DEFM14A 1 nt10010491x3_defm14a.htm DEFM14A

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Rule 14a-101)
Filed by the Registrant ☒
Filed by a Party other than the Registrant
Check the appropriate box:

Preliminary Proxy Statement

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material Under Rule 14a-12
GAIN CAPITAL HOLDINGS, INC.
(Name of Registrant as Specified in its Charter)
 
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
No fee required.
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
Fee paid previously with preliminary materials.
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
 
(1)
Amount Previously Paid:
 
 
 
 
(2)
Form, Schedule or Registration Statement No.:
 
 
 
 
(3)
Filing Party:
 
 
 
 
(4)
Date Filed:
 
 
 

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GAIN Capital Holdings, Inc.
Bedminster One, 135 Route 202/206, Bedminster, New Jersey 07921
May 1, 2020
Dear Stockholder:
On February 26, 2020, GAIN Capital Holdings, Inc. (“GAIN”) entered into a definitive merger agreement with INTL FCStone Inc. (“INTL”) and its wholly owned subsidiary, Golf Merger Sub I Inc. (“Merger Sub”) (the “merger agreement”). Pursuant to the terms of the merger agreement, Merger Sub will be merged with and into GAIN, with GAIN surviving the merger as a wholly owned subsidiary of INTL (the “merger”).
If the merger is completed, GAIN stockholders will have the right to receive $6.00 in cash, without interest and less any applicable withholding taxes, for each share of common stock, par value $0.00001 per share, of GAIN that they own immediately prior to the effective time of the merger unless they have properly demanded appraisal rights for such shares in accordance with Delaware law. The purchase price represents a premium of approximately 70% over GAIN’s closing share price on February 26, 2020, the last trading day prior to the announcement that GAIN had entered into the merger agreement and a premium of approximately 60% to GAIN’s thirty (30)-trading-day volume-weighted average stock price on the same date.
We will hold a virtual special meeting of our stockholders in connection with the proposed merger on June 5, 2020 at 2 p.m., Eastern Time (the “special meeting”) (unless the special meeting is adjourned or postponed). The special meeting is scheduled to be held exclusively online via live webcast. There will not be a physical meeting location. The special meeting can be accessed by visiting www.virtualshareholdermeeting.com/gcap2020SM (the “virtual meeting website”), where you will be able to attend the special meeting, vote, and submit your questions during the special meeting. Please note you will not be able to attend the special meeting in person. We have chosen to hold a virtual rather than an in-person meeting given the current public health implications of COVID-19 (novel coronavirus) and our desire to promote the health and welfare of our stockholders.
At the special meeting (or any adjournment or postponement thereof), stockholders will be asked to vote on the proposal to approve and adopt the merger agreement, as it may be amended from time to time. Under Delaware law, stockholders holding at least a majority of the shares of GAIN common stock outstanding at the close of business on the record date must vote “FOR” the merger proposal to approve and adopt the merger agreement. A failure to vote your shares of GAIN common stock or an abstention from voting will have the same effect as a vote against the merger proposal.
Concurrently with and as a condition to INTL’s execution of the merger agreement, on February 26, 2020, INTL entered into voting and support agreements with certain GAIN stockholders, pursuant to which such stockholders agreed, among other things, and subject to the terms set forth in the voting and support agreements, to vote shares of GAIN common stock that represent in the aggregate, approximately 44% of GAIN common stock, in favor of the adoption of the merger agreement and each of the other actions contemplated by the merger agreement and the merger.
We cannot complete the merger unless GAIN stockholders approve and adopt the merger agreement. Your vote is very important, regardless of the number of shares you own. Whether or not you are able to attend the special meeting via the virtual meeting website, please complete, sign and date the enclosed proxy card and return it in the envelope provided or vote by telephone (at the toll-free number indicated on the proxy card) or via the internet (at the voting site indicated on the proxy card) as promptly as possible so that your shares may be represented and voted at the special meeting (or any adjournment or postponement thereof).
After careful consideration, the GAIN board of directors has determined that the merger and the other transactions contemplated by the merger agreement are advisable and fair to and in the best interests of GAIN stockholders and has approved the merger agreement. The GAIN board of directors recommends that GAIN stockholders vote “FOR” the proposal to approve and adopt the merger agreement.
In addition, the Securities and Exchange Commission has adopted rules that require us to seek a non-binding, advisory vote with respect to certain compensation that will or may be paid by GAIN to its named executive officers that is based on or otherwise relates to the merger. The GAIN board of directors recommends that GAIN stockholders vote “FOR” the named executive officer merger-related compensation proposal described in the accompanying proxy statement.
The proposal to approve an adjournment or postponement of the special meeting, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes to approve the proposal to adopt the merger agreement requires the affirmative vote of the holders of a majority of the shares of our common stock in attendance via the virtual meeting website or represented by proxy at the special meeting and entitled to vote on such proposal. The GAIN board of directors recommends that GAIN stockholders vote “FOR” the proposal to approve an adjournment of the special meeting, including if necessary to solicit additional proxies in favor of the proposal to approve and adopt the merger agreement, if there are not sufficient votes at the time of such adjournment to approve and adopt the merger agreement.
The obligations of GAIN and INTL to complete the merger are subject to the satisfaction or waiver of certain conditions. The accompanying proxy statement contains detailed information about GAIN, the special meeting, the merger agreement, the merger and the other transactions contemplated by the merger agreement.
If you have any questions or need assistance voting your shares of our common stock, please contact MacKenzie Partners, Inc., our proxy solicitor (“MacKenzie Partners”), by calling toll-free at (800) 322-2885.
Thank you for your consideration of this matter.
 
Sincerely,
 
 
 

 
Joseph Schenk
Chairman of the Board of Directors
 

 
Glenn H. Stevens
President and Chief Executive Officer
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE MERGER, PASSED UPON THE MERITS OF THE MERGER AGREEMENT, THE MERGER OR THE OTHER TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT OR DETERMINED IF THE ACCOMPANYING PROXY STATEMENT IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The accompanying proxy statement is dated May 1, 2020 and, together with the enclosed form of proxy, is first being mailed to GAIN stockholders on or about May 4, 2020.

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GAIN Capital Holdings, Inc.
Bedminster One, 135 Route 202/206, Bedminster, New Jersey 07921
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
DATE & TIME
June 5, 2020 at 2 p.m., Eastern Time.
PLACE
The special meeting of stockholders of GAIN will be exclusively online via live webcast (the “special meeting”) and can be accessed by visiting www.virtualshareholdermeeting.com/gcap2020SM (the “virtual meeting website”), where you will be able to attend the special meeting, vote, and submit your questions during the special meeting. There will not be a physical meeting location.
ITEMS OF BUSINESS
Consider and vote on:
 
  • A proposal to approve and adopt the Agreement and Plan of Merger, dated as of February 26, 2020, by and among GAIN Capital Holdings, Inc. (“GAIN”), INTL FCStone, Inc. (“INTL”) and Golf Merger Sub I Inc., a wholly owned subsidiary of INTL (“Merger Sub”), as may be amended from time to time (the “merger agreement”), a copy of which is included as Annex A to the proxy statement of which this notice forms a part, and pursuant to which Merger Sub will be merged with and into GAIN, with GAIN surviving the merger as a wholly owned subsidiary of INTL (the “merger”);
 
  • A proposal to approve, on a non-binding, advisory basis, certain compensation that will or may be paid by GAIN to its named executive officers that is based on or otherwise relates to the merger; and
 
  • A proposal to approve an adjournment of the special meeting, including if necessary to solicit additional proxies in favor of the proposal to approve and adopt the merger agreement, if there are not sufficient votes at the time of such adjournment to approve and adopt the merger agreement.
RECORD DATE
Stockholders of record at the close of business on April 23, 2020 are entitled to notice of and may vote at the special meeting.
 
At least one day before the special meeting, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order and showing the address of and the number of shares registered in the name of each stockholder, will be prepared by the Corporate Secretary at GAIN Capital Holdings, Inc., Bedminster One, 135 Route 202/206, Bedminster, New Jersey 07921, or the transfer agent in charge of the stock ledger of GAIN. Such list will be open for examination by any GAIN stockholder at such address at the time of the meeting.
VOTING BY PROXY
The GAIN board of directors is soliciting your proxy to assure that a quorum is present and that your shares are represented and voted at the special meeting. For information on submitting your proxy over the internet, by telephone or by returning your proxy by mail (no extra postage is needed for the provided envelope if mailed in the United States), please see the attached proxy statement and enclosed proxy card. If you later decide to vote at the special meeting via the virtual meeting website, your proxy prior to the special meeting will be revoked.

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RECOMMENDATIONS
The GAIN board of directors recommends that you vote:
 
  • “FOR” the proposal to approve and adopt the merger agreement;
 
  • “FOR” the proposal to approve, on a non-binding, advisory basis, certain compensation that will or may be paid by GAIN to its named executive officers that is based on or otherwise relates to the merger; and
 
  • “FOR” the proposal to adjourn the special meeting, including if necessary to solicit additional proxies in favor of the proposal to approve and adopt the merger agreement, if there are not sufficient votes at the time of such adjournment to approve and adopt the merger agreement.
APPRAISAL RIGHTS
Under the Delaware General Corporation Law (the “DGCL”), any record holder of GAIN common stock who does not vote in favor of the merger, and who exercises its appraisal rights and fully complies with all of the provisions of Section 262 of the DGCL (but not otherwise), will be entitled to seek appraisal for, and obtain payment in cash for the judicially determined fair value of, all (but not less than all) of its shares of GAIN common stock if the merger is completed.
YOUR VOTE IS VERY IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING VIA THE VIRTUAL MEETING WEBSITE, PLEASE VOTE OVER THE INTERNET OR BY TELEPHONE PURSUANT TO THE INSTRUCTIONS CONTAINED IN THESE MATERIALS, OR BY MAIL BY COMPLETING, DATING, SIGNING AND RETURNING A PROXY CARD AS PROMPTLY AS POSSIBLE. IF YOU ATTEND THE SPECIAL MEETING AND WISH TO VOTE YOUR SHARES PERSONALLY VIA THE VIRTUAL MEETING WEBSITE, YOU MAY DO SO.
Your proxy may be revoked at any time before the vote at the special meeting, or any adjournment or postponement thereof, by (i) giving the Office of the Corporate Secretary written notice of revocation, (ii) returning a later-dated proxy or (iii) attending the special meeting and voting via the virtual meeting website.
Please note that we intend to limit attendance at the special meeting to stockholders at the close of business on the record date (or their authorized representatives). If your shares are held by a broker, bank or other nominee, you must instruct the broker, bank or other nominee how to vote your shares or obtain a proxy, executed in your favor, from that record holder giving you the right to vote the shares at the special meeting.
The proxy statement of which this notice forms a part provides a detailed description of the merger agreement, the merger and the other transactions contemplated by the merger agreement. We urge you to read the proxy statement, including any documents incorporated by reference, and its annexes carefully and in their entirety. If you have any questions concerning the merger or the proxy statement, would like additional copies of the proxy statement or need help voting your shares of GAIN common stock, please contact GAIN’s proxy solicitor:

1407 Broadway, 27th Floor
New York, NY 10018
Stockholders May Call Toll-Free: (800) 322-2885
Banks & Brokers May Call Collect: (212) 929-5500
 
By Order of the Board of Directors of GAIN Capital Holdings, Inc.
 

 
Joseph Schenk
Chairman of the Board of Directors
Bedminster, New Jersey
May 1, 2020


