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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 (Amendment No.          )

Filed by the Registrant ý

Filed by a Party other than the Registrant o

Check the appropriate box:

ý

 

Preliminary Proxy Statement

o

 

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

o

 

Definitive Proxy Statement

o

 

Definitive Additional Materials

o

 

Soliciting Material under §240.14a-12

 

RMG NETWORKS HOLDING CORPORATION

(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):

o

 

No fee required.

ý

 

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
    (1)   Title of each class of securities to which transaction applies:
        Common stock, par value $.0001 per share, of RMG Networks Holding Corporation
 
    (2)   Aggregate number of securities to which transaction applies:
        11,156,257 shares of common stock
 
    (3)   Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
        $1.27
 
    (4)   Proposed maximum aggregate value of transaction:
        $14,168,447
 
    (5)   Total fee paid:
        $1,764
 

o

 

Fee paid previously with preliminary materials.

o

 

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

 

(1)

 

Amount Previously Paid:
        
 
    (2)   Form, Schedule or Registration Statement No.:
        
 
    (3)   Filing Party:
        
 
    (4)   Date Filed:
        
 

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PRELIMINARY PROXY STATEMENT DATED MAY 10, 2018—SUBJECT TO COMPLETION

RMG NETWORKS HOLDING CORPORATION
15301 North Dallas Parkway
Suite 500
Addison, TX 75001
MERGER PROPOSED—YOUR VOTE IS VERY IMPORTANT

[    ·    ], 2018

Dear Fellow Stockholder:

        On April 2, 2018, RMG Networks Holding Corporation, a Delaware corporation (which we refer to as "RMG" or the "Company") entered into an Agreement and Plan of Merger (which we refer to as the "merger agreement") with SCG Digital, LLC, a Delaware limited liability company (which we refer to as "Parent"), SCG Digital Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (which we refer to as "Merger Sub") and SCG Digital Financing, LLC, a Delaware limited liability company and an affiliate of Parent. Under the terms and subject to the conditions of the merger agreement, Merger Sub will be merged with and into the Company, with the Company continuing as the surviving corporation and a wholly owned subsidiary of Parent (which we refer to as the "merger"). Parent is owned by SCG Digital Holdings, LLC, a Delaware limited liability company and an affiliate of Gregory H. Sachs, the Company's executive chairman. If the merger is completed, at the effective time of the merger, each share of the Company's common stock, par value $.0001 per share (which we refer to as "Company common stock," and the holders of which we refer to as "Company stockholders") issued and outstanding immediately prior to the effective time of the merger will be canceled and converted into the right to receive $1.27 in cash, without interest and less applicable withholding taxes, other than the following excluded shares: (1) shares of Company common stock owned by the Company or shares owned by Parent or Merger Sub or their respective affiliates, including those shares held by Gregory H. Sachs, our executive chairman, all of which will be canceled, and no payment will be made with respect thereto, (2) rollover shares (as defined in the accompanying proxy statement), and (3) shares of Company common stock held by a stockholder who has properly exercised, and has not failed to perfect, withdrawn or otherwise lost, appraisal rights in accordance with Delaware law.

        On May 9, 2018, the latest practicable date prior to the filing of this proxy statement, the closing price for Company common stock on the Nasdaq Capital Market was $1.17 per share. We urge you to obtain current market quotations for RMG Networks Holding Corporation (trading symbol "RMGN").

        The Company will hold a special meeting of the Company stockholders (which we refer to as the "special meeting") in connection with the merger. Company stockholders will be asked to vote to adopt and approve the merger agreement and approve related matters, as described in the attached proxy statement. Adoption and approval of the merger agreement requires the affirmative vote in person or by proxy of holders of at least both (1) a majority of the outstanding shares of Company common stock entitled to vote at the special meeting and (2) a majority of the outstanding shares of Company common stock, excluding shares held by (i) Parent or Merger Sub or any of their respective affiliates, including Gregory H. Sachs, the Company's executive chairman, (ii) any rollover investors (as defined in the accompanying proxy statement) and (iii) any of the Company's executive officers. Parent and the Company may, if they choose, elect to waive the voting requirement set forth in clause (2) above, but may not waive the requirement set forth in clause (1).

        Certain stockholders of the Company, who are affiliates of Gregory H. Sachs and who collectively own approximately [18]% of the outstanding shares of Company common stock as of the close of business on [    ·    ], 2018, the record date for the determination of stockholders entitled to vote at the special meeting, entered into a voting agreement with the Company pursuant to which, among other things, each of them has agreed to vote its shares of Company common stock in favor of the adoption and approval of the merger agreement.


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        The special meeting will be held on [    ·    ], 2018, at [    ·    ] [a.m.][p.m.], local time, at the principal executive offices of the Company, located at 15301 North Dallas Parkway, Suite 100, Addison, TX 75001.

        The accompanying proxy statement gives you detailed information about the special meeting and the merger and includes the merger agreement as Annex A. The receipt of cash in exchange for shares of Company common stock in the merger will constitute a taxable transaction to U.S. persons for U.S. federal income tax purposes. We encourage you to read the proxy statement and the merger agreement carefully.

        Our board of directors, in a meeting attended by each member of the board of directors except for Gregory H. Sachs who recused himself due to his interest in the transaction and Alan Swimmer who was unable to attend due to a personal matter, unanimously (1) declared that the merger agreement and the transactions contemplated by the merger agreement (other than any rollover by any rollover investor (as defined in the accompanying proxy statement)) were advisable, fair to, and in the best interests of the Company and its stockholders (other than certain affiliates of Mr. Sachs and any rollover investors), (2) approved the merger agreement and the transactions contemplated by the merger agreement, including the merger, (3) directed that the approval of the adoption of the merger agreement be submitted to the Company stockholders, and (4) recommended that the Company stockholders vote in favor of adoption of the merger agreement. This recommendation is based, in large part, upon the unanimous recommendation of the special committee of the board of directors in a meeting attended by each member of the special committee except for Mr. Swimmer. Our board of directors recommends that you vote "FOR" the proposal to adopt and approve the merger agreement.

        Your vote is very important. We cannot complete the merger unless the Company stockholders adopt and approve the merger agreement. The failure of any stockholder to vote on the proposal to adopt and approve the merger agreement will have the same effect as a vote "AGAINST" the adoption and approval of the merger agreement.

        Whether or not you plan to attend the special meeting, please complete, date, sign and return, as promptly as possible, the enclosed proxy in the accompanying reply envelope, or submit your proxy by telephone or by Internet. Stockholders who attend the special meeting may revoke their proxies and vote in person.

        Our board of directors and management appreciate your continuing support of the Company, and we urge you to support this transaction.

Sincerely,

Jonathan Trutter
Chairman of the Special Committee
  Robert Michelson
Chief Executive Officer

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

        The proxy statement is dated [    ·    ], 2018, and is first being mailed or otherwise delivered to Company stockholders on or about [    ·    ], 2018.


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RMG NETWORKS HOLDING CORPORATION
15301 North Dallas Parkway, Suite 500
Addison, Texas 75001

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

To Be Held On [    ·    ], 2018

Dear Stockholder:

        PLEASE TAKE NOTICE that a special meeting of stockholders of RMG Networks Holding Corporation, a Delaware corporation (which we refer to as the "Company"), will be held on [    ·    ], 2018, at [    ·    ] [a.m./p.m.], local time, at the Company's principal executive offices located at 15301 North Dallas Parkway, Suite 100, Addison, Texas 75001, to consider and vote upon the following matters:

    1.
    A proposal to adopt and approve the Agreement and Plan of Merger (which we refer to as the "merger agreement"), dated as of April 2, 2018, by and among the Company, SCG Digital, LLC, a Delaware limited liability company (which we refer to as "Parent"), SCG Digital Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (which we refer to as "Merger Sub") and (solely for the purposes of Sections 6.19, 8.03 and 8.04 of the merger agreement) SCG Digital Financing, LLC, a Delaware limited liability company and an affiliate of Parent), as the merger agreement may be amended from time to time (which we refer to as the "merger proposal").

    2.
    A proposal to approve, on a non-binding, advisory basis, the compensation that named executive officers of the Company may receive in connection with the merger pursuant to agreements or arrangements with the Company (which we refer to as the "compensation proposal").

    3.
    A proposal to approve one or more adjournments or postponements of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the meeting to approve the merger proposal (which we refer to as the "adjournment proposal").

        The record date for the determination of stockholders entitled to notice of and to vote at the special meeting is [    ·    ], 2018 (which we refer to as the "record date"). Accordingly, only stockholders of record as of that date will be entitled to notice of and to vote at the special meeting or any adjournment or postponement thereof. A list of our stockholders will be available at our principal executive offices at 15301 North Dallas Parkway, Suite 500, Addison, Texas 75001, during ordinary business hours for ten days prior to the special meeting.

        Adoption and approval of the merger agreement requires the affirmative vote in person or by proxy of holders of at least both (1) a majority of the outstanding shares of Company common stock entitled to vote at the special meeting and (2) a majority of the outstanding shares of Company common stock, excluding shares held by (i) Parent or Merger Sub or any of their respective affiliates, including Gregory H. Sachs, the Company's executive chairman, (ii) any rollover investors (as defined in the accompanying proxy statement) and (iii) any of the Company's executive officers. Parent and the Company may, if they choose, elect to waive the voting requirement set forth in clause (2) above, but may not waive the requirement set forth in clause (1). Approval of the compensation proposal and the adjournment proposal requires the affirmative vote of a majority of the votes cast at the special meeting by Company stockholders present in person or by proxy at the special meeting and entitled to vote thereon.

        Certain stockholders of the Company, who are affiliates of Gregory H. Sachs and who collectively own approximately [18]% of the outstanding shares of Company common stock as of the record date, entered into a voting agreement with the Company pursuant to which, among other things, each of them has agreed to vote its shares of Company common stock in favor of the merger proposal.


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        Our board of directors, in a meeting attended by each member of the board of directors except for Gregory H. Sachs who recused himself due to his interest in the transaction and Alan Swimmer who was unable to attend due to a personal matter, on the unanimous recommendation of the special committee of the board of directors, in a meeting attended by each member of the special committee except Mr. Swimmer, unanimously (1) declared that the merger agreement and the transactions contemplated by the merger agreement (other than any rollover by any rollover investor (as defined in the accompanying proxy statement)) were advisable, fair to, and in the best interests of the Company and its stockholders (other than certain affiliates of Mr. Sachs and any rollover investors), (2) approved the merger agreement and the transactions contemplated by the merger agreement, including the merger, (3) directed that the approval of the adoption of the merger agreement be submitted to the Company stockholders, and (4) recommended that the Company stockholders vote "FOR" the merger proposal. The Company board of directors also recommends that holders of Company common stock vote "FOR" the compensation proposal and "FOR" the adjournment proposal.

        Your vote is very important. We cannot complete the merger unless the Company stockholders approve the merger proposal.

        If you have any questions about the merger or the accompanying proxy statement, would like additional copies of the proxy statement or need assistance voting your shares of Company common stock, please contact the Company's information agent, Broadridge Corporate Issuer Solutions, Inc., by telephone at (855) 793-5068 (toll free) or by email at shareholder@broadridge.com. If you hold your shares in "street name" through a bank, broker or other nominee, please also contact your bank, broker or other nominee for additional information.

        Each copy of the proxy statement mailed to the Company stockholders is accompanied by a form of proxy card with instructions for voting. Regardless of whether you plan to attend the special meeting, please vote as soon as possible by accessing the Internet site listed on the proxy card, voting telephonically using the phone number listed on the proxy card or submitting your proxy card by mail. If you hold shares of Company common stock in your name as a stockholder of record and are voting by mail, please complete, sign, date and return the accompanying proxy card in the enclosed postage-paid return envelope. This will not prevent you from voting in person at the special meeting, but it will help to secure a quorum and avoid added solicitation costs. Any holder of record of shares of Company common stock who is present at the special meeting may vote in person instead of by proxy, thereby canceling any previous proxy. In any event, a proxy may be revoked at any time before the special meeting in the manner described in the accompanying proxy statement. Information and applicable deadlines for voting through the Internet or by telephone are set forth in the enclosed proxy card instructions. If you hold your stock in "street name" through a bank, broker or other nominee, please follow the instructions on the voting instruction card furnished by such bank, broker or other nominee.

        Registration will begin at [    ·    ] [a.m./p.m.], local time. If you attend, you must present valid picture identification. "Street name" holders will need to bring a copy of a brokerage statement reflecting stock ownership as of the record date. Cameras, recording devices and other electronic devices will not be permitted at the special meeting.

        Stockholders of the Company who do not vote in favor of the merger proposal will have the right to seek appraisal of the fair value of their shares of Company common stock if they deliver a demand for appraisal before the vote is taken on the merger agreement and comply with all requirements of Delaware law, which are summarized in the accompanying proxy statement.


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        WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN, AS PROMPTLY AS POSSIBLE, THE ACCOMPANYING PROXY CARD IN THE ENCLOSED POSTAGE-PAID RETURN ENVELOPE, OR SUBMIT YOUR PROXY BY TELEPHONE OR THE INTERNET. STOCKHOLDERS WHO ATTEND THE SPECIAL MEETING MAY REVOKE THEIR PROXIES AND VOTE IN PERSON.

    By Order of the Board of Directors,

 

 

Robert Michelson
Chief Executive Officer

Addison, Texas 75001
[    
·    ], 2018


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REFERENCES TO ADDITIONAL INFORMATION

        This proxy statement incorporates important business and financial information about the Company from documents filed with the Securities and Exchange Commission (which we refer to as the "SEC") that are attached as annexes to this proxy statement. You can obtain any of the documents filed with or furnished to the SEC by the Company at no cost from the SEC's website at https://www.sec.gov. You may also request copies of these documents, including documents attached as annexes to this proxy statement, at no cost by oral or written request to the Company at the following telephone number and address:

RMG Networks Holding Corporation
Attention: Corporate Secretary
15301 North Dallas Parkway
Suite 500
Addison, Texas 75001
Telephone: (800) 827-9666

        You will not be charged for any of these documents that you request. To obtain timely delivery of these documents, you must request them no later than five business days before the date of the special meeting. This means that Company stockholders requesting documents must do so by [    ·    ] in order to receive them before the special meeting.

        For additional questions about the merger, assistance in submitting proxies or voting shares of Company common stock, or to request additional copies of the proxy statement or the enclosed proxy card, please contact:

Broadridge Corporate Issuer Solutions, Inc.
If using UPS, FedEx or Courier:
Broadridge, Inc.
Attn: BCIS IWS
51 Mercedes Way
Edgewood, NY 11717

If using a USPS Service:
Broadridge, Inc.
Attn: Proxy Services
P .O. Box 9116
Farmingdale, NY 11735-9547
(855) 793-5068 (toll free)
Email: shareholder@broadridge.com

        If you hold your shares in "street name" through a bank, broker or other nominee, please also contact your bank, broker or other nominee for additional information.

        You should rely only on the information contained in, or incorporated by reference into, this proxy statement. No one has been authorized to provide you with information that is different from that contained in, or incorporated by reference into, this proxy statement. This proxy statement is dated [    ·    ], 2018, and you should assume that the information in this proxy statement is accurate only as of such date.

        This proxy statement does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction to or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction.

        See "Where You Can Find More Information," beginning on page 110 for more detail.


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TABLE OF CONTENTS

SUMMARY TERM SHEET

  1

The Parties to the Merger

 
1

The Merger

 
2

Recommendation of the Company Board of Directors

 
3

Opinion of Lake Street Capital Markets,  LLC

 
3

Certain Effects of the Merger

 
4

Financing of the Merger

 
4

Material U.S. Federal Income Tax Considerations with Respect to the Merger

 
4

The Special Meeting

 
5

Record Date, Quorum, Voting Rights

 
6

Vote Required

 
7

Go-Shop; Non-Solicitation; Competing Acquisition Proposals

 
7

Commercially Reasonable Efforts

 
9

Conditions to the Merger

 
9

Termination of the Merger Agreement

 
10

Termination Fees, Penalty Loan

 
11

Costs and Expenses

 
12

The Voting Agreement

 
12

The Bridge Loan Agreement and the Penalty Loan

 
12

Market Price and Dividend Data

 
13

Appraisal Rights

 
13

QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER

 
14

SPECIAL FACTORS

 
20

Background of the Merger

 
20

Subsequent Events

 
30

Reasons for the Merger; Recommendation of the Special Committee and of Our Board of Directors; Fairness of the Merger

 
30

Purposes, Reasons and Plans for the Company after the Merger

 
38

Projected Financial Information

 
39

Opinion of Lake Street Capital Markets,  LLC

 
41

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

 
49

Interests of the Company's Directors and Officers in the Merger

 
51

Certain Effects of the Merger

 
56

Effects on the Company if the Merger Is Not Completed

 
58

Financing of the Merger

 
59

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Material U.S. Federal Income Tax Consequences of the Merger to Our Stockholders

  59

Regulatory Approvals

 
61

Fees and Expenses of the Merger

 
61

Effective Time of Merger

 
61

Payment of Merger Consideration and Surrender of Stock Certificates

 
61

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

 
63

THE PARTIES TO THE MERGER

 
64

The Company

 
64

Parent

 
64

Merger Sub

 
64

Lender

 
65

THE SPECIAL MEETING

 
66

Date, Time and Place of the Special Meeting

 
66

Purpose of the Special Meeting

 
66

Recommendation of the Company Board of Directors

 
66

Record Date, Quorum, Voting Rights

 
66

Vote Required

 
67

Voting and Revocation of Proxies

 
68

Rights of Stockholders Who Object to the Merger

 
69

Solicitation of Proxies

 
69

Questions and Additional Information

 
69

THE MERGER AGREEMENT

 
70

The Merger

 
70

The Merger Consideration and Conversion of Capital Stock

 
70

Treatment of Company Stock Options

 
71

Payment Procedures

 
71

Company Representations and Warranties

 
72

Conduct of the Company's Business During the Pendency of the Merger

 
74

Company Stockholders Meeting

 
77

Go-Shop; Non-Solicitation; Competing Acquisition Proposals

 
77

Company Board of Directors Recommendation

 
79

Company Employee Compensation and Benefits

 
81

Agreement as to Director and Officer Indemnification and Insurance

 
82

Other Covenants and Agreements

 
83

Commercially Reasonable Efforts

 
84

Conditions to the Merger

 
84

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Termination of the Merger Agreement

  85

Termination Fees, Penalty Loan

 
86

Costs and Expenses

 
87

Governing Law

 
87

Amendments and Waiver

 
87

THE VOTING AGREEMENT

 
88

THE BRIDGE LOAN AND THE PENALTY LOAN

 
88

PROPOSAL 1—VOTE ON ADOPTION AND APPROVAL OF THE MERGER AGREEMENT

 
89

PROPOSAL 2—ADVISORY VOTE ON MERGER-RELATED COMPENSATION FOR THE COMPANY'S NAMED EXECUTIVE OFFICERS

 
89

Merger-Related Compensation Proposal

 
89

PROPOSAL 3—VOTE ON ONE OR MORE ADJOURNMENTS OR POSTPONEMENTS OF THE SPECIAL MEETING, IF NECESSARY OR APPROPRIATE

 
90

PROVISIONS FOR UNAFFILIATED STOCKHOLDERS

 
91

IMPORTANT INFORMATION ABOUT THE COMPANY

 
92

Directors and Executive Officers

 
92

Ratio of Earnings to Fixed Charges

 
94

Book Value Per Share

 
95

Market Price and Dividend Data

 
95

Security Ownership of Certain Beneficial Owners and Management

 
96

Prior Public Offerings

 
98

Transactions in Common Stock

 
98

IMPORTANT INFORMATION ABOUT THE PARENT PARTIES

 
100

APPRAISAL RIGHTS

 
102

OTHER MATTERS

 
108

IMPORTANT NOTICE REGARDING DELIVERY OF SECURITY HOLDER DOCUMENTS

 
108

STOCKHOLDER PROPOSALS

 
108

WHERE YOU CAN FIND MORE INFORMATION

 
110

ANNEX A—Agreement and Plan of Merger

   

ANNEX B—Opinion of Lake Street Capital Markets, LLC

ANNEX C—Section 262 of the General Corporation Law of the State of Delaware

ANNEX D—Annual Report on Form 10-K for the fiscal year ended December 31, 2017 of the Company

ANNEX E—Quarterly Report on Form 10-Q for the three months ended March 31, 2018 of the Company


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PRELIMINARY PROXY STATEMENT DATED MAY 10, 2018—SUBJECT TO COMPLETION

SUMMARY TERM SHEET

        This Summary Term Sheet, together with the "Questions and Answers About the Special Meeting and the Merger" below, highlights selected information in this proxy statement and may not contain all the information that is important to you. Accordingly, we encourage you to read carefully this entire proxy statement, its annexes and the documents otherwise referred to in this proxy statement for a more complete understanding of the matters being considered at the special meeting. Each item in this summary includes a page reference directing you to a more complete description of that item. See "Where You Can Find More Information," beginning on page 110.

        In this proxy statement, the terms "we," "us," "our," "the Company" and "RMG" refer to RMG Networks Holding Corporation, the term "Parent" refers to SCG Digital, LLC, the term "Merger Sub" refers to SCG Digital Merger Sub, Inc., the term "Buyer Entities" refers to Parent and Merger Sub, the term "Lender" refers to SCG Digital Financing, LLC, and the term "merger agreement" refers to the Agreement and Plan of Merger, dated as of April 2, 2018, by and among the Company, Parent and Merger Sub (and, solely for the purposes of Sections 6.19, 8.03, and 8.04, Lender), as the same may be amended from time to time.

The Parties to the Merger

        See "The Parties to the Merger," beginning on page 64.

        RMG Networks Holding Corporation.    The Company is a global leader in technology-driven visual communications. The Company is headquartered in Dallas, Texas with additional offices in the United States, United Kingdom and the United Arab Emirates.

RMG Networks Holding Corporation
15301 North Dallas Parkway, Suite 500
Addison, Texas 75001
(800) 827-9666

        SCG Digital, LLC.    Parent is a special purpose vehicle formed solely in anticipation of the merger by entities affiliated with Gregory H. Sachs, the Company's executive chairman. Parent is owned by SCG Digital Holdings, LLC, a Delaware limited liability company and successor by conversion of SCG Digital Holdings, Inc., and an affiliate of Mr. Sachs. Upon completion of the merger, the Company will be a direct wholly-owned subsidiary of Parent.

SCG Digital, LLC
c/o Sachs Capital Group LP
2132 Deep Water Lane, Suite 232
Naperville, IL 60564
(312) 784-3956

        SCG Digital Merger Sub, Inc.    Merger Sub was formed by Parent solely for the purpose of acquiring the Company and is a wholly-owned subsidiary of Parent. Upon completion of the merger, Merger Sub will cease to exist.

SCG Digital Merger Sub, Inc.
c/o Sachs Capital Group LP
2132 Deep Water Lane, Suite 232
Naperville, IL 60564
(312) 784-3956

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        SCG Digital Financing, LLC.    Lender is a special purpose vehicle formed solely in anticipation of the merger and the bridge loan by entities affiliated with Gregory H. Sachs, the Company's executive chairman. Lender is owned by Sachs Capital Group LP, a Delaware limited partnership which is controlled by Mr. Sachs.

SCG Digital Financing, LLC
c/o Sachs Capital Group LP
2132 Deep Water Lane, Suite 232
Naperville, IL 60564
(312) 784-3956

The Merger

        See "The Merger Agreement," beginning on page 70.

        The merger agreement, dated as of April 2, 2018, by and among the Company, Parent and Merger Sub and (solely for the purposes of Sections 6.19, 8.03 and 8.04 of the merger agreement) Lender, provides that Merger Sub will merge with and into the Company (which we refer to as the "merger"). The Company will be the surviving corporation (which we refer to as the "surviving corporation"), in the merger and will continue as a wholly-owned subsidiary of Parent.

