarter ended September 30, 2023;

 

•

Unaudited financial information for the Company for the years ended December 31, 2021 through December 31, 2023, which the Company’s management identified as being the most current financial statements available;

 

•

Two sets of financial projections for the years ended December 31, 2024 through December 31, 2028 provided to Duff & Phelps by management of the Company. The first set of projections were provided to Duff & Phelps on December 20, 2023 (the “Scenario 1 Projections”) and the second set of projections were provided to Duff & Phelps on December 22, 2023 reflecting certain adjustments requested by the Special Committee (the “Scenario 2 Projections”, and together with the Scenario 1 Projections, the “Management Projections”), which are described in the section of this proxy statement/prospectus entitled “Certain Unaudited Prospective Financial Information.” Duff & Phelps was instructed by the Company and the Special Committee to rely on the Management Projections for the purposes of the opinion;

 

•

Third Amendment dated as of November 13, 2023 to the Credit Agreement dated as of December 23, 2021;

 

•

Other internal documents relating to the history, past and current operations, financial condition and prospects, and probable future outlook of the Company provided to Duff & Phelps by management of the Company; and

 

•

Documents related to the Merger, including:

 

•

A draft dated February 14, 2024 of the Merger Agreement,

 

•

A draft dated February 13, 2024 of the Form of Amendment No. 1 (the “TRA Amendment”) to the Amended and Restated Tax Receivable Agreement, dated as of April 4, 2023, by and among the Company and the Majority TRA Parties (as defined therein) (the “April 2023 TRA”),

 

•

A draft dated February 12, 2024 of the Equity Commitment Letter to purchase securities between CORE and Parent,

 

•

A draft dated February 13, 2024 of the Form of Amendment No. 1 to the Second Amended and Restated Limited Liability Company Agreement of OpCo LLC,

 

50

•

A draft dated February 15, 2024 of the Support Agreement by and among the Company, Parent, and the Supporting Holders (as defined therein), and

 

•

A draft dated February 13, 2024 of the Form of Second Amended and Restated Certificate of Incorporation of the Company.

 

•

Discussed the information referred to above and the background and other elements of the Merger with the Special Committee and the management of the Company;

 

•

Reviewed the historical trading price and trading volume of the Company’s common stock;

 

•

Performed certain valuation and comparative analyses using generally accepted valuation and analytical techniques, including a discounted cash flow analysis and an analysis of selected public companies that Duff & Phelps deemed relevant as further described below in this section entitled “Special Factors — Opinion of the Special Committee’s Financial Advisor;”

 

•

Discussed with management of the Company and its advisors the steps undertaken in 2022 related to a formal review of strategic alternatives and an effort to sell the Company which did not result in any formal indications of interest or verbal offers; and

 

•

Conducted such other analyses and considered such other factors as Duff & Phelps deemed appropriate.

Assumptions, Qualifications and Limiting Conditions

In performing its analyses and rendering its opinion with respect to the Merger, Duff & Phelps, with the Special Committee’s consent:

 

•

Relied upon the accuracy, completeness, and fair presentation of all information, data, advice, opinions and representations obtained from public sources or provided to it from private sources, including Company management, including all financial, legal, regulatory, tax, accounting and other information provided to, discussed with or reviewed by it, and did not independently verify, or assume responsibility for the independent verification of, such information;

 

•

Relied upon the fact that the Board of Directors, the Special Committee and the Company have been advised by counsel as to all legal matters with respect to the Merger, including whether all procedures required by law to be taken in connection with the Merger have been duly, validly and timely taken;

 

•

Assumed that the Management Projections and any other estimates, evaluations, forecasts and projections and other pro forma information furnished to Duff & Phelps by Company management were reasonably prepared and based upon the best currently available information and good faith judgment of the person(s) furnishing the same, and Duff & Phelps has relied upon the Management Projections in arriving at its opinion, assumes no responsibility for, and expresses no opinion with respect to, the Management Projections, or any other such projections, estimates, evaluations, forecasts and other pro forma information or any underlying assumptions;

 

•

Assumed that information supplied and representations made by Company management were substantially accurate in all material respects regarding the Company and the Merger;

 

•

Assumed that the representations and warranties made in Merger Agreement were substantially accurate in all material respects;

 

•

Assumed that the final versions of all documents (including, without limitation, the Merger Agreement) reviewed by Duff & Phelps in draft form conform in all material respects to the drafts reviewed;

 

•

Assumed that there has been no material change in the assets, liabilities, financial condition, results of operations, business, or prospects of the Company since the date of the most recent financial statements and other information made available to Duff & Phelps, including, without limitation, the Management

 

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Projections and that there is no information or facts that would make the information reviewed by Duff & Phelps incomplete or misleading, and has relied upon the assurances of Company management with regard thereto;

 

•

Assumed that all of the conditions required to implement the Merger will be satisfied and that the Merger will be completed in a timely manner in accordance with the Merger Agreement without any material amendments thereto or any material waivers of any terms or conditions thereof;

 

•

Assumed that the consummation of the Merger will comply in all material respects with all applicable federal, state and local statutes, rules and regulations and that all governmental, regulatory or other consents and approvals necessary for the consummation of the Merger will be obtained without any material adverse effect on the Company or the Merger; and

 

•

Assumed that there is no material liability in respect of the Company’s commitments under the April 2023 TRA given sufficient uncertainty regarding the Company’s ability to generate material pre-tax income and satisfy the required payments thereunder.