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SUMMARY
This summary highlights information contained elsewhere in this proxy statement and may not contain all the information that is important to you with respect to the merger. We urge you to read carefully the remainder of this proxy statement, including the attached annexes, and the other documents to which we have referred you. For additional information on GAIN included in documents incorporated by reference into this proxy statement, see the section entitled “Where You Can Find More Information” beginning on page 97 of this proxy statement. We have included page references in this summary to direct you to a more complete description of the topics presented below.
All references to “GAIN,” “we,” “us” or “our” in this proxy statement refer to GAIN Capital Holdings, Inc., a Delaware corporation; all references to “INTL” refer to INTL FCStone Inc., a Delaware corporation; and all references to “Merger Sub” refer to Golf Merger Sub I Inc., a Delaware corporation and a wholly owned subsidiary of INTL formed for the sole purpose of effecting the merger; all references to “GAIN common stock” refer to the common stock, par value $0.00001 per share, of GAIN; all references to the “GAIN board” or “GAIN board of directors” refer to the board of directors of GAIN; all references to the “merger” refer to the merger of Merger Sub with and into GAIN with GAIN surviving as a wholly owned subsidiary of INTL; and, unless otherwise indicated or as the context requires, all references to the “merger agreement” refer to the Agreement and Plan of Merger, dated as of February 26, 2020, as may be amended from time to time, by and among GAIN, INTL and Merger Sub, a copy of which is included as Annex A to this proxy statement. GAIN, following the completion of the merger, is sometimes referred to in this proxy statement as the “surviving corporation.”
THE COMPANIES
GAIN Capital Holdings, Inc. (see page 23)
GAIN is a global provider of trading services and solutions, specializing in over-the-counter, or OTC, and exchange-traded markets. GAIN’s retail and futures segments service customers in more than 180 countries worldwide, and GAIN conducts business from its offices in Bedminster, New Jersey; New York, New York; Chicago, Illinois; Powell, Ohio; London, England; Tokyo, Japan; Sydney, Australia; Shanghai, China; Hong Kong; Dubai, U.A.E.; Krakow, Poland and Singapore.
GAIN’s principal executive office is located at Bedminster One, 135 Route 202/206, Bedminster, New Jersey 07921. GAIN’s telephone number is (908) 731-0700. GAIN’s internet website address is www.gaincapital.com. The information provided on the GAIN website is not part of this proxy statement and is not incorporated in this proxy statement by reference by this or any other reference to its website provided in this proxy statement.
Shares of GAIN common stock are listed and trade on the New York Stock Exchange (the “NYSE”) under the symbol “GCAP.”
INTL FC Stone Inc. (see page 23)
INTL is a diversified global brokerage and financial services firm providing execution, risk management and advisory services, market intelligence and clearing services across asset classes and markets around the world. INTL helps its clients to access market liquidity, maximize profits and manage risk.
INTL’s principal executive office is located at 155 East 44th Street, Suite 900, New York, NY 10017. INTL’s telephone number is (212) 485-3500.
Shares of INTL common stock are listed and trade on the NASDAQ Composite (the “NASDAQ”) under the symbol “INTL.”
Golf Merger Sub I Inc. (see page 23)
Merger Sub is a wholly owned subsidiary of INTL and was formed in February 2020 solely for the purpose of completing the merger with GAIN. Merger Sub has not carried out any activities to date, except for activities incidental to its formation and activities undertaken in connection with the transactions contemplated by the merger agreement.
Merger Sub’s principal executive office is located at 155 East 44th Street, Suite 900, New York, NY 10017. Merger Sub’s telephone number is (212) 485-3500.
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THE MERGER
A copy of the merger agreement is attached as Annex A to this proxy statement. We encourage you to read the entire merger agreement carefully because it is the principal document governing the merger. For more information on the merger agreement, see the section entitled “The Merger Agreement” beginning on page 59 of this proxy statement.
Effects of the Merger (see page 29)
If the merger is completed, then, at the effective time of the merger, Merger Sub will be merged with and into GAIN in accordance with the DGCL. As a result of the merger, the separate existence of Merger Sub will cease, and GAIN will survive the merger as a wholly owned subsidiary of INTL.
Upon consummation of the merger, your shares of GAIN common stock will be converted into the right to receive the per share merger consideration described below unless you have properly demanded appraisal rights in accordance with Delaware law. As a result, you will not own any shares of the surviving corporation, and you will no longer have any interest in its future earnings or growth. As a result of the merger, GAIN will cease to be a publicly-traded company and will be wholly owned by INTL. Following consummation of the merger, the surviving corporation will terminate the registration of GAIN’s common stock on the NYSE and GAIN will no longer be subject to reporting obligations under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Merger Consideration (see page 60)
Upon the terms and subject to the conditions of the merger agreement, at the effective time of the merger, GAIN stockholders will have the right to receive $6.00 in cash, without interest and less any applicable withholding taxes (the “merger consideration”), for each share of GAIN common stock that they own immediately prior to the effective time of the merger.
Treatment of GAIN Equity Awards (see page 61)
At or immediately prior to the effective time of the merger, to the extent required or permitted by the applicable employee plan:
At the effective time of the merger, each outstanding option to purchase shares of GAIN common stock under GAIN’s 2015 Omnibus Incentive Compensation Plan, 2010 Omnibus Incentive Compensation Plan or any predecessor equity compensation plan (the “ICP”) , whether or not exercisable or vested, that is outstanding and unexercised immediately prior to the effective time of the merger will, automatically, become vested as of immediately prior to the effective time of the merger, be canceled, and entitle the holder of each such option to receive (without interest) as soon as reasonably practicable after the effective time of the merger an amount in cash determined by multiplying (i) the excess, if any, of the per share merger consideration over the applicable exercise price of such stock option, by (ii) the number of shares of GAIN common stock such holder could have purchased (assuming full vesting of all stock options) had such holder exercised such stock option in full immediately prior to the effective time of the merger, less applicable taxes required to be withheld with respect to such payment. For the avoidance of doubt, any stock option which has an exercise price per share of GAIN common stock that is greater than or equal to the merger consideration will be cancelled at the effective time of the merger for no consideration or payment;
At the effective time of the merger, each (i) restricted stock unit and (ii) restricted stock award, in each case, with respect to shares of GAIN common stock granted under the ICP, whether subject to time-based or performance-based vesting, that is outstanding as of immediately prior the effective time of the merger will, automatically and without any action on behalf of the holder thereof, become vested as of immediately prior to the effective time of the merger and be canceled in exchange for the right to receive (without interest) a cash payment as soon as reasonably practicable after the effective time of the merger from INTL determined by multiplying (I) the per share merger consideration by (II) the number of shares of GAIN common stock underlying such restricted stock unit or restricted stock award, as applicable, as of the effective time of the merger, less applicable taxes required to be withheld with respect to such payment; however, with respect to restricted stock units or restricted
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stock awards that constitute nonqualified deferred compensation subject to Section 409A of the Code and that are not permitted to be paid at the effective time of the merger without triggering a tax or penalty under Section 409A of the Code, such payment will be made at the earliest time permitted under the employee plan and award agreement that will not trigger a tax or penalty;
For any outstanding restricted stock unit award subject to performance-based vesting, (A) if the performance period applicable to such award has concluded, the number of shares of GAIN common stock underlying such restricted stock unit will be reasonably determined by the compensation committee of the GAIN board of directors based on actual performance during the performance period and (B) if the performance period applicable to such award has not concluded, the number of shares of GAIN common stock underlying such restricted stock unit will, pursuant to the terms of such unit or award, be calculated using the target performance.
Treatment of ESPP (see page 62)
GAIN will, prior to the effective time of the merger, take all actions reasonably necessary to terminate GAIN’s 2011 Employee Stock Purchase Plan (the “ESPP”) and all outstanding rights thereunder as of immediately prior to and contingent upon the effective time of the merger. From and after the date of the merger agreement, GAIN will take all actions reasonably necessary to ensure that (i) the existing participants in the ESPP may not increase their elections with respect to the current offering period, (ii) no employee who was not a participant in the ESPP as of the end of the day on February 25, 2020 may become a participant in the ESPP, (iii) the aggregate number of shares of GAIN common stock purchasable during the current offering period will not exceed 134,000 shares of GAIN common stock and (iv) no offering period will commence after the current offering period and before the effective time of the merger.
Recommendation of the GAIN Board of Directors (see page 41)
After careful consideration, the GAIN board, by a vote of seven to one, approved the merger agreement, the merger and the other transactions contemplated by the merger agreement. Certain factors considered by the GAIN board in reaching its decision to approve and adopt the merger agreement, the merger and the other transactions contemplated by the merger agreement can be found in the section entitled “The Merger (Proposal 1)—GAIN’s Reasons for the Merger” beginning on page 38 of this proxy statement.
Alex Goor, the sole dissenting director, voted against the approval and adoption of the merger agreement, the merger and other transactions contemplated by the merger agreement. Certain factors considered by Mr. Goor in reaching his decision to vote against the approval and adoption of the merger agreement, the merger and the other transactions contemplated by the merger agreement can be found in the section entitled “The Merger (Proposal 1) —View of Dissenting Director” beginning on page 41 of this proxy statement.
The GAIN board recommends that GAIN stockholders vote:
FOR” the proposal to approve and adopt the merger agreement;
FOR” the proposal to approve, on a non-binding, advisory basis, certain compensation that will or may be paid by GAIN to its named executive officers that is based on or otherwise relates to the merger; and
FOR” the proposal to approve an adjournment of the special meeting, including if necessary to solicit additional proxies in favor of the proposal to approve and adopt the merger agreement, if there are not sufficient votes at the time of such adjournment to approve and adopt the merger agreement.
Opinion of GAIN’s Financial Advisor (see page 44)
GAIN retained GCA Advisors, LLC (“GCA Advisors”) to act as its financial advisor in connection with the merger based on GCA Advisors’ qualifications, expertise, reputation and knowledge of its business and affairs and the industry in which it operates. GCA Advisors is a global investment bank serving a broad client base through a range of advisory services, including mergers and acquisitions. On February 26, 2020, GCA Advisors delivered its opinion to the GAIN board of directors that, as of that date, and subject to the assumptions, qualifications and limitations set forth therein, the merger consideration to be received by the holders of GAIN common stock (other than as set forth in such opinion) pursuant to the merger agreement was fair, from a financial point of view, to such holders.
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The full text of the written opinion that GCA Advisors delivered to GAIN’s board of directors, which describes, among other things, the assumptions made, procedures followed, factors considered and qualifications and limitations on the review undertaken by GCA Advisors, is attached as Annex F to this proxy statement. The summary of the opinion of GCA Advisors set forth in this proxy statement is qualified in its entirety by reference to the full text of such opinion. GCA Advisors delivered its opinion to GAIN’s board of Directors for the benefit and use of GAIN’s board of directors in connection with and for purposes of its evaluation of the merger consideration of GAIN common stock from a financial point of view. GCA Advisors’ opinion does not constitute a recommendation to GAIN’s board of directors or any committee thereof, GAIN’s stockholders, or any other person as to any specific action that should be taken in connection with the merger, including whether GAIN’s stockholders should vote for the proposal to adopt the merger agreement. The opinion does not address GAIN’s underlying business decision to enter into the merger agreement, or the relative merits of the merger as compared to any alternatives that may be available to GAIN. GCA Advisors was not asked to, nor has it, offered any opinion as to the material terms of the merger agreement (other than as expressly set forth in the last paragraph of the opinion with respect to the fairness of the merger consideration) or the structure of the merger.
For additional information, see the section entitled “The Merger (Proposal 1)—Opinion of GAIN’s Financial Advisor” beginning on page 44 and Annex F to this proxy statement.
Financing of the Merger (see page 56)
Completion of the merger is not subject to a financing condition. INTL represented in the merger agreement that it has available or will have available to it, as of the date of the closing of the merger, immediately available funds to enable it to consummate the merger. Prior to the closing date, GAIN has agreed to, and to cause its subsidiaries and its and their respective representatives to, use their commercially reasonable best efforts to, on a timely basis, upon the reasonable request of INTL or any of its subsidiaries, provide customary cooperation that is necessary and customary in connection with any debt, equity, equity-linked or other financing of INTL or any of its subsidiaries in connection with the merger and the other transactions contemplated by the merger agreement (the “financing”).
Repayment of Convertible Notes (see page 75)
Pursuant to the merger agreement, GAIN and its subsidiaries were required to deliver all notices and take all other actions required to facilitate the repayment in full of all obligations in respect of GAIN’s 4.125% Convertible Senior Notes maturing on April 1, 2020 (the “2020 convertible notes”) on April 1, 2020 in accordance with the terms of the Indenture, dated as of April 1, 2015, by and between GAIN and The Bank of New York Mellon, as trustee (“the 2020 convertible notes indenture”). The 2020 convertible notes are no longer outstanding following GAIN’s satisfaction of all obligations due in respect of such convertible notes on or prior to their scheduled maturity date on April 1, 2020.
In addition, GAIN and its subsidiaries are required to use their reasonable best efforts to comply with all of their respective obligations under GAIN’s Convertible Senior Notes maturing on August 15, 2022 (the “2022 convertible notes”) issued pursuant to the Indenture, dated as of August 22, 2017, by and between GAIN and The Bank of New York Mellon, as trustee (the “2022 convertible notes indenture”).Following consummation of the merger, each holder of GAIN's outstanding 2022 convertible notes will, pursuant to the terms of the 2022 convertible notes indenture, be entitled to either (a) convert or exchange that holder's 2022 convertible notes into an amount in cash (without interest) for each $1,000 principal amount of the convertible notes held by that holder equal to $6.00 multiplied by the conversion rate for the 2022 convertible notes in effect on the applicable conversion date for the 2022 convertible notes or (b) require the surviving corporation to repurchase that holder's 2022 convertible notes (or any portion of principal amount thereof that is equal to $1,000 or an integral multiple of $1,000 in excess thereof), for cash on a date specified by GAIN in accordance with the 2022 convertible notes indenture at the applicable Fundamental Change Repurchase Price (as defined in the 2022 convertible notes indenture). Alternatively, holders of the 2022 convertible notes can continue to hold their 2022 convertible notes, which following the effective time will only be convertible or exchangeable into cash as described above.
See the section entitled “The Merger Agreement—Repayment of Convertible Notes” beginning on page 75 of this proxy statement.
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Material U.S. Federal Income Tax Consequences of the Merger (see page 93)
The exchange of GAIN common stock for cash in the merger will be a taxable transaction for U.S. federal income tax purposes and may also be taxable under state and local and other tax laws. You should read the section entitled “Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 93 of this proxy statement and consult your tax advisors regarding the U.S. federal income tax consequences of the merger to you in your particular circumstances, as well as tax consequences arising under the laws of any state, local or foreign taxing jurisdiction.
Regulatory Clearances and Approvals Required for the Merger (see page 57)
The completion of the merger is conditioned on, among other things, certain specified regulatory approvals having been obtained and remaining in full force and effect (or, in the case of certain specified regulatory approvals that are statutory waiting periods, having expired or been terminated), including the expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”). Under the terms of the merger agreement, each of GAIN and INTL have agreed to use their respective reasonable best efforts (except where the merger agreement specifies a different standard) to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable law to consummate the transactions contemplated by the merger agreement, including preparing and filing as promptly as practicable with any government authority or other third party all documentation to effect all necessary filings and obtaining certain specified regulatory approvals.
On April 16, 2020, both GAIN and INTL filed notification of the proposed merger with the United States Federal Trade Commission (“FTC”) and the Antitrust Division of the United States Department of Justice (the “Antitrust Division”) under the HSR Act. Early termination of the HSR waiting period was received on April 27, 2020.
See the section entitled “The Merger Agreement—Regulatory Clearances and Approvals Required for the Merger” beginning on page 57 of this proxy statement for a more detailed discussion of the parties’ obligations with respect to obtaining regulatory approvals in connection with the merger.
Expected Timing of the Merger (see page 75)
We expect to complete the merger in mid-2020. The merger is subject to various conditions, however, and it is possible that factors outside the control of GAIN or INTL could result in the merger being completed at a later time, or not at all. There may be a substantial amount of time between the special meeting and the completion of the merger. We expect to complete the merger promptly following the satisfaction or, to the extent permitted, waiver of the other conditions to the consummation of the merger. See the section entitled “The Merger Agreement—Conditions to Completion of the Merger” beginning on page 75 of this proxy statement.
Conditions to Completion of the Merger (see page 75)
As more fully described in this proxy statement and in the merger agreement, each party’s obligation to consummate the merger depends on a number of conditions being satisfied, including:
Approval and adoption of the merger agreement by an affirmative vote of the holders of a majority of the shares of GAIN common stock outstanding at the close of business on the record date in accordance with Delaware law;
The absence of any restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction having taken effect after February 26, 2020 and still being in effect;
Certain specified regulatory approvals having been obtained and remaining in full force and effect (or, in the case of any certain specified regulatory approvals that are statutory waiting periods, having expired or been terminated);
Subject to certain qualifications, the other party having performed in all material respects all of its obligations under the merger agreement contemplated to be performed by it at or prior to the effective time of the merger;
Subject to certain qualifications, the accuracy of representations and warranties made by the other party in the merger agreement (subject generally to a material adverse effect standard, with different standards applicable to certain representations and warranties); and
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There having not occurred a company material adverse effect (as described in the section entitled “The Merger Agreement—Definitions of ‘Material Adverse Effect”’) on GAIN or a parent material adverse effect (as described in the section entitled “The Merger Agreement—Definitions of ‘Material Adverse Effect”’) on INTL since the signing of the merger agreement.
Restrictions on Solicitation of Acquisition Proposals (see page 67)
Subject to certain exceptions, GAIN has agreed that from the date of the merger agreement until the effective time of the merger, or if earlier, the termination of the merger agreement in accordance with its terms, except as otherwise set forth below, GAIN will not, and will cause its subsidiaries not to, and to instruct its and its subsidiaries’ respective directors, officers, employees, affiliates, investment bankers, attorneys, accountants and other advisors or representatives not to, directly or indirectly:
Solicit, initiate or take any action to knowingly facilitate or encourage the submission of any “acquisition proposal” (as described in the section entitled “The Merger Agreement— Restrictions on Solicitation of Acquisition Proposals”);
Enter into or participate in any discussions or negotiations with, furnish any information relating to GAIN or any of its subsidiaries or afford access to the business, properties, assets, books or records of GAIN or any of its subsidiaries to, otherwise knowingly cooperate in any way with, or knowingly assist or participate in any effort by any third party relating to an acquisition proposal or any inquiry, expression of interest, proposal or request for information that would reasonably be expected to lead to an acquisition proposal (other than requesting the clarification of the terms and conditions thereof so as to determine whether the acquisition proposal is, or would reasonably be expected to result in, a “superior proposal”) (as described in the section entitled “The Merger Agreement— Restrictions on Solicitation of Acquisition Proposals”);
Make an adverse recommendation change (as described in the section entitled “The Merger Agreement— Restrictions on Solicitation of Acquisition Proposals”) with regard to the merger;
Take any action to make any “moratorium,” “control share acquisition,” “fair price,” “supermajority,” “affiliate transactions” or “business combination statute or regulation” or other similar anti-takeover laws and regulations of the State of Delaware inapplicable to any third party or any acquisition proposal; or
Fail to enforce, grant a waiver or release under a standstill or similar agreement with respect to any class of equity securities of GAIN or any of its subsidiaries.
Notwithstanding the restrictions described above, if at any time prior to obtaining the approval of GAIN stockholders (and in no event after obtaining the approval of GAIN stockholders), (i) the GAIN board of directors receives a bona fide written acquisition proposal made after the date of the merger agreement which has not resulted from a breach of the restrictions set forth above that the GAIN board of directors determines in good faith, after consultation with its financial advisor and outside legal counsel, is or is reasonably likely to lead to a superior proposal and (ii) the GAIN board of directors determines in good faith, after consultation with its outside legal counsel, that the failure to take such action would be reasonably likely to be inconsistent with its fiduciary duties under applicable law, then the GAIN board of directors may provide information to and engage in discussions or negotiations with a third party.
Changes in Board Recommendation (see page 70)
At any time prior to obtaining the approval of GAIN’s stockholders (and in no event after the obtaining the approval of GAIN’s stockholders), the GAIN board of directors is permitted to effect an adverse recommendation change involving or relating to a “company intervening event” (as described in the section entitled “The Merger Agreement— Changes in Board Recommendation) if the GAIN board of directors determines in good faith, after consultation with its outside legal counsel, that the failure to take such action would be reasonably likely to be inconsistent with its fiduciary duties under applicable law; provided that:
GAIN (A) promptly notifies INTL in writing of its intention to take such action and (B) negotiates in good faith with INTL (if requested by INTL in writing) for five business days following such notice regarding any revisions to the terms of the merger agreement proposed by INTL; and
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The GAIN board of directors is not permitted to effect an adverse recommendation change involving or relating to a company intervening event unless, after the five business day period described above, the GAIN board of directors determines in good faith, after consultation with its outside legal counsel, that the failure to take such action would be reasonably likely to be inconsistent with its fiduciary duties under applicable law.
The GAIN board of directors will not make an adverse recommendation change involving or relating to a superior proposal unless:
GAIN promptly notifies INTL, in writing at least five business days before taking such action, that GAIN intends to take such action, which notice attaches the most current version of any proposed transaction agreement or a summary of all material terms of such superior proposal and the identity of the third party;
If requested by INTL in writing, during such five business day period, GAIN negotiates in good faith with INTL regarding any proposal by INTL to amend the terms of the merger agreement in response to such superior proposal (and GAIN has instructed its affiliates and representatives, including its outside legal counsel and financial advisor, to the extent appropriate, to engage in good faith negotiations with INTL and its representatives); and
After such five business day period, the GAIN board of directors determines in good faith, taking into account any written proposal by INTL received during such period to amend the terms of the merger agreement, that such acquisition proposal continues to constitute a superior proposal (it being understood and agreed that in the event of any amendment to the principal financial terms or other material terms of any such superior proposal, a new written notification from GAIN (as described above) will be required and a new notice period of two business days will commence, during which notice period GAIN will be required to comply with the foregoing requirements anew, except that such new notice period will be for two business days (as opposed to five business days)).
In the event that the GAIN board is permitted to change its recommendation with respect to the merger agreement following the receipt of an acquisition proposal that it determines to be a superior proposal, GAIN may also terminate the merger agreement to enter into a definitive written agreement for such superior proposal if before or concurrently with such termination, GAIN pays to INTL the fee required to be paid to INTL as described in the section entitled “The Merger Agreement—Termination Fee Payable by GAIN” beginning on page 78 of this proxy statement.
In addition, if the GAIN board changes its recommendation with respect to the merger agreement, INTL may terminate the merger agreement and collect a termination fee as described in the section entitled “The Merger Agreement—Termination Fee Payable by GAIN” beginning on page 78 of this proxy statement.
Termination of the Merger Agreement (see page 77)
The merger agreement may be terminated and the merger may be abandoned at any time prior to the effective time of the merger (notwithstanding any approval of the merger agreement by GAIN stockholders):
At any time prior to the effective time of the merger, by mutual written agreement of GAIN and INTL;
At any time prior to the effective time of the merger, by either GAIN or INTL if:
The merger has not been consummated on or before November 27, 2020 (the “end date”); provided that this termination right will not be available to any party whose breach of any provision of the merger agreement results in the failure of the merger to be consummated by such time;
There is in effect any applicable law enjoining, prohibiting or preventing the consummation of the merger and, if such applicable law is an order, such order shall have become final and non-appealable; provided that this termination right will not be available to any party whose breach of any provision of the merger agreement results in the existence of such order;
At the meeting of GAIN stockholders to approve and adopt the merger agreement (including any adjournment or postponement thereof), the approval and adoption of the merger agreement by the stockholders is not obtained; or
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Any governmental authority required to provide a consent or approval has denied such consent or approval and such denial has become final and non-appealable (or on a final non-appealable basis such governmental authority has determined not to grant such consent without the imposition of a materially burdensome regulatory condition (as described in the section entitled “The Merger Agreement—Regulatory Clearances and Approvals Required for the Merger”).
At any time prior to the effective time of the merger, by INTL if:
An adverse recommendation change has occurred; or
GAIN has breached any representation or warranty or failed to perform any covenant or agreement on the part of GAIN set forth in the merger agreement that would cause the closing conditions not to be satisfied and to be incapable of being satisfied by the end date.
At any time prior to the effective time of the merger, by GAIN if:
The GAIN board of directors has determined to enter into a written agreement to accept a superior proposal (subject to compliance with the restrictions on solicitation of acquisition proposals); provided that this termination right will only be available to GAIN if GAIN:
Has not breached the restrictions on solicitation of acquisition proposals with respect to such superior proposal;
Concurrently enters into a definitive agreement pursuant to which such superior proposal is to be effected; and
Has paid, or concurrently pays (or causes to be paid) to INTL the termination fee required to be paid to INTL as described in the section entitled “The Merger Agreement—Termination Fee Payable by GAIN” beginning on page 78 of this proxy statement; or
INTL or Merger Sub has breached any representation or warranty or failed to perform any covenant or agreement on the part of INTL or Merger Sub set forth in the merger agreement that would cause the closing conditions not to be satisfied, and to be incapable of being satisfied by the end date.
Termination Fee Payable by GAIN (see page 78)
GAIN has agreed to pay INTL a termination fee of $9 million in immediately available funds (the “termination fee”) upon termination of the merger agreement if:
INTL terminates the merger agreement because an adverse recommendation change occurred;
GAIN terminates the merger agreement because the GAIN board of directors determined to enter into a written agreement to accept a superior proposal (subject to compliance with the restrictions on solicitation of acquisition proposals); provided that GAIN has complied with the requirements described above;
Either INTL or GAIN terminates the merger agreement because GAIN’s stockholders did not approve the merger at the stockholder meeting at a time when the merger agreement was terminable by INTL because an adverse recommendation change occurred;
Either INTL or GAIN terminates the merger agreement because the merger was not consummated by the end date or GAIN’s stockholders did not approve the merger at the stockholder meeting and:
At or prior to such termination, an acquisition proposal was publicly disclosed or publicly announced or made known to the management or board of directors of GAIN, or any person publicly announced an intention (whether or not conditional) to make an acquisition proposal, which was not withdrawn at least five (5) days in advance of the GAIN stockholders meeting; and
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On or prior to the first anniversary of such termination an acquisition proposal (whether or not the same one) is consummated; or a definitive agreement relating to an acquisition proposal (whether or not the same one) is entered into by GAIN (provided that all references to “15%” in the definition of acquisition proposal will be deemed to be a reference to “50%”).
GAIN is not entitled to receive a termination fee payable by INTL.
Expense Reimbursement (see page 78)
If the merger agreement is terminated by GAIN or INTL because GAIN’s stockholders did not approve the merger at the stockholder meeting, GAIN will reimburse INTL and its affiliates, no later than two business days after submission of documentation therefor, for 100% of their reasonable out-of-pocket fees and expenses (including all reasonable fees and expenses of counsel, accountants, investment banking firms and other financial advisors, experts and consultants) actually incurred in connection with or related to the transactions contemplated by the merger agreement; provided that the amount of such reimbursement will not exceed $3,500,000 in aggregate. Such expense reimbursement will be credited against any termination fee that is payable in connection with such termination or that subsequently becomes payable.
Remedies; Maximum Liability (see page 78)
The merger agreement provides that, upon any termination of the merger agreement under circumstances where the termination fee is payable by GAIN and the termination fee is paid in full, except in the case of fraud, INTL and Merger Sub will be precluded from any other remedy against GAIN, at law or in equity or otherwise and neither INTL nor Merger Sub will seek to obtain any recovery, judgment, or damages of any kind, including consequential, indirect, or punitive damages, against GAIN or any of GAIN’s subsidiaries or any of their respective directors, officers, employees, partners, managers, members, shareholders or affiliates or their respective representatives in connection with the merger agreement or the transactions contemplated thereby.
If the merger agreement is terminated under circumstances where the termination fee is not payable by GAIN, the merger agreement will become void and of no effect without liability of any party (or any stockholder, director, officer, employee, agent, consultant or representative of such party), except in the case of fraud or willful breach of any provision of the merger agreement.
Specific Performance (see page 79)
The merger agreement provides that the parties will be entitled to an injunction to prevent breaches of the merger agreement and to specifically enforce the performance of the terms and provisions of the merger agreement.
Appraisal Rights (page 58)
Under the DGCL, any record holder of GAIN common stock at the close of business on the record date who does not vote in favor of the merger, and who exercises its appraisal rights and fully complies with all of the provisions of Section 262 of the DGCL (but not otherwise), will be entitled to demand and receive payment of the “fair value” for all (but not less than all) of his or her shares of GAIN common stock if the merger is completed. See the section entitled “Appraisal Rights of Stockholders” beginning on page 84 of this proxy statement. The full text of Section 262 of the DGCL is attached to this proxy statement as Annex G.
The Special Meeting (see page 24)
The special meeting of GAIN’s stockholders is scheduled to be held exclusively online via live webcast on June 5, 2020 at 2 p.m., Eastern Time. The special meeting can be accessed by visiting www.virtualshareholdermeeting.com/gcap2020SM, where you will be able to attend the special meeting, vote, and submit your questions during the special meeting. Please note that you will not be able to attend the special meeting in person. Please have your 16-digit control number to join the special meeting. Instructions on how to attend and participate online are also posted online at www.proxyvote.com. We elected to use a virtual meeting given the current public health implications of COVID-19 (novel coronavirus) and our desire to promote the health and welfare of our stockholders.
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The special meeting is being held in order to consider and vote on the following:
A proposal to approve and adopt the merger agreement, which is further described in the sections entitled “The Merger (Proposal 1)” and “The Merger Agreement,” beginning on pages 29 and 59, respectively, of this proxy statement;
A proposal to approve, on a non-binding, advisory basis, certain compensation that will or may be paid by GAIN to its named executive officers that is based on or otherwise relates to the merger, discussed under the section entitled “The Merger (Proposal 1)—Interests of GAIN’s Directors and Executive Officers in the Merger” beginning on page 51 of this proxy statement; and
A proposal to approve an adjournment of the special meeting, including if necessary to solicit additional proxies in favor of the proposal to approve and adopt the merger agreement if there are not sufficient votes at the time of such adjournment to approve and adopt the merger agreement.
Only holders of record of GAIN common stock at the close of business on April 23, 2020, the record date for the special meeting, are entitled to notice of, and to vote at, the special meeting or any adjournments or postponements thereof. At the close of business on the record date, 37,803,516 shares of GAIN common stock were issued and outstanding, approximately 6.89% of which were held by GAIN’s directors and executive officers. We currently expect that seven of eight of GAIN’s directors and all executive officers will vote their shares in favor of the proposal to approve and adopt the merger agreement and the other proposals to be considered at the special meeting, although no director or executive officer is obligated to do so, with the exception of Glenn H. Stevens who has signed a voting agreement. See “Voting Agreements” beginning on page 80 for a discussion of the terms of the voting agreements.
The presence at the special meeting, by attendance via the virtual meeting website or by proxy, of the holders of a majority of the shares of GAIN common stock issued and outstanding and entitled to vote at the close of business on the record date will constitute a quorum. There must be a quorum for business to be conducted at the special meeting. If you submit a properly executed proxy card, even if you abstain from voting, your shares will be counted for purposes of calculating whether a quorum is present at the special meeting. Failure of a quorum to be represented at the special meeting will necessitate an adjournment or postponement and will subject GAIN to additional expense.
You may cast one vote for each share of GAIN common stock that you own at the close of business on the record date. Approval and adoption of the merger agreement requires the affirmative vote of the majority of the shares of GAIN common stock outstanding at the close of business on the record date in accordance with Delaware law. The proposal to approve, on a non-binding, advisory basis, certain compensation that will or may be paid by GAIN to its named executive officers that is based on or otherwise relates to the merger requires that the number of votes cast in favor of the proposal exceed the number of votes opposing the proposal measured by the stock power in attendance via the virtual meeting website or represented by proxy and entitled to vote at the special meeting (provided that a quorum is present). The proposal to adjourn the special meeting, including if necessary to permit further solicitation of proxies, requires that the number of votes cast in favor of the proposal exceed the number of votes opposing the proposal measured by the stock power in attendance via the virtual meeting website or represented by proxy and entitled to vote at the special meeting (whether or not a quorum is present).
An abstention occurs when a stockholder attends a meeting, either via the virtual meeting website or by proxy, but abstains from voting. At the special meeting, abstentions will be counted in determining whether a quorum is present. Because under Delaware law the approval and adoption of the merger agreement requires the affirmative vote of the majority of the shares of GAIN common stock outstanding at the close of business on the record date, abstentions and a complete failure to vote (including the failure of a record owner to execute and return a proxy card and the failure of a beneficial owner of shares held in “street name” by a broker, bank or other nominee to give voting instructions to the broker, bank or other nominee) will have the same effect as a vote “AGAINST” the proposal to approve and adopt the merger agreement. Because the other two proposals require that the number of votes cast in favor of the proposal exceed the number of votes opposing the proposal measured by the stock power in attendance via the virtual meeting website or represented by proxy at the special