        If the merger is completed, the following will occur:

    at the effective time of the merger (which we refer to as the "effective time"), each share of the Company common stock, par value $.0001 per share (which we refer to as "Company common stock," and the holders of which we refer to as "Company stockholders") issued and outstanding immediately prior to the effective time will be canceled and converted into the right to receive $1.27 in cash, without interest and less applicable withholding taxes (which we refer to as the "merger consideration"), other than the following excluded shares (which we refer to, collectively, as "excluded shares"): (1) shares of Company common stock owned by the Company or shares owned by Parent or Merger Sub or their respective affiliates, including those shares held by Gregory H. Sachs, our executive chairman, all of which will be canceled, and no payment will be made with respect thereto, (2) rollover shares (as defined below); and (3) shares of Company common stock held by a stockholder who has properly exercised, and has not failed to perfect, withdrawn or otherwise lost, appraisal rights in accordance with Delaware law;

    you will no longer have any interest in the Company's future earnings or growth;

    the Company will be wholly owned by entities controlled by Gregory H. Sachs, our executive chairman;

    the Company will no longer be a public company and the Company's common stock will no longer be traded on the Nasdaq Capital Market (or any stock exchange); and

    the Company will no longer be required to file periodic and other reports with the SEC.

Rollover Investors; Rollover Shares

        From the date of the merger agreement until two business days prior to the special meeting, SCG Digital Holdings, LLC (as successor by conversion of SCG Digital Holdings, Inc.) may from time to time enter into one or more rollover agreements (which we refer to as the "rollover agreements") pursuant to which stockholders as determined by Parent in its discretion (which we refer to as the "rollover investors") agree to contribute to SCG Digital Holdings, LLC the number of shares of Company common stock set forth in the rollover agreements (which we refer to as the "rollover shares"). Rollover investors will receive an equity interest in SCG Digital Holdings, LLC. All of the rollover shares will be cancelled at the effective time. As of the date of the filing of this proxy

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statement, no Company stockholders have agreed, or indicated to the Parent Parties (as defined below) a clear intention, to become rollover investors, but the Parent Parties expect that some Company stockholders may become rollover investors.

        Following and as a result of the merger, the Company will become a privately held company, wholly owned directly by Parent, which in turn is owned by SCG Digital Holdings, LLC which in turn will be owned by Sachs Capital Group LP and the rollover investors, if any. Sachs Capital Group LP is controlled by Gregory H. Sachs, our executive chairman.

        The closing sale price of a share of Company common stock on the Nasdaq Capital Market on May 9, 2018 was $1.17. You are encouraged to obtain current market quotations for Company common stock in connection with voting your shares.

        The merger agreement is attached as Annex A to this proxy statement. Please read it carefully.

Recommendation of the Company Board of Directors

        See "Special Factors—Reasons for the Merger; Recommendation of the Special Committee and of Our Board of Directors; Fairness of the Merger," beginning on page 30.

        The board of directors of the Company formed a special committee consisting of three independent, outside directors, which constitutes a majority of directors of the Company who are not Company employees (which we refer to as the "special committee"), to, among other things, review and evaluate the merger agreement proposal, consider and evaluate alternatives available to the Company and mitigate any potential conflicts of interest. The special committee, in a meeting attended by each member of the special committee except Alan Swimmer who was unable to attend due to a personal matter, among other things, unanimously recommended that the board of directors approve the merger agreement and the transactions contemplated by the merger agreement, including the merger. The board of directors of the Company, in a meeting attended by each member of the board of directors except Gregory H. Sachs who recused himself due to his interest in the transaction and Alan Swimmer who was unable to attend due to a personal matter, after considering carefully the recommendation of the special committee, unanimously (1) declared that the merger agreement and the transactions contemplated by the merger agreement (other than any rollover by any rollover investor) were advisable, fair to, and in the best interests of the Company and its stockholders (other than certain affiliates of Mr. Sachs and any rollover investors), (2) approved the merger agreement and the transactions contemplated by the merger agreement, including the merger, (3) directed that the approval of the adoption of the merger agreement be submitted to the Company stockholders and (4) recommended that the Company stockholders vote in favor of the adoption of the merger agreement.

        Accordingly, the Company board of directors, in a meeting attended by each member of the board of directors except Mr. Sachs and Mr. Swimmer, unanimously recommends that holders of Company common stock vote "FOR" the proposal to adopt and approve the merger agreement. The Company board of directors also recommends that holders of Company common stock vote "FOR" the compensation proposal and "FOR" the adjournment proposal.

        For the factors considered by the board of directors in reaching its decision to approve the merger agreement, see "Special Factors—Reasons for the Merger; Recommendation of the Special Committee and of Our Board of Directors; Fairness of the Merger," beginning on page 30.

Opinion of Lake Street Capital Markets, LLC

        See "Special Factors—Opinion of Lake Street Capital Markets, LLC," beginning on page 41 and Annex B.

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        In connection with the merger, Lake Street Capital Markets, LLC (which we refer to as "Lake Street"), financial advisor to the special committee, rendered to the special committee its oral opinion, subsequently confirmed in writing, that as of April 2, 2018, and based upon and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by Lake Street as set forth in the written opinion, the merger consideration to be received by the holders of Company common stock (other than certain affiliates of Gregory H. Sachs and any rollover investor, which we refer to as the "excluded stockholders," and Company stockholders excluding the excluded stockholders we refer to as "non-rolling stockholders") pursuant to the merger agreement was fair, from a financial point of view, to such holders.

        The full text of the written opinion of Lake Street to the special committee, dated as of April 2, 2018, which sets forth, among other things, the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of the review undertaken by Lake Street in rendering its opinion, is attached as Annex B to this proxy statement and is incorporated by reference into this proxy statement in its entirety. The summary of the opinion of Lake Street in this proxy statement is qualified in its entirety by reference to the full text of the opinion. You are encouraged to read Lake Street's opinion carefully and in its entirety. Lake Street's opinion was directed to the special committee, in its capacity as such, and addresses only the fairness, from a financial point of view, of the merger consideration to be received by the holders of shares of Company common stock (other than excluded stockholders) pursuant to the merger agreement as of the date of the opinion and does not address any other aspects or implications of the merger or related transactions. Lake Street's opinion was not intended to, and does not, constitute advice or a recommendation as to how Company stockholders should vote at any stockholders' meeting that may be held in connection with the merger or whether the stockholders should take any other action in connection with the merger.

Certain Effects of the Merger

        See "Special Factors—Certain Effects of the Merger," beginning on page 56.

        If the merger is completed, Company common stock will be delisted from the Nasdaq Capital Market and deregistered under the Securities Exchange Act of 1934, as amended (which we refer to as the "Exchange Act") and we will no longer file periodic reports with the SEC with respect to our common stock. The Company will cease to be an independent public company and will become a wholly owned subsidiary of Parent. You will no longer have any ownership interest in the Company.

Financing of the Merger

        See "Special Factors—Financing of the Merger," beginning on page 59.

        The merger agreement does not contain any condition to the obligations of Parent or Merger Sub relating to the receipt of financing.

        Parent intends to finance the merger using cash on hand or debt raised from private sources, to the extent available on terms acceptable to the Parent. Obtaining such financing, however, is not a condition to the closing of the merger.

        The total amount of funds necessary to complete the merger is $12,500,000 (which includes cash intended to be used to increase the Company's working capital) less the value of any common stock held by the rollover investors, if any.

Material U.S. Federal Income Tax Considerations with Respect to the Merger

        See "Special Factors—Material U.S. Federal Income Tax Consequences of the Merger to Our Stockholders," beginning on page 59.

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        The receipt of cash in exchange for shares of Company common stock pursuant to the merger generally will be a taxable transaction for U.S. federal income tax purposes. Generally, stockholders will recognize gain or loss equal to the difference between the amount of cash received and the adjusted tax basis of the shares of Company common stock surrendered. Company stockholders who are U.S. holders generally will be subject to U.S. federal income tax on any gain recognized in connection with the merger. Company stockholders who are non-U.S. holders generally will not be subject to U.S. federal income tax on any gain recognized in connection with the merger unless the stockholder has certain connections to the United States. However, the tax consequences of the merger to a Company stockholder will depend on the stockholder's particular circumstances, and Company stockholders should consult their own tax advisors to determine the tax consequences to them of the merger based on their particular circumstances.

The Special Meeting

        See "Questions and Answers About the Special Meeting and the Merger," beginning on page 14 and "The Special Meeting," beginning on page 66.

        Date, Time and Place.    The special meeting will be held on [    ·    ], 2018 at [    ·    ] [a.m.][p.m.], local time, at the Company's principal executive offices located at 15301 North Dallas Parkway, Suite 100, Addison, Texas 75001.

        Purpose.    At the special meeting, you will be asked to consider and vote upon the following matters:

    (1)
    a proposal to adopt and approve the merger agreement (which we refer to as the "merger proposal"),

    (2)
    a proposal to approve, on a non-binding, advisory basis, the compensation that named executive officers of the Company may receive in connection with the merger pursuant to agreements or arrangements with the Company (which we refer to as the "compensation proposal"), and

    (3)
    a proposal to approve one or more adjournments or postponements of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the meeting to approve the merger proposal (which we refer to as the "adjournment proposal").

        You may also be asked to consider and vote upon such other business as may properly come before the special meeting or any adjournments or postponements of the special meeting. We are currently not aware of any other business to come before the special meeting.

        Voting and Proxies.    Any stockholder of record entitled to vote at the special meeting may submit a proxy by telephone, by Internet, by returning the enclosed proxy card by mail, or by voting in person at the special meeting. If you intend to submit your proxy by telephone or by Internet, you must do so no later than the date and time indicated on the applicable proxy card(s). If you intend to vote by returning the enclosed proxy card by mail, please do so as soon as possible to ensure your vote is received in advance of the special meeting. Even if you plan to attend the special meeting, please vote your shares of Company common stock by completing, signing, dating and returning the enclosed proxy card or by using the telephone number printed on your proxy card or by using the Internet voting instructions printed on your proxy card.

        If you give your proxy, but do not indicate how you wish to vote, your shares will be voted "FOR" the merger proposal, "FOR" the compensation proposal and "FOR" the adjournment proposal.

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        If your shares of Company common stock are held in "street name" by a bank, broker or other nominee, your bank, broker or other nominee forwarded these proxy materials, as well as a voting card to you. Please follow the instructions on the voting instruction card to vote your shares. If you fail to provide your bank, broker or other nominee with instructions on how to vote your shares of Company common stock, your nominee will not be able to vote such shares at the special meeting.

        A list of Company stockholders entitled to vote at the special meeting will be available for inspection at the special meeting and at the Company's principal executive offices located at 15301 North Dallas Parkway, Suite 500, Addison, Texas 75001, during ordinary business hours, for ten days prior to the special meeting.

        Revocability of Proxy.    If you have submitted a proxy, you may revoke it at any time before is it voted at the special meeting by:

    delivering a signed written notice of revocation bearing a date later than the date of the proxy, stating that the proxy is revoked to the Company's Corporate Secretary at 15301 North Dallas Parkway, Suite 500, Addison, Texas 75001;

    signing and delivering a new proxy relating to the same shares of Company common stock and bearing a later date to the Company's Corporate Secretary at 15301 North Dallas Parkway, Suite 500, Addison, Texas 75001;

    submitting another proxy by telephone or by Internet by the date and time indicated on the applicable proxy card(s); or

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

        If you choose one of the first three methods, your notice of revocation or your new proxy card must be received before the start of the special meeting. Attendance at the special meeting will not by itself constitute revocation.

        The latest dated completed proxy will be the one that counts. Written notices of revocation and other communications with respect to the revocation of any proxies should be addressed to:

RMG Networks Holding Corporation
15301 North Dallas Parkway, Suite 500
Addison, Texas 75001
Attention: Corporate Secretary

        If your shares of Company common stock are held in "street name" by a bank, broker or other nominee, you may change your vote by submitting new voting instructions to your bank, broker or other nominee. You must contact your nominee to obtain instructions as to how to change or revoke your proxy.

Record Date, Quorum, Voting Rights

        Record Date.    You are entitled to vote at the special meeting if you owned shares of Company common stock at the close of business on [    ·    ], 2018, which the Company has set as the record date for the special meeting. As of [    ·    ], 2018, there were [11,156,257] shares of Company common stock issued and outstanding and entitled to vote.

        Quorum.    The presence in person or by proxy of holders of shares of Company common stock representing a majority of the voting power of all outstanding shares of Company common stock constitutes a quorum for the purpose of the special meeting.

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        Voting Rights.    You will have one vote for each share of Company common stock that you owned on the record date.

Vote Required

Merger Proposal:

    Vote Required:  Approval of the merger proposal requires the affirmative vote in person or by proxy of holders of at least both (1) a majority of the outstanding shares of Company common stock entitled to vote at the special meeting and (2) a majority of the outstanding shares of Company common stock, excluding shares held by (i) Parent or Merger Sub or any of their respective affiliates, including Gregory H. Sachs, the Company's executive chairman, (ii) any rollover investors, and (iii) any of the Company's executive officers. Parent and the Company may, if they choose, elect to waive the voting requirement set forth in clause (2) above, but may not waive the requirement set forth in clause (1).

    Effect of abstentions and broker non-votes:  If you mark "Abstain" on your proxy card, fail to submit a proxy card or vote in person at the special meeting, or fail to instruct your bank, broker or other nominee how to vote, it will have the same effect as a vote "AGAINST" the merger proposal.

Compensation Proposal:

    Vote Required:  Approval, on a non-binding, advisory basis, of the compensation proposal requires the affirmative vote of a majority of the votes cast at the special meeting by Company stockholders present in person or by proxy at the special meeting and entitled to vote thereon.

    Effect of abstentions and broker non-votes:  If you mark "Abstain" on your proxy card, it will have the same effect as a vote "AGAINST" the compensation proposal. If you fail to submit a proxy card or vote in person at the special meeting, or fail to instruct your bank, broker or other nominee how to vote with respect to the compensation proposal, it will have no effect on the compensation proposal.

Adjournment Proposal:

    Vote Required:  Whether or not a quorum is present, approval of the adjournment proposal requires the affirmative vote of a majority of the votes cast at the special meeting by Company stockholders present in person or by proxy at the special meeting and entitled to vote thereon.

    Effect of abstentions and broker non-votes:  If you mark "Abstain" on your proxy card, it will have the same effect as a vote "AGAINST" the adjournment proposal. If you fail to submit a proxy card or vote in person at the special meeting, or fail to instruct your bank, broker or other nominee how to vote with respect to the adjournment proposal, it will have no effect on the adjournment proposal.

        Certain Company stockholders, who are affiliates of Gregory H. Sachs and who collectively own approximately [18]% of the outstanding shares of Company common stock as of the record date, entered into a voting agreement with the Company pursuant to which, among other things, each of them has agreed to vote its shares of Company common stock in favor of the merger proposal.

Go-Shop; Non-Solicitation; Competing Acquisition Proposals

        See "The Merger Agreement—Go-Shop; Non-Solicitation; Competing Acquisition Proposals," beginning on page 77.

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        From the date of the merger agreement until 11:59 p.m. Eastern Time on May 17, 2018 (which we refer to as the "initial go-shop end date"), or, if the Company chooses, in its sole discretion, to extend the period prior to the initial go-shop end date, June 1, 2018 (which period, as it may be extended, we refer to as the "go-shop period"), we, our subsidiaries and our representatives have, subject to certain conditions, the right to:

    initiate, solicit, facilitate and encourage any inquiry, proposal or offer that constitutes an acquisition proposal (as defined below in the section entitled "The Merger Agreement—Go-Shop; Non-Solicitation; Competing Acquisition Proposals," beginning on page 77), including by way of providing non-public information pursuant to acceptable confidentiality agreements, provided that we promptly (and in any event within 24 hours thereafter) provide to Parent and Merger Sub any material non-public information concerning the Company and our subsidiaries that we provide to any person, to the extent such information was not previously made available to Parent or Merger Sub;

    engage in, continue, enter into or otherwise participate in any discussions or negotiations with any person with respect to any acquisition proposal; and

    otherwise cooperate with or assist or participate in, or facilitate any such inquiries, proposals, discussions or negotiations or any effort or attempt to make any acquisition proposals.

        After the expiration of the go-shop period, we, our subsidiaries and our respective representatives must immediately cease any discussions or negotiations with any person (except as noted below with respect to an excluded party) with respect to, or that could reasonably be expected to lead to, an acquisition proposal; and must promptly request the return or destruction of all confidential information from any person who has received non-public information or otherwise entered into a confidentiality or similar agreement in connection with a potential acquisition proposal.

        From the first calendar day immediately following the go-shop period (which we refer to as the "no-shop period start date"), until the effective time, or, if earlier, the valid termination of the merger agreement, we, our subsidiaries and our respective representatives may not (except as noted below with respect to an excluded party):

    initiate, solicit, or knowingly facilitate or encourage any inquiry, proposal or offer that constitutes, or that would reasonably be expected to lead to, an acquisition proposal;

    knowingly engage in, continue or otherwise participate in any discussions or negotiations with respect to an acquisition proposal, or provide any non-public information or data concerning the Company or its subsidiaries for the purpose of encouraging or facilitating, or that could reasonably be expected to lead to, an acquisition proposal;

    approve, endorse, recommend or enter into any agreement or arrangement with respect to an acquisition proposal; or

    resolve to do any of the foregoing.

        However, we are permitted to take any of the actions noted in the above four bullets with any person or group of persons from whom we have received a written acquisition proposal during the go-shop period, which such written acquisition proposal our board of directors or any committee thereof determines in good faith (after consultation with its financial advisor and outside legal counsel) constitutes, or would reasonably be expected to lead to, a superior proposal (as defined below in the section entitled "The Merger Agreement—Go-Shop; Non-Solicitation; Competing Acquisition Proposals," beginning on page 77) (which we refer to as an "excluded party"), until the date that such person ceases to be an excluded party or the special committee and such person cease to be in continuing active discussions with respect to an acquisition proposal as of or following the end of the go-shop period. Any such person or group shall cease to be an excluded party if such person or group

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withdraws or terminates its offer or proposal, such offer or proposal expires, or the special committee determines in good faith that such offer or proposal has ceased to constitute, or is no longer reasonably likely to lead to, a superior proposal.

        In addition, at any time following the no-shop period start date and prior to receipt of the requisite stockholder approval, if we receive an unsolicited written acquisition proposal from a third party that did not, directly or indirectly, result from or arise out of a breach of the non-solicitation provisions of the merger agreement, and that our board of directors (acting upon the recommendation of the special committee) determines in good faith, after consultation with outside legal counsel and financial advisor, constitutes or could reasonably be expected to lead to a superior proposal and that the failure to act would be inconsistent with the directors' fiduciary duties under applicable laws, then we may furnish to such third party non-public information relating to the Company and our subsidiaries pursuant to a confidentiality agreement meeting certain requirements as set forth in the merger agreement and afford such third party access to our businesses, properties, assets and personnel and enter into, maintain and participate in discussions or negotiations with such third party or otherwise cooperate with or assist or participate in, or facilitate, any such discussions or negotiations; provided we promptly (and in any event within 24 hours thereafter) provide to Parent any material non-public information concerning the Company or access provided to such third party which was not previously provided to Parent.

Commercially Reasonable Efforts

        See "The Merger Agreement—Commercially Reasonable Efforts," beginning on page 84.

        Each of the Company and Parent has agreed to use its commercially reasonable efforts to take or cause to be taken all actions reasonably necessary, proper and advisable on its part under the merger agreement in order to consummate the merger. Parent and the Company have agreed to use their commercially reasonable efforts to avoid, eliminate or resolve each and every impediment and obtain all clearances, consents, approvals and waivers under antitrust laws that may be required by any governmental authority, so as to enable the parties to consummate the merger as soon as reasonably practicable.

Conditions to the Merger

        See "The Merger Agreement—Conditions to the Merger," beginning on page 84.

        Consummation of the merger depends upon Parent and Merger Sub, on the one hand, and the Company, on the other hand, satisfying or, to the extent permitted by applicable law, waiving a number of conditions at or prior to the closing of the merger, including the following:

    adoption and approval of the merger agreement by an affirmative vote of holders of at least both (1) a majority of the outstanding shares of Company common stock entitled to vote at the special meeting and (2) a majority of the outstanding shares of Company common stock, excluding shares held by (i) Parent or Merger Sub or any of their respective affiliates, including Gregory H. Sachs, the Company's executive chairman, (ii) any rollover investors, and (iii) any of the Company's executive officers;

    no governmental authority with jurisdiction over any party will have issued any order, injunction, judgment, decree or ruling or taken any other action that is in effect (whether temporary, preliminary or permanent) restraining, enjoining or otherwise prohibiting the consummation of the merger; and

    no applicable law or regulation will have been adopted that makes the consummation of the merger illegal or otherwise prohibited.

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        The obligations of Parent and Merger Sub to consummate the merger are subject to the satisfaction of other conditions, including the following:

    the representations and warranties of the Company made in the merger agreement, subject to certain exceptions, will be true and correct when made and as of immediately prior to the effective time (other than those representations and warranties that were made only as of a specified date, which need only be true and correct as of such specified date), except where the failure of such representations and warranties to be true and correct (disregarding materiality or material adverse effect qualifications) would not, individually or in the aggregate, have a material adverse effect on the Company;

    the Company will have performed, in all material respects, its obligations under the merger agreement on or prior to the consummation of the merger;

    no event, change, effect or development has occurred and is continuing that would have a material adverse effect on the Company; and

    the number of shares of Company common stock that are "Dissenting Shares" as defined in the merger agreement must be less than ten percent (10%) of the number of shares of Company common stock outstanding immediately prior to the effective time.

        The obligation of the Company to consummate the merger is subject to the satisfaction of the following additional conditions:

    the representations and warranties of Parent and Merger Sub made in the merger agreement will be true and correct when made and as of immediately prior to the effective time (other than those representations and warranties that were made only as of a specified date, which need only be true and correct as of such specified date), except where the failure of such representations and warranties to be true and correct (disregarding materiality or material adverse effect qualifications) would not, individually or in the aggregate, prevent, materially delay or materially impair Parent's or Merger Sub's ability to consummate the transactions contemplated by the merger agreement; and

    Parent and Merger Sub will have performed in all material respects their respective obligations under the merger agreement.

Termination of the Merger Agreement

        See "The Merger Agreement—Termination of the Merger Agreement," beginning on page 85.

        The Company and Parent may terminate the merger agreement by mutual written consent at any time before the consummation of the merger, notwithstanding any approval of the merger agreement by the Company stockholders. In addition, either Parent or the Company may terminate the merger agreement at any time before the consummation of the merger if:

    the merger has not been consummated on or before August 30, 2018 (which we refer to as the "end date") (notwithstanding any approval of the merger agreement by the Company stockholders);

    the adoption of the merger agreement by the Company stockholders has not been obtained by reason of the failure to obtain the required vote upon a final vote taken at the special meeting (or any adjournment or postponement thereof); or

    any governmental authority of competent jurisdiction has issued a final and non-appealable order or taken any other action enjoining, restraining or otherwise prohibiting the consummation of the transactions contemplated by the merger agreement (notwithstanding any approval of the merger agreement by the Company stockholders); provided that such right to terminate the

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      merger agreement will not be available to any party who has materially breached the commercially reasonable efforts provision of the merger agreement resulting in such order.

        Parent may also terminate the merger agreement if:

    the Company has breached any of its representations, warranties, covenants or other agreements contained in the merger agreement in such a manner that would result in any of the conditions to Parent's obligations to close not being satisfied and such breach either has not been cured by the Company prior to the earlier of the end date or the 30th calendar day following Parent's delivery of written notice describing such breach to the Company (provided that neither Parent nor Merger Sub is in material breach of any representation, warranty, covenant or agreement contained in the merger agreement);

    the Company has materially breached the go-shop, board recommendation and stockholder approval covenants in the merger agreement; or

    our board of directors (or any committee thereof) has, prior to the stockholder approval, effected an adverse recommendation change (described below under the heading "The Merger Agreement—Company Board of Directors Recommendation," beginning on page 79).