Duff & Phelps informed the Special Committee that, to the extent that any of the foregoing assumptions, representations or any of the facts on which the opinion is based prove to be untrue in any respect material to Duff & Phelps’ analysis, the opinion cannot be relied upon. Furthermore, in Duff & Phelps’ analysis and in connection with the preparation of the Opinion, Duff & Phelps has made numerous assumptions with respect to industry performance, general business, market and economic conditions and other matters, many of which are beyond the control of any party involved in the Merger.

Duff & Phelps delivered an oral opinion to the Special Committee and the Board of Directors (in their capacities as such) on February 15, 2024, which was later confirmed by delivery of a written opinion, dated February 15, 2024. The opinion is necessarily based upon market, economic, financial and other conditions as they existed and could be evaluated as of the date of the opinion, and Duff & Phelps disclaims any undertaking or obligation to advise any person of any change in any fact or matter affecting its opinion which may come or be brought to the attention of Duff & Phelps after the date thereof.

Duff & Phelps did not evaluate the Company’s solvency or conduct an independent appraisal or physical inspection of any specific assets or liabilities (contingent, derivative, off-balance sheet or otherwise), nor was Duff & Phelps furnished with any such appraisals. Duff & Phelps also did not express any view or opinion as to the impact of the Merger on the solvency or the viability of the Company or its ability to pay its obligations when they come due. Duff & Phelps was not requested to, and did not, (i) initiate any discussions with, or solicit any indications of interest from, third parties with respect to the Merger, the assets, businesses or operations of the Company, or any alternatives to the Merger or (ii) advise the Company, the Special Committee, the Board of Directors or any other party with respect to alternatives to the Merger.

Duff & Phelps did not express any view or render any opinion regarding the legal or tax consequences of the Merger or any portion thereof to the Company, its stockholders or any other party, nor does the opinion address the solvency, creditworthiness or fair value of the Company or any other participant in the Merger under any applicable laws relating to bankruptcy, insolvency, fraudulent conveyance or similar matters.

Duff & Phelps did not express any opinion as to the market price or value of the Company Class A Common Stock (or anything else) after the announcement or the consummation of the Merger or how any such shares may trade at any time after the date thereof. The opinion should not be construed as a valuation opinion, a credit rating, a solvency opinion, an analysis of the Company’s creditworthiness, as tax advice, or as accounting advice. Duff & Phelps did not make, and assumed no responsibility to make, any representation, or render any opinion, as to any legal matter.

In rendering its opinion, Duff & Phelps did not express any opinion with respect to the amount or nature of any compensation to any of the Company’s officers, directors, or employees, or any class of such persons, relative to the consideration to be received by the Unaffiliate Shareholders in the Merger, or with respect to the fairness of any such compensation.

 

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The opinion was furnished for the use and benefit of the Special Committee and the Board of Directors (in their capacities as such) in connection with their consideration of the Merger. The opinion (i) does not address the merits of the underlying business decision to enter into the Merger versus any alternative strategy or transaction; (ii) does not address or express any view on any transaction, terms or arrangements related to the Merger, including, without limitation, the TRA Amendment; (iii) is not a recommendation as to how the Company, the Special Committee, the Board of Directors or any stockholder or any other party should vote or act with respect to any matters relating to the Merger, or whether to proceed with the Merger or any related transaction, and (iv) does not indicate that the Per Share Price to be received is the best possibly attainable under any circumstances; instead, it merely states whether the Per Share Price to be received pursuant to the Merger is within a range of fairness suggested by certain financial analyses. The decision as to whether to proceed with the Merger or any related transaction may depend on an assessment of factors unrelated to the financial analysis on which the opinion was based. The opinion should not be construed as creating any fiduciary duty on the part of Duff & Phelps to any party.

Except for the opinion, Duff & Phelps did not express any view or opinion as to (i) any other term, aspect or implication of (x) the Merger or the Merger Agreement or (y) any other agreement, transaction document or instrument contemplated by the Merger Agreement or to be entered into or amended in connection with the Merger; or (ii) the fairness, financial or otherwise, of the Merger to, or of any consideration to be paid to or received by, the holders of any class of securities of the Company.

Summary of Financial Analyses Performed by Duff & Phelps

The following is a summary of the material financial analyses performed by Duff & Phelps in connection with rendering its opinion to the Special Committee. Duff & Phelps noted that the analyses have been designed specifically for the opinion and may not translate to any other purposes. The preparation of a fairness opinion is a complex analytical process that involves various determinations as to appropriate and relevant methods of financial analysis and the application of these methods to the particular circumstances, and therefore is not readily susceptible to partial analysis or summary description. While this summary describes the analyses and factors that Duff & Phelps deemed material in its presentations to the Special Committee and its opinion, it does not purport to be a comprehensive description of all analyses and factors considered by Duff & Phelps. The opinion is based on the comprehensive consideration of the various analyses performed. This summary is qualified in its entirety by reference to the full text of the opinion attached as Annex C to this Proxy Statement.