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meeting, abstentions and a failure to vote (including the failure of a record owner to execute and return a proxy card and the failure of a beneficial owner of shares held in “street name” by a broker, bank or other nominee to give voting instructions to the broker, bank or other nominee) will have no effect on the outcome of such proposals.
If no instruction as to how to vote is given (including an instruction to abstain) in an executed, duly returned and not revoked proxy, the proxy will be voted for (i) the proposal to approve and adopt the merger agreement; (ii) the proposal to approve, on a non-binding, advisory basis, certain compensation that will or may be paid by GAIN to its named executive officers that is based on or otherwise relates to the merger; and (iii) the proposal to approve the adjournment of the special meeting, including if necessary to solicit additional proxies, if there are not sufficient votes at the time of such adjournment to approve and adopt the merger agreement.
Interests of GAIN’s Directors and Executive Officers in the Merger (see page 51)
In considering the recommendation of the GAIN board to approve and adopt the merger agreement, you should be aware that GAIN’s directors and executive officers have interests in the merger that are different from, or in addition to, those of GAIN stockholders generally. The GAIN board was aware of these interests and considered them, among other matters, in evaluating the merger agreement, in reaching its decision to approve the merger agreement and in recommending to GAIN stockholders that the merger agreement be approved and adopted. These interests are described in further detail and quantified below under “The Merger (Proposal 1)—Interests of GAIN’s Directors and Executive Officers in the Merger” beginning on page 51 of this proxy statement.
Directors’ and Officers’ Indemnification (see page 56)
For six years after the effective time of the merger, INTL has agreed to cause the surviving corporation to indemnify and hold harmless the present and former directors and officers of GAIN, exclusively in their capacity as such (each, an “indemnified person”) in respect of acts or omissions occurring at or prior to the effective time of the merger to the fullest extent provided under GAIN’s articles of incorporation and bylaws in effect on February 26, 2020.
Voting Agreements (see page 80)
Concurrently with and as a condition to INTL’s execution of the merger agreement on February 26, 2020, INTL entered into separate voting and support agreements (each a “voting agreement”) with each of (i) VantagePoint Venture Partners IV, L.P., VantagePoint Venture Partners IV (Q), L.P., VantagePoint Venture Partners IV Principals Fund L.P. and VP New York Venture Partners, L.P. (collectively, “VantagePoint”), (ii) IPGL Limited and IPGL No 1 Limited (collectively, “IPGL”) and (iii) Glenn H. Stevens, the Chief Executive Officer of GAIN, (together with VantagePoint and IPGL, the “supporting stockholders”).
Pursuant to the voting agreements, each supporting stockholder has agreed to vote a specified number of shares owned by such supporting stockholder, representing in the aggregate as to all supporting stockholders under all voting agreements, approximately 44% of GAIN common stock, at any meeting of the members of GAIN (including the special meeting): (i) in favor of the merger and certain related matters, and (ii) against certain specified actions, including (a) any action or agreement that would result in a breach of any representation, warranty or covenant of GAIN set forth in the merger agreement, (b) extraordinary corporate transactions other than the merger and (c) certain other specified actions.
See “Voting Agreements” beginning on page 80 for a description of these agreements.
Market Prices of GAIN Common Stock (see page 83)
The merger consideration of $6.00 per share represents a premium of approximately 70% over GAIN’s closing share price on February 26, 2020, the last trading day prior to the announcement that GAIN had entered into the merger agreement and a premium of approximately 60% to GAIN’s thirty (30)-day volume-weighted average stock price on the same date. The closing price of GAIN common stock on the NYSE on April 27, 2020, the most recent practicable date prior to the date of this proxy statement, was $6.51 per share. You are encouraged to obtain current market prices of GAIN common stock in connection with voting your shares of GAIN common stock.
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Litigation Related to the Merger (see page 58)
As of April 27, 2020, purported stockholders of GAIN filed six actions in the United States District Court for the District of New Jersey, the United States District Court for the District of Delaware and the United States District Court of the Southern District of New York, captioned Stein v. GAIN Capital Holdings, Inc., et al., Case No. 3:20-cv-04073 (D.N.J.), Franchi v. GAIN Capital Holdings, Inc., et al., Case No. 1:20-cv-00519 (D. Del.), Sperli v. GAIN Capital Holdings, Inc., et al., Case No. 1:20-cv-03187 (S.D.N.Y.), Sanderson v. GAIN Capital Holdings, Inc., et al., Case No. 1:20-cv-03228 (S.D.N.Y.), Raul v. GAIN Capital Holdings, Inc., et al., Case No. 1:20-cv-03211 (S.D.N.Y.) and Ye He v. GAIN Capital Holdings, Inc., et al., Case No. 2:20-cv-05026 (D.N.J.), respectively. The complaints, the second of which is a putative class action complaint, allege that a preliminary version of the proxy statement filed with the SEC on April 10, 2020 was materially incomplete, false or misleading in certain respects, thereby allegedly violating Sections 14(a) and 20(a) of the Exchange Act (15 U.S.C. § § 78n(a), 78t(a)), and SEC Rule 14a-9 (17 C.F.R. § 240.14a-9) or 17 C.F.R. § 244.100 promulgated thereunder. The complaints name as defendants each member of the GAIN board of directors and purport to seek injunctive relief and money damages, including reasonable attorneys’ fees. GAIN and the defendants believe the allegations in these actions are without merit.
For additional information regarding the pending litigation, please see the section entitled “The Merger—Litigation Related to the Merger” beginning on page 58.
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QUESTIONS AND ANSWERS
The following are some questions that you, as a stockholder of GAIN, may have regarding the merger and the special meeting and the answers to those questions. GAIN urges you to carefully read the remainder of this proxy statement because the information in this section does not provide all the information that might be important to you with respect to the merger and the special meeting. Additional important information is also contained in the annexes to and the documents incorporated by reference into this proxy statement.
Q:
What is the purpose of the special meeting?
A:
At the special meeting, stockholders will consider and act upon the matters outlined in the notice of meeting on the cover page of this proxy statement, namely:
A proposal to approve and adopt the merger agreement, which is further described in the sections entitled “The Merger (Proposal 1)” and “The Merger Agreement,” beginning on pages 29 and 59, respectively, of this proxy statement;
A proposal to approve, on a non-binding, advisory basis, certain compensation that will or may be paid by GAIN to its named executive officers that is based on or otherwise relates to the merger, discussed under the section entitled “The Merger (Proposal 1)—Interests of GAIN’s Directors and Executive Officers in the Merger” beginning on page 51 of this proxy statement; and
A proposal to approve an adjournment of the special meeting, including if necessary to solicit additional proxies in favor of the proposal to approve and adopt the merger agreement if there are not sufficient votes at the time of such adjournment to approve and adopt the merger agreement.
Q:
Where and when is the special meeting?
A:
The special meeting is scheduled to be held exclusively online via live webcast on June 5, 2020 at 2 p.m., Eastern Time. There will not be a physical meeting location. The special meeting can be accessed by visiting www.virtualshareholdermeeting.com/gcap2020SM, where you will be able to attend the special meeting, vote, and submit your questions during the special meeting. We encourage you to allow ample time for online check-in, which will open at 1:45 p.m., Eastern Time. Please note that you will not be able to attend the special meeting in person. We elected to use a virtual meeting given the current public health implications of COVID-19 (novel coronavirus) and our desire to promote the health and welfare of our stockholders.
Q:
What do I need in order to be able to attend the special meeting online?
A:
The special meeting will be held via live webcast only. Any stockholder can attend the special meeting live online at www.virtualshareholdermeeting.com/gcap2020SM. The webcast will start at 2 p.m., Eastern Time on June 5, 2020. Stockholders may vote and submit questions while attending the special meeting online. In order to be able to enter the special meeting, you will need the 16-digit control number, which is included on your proxy card if you are a stockholder of record of shares of GAIN common stock or included with your voting instruction card and voting instructions you received from your broker, bank or other nominee of your shares if you hold your shares of GAIN common stock in “street name.” Instructions on how to attend and participate online are also posted online at www.proxyvote.com.
Q:
How does the GAIN board recommend that I vote on the proposals?
A:
The GAIN board recommends that you vote as follows:
FOR” the approval and adoption of the merger agreement;
FOR” the approval, on a non-binding, advisory basis, of certain compensation that will or may be paid by GAIN to its named executive officers that is based on or otherwise relates to the merger; and
FOR” the approval of an adjournment of the special meeting, including if necessary to solicit additional proxies in favor of the proposal to approve and adopt the merger agreement, if there are not sufficient votes at the time of such adjournment to approve and adopt the merger agreement.
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Q:
How does the per share merger consideration compare to the market price of GAIN common stock prior to announcement of the merger?
A:
The merger consideration of $6.00 per share represents a premium of approximately 70% over GAIN’s closing share price on February 26, 2020, the last trading day prior to the announcement that GAIN had entered into the merger agreement. The closing price of GAIN common stock on the NYSE on April 27, 2020, the most recent practicable date prior to the date of this proxy statement, was $6.51 per share. You are encouraged to obtain current market prices of GAIN common stock in connection with voting your shares of GAIN common stock.
Q:
What will happen in the merger?
A:
If the merger is completed, Merger Sub will merge with and into GAIN, whereupon the separate existence of Merger Sub will cease and GAIN will be the surviving corporation and a wholly owned subsidiary of INTL. As a result of the merger, GAIN common stock will no longer be publicly traded, and you will no longer have any interest in GAIN’s future earnings or growth. In addition, GAIN common stock will be delisted from the NYSE and deregistered under the Exchange Act, and GAIN will no longer be required to file periodic reports with the Securities and Exchange Commission (the “SEC”) with respect to GAIN common stock, in each case in accordance with applicable law, rules and regulations.
Q:
Who will own GAIN after the merger?
A:
Immediately following the merger, GAIN will be a wholly owned subsidiary of INTL.
Q:
What will I receive in the merger?
A:
Upon the terms and subject to the conditions of the merger agreement, if the merger is completed, the holders of GAIN common stock will have the right to receive $6.00 in cash, without interest and less any applicable withholding taxes, for each share of GAIN common stock that they own immediately prior to the effective time of the merger.
Q:
What will happen in the merger to GAIN equity awards?
A:
At or immediately prior to the effective time of the merger, to the extent required or permitted by the applicable employee plan:
At the effective time of the merger, each outstanding option to purchase shares of GAIN common stock under the “ICP”, whether or not exercisable or vested, that is outstanding and unexercised immediately prior to the effective time of the merger will, automatically, become vested as of immediately prior to the effective time of the merger, be canceled, and entitle the holder of each such option to receive (without interest) as soon as reasonably practicable after the effective time of the merger an amount in cash determined by multiplying (i) the excess, if any, of the per share merger consideration over the applicable exercise price of such stock option, by (ii) the number of shares of GAIN common stock such holder could have purchased (assuming full vesting of all stock options) had such holder exercised such stock option in full immediately prior to the effective time of the merger, less applicable taxes required to be withheld with respect to such payment. For the avoidance of doubt, any stock option which has an exercise price per share of GAIN common stock that is greater than or equal to the merger consideration will be cancelled at the effective time of the merger for no consideration or payment;
At the effective time of the merger, each (i) restricted stock unit and (ii) restricted stock award, in each case, with respect to shares of GAIN common stock granted under the ICP, whether subject to time-based or performance-based vesting, that is outstanding as of immediately prior the effective time of the merger will, automatically and without any action on behalf of the holder thereof, become vested as of immediately prior to the effective time of the merger and be canceled in exchange for the right to receive (without interest) a cash payment as soon as reasonably practicable after the effective time of the merger from INTL determined by multiplying (I) the per share merger consideration by (II) the number of shares of GAIN common stock underlying such restricted stock unit or restricted stock award, as applicable, as of the effective time of the merger, less applicable taxes required to be
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withheld with respect to such payment; however, with respect to restricted stock units or restricted stock awards that constitute nonqualified deferred compensation subject to Section 409A of the Code and that are not permitted to be paid at the effective time of the merger without triggering a tax or penalty under Section 409A of the Code, such payment will be made at the earliest time permitted under the employee plan and award agreement that will not trigger a tax or penalty;
For any outstanding restricted stock unit award subject to performance-based vesting, (A) if the performance period applicable to such award has concluded, the number of shares of GAIN common stock underlying such restricted stock unit will be reasonably determined by the compensation committee of the GAIN board of directors based on actual performance during the performance period and (B) if the performance period applicable to such award has not concluded, the number of shares of GAIN common stock underlying such restricted stock unit will, pursuant to the terms of such unit or award, be calculated using the target performance.
Q:
Am I entitled to exercise appraisal rights instead of receiving the merger consideration for my shares of GAIN common stock?
A:
If you comply with all the requirements of Section 262 of the DGCL (including not voting in favor of the adoption of the merger agreement), you are entitled to have the “fair value” (as defined pursuant to Section 262 of the DGCL) of your shares of common stock determined by the Court of Chancery of the State of Delaware and to receive payment based on that valuation instead of receiving the merger consideration. The ultimate amount you would receive in an appraisal proceeding may be more than, the same as or less than the amount you would have received under the merger agreement. To exercise your appraisal rights, you must comply with the requirements of the DGCL. See “Appraisal Rights of Stockholders” beginning on page 84 of this proxy statement and the text of the Delaware appraisal rights statute, Section 262 of the DGCL, which is reproduced in its entirety as Annex G to this proxy statement.
Q:
What vote is required to approve and adopt the merger agreement?
A:
Under Delaware law, stockholders holding at least a majority of the shares of GAIN common stock outstanding at the close of business on the record date must vote “FOR” the merger proposal. In addition, under the merger agreement, the receipt of such required vote is a condition to the consummation of the merger. A failure to vote your shares of GAIN common stock or an abstention from voting will have the same effect as a vote against the merger proposal.
Additionally, concurrently with and as a condition to INTL’s execution of the merger agreement, on February 26, 2020, INTL entered into separate voting agreements with each of the supporting stockholders, pursuant to which the supporting stockholders agreed, among other things, and subject to the terms set forth in the voting agreements, to vote shares of GAIN common stock that represent, as to all such agreements in the aggregate, approximately 44% of GAIN common stock, in favor of the adoption of the merger agreement and each of the other actions contemplated by the merger agreement and the merger. See “Voting Agreements” beginning on page 80, for a description of these agreements.
Q:
What vote is required to approve, on a non-binding, advisory basis, certain compensation that will or may be paid by GAIN to its named executive officers that is based on or otherwise relates to the merger?
A:
The named executive officer merger-related compensation proposal, approval of which is not required to complete the merger, requires that the number of votes cast in favor of the proposal exceed the number of votes opposing the proposal measured by the stock power in attendance via the virtual meeting website or represented by proxy at the special meeting (provided a quorum is present or represented by proxy).
Q:
What vote is required to approve the proposal to adjourn the special meeting, including if necessary to solicit additional proxies in favor of the proposal to approve and adopt the merger agreement if there are not sufficient votes at the time of such adjournment to approve and adopt the merger agreement?
A:
The proposal to adjourn the special meeting, the approval of which is not required to complete the merger, requires that the number of votes cast in favor of the proposal exceed the number of votes opposing the proposal measured by the stock power in attendance via the virtual meeting website or represented by proxy and entitled to vote at the special meeting (whether or not a quorum is present).
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Q:
Do any of GAIN’s directors or officers have interests in the merger that may differ from or be in addition to my interests as a shareholder?
A:
In considering the recommendation of the board with respect to the merger proposal, you should be aware that our directors and executive officers have certain interests in the merger that may be different from, or in addition to, the interests of our GAIN stockholders generally. The GAIN board of directors was aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement and the merger, and in recommending that the merger agreement be approved by the shareholders of GAIN. See “The Merger—Interests of GAIN’s Directors and Executive Officers in the Merger” beginning on page 51 and “Advisory Vote on Named Executive Officer Merger-Related Compensation (Proposal 2)” beginning on page 88.
Q:
When do you expect the merger to be completed?
A:
In order to complete the merger, GAIN must obtain the stockholder approval of the proposal to adopt the merger agreement described in this proxy statement and the other closing conditions under the merger agreement must be satisfied or waived. The parties to the merger agreement currently expect to complete the merger in mid-2020, although GAIN cannot assure completion by any particular date, if at all. Because the merger is subject to a number of conditions, the exact timing of the merger cannot be determined at this time.
Q:
What conditions must be satisfied to complete the merger?
A:
There are several conditions which must be satisfied to complete the merger, including, among other things, the expiration or termination of any applicable waiting period under the HSR Act, compliance with certain other regulatory filings and obtaining certain other regulatory approvals. The obligation of each party to consummate the merger is also conditioned on the other party’s representations and warranties being true and correct (subject generally to a material adverse effect standard, with different standards applicable to certain representations and warranties) and the other party having performed in all material respects its obligations under the merger agreement (subject to certain qualifications). Consummation of the merger is not subject to any financing condition.
Q:
What happens to the rights agreement as a result of the merger agreement and the merger?
A:
In connection with the merger, on February 26, 2020, in connection with the transactions contemplated by the merger agreement, GAIN entered into an Amendment No. 3 (the “rights agreement amendment”) to the Rights Agreement dated as of April 9, 2013 (as amended by Amendment No. 1 dated as of April 8, 2016, and further amended by Amendment No. 2 dated as of April 8, 2019) (the “rights agreement”), by and between GAIN and Broadridge Corporate Issuer Solutions, Inc., a Delaware corporation. The rights agreement amendment provides, among other things, that neither the approval, execution, delivery or adoption of the merger agreement or the voting agreements, nor the announcement or the consummation of the transactions contemplated by the merger agreement or the voting agreements, will (a) cause a Section 9(a)(ii) Event (as defined in the rights agreement) to occur, (b) cause INTL, Merger Sub or any of their Affiliates (as defined in the rights agreement) or Associates (as defined in the rights agreement) to become an Acquiring Person (as defined in the rights agreement) or (c) give rise to a Stock Acquisition Date (as defined in the rights agreement) or Distribution Date (as defined in the rights agreement). Additionally, upon the consummation of the merger, the rights issued under the rights agreement to acquire shares of GAIN common stock (the “rights”) will not be exercisable and will expire in their entirety. The rights agreement will terminate immediately prior to the effective time (but only if the effective time occurs) without any consideration payable therefor or in respect thereof.
Q:
Why am I being asked to consider and act upon a proposal to approve, on a non-binding, advisory basis, certain compensation that will or may be paid by GAIN to its named executive officers that is based on or otherwise relates to the merger?
A:
SEC rules require GAIN to seek a non-binding, advisory vote to approve any agreements or understandings and compensation that will or may be paid by GAIN to its named executive officers in connection with the merger. Approval of this proposal by GAIN’s stockholders is not required to complete the merger.
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Q:
Do you expect the merger to be taxable to GAIN stockholders?
A:
The exchange of GAIN common stock for cash in the merger will be a taxable transaction for U.S. federal income tax purposes and may also be taxable under state and local and other tax laws. You should read the section entitled “Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 93 of this proxy statement and consult your tax advisors regarding the U.S. federal income tax consequences of the merger to you in your particular circumstances, as well as tax consequences arising under the laws of any state, local or foreign taxing jurisdiction.
Q:
Who is entitled to vote at the special meeting?
A:
The record date for the special meeting is April 23, 2020. Only stockholders of record at the close of business on that date are entitled to attend and vote at the special meeting or any adjournment or postponement thereof. The only class of stock that can be voted at the meeting is GAIN common stock. Each outstanding share of GAIN common stock is entitled to one vote on all matters that come before the meeting. At the close of business on the record date, there were 37,803,516 shares of GAIN common stock issued and outstanding, approximately 6.89% of which were held by GAIN’s directors and executive officers. We currently expect that seven out of eight of GAIN’s directors and all executive officers will vote their shares in favor of the proposal to approve and adopt the merger agreement and the other proposals to be considered at the special meeting, although no director or executive officer is obligated to do so, with the exception of Glenn H. Stevens who has signed a voting agreement. See “Voting Agreements” beginning on page 80 for a discussion of the terms of the voting agreements.
Q:
Who may attend the special meeting?
A:
Only stockholders as of the close of business on April 23, 2020, or their duly appointed proxies, and invited guests of GAIN may attend the meeting via the virtual meeting website. “Street name” holders (those whose shares are held through a broker, bank or other nominee) who wish to vote at the special meeting must obtain a proxy, executed in your favor, from your broker, bank or other nominee giving you the right to vote your shares at the special meeting.
Q:
Who is soliciting my vote?
A:
The GAIN board is soliciting your proxy, and GAIN will bear the cost of soliciting proxies. MacKenzie Partners has been retained to assist with the solicitation of proxies. MacKenzie Partners will be paid a solicitation fee of approximately $15,000 and will be reimbursed for its reasonable out-of-pocket expenses for these and other advisory services in connection with the special meeting. Solicitation initially will be made by mail. Forms of proxies and proxy materials may also be distributed through brokers, custodians, and other like parties to the beneficial owners of shares of GAIN common stock, in which case these parties will be reimbursed for their reasonable out-of-pocket expenses. Proxies may also be solicited in person or by telephone, facsimile, electronic mail or other electronic medium by MacKenzie Partners or, without additional compensation, by certain of GAIN’s directors, officers and employees.
Q:
What do I need to do now?
A:
Carefully read and consider the information contained in and incorporated by reference into this proxy statement, including its annexes. Whether or not you expect to attend the special meeting, please submit a proxy to vote your shares as promptly as possible so that your shares may be represented and voted at the special meeting.
Q:
How do I vote if my shares are registered directly in my name?
A:
If you are a stockholder of record, there are four methods by which you may vote at the special meeting:
Internet: To vote over the internet, log on to the voting site indicated on your proxy card. If you vote over the internet, you do not have to mail in a proxy card.
Telephone: To vote by telephone, call the toll-free number indicated on your proxy card. If you vote by telephone, you do not have to mail in a proxy card.
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Mail: To vote by mail, complete, sign and date a proxy card and return it promptly in the postage paid envelope provided. If you return your signed proxy card to us before the special meeting, we will vote your shares as you direct.
Virtually During Meeting: To vote your shares during the special meeting, click on the vote button provided on the screen and follow the instructions provided. If you encounter any difficulties accessing the special meeting during the check-in or meeting time, please call the technical support number that will be posted on the log in page.
Whether or not you plan to attend the meeting, we urge you to vote by proxy, whether by internet, by telephone or by mail, to ensure your vote is counted. You may still attend the meeting and vote your shares via the virtual meeting website, even if you have already voted by proxy. If you later decide to vote at the special meeting, your proxy prior to the special meeting will be revoked. Please choose only one method to cast your vote by proxy. We encourage you to vote over the internet, which is a convenient, cost-effective and reliable alternative to returning a proxy card by mail.
Q:
How do I vote if my shares are held in the name of my broker (street name)?
A:
If your shares are held by your broker, bank or other nominee, often referred to as held in “street name,” you will receive a form from your broker, bank or other nominee seeking instruction as to how your shares should be voted. You should contact your broker, bank or other nominee with questions about how to provide or revoke your instructions.
Q:
Can I change my vote after I submit my proxy?
A:
Yes. You can change or revoke your proxy at any time before the final vote at the special meeting or any adjournment or postponement thereof. If you are the record holder of your shares, you may change or revoke your proxy in any one of three ways:
You may submit another properly completed proxy bearing a later date, whether over the internet, by telephone or by mail;
You may send a written notice prior to the special meeting (or any adjournment or postponement thereof) that you are revoking your proxy to the Office of the Corporate Secretary, GAIN Capital Holdings, Inc., Bedminster One, 135 Route 202/206, Bedminster, New Jersey 07921; or
You may attend the special meeting (or any adjournment or postponement thereof) and vote via the virtual meeting website.
If your shares are held by your broker, bank or other nominee, you will have to follow the instructions provided by your broker, bank or other nominee to change or revoke your proxy.
If you have questions about how to vote or change your vote, please contact MacKenzie Partners, the firm assisting us in the solicitation of proxies, toll-free at (800) 322-2885. Banks and brokers may call collect at (212) 929-5500.
Q:
What happens if I sell my shares of GAIN common stock before the special meeting?
A:
The record date for the special meeting is earlier than the expected date of the merger. If you own shares of common stock as of the close of business on the record date but transfer your shares prior to the date of the special meeting, you will retain your right to vote at the special meeting, but the right to receive the merger consideration will pass to the person who holds your shares immediately prior to the effective time of the merger.
Q:
What happens if I sell my shares of GAIN common stock after the special meeting but before the effective time?
A:
If you transfer your shares after the special meeting but before the effective time, you will have transferred the right to receive the merger consideration to the person to whom you transfer your shares. In order to receive the merger consideration, you must hold your shares of common stock through completion of the merger.
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Q:
Should I send in my stock certificates now?
A:
No. If the merger is completed, the exchange agent for the merger will send you a letter of transmittal and instructions for exchanging your shares of GAIN common stock for the merger consideration.
PLEASE DO NOT SEND ANY STOCK CERTIFICATES WITH YOUR PROXY OR OTHERWISE SEND THEM TO GAIN, INTL OR THE PROXY SOLICITOR.
Q:
How many shares must be present to constitute a quorum for the meeting?
A:
The presence at the special meeting, by attendance via the virtual meeting website or by proxy, of the holders of a majority of the shares of GAIN common stock issued and outstanding and entitled to vote at the close of business on the record date will constitute a quorum. There must be a quorum for business to be conducted at the special meeting. Failure of a quorum to be present at the special meeting will necessitate an adjournment or postponement and will subject GAIN to additional expense.
Q:
What if I abstain from voting?
A:
If you attend the special meeting or send in your signed proxy card, but abstain from voting on any proposal, your shares will still be counted for purposes of determining whether a quorum exists. If you abstain from voting on the proposal to approve and adopt the merger agreement at the special meeting, it will have the same effect as a vote “AGAINST” such proposal. If you abstain from voting on the other two proposals, it will have no effect on the outcome of such proposals.
Q:
Will my shares be voted if I do not sign and return my proxy card or vote over the internet, by mail, by telephone or by attendance via the virtual meeting website?
A:
If you are a registered stockholder and you do not sign and return your proxy card or vote over the internet, by telephone, by mail or by attendance via the virtual meeting website, your shares will not be voted at the special meeting and will not be counted for purposes of determining whether a quorum exists.
If your shares are held in street name and you do not issue instructions to your broker, bank or other nominee, your broker, bank or other nominee may vote your shares at its discretion on routine matters, but may not vote your shares on non-routine matters. Under NYSE rules, all of the proposals in this proxy statement are non-routine matters. Accordingly, if your shares are held in “street name” and you do not issue instructions to your broker, bank or other nominee, your shares will not be voted at the special meeting and will not be counted for purposes of determining whether a quorum exists.
If you fail to complete, sign, date and return your proxy card by mail, or vote via the internet, by telephone or by attendance via the virtual meeting website, it will have the same effect as a vote “AGAINST” the proposal to approve and adopt the merger agreement, but will have no effect on the other proposals.
Q:
What is a broker non-vote?
A:
Broker non-votes are shares held by brokers and other record holders that are present or represented by proxy at the special meeting, but with respect to which the broker or other record holder is not instructed by the beneficial owner of such shares how to vote on a particular proposal and the broker does not have discretionary voting power on such proposal. Because brokers and other record holders do not have discretionary voting authority with respect to any of the three proposals described in this proxy statement, if a beneficial owner of shares of GAIN common stock held in “street name” does not give voting instructions to the broker or other holder of record, then those shares will not be present or represented by proxy at the special meeting. As a result, it is expected that there will not be any broker non-votes in connection with any of the three proposals described in this proxy statement.
If you do not instruct your broker, bank or other nominee to vote your shares, your shares will not be voted and the effect will be the same as a vote “AGAINST” the proposal to approve and adopt the merger agreement. However, a failure to instruct your broker, bank or other nominee to vote on the non-binding proposal regarding merger-related compensation for GAIN’s named executive officers (assuming a quorum is present) or the proposal to adjourn the special meeting, including if necessary to solicit additional proxies for the approval and adoption of the merger agreement, will have no effect on the outcome of such proposals.
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Q:
Will my shares held in “street name” or another form of record ownership be combined for voting purposes with shares I hold of record?
A:
No. Because any shares you may hold in “street name” will be deemed to be held by a different stockholder than any shares you hold of record, any shares so held will not be combined for voting purposes with shares you hold of record. Similarly, if you own shares in various registered forms, such as jointly with your spouse, as trustee of a trust or as custodian for a minor, you will receive, and will need to sign and return, a separate proxy card for those shares because they are held in a different form of record ownership. Shares held by a corporation or business entity must be voted by an authorized officer of the entity. Shares held in an individual retirement account must be voted under the rules governing the account.
Q:
What does it mean if I receive more than one set of proxy materials?
A:
This means you own shares of GAIN common stock that are registered under different names or are in more than one account. For example, you may own some shares directly as a stockholder of record and other shares through a broker or you may own shares through more than one broker. In these situations, you will receive multiple sets of proxy materials. You must vote, sign and return all of the proxy cards or follow the instructions for any alternative voting procedure on each of the proxy cards that you receive in order to vote all of the shares you own. Each proxy card you receive comes with its own prepaid return envelope. If you submit your proxy by mail, make sure you return each proxy card in the return envelope that accompanies that proxy card.
Q:
Who will count the votes?
A:
A representative from Broadridge Financial Solutions, Inc. (“Broadridge”) will serve as the inspector of election.
Q:
Can I participate if I am unable to attend the special meeting?
A:
If you are unable to attend the meeting, we encourage you to complete, sign, date and return your proxy card or to vote over the internet or by telephone.
Q:
Where can I find the voting results of the special meeting?
A:
GAIN intends to announce preliminary voting results at the special meeting and publish final results in a Current Report on Form 8-K that will be filed with the SEC following the special meeting. All reports that GAIN files with the SEC are publicly available when filed.
Q:
What happens if the merger is not completed?
A:
If the merger agreement is not approved and adopted by GAIN stockholders or if the merger is not completed for any other reason, GAIN stockholders will not receive any payment for their shares of GAIN common stock in connection with the merger. Instead, GAIN will remain an independent public company and shares of GAIN common stock will continue to be listed and traded on the NYSE.
The merger agreement provides that, upon termination of the merger agreement under certain circumstances, GAIN will be required to pay to INTL a termination fee of $9 million. Additionally, upon termination of the merger agreement in certain other circumstances, GAIN will reimburse INTL and its affiliates, no later than two business days after submission of documentation therefor, for 100% of their reasonable out-of-pocket fees and expenses (including all reasonable fees and expenses of counsel, accountants, investment banking firms and other financial advisors, experts and consultants) actually incurred in connection with or related to the transactions; provided that the amount of such reimbursement will not exceed $3,500,000 in aggregate.
See the section entitled “The Merger Agreement—Termination Fee Payable by GAIN” beginning on page 78 of this proxy statement for a discussion of the circumstances under which such a termination fee will be required to be paid.
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Q:
How can I obtain additional information about GAIN?
A:
GAIN will provide copies of this proxy statement and its 2019 Annual Report to Stockholders, including its Annual Report on Form 10-K for the fiscal year ended December 31, 2019, without charge to any stockholder who makes a written request to our Corporate Secretary at GAIN Capital Holdings, Inc., Bedminster One, 135 Route 202/206, Bedminster, New Jersey 07921. GAIN’s Annual Report on Form 10-K and other SEC filings may also be accessed at www.sec.gov or on the Investor Relations section of GAIN’s website at www.gaincapital.com. GAIN’s website address is provided as an inactive textual reference only. The information provided on or accessible through our website is not part of this proxy statement and is not incorporated in this proxy statement by reference by this or any other reference to our website provided in this proxy statement.
Q:
How many copies of this proxy statement and related voting materials should I receive if I share an address with another stockholder?
A:
The SEC has adopted rules that permit companies and intermediaries, such as 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 annual report or proxy statement, as applicable, addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially provides extra convenience for stockholders and cost savings for companies.
GAIN and some brokers may be householding our proxy materials by delivering proxy materials to multiple stockholders who request a copy and share an address, unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker or us that they or we will be householding materials to your address, householding will continue until you are notified otherwise or until you revoke your consent. If at any time you no longer wish to participate in householding and would prefer to receive a separate proxy statement and annual report, please notify your broker if your shares are held in a brokerage account or GAIN if you are a stockholder of record. You can notify us by sending a written request to GAIN Capital Holdings, Inc., Bedminster One, 135 Route 202/206, Bedminster, New Jersey 07921 Attn: Corporate Secretary, or calling (908) 731-0700. Stockholders who share a single address, but receive multiple copies of the proxy statement, may request that in the future they receive a single copy by notifying GAIN at the telephone and address set forth in the prior sentence. In addition, GAIN will promptly deliver, upon written or oral request to the address or telephone number above, a separate copy of the proxy statement to a stockholder at a shared address to which a single copy of the documents was delivered pursuant to a prior request.
Q:
Whom should I contact if I have any questions?
A:
If you have questions about the merger or the other matters to be voted on at the special meeting or desire additional copies of this proxy statement or additional proxy cards or otherwise need assistance voting, you should contact:

1407 Broadway, 27th Floor
New York, NY 10018
Stockholders May Call Toll-Free: (800) 322-2885
Banks & Brokers May Call Collect: (212) 929-5500
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CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement, and the documents incorporated by reference or otherwise referred to in this proxy statement, contain forward-looking statements within the meaning of the U.S. federal securities laws, including, without limitation, statements regarding management’s expectations, beliefs, intentions or future strategies that are signified by the words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “potential,” “predicts,” “projects” or similar words or phrases, although not all forward-looking statements contain such identifying words. Investors and security holders are cautioned not to place undue reliance on these forward-looking statements, which are based on information available to GAIN on the date of the merger agreement. Although these expectations may change, GAIN assumes no obligation to update or revise publicly any forward-looking statements whether as a result of new information, future events or otherwise. Forward-looking statements necessarily involve risks and uncertainties, many of which are outside of GAIN’s control, that could cause actual results to differ materially from such statements and from GAIN’s historical results and experience. These risks and uncertainties include such things as:
The occurrence of any event, change or other circumstance that could give rise to the termination of the merger agreement, including a termination of the merger agreement under circumstances that could require GAIN to pay a termination fee;
The failure to receive, on a timely basis or otherwise, the required approvals by GAIN stockholders with regard to the merger agreement;
The risk that a closing condition to the merger agreement may not be satisfied;
GAIN’s and INTL’s ability to complete the proposed merger on a timely basis or at all;
The failure of the merger to be completed on a timely basis or at all for any other reason;
The risks that GAIN’s business may suffer as a result of uncertainties surrounding the merger;
The ability of GAIN to retain and hire key personnel and maintain relationships with customers, suppliers and other business partners pending the consummation of the merger;
The possibility of disruption to GAIN’s business from the proposed merger, including increased costs and diversion of management time and resources;
Limitations placed on GAIN’s ability to operate its business under the merger agreement;
General economic conditions;
The outcome of any legal proceedings that may be instituted against GAIN or others relating to the merger agreement or the merger; and
Other financial, operational and legal risks and uncertainties detailed from time to time in GAIN’s SEC reports.
Additional information about risks and uncertainties, and about the material factors or assumptions underlying such forward-looking statements may be found under Part I, Item 1A in GAIN’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and under Part II, Item 1A in GAIN’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2019. GAIN cautions that the foregoing list of important factors that may affect future results is not exhaustive. When relying on forward-looking statements to make decisions with respect to the merger, stockholders and others should carefully consider the foregoing factors and other uncertainties and potential events. All subsequent written and oral forward-looking statements concerning the merger or other matters attributable to GAIN or any other person acting on its behalf are expressly qualified in their entirety by the cautionary statements referenced above. The forward-looking statements contained in this proxy statement speak only as of the date of this proxy statement. GAIN undertakes no obligation to update or revise any forward-looking statements for any reason, even if new information becomes available or other events occur in the future, except as may be required by law.
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THE COMPANIES
Gain Capital Holdings, Inc.
GAIN is a global provider of trading services and solutions, specializing in over-the-counter, or OTC, and exchange-traded markets. GAIN’s retail and futures segments service customers in more than 180 countries worldwide, and GAIN conducts business from its offices in Bedminster, New Jersey; New York, New York; Chicago, Illinois; Powell, Ohio; London, England; Tokyo, Japan; Sydney, Australia; Shanghai, China; Hong Kong; Dubai, U.A.E.; Krakow, Poland and Singapore.
GAIN’s principal executive office is located at Bedminster One, 135 Route 202/206, Bedminster, New Jersey 07921. GAIN’s telephone number is (908) 731-0700. GAIN’s internet website address is www.gaincapital.com. The information provided on the GAIN website is not part of this proxy statement and is not incorporated in this proxy statement by reference by this or any other reference to its website provided in this proxy statement.
Shares of GAIN common stock are listed and trade on the NYSE under the symbol “GCAP.”
INTL FCStone Inc.
INTL is a diversified global brokerage and financial services firm providing execution, risk management and advisory services, market intelligence and clearing services across asset classes and markets around the world. INTL helps its clients to access market liquidity, maximize profits and manage risk.
INTL’s principal executive office is located at 155 East 44th Street, Suite 900, New York, NY 10017. INTL’s telephone number is (212) 485-3500.
Shares of INTL common stock are listed and trade on the NASDAQ under the symbol “INTL.”
Golf Merger Sub I Inc.
Merger Sub is a wholly owned subsidiary of INTL and was formed in February 2020 solely for the purpose of completing the merger with GAIN. Merger Sub has not carried out any activities to date, except for activities incidental to its formation and activities undertaken in connection with the transactions contemplated by the merger agreement.
Merger Sub’s principal executive office is located at 155 East 44th Street, Suite 900, New York, NY 10017. Merger Sub’s telephone number is (212) 485-3500.
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THE SPECIAL MEETING
This proxy statement is being provided to the stockholders of GAIN as part of a solicitation of proxies by the GAIN board for use at the special meeting to be held at the time specified below, and at any properly convened meeting following an adjournment or postponement thereof. This proxy statement provides stockholders of GAIN with the information they need to know to be able to vote or instruct their vote to be cast at the special meeting or any adjournment or postponement thereof.
Date, Time and Place
The special meeting is scheduled to be held exclusively online via live webcast on June 5, 2020 at 2 p.m., Eastern Time. The special meeting can be accessed by visiting www.virtualshareholdermeeting.com/gcap2020SM, where you will be able to attend the special meeting, vote, and submit your questions during the special meeting. We encourage you to allow ample time for online check-in, which will open at 1:45 p.m., Eastern Time. Please note that you will not be able to attend the special meeting in person. We elected to use a virtual meeting given the current public health implications of COVID-19 (novel coronavirus) and our desire to promote the health and welfare of our stockholders.
Purpose of the Special Meeting
At the special meeting, GAIN stockholders will be asked to consider and vote on the following:
A proposal to approve and adopt the merger agreement, which is further described in the sections entitled “The Merger (Proposal 1)” and “The Merger Agreement,” beginning on pages 29 and 59, respectively, of this proxy statement;
A proposal to approve, on a non-binding, advisory basis, certain compensation that will or may be paid by GAIN to its named executive officers that is based on or otherwise relates to the merger, discussed under the section entitled “The Merger (Proposal 1)—Interests of GAIN’s Directors and Executive Officers in the Merger” beginning on page 51 of this proxy statement; and
A proposal to approve an adjournment of the special meeting, including if necessary to solicit additional proxies in favor of the proposal to approve and adopt the merger agreement, if there are not sufficient votes at the time of such adjournment to approve and adopt the merger agreement.
GAIN stockholders must approve and adopt the merger agreement for the merger to occur. If GAIN stockholders fail to approve and adopt the merger agreement, the merger will not occur. The vote on executive compensation payable in connection with the merger is a vote separate and apart from the vote to approve and adopt the merger agreement. Accordingly, a stockholder may vote to approve the executive compensation payable in connection with the merger and vote not to approve and adopt the merger agreement and vice versa. Because the vote on executive compensation is advisory in nature only, it will not be binding on either GAIN or INTL. Accordingly, because GAIN is contractually obligated to pay the compensation, the compensation will be payable, subject only to the conditions applicable thereto, if the merger agreement is approved and adopted and the merger is consummated, and regardless of the outcome of the advisory vote.
GAIN does not expect a vote to be taken on any other matters at the special meeting or any adjournment or postponement thereof. If any other matters are properly presented at the special meeting or any adjournment or postponement thereof for consideration, however, the holders of the proxies will have discretion to vote on these matters.
Recommendation of the GAIN Board of Directors
After careful consideration, the GAIN board, by a vote of seven to one, approved the merger agreement, the merger and the other transactions contemplated by the merger agreement. Certain factors considered by the GAIN board in reaching its decision to authorize and approve the merger agreement and the merger can be found in the section entitled “The Merger (Proposal 1)—GAIN’s Reasons for the Merger” beginning on page 38 of this proxy statement.
The GAIN board recommends that the GAIN stockholders vote “FOR” the proposal to approve and adopt the merger agreement, “FOR” the proposal to approve, on a non-binding, advisory basis, certain compensation that will or may be paid by GAIN to its named executive officers that is based on or
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otherwise relates to the merger and “FOR” the proposal to adjourn the special meeting, including if necessary to solicit additional proxies in favor of the proposal to approve and adopt the merger agreement, if there are not sufficient votes at the time of such adjournment to approve and adopt the merger agreement.
Record Date; Stockholders Entitled to Vote
Only holders of record of GAIN common stock at the close of business on April 23, 2020, the record date for the special meeting, will be entitled to notice of, and to vote at, the special meeting or any adjournments or postponements of the special meeting. At the close of business on the record date, 37,803,516 shares of GAIN common stock were issued and outstanding and held by 58 holders of record.
Holders of record of GAIN common stock are entitled to one vote for each share of GAIN common stock they own at the close of business on the record date.
Quorum
The presence at the special meeting, by attendance via the virtual meeting website or by proxy, of the holders of a majority of the shares of GAIN common stock issued and outstanding and entitled to vote at the close of business on the record date will constitute a quorum. Any shares of GAIN common stock held by GAIN are not considered to be outstanding for purposes of determining a quorum. There must be a quorum for business to be conducted at the special meeting. Failure of a quorum to be represented at the special meeting will necessitate an adjournment or postponement and will subject GAIN to additional expense. Once a share is represented at the special meeting, it will be counted for the purpose of determining a quorum at the special meeting and any adjournment of the special meeting. However, if a new record date is set for the adjourned special meeting, then a new quorum will have to be established. If you submit a properly executed proxy card, even if you abstain from voting, your shares will be counted for purposes of calculating whether a quorum is present at the special meeting.
Required Vote
Approval and adoption of the merger agreement requires the affirmative vote of a majority of the shares of GAIN common stock outstanding at the close of business on the record date. The proposal to adjourn the special meeting, including if necessary to permit further solicitation of proxies, requires that the number of votes cast in favor of the proposal exceed the number of votes opposing the proposal measured by the stock power in attendance via the virtual meeting website or represented by proxy and entitled to vote at the special meeting (whether or not a quorum is present). The proposal to approve, on a non-binding, advisory basis, certain compensation that will or may be paid by GAIN to its named executive officers that is based on or otherwise relates to the merger requires that the number of votes cast in favor of the proposal exceed the number of votes opposing the proposal measured by the stock power in attendance via the virtual meeting website or represented by proxy at the special meeting (provided that a quorum is present).
Abstentions and Broker Non-Votes
An abstention occurs when a stockholder attends a meeting, either by attendance via the virtual meeting website or by proxy, but abstains from voting. At the special meeting, abstentions will be counted in determining whether a quorum is present, and will be counted as a vote “AGAINST” the proposal to approve and adopt the merger agreement. At the special meeting, abstentions will have no effect on the outcomes of the proposal to adjourn the special meeting, including if necessary to permit further solicitation of proxies, and the advisory vote on named executive officer merger-related compensation.
If no instruction as to how to vote is given (including an instruction to abstain) in an executed, duly returned and not revoked proxy, the proxy will be voted “FOR” (i) the proposal to approve and adopt the merger agreement; (ii) the proposal to approve, on a non-binding, advisory basis, certain compensation that will or may be paid by GAIN to its named executive officers that is based on or otherwise relates to the merger; and (iii) the proposal to approve the adjournment of the special meeting, including if necessary to solicit additional proxies, if there are not sufficient votes at the time of such adjournment to approve and adopt the merger agreement.
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Broker non-votes are shares held by brokers and other record holders that are present or represented by proxy at the special meeting, but with respect to which the broker or other record holder is not instructed by the beneficial owner of such shares how to vote on a particular proposal and the broker does not have discretionary voting power on such proposal. Because brokers and other record holders do not have discretionary voting authority with respect to any of the three proposals described in this proxy statement, if a beneficial owner of shares of GAIN common stock held in “street name” does not give voting instructions to the broker or other holder of record, then those shares will not be present or represented by proxy at the special meeting. As a result, it is expected that there will not be any broker non-votes in connection with any of the three proposals described in this proxy statement. If you do not instruct your broker, bank or other nominee to vote your shares, your shares will not be voted and the effect will be the same as a vote “AGAINST” the proposal to approve and adopt the merger agreement. However, a failure to instruct your broker, bank or other nominee to vote on the proposal to adjourn the special meeting, including if necessary to solicit additional proxies for the approval and adoption of the merger agreement or, assuming a quorum is present, the proposal regarding the advisory vote on named executive officer merger-related compensation, will have no effect on the outcome of such proposals.
Failure to Vote
If you are a registered stockholder and you do not sign and return your proxy card or vote over the internet, by telephone or by attendance via the virtual meeting website, your shares will not be voted at the special meeting and will not be counted for purposes of determining whether a quorum exists. If you are the record owner of your shares and you fail to vote, it will have the same effect as a vote “AGAINST” the proposal to approve and adopt the merger agreement but will have no effect on the proposal to adjourn the special meeting (whether or not a quorum is present), including if necessary to permit further solicitation of proxies, and the advisory vote on named executive officer merger-related compensation (assuming a quorum is present).
Voting by GAIN’s Directors and Executive Officers
At the close of business on the record date, directors and executive officers of GAIN and their affiliates were entitled to vote 2,605,802 shares of GAIN common stock, or approximately 6.89% of the shares of GAIN common stock issued and outstanding on that date. We currently expect that seven of eight of GAIN’s directors and all executive officers will vote their shares in favor of the proposal to approve and adopt the merger agreement and the other proposals to be considered at the special meeting, although none of them is obligated to do so, with the exception of Glenn H. Stevens who has signed a voting agreement. See “Voting Agreements” beginning on page 80 for a discussion of the terms of the voting agreements.
Voting at the Special Meeting
To participate in the special meeting, visit www.virtualshareholdermeeting.com/gcap2020SM and enter the 16-digit control number included on your proxy card or on the instructions that accompanied your proxy materials. If you wish to submit a question during the special meeting, log into the virtual meeting website www.virtualshareholdermeeting.com/gcap2020SM, type your question into the “Ask a Question” field, and click “Submit.” If your question is properly submitted during the relevant portion of the meeting agenda, we will respond to your question during the live webcast.
If we experience technical difficulties during the special meeting (e.g., a temporary or prolonged power outage), we will determine whether the meeting can be promptly reconvened (if the technical difficulty is temporary) or whether the meeting will need to be reconvened on a later day (if the technical difficulty is more prolonged). In any situation, we will promptly notify stockholders of the decision via www.virtualshareholdermeeting.com/gcap2020SM. If you encounter technical difficulties accessing our meeting or asking questions during the special meeting, a support line will be available on the login page of the meeting website.
Please note that if your shares of GAIN common stock are held by a broker, bank or other nominee, and you wish to vote at the special meeting, you must obtain a proxy, executed in your favor, from your broker, bank or other nominee giving you the right to vote your shares at the special meeting.
You may also authorize the persons named as proxies on the proxy card to vote your shares by (i) signing, dating, completing and returning the proxy card by mail; (ii) over the internet; or (iii) by telephone. GAIN encourages you to vote over the internet as GAIN believes this is the most cost-effective method. We also
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recommend that you vote as soon as possible, even if you are planning to attend the special meeting, so that the vote count will not be delayed. The internet provides a convenient, cost-effective alternative to returning your proxy card by mail or voting by telephone. If you vote your shares over the internet, you may incur costs associated with electronic access, such as usage charges from internet access providers. If you choose to vote your shares over the internet, there is no need for you to mail back your proxy card.
To Vote Over the Internet:
To vote over the internet, log on to the voting site indicated on your proxy card. If you vote over the internet, you do not have to mail in a proxy card.
To Vote By Telephone:
To vote by telephone, call the toll-free number indicated on your proxy card. If you vote by telephone, you do not have to mail in a proxy card.
To Vote By Mail:
To vote by mail, complete, sign, date and return the enclosed proxy card and mail it to the address indicated on the proxy card.
If you return your signed proxy card without indicating how you want your shares of GAIN common stock to be voted with regard to a particular proposal, your shares of GAIN common stock will be voted in favor of each such proposal. Proxy cards that are returned without a signature will not be counted as present at the special meeting and cannot be voted.
If your shares are held by your broker, bank or other nominee, you will receive a form from your broker, bank or other nominee seeking instruction as to how your shares should be voted. You should contact your broker, bank or other nominee with questions about how to provide or revoke your instructions.
If you hold shares in more than one account, you may receive more than one proxy or voting instruction card. To be sure that all of your shares are represented at the meeting, you must submit your proxy or voting instructions with respect to each proxy or voting instruction card you receive.
Revocation of Proxies
You can revoke your proxy at any time before the final vote at the special meeting or any adjournment or postponement thereof. If you are the record holder of your shares, you may revoke your proxy in any one of three ways:
You may submit another properly completed proxy bearing a later date, whether over the internet, by telephone or by mail;
You may send a written notice prior to the special meeting (or any adjournment or postponement thereof) that you are revoking your proxy to the Office of the Corporate Secretary, GAIN Capital Holdings, Inc., Bedminster One, 135 Route 202/206, Bedminster, New Jersey 07921; or
You may attend the special meeting (or any adjournment or postponement thereof) and vote via the virtual meeting website.
If your shares are held by your broker, bank or other nominee, you will have to follow the instructions provided by your broker, bank or other nominee to revoke your proxy.
If you have questions about how to vote or change your vote, you should contact the firm assisting us with the solicitation of proxies, MacKenzie Partners, toll-free at (800) 322-2885. Banks and brokers may call collect at (212) 929-5500.
Shares Held in Name of Broker
If your shares are held by your broker, bank or other nominee, often referred to as held in “street name,” you will receive a form from your broker, bank or other nominee seeking instruction as to how your shares should be voted. You should contact your broker, bank or other nominee with questions about how to provide or revoke your instructions.
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Tabulation of Votes
A representative from Broadridge will serve as the inspector of election.
Solicitation of Proxies
The GAIN board is soliciting your proxy, and GAIN will bear the cost of soliciting proxies. MacKenzie Partners has been retained to assist with the solicitation of proxies. MacKenzie Partners will be paid a solicitation fee of approximately $15,000 and will be reimbursed for its reasonable out-of-pocket expenses for these and other advisory services in connection with the special meeting. Solicitation initially will be made by mail. Forms of proxies and proxy materials may also be distributed through brokers, custodians and other like parties to the beneficial owners of shares of GAIN common stock, in which case these parties will be reimbursed for their reasonable out-of-pocket expenses. Proxies may also be solicited in person or by telephone, facsimile, electronic mail, or other electronic medium by MacKenzie Partners or, without additional compensation, by certain of GAIN’s directors, officers and employees.
Adjournment
In addition to the proposal to approve and adopt the merger agreement and the advisory vote on named executive officer merger-related compensation, GAIN stockholders are also being asked to approve a proposal to, as permitted under the terms of the merger agreement, adjourn the special meeting for the purpose of soliciting additional proxies in favor of the proposal to approve and adopt the merger agreement if there are not sufficient votes at the time of the special meeting to approve and adopt the merger agreement. If this proposal is approved, the special meeting could be adjourned by GAIN. In addition, GAIN could postpone the meeting before it commences, whether for the purpose of soliciting additional proxies or for other reasons. If the special meeting is adjourned for the purpose of soliciting additional proxies, stockholders who have already submitted their proxies will be able to revoke them at any time prior to their use at the special meeting or any adjournment or postponement thereof. If you return a proxy and do not indicate how you wish to vote on any proposal, your shares will be voted in favor of such proposal.
The special meeting may be adjourned to another place, date or time, if the number of votes cast in favor of the proposal exceed the number of votes opposing the proposal measured by the stock power in attendance via the virtual meeting website or represented by proxy and entitled to vote at the special meeting (whether or not a quorum is present).
The GAIN board recommends a vote “FOR” the proposal to adjourn the special meeting, including if necessary to solicit additional proxies in favor of the proposal to approve and adopt the merger agreement, if there are not sufficient votes at the time of such adjournment to approve and adopt the merger agreement.
Other Information
You should not send documents representing GAIN common stock with the proxy card. If the merger is completed, the exchange agent for the merger will send you a letter of transmittal and instructions for exchanging your shares of GAIN common stock for the merger consideration.
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THE MERGER (PROPOSAL 1)
The discussion of the merger in this proxy statement is qualified in its entirety by reference to the merger agreement, a copy of which is attached to this proxy statement as Annex A and incorporated by reference into this proxy statement. You should read the merger agreement carefully as it is the legal document that governs the merger.
Effects of the Merger
Pursuant to the terms of the merger agreement, at the effective time of the merger, Merger Sub will be merged with and into GAIN in accordance with the DCGL. As a result of the merger, the separate existence of Merger Sub will cease, and GAIN will survive the merger as a wholly owned subsidiary of INTL.
At the effective time of the merger, each outstanding share of GAIN common stock (other than any shares held by GAIN (as treasury stock), INTL, Merger Sub or any other subsidiary of INTL or GAIN, or any stockholder who has properly demanded and not validly withdrawn appraisal rights in accordance with Delaware law) will be automatically converted into the right to receive $6.00 in cash, without interest and less any applicable withholding taxes.
Upon consummation of the merger, your shares of GAIN common stock will no longer be outstanding and will automatically be canceled and cease to exist in exchange for payment of the merger consideration described above unless you have properly demanded and not validly withdrawn appraisal rights in accordance with Delaware law. As a result, you will not own any shares of the surviving corporation, and you will no longer have any interest in its future earnings or growth. As a result of the merger, GAIN will cease to be a publicly-traded company and will be wholly owned by INTL. Following consummation of the merger, the surviving corporation will terminate the registration of GAIN common stock on the NYSE and GAIN will no longer be subject to reporting obligations under the Exchange Act.
Upon consummation of the merger, each outstanding stock option, restricted stock unit (whether subject to time-based or performance-based vesting) and share of restricted stock of GAIN will vest, be cancelled and the holder thereof paid, in each case based on the merger consideration. In the case of any restricted stock units subject to performance-based conditions for which the performance period has concluded, the number of shares underlying such units will be determined based on actual performance and in the case of performance-based restricted stock units for which the performance period has not concluded, the number of shares underlying such units will be determined based on “target” performance.
If, during the period between the date of the merger agreement and the effective time of the merger, any change in the outstanding shares of GAIN common stock occurs by reason of any reclassification, recapitalization, stock split or combination or any stock dividend thereon with a record date during such period, excluding any change that results from any exercise of options outstanding as of the date of the merger agreement to purchase shares of GAIN common stock granted under GAIN’s stock option or compensation plans or arrangements, the merger consideration will be appropriately adjusted.
Effects on GAIN If the Merger Is Not Completed
If the merger agreement is not approved and adopted by GAIN stockholders or if the merger is not completed for any other reason, GAIN stockholders will not receive any payment for their shares of GAIN common stock in connection with the merger. Instead, GAIN will remain an independent public company and shares of GAIN common stock will continue to be listed and traded on the NYSE. In addition, if the merger is not completed, GAIN stockholders will continue to be subject to the same risks and opportunities to which they are currently subject, including, without limitation, risks related to the industry in which GAIN operates, the servicing of GAIN’s debt, market volatility and adverse economic conditions.
Furthermore, if the merger is not completed, and depending on the circumstances that would have caused the merger not to be completed, it is likely that the price of GAIN common stock will decline significantly. If that were to occur, it is uncertain when, if ever, the price of GAIN common stock would return to the price at which it trades as of the date of this proxy statement.
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Accordingly, if the merger is not completed, there can be no assurance as to the effect of these risks and opportunities on the future value of your shares of GAIN common stock. If the merger agreement is not approved and adopted by GAIN stockholders or if the merger is not completed for any other reason, there can be no assurance that any other transaction acceptable to GAIN will be offered or that GAIN’s business, prospects or results of operation will not be adversely impacted.
In addition, the merger agreement provides that, upon termination of the merger agreement under certain circumstances, GAIN will be required to pay to INTL a termination fee of $9 million. Additionally, upon termination of the merger agreement, in some certain other circumstances, GAIN will reimburse INTL and its affiliates, no later than two business days after submission of documentation therefor, for 100% of their reasonable out-of-pocket fees and expenses (including all reasonable fees and expenses of counsel, accountants, investment banking firms and other financial advisors, experts and consultants) actually incurred in connection with or related to the transactions; provided that the amount of such reimbursement will not exceed $3,500,000 in aggregate.
See the section entitled “The Merger Agreement—Termination Fee Payable by GAIN” beginning on page 78 of this proxy statement for a discussion of the circumstances under which such a termination fee will be required to be paid.
Background of the Merger
The following chronology summarizes the key meetings and events that led to the signing of the merger agreement. The following chronology does not purport to catalogue every conversation among the GAIN board or the INTL board, or the representatives of each company, their respective advisors or any other persons.
As part of the ongoing evaluation of GAIN’s business, members of GAIN’s senior management and the GAIN board periodically review and assess GAIN’s operations, financial performance and industry conditions as they may each impact GAIN’s long-term strategic goals and plans, including a review of potential opportunities to maximize stockholder value.
On January 14, 2019, at the request of a representative of a potential counterparty to a strategic transaction that we refer to as Party A in this proxy statement, Mr. Stevens, President and Chief Executive Officer of GAIN, and Mr. Rotsztain, Head of Corporate Development, General Counsel and Executive Vice President of GAIN, held an in-person meeting in New York with representatives of Party A regarding a possible strategic transaction between Party A and GAIN. Representatives of GAIN noted that they will discuss Party A’s interest with the GAIN board.
On January 28, 2019, Party A and GAIN entered into a mutual confidentiality agreement to facilitate further discussions between the parties regarding a potential strategic transaction. GAIN subsequently provided Party A with access to certain non-public information to facilitate its due diligence review.
On March 12, 2019, the GAIN board held a meeting via teleconference at which Mr. Stevens reviewed with the GAIN board the recent discussions with Party A. Representatives of GAIN’s senior management also attended the board meeting at the invitation of the board. The GAIN board authorized Mr. Stevens and other members of GAIN’s senior management to continue discussions with Party A with respect to a potential strategic transaction and, at the same time, take steps to engage GCA Advisors to provide advice to GAIN in relation to the possible strategic transaction with Party A and undertake a review of GAIN’s strategic alternatives.
On March 20, 2019, Mr. Stevens and Mr. Rotsztain held a meeting with representatives of Party A to confirm Party A’s continued interest in pursuing a strategic transaction with GAIN following certain adverse developments with respect to the trading price of Party A’s stock.
On March 21, 2019, the GAIN board held a meeting via teleconference, which (at the invitation of the GAIN board) was attended by certain members of GAIN senior management, to discuss and consider the engagement of GCA Advisors to conduct a review of GAIN’s strategic alternatives generally.
On April 2, 2019, the GAIN board held a meeting via teleconference, which, at the invitation of the GAIN board, was attended by certain members of GAIN senior management and Davis Polk & Wardwell LLP (“Davis Polk”), legal counsel to GAIN. Members of GAIN senior management reviewed with the GAIN board the terms of the proposed engagement of GCA Advisors to act as financial advisor to GAIN. Following a discussion, the GAIN board determined that it was advisable and in the best interests of GAIN and its
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stockholders to engage GCA Advisors on the terms described. The determination to engage GCA Advisors to act as GAIN’s financial advisor was based on, among other things, the qualifications, expertise, reputation and knowledge of GAIN’s business and affairs and the industry in which it operates. Mr. Stevens then provided the GAIN board with an update on discussions with Party A and the status of Party A’s due diligence on GAIN, which had continued since the last update to the GAIN board.
On April 4, 2019, a representative of a private equity firm which we refer to as a Party B in this proxy statement contacted Mr. Stevens to arrange a telephonic meeting, which was subsequently held on April 11, 2019 and at which the participants discussed a potential strategic transaction between Party B and GAIN.
On April 7, 2019, GAIN entered into engagement and indemnification letters with GCA Advisors on the terms previously approved by the GAIN board. Subsequently, on April 21, 2019, the GAIN board held a meeting that was attended by members of GAIN’s senior management and representatives of GCA Advisors at the invitation of the GAIN board, at which representatives of GCA Advisors reviewed and discussed with the board its plan for a review of GAIN’s strategic alternatives.
On April 23, 2019, the GAIN board held a meeting via teleconference, which, at the invitation of the GAIN board, was attended by certain members of GAIN senior management, GCA Advisors and Mr. Rhoten, a non-voting board observer appointed by IPGL Limited, which we refer to in this document as IPGL, pursuant to a stockholders agreement. Representatives of GCA Advisors reviewed with the board the strategic alternatives for GAIN, including reviewing potential counterparties to a strategic transaction with GAIN. The GAIN board authorized GAIN management and GCA Advisors to contact third parties to assess their level of interest in pursuing a potential strategic transaction with GAIN and also determined that, for purposes of expedited decision-making and providing expedited guidance to the GAIN management and GAIN’s advisors, it was advisable to form a committee of the board, the strategic process committee, to identify and evaluate potential strategic alternatives for GAIN which the full GAIN board will consider. The strategic process committee consisted of three independent directors: Messrs. Quick, Schenk and Sugden. All other members of the Board were invited to attend the committee meetings if they were available and so desired.
Between April 2019 and July 2019, the strategic process committee held 14 meetings, which certain members of GAIN senior management and representatives of GCA Advisors and Davis Polk were invited to attend as appropriate, to review potential counterparties to a strategic transaction with GAIN and oversee the strategic process review.
Between April and June 24, 2019, GAIN and Party A continued to exchange certain non-public information regarding the two companies in connection with a potential strategic transaction. In addition, during the same period, GCA Advisors and GAIN contacted six parties, including Party B, that had previously been reviewed by the GAIN board or the strategic process committee and identified as potentially interested in a strategic transaction with GAIN. Of those six parties, five parties entered into mutual confidentiality agreements with GAIN to facilitate further discussions between the parties regarding a potential strategic transaction. Four of those five parties subsequently received access to a virtual data room containing certain non-public information regarding GAIN’s business and three of those parties received presentations in person from GAIN management regarding the GAIN business. GCA Advisors, at the instruction of GAIN, requested all interested parties to submit preliminary indications of interest with respect to a potential strategic transaction with GAIN by June 21, 2019.
On May 5, 2019, Party A submitted a written, non-binding proposal to acquire all of GAIN’s outstanding shares of common stock for $6.00 to $7.00 per share in cash.
On May 6, 2019, the strategic process committee held a meeting via teleconference, which members of GAIN senior management and representatives of GCA Advisors and Davis Polk attended by invitation of the committee, to review and discuss the proposal received from Party A on May 5, 2019. Mr. Stevens and a representative of GCA Advisors reviewed with the committee the terms of the proposal received from Party A, which were discussed by the committee members. As a result of this discussion, the committee determined that the proposal from Party A was materially lower than what GAIN should reasonably expect to receive. After further discussion, the committee instructed GAIN’s senior management and GCA Advisors to inform Party A that the Company would not pursue further discussions of Party A’s proposal unless it was materially improved, which the management and GCA Advisors subsequently did.
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On May 23, 2019, in response to feedback from GCA Advisors on behalf of GAIN consistent with the strategic process committee’s instructions, representatives of Party A’s financial advisor communicated to GCA Advisors certain revisions to its proposal submitted to GAIN on May 5, 2019, which representatives of Party A and GAIN discussed.
On May 29, 2019, GAIN and Party B entered into a mutual confidentiality agreement in connection with the strategic alternatives process to facilitate the provision of certain non-public information regarding GAIN to Party B, which subsequently occurred.
Between June 12, 2019 and June 19, 2019, representatives of Party A and GAIN attended various due diligence meetings, in-person and by teleconference, to facilitate Party A’s due diligence with respect to GAIN.
On June 24, 2019, Party A submitted a revised, written non-binding proposal to acquire all of GAIN’s outstanding shares of common stock for an aggregate notional consideration of up to $7.75 per share, comprising (i) $6.50 per share in cash at closing, including $1.50 per share payable in the form of a special cash dividend and (ii) two contingent value rights, each entitling the holder to a payment of up to $0.625 in cash, depending upon satisfaction of certain performance standards in the 24 months following closing. In addition, as a condition to moving forward with Party A’s proposal, Party A requested a period of exclusive negotiations for 40 days.
On June 26, 2019, Party B submitted a written, non-binding proposal to acquire all of GAIN’s outstanding shares of common stock for $5.00 to $6.00 per share in cash.
On June 27, 2019, the strategic process committee held a meeting via teleconference, which members of GAIN senior management and representatives of GCA Advisors and Davis Polk attended by invitation of the committee. Mr. Stevens and representatives of GCA Advisors updated the committee on the status of the strategic alternatives process overall. Representatives of GCA Advisors then reviewed with the committee the proposals that had been submitted by Party A and Party B (which was materially lower than the proposal from Party A and not considered by the committee in detail), which were discussed in detail by the committee. After further discussion the committee determined that the proposal from Party A was inadequate and instructed representatives of GCA Advisors to inform Party A that the proposal was inadequate. Representatives of GCA Advisors, at the instruction of the committee, subsequently informed Party B that its offer significantly undervalued GAIN and was not a basis on which to continue pursuing a potential strategic transaction. Finally, the committee authorized GCA Advisors to contact 10-15 additional parties to assess their level of interest in pursuing a potential strategic transaction with GAIN.
On July 1, 2019, at the instruction of the committee, GCA Advisors informed Party A’s financial advisor that Party A’s proposal of June 24, 2019 undervalued GAIN and conveyed further reservations regarding the inclusion of contingent value rights as consideration in a transaction. In consultation with GAIN management and members of the strategic process committee, representatives of GCA Advisors discussed with Party A’s financial advisor potential solutions to address concerns with respect to Party A’s proposal, including increasing the aggregate notional consideration and including Party A stock in place of the proposed contingent value rights.