        The Company may also terminate the merger agreement if:

    either of Parent or Merger Sub has breached any of its representations, warranties, covenants or other agreements contained in the merger agreement in such a manner that would result in any of the conditions to the Company's obligations to close not being satisfied, and such breach either has not been cured by Parent or Merger Sub prior to the earlier of the end date or the 30th calendar day following the Company's delivery of written notice describing such breach to Parent (provided that the Company is not in material breach of any representation, warranty, covenant or agreement contained in the merger agreement);

    our board of directors has, prior to the stockholder approval, effected an adverse recommendation change in respect of a superior proposal in accordance with the terms of the merger agreement, the Company has not breached any of its obligations under the non-solicitation provisions in the merger agreement (other than immaterial non-compliance) and, substantially concurrently with such termination, the Company enters into a binding acquisition agreement with respect to such superior proposal; provided that, in such instance occurring after the initial go-shop end date, the Company pays the applicable termination fee described in the section entitled "The Merger Agreement—Termination Fees, Penalty Loan," beginning on page 86; or

    all of the closing conditions have been satisfied (other than those conditions that are to be satisfied by actions taken at the closing, each of which is capable of being satisfied at the closing) and Parent and Merger Sub fail to consummate the merger at the closing and the Company has notified Parent in writing that we are ready, willing and able to consummate the merger, in which case Lender must make the penalty loan described in the section entitled "The Merger Agreement—Termination Fees, Penalty Loan," beginning on page 86, to the Company.

Termination Fees, Penalty Loan

        See "The Merger Agreement—Termination Fees, Penalty Loan," beginning on page 86.

        The Company will not pay any termination fee to Parent if we terminate the merger agreement on or before the initial go-shop end date to enter into a superior proposal. The Company has agreed to pay Parent a $150,000 termination fee (representing approximately 1.1% of our equity value based on a price of $1.27 per share, which is the consideration offered in the merger agreement) if we terminate the merger agreement after the initial go-shop end date but on or before the end of the go-shop period

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to enter into a superior proposal. The Company has agreed to pay Parent a $500,000 termination fee (representing approximately 3.5% of our equity value based on a price of $1.27 per share, which is the consideration offered in the merger agreement) if we terminate to enter into a superior proposal after the end of the go-shop period.

        The Company is also required to pay the $500,000 termination fee (i) if Parent terminates because our board of directors made an adverse recommendation change or the Company materially breached the go-shop, board recommendation or stockholder approval covenants, or (ii) if the merger agreement is terminated by the Company or Parent because the Company fails to obtain the stockholder approval or by Parent for certain uncured breaches by the Company, and (a) an acquisition proposal was made and not withdrawn prior to the special meeting or (b) the board of directors fails to publicly reaffirm the board recommendation in favor of the merger within ten (10) business days of a request to do so by Parent following any stockholder of the Company having publicly commenced a withhold or "vote no" campaign in respect of the merger; provided that in the case of clause (ii) the Company will pay $250,000 upon the termination of the merger agreement and the remaining $250,000 only upon consummation of an acquisition proposal for at least 50% of the assets or voting equity of the Company that is accepted by the Company within 12 months after such termination. In no event would the Company be required to pay a termination fee on more than one occasion.

        The merger agreement provides that Parent shall fund to the Company (through the escrow agreement) a $1 million penalty loan on terms more fully set forth below in the section entitled "The Bridge Loan and the Penalty Loan," beginning on page 88, (which we refer to as the "penalty loan") if the Company terminates the merger agreement due to uncured material breaches of the merger agreement by the Buyer Entities or if Parent fails to consummate the merger when all conditions to closing are satisfied or waived (other than those conditions that would be and are capable of being satisfied at closing) and the Company has irrevocably notified Parent that it is ready, willing and able to consummate the merger.

        If the merger agreement is terminated and the Company is obligated to pay any termination fee, then Parent is also entitled to reimbursement of certain reasonable, out of pocket costs and expenses, which amount is payable in addition to the applicable termination fee.

Costs and Expenses

        Except as expressly set forth in the merger agreement, all other costs and expenses incurred in connection with the merger agreement will be paid by the party incurring such costs and expenses.

The Voting Agreement

        See "The Voting Agreement," beginning on page 88.

        Certain stockholders affiliated with Mr. Sachs entered into a Voting Agreement (which we refer to as the "voting agreement") with the Company, dated as of April 2, 2018, pursuant to which such stockholders have agreed to vote all shares of Company common stock held by such stockholders in favor of the merger proposal and not to transfer such shares during the term of the voting agreement. These stockholders collectively own approximately [18]% of the outstanding shares of Company common stock as of the record date. The voting agreement will terminate upon the consummation of the merger or the termination of the merger agreement.

The Bridge Loan Agreement and the Penalty Loan

        See "The Bridge Loan and the Penalty Loan," beginning on page 88.

        The Company and certain of its subsidiaries (which we refer to as the "Borrowers") also entered into a Subordinated Loan and Security Agreement (which we refer to as the "bridge loan agreement")

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with Lender, dated as of April 2, 2018, pursuant to which the Lender agreed to make available to the Borrowers a bridge loan (which we refer to as the "bridge loan") in the principal amount of $2 million. The Lender is an affiliate of Mr. Sachs, Parent and Merger Sub. In the event that the merger agreement is terminated by the Company due to a material breach of the merger agreement by Parent or Merger Sub or in the event that Parent or Merger Sub fail to consummate the merger when otherwise obligated to do so pursuant to the terms and conditions thereof, the merger agreement provides for Parent to make a penalty loan to the Company upon termination of the merger agreement (which we refer to as the "penalty loan"). If the penalty loan is funded pursuant to the terms of the merger agreement, the penalty loan will also be a credit extension under the bridge loan agreement and subject to its terms (we refer to the penalty loan together with the bridge loan, as the "subordinated loans").

Market Price and Dividend Data

        See "Important Information about the Company—Market Price and Dividend Data," beginning on page 95.

        At the effective time, each share of Company common stock issued and outstanding immediately prior to the effective time (except for excluded shares) will be canceled and converted into the right to receive the merger consideration. On May 9, 2018, the latest practicable date prior to the filing of this proxy statement, the closing price for Company common stock on the Nasdaq Capital Market was $1.17 per share. You are encouraged to obtain current market quotations for Company common stock in connection with voting your shares.

Appraisal Rights

        See "Appraisal Rights," beginning on page 102 for a summary of your appraisal rights and Annex C for the text of the Delaware appraisal rights statute reproduced in its entirety.

        Company stockholders are entitled to appraisal rights under Delaware law in connection with the merger. This means that you are entitled to have the value of your shares determined by the Delaware Court of Chancery and to receive payment based on that valuation. The ultimate amount you receive as a dissenting stockholder 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 submit a written demand for appraisal to the Company before the vote is taken on the merger agreement and you must not vote in favor of the merger proposal. Your failure to follow exactly the procedures specified under Delaware law will result in the loss of your appraisal rights.

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QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER

        The following questions and answers are intended to address briefly some commonly asked questions regarding the merger, the merger agreement and the special meeting. These questions and answers do not address all questions that may be important to you as a Company stockholder. Please refer to the "Summary Term Sheet" and the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement, which are incorporated by reference into this proxy statement, and the documents referred to in this proxy statement, which you should read carefully.

Q.
What is the merger?

A.
RMG Networks Holding Corporation, a Delaware corporation (which we refer to as "RMG" or the "Company") entered into an Agreement and Plan of Merger, dated April 2, 2018, as such agreement may be amended from time to time (which we refer to as the "merger agreement") with SCG Digital, LLC, a Delaware limited liability company (which we refer to as "Parent"), SCG Digital Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (which we refer to as "Merger Sub") and (solely for the purposes of Sections 6.19, 8.03 and 8.04 of the merger agreement) SCG Digital Financing, LLC, a Delaware limited liability company and an affiliate of Parent. Upon the terms and subject to the conditions set forth in the merger agreement, Merger Sub will merge with and into the Company (which we refer to as the "merger"), so that the Company will be the surviving corporation in the merger and an indirect wholly owned subsidiary of Parent. A copy of the merger agreement is attached as Annex A to this proxy statement.

    The merger cannot be consummated unless, among other things, Company stockholders adopt and approve the merger agreement.

Q.
When and where is the special meeting?

A.
The special meeting of Company stockholders will be held on [    ·    ], 2018, at [    ·    ] [a.m./p.m.], local time, at the Company's principal executive offices located at 15301 North Dallas Parkway, Suite 100, Addison, Texas 75001.

    Registration will begin at [    ·    ] [a.m./p.m.], local time. If you attend, you must present valid picture identification. "Street name" holders will need to bring a copy of a brokerage statement reflecting stock ownership as of the record date. Cameras, recording devices and other electronic devices are not permitted at the meeting.

Q.
What matters will be voted on at the special meeting?

A.
You will be asked to consider and vote on the following proposals:

(1)
to adopt and approve the merger agreement (which we refer to as the "merger proposal");

(2)
to approve, on a non-binding, advisory basis, the compensation that named executive officers of the Company may receive in connection with the merger pursuant to agreements or arrangements with the Company, as described in "Proposal 2—Advisory Vote on Merger-Related Compensation for the Company's Named Executive Officers," beginning on page 89 (which we refer to as the "compensation proposal"); and

(3)
to approve one or more adjournments or postponements of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the meeting to approve the merger proposal (which we refer to as the "adjournment proposal").

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Q.
How does the Company board of directors recommend that I vote on the proposals?

A.
The board of directors recommends that you vote:

(1)
"FOR" the merger proposal;

(2)
"FOR" the compensation proposal; and

(3)
"FOR" the adjournment proposal.

Q:
How will the Company's directors and executive officers vote on the proposal to adopt the merger agreement?

A:
The directors and executive officers of the Company have informed the Company that, as of the date of the filing of this proxy statement, and to the extent they own shares of Company common stock, they intend to vote in favor of the proposal to adopt and approve the merger agreement. In addition, the directors and executive officers of the Company have informed the Company that, as of the date of the filing of this proxy statement, and to the extent they own shares of Company common stock, they intend to vote in favor of the compensation proposal and the adjournment proposal. As of the record date, our directors and executive officers (other than Mr. Sachs) owned, in the aggregate, [3]% of the outstanding shares of Company common stock.

Q.
Who is entitled to vote at the special meeting?

A.
Only Company stockholders of record as of the close of business on [    ·    ], 2018, the record date for the special meeting, are entitled to notice of, and to vote at, the special meeting. As of the record date, there were [11,156,257] shares of Company common stock outstanding and [20] holders of record. Every holder of Company common stock is entitled to one vote for each such share the stockholder held as of the record date.

Q.
What vote is required for the Company stockholders to adopt each proposal?

A.
Merger Proposal:

Vote Required:  Approval of the merger proposal requires the affirmative vote in person or by proxy of holders of at least both (1) a majority of the outstanding shares of Company common stock entitled to vote at the special meeting and (2) a majority of the outstanding shares of Company common stock, excluding shares held by (i) Parent or Merger Sub or any of their respective affiliates, including Gregory H. Sachs, the Company's executive chairman, (ii) any rollover investors, and (iii) any of the Company's executive officers. Parent and the Company may, if they choose, elect to waive the voting requirement set forth in clause (2) above, but may not waive the requirement set forth in clause (1).

Effect of abstentions and broker non-votes:  If you mark "Abstain" on your proxy card, fail to submit a proxy card or vote in person at the special meeting, or fail to instruct your bank, broker or other nominee how to vote, it will have the same effect as a vote "AGAINST" the merger proposal.

    Compensation Proposal:

    Vote Required:  Approval, on a non-binding, advisory basis, of the compensation proposal requires the affirmative vote of a majority of the votes cast at the special meeting by Company stockholders present in person or by proxy at the special meeting and entitled to vote thereon.

    Effect of abstentions and broker non-votes:  If you mark "Abstain" on your proxy card, it will have the same effect as a vote "AGAINST" the compensation proposal. If you fail to submit a proxy

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      card or vote in person at the special meeting, or fail to instruct your bank, broker or other nominee how to vote with respect to the compensation proposal, it will have no effect on the compensation proposal.

    Adjournment Proposal:

    Vote Required:  Whether or not a quorum is present, approval of the adjournment proposal requires the affirmative vote of a majority of the votes cast at the special meeting by Company stockholders present in person or by proxy at the special meeting and entitled to vote thereon.

    Effect of abstentions and broker non-votes:  If you mark "Abstain" on your proxy card, it will have the same effect as a vote "AGAINST" the adjournment proposal. If you fail to submit a proxy card or vote in person at the special meeting, or fail to instruct your bank, broker or other nominee how to vote with respect to the adjournment proposal, it will have no effect on the adjournment proposal.

    Certain Company stockholders, who are affiliates of Gregory H. Sachs and who collectively own approximately [18]% of the outstanding shares of Company common stock as of the record date, entered into a voting agreement with the Company pursuant to which, among other things, each of them has agreed to vote its shares of Company common stock in favor of the merger proposal.

Q.
Who is soliciting my vote and who bears the cost of solicitation?

A.
This proxy solicitation is being made and paid for by the Company. We have not retained a proxy solicitor to assist in the solicitation. Our directors, officers and employees may also solicit proxies by personal interview, mail, e-mail, telephone, facsimile or by other means of communication. These persons will not be paid additional remuneration for their efforts. We will also request brokers and other fiduciaries to forward proxy solicitation material to the beneficial owners of shares of Company common stock that the brokers and fiduciaries hold of record. We will reimburse them for their reasonable out-of-pocket expenses.

Q.
What do I need to do now?

A.
Even if you plan to attend the special meeting, after carefully reading and considering the information contained in and incorporated by reference into this proxy statement, please vote as soon as possible by accessing the Internet site listed on the proxy card, voting by telephone using the phone number listed on the proxy card or submitting your proxy card by mail. If you hold your shares in your own name as the stockholder of record, please vote your shares by completing, signing, dating and returning the accompanying proxy card in the enclosed postage-paid return envelope. You can also attend the special meeting and vote, or change your prior vote, in person. Do NOT enclose or return your stock certificate(s) with your proxy. If you hold your shares in "street name" through a bank, broker or other nominee, please follow the instructions on the voting instruction card furnished by such bank, broker or other nominee.

Q:
How do I vote? How can I revoke my vote?

A:
You may vote by signing and dating each proxy card you receive and returning it in the enclosed postage-paid envelope or as described below if you hold your shares in "street name." If you return your signed proxy card, but do not mark the boxes showing how you wish to vote, your shares will be voted "FOR" the merger proposal, "FOR" the compensation proposal and "FOR" the adjournment proposal.

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    You have the right to revoke your proxy at any time before the vote taken at the special meeting by:

    delivering a signed written notice of revocation bearing a date later than the date of the proxy, stating that the proxy is revoked to the Company's Corporate Secretary at 15301 North Dallas Parkway, Suite 500, Addison, Texas 75001;

    signing and delivering a new proxy relating to the same shares of Company common stock and bearing a later date to the Company's Corporate Secretary at 15301 North Dallas Parkway, Suite 500, Addison, Texas 75001;

    submitting another proxy by telephone or by Internet by the date and time indicated on the applicable proxy card(s); or

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

Q:
Can I vote by telephone or by Internet?

A:
If you hold your shares in your name as a stockholder of record, you may vote by telephone or by Internet by following the instructions included with the accompanying proxy card.

    If your shares are held by your bank, broker or other nominee, often referred to as held in "street name," please check your proxy card or contact your bank, broker or other nominee to determine whether you will be able to vote by telephone or by Internet.

Q.
If my shares are held in "street name," will my bank, broker or other nominee vote my shares for me?

A.
No. Your bank, broker or other nominee will only be permitted to vote your shares if you instruct your bank, broker or other nominee how to vote. You should follow the procedures provided by your bank, broker or other nominee regarding the voting of your shares. If you do not instruct your bank, broker 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 merger proposal and will have no effect on the compensation proposal and adjournment proposal.

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

A.
If you hold shares in "street name" and directly as a record holder, you may receive more than one proxy and/or set of voting instructions relating to the special meeting. These should each be voted and/or returned separately as described elsewhere in this proxy statement in order to ensure that all of your shares are voted.

Q.
How are votes counted?

A.
For each proposal, you may vote "FOR," "AGAINST" or "ABSTAIN." Abstentions will be counted for the purpose of determining whether a quorum is present and will have the same effect as a vote "AGAINST" each proposal. In addition, if your shares are held in the name of a bank, broker or other nominee, such bank, broker or other nominee will not be entitled to vote your shares in the absence of specific instructions. These non-voted shares, or "broker non-votes," will be counted for purposes of determining a quorum and will have the same effect as a vote "AGAINST" the merger proposal and will have no effect on the compensation proposal or the adjournment proposal. Your bank, broker or other nominee will vote your shares only if you provide instructions on how to vote by following the instructions provided to you by your bank, broker or other nominee.

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    If you sign your proxy card without indicating your vote, your shares will be voted "FOR" the merger proposal, "FOR" the compensation proposal and "FOR" the adjournment proposal, and in accordance with the recommendations of our board of directors on any other matters properly brought before the special meeting for a vote.

Q:
Who will count the votes?

A:
A representative of Broadridge Corporate Issuer Solutions, Inc., will count the votes and act as an inspector of election. Questions concerning stock certificates or other matters pertaining to your shares may be directed to Broadridge Corporate Issuer Solutions, Inc. at (855) 793-5068.

Q.
When is the merger expected to be completed? What is the "go-shop period"?

A.
We are working toward completing the merger as quickly as possible, and we anticipate that it will be completed in the third quarter of 2018. In order to complete the merger, we must obtain stockholder approval and the other closing conditions under the merger agreement must be satisfied or waived (as permitted by law).

    In addition, the Company may solicit and engage in discussions and negotiations with respect to competing proposals through May 17, 2018; provided that such end date may be extended until June 1, 2018 at the election of the Company (upon written notice to Parent) at any time prior to May 17, 2018. After the conclusion of the go-shop period, the Company may continue discussions with any "excluded party" (as defined below in the section entitled "The Merger Agreement—Go-Shop; Non-Solicitation; Competing Acquisition Proposals," beginning on page 77) until the date that such party ceases to be an excluded party or we cease to be in continuous active discussions with such person with respect to any alternative proposal. A person or group shall cease to be an excluded party if such person or group withdraws or terminated its offer or proposal, the offer or proposal expires, or the special committee determines in good faith that the offer or proposal has ceased to constitute, or is no longer reasonably likely to lead to, a "superior proposal" (as defined below in the section entitled "The Merger Agreement—Go-Shop; Non-Solicitation; Competing Acquisition Proposals," beginning on page 77).

Q.
What happens if the merger is not consummated?

A.
If the merger is not consummated for any reason, Company stockholders will not receive any consideration for their shares of Company common stock in connection with the merger. Instead, the company will remain an independent, public company and Company common stock will continue to be listed and traded on Nasdaq Capital Market for so long as the Company remains in compliance with the Nasdaq Capital Market listing standards. In additional, under certain circumstances, the Company may be required to pay a termination fee. See "The Merger Agreement—Termination Fees, Penalty Loan," beginning on page 86. As discussed under "Special Factors—Reasons for the Merger; Recommendation of the Special Committee and of Our Board of Directors; Fairness of the Merger," beginning on page 30, the Company board of directors believes that if the merger is not consummated for any reason, it is possible that the Company would not be able to continue as a long-term going concern absent a capital raise or other significant liquidity event. See "Special Factors—Effects on the Company if the Merger Is Not Completed," beginning on page 58.

Q.
Should I send in my stock certificates now?

A.
No. After the merger is completed, you will be sent a letter of transmittal with detailed written instructions for exchanging your Company common stock certificates for the merger consideration. If your shares are held in "street name" by your bank, broker or other nominee you will receive

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    instructions from your bank, broker or other nominee as to how to effect the surrender of your "street name" shares in exchange for the merger consideration. Please do not send your certificates in now.

Q.
How can I obtain additional information about the Company?

A.
We will provide a copy of our Annual Report on Form 10-K for the year ended December 31, 2017, excluding certain of its exhibits, and other filings with the Securities and Exchange Commission (which we refer to as the "SEC"), including our reports on Form 10-Q, without charge to any stockholder who makes a written request to RMG Networks Holding Corporation, 15301 North Dallas Parkway, Suite 500, Addison, Texas 75001. Our Annual Report on Form 10-K for the year ended December 31, 2017 is attached to this proxy statement as Annex D and our Quarterly Report on Form 10-Q for the three months ended March 31, 2018 is attached to this proxy statement as Annex E. Our Annual Report on Form 10-K and other SEC filings also may be accessed at http://www.sec.gov or on the Company's website at http://www.rmgnetworks.com under the heading "Company" and then under the heading "SEC Filings" in the "Investor Relations" drop down menu. Our website address is provided as an inactive textual reference only. The information provided on our website is not part of this proxy statement, and therefore is not incorporated by reference into this proxy statement. For a more detailed description of the additional information available, please refer to "Where You Can Find More Information," beginning on page 110.

Q.
Who can help answer my questions?

A.
If you have additional questions about the merger after reading this proxy statement, please call our information agent, Broadridge Corporate Issuer Solutions, Inc., at (855) 793-5068 (toll free).

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SPECIAL FACTORS

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

Background of the Merger

        The board of directors, together with members of the Company's senior management, regularly reviews and assesses the Company's long-term strategy and objectives in light of the Company's financial condition, developments in the industries in which the Company operates and evolving technology trends and advancements. This process has included evaluating strategic alternatives relating to the business of the Company to enhance stockholder value.

        Since July 2014, the Company has been executing a multi-year strategic turnaround plan focused on (a) delivering new, innovative products and solutions, (b) diversifying into select industry verticals, (c) improving the effectiveness and productivity of its sales and marketing efforts and (d) implementing a cost rationalization effort. Although the Company has made progress on its plan by strengthening its management team, enhancing its product offerings and reducing operating costs, the Company continues to incur significant net losses from operations.

        On November 17, 2017, the board of directors held a regularly scheduled meeting to review the Company's performance for the third quarter. In addition to all of the directors, Robert Michelson, the Company's chief executive officer, Jana A. Bell, the Company's chief financial officer, Robert R. Robinson, the Company's general counsel, Jordon Fisher, the board observer of DRW Holdings, LLC and its affiliates (which we refer to, collectively, as "DRW"), the Company's largest stockholder, and representatives of Greenberg Traurig LLP, the Company's outside counsel (which we refer to as "Greenberg Traurig"), participated in the meeting. Mr. Michelson and Ms. Bell reviewed with the directors the Company's third quarter and year-to-date financial performance. The board of directors discussed the Company's long-range plan and prospects and a number of material factors affecting the Company's business. The board of directors noted in particular the negative revenue trend in North America, competitive pressures and technological advancements in or impacting the industry in which the Company competes. The board of directors discussed material execution risks, including the financial impact of transitioning from a perpetual software license model to a software-as-a-service model and the Company's lack of access to capital to fund the required sales and marketing and research and development costs required to improve operations. In light of these trends and risks, the board of directors reviewed various strategic alternatives for the Company, including potential methods to raise capital and the potential sale of the Company. The board of directors determined to explore the available alternatives and form a special committee consisting of three independent, outside directors (which we refer to as the "special committee") to review any strategic opportunities that may be presented to the board of directors and to make a recommendation to the full board of directors as to the advisability of pursuing any such opportunities. The board of directors, after consultation with Greenberg Traurig, noted that although there were no known actual conflicts at the time, because Gregory Sachs, the Company's executive chairman, indicated a willingness to consider participating in a strategic transaction with the Company, it would be prudent to form a special committee of independent, outside directors to direct the strategic process on behalf of the board of directors.

        The board of directors appointed Jeffrey Hayzlett, Alan Swimmer and Jonathan Trutter to the special committee, with Mr. Trutter to serve as chairman. The board of directors delegated to the special committee the exclusive power to, among other things: (a) establish, monitor and direct the process and procedures related to the review and evaluation of a possible sale or capital raise transaction, including the authority to determine not to proceed with any process, procedures, review or evaluation; (b) respond to communications, inquiries or proposals regarding any such transaction;

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(c) review, evaluate and negotiate the terms and conditions of any such transaction; (d) solicit expressions of interest or other proposals for any such transaction; (e) determine whether any such transaction is advisable and is fair to, and in the best interests of, the Company and its stockholders; and (f) reject or approve any such transaction, or recommend such rejection or approval to the board of directors. The board of directors authorized, after receiving information from an outside compensation consultant, the special committee to retain financial, legal and other advisors. The board of directors authorized the payment of $25,000 to each special committee member for serving on the special committee. The amount of this payment was set below the fees paid to special committees in comparable situations based on the information provided by the compensation consultant in light of the Company's liquidity position. Throughout the special committee's evaluation of a potential sale or capital raising transaction, the special committee met frequently via telephone calls, but its members were also in regular informal communications with the committee's advisors and each other.