In arriving at its opinion, Duff & Phelps did not attribute any particular weight to any particular analysis or factor considered by it and did not draw, in isolation, conclusions from or with regard to any one analysis or factor for purposes of its opinion, but rather made qualitative judgments as to the significance and relevance of each analysis and factor. Accordingly, Duff & Phelps believes that its analyses must be considered as a whole and that selecting portions of its analyses or the factors considered by Duff & Phelps, without considering all analyses and factors in their entirety, could create a misleading or incomplete view of the evaluation process underlying the opinion. The conclusion reached by Duff & Phelps, therefore, is based on the application of Duff & Phelps’s own experience and judgment to all analyses and factors considered by Duff & Phelps, taken as a whole.

The financial analyses summarized below include information presented in tabular format. In order for Duff & Phelps’ financial analyses to be fully understood, 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. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before February 12, 2024, and is not necessarily indicative of current market conditions. 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 Duff & Phelps’ financial analyses.

 

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Valuation Analysis

Income Approach. The Income Approach is a valuation technique that provides an estimation of the value of a business based on the cash flows that a business can be expected to generate. The Income Approach begins with an estimation of the annual cash flows a market participant would expect the subject business to generate over a discrete projection period. The estimated cash flows for each of the years in the discrete projection period are then converted to their present value equivalents using a rate of return appropriate for the risk of achieving the projected cash flows. The present value of the estimated cash flows are then added to the present value equivalent of the residual/terminal value of the business at the end of the discrete projection period to arrive at a valuation estimate. For business valuations, the Income Approach is typically applied through a Discounted Cash Flow (“DCF”) Analysis. Under the DCF Analysis, the valuation is based on the present value of estimated future cash flows for the expected life of the business discounted at a rate of return that considers the relative risk of achieving those cash flows and the time value of money. Duff & Phelps performed a DCF Analysis of the estimated future unlevered free cash flows attributable to the Company for the years ending December 31, 2024 through December 31, 2028, with “unlevered free cash flow” defined as cash that is available either to reinvest or to distribute to security holders. In applying the DCF Analysis, Duff & Phelps relied on the Management Projections. Duff & Phelps estimated the net present value of all unlevered free cash flows for the Company after fiscal year 2028 (the “Terminal Value”) by applying a Gordon Growth perpetuity growth formula assuming a 3.5% terminal growth rate. Duff & Phelps discounted the projected unlevered free cash flows in the discrete period and the Terminal Value back to the present to obtain a range of the estimated implied enterprise value of the Company. Determination of an appropriate discount rate to use in the DCF Analysis requires a degree of judgment. Duff & Phelps considered a number of factors in determining the discount rate range, including the results of published studies on discount rates. Based on these factors and the published discount rate studies, Duff & Phelps used discount rates ranging from 14.0% to 17.0%, reflecting Duff & Phelps’ estimate of the Company’s weighted average cost of capital, to discount the projected unlevered free cash flows in the discrete projection period and the Terminal Value. Duff & Phelps estimated the Company’s weighted average cost of capital by estimating the weighted average of the Company’s cost of equity (derived using the capital asset pricing model) and the Company’s after-tax cost of debt. Duff & Phelps believes that this range of discount rates is consistent with the rate of return that security holders could expect to realize on alternative investment opportunities with similar risk profiles, including risks of achieving the projected cash flows based on the Management Projections. Based on these assumptions, Duff & Phelps’ DCF Analyses resulted in implied enterprise value ranges for the Company of (i) $93.2 million to $120.6 million under the Scenario 1 Projections and (ii) $106.5 million to $138.4 million under the Scenario 2 Projections. Duff & Phelps then estimated the range of aggregate equity value of the Company by adding cash of $5.6 million and subtracting (i) the warrant liability of $0.2 million, (ii) the earnout shares liability of $0.3 million, (iii) the Company’s debt of $159.8 million, and (iv) the restructuring and transaction expenses, after-tax, of $2.6 million. After making these adjustments, the estimated aggregate equity value for the Company implied by the waterfall approach was zero. As such, Duff & Phelps undertook an alternative valuation approach to estimate the equity value of the Company by utilizing a Black-Scholes option-based contingent claims analysis. Based on this option-based analysis, Duff & Phelps determined two valuation ranges for the estimated equity of the Company including (i) $0.2 million to $2.2 million under the Scenario 1 Projections and (ii) $0.7 million to $6.4 million under the Scenario 2 Projections. Duff & Phelps estimated ranges of the Company’s common share value by dividing the indicated ranges of common equity of the Company obtained in the option-based approach by 7.2 million fully diluted shares outstanding, as provided by Company management, resulting in an estimated range of per share common equity share value of the Company of (i) $0.02 to $0.31 under the Scenario 1 Projections and (ii) $0.10 to $0.90 under the Scenario 2 Projections.