On July 2, 2019, representatives of Party A’s financial advisor informed GCA Advisors that Party A was not willing to include Party A’s stock as merger consideration and under no circumstances would the aggregate notional consideration (including any contingent value rights) be increased to $8.25. GCA Advisors conveyed the same to GAIN management and members of the strategic process committee.
On July 5, 2019, following discussions among representatives of Party A, GAIN and their respective financial advisors, Party A submitted a revised written, non-binding proposal to acquire all of GAIN’s outstanding shares of common stock, which proposal increased the aggregate notional consideration from $7.75 per share to $8.05 per share, by increasing the cash at closing from $6.50 to $6.60, and making certain changes to the terms of the portion of the consideration payable in contingent value rights. Party A’s proposal further provided that consideration payable to GAIN stockholders would potentially be reduced by certain payments by GAIN in respect of its convertible notes.
During the final days of June and the first half of July 2019, Party A continued to conduct limited due diligence on GAIN and its business and, at the same time, GAIN and Party A, together with their respective financial advisors, continued to discuss the terms of a potential strategic transaction. Over the same period, as
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requested by the committee at the June 27, 2019 meeting, GCA Advisors contacted 15 additional parties to determine the level of interest that each such party might have in pursuing a strategic transaction involving GAIN. None of the contacted parties expressed an interest in such a transaction.
On July 9, 2019, Party A submitted a further revised written, non-binding proposal to acquire all of GAIN’s outstanding shares of common stock, which was the same as the July 4, 2019 proposal except in the following respects: (i) removal of any potential for the merger consideration to be reduced by payments by GAIN in respect of its convertible notes and (ii) $6.60 of cash at closing would be paid in full by Party A, and not in part in the form of a GAIN special dividend.
On July 10, 2019, the strategic process committee held a meeting via teleconference, which members of GAIN senior management and representatives of GCA Advisors and Davis Polk attended by invitation of the committee. Mr. Stevens and representatives of GCA Advisors updated the committee on the status of the strategic process and the committee discussed Party A’s latest proposal received on July 9, 2019.
Between July 10, 2019 and July 23, 2019, no further progress was made by the parties with respect to Party A’s latest proposal. During this time, representatives of GAIN attempted on several occasions to contact representatives of Party A to ascertain whether Party A was still interested in pursuing a strategic transaction with GAIN following its revised proposal of July 9, 2019, but such attempts were unsuccessful.
On July 23, 2019, the GAIN board held a regularly-scheduled meeting, which, at the invitation of the GAIN board, was attended by members of GAIN senior management and at which Mr. Rhoten was present in his capacity as a non-voting observer. Given the uncertain status of discussions with Party A and the fact that representatives of Party A had ceased engaging with GAIN following Party A’s revised proposal dated July 9, 2019, the GAIN board instructed Mr. Schenk, the Chairman of the GAIN board, to contact the chair of Party A to determine Party A’s level of interest in pursuing a potential strategic transaction with GAIN, which Mr. Schenk subsequently did.
On July 25, 2019, GAIN publicly released its financial results for the fiscal quarter ended June 30, 2019, during which period OTC trading volume declined by 31.7% compared to the same period of the prior fiscal year. GAIN reported a net income of $0.9 million or earnings of $0.02 per share of GAIN.
On July 30, 2019, the chair of the board of directors of Party A informed Mr. Schenk that Party A was terminating discussions with GAIN regarding a potential strategic transaction.
During July 2019, there were public reports that GAIN may be the subject of an acquisition offer from a potential acquirer, but no indications of interest were received as a result of such speculation.
During September, 2019 and October, 2019, at the direction of the strategic process committee and the GAIN board, GCA Advisors and GAIN approached 86 additional potential bidders to assess their level of interest in pursuing a potential strategic transaction with GAIN. Of those 86 parties, two parties executed mutual confidentiality agreements with GAIN and received access to a virtual data room containing certain non-public information regarding GAIN’s business, and, subsequently, one such party received a presentation from representatives of GAIN concerning GAIN’s business. During this period, no potential bidders contacted by GCA Advisors or GAIN submitted a formal indication of interest. On September 12, 2019, Party B informed GAIN that it was again willing to explore a potential strategic transaction with GAIN contingent upon conducting certain additional due diligence. GAIN and GCA Advisors promptly facilitated such additional due diligence.
On October 7, 2019, the GAIN board appointed John Douglas Rhoten to serve as a Class II Director of GAIN. Mr. Rhoten was appointed to the GAIN board pursuant to a director appointment right granted to IPGL under the stockholder agreement.
On October 22, 2019, the GAIN board held a meeting, which was attended in part, at the request of the GAIN board, by GCA Advisors. GCA Advisors reviewed with the board the status of the strategic alternatives process and discussion followed.
On October 24, 2019, GAIN publicly released its financial results for the fiscal quarter ended September 30, 2019, during which period OTC trading volume declined by 8.6% compared to the same period of the prior fiscal year. GAIN reported a net loss of $2.1 million or $0.06 per share of GAIN.
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Also on October 24, 2019, representatives of Jefferies LLC (“Jefferies”), on behalf of INTL, contacted Mr. Schenk and Mr. Stevens regarding a potential strategic transaction with GAIN and, later in the day, spoke with Mr. Schenk. Subsequently, on October 25, 2019, a representative of Jefferies spoke with Mr. Stevens in regard to setting up a meeting between Mr. Stevens and Mr. O’Connor.
On October 25, 2019, at the instruction of the GAIN board, a member of the GAIN board of directors contacted representatives of potential counterparty to a strategic transaction that we refer to as Party C, to assess its level of interest in pursuing a potential strategic transaction with GAIN. Party C subsequently executed a mutual confidential agreement on January 14, 2020, and was provided with access to GAIN’s virtual data room containing certain non-public information regarding GAIN’s business.
On November 4, 2019, Mr. Stevens and Mr. O’Connor, Chief Executive Officer of INTL, held a meeting, at the request of Mr. O’Connor, at which Mr. Stevens and Mr. O’Connor discussed the potential for a strategic transaction between GAIN and INTL. During such meeting, an indicative price of approximately $6.00 per share was suggested by Mr. O’Connor on a preliminary basis. Mr. Stevens promptly informed the members of the GAIN board of what was discussed with Mr. O'Connor. GAIN and INTL subsequently entered into a mutual confidentiality agreement on November 8, 2019 and INTL was thereafter provided access to the virtual data room, to facilitate the provision of non-public information concerning GAIN to INTL.
On December 5, 2019, representatives of Jefferies, financial advisor to INTL, communicated to GCA Advisors that INTL would be willing to submit a proposal to acquire GAIN for a price per share within a range that would not exceed $6.00. Jefferies made clear that there was no possibility that the range would extend above $6.00.
On December 9, 2019, the GAIN board held a meeting, via teleconference, which was attended (at the invitation of the GAIN board) by representatives of GAIN senior management and GCA Advisors. Representatives of GCA Advisors provided the board with an update on the strategic alternatives process, including with respect to the communication received from Jefferies, on behalf of INTL, on December 5, 2019. The GAIN board reviewed and discussed these developments and determined that any offer for GAIN below $6.00 would be inadequate and therefore in order to continue to pursue a strategic transaction with GAIN, INTL would need to make a proposal at a price of $6.00 per share or higher. The GAIN board then instructed GCA Advisors to inform INTL that it would only continue to engage with INTL if it submitted a proposal of not less than $6.00 per share, which GCA Advisors duly did.
On December 16, 2019, INTL submitted a written, non-binding proposal to acquire all of GAIN’s outstanding shares of common stock for $6.00 per share in cash.
On December 17, 2019, the board of GAIN held a meeting, via teleconference, which at the invitation of the board, was attended by certain members of GAIN senior management and representatives of GCA Advisors. Representatives of GCA Advisors reviewed with the GAIN board certain financial aspects of INTL’s proposal and potential alternatives to the proposed sale to INTL. The board noted that INTL had not requested exclusivity with respect to a potential transaction and therefore determined that GAIN and GCA Advisors should continue to contact parties to determine the level of interest that each such party might have in pursuing a strategic transaction with GAIN. Following further discussion, the GAIN board determined it was advisable and in the best interests of GAIN and its stockholders to continue discussions with INTL regarding a potential strategic transaction and to allow INTL to continue its due diligence investigation.
From late December 2019 onwards, representatives of GAIN and INTL held multiple in-person and teleconference meetings to facilitate INTL’s due diligence, including in-person due diligence meetings in Bedminster, New Jersey and London, United Kingdom.
During the same period, at the instruction of the GAIN board, representatives of GCA Advisors and GAIN contacted ten parties which had previously been contacted but, at that time, had declined to submit an indication of interest, to assess whether their level of interest in pursuing a strategic transaction involving GAIN had changed. None of the parties re-contacted expressed an interest in pursuing a potential strategic transaction with GAIN.
On January 8, 2020, representatives of Jefferies spoke with representatives of GAIN to discuss the preliminary diligence completed by INTL thus far. During such conversation, Jefferies indicated that INTL was
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considering reducing its proposed price per share of GAIN common stock below $6.00 and the GAIN representative indicated a belief that this would be poorly received by the GAIN board. Further due diligence meetings in-person and by teleconference were subsequently held.
On January 16, 2020, at the direction of the strategic process committee, representatives of GCA Advisors contacted Party B to ascertain its level of interest in continuing to pursue a potential strategic transaction with GAIN. Representatives of Party B informed GCA Advisors that it could no longer support its previous indication of interest in acquiring GAIN at a range per share of $5.00-$6.00. On the basis of the foregoing, discussions between Party B and GAIN did not proceed.
On January 29, 2020, representatives of GAIN and INTL held a teleconference call, with Davis Polk and DLA Piper LLP (US) (“DLA”), legal counsel to INTL, in attendance, to discuss responsibility for preparing the initial draft of the merger agreement and the process to ascertain which regulatory approvals and filings would be required in connection with the potential strategic transaction. INTL and GAIN discussed the timetable for the potential strategic transaction and GAIN’s proposal that a potential strategic transaction be announced prior to, or concurrently with, GAIN’s planned announcement of its financial results for the fiscal quarter ended December 31, 2019, at the end of February. INTL agreed to work towards this timetable. At the request of GAIN, INTL confirmed that it had sufficient cash-on-hand to pay the $6.00 per share in cash merger consideration but that it was exploring the possibility of obtaining third-party debt financing for the transaction. INTL informed GAIN that, as condition to signing a definitive merger agreement, it would require GAIN’s major shareholders to enter into voting and support agreements agreeing to vote in favor of the potential transaction.
On February 1, 2020, a financial news website reported that GAIN had received an approach from INTL and that there had been discussions between the parties.
On February 3, 2020, the GAIN board held a telephonic meeting, which was also attended, at the invitation of the GAIN board, by members of GAIN’s senior management and representatives from GCA Advisors and Davis Polk. Representatives of GCA Advisors provided the GAIN board with an update on their contacts with third parties to determine their level of interest in a strategic transaction involving GAIN, and certain directors who, at the request of the GAIN board, had also initiated contact with certain potentially interested parties due to their industry knowledge and contacts, provided an update on their interactions with such third parties. The board then debated whether or not to proactively contact certain parties that had already been contacted by GAIN and/or GCA Advisors on at least one occasion to ascertain whether any such party’s level of interest in pursuing a potential strategic transaction involving GAIN had changed. After a discussion, the board determined that, given that such parties had already been contacted at least once and had chosen not to pursue a potential strategic transaction, such attempts to re-contact parties were not in the best interest of GAIN and its stockholders at such time. Davis Polk then reviewed with the directors the fiduciary duties applicable to the GAIN board’s consideration of a potential change of control transaction such as the potential merger with INTL, under Delaware law. Davis Polk then reviewed with the directors the terms of the draft merger agreement proposed to be delivered to INTL. In particular, Davis Polk reviewed with the board the ‘no-shop’ provisions within the merger agreement that would prevent GAIN and its advisors from soliciting any acquisition proposals once the merger agreement with INTL was signed. The GAIN board asked questions and engaged in a discussion of the terms of the merger agreement and determined that the inclusion of a ‘no-shop’ from signing was appropriate given the number of parties contacted by GCA Advisors and GAIN as part of the strategic alternatives process as well as the GAIN board’s ability to terminate the merger agreement and enter into a superior transaction in connection with its exercise of its fiduciary duties, as contemplated by the terms of the merger agreement. Davis Polk also reported to the board that INTL had requested that GAIN’s key shareholders, including VantagePoint Capital Partners and IPGL, enter into voting and support agreements in connection with the potential transaction as a condition to INTL proceeding with the potential transaction. After a discussion, the board was supportive of proceeding as discussed and instructed Davis Polk to deliver the draft merger agreement to INTL and its counsel, DLA. Mr. Stevens and Mr. Rotsztain then provided the board with an update regarding INTL’s due diligence activities. Finally, members of GAIN senior management provided the GAIN board with an update on the recent performance of the GAIN business, which was discussed by the board.
On February 4, 2020, at the instruction of the GAIN board, Davis Polk sent DLA the initial draft of the merger agreement as described to the board. From February 4, 2020 to February 26, 2020, GAIN, assisted by its advisors, and INTL, assisted by its advisors, negotiated the terms of a definitive merger agreement. Significant areas of discussion and negotiation included INTL’s proposed condition to closing that no more than 10% of
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GAIN shareholders had exercised appraisal rights, INTL’s proposed allocation of financing risk, GAIN’s ability to continue paying its regular quarterly dividend, the “no-shop” provisions and the size of the termination fee that would be payable by GAIN if its agreement with INTL is terminated in certain circumstances, the scope of INTL’s undertaking to obtain required regulatory approvals and various employee-related matters. During this time, members of INTL’s management and representatives of INTL’s advisors also performed additional due diligence and had numerous telephonic conversations with members of GAIN’s senior management regarding GAIN’s business and operations.
On February 8, 2020, DLA sent Davis Polk a revised draft of the merger agreement together with a draft form voting and support agreement to be entered into by certain GAIN shareholders. Representatives of GAIN, at the request of INTL, subsequently shared this draft voting and support agreement with IPGL and Vantage.
On February 11, 2020, Party C indicated it was not interested in pursuing a potential acquisition of GAIN.
On February 12, 2020, Mr. Stevens and Mr. O’Connor communicated via telephone and email concerning the proposal on certain key issues received from INTL in the revised draft of the merger agreement received from DLA on February 8, 2020, including the importance of closing certainty to GAIN (including GAIN’s request for the deletion of the condition to closing linked to the exercise of appraisal rights by GAIN shareholders), the so-called ‘force the vote’ provision, the size of the termination fee payable by GAIN under certain circumstances, the obligation of GAIN to reimburse INTL’s expenses under certain circumstances and the ability for GAIN to pay its regular quarterly dividend.
Later on February 12, 2020, DLA and Davis Polk held a conference call in which DLA communicated to Davis Polk certain changes to the merger agreement INTL was willing to make, including the removal of the closing condition linked to appraisal rights, the size of the termination fee, adding a cap on GAIN’s obligation to reimburse INTL’s expenses under certain circumstances, changes to the financing provisions to provide GAIN with greater closing certainty, the ability of GAIN to pay one regular quarterly dividend following signing of the merger agreement and the deletion of the ‘force-the-vote’ provision to the extent it relates to receipt of a superior proposal by GAIN. DLA reiterated that INTL was not willing to entertain a less restrictive ‘no-shop’ provision that it had proposed, which it viewed as critical to its willingness to undertake the transaction.
Between February 13, 2020 and February 20, 2020, GAIN and INTL continued to negotiate the terms of the merger agreement with the assistance of their advisors.
On February 20, 2020, representatives of INTL and GAIN held a teleconference call, attended by Davis Polk and DLA, to discuss certain key issues that remained outstanding in the merger agreement, including the scope of the regulatory efforts undertaking of INTL, the ability of INTL to ‘force the vote’, and for the voting agreements to be terminated, in each case, in circumstances where the GAIN board changed its recommendation to the GAIN shareholder in response to certain events unrelated to receipt of an acquisition proposal (a so-called, ‘Company Intervening Event’) and certain employee-related provisions.
On February 21, 2020, Davis Polk sent DLA a revised draft of the merger agreement.
On February 21, 2020, representatives of Jefferies informed representatives of GAIN that INTL required Mr. Stevens to enter into a voting agreement in connection with the potential transaction.
On February 21, 2020, Davis Polk sent DLA an initial draft of GAIN’s disclosure schedules to the merger agreement.
On February 23, 2020, DLA sent Davis Polk a revised draft of the merger agreement.
On February 24, 2020, Davis Polk sent DLA a draft amendment to GAIN’s rights agreement, pursuant to which the potential transaction would be excluded from the rights agreement.
Between February 24 and February 26, representatives of GAIN and INTL negotiated mutually acceptable resolutions to all the remaining material issues in the merger agreement.
On February 25, 2020, the GAIN board held a meeting, which was also attended by members of GAIN’s senior management and, by invitation of the GAIN board, representatives from GCA Advisors and Davis Polk. Prior to the meeting, the directors had received (i) the latest draft of the merger agreement, together with a summary thereof prepared by Davis Polk and (ii) fairness opinion materials prepared by GCA Advisors. GCA Advisors reviewed with the GAIN board the strategic review process it had undertaken at the request of the
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GAIN board and its financial analyses of the merger consideration in the proposed transaction with INTL. The financial analyses of the merger consideration in the proposed transaction with INTL were based on the January 2020 Projections prepared by GAIN senior management and approved for use by GCA Advisors by the GAIN board. Davis Polk then reviewed with the directors the fiduciary duties applicable to the GAIN board’s consideration of the merger agreement and the merger under Delaware law. Davis Polk then reviewed with the directors the terms of the merger agreement.
Also on February 25, 2020, Davis Polk sent DLA a revised draft of the voting and support agreement that INTL had requested Mr. Stevens enter into at signing, as a condition to INTL’s willingness to enter into the merger agreement.
On February 26, 2020, the GAIN board held a meeting, which was also attended by members of GAIN’s senior management and, by invitation of the GAIN board, representatives from GCA Advisors and Davis Polk. Prior to the meeting, the directors had received (i) a substantially final draft of the merger agreement, together with a summary thereof prepared by Davis Polk and (ii) fairness opinion materials prepared by GCA Advisors that had been shared during the February 25 board meeting. Also prior to the meeting, the GAIN board had been provided with a relationship disclosure letter provided by GCA Advisors. GCA Advisors reviewed again with the GAIN board the strategic review process it had undertaken at the request of the GAIN board and its financial analyses of the merger consideration in the proposed transaction with INTL that had been shared during the February 25 board meeting. GCA Advisors then orally delivered its opinion to the GAIN board, which was subsequently confirmed by the delivery of a written opinion dated February 26, 2020, addressed to the GAIN board to the effect that, as of the date of the opinion, and subject to the assumptions, qualifications and limitations set forth therein, the merger consideration of $6.00 per share to be received by the holders of GAIN common stock (other than as set forth in such opinion) pursuant to the merger agreement was fair, from a financial point of view, to such holders. Davis Polk then again reviewed with the directors the fiduciary duties applicable to the GAIN board’s consideration of the merger agreement and the merger under Delaware law. Davis Polk then reviewed with the directors the terms of the merger agreement. A discussion was then had by the directors, in which Mr. Goor, a director, expressed his view the proposed transaction with INTL was not in the best interests of GAIN and its stockholders as, when compared against the INTL offer, he considered remaining as a standalone company to be in the best interests of GAIN and its stockholders. Based on the discussions and deliberations at this meeting and prior meetings, the various discussions and reviews with Davis Polk and GCA Advisors, including financial analyses presented by GCA Advisors, and various other factors, including those described in “— GAIN’s Reasons for the Merger; Recommendation of the GAIN Board,” the GAIN board (1) determined that the merger agreement, the merger and the other transactions contemplated thereby were fair to, and in the best interests of, GAIN and its stockholders, (2) approved and declared advisable the execution and delivery thereof and (3) recommended that GAIN’s stockholders approve and adopt the merger agreement, the merger and the other transactions contemplated thereby. Mr. Goor voted against the aforementioned resolutions for the reasons he expressed to the board described above.
Later in the evening of February 26, 2020, GAIN and Broadridge executed the amendment to the rights agreement, and subsequently, GAIN, INTL and Merger Subsidiary entered into the merger agreement and concurrently therewith, INTL and the supporting stockholders entered into the voting agreements.
GAIN issued a press release publicly announcing the transaction prior to the NYSE market opening on February 27, 2017. Also prior to the NYSE market opening, GAIN publicly announced its fourth quarter and full year financial results for the fiscal quarter and full-year ended December 31, 2019, respectively, during which period OTC trading volume declined by 32.1% compared to the same period of the prior fiscal year. GAIN reported a net loss of $31.2 million, or loss of $0.83 per share of GAIN for the quarter.
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GAIN’s Reasons for the Merger
At a meeting duly called and held on February 26, 2020, the GAIN board determined, by a vote of seven to one, that the merger and the other transactions contemplated by the merger agreement are fair to, and in the best interests of, GAIN and its stockholders and approved and declared advisable the merger agreement and the merger and the other transactions contemplated by the merger agreement. The GAIN board also resolved that the merger agreement be submitted for consideration by the stockholders of GAIN at a special meeting of stockholders and to recommend that the stockholders of GAIN vote to adopt the merger agreement. The GAIN board consulted with GAIN’s outside financial and legal advisors and senior management at various times and considered a number of factors, including the following principal factors (not in any relative order of importance) that the GAIN board believed to support its decision:
GAIN’s business, current and projected financial performance and condition and future prospects in relation to the merger consideration of $6.00 per share,
the GAIN board’s belief that the merger was more favorable to GAIN’s stockholders than the alternative of remaining a standalone independent company, which belief was based on and informed by consideration of a number of factors, risks and uncertainties, including:
general industry, economic and market conditions, both on a historical and on a prospective basis,
the risks and uncertainties associated with maintaining GAIN’s performance as a standalone company, including, among other risks and uncertainties, generally unfavorable economic market and regulatory trends that have historically significantly adversely impacted GAIN’s business (which trends include low currency and general market volatility), narrow trading ranges in the products that GAIN offers, the adoption of new, more restrictive regulations in GAIN’s current markets and potential new markets, among other factors), regulatory uncertainty in certain jurisdictions, increasing cost of customer acquisition, continuing pricing pressure and the other risks and uncertainties described in GAIN’s SEC filings, and
the uncertain returns to GAIN’s stockholders if GAIN were to remain independent, taking into account, in particular, management’s financial projections of the future financial performance and earnings of GAIN, including those set forth below under “The Merger (Proposal 1)—Certain Financial Projections” and the risks involved in achieving those returns.
the GAIN board’s belief that the risks and challenges to GAIN’s business described above, and in GAIN’s SEC filings, create substantial execution risks relative to the $6.00 per share price in the merger,
the fact that, over more than a year leading up to the execution of the merger agreement, the GAIN board thoroughly explored and evaluated various strategic alternatives, including a sale of the whole company and remaining as a standalone public company, none of which alternatives was more favorable to GAIN’s stockholders than the merger,
the fact that GAIN’s exploration of strategic alternatives involved a lengthy and thorough auction process involving 108 potential bidders, in addition to INTL, which included both strategic and financial potential acquirors, eight of which, in addition to INTL, entered into mutual confidentiality agreements with GAIN and received information related to GAIN, but none of which resulted in a credible, financed alternative transaction other than the merger,
the fact that GAIN did not enter into any exclusivity arrangements with INTL and did not negotiate with INTL on a contractually exclusive basis,
the fact that on February 1, 2020 a potential transaction between GAIN and INTL became known to the public before it was signed and, following such date, GAIN’s board did not receive alternative proposals from any third party, as described further under “The Merger (Proposal 1)—Background of the Merger”,
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the current and historical market prices of GAIN common stock, including the market performance of GAIN common stock relative to other participants in GAIN’s industry and general market indices, and the fact that the merger consideration represented an attractive premium of approximately 70% to GAIN’s closing stock price on February 26, 2020, the last trading day before the announcement of the merger,
the opinion of GCA Advisors delivered orally to the GAIN board on February 26, 2020 and subsequently confirmed by a written opinion, dated as of the same date, addressed to the GAIN board to the effect that, as of the date of such opinion, and subject to the assumptions, qualifications and limitations set forth therein, the merger consideration to be received by the holders of GAIN common stock (other than as set forth in such opinion) pursuant to the merger agreement was fair, from a financial point of view, to such holders, as described further under “The Merger (Proposal 1) —Opinion of GAIN’s Financial Advisor” and Annex F to this proxy statement,
the fact that GAIN’s financial and legal advisors were involved throughout the process and negotiations and updated the GAIN board directly and regularly, which provided the GAIN board with additional perspectives on the negotiations in addition to those of GAIN’s management,
the fact that the merger consideration is all cash, so that the transaction will allow GAIN’s stockholders to realize a fair value, in cash, for their investment and provides such stockholders certainty of value for their shares, and
the material terms and conditions of the merger agreement, including:
the conditions to the consummation of the merger, including the requirement that the merger agreement be adopted by GAIN’s stockholders,
the GAIN board’s “fiduciary out” with respect to third-party acquisition proposals likely to result in superior proposals, the GAIN board’s ability to negotiate with another party regarding a superior proposal and, subject to paying a termination fee to INTL in the amount of $9 million, accept a superior proposal,
the GAIN board’s belief that, if triggered, the termination fee payable by GAIN to INTL is consistent with fees payable in comparable transactions and would not be likely to preclude another party from making a competing proposal,
the scope of the representations, warranties and covenants being made by GAIN, INTL or Merger Sub,
the fact that the merger agreement is not subject to a financing condition and, in particular, that INTL had represented that it had at signing of the merger agreement, or would have at the effective time, sufficient funds to pay the merger consideration,
GAIN’s ability to specifically enforce INTL’s obligation to cause the completion of the merger to occur,
the fact GAIN and INTL agreed to use their respective reasonable best efforts (except where the merger agreement specifies a different approach) to consummate the merger, including preparing and filing as promptly as practicable all necessary filings and obtaining certain specified regulatory approvals; INTL has further agreed to take any such actions that do not constitute a materially burdensome regulatory condition (as described in this proxy statement) in connection with the merger or the consummation of the merger.
The GAIN board also considered various potentially countervailing factors in its deliberations related to the merger, including the following principal factors (not in any relative order of importance):
the fact that the holders of common stock will not have an opportunity to participate in any future earnings or growth of the combined company following the merger,
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the possibility that the merger might not be completed and the effect the termination of the transaction may have on the trading price of GAIN common stock, its business, operating results and prospects, which effect is likely to be exacerbated the longer the time period between the signing and any termination of the merger agreement,
the fact that there was an improvement in GAIN’s operating results in 2020 (as compared to the same period in 2019), although the GAIN board also considered the uncertainty as to whether such trend was sustainable over any significant period,
that the voting agreements required by INTL cover approximately 44% of GAIN common stock and cannot be terminated unless the merger agreement is terminated as well,
that the merger agreement requires GAIN and its board to present the merger agreement for approval to its stockholders even if the GAIN board changes it recommendation and that the combination of the voting agreements described above with this obligation increases the probability of approval of the transaction even if the GAIN board determines in the future to change its recommendation and recommend against the merger and the transactions contemplated thereby,
that GAIN cannot solicit other acquisition proposals, and must pay INTL a termination fee in the amount of $9 million if the merger agreement is terminated under certain circumstances, including if the GAIN board changes its recommendation to GAIN’s stockholders to adopt the merger agreement or exercises its right to enter into a transaction that constitutes a superior proposal, which may deter others from proposing an alternative transaction that may be more advantageous to GAIN’s stockholders,
that if the merger agreement is terminated because GAIN’s stockholders did not approve the merger at the stockholder meeting, GAIN will reimburse INTL and its affiliates for 100% of their reasonable out-of-pocket fees and expenses (not to exceed $3,500,000 in aggregate),
that the restrictions imposed by the merger agreement on the conduct of GAIN’s business prior to completion of the merger, requiring GAIN to conduct its business only in the ordinary course and imposing additional specific restrictions, may delay, limit or prevent GAIN from undertaking business opportunities that may arise during that period,
the possible effects of the pendency (or termination) of the merger agreement on GAIN’s business, operating results, prospects, employees, customers and suppliers,
the fact that if the merger is not consummated, GAIN will be required to pay its own expenses associated with the merger agreement,
the fact that the receipt of cash in exchange for shares of common stock pursuant to the merger will generally be a taxable transaction for U.S. federal income tax purposes,
the fact that GAIN is subject to various remedies available to INTL should it fail to complete the merger or breach the merger agreement, and
that if INTL fails to complete the merger as a result of a breach of the merger agreement, depending upon the reason for not closing, GAIN’s rights and remedies may be expensive and difficult to enforce through litigation, and the success of any such action may be uncertain.
The foregoing discussion of the information and factors considered by the GAIN board is not intended to be exhaustive, but includes the material factors considered by the GAIN board. The GAIN board did not undertake to make any specific determination as to whether any factor, or any particular aspect of any factor, supported or did not support its ultimate determination. The GAIN board based its recommendation on the totality of the information it considered.
In considering the recommendation of the GAIN board with respect to the proposal to adopt the merger agreement, you should be aware that our directors and executive officers have interests in the merger that are different from, or in addition to, yours. The GAIN board was aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement and the merger, and in recommending that the merger agreement be adopted by the stockholders of GAIN. See the section entitled “The Merger (Proposal 1)—Interests of GAIN’s Directors and Executive Officers in the Merger.”
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View of Dissenting Director
The GAIN board of directors also considered the views of director Alex Goor, who voted against the approval of the merger agreement. Mr. Goor consistently opposed the merger and any other sale transaction involving GAIN and consistently expressed that view to the GAIN board of directors. It was his belief that, given GAIN’s prevailing stock price, neither the merger nor any other sale transaction would be able to realize a price reflecting GAIN’s true long-term value. In addition, Mr. Goor was opposed to the merger because, in his view, not only did it not reflect the long-term value of GAIN, it also represented only a small premium to the net tangible book value of GAIN.
The other seven members of the GAIN board of directors have considered Mr. Goor’s views over the course of a period of time, including during several meetings of the board of directors prior to the signing of the merger agreement, but have determined that, on the whole, the positive factors outlined above outweighed the negative factors associated with the merger and the transactions contemplated thereby, including factors weighed by Mr. Goor.
Recommendation of the GAIN Board of Directors
After careful consideration, the GAIN board, by a vote of seven to one, approved the merger agreement, the merger and the other transactions contemplated by the merger agreement.
The GAIN board recommends that the GAIN stockholders vote “FOR” the proposal to approve and adopt the merger agreement.
Subsequent Developments
The preliminary unaudited financial information below reflects our preliminary estimates of our financial and operating results for the period commencing on January 1, 2020 and ending on April 24, 2020 (the most recent practicable date prior to the date of this proxy statement), based on currently available information. We have not yet finalized our results for this period and our actual results remain subject to the completion of our fiscal quarter-end closing processes, which includes review by GAIN management and the GAIN board of directors. While carrying out such procedures, we may identify items that require us to make adjustments to the preliminary estimates of our results set forth below. As a result, our actual results could be materially different from those set forth below.
The preliminary estimates of our results included below have been prepared by, and are the responsibility of, GAIN management. Our independent auditors have not audited, reviewed or compiled such preliminary estimates of our results. The information presented herein should not be considered a substitute for the information to be filed with the SEC in our Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2020 and June 30, 2020, respectively, once they become available. We have no intention or obligation to update the preliminary estimates of our results set forth below that relate to the fiscal quarter ended March 31, 2020 or June 30, 2020 prior to filing our Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2020 and June 30, 2020, respectively.
Description of Subsequent Developments
An outbreak of a novel strain of coronavirus, COVID-19, was recognized as a pandemic by the World Health Organization on March 11, 2020. This coronavirus outbreak has severely restricted the level of economic activity around the world. In response to this coronavirus outbreak, the governments of many countries, states, cities and other geographic regions have taken preventative or protective actions, such as imposing restrictions on travel and business operations and advising or requiring individuals to limit or forego their time outside of their homes. Temporary closures of businesses have been ordered and numerous other businesses have temporarily closed voluntarily. As a result of the foregoing developments, the financial markets experienced extraordinarily high levels of volatility following the signing of the merger agreement.
The volatility during the period commencing on February 27, 2020 (the first trading day following the signing of the merger agreement) and ending on March 31, 2020, the last day of the first quarter of 2020 (which period we refer to in this proxy statement as the “post-signing Q1 period”), increased very significantly as compared to both the period commencing on January 1, 2020 and ending on the date the merger agreement was signed, February 26, 2020 (which period we refer to in this proxy statement as the “pre-signing Q1 period”)
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and the first quarter of 2019. This is evidenced by a significant increase in the closing prices of VIX volatility index, which increased to an average of 56.2 in the post-signing Q1 period, with a peak of 82.7, compared to averages of 15.4 (with a peak of 27.9) and 16.5 (with a peak of 25.5) in the pre-signing Q1 period and first quarter of 2019, respectively. These extraordinary levels of volatility in the post-signing Q1 period led to a significant increase in retail customer trading volume during the post-signing Q1 period. Specifically, average daily trading volume (“ADV”) during the post-signing Q1 period was $17.8 billion, a 123% increase from $8.0 billion, the ADV during the pre-signing Q1 period, and a 131% increase from $7.7 billion, the ADV during the first quarter of 2019. Similarly, the heightened volatility resulted in a significant increase in retail revenue per million (“RPM”) during the post-signing Q1 period, which increased to an RPM of approximately $281 during the post-signing Q1 period, an increase of 71% and 462% from an RPM of $164 and $50 in the pre-signing Q1 period and the first quarter of 2019, respectively. As a result of the foregoing, as set forth in the table below, GAIN’s results of operations increased sharply during the post-signing Q1 period, with approximately 67%, 85% and 83% of the aggregate revenue, net income and adjusted net income, respectively, for the first quarter of 2020 generated during the post-signing Q1 period.
The volatility experienced during the post-signing Q1 period continued during the period commencing on April 1, 2020 and ending on April 24, 2020 (which period we refer to in this proxy statement as the “post-signing Q2 period”). This is evidenced by continuing high closing prices of VIX volatility index, which averaged 43.4 in the post-signing Q2 period (with a peak of 57.1). These continuingly high levels of volatility in the post-signing Q2 period resulted in ADV of $8.4 billion and RPM of $234. In light of the foregoing, GAIN’s results of operations for the post-signing Q2 period were as set forth in the table below.
$m
Q1’19
Q4’19
Q1’20 Pre
Signing
Period(1)
Q1’20 Post
Signing
Period(2)
Q1’20 Full
Quarter
Q2’20 Post Signing Period(5)
Retail
$24.3
$40.2
$52.8
$120.3
$173.1
 