        On December 5, 2017, the special committee had a telephonic meeting with a representative of Greenberg Traurig. At the meeting, the representative provided an overview of the fiduciary duties of the members of the special committee and the mandate of the special committee in considering a potential sale or capital raise transaction. The special committee discussed the financial condition and liquidity needs of the Company and the impact of such condition and needs on the special committee's process and timeline to attract potential buyers or investors. The special committee also considered the Company's historical efforts to raise capital, including the rights offering and private placement to the existing stockholders in December 2016. The special committee discussed the advisability of engaging an investment banking firm to assist the special committee in its evaluation of a potential sale or capital raise transaction and decided that Mr. Trutter should contact investment banking firms discussed by the special committee about a possible engagement.

        Over the course of the remainder of December 2017, Mr. Trutter had preliminary discussions with five investment banking firms. Mr. Trutter inquired as to their industry expertise and experience in similar sale and capital raise transactions. Mr. Trutter arranged for three of the investment banking firms to meet with members of the special committee in Dallas, Texas on January 9, 2018.

        In early January, 2017, in light of Mr. Sach's indication of a willingness to consider a potential strategic transaction with the Company, the Company entered into a mutual nondisclosure agreement with Sachs Capital Group LP (which we refer to as "SCG") effective as of November 11, 2017.

        On January 16, 2018, the members of the special committee held a telephonic meeting to discuss the three investment banking firms the special committee met with on January 9, 2018, and discussed retaining counsel for the special committee.

        On January 22, 2018, SCG submitted a non-binding, highly confidential indication of interest to acquire all of the outstanding shares of the Company (other than those held by SCG, its affiliates and other stockholders who would elect to rollover their shares) for $1.23 per share in cash (which we refer to as the "SCG Proposal"). The indication included that the $1.23 per share price represented a 24% premium to $0.99, the average closing price between November 1, 2017 and January 19, 2018 and a 13% premium to $1.09, the closing price on Friday, January 19, 2018.

        On January 23, 2018, the members of the special committee held a telephonic meeting to discuss the SCG Proposal. The special committee discussed retaining counsel for the special committee and determined that prior to responding to the SCG Proposal, the special committee would retain counsel.

        Beginning in December and continuing through January, the special committee developed a list of law firms to act as counsel to the special committee. The special committee conducted several telephonic interviews with potential counsel, inquiring as to their experience representing a special committee formed to explore strategic alternatives, expertise in mergers and acquisitions and financings and potential fee structures. The special committee developed a list of three finalist law firms and on

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January 27, 2018 held a telephonic meeting of the special committee to discuss the selection of counsel. Following an extensive discussion, the special committee unanimously selected DLA Piper to act as counsel for the special committee. The special committee's decision to engage DLA Piper was based on the experience DLA Piper has representing special committees in evaluating strategic alternatives, the reputations of the attorneys who would represent the special committee and DLA Piper's expertise in mergers and acquisitions and financings.

        On February 1, 2018, the special committee held a telephonic meeting with representatives of DLA Piper to review the SCG Proposal. At the meeting, the representatives provided an overview of process considerations with respect to a potential sale of the Company. The special committee instructed DLA Piper to contact Mr. Sachs and inform him that the special committee had engaged DLA Piper and that any communications, requests for information or questions regarding the special committee's process should be directed to DLA Piper. The special committee also requested that DLA Piper contact the board of directors observer of DRW the Company's largest stockholder, to determine DRW's willingness to explore potential financing or alternative transactions with the Company.

        The attorney who had served as Greenberg Traurig's primary representative to the Company left Greenberg Traurig and joined Mayer Brown. In connection with this transfer, and in order to continue its engagement with the primary individual who had previously advised the Company in these matters, the Company executed an engagement letter with Mayer Brown on February 1, 2018. From that point onward, Mayer Brown represented the Company through the same primary attorney who had previously represented the Company on behalf of Greenberg Traurig.

        On February 6, 2018, the special committee held a telephonic meeting with representatives from DLA Piper. At the meeting, the representatives provided an overview of the fiduciary duties of the members of the special committee in the context of evaluating a potential sale of the Company for cash, particularly if the buyer is an affiliate of the Company. The representatives of DLA Piper discussed with the special committee the importance of the process engaged in by the special committee. The special committee discussed feedback received by DLA Piper from DRW, the Company's largest stockholder, that DRW was not interested in further investing in the Company or proposing an alternative transaction for the Company. As part of the meeting, the special committee also discussed management's forecasts as to the Company's liquidity. After taking into consideration the feedback received from DRW and the Company's liquidity position, the special committee determined to proceed with exploring a potential capital raise or sale transaction, including the SCG Proposal. The special committee determined to continue discussions with three of the investment banking firms previously discussed by the special committee and obtain information from an additional two investment banking firms about a possible engagement to assist the special committee in identifying potential financial and strategic buyers in addition to SCG and evaluating potential transactions.

        On February 8, 2018, the special committee held a telephonic meeting with representatives from DLA Piper. At the meeting, the special committee reviewed cash projections made available to the board of directors. Mr. Trutter also reported to the special committee on his discussions with Ms. Bell about the risk that the Company's forecast reflects that the Company will not be able to comply with financial covenants in the Company's senior loan agreement, and as such the Company may receive a going concern explanatory paragraph from its auditors. The special committee, with the assistance of the representatives of DLA Piper, considered the impact of the Company's financial and liquidity condition on the special committee's process and timing in exploring a potential sale or capital raise transaction.

        On February 9, 2018, the special committee held a telephonic meeting with representatives of DLA Piper to review and consider updated projections about the Company's liquidity and covenant compliance prepared by Ms. Bell and circulated to the board of directors. The special committee discussed the risks to the Company's business if the Company were unable to generate sufficient cash

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to satisfy its debt obligations and working capital needs or were to fail to comply with the financial and operational covenants in its senior loan agreement. The Special Committee also discussed the risk that short- or long-term financing would not be available given the Company's recent efforts to secure such financing and the Company's cash flow projections. In light of these risks, the members of the special committee determined to continue to engage in discussions with SCG while continuing to explore alternative strategic transactions.

        On February 11, 2018, the board of directors held a telephonic meeting to review the Company's performance and liquidity position. In addition to all of the directors, Ms. Bell, Mr. Robinson and representatives from Mayer Brown and DRW participated in the meeting. Mr. Trutter reported to the board of directors on the developing liquidity situation, including the risk that the Company would not be able to comply with financial covenants in the Company's senior loan agreement and as such, the Company may receive a going concern explanatory paragraph from its auditors. Mr. Trutter also informed the board of directors that the special committee was in the preliminary stages of evaluating the SCG Proposal and reviewed several options available to the Company to help its cash flow situation, including seeking a bridge credit facility, implementing a sale of the Company or initiating a restructuring process. Ms. Bell gave a presentation on the liquidity situation and projections, after which the board of directors discussed the liquidity issues. A representative of Mayer Brown led a discussion on various topics, for some of which Mr. Sachs recused himself. The topics included the duties of the Company's directors and the legal issues involved with conducting transactions between the Company and its insiders. Ms. Bell noted that the Company was required to provide a budget approved by the board of directors under its senior loan agreement by February 15, 2018 and that any such budget would indicate that the Company anticipated it might not be in compliance with future financial covenants without an amendment thereto. The board of directors discussed alternatives to ease the liquidity position, including obtaining mezzanine debt, a third-party bridge loan and other similar transactions. The board of directors also discussed the timeline of a potential sale of the Company and cost control efforts being implemented. The board of directors asked Ms. Bell to update her financial projections to reflect only pre-transaction special committee costs that would be due and owing prior to the consummation of a potential transaction.

        On February 12, 2018, the special committee held a telephonic meeting with representatives of DLA Piper. The members of the special committee discussed management's presentation to the board of directors on February 11, 2018 with respect to the Company's financial and liquidity position. The special committee considered the execution risks to a potential sale or capital raise transaction resulting from the Company's projected cash resources, including the risks if the Company were to fail to comply with the financial covenants in the Company's senior loan agreement. The special committee instructed the representatives of DLA Piper to determine whether Mr. Sachs and/or DRW would consider providing bridge financing to the Company to, at a minimum, give the special committee the time and resources to explore a potential capital raise or sale transaction.

        On February 15, 2018, the special committee held a telephonic meeting with representatives of DLA Piper and a representative of Mayer Brown. The representatives of DLA Piper and Mayer Brown reported to the special committee that Mr. Sachs indicated that he would only provide financing to the Company in connection with the Company entering into a definitive merger agreement with SCG. The special committee also noted that DRW indicated that it would not provide any additional financing to the Company. In light of the foregoing, the special committee determined to engage with SCG as to the terms of the potential bridge financing that would be available in connection with a definitive merger agreement. In addition, since Mr. Sachs indicated he would only engage in discussions with respect to a bridge financing in connection with the negotiation of a definitive merger agreement, the special committee authorized DLA Piper to prepare a draft merger agreement to be reviewed by the special committee and then shared with SCG.

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        On February 16, 2018, the special committee held a telephonic meeting with representatives of DLA Piper. Mr. Michelson and Ms. Bell also participated in the meeting. The representatives of DLA Piper discussed with the members of the Company's management the duties and responsibilities of the special committee to independently evaluate strategic alternatives available to the Company. The representatives of DLA informed management that all communications relating to a potential transaction or financing of the Company must be coordinated by the special committee and its counsel. The representatives of DLA Piper and management also discussed the handling of information requests from SCG or any other third parties involved in a potential transaction or financing and coordinating with management as appropriate the implementation of any transaction or financing. The members of the special committee and management also reviewed the Company's financial condition and liquidity position.

        On February 21, 2018, the special committee held a telephonic meeting with representatives of DLA Piper. The members of the special committee reviewed the investment bank candidates to serve as financial advisor to the special committee. The special committee determined that it would be advisable to engage one of the investment banking firms to assist the Company in identifying and pursuing potential buyers and/or financing sources in addition to SCG, but decided to defer engaging an investment banking firm to assist the special committee in valuing the Company's equity and rendering a fairness opinion until the special committee progressed in its discussions with SCG or any other potential third party. A representative of DLA Piper then reviewed in detail with the members of the special committee the terms and conditions set forth in the draft merger agreement previously circulated by DLA Piper to the members of the special committee. The representatives of DLA Piper and the special committee discussed the advisability of having a go-shop period of at least 45 days to supplement the "market check" that the special committee will continue to engage in prior to entering into any definitive transaction agreement. The special committee and DLA Piper also determined that, given the potential buyer is an affiliate of Mr. Sachs (with Mr. Sachs owning or controlling, directly or indirectly, approximately 18% of the Company's outstanding shares of common stock), having a closing condition that requires the merger agreement to be approved by a majority of stockholders other than SCG and its affiliates and any other stockholders who elect to rollover their shares would give minority stockholders a strong voice in determining whether the proposed transaction is in the best interests of the Company stockholders. The special committee instructed DLA Piper to share the draft merger agreement with Gardere Wynne Sewell LLP, outside counsel to SCG, and to inform such firm that as a condition to continuing discussions SCG would have to agree to the go-shop provision and majority of minority vote condition and propose bridge financing in an amount, and upon terms, to enable the Company to operate in the ordinary course during the course of any pending transaction and allow the special committee to engage in a process to maximize stockholder value. On April 1, 2018, Gardere Wynne Sewell LLP combined with Foley & Lardner LLP. The combined firm, Foley & Lardner LLP, will do business as "Foley Gardere" in its Texas and Colorado offices for a time following the combination. Throughout the remainder of this proxy statement, the law firm is referred to as "Foley Gardere" without distinguishing between the pre- and post- combination periods. The primary attorneys representing SCG prior to the combination continued to serve as the primary attorneys representing SCG after the combination. The special committee also requested that DLA Piper inform Foley Gardere that, although the special committee was prepared to engage with SCG on the draft merger agreement, the special committee had not approved the proposed merger consideration, which would not be discussed or negotiated unless and until the parties made progress on the draft merger agreement and financing terms.

        On February 27, 2018, representatives of DLA Piper and Foley Gardere engaged in discussions concerning the terms of the merger agreement.

        On February 28, 2018, the special committee held a telephonic meeting with representatives of DLA Piper. The representatives of DLA Piper reviewed with the members of the special committee the

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communications between DLA Piper and Foley Gardere relating to the draft merger agreement, including comments by Foley Gardere that would reduce the period of the go-shop to thirty days and establish termination fees to $500,000 plus expenses during the go-shop period and $1 million plus expenses thereafter. Foley Gardere also indicated that it would be sending to DLA a proposed term sheet for bridge financing that SCG or one of its affiliates would enter into simultaneously with entering into a definitive merger agreement and that SCG believed that the amount of the bridge financing would reduce the proposed merger consideration. The special committee instructed DLA Piper to inform Foley Gardere that the go-shop period must be at least 45 days (with extension rights to 60 days), the termination fees must be reduced, and the merger consideration would not be reduced by the amount of any bridge financing. The special committee also reviewed the qualifications and terms of engagement of the investment banking firms that had previously met with the special committee and its members. The special committee determined to engage Carl Marks to advise the special committee in its review of strategic alternatives. The special committee's decision to engage Carl Marks was based on Carl Marks' familiarity with the industry in which the Company competes and potential strategic and financial buyers and/or investors as well as Carl Marks' qualifications, reputation and experience in sale and financing transactions. The special committee authorized Mr. Trutter to execute an engagement letter with Carl Marks on the terms discussed at the meeting.

        On March 5, 2018, the special committee held a telephonic meeting with representatives of DLA Piper and Carl Marks. Prior to the meeting, the special committee entered into a customary letter agreement formally engaging Carl Marks as financial advisor to the special committee with respect to a potential sale or financing transaction. The representatives of Carl Marks and the special committee discussed the Company's financial condition and liquidity position. The special committee and Carl Marks also discussed potential strategic and financial parties that Carl Marks would contact to determine if they are interested in a potential sale or financing transaction. The special committee noted that, given the Company's liquidity position, any potential party must demonstrate the ability to proceed expeditiously. The representatives of DLA Piper and Carl Marks discussed the process for engaging interest from third parties, including the form of confidentiality agreement to be executed by parties that express an interest in a potential transaction with the Company.

        On March 6, 2018, Foley Gardere sent to DLA Piper a draft term sheet for bridge financing to be provided by an affiliate of SCG simultaneously with the execution of a definitive merger agreement with SCG. The term sheet provided for a facility of up to $2 million that could be drawn in installments of not more than $250,000, each upon ten days' notice. The facility had a one-year term with an interest rate of prime plus 8%, subject to increase up to prime plus 16% under certain conditions, including if the merger with SCG is not approved by stockholders. The facility also provided that the full amount of borrowings thereunder would be convertible into preferred stock of the Company with a liquidation preference of 3x principal that is convertible into shares of common stock at a price per share of common stock equal to $0.10.

        On March 8, 2018 representatives of DLA Piper and Foley Gardere reviewed and discussed the proposed term sheet for the bridge financing.

        On March 8, 2018, the special committee held a telephonic meeting with representatives of DLA Piper and Carl Marks to discuss the proposed term sheet for the bridge financing. Carl Marks presented its views as to the availability of bridge financing from third parties taking into account the Company's liquidity position and the pending process to explore strategic alternatives. The special committee noted that its objectives for any bridge financing, including the proposed bridge financing by SCG, are to provide the Company with adequate resources to operate in the ordinary course while the special committee explores and implements strategic alternatives. The special committee determined that the bridge financing proposed by SCG would not allow the Company to accomplish these objectives as it included significant limitations on the Company's ability to borrow funds and other terms, such as conversion into convertible preferred stock with a 3x liquidation preference and $0.10

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per share conversion into common stock, that made such bridge financing too expensive and would likely have the effect of precluding third parties from making competing proposals. In light of the foregoing, the special committee instructed DLA Piper and Carl Marks to inform Foley Gardere and SCG that the proposed term sheet is unacceptable and that the special committee will not continue to engage in discussions with SCG on a possible sale transaction unless SCG submits a market-based term sheet that allows the special committee to accomplish its objectives.

        On March 10, 2018, representatives of DLA Piper and Foley Gardere discussed the proposed term sheet for the bridge financing and the objections of the special committee to certain of the terms and conditions therein.

        On March 12, 2018, Foley Gardere submitted to DLA Piper a revised draft of the term sheet for the bridge financing. The term sheet allowed an initial borrowing of an unspecified amount under the bridge financing upon signing of the definitive merger agreement, reduced the range of interest rates to prime plus 8% to 12% instead of 8% to 16%, maintained the ability to convert the bridge financing to convertible preferred stock with a 3x liquidation preference, and increased the conversion price into common stock from $0.10 to $1.23 per share. The draft merger agreement reduced the go-shop period from 60 to 45 days and proposed a termination fee of $250,000 plus reimbursement of expenses during the go-shop period and $500,000 plus expenses thereafter.

        On March 13, 2018, the special committee held a telephonic meeting with representatives of DLA Piper and Carl Marks. At the meeting, Carl Marks updated the special committee on its efforts to solicit strategic and financial parties that may be interested in a transaction or investment with the Company. Carl Marks noted that of the 40 parties it contacted, 3 had entered into confidentiality agreements and received virtual data room access but none have submitted an indication of intent. DLA Piper next reviewed with the special committee the terms of the revised term sheet for the bridge financing submitted by Foley Gardere. Carl Marks discussed proposed revisions to the terms of the bridge financing, including adding a payment-in-kind interest feature and eliminating or reducing the conversion feature. DLA Piper discussed proposed revisions to the terms of the merger agreement, including increasing the duration of the go-shop and decreasing the amount of the termination fees. The special committee instructed DLA Piper and Carl Marks to send revised drafts of the term sheet for the bridge financing and the merger agreement to SCG and Foley Gardere.

        On March 14, 2018, DLA Piper submitted a revised draft of the term sheet for the bridge financing and the merger agreement to Foley Gardere.

        From March 15, 2018 through March 18, 2018, Messrs. Sachs, Trutter and Swimmer and representatives of each of DLA Piper, Foley Gardere and Carl Marks negotiated the terms of the bridge financing and the merger agreement. Mr. Sachs indicated that he needed the special committee to agree to the proposed merger consideration of $1.23 per share in order for him to continue to expend the time and resources negotiating the merger agreement and related documents. Mr. Trutter informed Mr. Sachs that the merger consideration is subject to the receipt by the special committee of a valuation analysis and fairness opinion. Mr. Trutter also noted that, although the trading price of the common stock is not the only factor to be considered by the special committee, the common stock has traded above $1.23 since the time Mr. Sachs submitted his indication and requested that Mr. Sachs increase the merger consideration to take into account recent trading prices. Mr. Sachs ultimately agreed to increase the merger consideration from $1.23 to $1.27 per share but emphasized that such price was the maximum amount that SCG was willing to offer and his view that the recent trading prices of common stock were excessively volatile and that the price offered reflected a premium over the average trading price of the common stock during its recent history. The parties also discussed the interest rate and conversion feature of the bridge financing. Mr. Sachs agreed to allowing a portion of the interest to be paid in kind, but refused to eliminate the conversion feature on the grounds that it represents appropriate consideration that any other third party lender would demand under the

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circumstances; however, in response to the demand from the committee, Mr. Sachs agreed to eliminate the convertibility of the preferred stock into common stock and to provide that SCG may only convert the bridge loan into preferred stock if the Company fails to obtain stockholder approval of the definitive merger agreement with SCG or an alternative transaction. Finally, during the course of negotiations, Foley Gardere indicated that Mr. Sachs would not guarantee the obligations of the buyer entity to the merger agreement. Instead, Mr. Sachs proposed a $1 million penalty loan on the same terms as the bridge financing if the Company satisfied all of the conditions to closing of the merger, but the buying entity did not close the merger. After Mr. Sachs refused to give a guarantee or agree to a reverse termination fee instead of a penalty loan, the representatives of the special committee, DLA Piper and Carl Marks discontinued negotiations and indicated that the special committee would meet to discuss whether it was possible to proceed with a sale transaction under these circumstances.

        On March 18, 2018, the special committee held a telephonic meeting with DLA Piper and Carl Marks. The special committee, with the advice of DLA Piper, considered the material risks of not having a person or entity with resources guarantee the obligations of the buying entity, including that the buying entity could fail to close the merger on the terms set forth in the definitive merger agreement after the Company incurs the time and expense of filing a proxy statement and having a meeting of stockholders. Although the special committee noted that target companies that agree to financing or other similar conditions in favor of a buyer would typically have the protection of a reverse termination fee payable to the target if such conditions are not satisfied as opposed to a penalty loan, the special committee determined to continue to engage with SCG in light of the absence of interest by any other strategic or financial parties and the Company's liquidity position and the risk that the Company would not be able to comply with financial covenants in the Company's senior loan agreement, and as such, the Company may receive a going concern explanatory paragraph from its auditors. The special committee authorized DLA Piper to negotiate with Foley Gardere terms which would give the Company the benefit of the $2 million bridge financing to have the time to consummate the definitive merger agreement with SCG and solicit alternative transactions and the benefit of the $1 million penalty loan if all closing conditions have been satisfied and the buying entity fails to close. The special committee instructed DLA Piper that the interest rate for the penalty loan should be payable in kind at a rate below the interest rate for the bridge financing and the $1 million should be deposited into escrow upon signing of the merger agreement. Finally, in light of Mr. Sachs' refusal to guarantee the obligations of the buying entity, the special committee also requested improvements in its ability to seek alternative transactions by allowing the Company to extend the go-shop period from 45 to 60 days and eliminating any termination fee (other than reimbursement of legal fees and expenses) during the go-shop period.

        The special committee next reviewed the qualifications and terms of engagement of the investment banking firms that had previously met with the special committee and its members. The special committee determined to engage Lake Street Capital Markets, LLC (which we refer to as "Lake Street") to render a fairness opinion with respect to the merger consideration to be received by the holders of the Company's outstanding shares of common stock (other than certain affiliates of Mr. Sachs and any rollover investor, which we refer to as the "excluded stockholders," and the Company stockholders excluding the excluded stockholders we refer to as the "non-rolling stockholders"). The special committee authorized Mr. Trutter to execute an engagement letter with Lake Street on the terms discussed at the meeting.

        On March 20, 2018, the special committee held a telephone meeting with representatives of DLA Piper and Lake Street. Ms. Bell also attended for a portion of the meeting. Ms. Bell reviewed with the special committee and Lake Street certain information previously made available to Lake Street and the board of directors, including certain financial projections relating to the Company for the years ending December 31, 2018 through December 31, 2021 (which assumed the Company would be able to continue as a going concern) and weekly cash flow forecasts through April 30, 2018. Lake Street

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discussed with the special committee Lake Street's preliminary view regarding the valuation of the Company and the process Lake Street was undertaking in connection with the preparation of the fairness opinion.

        From March 20, 2018 to March 26, 2018, Foley Gardere and DLA exchanged drafts of, and negotiated the terms of, the merger agreement, the bridge loan agreement, a subordination agreement which subordinates the payment and other rights of SCG to the Company's existing senior lender, a certificate of designation for the preferred stock which the bridge financing may be converted into under certain circumstances, a voting agreement pursuant to which SCG agrees to vote the shares of common stock held by itself and its affiliates in favor of the merger agreement and the merger and an escrow agreement to hold the $1 million proceeds of the penalty loan. During these negotiations, SCG agreed to fund the entire $2 million bridge financing upon signing of the definitive merger agreement. SCG also agreed to deposit the $1 million penalty loan, which if funded would bear paid-in-kind interest at 5.0% above the prime rate, into escrow upon signing of the definitive merger agreement but requested the ability to alternatively secure a $1 million letter of credit to be deposited into escrow.

        On March 28, 2018, Mr. Trutter, Ms. Bell and representatives of DLA Piper and Mayer Brown discussed provisions of the bridge financing and the subordination agreement relating to the Company's ability to refinance its debt and the cap on the aggregate amount of senior debt under the subordination agreement. Ms. Bell informed the representatives of DLA Piper and Mayer Brown of the feedback received by the Company's senior lender as to these provisions. Based on this feedback, on March 29, 2018, Mayer Brown submitted a revised draft of the bridge loan facility and the subordination agreement to Foley Gardere.

        From March 29, 2018 through April 1, 2018, Mr. Sachs, Mr. Trutter and representatives of DLA Piper, Mayer Brown and Foley Gardere continued to negotiate the merger agreement and related documents. During these negotiations, the Company and Mayer Brown negotiated with the Company's senior lender an amendment to its senior loan agreement to, among other things, permit the bridge financing and the terms of the subordination agreement.