Market Approach. The Market Approach is a valuation technique that provides an estimation of value by applying valuation multiples to financial metrics for the subject company. These valuation multiples are either observed or derived from (i) market prices of actively traded, public companies, publicly available historical financial information and consensus equity research analyst estimates of future financial performance or (ii) prices paid in actual mergers, acquisitions, or other transactions. The valuation process includes, but is not limited to, a comparison of various quantitative and qualitative factors between the subject business and other similar businesses. Duff & Phelps analyzed twelve selected publicly traded companies (the “Selected Publicly

 

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Traded Companies”) for purposes of estimating valuation multiples with which to select a range of valuation multiples to apply to the Company’s financial metrics to obtain a range of implied enterprise values for the Company. Due to limited recent relevant merger and acquisition transactions, Duff & Phelps relied on the Selected Publicly Traded Companies in the Market Approach. This analysis was based on publicly available information and is described in more detail in the sections that follow. Duff & Phelps selected the group of Selected Publicly Traded Companies listed below based on their relative similarity to the Company with regard to certain business and operating characteristics, including business focus, historical and forecasted growth in revenue and earnings before interest, taxes, depreciation and amortization (“EBITDA”), historical and projected profitability, capital requirements and other characteristics. However, certain of these companies may have characteristics that are materially different from those of the Company. Duff & Phelps noted that none of the Selected Publicly Traded Companies are perfectly comparable to the Company, and that Duff & Phelps did not have access to non-public information of any of the Selected Publicly Traded Companies. Accordingly, a complete valuation analysis of the Company cannot rely solely upon a quantitative review of the Selected Publicly Traded Companies but involves complex considerations and judgments concerning differences in financial and operating characteristics of such companies, as well as other factors that could affect their value relative to that of the Company. Duff & Phelps also made qualitative judgments when performing its analysis, based on its experience and professional judgment, concerning differences between the operational, business or financial characteristics of the Company to the Selected Publicly Traded Companies that could affect the public trading, acquisition or other values of each in order to provide a context in which to consider the results of the quantitative analysis. In evaluating the Selected Publicly Traded Companies, Duff & Phelps made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond Duff & Phelps’ control. Therefore, the Market Approach is subject to certain limitations. Using publicly available information, Duff & Phelps calculated, for each selected company, the multiple of enterprise value (the “EV”) (calculated as equity market capitalization plus management equity, debt, finance leases, plus operating leases (for IFRS/non-US GAAP companies only), plus preferred stock and non-controlling interest, less cash & equivalents, long-term investments and net non-operating assets) to 2023 EBITDA and 2024 EBITDA based on analyst consensus estimates and adjusted for stock based compensation expense (“Adjusted EBITDA”).

The tables below summarize certain observed historical and projected financial performance and trading multiples of the Company and the Selected Publicly Traded Companies as of February 12, 2024.

 

		REVENUE GROWTH																ADJ. EBITDA GROWTH
		21-23 CAGR				2023				2024				2025				21-23 CAGR				2023				2024				2025
Diversified Fabricators
Barnes Group Inc.			NM				NM				4.5	%			6.3	%			NM				NM				29.0	%			6.0	%
Materialise NV			12.9	%			12.9	%			8.0	%			10.8	%			-2.0	%			72.9	%			26.8	%			23.7	%
Mayville Engineering Company, Inc.			NM				NM				3.3	%			6.3	%			NM				NM				7.8	%			19.2	%
Proto Labs, Inc.			2.5	%			3.2	%			1.9	%			NA				-0.2	%			1.5	%			-1.8	%			NA
Sanmina Corporation			15.2	%			12.8	%			-11.8	%			11.9	%			20.0	%			25.5	%			-13.2	%			12.0	%
Industrial Machinery Manufacturers & Industry Participants
3D Systems Corporation			-9.9	%			-7.1	%			1.7	%			6.8	%			NM				NM				NM				NM
Desktop Metal, Inc.			29.5	%			-9.8	%			3.9	%			NA				NM				NM				NM				NA
Markforged Holding Corporation			-0.3	%			-10.1	%			5.9	%			NA				NM				NM				NM				NA
Prodways Group SA			1.8	%			-9.3	%			2.7	%			11.2	%			-0.6	%			-28.0	%			48.1	%			12.5	%
Stratasys Ltd.			1.5	%			-4.0	%			3.0	%			5.7	%			NM				68.1	%			230.7	%			66.4	%
Velo3D, Inc.			97.7	%			32.8	%			13.1	%			42.7	%			NM				NM				NM				NM
Xometry, Inc.			28.4	%			21.6	%			28.9	%			26.4	%			NM				NM				NM				NM
Fathom (Analyst Projections)			-6.6	%			-17.7	%			0.6	%			NA				-33.3	%			-19.2	%			9.1	%			NA
Fathom (Scenario 1 Projections) (1)			-10.1	%			-18.5	%			2.3	%			5.0	%			-43.9	%			-45.9	%			17.8	%			38.4	%
Fathom (Scenario 2 Projections) (1)			-10.1	%			-18.5	%			2.3	%			6.1	%			-43.9	%			-45.9	%			17.8	%			41.1	%

 