Futures
$8.0
$7.2
$5.4
$3.9
$9.4
$35.5
Other
$6.2
$5.9
$2.6
$0.7
$3.2
$2.1
Net Revenue
$38.4
$53.3
$60.8
$124.9
$185.7
$1.2
 
 
 
 
 
 
$38.8
Operating expenses
$(61.9)
$(53.5)
$(36.9)
$(34.4)
$(71.3)
$(16.7)
Adjusted EBITDA(3)
$(23.5)
$(0.2)
$23.9
$90.5
$114.4
$22.1
Adjusted Net (loss)/income(4)
$(28.4)
$(7.8)
$13.2
$65.4
$78.6
$15.1
Net (loss)/income
$(28.4)
$(31.2)
$11.8
$65.5
$77.3
$14.2
(1)
Period commencing on January 1, 2020 and ending February 26, 2020.
(2)
Period commencing on February 27, 2020 and ending March 31, 2020.
(3)
See Annex H for a definition of Adjusted EBITDA and a reconciliation of GAAP Net (Loss) Income to Adjusted EBITDA.
(4)
See Annex H for a definition of Adjusted Net Income and a reconciliation of GAAP Net (Loss) Income to Adjusted Net Income.
(5)
Period commencing on April 1, 2020 and ending April 24, 2020. Operating expenses for this period have been estimated based on GAIN’s budget for April and management expectation of certain variable costs including bad debt provision, employee bonus provision, Retail referral fees and transaction costs. A tax rate of 24.5% has been assumed for this period.
Reasons for Recommendation Following Subsequent Developments
As of the date of this proxy statement, the GAIN board continues to recommend that the merger agreement be adopted by the stockholders of GAIN, by a vote of seven to one. However, the subsequent developments described above that have occurred following the signing of the merger agreement, resulted in the GAIN board continuing to review its recommendation, including both the positive and negative factors which the GAIN board considered in arriving at its initial positive recommendation. Furthermore, the GAIN board has, with the assistance of its financial and legal advisors, reviewed, and continues to review, its rights under the merger agreement, including without limitation the GAIN board’s right, subject to compliance with certain restrictions in the merger agreement, to make an adverse recommendation change in connection with a “company intervening event” (as described in the section entitled “The Merger Agreement— Changes in Board Recommendation). The GAIN board will continue to review its rights under the merger agreement, including its rights relating to the determination of the existence of a “company intervening event” and changing its recommendation to the GAIN stockholders up to the time of the special meeting.
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The GAIN board considered a number of factors in determining to continue to recommend that the stockholders adopt the merger agreement including all the factors set forth in the section entitled “GAIN’s Reasons for the Merger” beginning on page 38 of this proxy statement, together with the following factors principally related to subsequent developments following the signing of the merger agreement (not in any relative order of importance) that the GAIN board believes support its decision:
the fact that the merger consideration of $6.00 per share is all-cash, and therefore unaffected by the considerable uncertainty in financial markets related to the spread of COVID-19,
the fact that if the GAIN board were to make an adverse recommendation change involving or relating to a company intervening event, INTL would be entitled to terminate the merger agreement and, in connection with such termination, GAIN would be required pay INTL a termination fee in the amount of $9 million,
the fact that the significant improvement in GAIN’s financial performance in the first fiscal quarter of 2020 (as compared to the same fiscal quarter in 2019) was primarily due to the extraordinary developments resulting from the COVID-19 global pandemic, including significant increases in ADV and RPM, and there can be no assurance that such improvements in financial performance would continue or be maintained,
the challenges presented by the prevailing industry, economic and market conditions and trends in the markets in which GAIN competes were likely to remain present following the anticipated resolution of the COVID-19 global pandemic,
the fact that GAIN’s exploration of strategic alternatives involved a lengthy and thorough auction process involving 108 potential bidders, in addition to INTL, which included both strategic and financial potential acquirers, eight of which, in addition to INTL, entered into mutual confidentiality agreements with GAIN and received information related to GAIN, but none of which resulted in a credible, financed alternative transaction other than the merger, and as a result, if the merger agreement were to be terminated, there was a considerable risk that no credible, financeable alternative transaction would be available, and
the fact that stockholders of GAIN who comply with the requirements of the Delaware General Corporation Law will have appraisal rights in respect of their shares and will be able to seek such appraisal if they believe that $6.00 per share in cash does not represent a fair value for their shares.
The GAIN board also considered, in addition to the potentially countervailing factors set forth in the section entitled “GAIN’s Reasons for the Merger” beginning on page 38 of this proxy statement, the following countervailing factors principally related to subsequent developments following the signing of the merger agreement (not in any relative order of importance), including the following:
the fact that the ADV for the post-signing Q1 period was $17.8 billion, compared to $8.0 billion and $7.7 billion for the pre-signing Q1 period and the first quarter of 2019, respectively, increases of 123% and 131%, respectively,
the fact that average daily retail segment revenue for the post-signing Q1 period was $5.0 million, an increase of 280% and 1,200% over average daily retail segment revenue for the pre-signing Q1 period and the first quarter of 2019, respectively, principally due to sharp increases in ADV and RPM, which resulted from unusually high volatility, especially in late February and March 2020,
the fact that retail segment revenue for the 24 trading days constituting the post-signing Q1 period was $120.3 million, compared to $52.8 million for the 40 trading days constituting the pre-signing Q1 period and $24.3 million for all of the first quarter of 2019,
the fact that net income and adjusted net income for the 24 trading days constituting the post-signing Q1 period was $65.5 million and $65.4 million, respectively, compared to $11.8 million and $13.2 million for the 40 trading days constituting the pre-signing Q1 period, respectively, and net loss and adjusted net loss of $28.4 million and $28.4 million, respectively for all of the first quarter of 2019,
the fact that GAIN’s financial performance in the post-signing Q2 period continued to be strong,
the fact that the tangible book value and adjusted tangible book value(1) of GAIN as of April 24, 2020 was $289.5 million and $305.2 million, which is an increase of 33% and 36%, respectively, relative to
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the tangible book value and to the adjusted tangible book value of GAIN on February 26, 2020 (the last day prior to the public announcement of the merger) of $217.5 million and $224.9 million, respectively, which increases on a per share basis would equal $1.83 and $2.04, and, an increase of 38% and 45%, respectively, relative to the tangible book value and adjusted tangible book value as of December 31, 2019 of $210.5 million and $210.5 million, respectively, which increases on a per share basis would be equal to $2.01 and $2.41, and
any increase in the tangible book value or cash position of GAIN resulting from the developments described above cannot be distributed to GAIN’s stockholders as a result of the restrictions on dividends in the merger agreement.
(1)
See Annex H for a definition of adjusted tangible book value and a reconciliation of GAAP tangible book value to adjusted tangible book value.
View of Dissenting Director
Mr. Goor continues to be opposed to the merger, as, in his view, the basis for his previous dissent – that the merger consideration did not reflect the long term value of the company – has become significantly more pronounced, and, on April 24, 2020 the valuation of GAIN implied by the merger consideration of $6.00 per share was approximately 23% below GAIN’s adjusted tangible book value.
Opinion of GAIN’s Financial Advisor
GAIN retained GCA Advisors to act as its financial advisor in connection with the merger based on GCA Advisors’ qualifications, expertise, reputation and knowledge of GAIN’s business and affairs and the industry in which it operates. GCA Advisors is a global investment bank serving a broad client base through a range of advisory services, including mergers and acquisitions. On February 26, 2020, GCA Advisors delivered its oral opinion (subsequently confirmed by a written also dated as of that date) to the board of directors that, as of that date, and subject to the assumptions, qualifications and limitations set forth therein, the merger consideration of $6.00 per share to be received by the holders of GAIN common stock (other than as set forth in such opinion) pursuant to the merger agreement was fair, from a financial point of view, to such holders.
The full text of the written opinion that GCA Advisors delivered to the board of directors, which describes, among other things, the assumptions made, procedures followed, factors considered and qualifications and limitations on the review undertaken by GCA Advisors, is attached as Annex F to this proxy statement. You should read the opinion carefully in its entirety.
GCA Advisors delivered its opinion to the board of directors for the benefit and use of the board of directors dated February 26, 2020 in connection with and for purposes of its evaluation of the merger consideration from a financial point of view. In rendering such opinion to the board of directors, GCA Advisors assumed that the merger consideration GAIN’s stockholders would receive in the transaction was determined through arm’s-length negotiations between GAIN, on the one hand, and INTL, on the other hand, and was approved by the board of directors. GCA Advisors’ opinion does not constitute a recommendation to the board of directors or any committee thereof, GAIN’s stockholders, or any other person as to any specific action that should be taken in connection with the merger, including whether GAIN’s stockholders should vote for the merger proposal. The GCA Advisors opinion was approved by a fairness committee of GCA Advisors.
The opinion addresses only whether the merger consideration to be received by the holders of common stock (other than as set forth in such opinion) pursuant to the merger agreement is fair, from a financial point of view, to such holders. The opinion does not address GAIN’s underlying business decision to enter into the merger agreement, or the relative merits of the merger as compared to any alternatives that may be available to GAIN. GCA Advisors was not asked to, nor has it, offered any opinion as to the material terms of the merger agreement (other than as expressly set forth in the last paragraph of the opinion with respect to the fairness of the merger consideration) or the structure of the merger. Further, the opinion does not address the fairness of the amount or nature of, or any other aspect relating to, any compensation to any of GAIN’s officers, directors or employees, or class of such persons, including, without limitation, in relation to the merger consideration.
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For purposes of its opinion, GCA Advisors:
reviewed a draft, dated February 25, 2020, of the merger agreement and certain related documents;
reviewed certain publicly available financial statements and other business and financial information of GAIN; including Annual Reports on Form 10-K of GAIN for the years ended December 31, 2018, December 31, 2017 and December 31, 2016, Quarterly Reports on Form 10-Q of GAIN and certain publicly available research analyst reports for GAIN;
reviewed certain internal financial statements and other financial and operating data concerning GAIN prepared by GAIN’s management and furnished to us for our analysis;
reviewed certain financial projections relating to GAIN prepared by GAIN’s management and furnished to us for our analysis;
discussed the past and current operations and financial condition and the prospects of GAIN with GAIN’s management;
reviewed and discussed with GAIN’s management and the board of directors certain alternatives to the merger;
contacted certain parties on behalf of GAIN regarding their interest with respect to a possible acquisition of all or a portion of GAIN and considered the results of those efforts
reviewed and discussed with GAIN’s management and the board of directors their view of the merger;
reviewed the recent reported closing prices and trading activity for GAIN’s common stock;
compared the financial performance of GAIN and the prices and trading activity of the common stock of GAIN with that of certain other publicly traded companies and their securities that GCA Advisors believed to be generally relevant in evaluating the business of GAIN;
reviewed the financial terms, to the extent publicly available, of certain transactions that GCA Advisors believed to be generally relevant in evaluating GAIN’s business and the merger;
evaluated a discounted cash flow analysis based on the projected future cash flows of GAIN as provided by GAIN’s management;
reviewed the premium to the stock price of certain transactions that GCA Advisors believed to be generally relevant in evaluating the business of GAIN and the merger;
participated in discussions and negotiations among representatives of GAIN and INTL; and
performed such other analyses and considered such other factors as GCA Advisors deemed appropriate.
In preparing its opinion, GCA Advisors assumed and relied upon, without independent verification, the accuracy and completeness of the information provided to and reviewed by it for the purposes of the opinion. GCA Advisors did not accept any responsibility for the accuracy, completeness or independent verification of such information. With respect to the financial and cash flow projections of GAIN, GCA Advisors assumed that they were reasonably prepared on bases reflecting the best currently available estimates and judgments of the management of GAIN of the future financial performance of GAIN and that such projections provided a reasonable basis for the opinion. GCA Advisors assumes no responsibility for and expressed no view as to such projections or the assumptions on which they were based. In addition, GCA Advisors assumed that the merger would be consummated in accordance with the terms set forth in the February 25, 2020 draft merger agreement furnished to GCA Advisors, without waiver by any party of any material rights thereunder, or any amendment or modification thereto and that the representations and warranties contained in the merger agreement made by the parties thereto were true and correct in all respects material to GCA Advisors’ analysis. GCA Advisors also assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of the merger would be timely obtained without any material restriction. The opinion is necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to GCA Advisors as of, February 26, 2020. GCA Advisors assumes no responsibility to update or revise its opinion based upon events or circumstances occurring or becoming known to it after February 26, 2020.
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GCA Advisors did not make any independent investigation of any legal, accounting or tax matters affecting GAIN or the merger, and it assumed the correctness of all legal, accounting and tax advice given to GAIN and the board of directors. GCA Advisors was not asked to prepare, nor has it prepared, an appraisal of any of the assets or liabilities of GAIN or concerning the solvency or fair value of GAIN, or the ability of GAIN to pay its obligations when they become due, nor has GCA Advisors been furnished with any such appraisals, and its opinion should not be construed as such. GCA Advisors was requested to and did initiate discussions with and solicit indications of interest from certain third parties with respect to a possible transaction with GAIN. GCA Advisors also took into account its experience in transactions that it believes to be generally comparable or relevant, as well as its experience in securities valuation in general.
The following represents a summary of the material financial analyses performed by GCA Advisors in connection with delivering its opinion to the board of directors. Some of the summaries of financial analyses performed by GCA Advisors include information presented in tabular format. In order to fully understand the financial analyses performed by GCA Advisors, GAIN’s stockholders should read the tables together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Considering the data set forth in the tables 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 the financial analyses performed by GCA Advisors.
Selected Public Company Analysis
Based on public and other available information as of February 21, 2020, GCA Advisors calculated (to the extent relevant financial data was available) the company’s then-current stock price as a multiple of Wall Street research analyst earning consensus estimated earnings per share (such ratio, the “P/E ratio”) for calendar year 2018 and for estimated calendar years 2019, 2020 and 2021, for each of the selected public companies set forth below (the “selected companies”). GCA Advisors utilized Wall Street analyst research, CapitalIQ and certain publicly available financial statements and press releases to analyze the relevant metrics. GCA Advisors believes, based on it judgement, that the selected companies have similar operating or financial performance characteristics to those of GAIN, but noted that none of these companies have the same management, composition, industry, size or operations as GAIN. While the selected company analysis compared GAIN to the selected companies, GCA Advisors did not include every company that could be deemed to be a participant in this same industry or in the specific sectors of this industry, in which GAIN or any of the selected companies operates.
CMC Markets PLC(1)
IG Group Holdings PLC(2)
Interactive Brokers Group, Inc.
Plus500 Ltd.
Swissquote Group Holding Ltd.
(1)
CMC Markets PLC’s fiscal year end is March 31, and as a result, calendar year-end figures are those from the subsequent fiscal year-end (e.g., 2018 calendar year-end figures are 2019 fiscal year-end figures).
(2)
IG Group Holdings PLC’s fiscal year-end is May 31; Calendar year-end figures are calendarized.
Based on these selected companies, GCA Advisors determined a range of P/E ratio for calendar year 2018 and for estimated calendar years 2019, 2020 and 2021, with multiples less than 0.0x or more than 60.0x excluded as outliers. The following table sets forth the ranges of P/E ratios indicated by this analysis:
 
High
Low
Median
Mean
CY2018 (Actual) P/E Ratio
36.1x
3.2x
16.4x
18.0x
CY2019 (Estimate) P/E Ratio
34.2x
8.0x
17.2x
18.6x
CY2020 (Estimate) P/E Ratio
29.1x
8.0x
18.5x
18.5x
CY2021 (Estimate) P/E Ratio
26.3x
7.4x
14.5x
15.9x
GCA Advisors compared such ranges to (other than with respect to the calendar year 2019, because the P/E ratio of GAIN for such year was not meaningful as those were either less than 0.0x or more than 60.0x) (a) the P/E ratio of GAIN for calendar year 2018 and for estimated calendar years 2020 and 2021 based on
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GAIN’s projections, which was 4.9x, 50.5x and 6.3x, respectively, and (b) the P/E ratio of GAIN for calendar year 2018 and for estimated calendar years 2020 and 2021 based on the average Wall Street analyst research estimates, which were 4.9x, 15.8x and 6.4x, respectively.
The P/E Ratio of GAIN implied by the merger consideration for calendar year 2019 was not meaningful because it was less than 0.0x and the P/E Ratio of GAIN implied by the merger consideration for estimated calendar year 2020 was 87.1x.
Selected Transactions Analysis
Based on public and other available information as of February 21, 2020, GCA Advisors calculated (to the extent relevant financial data was available) enterprise value (implied for the applicable target company based on the consideration payable in the applicable selected transaction) as a multiple of the target company’s revenue for the applicable last-12-months period (“LTM”) (“revenue multiples”) for the following selected transactions (the “selected transactions”). GCA Advisors utilized Wall Street analyst research, CapitalIQ and certain publicly available financial statements and press releases to analyze the relevant revenue multiples. GCA Advisors calculated enterprise value as equity value plus debt minus cash and cash equivalents. To calculate the equity value of GAIN, GCA Advisors took the fully diluted share count of GAIN (determined using treasury stock method), which fully diluted shares were based on 37,484,277 shares of common stock, and options and restricted stock units (performance based or otherwise), in each case, outstanding as of February 21, 2020, assuming accelerated vesting of earned performance based restricted stock units in 2018 and accelerated vesting of all performance based restricted stock units in 2019, in each case, as provided by GAIN senior management (“FD shares”). The selected transactions used in this comparison were selected because the respective target company possessed, in GCA Advisors’ judgment, similar operating or financial performance characteristics to those of GAIN. No company or transaction used in the selected transactions analyses is identical to GAIN or the merger. GCA Advisors noted that none of these companies have the same management, composition, industry, size or operations as GAIN. Accordingly, an analysis of the results of the foregoing is not purely mathematical; rather, it involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies and other factors that could affect the value of the companies and transactions to which GAIN and the merger, respectively, are being compared.
The transactions analyzed, together with their respective announcement dates, are listed below ($ in millions):
Date Announced
Acquirer
Target
Enterprise Value
4/25/2013
GAIN Capital Holdings, Inc.
Global Futures & Forex, Ltd.
$108
10/31/2014
GAIN Capital Holdings, Inc.
City Index (Holdings) Limited
$148
3/25/2015(1)
Rakuten Securities, Inc.
FXCM Japan Securities Co., Ltd.
$62
4/1/2015(2)
Playtech PLC
TradeFX Limited
$493
8/23/2017(3)
Playtech PLC
ACM Group Limited (a/k/a Alpha)
$150
(1)
Based on Pro Forma Adjustments disclosed by FXCM Inc. that are directly attributable to the transaction, factually supportable and expected to have a continuing impact on FXCM Inc.’s operating results.
(2)
Based on sum of upfront cash consideration of €208MM and contingent consideration cap of €250MM. Total consideration converted to USD based on conversion rate of 1.0771 USD to EUR at announcement.
(3)
Based on total consideration cap of $150MM. Transaction structured as upfront payment of $5MM, two staged payments based on 1.0x EBITDA of 2017 and 2018; and contingent consideration based on 5.2x the 2019 EBITDA, minus the initial payment and 2017 and 2018 payments.
Summary Revenue Multiples for the selected transactions are listed below (with multiples less than 0.0x or more than 60.0x excluded as not meaningful):
 
High
Low
Revenue Multiple
5.6x
1.1x
GCA Advisors compared such range of the revenue multiples to the implied revenue multiple of GAIN as of December 31, 2019, which was 1.1x.
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Discounted Cash Flow Analysis
GCA Advisors used the financial projections of GAIN for fiscal years 2020 and 2021 contained in the January 2020 Projections (as described below under “The Merger (Proposal 1)—Certain Financial Projections”), in each case as prepared by GAIN’s management to perform a discounted cash flow analysis, based on unlevered free cash flow as described in the section entitled “Projected Financial Information” below (the “projections”). In conducting this analysis, GAIN management has not provided, and GCA Advisors has not relied on, any financial forecast beyond the calendar year 2021 due to the volatile nature of GAIN’s business per GAIN management, and GCA Advisors otherwise assumed that GAIN would perform in accordance with the projections provided by management. GCA Advisors estimated GAIN’s perpetual unlevered free cash flows by applying terminal growth rates of (1.0%) to 1.0%, based on GCA Advisors comparative analysis and its judgment, and then discounted the unlevered free cash flows projected through fiscal year 2021 and the perpetual unlevered free cash flows to present values using discount rates ranging from 12.9% to 14.9%. GCA Advisors considered publicly available data, including FactSet, CapitalIQ financial databases and Duff &Phelps data published on Duff & Phelps’s website and in Duff & Phelps’s 2017 Valuation Handbook—Guide to Cost of Capital, when analyzing the range of discount rates for the unlevered free cash flows of GAIN, including: (i) a U.S. risk-free rate of 2.9%, based on trailing 10-year average 20-year treasury yield, (ii) a beta estimate of 0.6 to 1.7, measured over a 52-week period, (iii) an equity market risk premium of 6.9% and (iv) a size premium of 5.6%. This method of analysis, varying the discount rate from 12.9% to 14.9% and the terminal growth rate from (1.0%) to 1.0%, indicated a range of implied per share values of $5.06 to $6.83. In addition, this method of analysis, when holding the discount rate constant at the midpoint of 13.9% and varying the terminal growth rate from (1.0%) to 1.0%, indicated a range of implied per share values of $5.46 to $6.23, based on the FD shares. GCA Advisors then compared this range of per share values for the common stock implied by the discounted cash flow analysis to the $6.00 per share merger consideration.
Other Information
GCA Advisors also reviewed the volume-weighted average price of the common stock for the 30-trading day period ending February 21, 2020, which was $3.80 per share, the 60-trading day period ending February 21, 2020, which was $3.96 per share, the 90-trading day period ending February 21, 2020, which was $4.05, the 12-month period ending February 21, 2020, which was $4.78 per share, the two-year period ending February 21, 2020, which was $7.53, and the three-year period ending February 21, 2020, which was $7.42, and, in each case, compared them to the merger consideration. GCA Advisors noted that these trading ranges were presented for reference purposes only, and were not relied upon for valuation purposes.
GCA Advisors also reviewed the consideration paid in completed or announced acquisitions of 28 U.S. publicly traded technology and financial services target companies, with implied transaction values between $100 million and $750 million, announced or completed since January 1, 2017 through February 21, 2020, and calculated the premiums paid in these transactions over (a) the last unaffected stock price prior to announcement, which range (based on the 25th through 75th percentile for the set of transactions) was 11% to 36%, and (b) the volume-weighted average stock price of the target company for a period of 30 calendar days prior to the announcement of the proposed acquisition, which range (based on the 25th through 75th percentile for the set for transactions) was 12% to 37%, and, in each case, compared them to the applicable premium implied by the $6.00 per share merger consideration, as applied to GAIN’s closing stock price on February 21, 2020, which was 72%, and the 30-calendar day volume-weighted average price of the common stock for the period ending on February 21, 2020, which was 65%. GCA Advisors noted that this premiums analysis was presented for reference purposes only, and was not relied upon for valuation purposes.
Miscellaneous
The foregoing description is only a summary of the analyses and examinations that GCA Advisors deems material to its opinion. It is not a comprehensive description of all analyses and examinations actually conducted by GCA Advisors. The preparation of a fairness opinion necessarily is a complex process involving subjective judgment and is not necessarily susceptible to partial analysis or summary description. GCA Advisors believes that its analyses and the summary set forth above must be considered as a whole and that selecting portions of its analyses and of the factors considered, without considering all analyses and factors, would create an incomplete view of the process underlying the analyses set forth in its presentation to the board of directors. In addition, GCA Advisors may have given various analyses more or less weight than other analyses, and may have deemed various assumptions more or less probable than other assumptions. The fact that any specific analysis
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has been referred to in the summary above is not meant to indicate that this analysis was given greater weight than any other analysis. Accordingly, the ranges of valuations resulting from any particular analysis described above should not be taken to be the view of GCA Advisors with respect to the actual value of GAIN.
In performing its analyses, GCA Advisors made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of GAIN. The analyses performed by GCA Advisors are not necessarily indicative of actual values or actual future results, which may be significantly more or less favorable than those suggested by these analyses. These analyses were prepared solely as part of the analysis performed by GCA Advisors with respect to its opinion and were provided to the board of directors in connection with the delivery of the GCA Advisors opinion that, as of February 26, 2020, and subject to the assumptions, qualifications and limitations set forth therein, the merger consideration to be received by the holders of common stock (other than as set forth in such opinion) pursuant to the merger agreement is fair, from a financial point of view, to such holders. The analyses do not purport to be appraisals or to reflect the prices at which a company might actually be sold or the prices at which any securities may trade at any time in the future.
As described above, GCA Advisors’ opinion and presentation were among the many factors the board of directors took into consideration in making its determination to approve the merger agreement, and should not be viewed as determinative of the views of the board of directors or management with respect to the merger or the merger consideration. GCA Advisors did not recommend any specific consideration to the board of directors or state that any specific consideration constituted the only appropriate consideration.
GCA Advisors has acted as financial advisor to the board of directors in connection with the merger and its opinion and will receive a fee for its services of approximately $4.75 million, $100,000 of which has been earned upon the execution of the engagement agreement, $1 million of which was payable upon rendering of its opinion, and the balance of which will be paid contingent upon the consummation of the merger, and GAIN has agreed to reimburse GCA Advisors’ expenses and indemnify GCA advisors against certain liabilities arising out of its engagement with GCA Advisors.
In the two years prior to the date of its written opinion, except for GCA Advisors’ current engagement, GCA Advisors has not been engaged to provide financial advisory or other services to GAIN, and GCA Advisors has not received any compensation from GAIN during such period. GCA Advisors has not, in the two years prior to the date of its written opinion at any time, provided financial advisory or other services to INTL or Merger Sub, and GCA Advisors has not received any compensation from INTL or Merger Sub during such period. However, GCA Advisors may seek to provide such services to INTL or its affiliates in the future and receive fees for such services.
The full text of the written opinion that GCA Advisors delivered to GAIN’s board of directors, which describes, among other things, the assumptions made, procedures followed, factors considered and qualification and limitations on the review undertaken by GCA Advisors, is attached as Annex F to this proxy statement. You should read the opinion carefully in its entirety. The summary of the opinion of GCA Advisors set forth in this proxy statement is qualified in its entirety by reference to the full text of such opinion. GCA Advisors delivered its opinion to GAIN’s board of directors for the benefit and use of GAIN’s board of directors in connection with and for purposes of its evaluation of the merger consideration from a financial point of view. GCA Advisors’ opinion does not constitute a recommendation to GAIN’s board of directors or any committee thereof, GAIN’s stockholders, or any other person as to any specific action that should be taken in connection with the merger, including whether GAIN’s stockholders should vote for the proposal to adopt the merger agreement. The opinion does not address GAIN’s underlying business decision to enter into the merger agreement, or the relative merits of the merger as compared to any alternatives that may be available to GAIN. GCA Advisors was not asked to, nor has it, offered any opinion as to the material terms of the merger agreement (other than as expressly set forth in the last paragraph of the opinion with respect to the fairness of the merger consideration) or the structure of the merger.
Projected Financial Information
GAIN does not as a matter of course make public projections as to future performance or earnings beyond the current fiscal year and is especially wary of making projections for extended earnings periods due to, among other reasons, the unpredictability and uncertainty of the underlying assumptions and estimates. However, we
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provided GCA Advisors with the June 2019 Projections, the September 2019 Projections and the January 2020 Projections (each, as described and summarized below) at the request of the GAIN board of directors, and the January 2020 Projections were approved by the GAIN board of directors for GCA Advisors to rely (and were relied) on in performing their financial analyses as described further under “The Merger (Proposal 1)—Opinion of GAIN’s Financial Advisor.”
GAIN initially prepared financial projections in June 2019, which we refer to as the “June 2019 Projections,” for the fiscal years 2019, 2020, 2021, 2022 and 2023, in connection with the GAIN board’s review of strategic alternatives.
In September 2019, in connection with the GAIN board’s review of strategic alternatives, the GAIN management updated the June 2019 Projections, which updated projections we refer to as the “September 2019 Projections,” to reflect GAIN’s then-recent performance, GAIN management’s then-current expectations for fiscal years 2019 to 2023 and GAIN management’s view that market conditions were unlikely to improve during the remainder of fiscal year 2019.
In January 2020, in connection with the GAIN board’s review of strategic alternatives and for the purpose of the financial analyses of GCA Advisors, GAIN management updated the September 2019 Projections, which updated projections we refer to as the “January 2020 Projections,” to reflect GAIN management’s updated projections for fiscal year 2020 and to account for then-estimated full-year 2019 performance. In addition, the January 2020 Projections reflected GAIN management’s then-current expectations, reflecting, among other items, changes in share count to 2021 and GAIN management’s view that unfavorable market conditions from fiscal year 2019 were likely to persist through 2020. In view of the unpredictability and uncertainty inherent in making 5-year projections, GAIN management determined that it could only reasonably prepare projections for fiscal years 2020 and 2021 for the purpose of the financial analyses of GCA Advisors in connection with rendering its opinion to the GAIN board of directors. As a result, the January 2020 Projections were limited to fiscal years 2020 and 2021.
The June 2019 Projections were provided to Party A, Party B and two other potential bidders. The September 2019 Projections were provided to INTL, Party B and two other potential bidders. The January 2020 Projections were provided to INTL in the course of its due diligence. In addition, the January 2020 Projections were provided to the GAIN board of directors and GCA Advisors and were approved by GAIN’s board of directors for use by GCA Advisors for purposes of its financial analyses as described further under “The Merger (Proposal 1)—Opinion of GAIN’s Financial Advisor.” None of the 2019 Projections or the September 2019 Projections were approved by the GAIN board of directors for use, or were used, for the purposes of GCA Advisors’ financial analyses as described further under “The Merger (Proposal 1)—Opinion of GAIN’s Financial Advisor.”
We have included a summary of the June 2019 Projections, the September 2019 Projections and the January 2020 Projections, which we refer to as the “Projections” below, to give stockholders access to certain nonpublic information provided to the GAIN board of directors for purposes of considering and evaluating GAIN’s strategic and financial alternatives, including the merger, and to GCA Advisors in connection with its financial analyses that were based solely on the January 2020 Projections. The inclusion of the Projections should not be regarded as an indication that INTL, Merger Sub or the GAIN board of directors, GCA Advisors, any of their respective affiliates, officers, directors, advisors or other representatives, or any other recipient of this information considered, or now considers, it to be an assurance of the achievement of future results.
The Projections and the underlying assumptions upon which the Projections were based are subjective in many respects. The Projections reflect numerous estimates and assumptions with respect to industry performance, general business, economic, market and financial conditions, changes to the business, financial condition or results of operations of GAIN and other matters, including those described under “Caution Regarding Forward-Looking Statements,” many of which are difficult to predict, subject to significant economic and competitive uncertainties, are beyond GAIN’s control and may cause the Projections or the underlying assumptions to be inaccurate. Since the Projections cover multiple years, such information by its nature becomes less reliable with each successive year. The Projections do not take into account any circumstances or events occurring after the date they were prepared. As a result, there can be no assurance that the Projections will be realized or that actual results will not be significantly higher or lower than projected. The Projections were prepared for internal use and provided to our board of directors and GCA Advisors, and not with a view toward
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public disclosure or toward complying with GAAP, the published guidelines of the SEC regarding projections or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. For example, certain metrics included in the Projections are non-GAAP measures, and the Projections do not include footnote disclosures as may be required by GAAP. Neither GAIN’s independent auditors, nor any other independent accountants, have compiled, examined, or performed any procedures with respect to the prospective financial information contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and assume no responsibility for, and disclaim any association with, the prospective financial information.
Readers of this proxy statement are cautioned not to place undue reliance on the specific portions of the Projections below. No one has made or makes any representation to any stockholder regarding the information included in the Projections.
For the foregoing reasons, as well as the basis and assumptions on which the Projections were compiled, the inclusion of specific portions of the Projections in this proxy statement should not be regarded as an indication that such Projections will be an accurate prediction of future events, and they should not be relied on as such. Except as required by applicable securities laws, GAIN does not intend to update, or otherwise revise the Projections or the specific portions presented to reflect circumstances existing after the date when made or to reflect the occurrence of future events, even in the event that any or all of the assumptions are shown to be in error.
The following is a summary of the June 2019 Projections (dollars in millions, except for Earnings Per Share):
 
Fiscal Year End
 
2019E
2020E
2021E
2022E
2023E
Total Revenue
$277.5
$366.5
$421.0
$460.5
$489.5
EBITDA
$18.0
$89.4
$137.3
$169.1
$190.2
EPS
$(0.52)
$1.19
$2.33
$3.31
$4.15
The following is a summary of the September 2019 Projections (dollars in millions, except for Earnings Per Share):
 
Fiscal Year End
 
2019E
2020E
2021E
2022E
2023E
Total Revenue
$262.6
$362.0
$417.6
$456.0
$485.4
EBITDA
$8.0
$88.1
$139.7
$170.3
$191.9
EPS
$(0.76)
$1.13
$2.31
$3.22
$4.03
The following is a summary of the January 2020 Projections (dollars in millions, except for Earnings Per Share):
 