        On April 2, 2018, the special committee (with Mr. Swimmer unable to attend due to a personal matter) held a telephonic meeting with representatives of DLA Piper, Carl Marks and Lake Street. Ms. Bell also attended for a portion of the meeting. At the request of the special committee, Ms. Bell updated the members of the special committee on the Company's near-term liquidity constraints and management's projection that, absent a substantial capital infusion, the Company would be unable to amend the financial covenants in its senior loan agreement and would likely face a liquidity shortfall by mid-April 2018. The special committee discussed the urgent need to address the Company's liquidity constraints and the Company's ongoing efforts to obtain an amendment to its senior loan agreement as well as the impact the Company's entering into the bridge financing in connection with the definitive merger agreement would have on such efforts. Following such discussion, Ms. Bell was excused from the meeting.

        The representatives of Carl Marks next updated the special committee on its process to seek potential strategic and financial parties interested in a transaction with the Company. Carl Marks said that since March 9, 2018, it had contacted 42 potential strategic and financial parties, with 10 parties executing confidentiality agreements but no parties submitting an indication of interest. Carl Marks noted that the capital infusion from the bridge loan together with the 45 day (plus up to 15-day extension) go-shop period would give the special committee time to determine if there are any alternative transactions for the Company, which time would not otherwise be available in light of the Company's liquidity constraints and risk of covenant default under its senior loan agreement, and that the terms of the merger agreement and the bridge financing would not be likely to preclude any such alternative transaction during the go-shop period.

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        At the request of the special committee, Lake Street next reviewed its financial analysis of the $1.27 per share merger consideration and rendered to the special committee an oral opinion (which as subsequently confirmed by delivery of Lake Street's written opinion, dated April 2, 2018, to the special committee) to the effect that, as of such date and based on and subject to various procedures followed, assumptions made, qualifications and limitations on the review undertaken and the other matters considered by Lake Street in connection with the preparation of its opinion, the merger consideration to be received by holders of Company common stock (other than SCG, its affiliates and any rollover investors) in the merger pursuant to the merger agreement was fair to such holders from a financial point of view. The representatives of Carl Marks and Lake Street were then excused from the meeting.

        DLA Piper confirmed that the special committee had received and reviewed in advance of the meeting the final version of the merger agreement (including the disclosure schedules thereto), bridge loan agreement, subordination agreement, voting agreement, certificate of designation of preferred stock, escrow agreement, final financial presentation and form of fairness opinion delivered by Lake Street, and the special committee approval resolutions. DLA Piper reviewed the fiduciary duties of the special committee in connection with the sale of the Company. Representatives of DLA Piper then summarized the principal terms and conditions of the merger agreement, as well as the related transaction agreements.

        The special committee then further discussed and considered the merger and related transactions, including the considerations described in more detail below under "—Reasons for the Merger; Recommendation of the Special Committee and of Our Board of Directors; Fairness of the Merger," beginning on page 30. Mr. Trutter informed Mr. Hayzlett that Mr. Swimmer was unable to attend the meeting due to a personal matter but had informed Mr. Trutter on April 1, 2018 that, based on Mr. Swimmer's participation in all of the meetings and activities of the special committee through April 1, 2018, Mr. Swimmer was supportive of the merger and related transactions. Following discussion, the special committee, in a meeting attended by each member of the special committee except Mr. Swimmer who was unable to attend due to a personal matter, unanimously adopted resolutions (i) determining that the merger agreement and the transactions contemplated thereby (other than any rollover by any rollover investor), including the merger and the transaction documents, are advisable, fair to and in the best interest of the Company and non-rolling stockholders, and (ii) recommending that the board of directors (1) declare that the merger agreement and the transactions contemplated by the merger agreement (excluding any rollover by any rollover investor), including the merger and the transaction documents, are advisable, fair to, and in the best interests of the Company and non-rolling stockholders, (2) approve the merger agreement and the transactions contemplated by the merger agreement (excluding any rollover by any rollover investor), including the merger and the transaction documents, and (3) subject to the foregoing board of directors approval, submit the approval of the adoption of the merger agreement to the Company stockholders and recommend that the Company stockholders approve the adoption of the merger agreement.

        Following the meeting of the special committee, on April 2, 2018, the board of directors held a telephonic meeting with representatives of Mayer Brown and DLA Piper. The representatives of Mayer Brown confirmed that the board of directors had received and reviewed in advance of the meeting the final version of the merger agreement (including the disclosure schedules thereto), bridge loan agreement, subordination agreement, voting agreement, certificate of designation of preferred stock, escrow agreement, final financial presentation and form of fairness opinion delivered by Lake Street to the special committee, and the board of directors approval resolutions. The representatives of Mayer Brown and DLA Piper then summarized the principal terms and conditions of the merger agreement, the bridge loan agreement, and the other related transaction agreements, and reviewed the fiduciary duties of the board of directors in connection with the sale of the Company. Mr. Trutter, as chair of the special committee, then reviewed the process undertaken by the special committee and the special committee's receipt of the oral opinion of Lake Street rendered to the special committee and the

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determinations and recommendations of the special committee with respect to the merger (which determinations and recommendations were made with Mr. Swimmer unable to attend due to a personal matter, but were otherwise unanimous), the merger agreement and the related transactions. The board of directors then further discussed and considered the merger and related transactions, including the considerations described in more detail below under "—Reasons for the Merger; Recommendation of the Special Committee and of Our Board of Directors; Fairness of the Merger," beginning on page 30.

        Following discussion, the board of directors, in a meeting attended by each member of the board of directors except for Mr. Sachs who recused himself due to his interest in the transaction and Mr. Swimmer who was unable to attend due to a personal matter, after carefully considering the unanimous recommendation of the special committee (in a meeting attended by each member of the special committee except Mr. Swimmer), unanimously adopted resolutions (1) declaring that the merger agreement and the transactions contemplated by the merger agreement (other than any rollover by any rollover investor) were advisable, fair to, and in the best interests of the Company and its stockholders (other than certain affiliates of Mr. Sachs and any rollover investors), (2) approving the merger agreement and the transactions contemplated by the merger agreement, including the merger, (3) directing that the approval of the adoption of the merger agreement be submitted to the Company stockholders and (4) recommending that Company stockholders vote in favor of adoption of the merger agreement.

        Following the meeting of the board of directors, on April 2, 2018, the Company and SCG executed the merger agreement and other definitive documentation, including the bridge financing, the subordination agreement and the voting agreement and the Company issued a press release announcing its entry into the merger agreement.

Subsequent Events

        Under the terms of the merger agreement, and as further described under "The Merger Agreement—Go-Shop; Non-Solicitation; Competing Acquisition Proposals," beginning on page 77, the Company is permitted to actively solicit and negotiate acquisition proposals from third parties during a 45-day "go-shop" period that began on April 2, 2018 and will expire at 11:59 p.m. Central time on May 17, 2018 (subject to a 15-day extension until June 1, 2018). We refer to this period as the "go-shop period". During the go-shop period, Carl Marks, under the direction of the special committee, undertook a broad solicitation effort, contacting [    ·    ] potential acquirors, compromising [    ·    ] strategic parties and [    ·    ] financial parties. Of these parties, [    ·    ] potential strategic acquirors and [    ·    ] potential financial acquiror were already party to (as part of prior discussions between the parties) confidentiality agreements, and an additional [    ·    ] potential acquirors entered into a new confidentiality agreements.

Reasons for the Merger; Recommendation of the Special Committee and of Our Board of Directors; Fairness of the Merger

The Special Committee

        The special committee consists of three independent, outside directors, which constitutes a majority of directors of the Company who are not Company employees. The special committee, in evaluating and negotiating the merger, including the terms and conditions of the merger agreement, consulted with the special committee's independent legal and financial advisors and the Company's outside legal advisors.

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        The special committee determined that the merger agreement and the transactions contemplated by the merger agreement (other than any rollover by any rollover investor), including the merger and the transaction documents, are advisable, fair to, and in the best interest of the Company and non-rolling stockholders. The special committee also determined that the merger is fair to the Company's "unaffiliated security holders," as defined under Rule 13e-3 of the Exchange Act. The special committee, in a meeting attended by each member of the special committee except Alan Swimmer who was unable to attend due to a personal matter, recommended to the board of directors that it:

    declare that the merger agreement and the transactions contemplated by the merger agreement (excluding any rollover by any rollover investor), including the merger and the transaction documents, are advisable, fair to, and in the best interests of the Company and non-rolling stockholders;

    approve the merger agreement and the transactions contemplated by the merger agreement (excluding any rollover by any rollover investors), including the merger and the transaction documents; and

    subject to the foregoing board of directors approval, submit the approval of the adoption of the merger agreement to the Company stockholders and recommend that the Company stockholders approve the adoption of the merger agreement.

        In the course of reaching its determination and making its recommendations, the special committee considered the following non-exhaustive list of material factors, which are not presented in any relative order of importance and each of which the special committee viewed as being generally supportive of its determinations and recommendations to the board of directors:

    the current and historical market prices of the Company common stock, including those set forth in the table under "Important Information Regarding the Company—Market Price and Dividend Data," beginning on page 95, taking into account the market performance of the Company's common stock relative to the common stock of other participants in the industry in which the Company operates and general market indices, the fact that the trading price of the Company's common stock had declined since the initial public offering of the Company, and the fact that the Company has had difficulty maintaining compliance with the Nasdaq Capital Market's continuing listing standards and therefore the Company's common stock is subject to the risk of being removed from the Nasdaq Capital Market, which could adversely affect the Company's ability to attract new investors, decrease the liquidity of outstanding shares of the Company's common stock, reduce the Company's flexibility to raise additional capital, reduce the price at which the Company's common stock trades, and increase the transaction costs inherent in trading such shares with overall negative effects for the Company stockholders;

    the Company's near-term liquidity constraints and the risk that the Company would not be able to continue as a long-term going concern absent a capital raise or other significant liquidity event, as well as other information with respect to the Company's business, operations, financial condition, earnings and prospects, the Company's long-range plans, and the risk in achieving those prospects and plans, as well as industry, economic and market conditions and trends, the impact on the Company of general, macro-economic developments and other risks and uncertainties discussed in the Company's public filings with the SEC;

    the merger consideration of $1.27 per share in cash represents a premium of (i) approximately 17% over the closing price of the Company common stock as quoted on the Nasdaq Capital Market of $1.09 per share on January 19, 2018 (the last trading day prior to the submission by SCG of its initial proposal) and (ii) approximately 6%, 18%, 18% and 2% over the value weighted average price of the Company common stock as quoted on the Nasdaq Capital Market

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      for the 30, 60, 90, and 180 day period, respectively, ending on April 2, 2018 (the last trading day prior to public announcement of the merger);

    the fact that the financial and other terms and conditions of the merger agreement and the relevant transactions contemplated thereby, including the merger, resulted from extensive negotiations conducted by or on behalf of the special committee, which consisted of three independent, outside directors and which retained its own independent legal and financial advisors;

    the fact that the special committee's financial advisor, Carl Marks, had solicited interest from 42 potential strategic or financial parties without such solicitation resulting in any significant interest by such parties in a transaction with the Company;

    the fact that the special committee was not aware of any firm offer by any other person during the prior two years for a merger or consolidation of the Company with another company, the sale or transfer of all or substantially all of the Company's assets or a purchase of the Company's securities that would enable such person to exercise control of the Company;

    SCG's representation to the special committee that the $1.27 per share merger consideration was its best offer, and the conclusion reached by the special committee that (i) the merger consideration was likely the highest price per share that SCG was willing to pay, (ii) given the Company's near-term liquidity constraints, further negotiations would run the risk of causing SCG to abandon the transaction altogether, in which event the non-rolling stockholders would lose the opportunity to receive the $1.27 per share and, in the event of a bankruptcy, would risk receiving no value for their shares of common stock, and (iii) the combination of SCG's agreement to pay the merger consideration and to the "go-shop" process (as more fully described under "The Merger Agreement—Go-Shop; Non-Solicitation; Competing Acquisition Proposals," beginning on page 77) would likely result in a sale of the Company at the highest price per share of common stock that was reasonably attainable;

    the fact that SCG and its affiliates, which controlled, directly or indirectly, approximately 18% of the voting power of the Company's outstanding capital stock as of the date of the merger agreement, agreed to vote in favor of the merger (as more fully described under "The Voting Agreement," beginning on page 88);

    the special committee's consideration of the risk and potential likelihood of achieving greater value for the non-rolling stockholders relative to the benefits of the merger by pursuing strategic alternatives to the merger, including continuing as an independent public company and pursuing the Company's strategic plan and/or acquisition of certain businesses, including risks related to the Company's ability to continue as a long-term going concern absent a capital raise or other significant liquidity event;

    the special committee's consideration that the timing of the merger is in the best interests of the non-rolling stockholders given the substantial risk that the present value achievable for non-rolling stockholders in an alternative transaction effected at a later date or on a standalone basis would, in the special committee's view, likely not exceed the merger consideration;

    the fact that the non-rolling stockholders will receive cash for their shares and will therefore have immediate liquidity and certainty in the value for their shares of $1.27 per share of the Company's common stock;

    the fact that the Company's management did not negotiate or enter into any contracts (including as to post-closing employment) with SCG or any of its affiliates in connection with the execution of the merger agreement or during the course of the Company's negotiations with SCG;

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    the opinion of Lake Street rendered to the special committee on April 2, 2018 as to the fairness, from a financial point of view and as of such date, of the merger consideration to be received by the non-rolling stockholders in the merger pursuant to the merger agreement, which opinion was based on and subject to the various procedures followed, assumptions made, qualifications and limitations on the review undertaken and the other matters considered by Lake Street in connection with the preparation of its opinion as more fully described below under the section titled "—Opinion of Lake Street Capital Markets, LLC," beginning on page 41;

    the belief of the special committee that the Company's termination fee is reasonable in light of, among other matters, the benefit of the merger to the Company stockholders, and the size of such termination fee in similar transactions and the enterprise value of the Company;

    the fact that the $2 million received by the Company under the bridge financing upon execution of the merger agreement would provide the Company with funds to continue to operate as a going concern for a period of time while the Company proceeds towards closing of the merger and the special committee solicits offers for alternative acquisitions;

    the terms of the merger agreement, including:

    the condition to the closing of the merger that the merger agreement must be adopted by the Company stockholders, including the holders of a majority of the outstanding shares of common stock held by stockholders other than (i) Parent or Merger Sub or any of their respective affiliates, including Gregory H. Sachs, the Company's executive chairman, (ii) any rollover investors and (iii) the Company's directors or executive officers, which allows for an informed vote on the merits of the merger by Company stockholders that did not participate in evaluating and negotiating the merger;

    the Company's right to solicit offers with respect to alternative acquisition proposals, including by way of providing non-public information pursuant to a confidentiality agreement, during a 45-day go-shop period (which may be extended to 60 days) and to continue discussions with certain excluded parties that make acquisition proposals during the go-shop period;

    the Company's right, from the end of the go-shop period and prior to the time the Company stockholders vote on the merger proposal as described in this proxy statement, subject to certain conditions and requirements, to consider and respond to unsolicited acquisition proposals or engage in discussions or negotiations with third parties making such acquisition proposals and to terminate the merger agreement to accept a "superior proposal," and only pay SCG a termination fee of $500,000 plus reimbursement of SCG's legal fees and expenses (as more fully described under "The Merger Agreement—Termination Fees, Penalty Loan," beginning on page 86); and

    the limited representations and warranties given by the Company.

        The special committee also considered a number of factors discussed below relating to the procedural safeguards that it believes were and are present to ensure the fairness of the merger and to permit the special committee to represent effectively the interests of the non-rolling stockholders. In light of such procedural safeguards, the special committee did not consider it necessary to retain an unaffiliated representative to act solely on behalf of the Company's unaffiliated security holders for purposes of negotiating the terms of the merger agreement or preparing a report concerning the fairness of the merger agreement and the merger. The special committee believes these factors support

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its determinations and recommendations and provide assurance of the procedural fairness of the merger to the non-rolling stockholders:

    the special committee consists of three independent, outside directors without any member of the special committee (i) being an employee of the Company or any of its subsidiaries, (ii) being affiliated with SCG or its affiliates, or (iii) having any financial interest in the merger that is different from that of the non-rolling stockholders, other than as discussed in the section titled "—Interests of the Company's Directors and Officers in the Merger," beginning on page 51;

    the authority granted to the special committee by the board of directors to negotiate the terms of the definitive agreement with respect to the merger, or to determine not to pursue any agreement with SCG, and to analyze, investigate and negotiate any alternative transaction to the merger;

    the fact that the special committee held numerous meetings and met regularly to discuss and evaluate the proposals from SCG and that the special committee was actively involved in guiding the negotiation process on a regular basis;

    the special committee retained and received the advice of its own independent legal and financial advisors and that these legal and financial advisors were involved throughout the process and advised the special committee directly and regularly;

    the merger agreement and the merger consideration were the product of extensive negotiations between the special committee and its advisors, on the one hand, and SCG and its affiliates and advisors, on the other hand, which resulted, in material improvements, from the point of view of the company, of the terms of the agreement, including in an increase in the amount of merger consideration and the agreement of SCG and its affiliates to enter into a voting agreement with the Company (as more fully described under "The Voting Agreement," beginning on page 88);

    the various terms of the merger agreement, including that the merger agreement contains "go-shop" provisions and the ability of the Company to terminate the merger agreement under certain circumstances to accept a "superior proposal" (each as more fully described under "The Merger Agreement," beginning on page 70), that are intended to help ensure that the Company stockholders receive the highest price per share reasonably available;

    the rights of non-rolling stockholders to elect to dissent from the merger, vote their shares against the merger and exercise their rights to demand an appraisal of their shares by the Delaware Court of Chancery and receive cash payment of the fair value of their shares of the Company's common stock as determined by such court and in accordance with Section 262 of the Delaware General Corporation Law (which we refer to as the "DGCL") (as more fully described under "Appraisal Rights," beginning on page 102); and

    the recognition by the special committee that it had no obligation to recommend to the board of directors the approval of the merger or any other transaction.

        In the course of reaching its determinations and making its recommendations, the special committee also considered the following countervailing factors concerning the merger agreement and the merger, which are not presented in any relative order of importance:

    that the merger consideration of $1.27 per share in cash is below the closing price of the Company's common Stock as priced on the Nasdaq Capital Market of $1.47 on April 2, 2018 (the last trading day prior to the announcement of the merger), although the merger consideration does represent a premium to the 30, 60, 90, and 180 day value weighted average trading of the Company common stock and, in any event, the special committee did not believe that such trading prices were indicative of the then-current fundamental value of the Company;

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    that, following the completion of the merger, the Company will no longer exist as an independent public company and that the consummation of the merger and receipt of the merger consideration, while providing relative certainty of value, will not allow the non-rolling stockholders to participate in potential further growth in the Company's assets, future earnings growth, future appreciation in value of the Company's common stock or any future dividends after the merger, and that SCG will be entitled to participate in such potential future appreciation;

    the risk that the transactions contemplated by the merger agreement, including the merger, may not be consummated in a timely manner or at all, and the consequences thereof, including (i) the potential loss of value to the Company stockholders, (ii) the potential negative impact on the operations and prospects of the Company, including the risk of loss of key personnel and customers, and (iii) the potential adverse effect on the market's perception of the Company's prospects;

    the possible effects of the pendency or consummation of the transactions contemplated by the merger agreement, including the potential for suits, actions or proceedings in respect of the merger agreement or the transactions contemplated by the merger agreement, the risk of any loss or change in the relationship of the Company and its subsidiaries with their respective employees, agents, customers and other business relationships, and any possible effect on the Company's ability to attract and retain key employees, including that certain key members of senior management might choose not to remain employed with the Company prior to the completion of the merger;

    the restrictions imposed by the merger agreement on the Company's solicitation of acquisition proposals from third parties after the go-shop period, and that potential bidders may perceive SCG's right under the merger agreement to negotiate with the Company to match the terms of any "superior proposal" prior to the Company being able to terminate the merger agreement and accept a "superior proposal" to be a deterrent to making alternative proposals;

    that the ownership interest of SCG and its affiliates in the Company would likely be taken into account by third parties considering whether to make alternative proposals;

    the possibility that the up to $500,000 termination fee plus legal fees and expense reimbursement payable by the Company upon the termination of the merger agreement under certain circumstances, may discourage other potential bidders from making an acquisition proposal for the Company;

    that the buying entity is a newly formed entity by SCG with essentially no assets and that the Company would receive $1 million in the form of a penalty loan as opposed to a reverse termination fee in the event that all closing conditions are satisfied, and the buying entity does not close;

    the understanding that some of the Company's directors and executive officers have other interests in the merger in addition to their interests as Company stockholders, including the manner in which they would be affected by the merger (as discussed under "—Interests of the Company's Directors and Officers in the Merger," beginning on page 51);

    the risk that, while the merger is expected to be completed, there can be no guarantee that all conditions to the parties' obligations to complete the merger will be satisfied, and, as a result, it is possible that the merger may not be completed even if approved by the Company stockholders at the special meeting;

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    the risk that, if the merger is not approved by stockholders, SCG would be entitled to convert the outstanding bridge financing into preferred stock of the Company with a 3x liquidation preference;

    the restrictions on the Company's operations prior to completion of the merger, which may delay or prevent the Company from undertaking business opportunities that may arise or any other action it would otherwise take with respect to the operations of the Company pending the completion of the merger; and

    the fact that the Company has incurred and will continue to incur significant transaction costs and expenses in connection with the potential transaction regardless of whether the merger is closed.

        The special committee did not specifically consider the liquidation value of the Company's and its subsidiaries' assets in determining the fairness of the transaction to the non-rolling stockholders. The special committee believes that this method would have undervalued the assets of the company and its subsidiaries and failed to examine the business of the Company and its subsidiaries as a going concern. In addition, the special committee did not seek to establish a pre-merger going concern value for the Company in determining the fairness of the transaction to the non-rolling stockholders because the special committee did not believe there was a single method for determining going concern value. Rather, the special committee believed that the future financial results reflected in the projections of the management of the Company and the related additional factors considered by the special committee provided an indication of the Company's going concern value. The special committee also did not consider the purchase price paid for shares of Company common stock in the December 2016 Rights Offering (defined below) of $0.62 per share because the special committee did not consider this to be relevant given that the December 2016 Rights Offering occurred in 2016 and the Company circumstances had changed since that time. In determining the substantive fairness of the transaction to the non-rolling stockholders, the special committee also did not consider the Company's net book value, which is an accounting concept, because the special committee believes that net book value is not a material indicator of the value of the Company's equity but rather an indicator of historical costs.

The Board of Directors of the Company

        The board of directors of the Company consists of six directors. At a meeting on April 2, 2018, based in part on the unanimous recommendation of the special committee (in a meeting attended by each member of the special committee except Mr. Swimmer), as well as on the basis of the other factors described above, the board of directors, in a meeting attended by a majority of the directors of the Company who are not employees of the Company which included each member of the board of directors except for Mr. Sachs who recused himself due to his interest in the transaction and Mr. Swimmer who was unable to attend due to a personal matter, unanimously:

    declared that the merger agreement and the transactions contemplated by the merger agreement (other than any rollover by any rollover investor) were advisable, fair to, and in the best interests of the Company and its stockholders (other than certain affiliates of Mr. Sachs and any rollover investors);

    approved the merger agreement and the transactions contemplated by the merger agreement, including the merger;

    directed that the approval of the adoption of the merger agreement be submitted to the Company stockholders; and

    recommended that Company stockholders vote in favor of adoption of the merger agreement.

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        In addition, the board of directors of the Company determined that the merger is fair to the Company's "unaffiliated security holders," as defined under Rule 13e-3 of the Exchange Act.