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		ADJ. EBITDA MARGIN
		21-23 AVG				2023				2024				2025
Diversified Fabricators
Barnes Group Inc.			NM				16.7	%			20.7	%			20.6	%
Materialise NV			10.2	%			10.3	%			12.1	%			13.5	%
Mayville Engineering Company, Inc.			NM				11.0	%			11.5	%			12.9	%
Proto Labs, Inc.			13.3	%			13.3	%			12.9	%			NA
Sanmina Corporation			6.2	%			6.6	%			6.5	%			6.5	%
Industrial Machinery Manufacturers & Industry Participants
3D Systems Corporation			-6.4	%			-10.4	%			-3.7	%			-2.6	%
Desktop Metal, Inc.			-73.6	%			-29.8	%			-8.2	%			NA
Markforged Holding Corporation			-65.4	%			-54.1	%			-40.2	%			NA
Prodways Group SA			8.0	%			7.2	%			10.4	%			10.5	%
Stratasys Ltd.			-0.1	%			0.7	%			2.3	%			3.6	%
Velo3D, Inc.			-119.7	%			-54.3	%			-22.4	%			-6.1	%
Xometry, Inc.			-14.4	%			-10.5	%			-2.8	%			0.4	%
Fathom (Analyst Projections)			14.0	%			10.6	%			11.5	%			NA
Fathom (Scenario 1 Projections) (1)			14.2	%			8.4	%			9.7	%			12.8	%
Fathom (Scenario 2 Projections) (1)			14.2	%			8.4	%			9.7	%			12.9	%

 

(1)	Fathom Adjusted EBITDA figures adjusted to include expense related to board fees and a normalized level of stock-based compensation

CAGR = Compounded Annual Growth Rate

Source: S&P Capital IQ, SEC Filings, Annual and Interim Reports, Management Projections.

 

ADJ. EV/2023 EBITDA

ADJ. EV/2024 EBITDA

ADJ. EV/2025 EBITDA

2023 Revenue

Diversified Fabricators

Barnes Group Inc.

10.8x

8.4x

7.9x

1.81x

Materialise NV

8.4x

6.7x

5.4x

0.87x

Mayville Engineering Company, Inc.

NA

5.7x

4.8x

0.68x

Proto Labs, Inc.

12.6x

12.8x

NA

1.68x

Sanmina Corporation

5.8x

6.7x

6.0x

0.38x

Mean

9.4x

8.1x

6.0x

1.08x

Median

9.6x

6.7x

5.7x

0.87x

Industrial Machinery Manufacturers & Industry Participants

3D Systems Corporation

NM

NM

NM

1.36x

Desktop Metal, Inc.

NM

NM

NA

1.04x

Markforged Holding Corporation

NM

NM

NA

0.20x

Prodways Group SA

9.6x

6.5x

5.7x

0.69x

Stratasys Ltd.

NM

NM

23.9x

0.93x

Velo3D, Inc.

NM

NM

NM

0.66x

Xometry, Inc.

NM

NM

NM

3.54x

Mean

9.6x

6.5x

14.8x

1.20x

Median

9.6x

6.5x

14.8x

0.93x

Sources: S&P Capital IQ, SEC Filings, Annual and Interim Reports.

 

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Based on the results of this analysis, and Duff & Phelps’ professional judgement and experience, Duff & Phelps selected an EV/2023A Adj. EBITDA multiple reference range of 6.5x to 8.5x and an EV/2024P Adj. EBITDA multiple reference range of 6.0x to 8.0x to assess indications of implied enterprise value ranges for the Company. Duff & Phelps applied such reference ranges to the Company’s 2023A Adj. EBITDA and 2024P Adj. EBITDA, respectively, resulting in two estimated implied enterprise value ranges for the Company. Duff & Phelps selected multiples that, in its professional judgement and experience, reflected the Company’s characteristics in comparison to the Selected Publicly Traded Companies, including notably that the Company is significantly smaller than the Selected Publicly Traded Companies and has had historical profitability declines that are more pronounced than the Selected Publicly Traded Companies, among other factors.

Duff & Phelps’ Market Approach resulted in two indications of implied enterprise value ranges for the Company including (i) $71.9 million to $94.1 million based on the application of a range of reference multiples to 2023A Adj. EBITDA and (ii) $78.2 million to $104.3 million based on the application of a range of reference multiples to 2024P Adj. EBITDA. Duff & Phelps then estimated the range of aggregate equity value of the Company by adding cash of $5.6 million and subtracting (i) the warrant liability of $0.2 million, (ii) the earnout shares liability of $0.3 million, (iii) the Company’s debt of $159.8 million, and (iv) restructuring and transaction expenses, after-tax, of $2.6 million. After making these adjustments, the aggregate equity value for the Company implied by the waterfall approach was zero. As such, Duff & Phelps undertook an alternative valuation approach to estimate the equity value of the Company by utilizing a Black-Scholes option-based contingent claims analysis. Based on this analysis, Duff & Phelps determined two valuation ranges for the estimated equity of the Company including (i) $5,000 to $0.2 million based on the application of a range of reference multiples to 2023A Adj. EBITDA and (ii) $17,000 to $0.6 million based on the application of a range of reference multiples to 2024P Adj. EBITDA. Duff & Phelps estimated ranges of the Company’s common share value by dividing the indicated ranges of common equity of the Company obtained in the option-based approach by 7.2 million fully diluted shares outstanding, as provided by Company management, resulting in an estimated range of per share common equity value of the Company of (i) $0.00 to $0.03 based on the application of a range of reference multiples to 2023A Adj. EBITDA and (ii) $0.00 to $0.08 based on the application of a range of reference multiples to 2024P Adj. EBITDA.