Calendar Year End
 
2020E
2021E
Total Revenue
$264
$286
Adjusted EBITDA
$37
$62
Unlevered Free Cash Flow(1)
$32
$49
EPS
$0.07
$0.63
(1)
Unlevered Free Cash Flow is earnings before interest and taxes, less cash tax expense, less capital expenditures, plus depreciation and amortization, less changes in net working capital. Unlevered Free Cash Flow was calculated by GCA Advisors and approved by GAIN management to be part of the January 2020 Projections for use in GCA Advisors’ financial analyses in connection with rendering its opinion to the GAIN board of directors. Non-cash compensation based expense is treated as a cash expense.
Interests of GAIN’s Directors and Executive Officers in the Merger
In considering the recommendation of the GAIN board to approve and adopt the merger agreement, you should be aware that some of GAIN’s directors and executive officers have interests in the merger that are different from, or in addition to, those of GAIN stockholders generally. The GAIN board was aware of these
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interests and considered them, among other matters, in evaluating the merger agreement, in reaching its decision to approve the merger agreement and in recommending to our stockholders that the merger agreement be approved. These interests are described and quantified below.
On April 2, 2019, Jason Granite, a member of the GAIN board, notified GAIN that he was resigning, effective immediately. Effective September 30, 2019, Samantha Roady, GAIN’s former President of the retail business stepped down from her position. Mr. Granite and Ms. Roady are not entitled to any payments or benefits in connection with the transaction, other than the merger consideration that he or she will receive to the extent that he or she is a stockholder of GAIN.
Equity-Based Awards
GAIN’s executive officers currently hold vested and unvested stock options and restricted stock units (“RSUs”).
At or immediately prior to the effective time of the merger, to the extent required or permitted by the applicable employee plan, the equity-based awards then held by GAIN executive officers and non-employee directors would be treated as follows:
Stock Options. Each outstanding stock option, whether exercisable or not yet exercisable, will be canceled in exchange for an amount in cash equal to the excess of the merger consideration over the exercise price. If the exercise price is greater than or equal to the merger consideration, the stock options will be canceled without any consideration being paid.
RSUs. Each outstanding RSU, whether vested or unvested, will be canceled, and entitle the holder of each RSU to an amount in cash equal to the merger consideration. The number of shares of stock underlying any restricted stock unit that is subject to performance-based vesting will be determined as follows: (x) if the performance period applicable to such award has concluded, based on actual performance during the performance period and (y) if the performance period applicable to such award has not concluded, assuming target performance.
Restricted Stock. Each outstanding share of restricted stock, whether vested or unvested, will be canceled and entitle the holder of such restricted stock award to an amount in cash equal to the merger consideration.
Employee Stock Purchase Plan
GAIN will, prior to the effective time of the merger, take all actions reasonably necessary to terminate GAIN’s 2011 Employee Stock Purchase Plan (the “ESPP”) and all outstanding rights thereunder as of immediately prior to and contingent upon the effective time of the merger. From and after the date of the merger agreement, GAIN will take all actions reasonably necessary to ensure that (i) the existing participants in the ESPP may not increase their elections with respect to the current offering period, (ii) no employee who was not a participant in the ESPP as of the end of the day on February 25, 2020 may become a participant in the ESPP, (iii) the aggregate number of shares of GAIN common stock purchasable during the current offering period will not exceed 134,000 shares of GAIN common stock and (iv) no offering period will commence after the current offering period and before the effective time of the merger.
Employment Agreements
Mr. Stevens, GAIN’s Chief Executive Officer and President, entered into a new employment agreement with GAIN on October 22, 2018. Mr. Stevens’s employment agreement provides for certain payments and benefits depending upon the circumstances of his termination of employment. The employment agreement additionally provides for enhanced severance payments and benefits described below in the event of a termination of Mr. Stevens’s employment, specifically in the case of a termination by GAIN without “cause” (as defined in the employment agreement) or a resignation for “good reason” (as defined in the employment agreement) on or within 18 months after a change in control.
In the event of a termination by GAIN without “cause” or a resignation for “good reason” on or within 18 months following a change in control, Mr. Stevens would be entitled to a lump sum payment equal to (i) 24 months of his base salary, (ii) accrued and unpaid incentive compensation for the fiscal year prior to such
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termination; (iii) incentive compensation for the termination year (prorated based on the formula set forth in the employment agreement); (iv) an amount equal to two times his aggregate target incentive compensation for the termination year; and (v) continued health benefits for 24 months following his termination of employment. Under the employment agreement, the payment is dependent upon Mr. Stevens (i) executing a waiver and release of claims against GAIN and its affiliates and (ii) complying with specified restrictive covenants including perpetual confidentiality and 18-month post-employment non-solicitation and non-competition.
If Mr. Stevens dies or his employment is terminated due to disability, whether or not following a change in control, Mr. Stevens (or his estate) would be entitled to receive (i) incentive compensation for the termination year (prorated based on the formula set forth in the employment agreement) and (ii) base salary continuation payments in an amount equal to 24 months’ of his then current base salary, which would either be paid via a lump sum (in the case of Mr. Stevens’s death) or through salary continuation payments (in the event of a termination of Mr. Stevens’s employment due to disability). The pro rata incentive compensation would be paid when such incentive compensation was paid to other executives.
Mr. Rose became our Chief Financial Officer in October 2015, and his existing employment agreement with City Index (Holdings) Limited, which was acquired by the Company in April 2015, remained in effect subsequent to the acquisition and throughout 2015. The employment agreement requires 12 months’ prior notice of a termination of his employment absent certain circumstances specified in his employment agreement, including gross misconduct, negligent or incompetent performance of his duties or conviction of a criminal offense. During the applicable notice period (including any period of garden leave), Mr. Rose is entitled to receive, his base salary and benefits in the ordinary course. The employment agreement does not contain any enhanced change in control severance terms. Mr. Rose’s employment agreement contains specified restrictive covenants including perpetual confidentiality and 12-month post-employment non-solicitation and non-competition.
The Company entered into an employment agreement with Mr. Hine, GAIN’s Chief Operating Officer, in November 2017. The employment agreement provides for severance payments in the event of a termination of Mr. Hine’s employment, specifically in the case of a termination by GAIN without “cause” (as defined in the employment agreement) or a resignation for “good reason” (as defined in the employment agreement). The employment agreement does not contain any enhanced change in control severance terms. In the event of a termination by GAIN “cause” or a resignation for “good reason”, Mr. Hine would be entitled to a lump sum payment equal to 12 months of base salary. Under the employment agreement, the payment is dependent upon Mr. Hine (i) executing a waiver and release of claims against GAIN and its affiliates and (ii) complying with specified restrictive covenants including perpetual confidentiality and for the period of any garden leave imposed by GAIN, non-solicitation and non-competition.
Mr. Rotsztain, GAIN’s General Counsel, Head of Corporate Development and Secretary, entered into a new employment agreement with GAIN on February 4, 2019. The employment agreement provides for severance payments in the event of a termination of Mr. Rotsztain’s employment, specifically in the case of a termination by GAIN without “cause” (as defined in the employment agreement) or a resignation for “good reason” (as defined in the employment agreement) on or within 12 months after a change in control.
In the event of a termination by GAIN without “cause” or a resignation for “good reason” on or within 12 months following a change in control, Mr. Rotsztain would be entitled to a lump sum payment equal to (i) 24 months of his base salary, (ii) a lump sum payment equal to accrued and unpaid incentive compensation for the fiscal year prior to such termination (which amount shall be equal to the actual incentive compensation achieved for such fiscal year); (iii) incentive compensation for the termination year (prorated based on the formula set forth in the employment agreement); (iv) an amount equal to two times his aggregate target incentive compensation for the termination year; and (v) continued health benefits for 24 months following his termination of employment. Under the employment agreement, the payment is dependent upon Mr. Rotsztain (i) executing a waiver and release of claims against GAIN and its affiliates and (ii) complying with specified restrictive covenants regarding perpetual confidentiality and 12-month post-employment non-solicitation and non-competition.
None of the executives’ employment agreements provide for the payment of any tax gross-up in the event that the applicable severance benefits cause the executive to be liable for the payment of golden parachute excise
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taxes. We can, however, reduce the severance benefits to a level below that which would cause the executive to be liable for the payment of golden parachute excise taxes if he or she would receive a greater net after-tax benefit by receiving the reduced severance benefits rather than receiving the full severance benefits and having to pay the excise taxes.
Golden Parachute Compensation
The table below sets forth, for each of GAIN’s named executive officers (as well as GAIN’s other executive officers and directors), estimates of the amounts of compensation that are payable in connection with or otherwise relate to the merger and that will or may become payable to the named executive officer, executive officer or director either immediately on the consummation of the merger or on a qualifying termination of employment within two years after the merger. GAIN’s stockholders are being asked to approve, on a non-binding, advisory basis, such compensation for these named executive officers (see the section entitled “Advisory Vote on Named Executive Officer Merger-Related Compensation Arrangements (Proposal 2)” beginning on page 88 of this proxy statement). Because the vote to approve such compensation is advisory only, it will not be binding on either GAIN or INTL. Accordingly, if the merger is approved by GAIN’s stockholders and the merger is completed, the compensation will be payable regardless of the outcome of the advisory vote to approve such compensation, subject only to the conditions applicable to the vote to approve the merger, which are described in the footnotes to the table and above under the section entitled “The Merger (Proposal 1) —Interests of GAIN’s Directors and Executive Officers in the Merger” beginning on page 51 of this proxy statement.
The estimates in the table assume that the merger became effective on December 31, 2020 and that, immediately after the consummation of the merger, each executive’s employment had been terminated by GAIN without “cause” or by the executive for “good reason.” See the footnotes to the table for additional assumptions.
The table also sets forth estimates of the amounts of such compensation for GAIN’s executive officers other than the named executive officers. GAIN’s stockholders are not being asked to approve such compensation for these individuals.
As described in the section entitled “The Merger (Proposal 1)—Interests of GAIN’s Directors and Executive Officers in the Merger—Employment Agreements” beginning on page 52 of this proxy statement, the amounts payable to Mr. Stevens and Mr. Rotsztain are subject to reduction under the applicable employment agreement to the extent necessary for the executive officer to avoid the excise tax imposed under Section 4999 of the Code, if such reduction would result in the executive officer retaining a higher amount of the payments (net of the excise and other taxes) than if such reduction were not made. The table does not take into account any such reduction.
Name(1)
Cash
($)(2)
Equity
($)(3)
Pension/
NQDC
($)
Perquisites/
Benefits
($)(4)
Tax
Reimbursement
($)
Total ($)
Named Executive Officers
 
 
 
 
 
 
Glenn H. Stevens, President and Chief Executive Officer
6,400,000(5)
1,721,856
0
36,000
0
8,157,856
Nigel Rose, Chief Financial Officer
656,813(6)
346,653
0
3,566
0
1,007,032
Alastair Hine, Chief Operating Officer
624,375(7)
281,757
0
0
0
906,132
Diego Rotsztain, Head of Corporate Development, General Counsel and Secretary
2,240,000(8)
459,794
0
36,000
0
2,735,794
Directors
 
 
 
 
 
 
Joseph A. Schenk, Chairman of the Board
0
102,091
0
0
0
102,091
Tom Bevilacqua
0
7,645
0
0
0
7,645
Christopher W. Calhoun
0
11,468
0
0
0
11,468
Alex Goor
0
11,468
0
0
0
11,468
Doug Rhoten
0
0
0
0
0
0
Christopher S. Sugden
0
11,468
0
0
0
11,468
Peter Quick
0
124,360
0
0
0
124,360
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(1)
On April 2, 2019, Jason Granite, a member of the GAIN board, notified GAIN that he was resigning, effective immediately. Effective September 30, 2019, Samantha Roady, GAIN’s former President of the retail business stepped down from her position. Mr. Granite and Ms. Roady are not entitled to any payments or benefits in connection with the transaction, other than the merger consideration that he or she will receive to the extent that he or she is a stockholder of GAIN.
(2)
The amounts included in this column are (i) the severance payments that each executive officer would receive under the executive’s employment agreement described in the section entitled “The Merger (Proposal 1)—Interests of GAIN’s Directors and Executive Officers in the Merger—Employment Agreements” and (ii) the accelerated payment of deferred cash awards that each executive officer received in lieu of a 2020 long-term equity award. The following table shows additional information about the types of cash payments that would be received by the executive officers based on the assumptions set forth below. None of the directors are eligible for payments in this column. The severance payments pursuant to the employment agreements are double-trigger payments.
 
Severance
Amount
($)
Incentive
Compensation
for the
Termination
Year
($)
Incentive
Compensation
Multiple
($)
Deferred
Cash Award
($)(a)
Total
($)(b)
Named Executive Officers
Glenn H. Stevens, President and Chief Executive Officer
1,300,000
750,000
3,000,000
1,350,000
6,400,000
Nigel Rose, Chief Financial Officer
356,813
0
0
300,000
656,813
Alastair Hine, Chief Operating Officer
324,375
0
0
300,000
624,275
Diego Rotsztain, Head of Corporate Development, General Counsel and Secretary
850,000
200,000
800,000
390,000
2,240,000
(a)
The amounts set forth in this column are the payment of deferred cash grants that each executive officer received in lieu of a 2020 long-term equity award. Such amounts are payable in a lump sum on certain terminations of employment following a change in control.
(b)
For purposes of quantifying the potential payments and benefits described in this table, the following assumptions were used. The actual amounts payable following a termination of employment would depend on the date of termination, the manner of termination and the terms of the agreements in effect at such time.
The merger is assumed to have been consummated on June 30, 2020.
Each executive officer is assumed to experience a termination without cause or for good reason (if applicable under the terms of the applicable employment agreement) immediately following the consummation of the merger.
Compensation levels on the date of termination are assumed to be the same as those as of January 1, 2020.
(3)
The following table provides additional information regarding the equity holdings of each executive officer and director that will be canceled and exchanged for the merger consideration in connection with the consummation of the merger.
Name
Value of
Unvested
Stock
Options
($)
Value of
Vested
Stock
Options
($)
Value of
Restricted
Stock
($)
Value of
RSUs
($)
Value of
PSUs
($)
Total
($)
Named Executive Officers
 
 
 
 
 
 
Glenn H. Stevens, President and Chief Executive Officer
0
0
0
701,418
1,020,438
1,721,856
Nigel Rose, Chief Financial Officer
0
0
0
183,843
162,810
346,653
Alastair Hine, Chief Operating Officer
0
0
0
123,147
158,610
281,757
Diego Rotsztain, Head of Corporate Development, General Counsel and Secretary
0
0
0
241,028
218,766
459,794
Directors
 
 
 
 
 