        In reaching these determinations, the board of directors considered a number of factors, including the following material factors:

    the special committee's analysis (as to both substantive and procedural aspects of the transaction), conclusions and determination, which the board of directors adopted, that the merger agreement and the transactions contemplated thereby (other than any rollover by any rollover investor), including the merger and the transaction documents, are advisable, fair to and in the best interest of the Company and non-rolling stockholders, and the special committee's recommendation that the board of directors approve the merger agreement and the transactions contemplated thereby (excluding any rollover by any rollover investor) and recommend that the Company stockholders approve the adoption of the merger agreement;

    the procedural fairness of the transaction, including that the transaction was negotiated by the special committee consisting of three directors who are not affiliated with SCG or Mr. Sachs and are not employees of the Company or any of its subsidiaries, that the members of the special committee do not have an interest in the merger different from, or in addition to, that of the Company stockholders who are not affiliated with SCG other than their interests described under "—Interests of the Company's Directors and Officers in the Merger," beginning on page 51, and that the special committee was advised by its own independent legal and financial advisors;

    the fact that the special committee received an opinion, dated April 2, 2018, of Lake Street as to the fairness, from a financial point of view and as of such date, of the merger consideration to be received by the non-rolling stockholders in the merger pursuant to the merger agreement, which opinion was based on and subject to the various procedures followed, assumptions made, qualifications and limitations on the review undertaken and the other matters considered by Lake Street in connection with the preparation of its opinion as more fully described below under the section entitled "—Opinion of Lake Street Capital Markets, LLC," beginning on page 41; and

    the board of directors' consideration of the Company's near-term liquidity constraints and the risk that the Company would not be able to continue as a long-term going concern absent a capital raise or other significant liquidity event, as well as other information with respect to the Company's business, operations, financial condition, earnings and prospects, the Company's long-range plans, and the risk in achieving those prospects and plans, as well as industry, economic and market conditions and trends, the impact on the Company of general, macro-economic developments and other risks and uncertainties discussed in the Company's public filings with the SEC, as well as the terms of the merger agreement and the countervailing factors concerning the merger agreement and the merger considered by the special committee.

        The foregoing discussion of the information and factors considered by the special committee and by the board of directors is not intended to be exhaustive but includes the material factors considered by the special committee and the board of directors, respectively, including the factors considered by the special committee and the board of directors discussed above. In view of the wide variety of factors considered by the special committee and by the board of directors in evaluating the merger agreement and the merger, neither the special committee nor the board of directors found it practicable, or attempted, to quantify, rank or otherwise assign relative weights to the foregoing factors in reaching their respective conclusions. In addition, individual members of the special committee and of the board of directors may have given different weights to different factors and may have viewed some factors more positively or negatively than others. The special committee and the board of directors conducted an overall review of the factors described above and considered the factors overall to be favorable to, and to support, their respective determinations. It should be noted that this explanation of the

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reasoning of the special committee and the board of directors and certain information presented in this section is forward-looking in nature and should be read in light of the factors set forth in the section titled "Cautionary Statement Concerning Forward-Looking Statements."

        The board of directors recommends that you vote "FOR" the adoption and approval of the merger agreement.

Purposes, Reasons and Plans for the Company after the Merger

Purposes, Reasons and Plans of the Company

        The purpose of the merger for the Company is to enable its unaffiliated stockholders to immediately realize the value of their investment in the Company through their receipt of the per share merger consideration of $1.27 in cash, without interest and less applicable withholding taxes. Another purpose of the merger is to create greater operating flexibility, allowing management to concentrate on long-term growth rather than the short-term expectations of the financial markets. In light of the foregoing, and given our stock price and the economic and market conditions affecting us and our industry sector as a whole, we believe our long-term objectives can best be pursued as a private company.

        The reasons for undertaking the transaction at this time and the alternatives the Company considered to achieving the purposes identified above are described above under "—Background of the Merger," beginning on page 20.

        It is expected that, upon consummation of the merger, the operations of the Company will be conducted substantially as they currently are being conducted. Parent has advised the Company that it does not have any current intentions, plans or proposals to cause us to engage in any of the following:

    an extraordinary corporate transaction following consummation of the merger involving the Company's corporate structure, business or management, such as a merger, reorganization or liquidation,

    the relocation of any material operations or sale or transfer of a material amount of assets, or

    any other material changes in its business.

        Nevertheless, following consummation of the merger, the management and/or board of directors of the surviving corporation may initiate a review of the surviving corporation and its assets, corporate and capital structure, capitalization, operations, business, properties and personnel to determine what changes, if any, would be desirable following the merger to enhance the business and operations of the surviving corporation and may cause the surviving corporation to engage in the types of transactions set forth above if the management and/or board of directors of the surviving corporation decides that such transactions are in the best interest of the surviving corporation upon such review. The surviving corporation expressly reserves the right to make any changes it deems appropriate in light of such evaluation and review or in light of future developments.

Purposes, Reasons and Plans of the Parent Parties

        Under the SEC rules governing "going private" transactions, each of Merger Sub, Lender, SCG Digital Holdings, LLC, SCG, The Gregory H. Sachs Revocable Trust UDT Dtd. 4/24/98, 2011 Sachs Family Trust, White Knight Capital Management LLC and Gregory H. Sachs (who we refer to, collectively with Parent, as the "Parent Parties") may be deemed to be affiliates of Parent, and, therefore, are required (in addition to Parent) to express their reasons for the merger to the Company's unaffiliated stockholders. The Parent Parties are making the statements included in this section solely for the purposes of complying with the requirements of Rule 13e-3 and the related rules under the Exchange Act. For each of the Parent Parties, the purpose of the merger is to enable Parent

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to acquire all of the outstanding shares of the Company's common stock so that Parent will benefit from any future earnings and growth of the Company after shares of the Company's common stock cease to be publicly traded. The Parent Parties did not consider any alternatives for achieving these purposes. The transaction has been structured as a cash merger in order to provide the Company's unaffiliated stockholders with cash for their shares of Company common stock and to provide a prompt and orderly transfer of ownership of the Company in a single step, without the necessity of financing separate purchases of the Company's common stock in a tender offer and implementing a second-step merger to acquire any shares of common stock not tendered into any such tender offer, and without incurring any additional transaction costs associated with such activities.

        The Parent Parties have undertaken to pursue the transaction at this time in light of the opportunities they perceive to strengthen the Company's competitive position, strategy and financial performance under a new form of ownership. The Parent Parties believe that there are significant advantages in the Company becoming a private company, and the Parent Parties plan to cause the Company to avail itself of any opportunities it may have as a private company, including, but not limited to, making any public or private offering for its shares, or entering into any other arrangement or transaction as it may deem appropriate. Although the Parent Parties do not presently have an intent to enter into any such transaction nor is any Parent Party currently in negotiations with respect to any such transaction, there exists the possibility that the Parent Parties may cause the Company to enter into such an arrangement or transaction in the future and the Parent Parties, together with any rollover investors, may receive payment, directly or indirectly, for the shares of the Company's common stock in any such transaction lower than, equal to or in excess of $1.27, the per share merger consideration that stockholders will receive in the merger.

        After the effective time, the Parent Parties anticipate that the Company will continue its current operations, except that it will (i) cease to be an independent public company and will instead be a wholly owned subsidiary of Parent and (ii) have more debt than it currently has. There are no current plans to repay the bridge loan or to repay the debt, if any, taken out to finance the merger. After the effective time, the directors of Merger Sub immediately prior to the effective time will become the directors of the Company, and the officers of the Company immediately prior to the effective time will remain the officers of the Company, in each case until the earlier of their resignation or removal or until their respective successors are duly elected or appointed and qualified, as the case may be. Gregory H. Sachs is the sole director of Merger Sub at this time; however, it is expected that shortly prior to the effective time of the merger, Merger Sub may appoint additional directors who are generally aligned with Mr. Sachs.

        Each Parent Party that owns shares of the Company's common stock intends to vote its shares in favor of all three proposals, including the merger proposal.

Projected Financial Information

        We do not, as a matter of course, publicly disclose detailed financial forecasts. However, in connection with the negotiation of the proposed merger and the other transactions contemplated by the merger agreement, Company management prepared certain non-public unaudited financial forecasts, which were furnished to Parent and Lake Street for its use and reliance in connection with its financial analyses and opinion.

        The unaudited financial forecasts were not prepared for the purpose of public disclosure, nor were they prepared in compliance with published guidelines of the SEC, the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of financial forecasts, or GAAP. The summary of the unaudited financial forecasts is not being included in this proxy statement/prospectus to influence Company stockholders with respect to the approval of the merger agreement, including whether or not to seek appraisal rights with respect to shares of Company

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common stock held by stockholders. The inclusion of the unaudited financial forecasts in this proxy statement/prospectus should not be regarded as an indication that any of Parent, the Company or any of their respective affiliates, directors, officers, advisors or other representatives, or any other recipient of the unaudited financial forecasts, considered, or now considers, the forecasts to be material or necessarily predictive of actual future results or events, and the unaudited financial forecasts should not be relied upon as such.

        The unaudited financial forecasts include certain non-GAAP financial measures, including EBITDA (in each case, as defined below). Company management included forecasts of EBITDA in the unaudited financial forecasts because Company management believes that EBITDA could be a useful component in forecasting the future unlevered free cash flows generated by the Company. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures as presented in this proxy statement/prospectus may not be comparable to similarly titled measures used by the Company or other companies. The footnotes to the tables below provide certain supplemental information with respect to the calculation of these non-GAAP financial measures. The unaudited financial forecasts were not prepared with a view toward compliance with published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information.

        All of the unaudited financial forecasts summarized below were prepared by, and are the responsibility of, Company management. No independent registered public accounting firm has examined, compiled or otherwise performed any procedures with respect to the prospective financial information contained in the unaudited financial forecasts and, accordingly, no independent registered public accounting firm has expressed any opinion or given any other form of assurance with respect thereto, and no independent registered public accounting firm assumes any responsibility for the prospective financial information. The reports of the independent registered public accounting firms incorporated by reference into this proxy statement/prospectus relate to the Company's historical financial information. These reports do not extend to the unaudited financial forecasts and should not be read to do so.

        The unaudited financial forecasts do not give effect to the merger and the other transactions contemplated by the merger agreement or any changes to the Company's operations or strategy that may be implemented after the completion of the merger, including any potential synergies realized as a result of the merger and the other transactions contemplated by the merger agreement, or to any costs related to, or that may arise in connection with, the merger and the other transactions contemplated by the merger agreement, including the effect of any failure of the merger to occur.

        The unaudited financial forecasts were based on numerous variables and assumptions that are inherently uncertain and may be beyond the control of Company management. In preparing these unaudited financial forecasts, Company management used assumptions that were substantially based on and consistent with the Company's recent historical results. These assumptions included assumptions with respect to the growth rate by geography anticipated in each fiscal period, average sales prices, gross and contribution margins, general and administrative, sales and marketing and research and development expenses as a percentage of sales, and the Company's effective tax rate. Company management also assumed the Company requires at least an additional $6 million in new debt or equity capital over the forecast period in order to achieve the unaudited financial forecasts. The unaudited financial forecasts were prepared by the Company in the first quarter of 2018, and Company management believes the unaudited financial forecasts were prepared on a reasonable basis and reflected the best then-currently available estimates and judgments of Company management at that time. Important factors that may affect actual results and cause the unaudited financial forecasts to not be realized include, but are not limited to, the risks, contingencies and other uncertainties described under "Cautionary Statement Regarding Forward-Looking Statements," beginning on page 63. The

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unaudited financial forecasts are forward-looking in nature. The forecasts relate to expectations of multiple future years' performance, and such information by its nature becomes less predictive with each succeeding year. As a result, actual results may differ materially, and will differ materially if the merger and the other transactions contemplated by the merger agreement are completed, from the unaudited financial forecasts, and there can be no assurance that the forecasts will be realized. None of Company, Parent, or any of their respective affiliates, directors, officers, advisors or other representatives made or makes any representation to any stockholder or other person regarding the Company's ultimate performance compared to the information contained in the unaudited financial forecasts. Except as may be required under applicable law, the Company does not undertake any obligation to update or otherwise revise the unaudited financial forecasts to reflect events or circumstances after the date the forecasts were made, including events or circumstances that may have occurred during the period between that date and the date of this proxy statement/prospectus, or to reflect the occurrence of unanticipated events, even in the event that any or all of the assumptions are not realized.

 
  2017A   2018E   2019P   2020P   2021P   2022P    
 
 
  (In thousands)
 

Revenue:

                                           

Product

  $ 16,350   $ 17,319   $ 17,005   $ 16,892   $ 16,514   $ 18,991        

Maintenance and content services

  $ 13,545   $ 13,493   $ 14,520   $ 16,117   $ 19,246   $ 19,720        

Professional services

  $ 7,147   $ 7,679   $ 9,650   $ 10,505   $ 11,733   $ 13,493        

Total

  $ 37,042   $ 38,491   $ 41,175   $ 43,514   $ 47,493   $ 52,204        

Gross profit

 
$

21,133
 
$

20,466
 
$

22,048
 
$

23,166
 
$

25,611
 
$

28,089
       

EBITDA (non-GAAP)(1)

  $ (1,359 ) $ (2,917 ) $ (2,343 ) $ (1,287 ) $ 516   $ 2,569        

Capital expenditures

  $ 120   $ 385   $ 412   $ 435   $ 475   $ 522        

(1)
EBITDA (non-GAAP) represents net income (loss) with adjustments for interest expense and other income, income tax expense, gain (loss) on change in warrant liability, depreciation and amortization expenses, stock-based compensation expense and any transaction-related costs.

        The estimates and assumptions underlying the unaudited forecasted financial information are inherently uncertain and, though considered reasonable by the management as of the date of the preparation of such unaudited forecasted financial information, are subject to a wide variety of significant business, economic, regulatory and competitive risks and uncertainties that could cause actual results to differ materially from those contained in the unaudited forecasted financial information. Accordingly, there can be no assurance that the forecasted results are indicative of the future performance, or that actual results will not differ materially from those presented in the unaudited forecasted financial information.

Opinion of Lake Street Capital Markets, LLC

        On April 2, 2018, Lake Street orally rendered its opinion to the special committee (which was confirmed by delivery of Lake Street's written opinion, dated April 2, 2018, to the special committee) as to, as of such date, the fairness, from a financial point of view, to holders of Company common stock (other than certain affiliates of Mr. Sachs and any rollover investor, which we refer to as the "excluded stockholders," and Company stockholders excluding the excluded stockholders we refer to as "non-rolling stockholders") of the merger consideration to be received by such stockholders in the merger pursuant to the merger agreement.

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        Lake Street's opinion was provided for the benefit of the special committee (in its capacity as such), in connection with and for the purposes of the special committee's consideration of the merger. The opinion only addressed the fairness, from a financial point of view, to the non-rolling stockholders of the merger consideration to be received by such stockholders in the merger pursuant to the merger agreement and did not address any other term or aspect of the merger agreement or the merger. The summary of Lake Street's opinion in this proxy statement is qualified in its entirety by reference to the full text of its written opinion, which is attached as Annex B to this proxy statement and describes the assumptions made, qualifications and limitations on the review undertaken and other matters considered by Lake Street in connection with the preparation of its opinion. However, neither Lake Street's opinion nor the summary of its opinion and the related analyses set forth in this proxy statement are intended to be, and do not constitute, advice or a recommendation to the special committee, the board of directors, any security holder or any other party as to how to act or vote with respect to any matter relating to the merger or otherwise or any form of assurance by Lake Street as to the condition of the Company. The decision as to whether to proceed with the proposed merger or any related transaction may depend on an assessment of factors unrelated to the financial analysis on which Lake Street's opinion was based.

        In connection with its opinion, Lake Street, among other things:

    reviewed a draft of the definitive merger agreement dated March 20, 2018;

    reviewed certain business, financial and other information and data with respect to the Company that was either publicly available or made available to Lake Street from internal records of the Company;

    reviewed certain internal financial projections for the Company and the Company's draft Annual Report on Form 10-K for the year ended December 31, 2017, prepared for financial planning purposes and furnished to Lake Street by the Company's management;

    conducted discussions with members of senior management with respect to the past and present operations of the business and prospects of the Company;

    compared the financial performance of the Company with that of other publicly traded companies deemed by Lake Street to be comparable to the Company;

    reviewed the financial terms, to the extent publicly available, of certain comparable merger and acquisition transactions;

    performed a sum-of-the-parts and discounted cash flows analysis for the Company, based on projected financial performance prepared by management of the Company;

    reviewed certain publicly available information and stock price data for stockholder buyout transactions;

    reviewed the historical market prices and trading activity of the Company's common stock; and

    performed such other analyses, examinations and inquiries and considered such other financial, economic and market criteria as Lake Street deemed necessary and appropriate in arriving at Lake Street's opinion.

        Lake Street's opinion was subject to the following additional qualifications and limitations, with the Company's consent:

    In arriving at its opinion, Lake Street relied upon and assumed, without assuming liability or responsibility for independent verification, the accuracy and completeness of all information that was publicly available or was furnished, or otherwise made available, to Lake Street or discussed with or reviewed by or for Lake Street. Lake Street has further assumed that the financial

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      information provided has been prepared on a reasonable basis in accordance with industry practice, and that management of the Company is not aware of any information or facts that would make any information provided to Lake Street incomplete or misleading. Without limiting the generality of the foregoing, for the purpose of its opinion, Lake Street assumed that with respect to financial forecasts, estimates and other forward-looking information reviewed by Lake Street, that such information has been reasonably prepared based on assumptions reflecting the best currently available estimates and judgments of the management of the Company as to the expected future results of operations and financial condition of the Company. Lake Street expresses no opinion as to any such financial forecasts, estimates or forward-looking information or the assumptions on which they were based.

    In connection with Lake Street's opinion, Lake Street assumed and relied upon, without independent verification, the accuracy and completeness of all of the financial, legal, regulatory, tax, accounting and other information provided to, discussed with or reviewed by Lake Street. Lake Street's opinion does not address any legal, regulatory, tax or accounting issues.

    In arriving at Lake Street's opinion, Lake Street assumed that the executed documents for the merger (which we refer to as the "merger documents") will be in all material respects identical to the draft merger documents reviewed by Lake Street. Lake Street has relied upon and assumed, without independent verification, that (i) the representations and warranties of all parties set forth in the merger documents and all related documents and instruments that are referred to therein are true and correct, (ii) each party to the merger documents will fully and timely perform all of the covenants and agreements required to be performed by such party, (iii) the merger will be consummated pursuant to the terms of the merger documents without amendments thereto, and (iv) all conditions to the consummation of the merger will be satisfied without waiver by any party of any conditions or obligations thereunder. Additionally, Lake Street assumed that all the necessary regulatory approvals and consents required for the merger will be obtained in a manner that will not adversely affect the Company or the contemplated benefits of the merger.

    In arriving at Lake Street's opinion, Lake Street did not perform any appraisals or valuations of any specific assets or liabilities (fixed, contingent or other) of the Company, and has not been furnished or provided with any such appraisals or valuations, nor has Lake Street evaluated the solvency of the Company under any state or federal law relating to bankruptcy, insolvency or similar matters. The analyses performed by Lake Street in connection with this opinion were going concern analyses. Lake Street expresses no opinion regarding the liquidation value of the Company or any other entity or the ability of the Company to operate as a going concern, whether or not the merger is consummated. Without limiting the generality of the foregoing, Lake Street did not undertake any independent analysis of any pending or threatened litigation, regulatory action, possible unasserted claims or other contingent liabilities, to which the Company or any of its affiliates is a party or may be subject, and at the direction of the Company and with its consent, Lake Street's opinion makes no assumption concerning, and therefore does not consider, the possible assertion of claims, outcomes or damages arising out of any such matters.

    Lake Street's opinion is necessarily based upon the information available to Lake Street and facts and circumstances as they exist and are subject to evaluation on the date of the opinion; events occurring after the date of the opinion could materially affect the assumptions used in preparing Lake Street's opinion. Lake Street's opinion does not address the price at which shares of the Company common stock may trade following announcement of the merger or at any future time. Lake Street did not undertake to reaffirm or revise its opinion or otherwise comment upon any events occurring after the date thereof and does not have any obligation to update, revise or reaffirm its opinion.

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        To the extent that any of the foregoing assumptions or any of the facts on which Lake Street's opinion was based prove to be untrue in any material respect, Lake Street's opinion cannot and should not be relied upon. Furthermore, in its analysis and in connection with the preparation of its opinion, Lake Street made numerous assumptions with respect to industry performance, general business, market and economic conditions and other matters, many of which are beyond the control of any party involved in the merger.

        Lake Street's opinion may not be quoted or referred to, in whole or in part, filed with, or furnished or disclosed to any other party, without its prior written consent, except as described in the remainder of this paragraph. Its opinion may be included in its entirety in any proxy statement distributed to Company stockholders in connection with the merger or other document required by law or regulation to be filed with the SEC, and the Company may summarize or otherwise reference the existence of the opinion in such documents, provided that any such summary or reference language is also subject to the prior written approval by Lake Street. In that regard, Lake Street has consented to the inclusion, summarization and quotation of its opinion, and references to its opinion, in this proxy statement.

Material Financial Analyses

        In preparing its opinion to the special committee, Lake Street performed a variety of analyses, including those described below. The summary of Lake Street's analyses is not a complete description of the analyses underlying Lake Street's opinion. The preparation of such an opinion is a complex process involving various quantitative and qualitative judgments and determinations with respect to the financial, comparative and other analytical methods employed and the adaptation and application of these methods to the unique facts and circumstances presented. As a consequence, neither Lake Street's opinion nor its underlying analyses are readily susceptible to summary description. Lake Street arrived at its opinion based on the results of all analyses undertaken by it and assessed as a whole and did not draw, in isolation, conclusions from or with regard to any individual analysis, methodology or factor. While the results of each analysis were taken into account in reaching Lake Street's overall conclusion with respect to fairness, Lake Street did not make separate or quantifiable judgments regarding individual analyses. Accordingly, Lake Street believes that its analyses and the following summary must be considered as a whole and that selecting portions of its analyses, methodologies and factors, without considering all analyses, methodologies and factors, could create a misleading or incomplete view of the processes underlying Lake Street's analyses and opinion.

        In performing its analyses, Lake Street considered general business, economic, industry and market conditions, financial and otherwise, and other matters as they existed on, and could be evaluated as of, the date of its opinion. No company or business used in Lake Street's analyses or otherwise reviewed for comparative purposes is identical to the Company, and an evaluation of the results of those analyses is not entirely mathematical.

        The implied reference range values indicated by Lake Street's analyses are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by the analyses. Much of the information used in, and accordingly the results of, Lake Street's analyses are inherently subject to substantial uncertainty.

        Lake Street's opinion was only one of many factors considered by the special committee in evaluating the proposed merger. Neither Lake Street's opinion nor its analyses were determinative of the merger consideration or of the views of the special committee, the board of directors, management or any other party with respect to the merger or the merger consideration. Lake Street was not requested to, and it did not, recommend the specific consideration payable in the merger or that any given consideration constituted the only appropriate consideration for the merger. The type and amount of consideration payable in the merger were determined through negotiation between the

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special committee and SCG, and the decision for the Company to enter into the merger agreement was solely that of the special committee and the board of directors.

        The following is a summary of the material financial analyses performed by Lake Street in connection with the preparation of its opinion and reviewed with the special committee on April 2, 2018. The order of the analyses does not represent relative importance or weight given to those analyses by Lake Street. The analyses summarized below include information presented in tabular format. The tables alone do not constitute a complete description of the analyses. Considering the data in the tables below without considering the full narrative description of the analyses, as well as the methodologies underlying, and the assumptions, qualifications and limitations affecting, each analysis, could create a misleading or incomplete view of Lake Street's analyses.

        Unless indicated otherwise, enterprise values and equity values used in the selected Sum of the Parts analysis were calculated using the closing price of the common stock of the selected companies as of March 29, 2018. Information with respect to the historical financial and operating performance of the Company for purposes of this financial analyses were based on public filings. Information with respect to the historical financial and operating performance of the selected companies listed below, were based on publicly available information and public filings. Estimates of the future financial and operating performance of the selected comparable companies listed below were based on publicly available Wall Street research analyst estimates and other publicly available information for those companies. LTM refers to the most recent twelve months of publicly released financial information.

        Sum of the Parts Comparable Valuation:    Lake Street analyzed the public market statistics of certain companies it deemed comparable to the Company and examined various operating performance, trading statistics and information relating to those companies. For purposes of their analysis, Lake Street completed a Sum of the Parts (which we refer to as "SOTP") implied valuation by applying the enterprise value to revenue multiples of the selected public comparable groups to the Company's three major revenue lines. The Company's three major revenue lines include Product, Maintenance & Content Services, and Professional Services which account for 44%, 37% and 19% respectively of 2017 revenue. Lake Street selected 22 companies that, in its view, are engaged in businesses and have operating profiles that are reasonably comparable to the Company's Maintenance & Content Services revenue. In addition, Lake Street selected 6 companies in the Professional Services & Consulting industries and 6 companies in the Technology Distributors industry whose operating profiles were reasonably comparable to the Products and Professional Services revenue lines of the Company.