Summary Financial Analyses

Duff & Phelps noted that the Price Per Share of $4.75 to be received by the Public Stockholders in the Merger was above the estimated ranges of indicated common stock prices of the Company derived from each of the aforementioned valuation methodologies.

The opinion was only one of the many factors considered by the Special Committee and the Board of Directors in their evaluation of the Merger and should not be viewed as determinative of the views of the Special Committee and the Board of Directors.

Fees and Expenses, Prior Relationships

Under the terms of the Special Committee’s engagement letter with Duff & Phelps, dated November 27, 2023 (the “Engagement Letter”), the Company has agreed to pay Duff & Phelps an aggregate fee of $700,000, $100,000 of which was paid upon execution of the Engagement Letter, $250,000 of which was paid on December 4, 2023, and $350,000 of which was paid upon Duff & Phelps advising the Special Committee that it was prepared to render its opinion after the Special Committee requested in writing that Duff & Phelps issue its opinion. As part of the engagement, Kroll Securities, LLC (“Kroll Securities”) also is entitled to receive a fee of approximately $30,000 to be paid upon the successful consummation of the Merger. In addition, the Company has agreed to indemnify Duff & Phelps, Kroll Securities and certain related parties against certain liabilities, and to reimburse Duff & Phelps and Kroll Securities for various expenses arising in connection with or as a result of the engagement. The terms of the fee arrangement with Duff & Phelps were negotiated at arm’s length between the Special Committee and Duff & Phelps. No portion of Duff & Phelps’s fee was contingent on the conclusions reached in its opinion.

 

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During the two years preceding the date of the opinion, Kroll, LLC has provided certain compliance risk and diligence services to CORE or portfolio companies of CORE. For these prior engagements, Kroll, LLC received customary fees, expense reimbursement and indemnification. The amount of fees received for these services totaled approximately $155,000.

Position of the Parent Entities as to the Fairness of the Merger

Under the SEC rules governing so-called “going private” transactions, the Parent Entities may be deemed to be affiliates of the Company, and, therefore, required to express their beliefs as to the fairness of the Transactions, including the Merger, to the “unaffiliated security holders,” as defined in Rule 13e-3 under the Exchange Act. The Merger is a Rule 13e-3 transaction for which a Transaction Statement on Schedule 13E-3 has been filed with the SEC. The Parent Entities are making the statements included in this section solely for purposes of complying with the requirements of Rule 13e-3 and related rules and regulations promulgated under the Exchange Act. However, the view of the Parent Entities as to the fairness of the Merger is not intended to be and should not be construed as a recommendation to any Company stockholder as to how that stockholder should vote on the proposal to adopt the Merger Agreement or any other proposal contained in this Proxy Statement. The Parent Entities have interests in the Merger that may be different from, and in addition to, those of the other stockholders of Fathom. The effectiveness of the Transactions, including the Merger, is not structured so that approval of at least a majority of the unaffiliated security holders (a “Majority of the Minority Vote Condition”) is required. The Parent Entities believe, notwithstanding the absence of a Majority of the Minority Vote Condition, that the Transactions, including the Merger, are substantively and procedurally fair to the unaffiliated security holders for the reasons discussed in this section and in “Purposes and Reasons of the Parent Entities for the Merger”.

The Parent Entities believe that the interests of the unaffiliated security holders were represented by the Special Committee, which negotiated the terms and conditions of the Merger Agreement and the Merger on their behalf, with the assistance of the Special Committee’s independent legal and financial advisors. The Parent Entities did not participate in the deliberations of the Special Committee regarding, nor did they receive advice from the respective legal or other advisors to the Special Committee as to, the fairness of the Merger. The Parent Entities have not performed, or engaged a financial advisor to perform, any valuation or other analysis for the purposes of assessing the fairness of the Merger to the unaffiliated security holders. The Parent Entities did not receive and did not consider any reports, opinions or appraisals from any outside party materially related to the fairness of the Merger, and thus did not consider any such reports, opinions or appraisals in determining the substantive and procedural fairness of the Merger to the Unaffiliated Stockholders. Based on, among other things, the factors considered by, and the analysis and resulting conclusions of, the Fathom Board and the Special Committee discussed in “Purpose and Reasons of Fathom for the Merger; Recommendation of the Fathom Board and the Special Committee; Fairness of the Merger” (which analysis and resulting conclusions the Parent Entities adopt), the Parent Entities believe that the Merger is substantively fair to the unaffiliated security holders.