 
Joseph A. Schenk, Chairman of the Board
0
86,800
0
15,291
0
102,091
Tom Bevilacqua
0
0
0
7,645
0
7,645
Christopher W. Calhoun
0
0
0
11,468
0
11,468
Alex Goor
0
0
0
11,468
0
11,468
Doug Rhoten
0
0
0
0
0
0
Christopher S. Sugden
0
0
0
11,468
0
11,468
Peter Quick
0
112,892
0
11,468
0
124,360
(4)
The amounts included in this column reflect benefits provided to executive officers pursuant to the applicable employment agreement which respectively provides the applicable executive officer to continued health benefits for 24 months following termination of employment.
(5)
Pursuant to the terms of his employment agreement, Mr. Stevens is entitled to payment of (i) 24 months’ base salary, plus (ii) a lump sum amount equal to two times his target cash incentive compensation for the termination year, plus (iii) pro rata incentive compensation with respect to the termination year based upon his target incentive compensation for the termination year. Since the
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table assumes termination as of June 30, 2020, Mr. Stevens’s pro rata incentive compensation payment is reflected as half of the target cash incentive compensation payable to him for the assumed year of termination. The amount set forth in the table is equal to (i) two times Mr. Stevens’s 2020 base salary, $1,300,000, plus (ii) two times Mr. Stevens’s 2020 target cash incentive compensation amount, $3,000,000, plus (iii) half of Mr. Stevens’s 2020 target cash incentive compensation, $750,000.
(6)
Pursuant to the terms of his employment agreement, Mr. Rose is entitled to twelve months’ prior notice of the termination of his employment absent certain circumstances specified in the employment agreement. During the applicable notice period (including any period of garden leave), Mr. Rose is entitled to receive his pay and contractual benefits in the usual way. The amount set forth in the table is equal to 12 months of Mr. Rose’s 2020 base salary, $356,813.
(7)
Pursuant to the terms of his employment agreement, Mr. Hine is entitled to payment of 12 months’ base salary. The amount set forth in the table reflects Mr. Hine’s base salary, $324,375.
(8)
Pursuant to the terms of his employment agreement, Mr. Rotsztain is entitled to payment of (i) 24 months’ base salary, plus (ii) a lump sum amount equal to two times his target cash incentive compensation for the termination year, plus (iii) pro-rata incentive compensation with respect to the termination year based upon his target incentive compensation for the termination year. Since the table assumes termination as of June 30, 2020, Mr. Rotsztain’s pro rata incentive compensation payment is reflected as half of the target cash incentive compensation payable to him for the assumed year of termination. The amount set forth in the table is equal to (i) two times Mr. Rotsztain’s 2020 base salary, $850,000 million, plus (ii) two times Mr. Rotsztain’s 2020 target cash incentive compensation amount, $800,000, plus (iii) half of Mr. Rotsztain’s 2020 target cash incentive compensation, $200,000.
Directors’ and Officers’ Indemnification and Insurance
For information regarding indemnification of GAIN’s directors and executive officers, see the section entitled “The Merger Agreement—Directors’ and Officers’ Indemnification and Insurance” beginning on page 56 of this proxy statement.
Financing of the Merger
Completion of the merger is not subject to a financing condition. INTL has represented in the merger agreement that it has available or will have available to it, as of the date of the closing of the merger, immediately available funds to enable it to consummate the merger. Prior to the closing date, GAIN has agreed to, and to cause its subsidiaries and its and their respective representatives to, use their commercially reasonable best efforts to, on a timely basis, upon the reasonable request of INTL or any of its subsidiaries, provide customary cooperation that is necessary and customary in connection with the financing.
GAIN and its subsidiaries are not required to pay any commitment or other similar fees or incur any other liability or expenses or permit any lien to be placed on any of its respective assets, in each case, prior to the closing of the merger in connection with any financing to be obtained by INTL or its subsidiaries in connection with the transactions. GAIN, its subsidiaries and any of their respective directors or officers are not required to execute any agreement, certificate, document, letter, registration statement or instrument with respect to such financing that would be effective prior to the closing (other than customary authorization letters, but solely to the extent customarily required for financings of the type contemplated).
For more information on INTL’s financing arrangements for the merger, see the sections entitled “The Merger Agreement—Financing of the Merger” beginning on page 56.
Repayment of Convertible Notes
Pursuant to the merger agreement, GAIN and its subsidiaries were required to deliver all notices and take all other actions required to facilitate the repayment in full of all obligations in respect of the 2020 convertible notes on April 1, 2020 in accordance with the terms of the 2020 convertible notes indenture. The 2020 convertible notes are no longer outstanding following GAIN’s satisfaction of all obligations due in respect of such convertible notes on or prior to their scheduled maturity date on April 1, 2020.
In addition, GAIN and its subsidiaries will use their reasonable best efforts to comply with all of their respective obligations under the 2022 convertible notes issued pursuant to the 2022 convertible notes indenture. Following consummation of the merger, each holder of GAIN's outstanding 2022 convertible notes will, pursuant to the terms of the 2022 convertible notes indenture, be entitled to either (a) convert or exchange that holder's 2022 convertible notes into an amount in cash (without interest) for each $1,000 principal amount of the convertible notes held by that holder equal to $6.00 multiplied by the conversion rate for the 2022 convertible notes in effect on the applicable conversion date for the 2022 convertible notes or (b) require the surviving corporation to repurchase that holder's 2022 convertible notes (or any portion of principal amount thereof that is equal to $1,000 or an integral multiple of $1,000 in excess thereof), for cash on a date specified by GAIN in accordance with the 2022 convertible notes indenture at the applicable Fundamental Change Repurchase Price (as defined in the 2022 convertible notes indenture). Alternatively, holders of the 2022 convertible notes can continue to hold their 2022 convertible notes, which following the effective time will only be convertible or exchangeable into cash as described above.
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See the section entitled “The Merger Agreement—Repayment of Convertible Notes” beginning on page 56 of this proxy statement.
Regulatory Clearances and Approvals Required for the Merger
The completion of the merger is conditioned on, among other things, certain specified regulatory approvals having been obtained and remaining in full force and effect (or, in the case of certain specified regulatory approvals that are statutory waiting period, having expired or been terminated, including the expiration or termination of any applicable waiting period under the HSR Act). Under the terms of the merger agreement, each of GAIN and INTL agrees to use their respective reasonable best efforts (except where the merger agreement specifies a different standard) to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable law to consummate the transactions contemplated by the merger agreement, including preparing and filing as promptly as practicable with any government authority or other third party all documentation to effect all necessary filings and obtaining certain specified regulatory approvals.
Notwithstanding the foregoing, INTL is not be required to (i) take or commit to take any action that would reasonably be expected to result in changes to the business of GAIN or any of its subsidiaries or of INTL or any of its subsidiaries that, if in effect at the start of fiscal year 2019, would have resulted in the reduction of the revenues of GAIN, its subsidiaries, INTL and/or its subsidiaries, by an amount in excess of $25,000,000 in the aggregate, in the 2019 fiscal year or (ii) take or commit to take any actions that would result in incremental payments, costs or expenditures (including reasonable counsel and advisor fees) by GAIN, its subsidiaries, INTL and/or its subsidiaries, on or after the date of the merger agreement (but excluding any payments, costs or expenditures otherwise incurred in connection with the merger agreement or the consummation of the merger), in excess of $12,500,000 in the aggregate in any fiscal year (a “materially burdensome regulatory condition”) (it being understood and agreed that INTL shall be obligated to take any such actions (A) that result in changes to the business of GAIN or any of its subsidiaries or of INTL or its subsidiaries that, if in effect at the start of fiscal year 2019, would have resulted in the reduction of the revenues of GAIN, its subsidiaries, INTL and/or its subsidiaries, by an amount not in excess of $25,000,000 in the aggregate, in the 2019 fiscal year and (B) that would not result in incremental payments, costs or expenditures (including reasonable counsel and advisor fees) to GAIN, its subsidiaries, INTL and/or its subsidiaries, on or after the date of the merger agreement (but excluding any payments, costs or expenditures otherwise incurred in connection with the merger agreement or the consummation of the merger) in excess of $12,500,000 in the aggregate in any fiscal year).
On April 16, 2020, both GAIN and INTL filed notification of the proposed merger with the FTC and the Antitrust Division under the HSR Act. Early termination of the HSR waiting period was received on April 27, 2020.
Accounting Treatment
The merger will be accounted for as a “purchase transaction” for financial accounting purposes.
Material U.S. Federal Income Tax Consequences of the Merger
The exchange of GAIN common stock for cash in the merger will be a taxable transaction for U.S. federal income tax purposes and may also be taxable under state and local and other tax laws. In general, a U.S. holder (as described in the section entitled “Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 57 of this proxy statement) whose shares of GAIN common stock are converted into the right to receive cash in the merger will recognize capital gain or loss for U.S. federal income tax purposes in an amount equal to the difference, if any, between the amount of cash received with respect to such shares and the U.S. holder’s adjusted tax basis in such shares.
You should read the section entitled “Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 57 of this proxy statement and consult your tax advisors regarding the U.S. federal income tax consequences of the merger to you in your particular circumstances, as well as tax consequences arising under the laws of any state, local or foreign taxing jurisdiction.
Delisting and Deregistration of GAIN Common Stock
Upon completion of the merger, the GAIN common stock currently listed on the NYSE will cease to be listed on the NYSE and will subsequently be deregistered under the Exchange Act.
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Appraisal Rights
Under the DGCL, any record holder of GAIN common stock at the close of business on the record date who does not vote in favor of the merger, and who exercises its appraisal rights and fully complies with all of the provisions of Section 262 of the DGCL (but not otherwise), will be entitled to demand and receive payment of the “fair value” for all (but not less than all) of his or her shares of GAIN common stock if the merger is completed. See the section entitled “Appraisal Rights of Stockholders” beginning on page 84 of this proxy statement. The full text of Section 262 of the DGCL is attached to this proxy statement as Annex G.
Litigation Related to the Merger
As of April 27, 2020, purported stockholders of GAIN filed six actions in the United States District Court for the District of New Jersey, the United States District Court for the District of Delaware and the United States District Court of the Southern District of New York, captioned Stein v. GAIN Capital Holdings, Inc., et al., Case No. 3:20-cv-04073 (D.N.J.), Franchi v. GAIN Capital Holdings, Inc., et al., Case No. 1:20-cv-00519 (D. Del.), Sperli v. GAIN Capital Holdings, Inc., et al., Case No. 1:20-cv-03187 (S.D.N.Y.), Sanderson v. GAIN Capital Holdings, Inc., et al., Case No. 1:20-cv-03228 (S.D.N.Y.), Raul v. GAIN Capital Holdings, Inc., et al., Case No. 1:20-cv-03211 (S.D.N.Y.) and Ye He v. GAIN Capital Holdings, Inc., et al., Case No. 2:20-cv-05026 (D.N.J.), respectively. The complaints, the second of which is a putative class action complaint, allege that a preliminary version of the proxy statement filed with the SEC on April 10, 2020 was materially incomplete, false or misleading in certain respects, thereby allegedly violating Sections 14(a) and 20(a) of the Exchange Act (15 U.S.C. § § 78n(a), 78t(a)), and SEC Rule 14a-9 (17 C.F.R. § 240.14a-9) or 17 C.F.R. § 244.100 promulgated thereunder. The complaints name as defendants each member of the GAIN board of directors and purport to seek injunctive relief and money damages, including reasonable attorneys’ fees. GAIN and the defendants believe the allegations in these actions are without merit.
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THE MERGER AGREEMENT
The following is a summary of the material terms and conditions of the merger agreement. This summary does not purport to be complete and may not contain all of the information about the merger agreement that is important to you. This summary is qualified in its entirety by reference to the complete text of the Agreement and Plan of Merger, dated as of February 26, 2020, a copy of which is attached to this proxy statement as Annex A, and which is incorporated by reference into this proxy statement. We encourage you to read the merger agreement carefully and in its entirety because it is the legal document that governs the merger.
Explanatory Note Regarding the Merger Agreement
The following summary of the Agreement and Plan of Merger, dated as of February 26, 2020, a copy of which is attached hereto as Annex A to this proxy statement, is intended to provide information regarding the terms of the merger agreement and is not intended to modify or supplement any factual disclosures about GAIN in its public reports filed with the SEC. In particular, the merger agreement and the related summary are not intended to be, and should not be relied upon as, disclosures regarding any facts and circumstances relating to GAIN or any of its subsidiaries or affiliates. The merger agreement contains representations and warranties by GAIN, INTL and Merger Sub which were made only for purposes of that agreement and as of specified dates. The representations, warranties and covenants in the merger agreement were made solely for the benefit of the parties to the merger agreement; may be subject to limitations agreed upon by the contracting parties, including being qualified by the disclosure schedules to the merger agreement; were made for the purposes of allocating contractual risk between the parties to the merger agreement instead of establishing these matters as facts; and may apply contractual standards of materiality or material adverse effect that generally differ from those applicable to investors. In addition, information concerning the subject matter of the representations, warranties and covenants may change after the date of the merger agreement, which subsequent information may or may not be fully reflected in GAIN’s public disclosures.
Additional information about GAIN may be found elsewhere in this proxy statement and GAIN’s other public filings. See the section entitled “Where You Can Find More Information,” beginning on page 97 of this proxy statement.
Structure of the Merger
At the effective time of the merger, Merger Sub will be merged with and into GAIN in accordance with the DGCL. As a result of the merger, the separate existence of Merger Sub will cease, and GAIN will be the surviving corporation. At the effective time of the merger and by virtue of the merger, the certificate of incorporation of GAIN will be amended and restated in its entirety to be identical to the certificate of incorporation of Merger Sub in effect immediately prior to the effective time of the merger, except (a) to change the name of the surviving corporation to GAIN and (b) as otherwise required by the merger agreement to maintain in effect provisions regarding elimination of liability of directors and indemnification of officers, directors, employees, fiduciaries and agents described in the section entitled “The Merger Agreement—Directors’ and Officers’ Indemnification and Insurance” beginning on page 73 of this proxy statement, and as so amended will be the amended and restated certificate of incorporation of the surviving corporation. The bylaws of Merger Sub in effect at the effective time of the merger will be the bylaws of the surviving corporation. From and after the effective time of the merger, until successors are duly elected or appointed and qualified in accordance with applicable law, the directors of Merger Sub at the effective time of the merger will be the directors of the surviving corporation and the officers specified by INTL will be the officers of the surviving corporation.
Closing and Effective Time of the Merger
Unless another time, date or place is mutually agreed in writing by GAIN and INTL, the closing of the merger will take place as soon as possible, but in any event no later than three business days after the date the closing conditions set forth in the merger agreement and described in the section entitled “The Merger Agreement—Conditions to Completion of the Merger” beginning on page 75 of this proxy statement (other than conditions that by their nature are to be satisfied at the closing, but subject to the satisfaction or, to the extent permissible, waiver of those conditions) have been satisfied or, to the extent permissible, waived by the party or parties entitled to the benefit of such conditions. The merger will become effective at such time as the certificate of merger is duly filed with the Delaware Secretary of State or at such later time as may be specified in the
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certificate of merger. As of the date of this proxy statement, we expect to complete the merger in mid-2020. However, completion of the merger is subject to the satisfaction or waiver of the conditions to the completion of the merger, which are described below, and it is possible that factors outside the control of GAIN or INTL could delay the completion of the merger, or prevent it from being completed at all. There may be a substantial amount of time between the special meeting and the completion of the merger. We expect to complete the merger promptly following the receipt of all required approvals.
Effect of the Merger on GAIN Common Stock
At the effective time of the merger, each share of GAIN common stock outstanding immediately prior to the effective time of the merger (other than shares owned by GAIN (as treasury stock), INTL or any of their respective subsidiaries, Merger Sub or any stockholder who has properly demanded appraisal rights in accordance with Delaware law, together, the “excluded shares”) will be converted into the right to receive $6.00 in cash, without interest. As of the effective time of the merger, all such shares of GAIN common stock will no longer be outstanding and will automatically be cancelled and retired and cease to exist, and will thereafter represent only the right to receive the merger consideration to be paid in accordance with the terms of the merger agreement.
At the effective time of the merger, each share of GAIN common stock held by GAIN (as treasury stock) or owned by INTL, Merger Sub or any other subsidiary of INTL will be canceled without payment of any consideration. At the effective time of the merger, each share of GAIN common stock held by any subsidiary of GAIN will be converted into such number of shares of stock of the surviving corporation such that each such subsidiary owns the same percentage of the outstanding capital stock in the surviving corporation immediately following the effective time of the merger as such subsidiary owned in GAIN immediately prior to the effective time of the merger. In addition, shares of GAIN common stock outstanding immediately prior to effective time of the merger and held by a stockholder who has not voted in favor of the merger or consented thereto in writing and who has properly demanded appraisal for such shares in accordance with Delaware law will not be converted into the right to receive the merger consideration, unless and until such holder fails to perfect, withdraws or otherwise loses the right to appraisal. If any holder of GAIN common stock that demands appraisal rights properly perfects such rights, such holder will be entitled to the fair value of such shares as determined by the Delaware Court of Chancery plus interest, if any, on the amount determined to be the fair value, as further described in the section entitled “Appraisal Rights of Stockholders” beginning on page 84 of this proxy statement.
Each share of common stock of Merger Sub outstanding immediately prior to the effective time of the merger will be converted into one share of common stock of the surviving corporation.
Procedures for Surrendering Shares for Payment
Prior to the effective time of the merger, INTL will appoint an exchange agent reasonably acceptable to GAIN for the purpose of exchanging for the merger consideration certificates representing shares of GAIN common stock or uncertificated shares of GAIN common stock. At or prior to the effective time of the merger, INTL will make available to the exchange agent the merger consideration to be paid in respect of the certificates representing shares of GAIN common stock or uncertificated shares of GAIN common stock.
As promptly as reasonably practicable after the effective time of the merger (but no later than five business days thereafter), INTL will send, or cause the exchange agent to send, to each holder of shares of GAIN common stock at the effective time of the merger a letter of transmittal and instructions (which will specify that the delivery will be effected, and risk of loss and title will pass, only upon proper delivery of certificates representing shares of GAIN common stock or transfer of uncertificated shares of GAIN common stock to the exchange agent) for use in such exchange.
Each holder of shares of GAIN common stock that have been converted into the right to receive the merger consideration will be entitled to receive, upon (i) surrender to the exchange agent of a certificate, together with a properly completed letter of transmittal, or (ii) receipt of an “agent’s message” by the exchange agent (or such other evidence, if any, of transfer as the exchange agent may reasonably request) in the case of a book-entry transfer of uncertificated shares, in each case (i) or (ii), the merger consideration in respect of GAIN common stock represented by a certificate or uncertificated share. Until so surrendered or transferred, as the case may be, each such certificate or uncertificated share will represent after the effective time of the merger for all purposes only the right to receive such merger consideration.
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If any portion of the merger consideration is to be paid to a person other than the person in whose name the surrendered certificate or the transferred uncertificated share is registered, it will be a condition to such payment that (i) either such certificate be properly endorsed or otherwise be in proper form for transfer or such uncertificated share be properly transferred and (ii) the person requesting such payment must pay to the exchange agent any transfer or other taxes required as a result of such payment or establish to the satisfaction of the exchange agent that such tax has been paid or is not payable.
After the effective time of the merger, there will be no further registration of transfers of shares of GAIN common stock. If, after the effective time of the merger, certificates representing shares of GAIN common stock or uncertificated shares of GAIN common stock are presented to the surviving corporation or the exchange agent, they will be canceled and exchanged for the merger consideration.
Any portion of the merger consideration made available to the exchange agent for payment to the stockholders that remains unclaimed by the holders of GAIN common stock twelve months after the effective time of the merger will be returned to INTL, upon demand, and any such holder who has not exchanged shares of GAIN common stock will thereafter look only to INTL for payment of the merger consideration in respect of such shares without any interest thereon. Notwithstanding the foregoing, INTL and its subsidiaries (including the surviving corporation and its subsidiaries) will not be liable to any holder of GAIN common stock for any amounts paid to a public official pursuant to applicable abandoned property, escheat or similar applicable laws. Any merger consideration remaining unclaimed by holders of shares of GAIN common stock immediately prior to such time as such amounts would otherwise escheat to or become the property of any governmental authority will, to the extent permitted by applicable law, become the property of INTL free and clear of any claims or interest of any person previously entitled thereto.
Withholding
INTL, the surviving corporation and the exchange agent are entitled to deduct and withhold from the consideration otherwise payable to any person pursuant to the merger agreement such amounts as it is required to deduct and withhold with respect to the making of such payment under any provision of federal, state, local or foreign tax law. If the exchange agent, the surviving corporation or INTL, as the case may be, so withholds amounts, such amounts will be treated for all purposes of the merger agreement as having been paid to the holder of the shares of GAIN common stock, GAIN stock options, GAIN restricted stock units or GAIN restricted stock awards, as applicable, in respect of which the exchange agent, the surviving corporation or INTL, as the case may be, made such deduction and withholding.
Treatment of GAIN Equity Awards
At the effective time of the merger, each outstanding option to purchase shares of GAIN common stock under GAIN’s 2015 Omnibus Incentive Compensation Plan, 2010 Omnibus Incentive Compensation Plan or any predecessor equity compensation plan (the “ICP”) , whether or not exercisable or vested, that is outstanding and unexercised immediately prior to the effective time of the merger will, automatically, become vested as of immediately prior to the effective time of the merger, be canceled, and entitle the holder of each such option to receive (without interest) as soon as reasonably practicable after the effective time of the merger an amount in cash determined by multiplying (i) the excess, if any, of the per share merger consideration over the applicable exercise price of such stock option, by (ii) the number of shares of GAIN common stock such holder could have purchased (assuming full vesting of all stock options) had such holder exercised such stock option in full immediately prior to the effective time of the merger, less applicable taxes required to be withheld with respect to such payment. For the avoidance of doubt, any stock option which has an exercise price per share of GAIN common stock that is greater than or equal to the merger consideration will be cancelled at the effective time of the merger for no consideration or payment.
At the effective time of the merger, each (i) restricted stock unit and (ii) restricted stock award, in each case, with respect to shares of GAIN common stock granted under the ICP, whether subject to time-based or performance-based vesting, that is outstanding as of immediately prior the effective time of the merger will, automatically and without any action on behalf of the holder thereof, become vested as of immediately prior to the effective time of the merger and be canceled in exchange for the right to receive (without interest) a cash payment as soon as reasonably practicable after the effective time of
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the merger from INTL determined by multiplying (I) the per share merger consideration by (II) the number of shares of GAIN common stock underlying such restricted stock unit or restricted stock award, as applicable, as of the effective time of the merger, less applicable taxes required to be withheld with respect to such payment; however, with respect to restricted stock units or restricted stock awards that constitute nonqualified deferred compensation subject to Section 409A of the Code and that are not permitted to be paid at the effective time of the merger without triggering a tax or penalty under Section 409A of the Code, such payment will be made at the earliest time permitted under the employee plan and award agreement that will not trigger a tax or penalty.
For any outstanding restricted stock unit award subject to performance-based vesting, (A) if the performance period applicable to such award has concluded, the number of shares of GAIN common stock underlying such restricted stock unit will be reasonably determined by the compensation committee of the GAIN board of directors based on actual performance during the performance period and (B) if the performance period applicable to such award has not concluded, the number of shares of GAIN common stock underlying such restricted stock unit will, pursuant to the terms of such unit or award, be calculated using the target performance.
Treatment of ESPP
GAIN will, prior to the effective time of the merger, take all actions reasonably necessary to terminate GAIN’s 2011 Employee Stock Purchase Plan (the “ESPP”) and all outstanding rights thereunder as of immediately prior to and contingent upon the effective time of the merger. From and after the date of the merger agreement, GAIN will take all actions reasonably necessary to ensure that (i) the existing participants in the ESPP may not increase their elections with respect to the current offering period, (ii) no employee who was not a participant in the ESPP as of the end of the day on February 25, 2020 may become a participant in the ESPP, (iii) the aggregate number of shares of GAIN common stock purchasable during the current offering period will not exceed 134,000 shares of GAIN common stock and (iv) no offering period will commence after the current offering period and before the effective time of the merger.
Representations and Warranties
GAIN’s representations and warranties to INTL in the merger agreement relate to, among other things:
The organization, good standing and qualification of GAIN and its subsidiaries;
The corporate power and authority to execute, deliver and perform the merger agreement and to consummate the transactions contemplated by the merger agreement;
Required regulatory filings and authorizations, consents or approvals of governmental entities;
The absence of certain breaches, violations, defaults or consent requirements under certain contracts, organizational documents and laws, in each case arising out of the execution, delivery and performance of, and consummation of the transactions contemplated by, the merger agreement;
The capital structure of GAIN and its subsidiaries;
The reports, schedules, forms, statements and other documents required to be filed with the SEC and other regulatory agencies and the accuracy of the information contained in those documents;
The financial statements of GAIN and GAIN’s internal system of disclosure controls and procedures concerning financial reporting;
The disclosure documents required to be filed with the SEC in connection with the merger (including this proxy statement);
The absence of certain changes or events;
The absence of certain undisclosed liabilities;
Compliance with laws by GAIN and its subsidiaries;
The absence of certain litigation, actions, suits, investigations or proceedings;
Real property owned or leased by GAIN and its subsidiaries;
Ownership of or rights with respect to the intellectual property of GAIN and its subsidiaries;
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The payment of taxes, the filing of tax returns and other tax matters related to GAIN and its subsidiaries;
Compensation and benefits plans, agreements and arrangements with or concerning employees of GAIN and its subsidiaries;
Compliance with environmental laws, permits and licenses by GAIN and its subsidiaries and other environmental matters;
Certain material contracts of GAIN and its subsidiaries;
Brokers’ and finders’ fees and other expenses payable by GAIN;
Receipt of the opinion of GCA Advisors with respect to the fairness of the merger consideration from a financial point of view;
The applicability of, and GAIN’s compliance with, certain state takeover statutes, including the exemption of the merger from the rights agreement;
Permits (and compliance therewith) necessary for the operation of the business by GAIN and its subsidiaries;
Compliance with laws and other applicable rules by GAIN’s regulated subsidiaries;
Compliance with laws related to labor and employment by GAIN and its subsidiaries;
Certain matters related to the insurance policies and arrangements of GAIN and its subsidiaries; and
The absence of related party transactions since January 1, 2017.
INTL’s representations and warranties to GAIN in the merger agreement relate to, among other things:
The corporate organization, good standing and qualification of each of INTL and Merger Sub;
The corporate power and authority to execute, deliver and perform the merger agreement and to consummate the transactions contemplated by the merger agreement;
Required regulatory filings and authorizations, consents or approvals of governmental entities;
The absence of certain breaches, violations, defaults or consent requirements under certain contracts, organizational documents and laws, in each case arising out of the execution, delivery and performance of, and consummation of the transactions contemplated by, the merger agreement;
The accuracy of information supplied by INTL to be included in this proxy statement;
Brokers’ and finders’ fees and other expenses payable by INTL;
The availability of funds to consummate the merger and pay related fees and absence of financing contingency;
The solvency of the surviving corporation after the consummation of the merger;
The absence of certain actions, suits, arbitrations or proceedings that would prevent, impair or materially delay the ability of INTL or Merger Sub to perform their respective obligations under the merger agreement or to consummate the merger;
Beneficial ownership of shares of GAIN common stock by INTL, Merger Sub or any of their respective subsidiaries;
The absence of agreements pursuant to which a stockholder of GAIN would be entitled to receive consideration related to the merger of a different amount or nature than the merger consideration;
The absence of agreements between INTL or Merger Sub or any of their affiliates, on one hand, and any member of GAIN’s management or GAIN’s board of directors, on the other hand; and
The acknowledgement that there are no further representations and warranties made by or on behalf of GAIN, other than in the merger agreement.
None of the representations and warranties in the merger agreement survive the effective time of the merger, except in the case of fraud.
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Definitions of “Material Adverse Effect”
Many of GAIN’s representations and warranties in the merger agreement are qualified by a “company material adverse effect” standard (that is, they will not be deemed to be untrue or incorrect unless their failure to be true or correct has had or would reasonably be expected to have, individually or in the aggregate, a company material adverse effect). For purposes of the merger agreement, a “company material adverse effect” means any event, change, development, circumstance or effect that, individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect on the financial condition, business or results of operations of GAIN and its subsidiaries, taken as a whole, excluding any event, change, development, circumstance or effect to the extent arising out of any of the following:
Changes in GAAP or in the regulatory accounting requirements applicable to any industry in which GAIN and its subsidiaries operate;
Changes in the financial or securities markets or general economic or political conditions in the United States or any other country or region;
Changes (including changes in applicable law or interpretations thereof) or conditions generally affecting any of the industries in which GAIN and its subsidiaries operate;
Acts of war, sabotage, terrorism or natural disasters;
The execution, delivery and performance of the merger agreement or the public announcement, pendency or consummation (excluding, in the case of consummation, certain specified representations) of the transactions contemplated by the merger agreement including the impact thereof on the relationships, contractual or otherwise, of GAIN and any of its subsidiaries with employees, customers, suppliers or other third parties;
Any actions, suits, claims, investigations, stockholder demands or proceedings commenced or, to GAIN’s knowledge, threatened in writing against GAIN or any of its directors or officers or any of GAIN’s subsidiaries or INTL and any of its subsidiaries, as the case may be, that relate to the consummation of the transactions (“transaction litigation”);
Any failure in and of itself by GAIN and its subsidiaries to meet any internal or published budgets, projections, forecasts or predictions of financial performance or integration synergies for any period (provided that the exception in this clause shall not preclude INTL from asserting that any underlying facts giving rise or contributing to such failure should be taken into account in determining whether there has been, or would reasonably be expected to be, a company material adverse effect);
Any action taken (or omitted to be taken) at the written request of INTL or Merger Sub;
Any change, in and of itself, in the price and/or trading volume of GAIN common stock on the NYSE or any other market in which such securities are quoted for purchase and sale (provided that the exception in this bullet shall not preclude INTL from asserting that any underlying facts giving rise or contributing to such change should be taken into account in determining whether there has been, or would reasonably be expected to be, a company material adverse effect); or
Any action taken by GAIN or any of its subsidiaries that is required pursuant to the merger agreement, including any actions required under the merger agreement to obtain any approval or authorization under applicable antitrust, competition or other applicable laws for the consummation of the merger.
Notwithstanding these exclusions, any event, change, development, circumstance or effect referred to in the first four bullets will be taken account in determining whether a “company material adverse” effect has occurred or would reasonably be expected to occur to the extent that any such event, change, development, circumstance or effect has a materially disproportional adverse effect on GAIN and its subsidiaries, taken as a whole, relative to the adverse effect such event, change, development, circumstance or effect has on other companies in the same industry or industries in GAIN and its subsidiaries operate (in which case the incremental, but only the incremental, materially disproportionate adverse effect may be taken into account in determining whether a company material adverse effect has occurred).
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Certain of INTL’s representations and warranties in the merger agreement are qualified by a “parent material adverse effect” standard (that is, they will not be deemed to be untrue or incorrect unless their failure to be true or correct has had or would reasonably be expected to have, individually or in the aggregate, a parent material adverse effect). For purposes of the merger agreement, a “parent material adverse effect” means any event, change, effect, development or occurrence that would reasonably be expected to prevent, impair or materially delay the ability of INTL or Merger Sub to perform its obligations under the merger agreement or prevent, impair or materially delay the consummation of the merger or the other transactions contemplated by the merger agreement.
Conduct of the Business Pending the Merger
GAIN has agreed to certain covenants in the merger agreement restricting the conduct of its business between the date of the merger agreement and the effective time of the merger. In general, except as contemplated by the merger agreement, as set forth on the disclosure schedules to the merger agreement, as required by applicable law, or with the prior written consent of INTL (not to be unreasonably withheld, conditioned or delayed), GAIN will, and will cause each of its subsidiaries to, conduct its business in the ordinary course consistent with past practice (including, without limitation, the implementation of its cost-cutting program in effect on the date of the merger agreement) and use its commercially reasonable efforts to preserve intact its business organizations and relationships with third parties (including government authorities with jurisdiction over GAIN’s operations, customers, suppliers, licensors, licensees and other third parties) and to keep available the services of its present officers and key employees.
In addition, without limiting the generality of the foregoing, except as expressly contemplated by the merger agreement, as set forth on the disclosure schedules to the merger agreement, or with the prior written consent of INTL (not to be unreasonably withheld, conditioned or delayed), GAIN will not, nor will GAIN permit any of its subsidiaries to:
Amend or publicly propose any amendment to its certificate of incorporation, bylaws or other similar organizational documents in any respect;
(i) split, combine or reclassify any shares of its capital stock, (ii) declare, set aside or pay any dividend or other distribution (whether in cash, stock or property or any combination thereof) in respect of its capital stock, except for (A) dividends by any of its wholly owned subsidiaries and (B) two regular quarterly cash dividends by GAIN (including one declared on February 27, 2020) in an amount consistent with GAIN’s past practice with customary record and payment dates on the shares of GAIN common stock, or (iii) redeem, repurchase or otherwise acquire or offer to redeem, repurchase, or otherwise acquire securities of GAIN or its subsidiaries except pursuant to the GAIN ESPP or GAIN ICP;
(i) issue, deliver or sell, or authorize the issuance, delivery or sale of, any shares of GAIN securities or its subsidiaries’ securities, other than the issuance of (A) any shares of GAIN common stock upon the exercise of GAIN stock options, GAIN restricted stock awards or GAIN restricted stock units that are outstanding on the date of the merger agreement, (B) any securities of GAIN’s subsidiaries to GAIN or any other subsidiary of GAIN and (C) any shares of GAIN common stock upon the conversion of GAIN’s outstanding convertible notes or (ii) amend any term of any security of GAIN or its subsidiaries, except, in each case, as required by the terms of any compensatory stock option or other compensation plan or arrangement;
(i) merge or consolidate with any other person, (ii) acquire any interest in any corporation, partnership, other business organization or any division thereof or any assets, securities or property, other than (A) pursuant to specified existing contracts or commitments, (B) acquisitions of assets, securities or property in the ordinary course of business consistent with past practice in an amount not to exceed $1,500,000 per acquisition or $11,500,000 in the aggregate for all such acquisitions unless a transaction otherwise permitted would, or would reasonably be expected to, prevent, enjoin, alter or materially delay the merger, and (C) transactions solely among GAIN and one or more of its wholly owned subsidiaries or solely among GAIN’s wholly owned subsidiaries, or (iii) adopt or publicly propose a plan of complete or partial liquidation, dissolution, recapitalization or restructuring;
Sell, lease, license or otherwise transfer any subsidiary of GAIN or any material assets, securities, properties, interests or businesses, other than (i) pursuant to certain specified existing contracts or
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commitments, (ii) transactions solely among GAIN and one or more of its wholly owned subsidiaries, (iii) transactions solely among GAIN’s wholly owned subsidiaries or (iv) in the ordinary course of business consistent with past practice for fair market value not to exceed $1,000,000 in the aggregate;
Except as permitted by the fourth bullet above, make any material loans, advances or capital contributions to, or investments in, any other person (other than (i) loans or advances between and among GAIN and/or any of its wholly owned subsidiaries, (ii) capital contributions to or investments in its wholly owned subsidiaries and (iii) loans, advances, capital contributions or investments of $1,000,000 or less each, or $2,500,000 in aggregate);
Incur any indebtedness for borrowed money or guarantees thereof, other than (i) in an aggregate amount not to exceed $2,500,000 or (ii) incurred between or among GAIN and/or any of its wholly owned subsidiaries or between any of such wholly owned subsidiaries or guarantees by GAIN of indebtedness of any of its wholly owned subsidiaries;
Authorize, make or incur any capital expenditures or obligations or liabilities in connection therewith, other than any capital expenditures not to exceed $11,500,000 in the aggregate;
Except as required under any company plan or by applicable law, grant or increase any severance or termination pay to (or amend any existing severance pay or termination arrangement with) any executive officer or director of GAIN; establish, adopt or amend any collective bargaining agreement or any material company plan or increase compensation, bonus or other benefits payable to any employee of GAIN, other than increases in annual base compensation or cash bonus opportunities in the ordinary course of business consistent with past practice with respect to any employee of GAIN whose annual base salary does not exceed $250,000, subject to maximum payout increases;
Other than recruiting to fill open positions in the ordinary course of business consistent with past practice, hire any employee whose annual base salary would exceed $250,000 and whose employment is not terminable at-will;
Sell, assign, license, sublicense, abandon, allow to lapse, transfer or otherwise dispose of, or create or incur any lien on any material intellectual property owned by GAIN or its subsidiaries, other than in the ordinary course of business consistent with past practice (i) pursuant to non-exclusive licenses or (ii) for the purpose of disposing of obsolete or immaterial assets;
(i) voluntarily terminate, modify or amend in any respect materially adverse to GAIN or any of its subsidiaries any material contract other than the expiration or renewal of material contracts, in accordance with their terms, (ii) waive any material term of, or waive any material default under, any material contract other than in the ordinary course of business consistent with past practice, (iii) enter into any contract which contains a change of control or similar provision that would require a material payment to the other party or parties thereto solely as a result of the consummation of the merger or the other transactions contemplated by the merger agreement, or (iv) enter into any contract that contains a non-compete that would be binding on INTL and its subsidiaries (excluding GAIN and its subsidiaries) following the consummation of the merger;
Subject to certain exceptions, create or incur any lien on any material tangible asset;
Change GAIN’s methods of accounting, except as required by concurrent changes in GAAP or in Regulation S-X of the 1934 Act, as agreed to by its independent public accountants;
Make or change any material tax election, change any annual tax accounting period (except as would not be material), adopt or change any method of tax accounting (except as would not be material) or enter into any material closing agreement with respect to taxes or settle or surrender any material tax claim, audit or assessment;
Settle or compromise, or propose to settle or compromise any claim, action, suit, investigation, regulatory examination or other proceeding involving or against GAIN or any of its subsidiaries, other than (i) those involving only a monetary payment by GAIN or any of its subsidiaries in an amount not to exceed $500,000 individually or $5,000,000 in the aggregate, (ii) any settlements for amounts not exceeding the amount reserved on the consolidated balance sheet of GAIN and its subsidiaries as of September 30, 2019 and the footnotes thereto set forth in GAIN’s quarterly report on Form 10-Q for the fiscal quarter ended September 30, 2019 for such claim, or (iii) transaction litigation if the settlement costs thereof will be paid by insurance;
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Enter into any material transaction between GAIN or any of its subsidiaries, on the one hand, and any affiliate of GAIN, on the other hand, except in connection with employment or on arms’ length terms;
(i) voluntarily terminate, suspend, amend or modify in any material respect any material company permit other than in the ordinary course of business or as required pursuant to the merger agreement or (ii) obtain any additional material company permit (other than in the ordinary course of business) or voluntarily enter a new material regulated line of business that is not currently conducted by GAIN or any of its subsidiaries, except, in each case, (i) and (ii), as required in order to comply with applicable law; or
Agree, resolve or commit to do any of the foregoing.
Board Obligation to Call a Stockholders’ Meeting
GAIN has agreed under the merger agreement to cause a meeting of GAIN stockholders to be duly called and held as soon as reasonably practicable after this proxy statement is cleared by the SEC for the purpose of voting to approve and adopt the merger agreement and the merger. Under the merger agreement, the GAIN board of directors is required to (i) recommend approval of the merger agreement, the merger and the other transactions contemplated by the merger agreement by GAIN stockholders, unless there has been an “adverse recommendation change” (as described below), (ii) use its reasonable best efforts to obtain such approval by GAIN stockholders and (iii) otherwise comply with all applicable laws relating to such meeting. As promptly as reasonably practicable after the proxy statement is cleared by the SEC GAIN is required to, in accordance with applicable law and GAIN’s certificate of incorporation, (i) duly call and give notice of the stockholder meeting, (ii) cause the proxy statement (and all other proxy materials for the stockholder meeting) to be mailed to GAIN stockholders and (iii) duly convene and hold the stockholder meeting. GAIN is not permitted to, without the prior written consent of INTL, adjourn, postpone or otherwise delay the stockholder meeting; provided, that GAIN, acting reasonably and in good faith, may postpone or adjourn the stockholder meeting (A) to allow reasonable additional time for the filing and mailing of any supplemental or amended disclosure which GAIN’s board of directors has determined in good faith after consultation with outside counsel is necessary under applicable law, (B) to allow reasonable additional time to solicit additional proxies to the extent GAIN reasonably believes necessary in order to obtain the stockholder approval or (C) if otherwise required by applicable law. In addition, if instructed by INTL (acting reasonably and in good faith), GAIN is required to postpone or adjourn the stockholder meeting if there are not sufficient votes at the stockholder meeting to adopt the merger agreement to allow reasonable additional time to solicit additional proxies for purposes of obtaining the stockholder approval. Notwithstanding anything in the merger agreement to the contrary, but subject to the immediately preceding two sentences, unless the merger agreement has been terminated in accordance with its terms, the stockholder meeting will be convened and the merger agreement will be submitted to GAIN stockholders at the stockholder meeting for the purpose of voting on the adoption of the merger agreement. GAIN will use commercially reasonable efforts to cooperate with and keep INTL informed on a reasonably current basis regarding its solicitation efforts and voting results following dissemination of this proxy statement.
Restrictions on Solicitation of Acquisition Proposals
GAIN has agreed that from the date of the merger agreement until the effective time of the merger or, if earlier, the termination of the merger agreement in accordance with its terms, except as otherwise set forth below, GAIN will not, and will cause its subsidiaries not to, and will instruct its and its subsidiaries respective directors, officers, employees, affiliates, investment bankers, attorneys, accountants and other advisors or representatives (collectively, “representatives”) not to, directly or indirectly:
solicit, initiate or take any action to knowingly facilitate or encourage the submission of any “acquisition proposal” (as described below);
enter into or participate in any discussions or negotiations with, furnish any information relating to GAIN or any of its subsidiaries or afford access to the business, properties, assets, books or records of GAIN or any of its subsidiaries to, otherwise knowingly cooperate in any way with, or knowingly assist or participate in any effort by any third party relating to an acquisition proposal or any inquiry, expression of interest, proposal or request for information that would reasonably be expected to lead to an acquisition proposal (other than requesting the clarification of the terms and conditions thereof so as to determine whether the acquisition proposal is, or would reasonably be expected to result in, a superior proposal (as described below));
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make an adverse recommendation change with regard to the merger;
take any action to make any “moratorium,” “control share acquisition,” “fair price,” “supermajority,” “affiliate transactions” or “business combination statute or regulation” or other similar anti-takeover laws and regulations of the State of Delaware inapplicable to any third party or any acquisition proposal; or
fail to enforce, grant a waiver or release under a standstill or similar agreement with respect to any class of equity securities of GAIN or any of its subsidiaries.
If any representative of GAIN takes any action that GAIN is prohibited from taking by these restrictions, then GAIN will be deemed to have breached such restrictions.
GAIN also agreed in the merger agreement to (and agreed to cause its subsidiaries and to instruct its and their respective representatives to) cease immediately and cause to be terminated any and all existing activities, discussions or negotiations, if any, with any third party and its representatives with respect to any acquisition proposal and to use its reasonable best efforts to cause any such third party and its representatives in possession of confidential information about GAIN or any of its subsidiaries that was furnished by or on behalf of GAIN in connection with a proposed acquisition proposal or any inquiry, expression of interest, proposal or request for information that would reasonably be expected to lead to an acquisition proposal to return or destroy all such information in accordance with the applicable confidentiality agreements.
Notwithstanding the restrictions described above, if at any time prior to obtaining the approval of GAIN stockholders (and in no event after obtaining the approval of GAIN stockholders), (i) the GAIN board of directors receives a bona fide written acquisition proposal made after the date of the merger agreement which has not resulted from a breach of the restrictions set forth above that the GAIN board of directors determines in good faith, after consultation with its financial advisor and outside legal counsel, is or is reasonably likely to lead to a superior proposal and (ii) the GAIN board of directors determines in good faith, after consultation with its outside legal counsel, that the failure to take such action would be reasonably likely to be inconsistent with its fiduciary duties under applicable law, then the GAIN board of directors may, subject to the compliance with the terms described below:
Engage in negotiations or discussions with such third party and its representatives;
Furnish to such third party or its representatives non-public information relating to GAIN or any of its subsidiaries pursuant to a confidentiality agreement that meets certain standards, a copy of which must be provided, promptly after its execution, to INTL for informational purposes; provided that GAIN is required to promptly provide to INTL any such information that is provided to any such person which was not previously provided to or made available to INTL; and
Following receipt of a superior proposal after the date of the merger agreement, make an adverse recommendation change.
In addition, the GAIN board of directors is not permitted to take any of the actions referred to in the above bullets unless GAIN has first delivered to INTL written notice advising INTL that it intends to take such action.
GAIN is required to keep INTL promptly informed, on a reasonably current basis, after taking action referred to in the above bullets of the status and material terms of any discussions and negotiations with the applicable third party with respect to the acquisition proposal. In addition, prior to obtaining the approval of GAIN’s stockholders, GAIN is required to notify INTL promptly (but in no event later than one business day) after receipt by GAIN (or any of its representatives) of any acquisition proposal or any request for information relating to GAIN or any of its subsidiaries or for access to the business, properties, assets, books or records of GAIN or any of its subsidiaries by any third party that, to the knowledge of GAIN, is considering making, or has made, an acquisition proposal, which notice must be provided in writing and identify the relevant third party, to the extent known, the material terms and conditions of, any such acquisition proposal. GAIN is required to keep INTL informed, on a reasonably prompt basis (but in no event more than one business day after actual receipt), of the status and material terms of any such acquisition proposal (including any material changes thereto), and is required to provide to INTL copies of all material correspondence and written materials sent or provided to GAIN or any of its subsidiaries that describes any terms or conditions of any acquisition proposal (as well as written summaries of any material oral communications addressing such matters).
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For purposes of the merger agreement, “acquisition proposal” means any proposal or offer from any third party relating to any:
Direct or indirect acquisition (whether in a single transaction or a series of related transactions) of assets of GAIN or its subsidiaries (including securities of subsidiaries) equal to 15% or more of the consolidated assets of GAIN, or to which 15% or more of the revenues or earnings of GAIN on a consolidated basis are attributable;
Direct or indirect acquisition (whether in a single transaction or a series of related transactions) of 15% or more of any class of equity or voting securities of GAIN or any of its subsidiaries to which 15% or more of the revenues or earnings of GAIN on a consolidated basis are attributable;
Tender offer or exchange offer that, if consummated, would result in such third party beneficially owning 15% or more of any class of equity or voting securities of GAIN or any of its subsidiaries to which 15% or more of the revenues or earnings of GAIN on a consolidated basis are attributable; or
Merger, consolidation, share exchange, business combination, joint venture, reorganization, recapitalization, liquidation, dissolution or similar transaction involving GAIN or any of its subsidiaries, under which such third party would acquire, directly or indirectly:
Assets (including securities of subsidiaries) equal to 15% or more of the consolidated assets of GAIN, or to which 15% or more of the revenues or earnings of GAIN on a consolidated basis are attributable; or
Beneficial ownership of 15% or more of any class of equity or voting securities of GAIN or any of its subsidiaries to which 15% or more of the revenues or earnings of GAIN on a consolidated basis are attributable.
For purposes of the merger agreement, “adverse recommendation change” means the GAIN board of directors (A) failure to make, withdraw or modify in a manner adverse to INTL the GAIN board’s recommendation of the merger (it being understood that any failure to publicly reaffirm such recommendation within ten (10) business days of INTL’s written request will be treated as a withdrawal for purposes of the merger agreement (provided that INTL makes such request only after a material development has occurred that INTL believes, in good faith, has created public uncertainty as to the position of the GAIN board of directors or whether the GAIN stockholder approval will be obtained and that INTL may only make such request once with respect to any acquisition proposal that has not been amended with respect to financial or other material terms)), (B) failure to include the GAIN board’s recommendation of the merger in this proxy statement or (C) recommendation, adoption or approval or public proposal to recommend, adopt or approve any acquisition proposal.
For purposes of the merger agreement, “superior proposal” means any bona fide, acquisition proposal (other than an acquisition proposal which has resulted from a breach of the restrictions on solicitation outlined in this section of the proxy statement (with all references to “15%” in the definition of acquisition proposal being deemed to be references to “50%” and certain clauses being disregarded) on terms that the GAIN board of directors determines in good faith, after consultation with its financial advisor and outside legal counsel, and taking into account all the terms and conditions of the acquisition proposal that the GAIN board of directors considers to be appropriate (including the identity of the person making the acquisition proposal and the expected timing and likelihood of consummation, any governmental or other approval requirements, break-up fees, expense reimbursement provisions and conditions to consummation and availability of necessary financing), would result in a transaction (i) that, if consummated, is more favorable to GAIN’s stockholders from a financial point of view than the merger (taking into account any proposal by INTL to amend the terms of the merger agreement agreed to be made in writing by INTL in response to such acquisition proposal), (ii) that is reasonably capable of being completed on the terms proposed, taking into account the identity of the person making the acquisition proposal, any approval requirements and all other financial, regulatory, legal and other aspects of such acquisition proposal and (iii) for which financing, if a cash transaction (whether in whole or in part), is then fully committed or reasonably determined to be available by the GAIN board of directors.
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Changes in Board Recommendation
At any time prior to obtaining the approval of GAIN’s stockholders (and in no event after the obtaining the approval of GAIN’s stockholders), the GAIN board of directors is permitted to effect an adverse recommendation cha