        Lake Street selected financial and stock market data of the following 6 selected publicly traded companies in the technology distribution products industry (which we refer to, collectively, as the "selected product companies").

Selected Product Companies

    ScanSource, Inc.

    PC Connection, Inc.

    Avnet, Inc.

    Tech Data Corporation

    Richardson Electronics, Ltd.

    Tech Data Corporation

        Lake Street also reviewed, for informational purposes, selected financial and stock market data of the following 22 publicly traded companies in the maintenance and content services industry. Lake

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Street noted that the size, scale and expected growth outlook of certain of the selected companies differed significantly from that of the Company. As a result, for purposes of their analyses Lake Street viewed only those 11 companies within the comparable set with enterprise values of less than $500 million as being relevant to the analysis (which we refer to, collectively, as the "selected maintenance and content services companies").

Selected Maintenance and Content Services Companies

    JCDecaux SA

    NCR Corporation

    Clear Channel Outdoor Holdings

    Acuity Brands, Inc.

    Outfront Media Inc.

    Ströer SE & Co. KGaA

    VeriFone Systems, Inc.

    Cardtronics plc

    Brady Corporation

    National CineMedia, Inc.

    Barco NV

    Limelight Networks, Inc.

    Daktronics, Inc.

    LSI Industries Inc.

    Agilysys, Inc.

    PAR Technology Corporation

    Brightcove Inc.

    RhythmOne plc

    ClearOne, Inc.

    Qumu Corporation

    Sonic Foundry, Inc.

    Bridgeline Digital, Inc.

        In addition, Lake Street reviewed, for informational purposes, selected financial and stock market data of the following 6 publicly traded companies in the professional services industry (which we refer to, collectively, as the "selected professional services companies").

Selected Professional Services Companies

    Computer Task Group, Inc.

    Mastech Digital, Inc.

    RCM Technologies, Inc.

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    Edgewater Technology, Inc.

    TSR, Inc.

    Kforce, Inc.

        Lake Street analyzed the following statistics for the SOTP comparative analysis:

    Enterprise value as a multiple, to the extent available, of calendar year 2017 revenue; and

    Enterprise value as a multiple, to the extent available, of the calendar year 2018 estimated revenue.

        Lake Street applied each comparable public group enterprise value to revenue multiple, to the Company's applicable revenue stream at the 25th, median and 75th percentiles to calculate the implied enterprise value range and implied equity price per share range.

        The analysis based on 2017 calendar revenue indicated the following:

 
   
   
  EV / Revenue
Multiples
   
   
   
 
 
   
   
  Implied Enterprise Value  
 
   
  % of Rev.  
($ in 000's)
  2017A   25th   Median   75th   25th   Median   75th  

Revenue:

                                                 

Product

  $ 16,350     44 %   0.1x     0.2x     0.3x   $ 1,773   $ 3,495   $ 5,413  

Professional Svcs. 

  $ 7,147     19 %   0.5x     0.5x     0.6x   $ 2,474   $ 3,851   $ 4,054  

Maint. & Cont. Svcs. 

  $ 13,545     37 %   0.6x     0.8x     1.4x   $ 8,455   $ 10,278   $ 18,927  

Total Revenue

  $ 37,042     100 %                   $ 13,702   $ 17,623   $ 28,393  

 

 
  25th   Median   75th  

Implied Equity Value Per Share

  $ 1.03   $ 1.36   $ 2.28  

        The analysis based on 2018 calendar revenue estimates indicated the following:

 
   
   
  EV / Revenue
Multiples
   
   
   
 
 
   
   
  Implied Enterprise Value  
 
   
  % of Rev.  
($ in 000's)
  2018E   25th   Median   75th   25th   Median   75th  

Revenue:

                                                 

Product

  $ 17,319     45 %   0.1x     0.2x     0.3x   $ 1,896   $ 3,546   $ 5,438  

Professional Svcs. 

  $ 7,679     20 %   0.4x     0.5x     0.5x   $ 3,143   $ 3,648   $ 3,983  

Maint. & Cont. Svcs. 

  $ 13,493     35 %   0.6x     1.0x     1.4x   $ 8,721   $ 13,028   $ 19,308  

Total Revenue

  $ 38,491     100 %                   $ 13,760   $ 20,223   $ 28,729  

 

 
  25th   Median   75th  

Implied Equity Value per Share

  $ 1.03   $ 1.58   $ 2.31  

        Precedent Transaction Analysis:    In conducting its review, Lake Street performed a valuation analysis based on precedent merger and acquisition transactions. For purposes of the analysis Lake Street analyzed publicly disclosed transactions with implied enterprise values between $10 million and $250 million, within the internet software and services, application software, electronic equipment and

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instruments and advertising markets. The selected transactions closed between March 27, 2015 and March 27, 2018. The transactions selected and reviewed are as follows:

Select Precedent Transactions
Date Closed   Target   Acquirer
2/1/2018   YuMe, Inc.   RhythmOne plc
10/6/2018   MaxPoint Interactive, Inc.   Harland Clarke Holdings Corp.
9/15/2017   Shaw Satellite Services Inc.   Turnpike Global Technologies
9/5/2017   Rocket Fuel, Inc.   Sizmek Inc.
8/7/2017   ScanScout Inc., Buyer Platform   Taptica Ltd
7/26/2017   Covisint Corporation   Open Text Corporation
7/19/2017   Sajan, Inc.   Amplexor USA, LLC
4/3/2017   Zycron Inc.   BG Staffing, LLC
3/31/2017   Visible Measures Corporation   AcuityAds US Inc.
2/10/2017   ServicePower Technologies plc   Diversis Capital UK Limited
1/20/2017   eNom, Inc.   Tucows Inc.
12/5/2016   United States Traffic Network LLC   GTN Limited
9/26/2016   Sizmek Inc.   Vector Capital
8/8/2016   ReachLocal, Inc.   Gannett Co., Inc.
7/11/2016   mBlox, Inc.   CLX Communications AB (publ)
7/1/2016   United Online, Inc.   B. Riley Financial, Inc.
12/7/2015   CTI Group (Holdings) Inc.   Enghouse Systems Limited
12/1/2015   Local Corporation, Substantially All Assets   Media.Net Advertising FZ-LLC
11/27/2015   Planar Systems, Inc.   Leyard American Corporation
11/23/2015   Daegis Inc.   Open Text Corporation
10/22/2015   Millennial Media Inc.   Oath Inc.
10/4/2015   Access Data Consulting Corporation   General Employment Enterprises Inc.
6/22/2015   Lyris, Inc.   Aurea Software, Inc.
6/1/2015   ProSoft Group, Inc.   Kellton Tech Solutions Limited
5/21/2015   Dealix Corporation And Autotegrity, Inc.   Autobytel Inc.

        For each of the above listed transactions, Lake Street examined the ratio of implied enterprise value to the company's last twelve months revenue and calculated the range of multiples at the 25th, median and 75th percentiles. The analysis yielded the following results:

 
  25th Percentile   Median   75th Percentile  

Implied Enterprise Value/Revenue

    0.4x     0.6x     0.8x  

        Lake Street further calculated the implied equity value per share range at the 25th, median and 75th percentiles which yielded the following results:

 
  25th Percentile   Median   75th Percentile  

Implied Equity Value Per Share

  $ 1.16   $ 1.75   $ 2.44  

        Discounted Cash Flow Analysis:    Lake Street performed a discounted cash flow analysis for the Company utilizing going concern projections and estimates provided by Company management. They calculated the discounted cash flows as the sum of the net present value of (i) the estimated unleveraged free cash flows for the Company for the fiscal years ending December 31, 2018 through December 31, 2022 plus (ii) the terminal value at the end of such period. The implied terminal value was calculated based on an enterprise value to revenue multiple of 0.75x. Lake Street further assumed that no taxes are payable over the forecast period, due to the Company's federal net operating loss carryforward balance of approximately $68.7 million at December 31, 2017. In addition, they applied

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discount rates ranging from 22% to 24% based on their weighted average cost of capital calculation and terminal enterprise value to revenue multiples of 0.6x to 0.9x. The discounted cash flow analysis indicated an implied enterprise value range of $6.98 million and $14.29 million and an implied equity value per share range as shown below.

Implied Equity Value Per Share

  $0.45 - $1.08

Additional Information

        Lake Street also reviewed with the special committee certain additional information that was not considered part of Lake Street's financial analyses with respect to its opinion but was referenced for informational purposes.

        Lake Street observed that the merger consideration represented a 11% discount to the Company's closing stock price on April 2, 2018 (the last trading day prior to the announcement of the merger) and a 6%, 18%, 18% and 2% premium to the 180, 90, 60 and 30, respectively, volume weighed average trading price of the Company common stock.

Other Matters

        Lake Street was engaged as a financial advisor to the special committee to provide an opinion to the special committee as of the date of such opinion, as to the fairness, from a financial point of view, to the non-rolling stockholders of the merger consideration to be received by such stockholders in the merger pursuant to the merger agreement. The special committee engaged Lake Street based on Lake Street's experience and reputation. Lake Street is regularly engaged to provide financial advisory services in connection with mergers and acquisitions, financings, and financial restructurings. Pursuant to its engagement by the special committee, Lake Street is entitled to an aggregate fee of $150,000 as compensation for its services, $25,000 of which was paid as a non-refundable retainer and the remainder of which became payable upon Lake Street completing and delivering the opinion to the special committee and the board of directors. No portion of Lake Street's fee was contingent upon either the conclusion expressed in Lake Street's opinion or whether or not the merger is successfully consummated. The Company also agreed to reimburse Lake Street for certain expenses and to indemnify Lake Street in respect of certain liabilities that might arise out of its engagement. During the two years preceding the date of Lake Street's written opinion, Lake Street has not been engaged by, performed services for or received any compensation from the Company or Parent or any of its affiliates other than the amounts described above.

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

        Under the SEC rules governing "going private" transactions, each of the Parent Parties is an affiliate of the Company that is engaged in the "going private" transaction and, therefore, is required to express its position as to the fairness of the proposed merger to the Company's "unaffiliated security holders," as defined under Rule 13e-3 of the Exchange Act. The Parent Parties are making the statements included in this section solely for the purpose of complying with the requirements of Rule 13e-3 and related rules under the Exchange Act.

        As described under the heading "—Background of the Merger," beginning on page 20, none of the Parent Parties participated in any deliberations of the special committee or the board of directors relating to the merger. The Parent Parties believe that the merger is both substantively and procedurally fair to the Company stockholders, other than the rollover investors. However, none of the Parent Parties has undertaken any formal evaluation of the fairness of the merger to the Company stockholders (other than the Parent Parties, their affiliates, and any rollover investors) or engaged a financial advisor for such purpose. Moreover, none of the Parent Parties participated in the

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deliberations of the special committee or received advice from the special committee's or the Company's respective legal or financial advisors in connection with the merger.

        While the Parent Parties believe that the merger is substantively and procedurally fair to the Company stockholders (other than the Parent Parties, their affiliates, and any rollover investors), the Parent Parties attempted to negotiate the terms of a transaction that would be most favorable to them and, accordingly, did not negotiate the merger agreement with the goal of obtaining terms that were fair to the Company stockholders generally or any other person. The Company and its stockholders (other than the Parent Parties, their affiliates, and any rollover investors) were represented by an independent special committee that negotiated on their behalf with the Parent Parties, each with the assistance of its respective advisors, as described above in "—Reasons for the Merger; Recommendation of the Special Committee and of Our Board of Directors; Fairness of the Merger," beginning on page 30.

        The Parent Parties did not seek to establish a pre-merger going concern value for the Company common stock to determine the fairness of the merger consideration to the Company stockholders (other than the Parent Parties, their affiliates, and any rollover investors) because following the merger the Company will have a significantly different capital structure.

        The belief of the Parent Parties that the merger is substantively and procedurally fair to the unaffiliated security holders of the Company is based on the following factors, among others:

    the Parent Parties' assessment of the Company's near-term liquidity constraints and the risk that the Company will not be able to continue as a long-term going concern absent a capital raise or other significant liquidity event;

    the merger consideration of $1.27 per share in cash represents a premium of (i) approximately 17% over the closing price of the Company common stock as quoted on the Nasdaq Capital Market of $1.09 per share on January 19, 2018 (the last trading day prior to the submission by SCG of its initial proposal) and (ii) approximately 6%, 18%, 18% and 2% over the value weighted average price of the Company common stock as quoted on the Nasdaq Capital Market for the 30, 60, 90, and 180 day period, respectively, ending on April 2, 2018 (the last trading day prior to public announcement of the merger);

    the fact that the financial and other terms and conditions of the merger agreement and the merger, resulted from extensive negotiations conducted by or on behalf of the special committee, which consisted solely of independent, outside directors and which retained its own independent legal and financial advisors;

    the fact that the Company stockholders (other than the Parent Parties, their affiliates, and any rollover investors) will receive cash for their shares and will therefore have immediate liquidity and certainty in the value for their shares of $1.27 per share of Company common stock; and

    the various terms of the merger agreement, including that the merger agreement contains "go-shop" provisions and the ability of the Company to terminate the merger agreement under certain circumstances to accept a "superior proposal" (each as more fully described under "The Merger Agreement"), that are intended to help ensure that the Company stockholders receive the highest price per share reasonably available.

        The Parent Parties considered each of the foregoing factors in determining the fairness of the merger to the Company stockholders (other than the Parent Parties, their affiliates, and any rollover investors).

        The Parent Parties did not consider the Company's net book value, which is an accounting concept, to be a factor in determining the substantive fairness of the transaction to the Company's unaffiliated security holders because they believed that net book value is not a material indicator of the value of the Company's equity but rather an indicator of historical costs. The Parent Parties also did

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not consider the liquidation value of the Company's assets as indicative of the Company's value primarily because of their belief that the liquidation value would be significantly lower than the Company's value as an ongoing business and that, due to the fact that the Company is being sold as an ongoing business, the liquidation value is irrelevant to a determination as to whether the merger is fair to the unaffiliated security holders of the Company.

        The Parent Parties also did not consider the purchase price paid for shares of Company common stock in the December 2016 Rights Offering of $0.62 per share because the Parent Parties did not consider this to be relevant given that the December 2016 Rights Offering occurred in 2016 and the Company circumstances had changed since that time.

        In making their determination as to the fairness of the proposed merger to the Company stockholders (other than the Parent Parties, their affiliates, and any rollover investors), the Parent Parties were not aware of any firm offer by any other person during the prior two years for a merger or consolidation of the Company with another company, the sale or transfer of all or substantially all of the Company's assets or a purchase of the Company's securities that would enable such person to exercise control of the Company.

        The Parent Parties' view as to the fairness of the merger to the Company stockholders (other than the Parent Parties, their affiliates, and any rollover investors) is not a recommendation as to how any such stockholder should vote on the merger proposal. The foregoing discussion of the information and factors considered by the Parent Parties, while not exhaustive, is believed to include all material factors considered by the Parent Parties. The Parent Parties did not find it practicable to assign, nor did they assign, relative weights to the individual factors considered in reaching their conclusion as to the fairness of the merger to such stockholders. The Parent Parties believe that these factors provide a reasonable basis for their position that the merger is fair to the Company's common stockholders (other than the Parent Parties, their affiliates, and any rollover investors).

Interests of the Company's Directors and Officers in the Merger

        In considering the recommendation of the Company board with respect to the merger, you should be aware that the Company's directors and executive officers have certain interests in the merger that may be different from, or in addition to, the interests of the other Company stockholders. The Company board was aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement and the merger, and in determining to recommend to Company stockholders that they vote for the merger proposal and thereby approve the transactions contemplated by the merger agreement, including the merger. These interests are described below.

        The amounts described below are estimates based on multiple assumptions that may or may not actually occur, including assumptions described in this proxy statement, and do not reflect certain compensation actions that may occur before the consummation of the merger. As a result, the actual amounts, if any, to be received by the executive officers and non-employee directors may materially differ from the amounts set forth below. All dollar amounts have been rounded to the nearest whole dollar.

Gregory H. Sachs

        As a result of the merger, Gregory H. Sachs will, indirectly, be the largest stockholder in the Company and will generally be able to direct the Company's policies and operations. Accordingly, Mr. Sachs will be able to participate in potential further growth in the Company's assets, future earnings growth, future appreciation in value of the Company common stock or any future dividends after the merger, and any other potential future appreciation that may be experienced by the Company. In addition, Mr. Sachs will participate in any benefit caused by the Company's post-merger cessation to be subject to Exchange Act reporting requirements and the other synergies effected by the merger

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Rollover Investors

        As of the date of the filing of this proxy statement, no Company stockholders have agreed, or indicated to the Parent Parties a clear intention, to become rollover investors, but the Parent Parties expect that some Company stockholders may become rollover investors.

Treatment of Company Stock Options

        The stock options held by the Company's employees, including the Company's executive officers, and by directors of the Company immediately prior to the effective time of the merger (which we refer to as the "effective time") will be cancelled in exchange for a cash payment in the same manner as those Company equity awards held by other employees of the Company.

        As described further in the section entitled "The Merger Agreement—Treatment of Company Stock Options," beginning on page 71, at the effective time, each stock option granted under the Company stock plans, whether vested or unvested, that has an exercise price per share that is less than the merger consideration will convert into the right to receive, an amount in cash, without interest, equal to the product of (i) the amount, if any, by which the merger consideration exceeds the exercise price per share of such stock option and (ii) the total number of shares of Company common stock subject to such stock option. Any stock option that has an exercise price per share that equals or exceeds the merger consideration will be cancelled at the effective time for no consideration or payment.

        All stock options held by the Company's named executive officers, other executive officers and directors that are vested or are scheduled to be vested or accelerated in connection with the merger as of May 1, 2018 (the assumed date the merger is completed) have an exercise price greater than $1.27 per share and, therefore, no named executive officers, other executive officers or directors will receive compensation for their stock options in connection with the merger. Further information regarding the named executive officers may be found in the section "—Interests of the Company's Directors and Officers in the Merger—Golden Parachute Compensation," beginning on page 55.

The Company's Employment Arrangements with Executive Officers

        We have entered into employment agreements with each of our executive officers, summarized below.

Robert Michelson

        In connection with his appointment as interim President and Chief Executive Officer, Mr. Michelson entered into an employment agreement with SCG Financial Merger I Corp. (which we refer to as "SCG Intermediate"), a wholly-owned subsidiary of the Company, effective as of July 22, 2014, and providing for a term of two and a half years. On January 16, 2017, Mr. Michelson and SCG Intermediate entered into a replacement employment agreement (which we refer to as the "Michelson Employment Agreement"). Mr. Michelson provides his services as President and Chief Executive Officer of the Company through the Michelson Employment Agreement with SCG Intermediate. The Michelson Employment Agreement provides for a term of two years, subject to extension by mutual agreement of the parties. Pursuant to the Michelson Employment Agreement, Mr. Michelson will also serve as a member of the board of directors of the Company and its subsidiaries. Under the Michelson Employment Agreement, Mr. Michelson is entitled to receive an annual salary of $400,000 per year, subject to annual increases at the discretion of the board of directors. Mr. Michelson is also entitled to an annual bonus of up to 120% of Mr. Michelson's base salary, subject to the achievement of the Company's annual earnings before interest, taxes, depreciation and amortization (which we refer to as "EBITDA") target as well as other performance criteria established by the Compensation Committee after consultation with Mr. Michelson.

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        The Michelson Employment Agreement will automatically terminate upon Mr. Michelson's death and will be terminable at the option of SCG Intermediate for "cause" or if Mr. Michelson becomes "disabled" (each as defined in the Michelson Employment Agreement). If SCG Intermediate terminates the Michelson Employment Agreement without "cause" or Mr. Michelson is deemed to have been "constructively terminated" (as defined in the Michelson Employment Agreement), SCG Intermediate will be obligated to pay to Mr. Michelson (1) all accrued but unpaid salary and benefits, (2) the prior calendar year's annual bonus if such termination date occurs after January 1 of the current year and such prior calendar year's bonus has not yet been paid, (3) a pro rata portion of Mr. Michelson's annual bonus for the year in which termination occurs, and (4) continued payment of his base salary until the later of the end of the term of Mr. Michelson's employment or the twelve month anniversary of his termination date. The payment of any severance benefits under the Michelson Employment Agreement will be subject to Mr. Michelson's execution of a release of all claims against SCG Intermediate and its affiliates on or before the 21st day following his separation from service.

        The Michelson Employment Agreement contains customary confidentiality provisions, which apply both during and after the term of the Michelson Employment Agreement, and customary non-competition and non-solicitation provisions, which apply during the term of the Michelson Employment Agreement and for one year thereafter.

Gregory H. Sachs

        On August 13, 2013, we entered into an employment agreement with Gregory H. Sachs, our executive chairman, pursuant to which Mr. Sachs holds the office of executive chairman and serves on our board of directors. Pursuant to the employment agreement, Mr. Sachs agreed to serve as executive chairman for a five-year term commencing on August 13, 2013, subject to extension by mutual agreement of us and Mr. Sachs. Mr. Sachs is permitted to engage in other activities during the term of the employment agreement, so long as such activities do not violate the non-competition covenants contained in the employment agreement. Under the employment agreement, Mr. Sachs is entitled to receive a minimum annual salary of $250,000 per year. In addition to reimbursement for routine business and travel expenses, Mr. Sachs is also entitled to reimbursement for (i) use of a private aircraft for travel that is primarily for a purpose related to Mr. Sachs' duties under the employment agreement and (ii) 50% of the rent for office space leased by Mr. Sachs, including monthly rent (the full amount of which is currently $9,921) and build-out expenses in the total amount of $62,000.

        The employment agreement will automatically terminate upon Mr. Sachs' death and will be terminable at our option for "cause" or if Mr. Sachs becomes "disabled" (each as defined in the employment agreement). If we terminate the employment agreement without "cause" or Mr. Sachs is deemed to have been "constructively terminated" (as defined in the employment agreement), we will be obligated to pay to Mr. Sachs all accrued but unpaid salary and benefits and will be required to continue to pay Mr. Sachs' base salary until the later of the end of the five-year term of the agreement or the twelve-month anniversary of his termination date. In addition, we will be required to make a lump sum payment to Mr. Sachs equal to the lesser of (i) 2% of the enterprise value of the Company at the end of the calendar month preceding the date of termination and (ii) $5,000,000, and all unvested equity awards (if any) granted to Mr. Sachs prior to the date of his termination will become fully vested as of the termination date. The payment of any severance benefits under the employment agreement will be subject to Mr. Sachs' execution of a release of all claims against us on or before the 21st day following his separation from service.

        On December 22, 2014, Mr. Sachs notified the Company that, effective immediately, he would (i) defer receipt of the salary payable to him pursuant to his employment agreement, and that such deferred salary would accrue until the Company's cash position improves and (ii) not seek reimbursement from the Company for Mr. Sachs' use of a private jet for Company-related travel purposes until further notice.

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        Effective as of February 29, 2016, Mr. Sachs has waived his right to receive any deferred salary accrued through that date and has further waived his right to receive any base salary for the period commending on that date and ending at such time as the Compensation Committee shall determine.

Jana Ahlfinger Bell

        In connection with her appointment as Executive Vice President, Chief Financial Officer, Jana Ahlfinger Bell entered into an employment agreement with RMG Enterprise Solutions, Inc. (which we refer to as "RMG Intermediate"), a wholly-owned subsidiary of the Company, effective as of April 27, 2015 (which we refer to as the "Bell Employment Agreement"). Ms. Bell provides her services as Executive Vice President and Chief Financial Officer of the Company through the Employment Agreement with RMG Intermediate. Ms. Bell is an "at-will" employee of the Company. Under the Bell Employment Agreement, Ms. Bell is entitled to receive an annual salary of $285,000 per year, subject to annual increases at the discretion of the board of directors. Ms. Bell is also entitled to an annual bonus, beginning with fiscal year 2015, of up to $142,500, subject to the achievement of goals established by the Company's CEO for a given fiscal year.