In particular, the Parent Entities considered the following:

 

•

the fact that the Special Committee unanimously determined that the Merger Agreement and the Transactions, including the Merger are advisable, fair to, and in the best interests of, the Company and the Unaffiliated Stockholders (and, as described in this Proxy Statement, the unaffiliated security holders);

 

•

the fact that the Fathom Board, acting upon the recommendation of the Special Committee, determined that the Merger Agreement and the Transactions, including the Merger are advisable, fair to, and in the best interests of, the Company and the Company’s stockholders (including the Unaffiliated Stockholders) and, as described in this Proxy Statement, the unaffiliated security holders);

 

•

the fact that the Merger Consideration paid to Unaffiliated Stockholders is all cash, thus allowing the Unaffiliated Stockholders who receive such Merger Consideration to immediately realize liquidity at a

 

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certain and fair value for their shares of Class A Common Stock, which value represents a significant premium over the closing price of the shares of Class A Common Stock on the last trading day before Fathom publicly announced the Merger (and without incurring brokerage and other costs typically associated with market sales);

 

•

the fact that the Merger is not conditioned on the prior approval of any antitrust authority or any financing being obtained by Parent, increasing the likelihood that the Merger will be consummated and that the consideration to be paid to the Unaffiliated Stockholders in the Merger will be received;

 

•

the current and historical market prices of Company Common Stock, including the market performance of Company Common Stock relative to those of other participants in the Company’s industry and general market indices, and the fact that the per share merger consideration represents a premium of 13.1% over the closing price of the Class A Shares on November 24, 2023, the last full trading day before the Parent Entities publicly disclosed their non-binding acquisition proposal to the Board;

 

•

the potential risks to the Company of continuing to have publicly-traded common stock, including the risks of market volatility and global uncertainty;

 

•

the fact that the Company had previously disclosed that anticipated difficulties in complying with the minimum EBITDA covenants under its credit facility absent a waiver or amendment from its lenders, the receipt of which relief was then uncertain, and the lack of assurance that the Company would be able to satisfy its Term Loan Paydown obligation under the credit facility when due, raised substantial doubt as to the Company’s ability to continue as a going concern if the Company were to continue as a publicly held company and the lack of practicable potentiality of achieving greater value for the Unaffiliated Stockholders, including the unaffiliated security holders, in the absence of the Merger;

 

•

the fact that the Company has the ability to seek specific performance under the Merger Agreement to prevent breaches of the Merger Agreement and to specifically enforce the terms of the Merger Agreement; and

 

•

the fact that, notwithstanding that the Parent Entities are not entitled to, and did not rely on the opinion provided by Duff & Phelps to the Special Committee on February 15, 2024, the Special Committee received an opinion from Duff & Phelps stating that, as of the date of such opinion and subject to and based on the assumptions made, procedures followed, matters considered, limitations of the review undertaken and qualifications contained in the opinion, as of the date of such opinion, the Per Share Price (as defined therein) is fair, from a financial point of view, to the Public Stockholders (as defined therein).

The Parent Entities further believe that the Merger is procedurally fair to the unaffiliated security holders based upon, among other things, the following factors:

 

•

the fact that the Special Committee, consisting solely of independent and disinterested directors of the Fathom Board who are not officers or employees of the Company and who are not affiliated with the Parent Entities, and who have no financial interest in the Merger different from, or in addition to, the Unaffiliated Stockholders, including the unaffiliated security holders, generally, was given exclusive authority to, among other things, review, evaluate and negotiate the terms of the Merger Agreement and the Transactions, including the Merger, to determine the advisability of the Merger Agreement and the Transactions, including the Merger, to decide not to engage in the Merger, and to consider alternatives to the Merger;

 

•

the fact that the Special Committee was formed at the outset of the Company’s consideration of a potential transaction and prior to any consideration of the Merger Agreement and the Transactions, including the Merger, or any negotiations with respect thereto;

 

•

the fact that the Special Committee conducted a thorough process, including frequent deliberations and negotiations, and retained and was advised by independent, nationally recognized financial and legal advisors;

 

59

•

the fact that the Special Committee was fully informed and consulted with its advisors about the extent to which the interests of the CORE Funds in the Merger differed from those of the Unaffiliated Stockholders, including the unaffiliated security holders, and that the consideration and negotiation of the Merger Agreement were conducted under the control and supervision of the Special Committee;

 

•

the fact that from the beginning of the Parent Entities’ engagement regarding a potential “going private” transaction, the Fathom Board was not permitted to recommend any potential transaction or any alternative thereto for approval by Fathom’s stockholders or otherwise approve any proposed transaction or any alternative thereto without a prior favorable recommendation of such proposed transaction or alternative thereto by the Special Committee;

 

•

the fact that the Special Committee had no obligation to recommend any transaction, including a transaction with Parent, and that the Special Committee had the authority to reject any proposals made by the CORE Funds or their Affiliates or any other person or entity;

 

•

the fact that the Merger Consideration was the result of the Special Committee’s arm’s-length negotiations with the Parent Entities and their respective advisors;

 

•

the Company’s ability, under certain circumstances as set out in the Merger Agreement, to provide information to, or participate in discussions or negotiations with, third parties regarding Acquisition Proposals that would be reasonably likely to result in a Superior Proposal;

 

•

that fact that, in certain circumstances under the terms of the Merger Agreement, the Special Committee and the Fathom Board are able to change, withhold, withdraw, qualify or modify their recommendation that the Company’s stockholders vote in favor of the proposal to adopt the Merger Agreement;

 

•

the Company’s ability, under certain circumstances as set out in the Merger Agreement, to terminate the Merger Agreement to enter into a definitive agreement related to a Superior Proposal, subject to paying Parent a Company Termination Fee of $813,771 in cash, subject to and in accordance with the terms and conditions of the Merger Agreement; and

 

•

the availability of appraisal rights to Fathom’s stockholders (other than the CORE Funds and any holders of Class A Common Stock who roll over their shares) who comply with all of the required procedures under Delaware law for exercising appraisal rights, which allow such holders to seek appraisal of the fair value of their shares of Class A Common Stock.

The Parent Entities also considered a variety of risks and other countervailing factors related to the substantive and procedural fairness of the Merger, including:

 

•

the risk that the Merger might not be completed in a timely manner or at all;

 

•

that Parent, Company Merger Sub and LLC Merger Sub are newly formed entities substantially all of whose assets consist of equity commitments from the CORE Funds;

 

•

the restrictions on the conduct of the Company’s business prior to the completion of the Merger set forth in the Merger Agreement, which may delay or prevent Fathom from undertaking business opportunities that may arise and certain other actions it might otherwise take with respect to the operations of Fathom pending completion of the Merger;

 

•

the potential negative effect that the pendency of the Merger, or a failure to complete the Merger, could have on the Company’s business and relationships with its employees, distributors and customers;

 

•

that the Company and its subsidiaries are restricted from soliciting, initiating or encouraging the submission of Acquisition Proposals from third parties or the making of any inquiry, proposal or offer that would reasonably be expected to lead to an Alternative Acquisition Agreement;

 

•

the possibility that the amounts that may be payable by the Company upon the termination of the Merger Agreement, including payment to Parent of a Company Termination Fee of $813,771 in cash,

 

60

and the processes required to terminate the Merger Agreement, could discourage other potential acquirors from making a competing bid to acquire Fathom; and

 

•

the fact that an all cash transaction would be taxable to the Company’s stockholders who receive cash proceeds and are U.S. holders for U.S. federal income tax purposes.

The Parent Entities did not consider net book value, which is an accounting concept, in determining their view as to fairness of the Merger to the unaffiliated security holders because they believed that net book value is not a material indicator of the value of the Company as a going concern but rather is indicative of historical costs and therefore not a relevant measure in the determination as to the fairness of the Merger. The Parent Entities note, however, that the Per Share Price of $4.75 is substantially lower than the unaudited estimated net book value per share of Class A Common Stock as of December 31, 2023 of $31.33 (based on 3,526,432 issued and outstanding shares of Class A Common Stock as of that date) and the unaudited estimated net book value per share of Class A Common Stock of $16.44 (based on 6,853,811 issued and outstanding shares of Class A Common Stock as of that date assuming the full exchange of the 3,327,379 Class A units of Opco (and corresponding shares of Class B Common Stock outstanding at December 31, 2023 for 3,327,379 shares of Class A Common Stock). See the section of this proxy statement captioned “Where You Can Find Additional Information” for a description of how to obtain copies of Fathom’s periodic reports.

In considering the fairness of the Merger, the Parent Entities did not consider the historical purchase prices of the Class A Common Stock relating to the issuance and sale of such securities by the Company because the Company did not issue or sell any securities during the past two years in transactions that would be relevant for the Parent Entities’ fairness determinations.

The foregoing discussion of the information and factors considered by and material to the Parent Entities in connection with the fairness of the Merger is not intended to be exhaustive but is believed to include all material factors considered by them. The Parent Entities did not find it practicable to, and did not, quantify or otherwise attach relative weights to the foregoing factors in reaching their conclusion as to the fairness of the Merger. Rather, the Parent Entities reached their position as to the fairness of the Merger after considering all of the foregoing as a whole. The Parent Entities believe these factors provide a reasonable basis upon which to form their position regarding the fairness of the Merger to the unaffiliated security holders. This position should not, however, be construed as a recommendation to any Company stockholder to approve the Merger Agreement. The Parent Entities make no recommendation as to how stockholders of Fathom should vote their shares of Company Common Stock in relation to the Merger. The Parent Entities attempted to negotiate the terms of a transaction that would be most favorable to them, and not to the unaffiliated security holders, and, accordingly, did not negotiate the Merger Agreement with a goal of obtaining terms that were fair to such stockholders.

The Parent Entities were not aware of, and thus did not consider, any firm offer for a merger, sale of all or a substantial part of Fathom’s assets, or a purchase of a controlling interest in Fathom’s voting securities having been received by Fathom from anyone other than the Parent Entities in the two (2) years preceding the signing of the Merger Agreement.

While two of the directors of the Fathom Board are affiliated with the CORE Funds, none of the Parent Entities or such directors participated in the deliberations of the Special Committee regarding, nor did they receive advice from the respective legal or other advisors to the Special Committee as to, the fairness of the Merger to the unaffiliated security holders. Based on the Parent Entities’ knowledge and analysis of available information regarding the Company, the Special Committee and the Fathom Board, as well as discussions with members of Fathom’s senior management regarding Fathom and its business and the factors considered by, and findings of, the Special Committee and the Fathom Board and discussed in this proxy statement in the section titled “Purpose and Reasons of Fathom for the Merger; Recommendation of the Fathom Board and the Special Committee; Fairness of the Merger,” the Parent Entities believe that the Merger is fair to the unaffiliated security holders.

 

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