        The Bell Employment Agreement will automatically terminate upon Ms. Bell's death and will be terminable at the option of RMG Intermediate for "cause" or if Ms. Bell becomes "disabled" (each as defined in the Bell Employment Agreement). If RMG Intermediate terminates the Bell Employment Agreement without "cause" or Ms. Bell is deemed to have been "constructively terminated" (as defined in the Bell Employment Agreement), the Company will be obligated to pay to Ms. Bell all accrued but unpaid salary and benefits and will be required to continue to pay Ms. Bell's base salary until the six-month anniversary of her termination date. The payment of any severance benefits under the Bell Employment Agreement will be subject to Ms. Bell's execution of a release of all claims against the Company and its affiliates on or before the 21st day following her separation from service.

        The Bell Employment Agreement contains customary confidentiality provisions, which apply both during and after the term of the Bell Employment Agreement, and customary non-competition and non-solicitation provisions, which apply during the term of the Bell Employment Agreement and for one year thereafter.

Robert R. Robinson

        In connection with his appointment as Senior Vice President, General Counsel & Secretary, Mr. Robinson entered into an employment agreement with RMG Intermediate, effective as of August 25, 2015, as amended by an amendment dated August 2, 2017 (which we refer to, as so amended, as the "Robinson Employment Agreement"). Mr. Robinson provides his services as Executive Vice President and Chief Financial Officer of the Company through the Employment Agreement with RMG Intermediate. Mr. Robinson is an "at-will" employee of the Company. Under the Robinson Employment Agreement, Mr. Robinson is entitled to receive an annual salary of $250,000 per year commencing in 2016, subject to annual increases at the discretion of the board of directors. Mr. Robinson is also entitled to an annual bonus, subject to the achievement of incentive goals to be established annually, with a target bonus amount equal to 30% of his annual base salary.

        The Robinson Employment Agreement will automatically terminate upon Mr. Robinson's death and will be terminable at the option of RMG Intermediate for "cause" or if Mr. Robinson becomes "disabled" (each as defined in the Robinson Employment Agreement). If RMG Intermediate terminates the Robinson Employment Agreement without "cause" or Mr. Robinson is deemed to have been "constructively terminated" (as defined in the Robinson Employment Agreement), the Company will be obligated to pay to Mr. Robinson all accrued but unpaid salary and benefits and will be required to continue to pay Mr. Robinson's base salary until the six month anniversary of his termination date. The payment of any severance benefits under the Robinson Employment Agreement

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will be subject to Mr. Robinson's execution of a release of all claims against the Company and its affiliates on or before the 21st day following his separation from service.

        The Robinson Employment Agreement contains customary confidentiality provisions, which apply both during and after the term of the Robinson Employment Agreement, and customary non-competition and non-solicitation provisions, which apply during the term of the Robinson Employment Agreement and for one year thereafter.

        Except as described above, we are not party to any agreements with our executive officers and directors that provide for benefits upon termination of employment.

SCG Digital LLC's Arrangements with the Company's Executive Officers

        As of the date of this proxy statement, none of the Company's executive officers has entered into any agreement with Parent or any of its affiliates regarding employment with, or the right to purchase the equity of, the surviving corporation or one or more of its affiliates, and Parent does not have any present or proposed arrangements with any of the Company's executive officers with respect to employment with the surviving corporation or one or more of its affiliates.

        Parent expects that the Company's executive officers as of the effective time will continue as the Company's executive officers of the surviving corporation and that the surviving corporation will keep in force the employment agreements described above under "—The Company's Employment Arrangements with Executive Officers," beginning on page 52.

Golden Parachute Compensation

        This section sets forth information required by Item 402(t) of Regulation S-K regarding the compensation for each named executive officer of the Company that is based on or otherwise relates to the merger. This compensation is referred to as "golden parachute" compensation by the applicable SEC disclosure rules, and in this section we use such term to describe the merger-related compensation payable to our named executive officers. The merger-related compensation payable to these individuals is the subject of a non-binding, advisory vote of the Company stockholders, as described below in the section entitled "Proposal 2—Advisory Vote on Merger-Related Compensation for the Company's Named Executive Officers," beginning on page 89.

        The estimated value of the payments and benefits that the Company's named executive officers will receive in connection with the merger is quantified below in accordance with Item 402(t) of Regulation S-K. The estimated values are based on (i) an assumption that the consummation of the merger occurs on May 1, 2018 (the latest practicable date determined in accordance with Item 402(t) of Regulation S-K); (ii) the merger consideration; (iii) salary levels as of the date of this proxy statement; (iv) the number of unvested Company stock options held by the named executive officers as of the date of this proxy statement, assuming a merger closing date of May 1, 2018; and (v) "constructive termination" or termination of each named executive officer's employment without "cause" (each as defined in the applicable named executive officer's employment agreement) immediately after the consummation of the merger.

        Depending on when the merger occurs, certain Company equity awards that would be unvested as of May 1, 2018 and included in the table below may vest independently of the merger pursuant to their terms based on continued service with the Company. In addition, the amounts indicated below are estimates based on multiple assumptions that may or may not actually occur, including assumptions described in this proxy statement, and do not reflect any compensation actions that may occur before the consummation of the merger. As a result, the actual amounts, if any, to be received by a named executive officer may materially differ from the amounts set forth below. All dollar amounts have been rounded to the nearest whole dollar.

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        The table below quantifies the estimated value of the cash severance that would be payable to each named executive officer assuming each individual had a qualifying termination of employment on the assumed merger closing date of May 1, 2018. These payments would be the result of a termination without "cause" and are not contingent on the occurrence of a merger.


Golden Parachute Compensation

Name
  Cash ($)
(1)
  Equity
($)
  Pension/
NQDC
($)
  Perquisites/
Benefits
($)
  Tax
Reimbursement
($)
  Other
($)
  Total
($)
 

Robert Michelson

  $ 400,000                       $ 400,000  

Jana Ahlfinger Bell

  $ 155,000                       $ 155,000  

Robert R. Robinson

  $ 125,000                       $ 125,000  

(1)
These amounts reflect payments for base salary.

Director and Officer Indemnification and Insurance

        As discussed below under "The Merger AgreementAgreement as to Director and Officer Indemnification and Insurance," beginning on page 82, for a period of six years following the consummation of the merger, Parent will, and will cause the surviving corporation to, maintain directors' and officers' liability insurance policies with respect to acts or omissions occurring prior to the effective time with respect to each current and former Company director and officer covered by our current policy; provided, that in no event shall Parent be required to expend annually in the aggregate an amount in excess of 250% of the annual premiums currently paid by us. In lieu of the foregoing, following consultation with Parent, we may purchase, prior to the consummation of the merger, a six-year "tail" prepaid directors' and officers' liability insurance policy in respect of acts or omissions occurring prior to and including the consummation of the merger. In the event that we purchase such a "tail" policy prior to the consummation of the merger, Parent will cause the surviving corporation to maintain such "tail" policy for its full term and continue to honor the obligations thereunder.

        In addition, Parent will, and will cause the surviving corporation to, indemnify to the fullest extent of the law any individual who is or was a director or officer of the Company or any of its subsidiaries prior to the effective time, for any and all costs and expenses (including fees and expenses of legal counsel, which shall be advanced as they are incurred provided that the indemnified party provides an undertaking to repay such expenses if it is later determined that such party was not entitled to indemnification hereunder) imposed upon or relating to (i) the fact that such person is or was a director or officer of the Company prior to the effective time or (ii) the merger agreement or any transactions related to the merger agreement, whether arising prior to or after the effective time. All rights to indemnification and exculpation from liabilities for acts or omissions occurring at or prior to the effective time now existing in favor of any indemnified party as provided in the applicable certificates or articles of incorporation or bylaws (or comparable organizational documents) will survive the merger and will continue in full force and effect.

Certain Effects of the Merger

        If the merger agreement is approved by the requisite vote of the Company stockholders and all other conditions to the closing of the merger are either satisfied or waived, Merger Sub will merge with and into the Company, with the Company surviving the merger. The Company will cease to be an independent public company and will become a wholly owned subsidiary of Parent. You will no longer have any ownership interest in the Company.

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        At the effective time, each share of Company common stock issued and outstanding immediately prior to the effective time (other than shares of Company common stock owned by the Company or shares owned by Parent or Merger Sub or their respective affiliates, including those shares held by Gregory H. Sachs, our executive chairman, all of which will be canceled, and no payment will be made with respect thereto; any rollover shares; and any shares of Company common stock held by a stockholder who has properly exercised, and has not failed to perfect, withdrawn or otherwise lost, appraisal rights in accordance with Delaware law) will be converted into the right to receive the merger consideration. All such shares of common stock, when so converted, will no longer be outstanding and shall automatically be canceled and will cease to exist, and each holder of a certificate (or evidence of shares in book-entry form) that immediately prior to the effective time represented any such shares of Company common stock will cease to have any rights with respect thereto, except the right to receive the merger consideration.

        Each share of common stock of Merger Sub outstanding immediately prior to the effective time will be converted into and become one fully paid, nonassessable share of common stock, par value $0.01 per share, of the surviving corporation with the same rights, powers and privileges as the shares so converted and will constitute the only outstanding shares of capital stock of the surviving corporation.

        Each stock option granted under the Company stock plan, whether or not vested and exercisable, that is outstanding and unexercised as of immediately prior to the effective time, will be converted by virtue of the merger into the right to receive an amount in cash, without interest, equal to the product obtained by multiplying (i) the amount, if any, by which the merger consideration exceeds the exercise price per share of such stock option by (ii) the total number of shares of Company common stock issuable in respect of such stock option. Any stock option that has an exercise price per share that equals or exceeds the merger consideration will be cancelled at the effective time for no consideration or payment. As of the effective time, each outstanding stock option will no longer be outstanding and will automatically be cancelled and each holder thereof will cease to have any rights with respect thereto, other than the right to receive the cash amount set forth above.

        Parent does not currently own any interest in the Company. Following consummation of the merger, Parent will own 100% of the outstanding Company common stock and will have a corresponding interest in our net book value and net earnings. SCG Digital Holdings, LLC, as the sole member of Parent, and Sachs Capital Group LP, as the sole member of SCG Digital Holdings, LLC, will indirectly own 100% of the outstanding Company common stock and will have a corresponding interest in our net book value and net earnings. Our net book value as of March 31, 2018 was approximately $3,036,000 and our net earnings for the three months ended March 31, 2018 was $0.

        The table below sets forth the direct and indirect interests of Parent and Gregory H. Sachs in the Company's net book value and net earnings prior to and immediately after the merger, based on the net book value at March 31, 2018 and net earnings for the three months ended March 31, 2018.

 
  Ownership of the Company Prior to the
Merger(1)
  Ownership of the Company After the
Merger(2)
 
 
  %
Ownership
  Net book
value as of
March 31,
2018
  Net earnings
for the three
months ended
March 31,
2018
  %
Ownership
  Net book
value at
March 31,
2018
  Net earnings
for the three
months ended
March 31,
2018
 
 
  (in thousands)
 

Parent

                100 % $ 3,036   $ 0  

Gregory H. Sachs(3)

    18.0 % $ 546   $ 0              

(1)
Based upon beneficial ownership as of March 31, 2018 and the Company's net book value at March 31, 2018 and net earnings for the three months ended March 31, 2018.

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(2)
Based upon the Company's net book value at March 31, 2018 and net earnings for the three months ended March 31, 2018.

(3)
Ownership percentage for Mr. Gregory H. Sachs as of March 31, 2018 includes 109,364 shares held by The Gregory H. Sachs Revocable Trust UDT Dtd. 4/24/98, 1,873,656 shares held by White Knight Capital Management LLC, and 29,238 shares held by the 2011 Sachs Family Trust. Mr. Sachs disclaims beneficial ownership of all shares of Company common stock beneficially owned by The Gregory H. Sachs Revocable Trust UDT Dtd. 4/24/98 and the 2011 Sachs Family Trust, except to the extent of his pecuniary interest therein (if any). This beneficial ownership does not reflect the indirect beneficial ownership of Gregory H. Sachs through Parent.

        Parent expects that the Company's executive officers as of the effective time will continue as the Company's executive officers of the surviving corporation and that the surviving corporation will keep in force the employment agreements described above under "—The Company's Employment Arrangements with Executive Officers," beginning on page 52.

        The Company common stock is currently registered under the Exchange Act and is quoted on the Nasdaq Capital Market under the symbol "RMGN." As a result of the merger, the Company will be a privately held corporation and there will be no public market for its common stock. After the merger, the common stock will cease to be quoted on Nasdaq Capital Market and price quotations with respect to sales of common stock in the public market will no longer be available. In addition, the registration of the common stock under the Exchange Act will be terminated and the Company will no longer file periodic reports with the SEC with respect to its common stock. Termination of registration of the Company common stock under the Exchange Act will significantly reduce the information required to be furnished by the Company to our stockholders, and would make certain provisions of the Exchange Act, such as the short-swing trading provisions of Section 16(b) of the Exchange Act and the requirement to furnish a proxy statement in connection with stockholders' meetings pursuant to Section 14(a) of the Exchange Act, no longer applicable to the Company.

Effects on the Company if the Merger Is Not Completed

        If the merger agreement is not adopted by the requisite vote of the Company stockholders or if the merger is not completed for any other reason, stockholders will not receive any payment for their shares in connection with the merger. Instead, the Company will remain an independent public company and the Company common stock will continue to be listed and traded on the Nasdaq Capital Market for so long as the Company remains in compliance with the Nasdaq Capital Market listing standards. In addition, if the merger is not completed, we expect that management will operate the business in a manner similar to that in which it is being operated today and that Company stockholders will continue to be subject to the same risks and opportunities as they currently are, including, among other things, increased liquidity risks, increased risks of delisting from the Nasdaq Capital Market, increased competition for customers due to customer perception of Company financial weakness, and general industry, economic, regulatory and market conditions. Accordingly, if the merger is not consummated, there can be no assurance as to the effect of these risks and opportunities on the future value of your Company common stock. From time to time, the board of directors will evaluate and review, among other things, the business operations, properties and capitalization of the Company and make such changes as are deemed appropriate and continue to seek to identify strategic alternatives to enhance shareholder value. If the merger agreement is not adopted by the Company stockholders or if the merger is not consummated for any other reason, there can be no assurance that any other transaction acceptable to the Company will be offered, or that the business, prospects or results of operations of the Company will not be adversely impacted.

        The Company board of directors believes that if the merger is not consummated for any reason, it is possible that the Company would not be able to continue as a long-term going concern absent a

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capital raise or other significant liquidity event. See "—Reasons for the Merger; Recommendation of the Special Committee and of Our Board of Directors; Fairness of the Merger," beginning on page 30.

Financing of the Merger

        The merger agreement does not contain any condition to the obligations of Parent or Merger Sub relating to the receipt of financing.

        Parent intends to fund the merger consideration with cash on hand or debt raised from private resources, to the extent available on terms acceptable to the Parent. Obtaining such financing, however, is not a condition to the closing of the merger.

        The total amount of funds necessary to complete the merger is $12,500,000 (which includes cash intended to be used to increase the Company's working capital) less the value of any common stock held by the rollover investors, if any.

Material U.S. Federal Income Tax Consequences of the Merger to Our Stockholders

        The following is a summary of the material U.S. federal income tax consequences of the merger to U.S. persons (as defined below) whose shares of Company common stock are converted into the right to receive cash in the merger. This summary does not purport to consider all aspects of U.S. federal income taxation that might be relevant to our stockholders. For purposes of this discussion, we use the term "U.S. person" to mean a beneficial owner of shares of Company common stock that is, for U.S. federal income tax purposes:

    a citizen or resident of the United States;

    a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States or any of its political subdivisions;

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

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

        If a partnership, or other entity taxable as a partnership for U.S. federal income tax purposes, holds Company common stock, the tax treatment of a partner will generally depend on the status of the partners and the activities of the partnership. A partner of a partnership holding Company common stock should consult its tax advisor.

        This discussion is based on the provisions of the United States Internal Revenue Code of 1986, as amended (the "Code"), applicable U.S. Treasury regulations, judicial opinions and administrative rulings and published positions of the Internal Revenue Service, each as in effect as of the date hereof, which is subject to change, possibly with retroactive effect. It applies only to beneficial owners who hold shares of Company common stock as capital assets within the meaning of Section 1221 of the Code (generally, property held for investment), and may not apply to shares of Company common stock received in connection with the exercise of employee stock options or otherwise as compensation, stockholders who hold an equity interest, directly or indirectly, in Parent or the surviving corporation after the merger, or to certain types of beneficial owners who may be subject to special rules (such as insurance companies, controlled foreign corporations, passive foreign investment companies, certain expatriates, banks, tax-exempt organizations, financial institutions, broker-dealers, partnerships, S corporations or other pass-through entities, mutual funds, traders in securities who elect the mark-to-market method of accounting, stockholders subject to the alternative minimum tax, stockholders that have a functional currency other than the U.S. dollar, or stockholders who hold

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Company common stock as part of a hedge, straddle or a constructive sale or conversion transaction). This discussion does not address the receipt of cash in connection with the cancellation of shares of restricted stock, restricted share units or options to purchase shares of Company common stock, or any other matters relating to equity compensation or benefit plans. This discussion also does not address the U.S. tax consequences to any stockholder who, for U.S. federal income tax purposes, is a non-resident alien individual, foreign corporation, foreign partnership or foreign estate or trust, and does not address any aspect of state, local or foreign tax laws.

        The exchange of shares of Company common stock for cash in the merger will be a taxable transaction for U.S. federal income tax purposes. In general, a stockholder whose shares of Company 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 equal to the difference, if any, between the amount of cash received with respect to such shares (determined before the deduction of any applicable withholding taxes) and the stockholder's adjusted tax basis in such shares. Gain or loss will be determined separately for each block of shares (i.e., shares acquired at the same cost in a single transaction). Such gain or loss will be long-term capital gain or loss provided that a stockholder's holding period for such shares is more than 12 months at the time of the consummation of the merger. Long-term capital gains of individuals are eligible for reduced rates of taxation. There are limitations on the deductibility of capital losses.

        In addition to regular U.S. federal income tax, a stockholder that is an individual, estate or trust and whose income exceeds certain thresholds is subject to a 3.8% Medicare tax on all or a portion of such stockholder's "net investment income," which may include all or a portion of such stockholder's gain from the disposition of shares of Company common stock. Shareholders that are individuals, estates or trusts should consult their tax advisors regarding the applicability of the Medicare tax to gain from the disposition of shares of Company common stock.

        Backup withholding of tax may apply to cash payments to which a non-corporate stockholder is entitled under the merger agreement, unless the stockholder or other payee provides a taxpayer identification number (social security number, in the case of individuals, or employer identification number, in the case of other stockholders), certifies that such number is correct, and otherwise complies with the backup withholding rules. Each of our stockholders should complete and sign the Substitute Form W-9 included as part of the letter of transmittal and return it to the paying agent, in order to provide the information and certification necessary to avoid backup withholding, unless an exemption applies and is established in a manner satisfactory to the paying agent.

        Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules will be allowable as a refund or a credit against a stockholder's U.S. federal income tax liability provided the required information is timely furnished to the Internal Revenue Service.

        Cash received in the merger will also be subject to information reporting unless an exemption applies.

        The U.S. federal income tax consequences set forth above are not intended to constitute a complete description of all tax consequences relating to the merger. Because individual circumstances may differ, each stockholder should consult the stockholder's tax advisor regarding the applicability of the rules discussed above to the stockholder and the particular tax effects to the stockholder of the merger in light of such stockholder's particular circumstances, the application of state, local and foreign tax laws, and, if applicable, the tax consequences of the receipt of cash in connection with the cancellation of restricted shares, restricted share units or options to purchase shares of Company common stock, including the transactions described in this proxy statement relating to our other equity compensation and benefit plans.

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Regulatory Approvals

        No federal or state regulatory requirements are required to be complied with and no approvals are required to be obtained in connection with the merger.

Fees and Expenses of the Merger

        We estimate that we will incur transaction-related fees and expenses, consisting primarily of financial, legal, accounting and other professional fees, SEC filing fees and other related charges, totaling approximately $[    ·    ] million. The Company will pay for all of these expenses. This amount includes the following estimated fees and expenses:

Description
  Amount to be
Paid
 

Financial advisory fees and expenses

  $ [·]  

Legal, accounting and other professional fees

  $ [·]  

SEC filing fees

  $ 1,764  

Information agent, printing and mailing expenses

  $ [·]  

Miscellaneous expenses

  $ [·]  

Total

  $ [·]  

Effective Time of Merger

        If the merger is approved by our stockholders at the special meeting then, subject to the satisfaction or, to the extent permitted under the merger agreement and by applicable law, waiver of all the conditions to the merger set forth in the merger agreement, we anticipate that the merger will be completed promptly thereafter. The merger will become effective on the date and at the time of the filing of the certificate of merger with the Secretary of State of the State of Delaware or at such later date and time as may be agreed by the parties to the merger agreement in writing and specified in the certificate of merger (which we refer to as the "effective time").

Payment of Merger Consideration and Surrender of Stock Certificates

        Prior to the effective time, Parent will appoint Broadridge Corporate Issuer Services, Inc. as the exchange agent for the purpose of exchanging for the merger consideration the certificated and uncertificated shares of Company common stock. At or prior to the effective time, Parent will deposit, or cause to be deposited, with the exchange agent the aggregate merger consideration to be paid in respect of the certificated and uncertificated shares of Company common stock. To the extent such fund diminishes for any reason below the level required to make prompt payment of the merger consideration, Parent and the surviving corporation will promptly replace or restore the lost portion of such fund so as to ensure that it is, at all times, maintained at a level sufficient to make such payments.

        Each holder of shares of Company common stock that have been converted into the right to receive the merger consideration will be entitled to receive the merger consideration in respect of their shares of Company common stock upon (1) surrender to the exchange agent of a certificate, together with a duly completed and validly executed letter of transmittal and such other documents as may reasonably be requested by the exchange agent, or (2) 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 of Company common stock. Until so surrendered or transferred, each such certificated or uncertificated share will represent after the effective time for all purposes only the right to receive such merger consideration. No interest will be paid or accrued on the cash payable upon the surrender or transfer of such certificated or uncertificated share.

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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 (1) either such certificate will be properly endorsed or will otherwise be in proper form for transfer or such uncertificated share will be properly transferred and (2) the person requesting such payment will pay to the exchange agent any transfer or other tax required as a result of such payment to a person other than the registered holder of such certificate or uncertificated share or establish to the satisfaction of the exchange agent that such tax has been paid or is not payable.

        All merger consideration paid upon the surrender of certificated or uncertificated shares in accordance with the terms of the merger agreement will be deemed to have been paid in full satisfaction of all rights pertaining to the shares of Company common stock formerly represented by such certificated or uncertificated shares. From and after the effective time, there will be no further registration of transfers of shares of Company common stock on the stock transfer books of the surviving corporation. If, after the effective time, certificated or uncertificated shares of Company common stock are presented to the surviving corporation, they will be canceled and exchanged for the merger consideration in accordance with the procedures described in the two paragraphs immediately above.

        Any portion of the payment fund deposited with the exchange agent that remains unclaimed by the holders of shares of Company common stock 12 months after the effective time will be delivered to the surviving corporation, upon demand, and any such holder who has not exchanged shares of Company common stock for the merger consideration in accordance with the merger agreement prior to that time will thereafter look only to Parent or the surviving corporation for payment of the merger consideration, without interest.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

        This proxy statement, and the documents to which we refer you in this proxy statement, contain forward-looking statements based on estimates and assumptions. Forward-looking statements include information concerning possible or assumed future results of operations of the Company, the expected completion and timing of the merger and other information relating to the merger. There are forward-looking statements throughout this proxy statement, including, without limitation, under the headings "Summary Term Sheet," "Special Factors," "Special Factors—Projected Financial Information" and in statements containing the words "believes," "will continue," "plans," "expects," "anticipates," "intends," "estimates" or other similar expressions. You should be aware that forward-looking statements involve known and unknown risks and uncertainties. Many of the factors that will determine our future results are beyond our ability to control or predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot assure you that the actual results or developments we anticipate will be realized, or even if realized, that they will have the expected effects on the business or operations of the Company. In light of the significant uncertainties inherent in the forward-looking statements contained herein, readers should not place undue reliance on forward-looking statements, which reflect management's views only as of the date hereof. We cannot guarantee any future results, levels of activity, performance or achievements. These forward-looking statements speak only as of the date on which the statements were made, and we undertake no obligation to publicly update or revise any forward-looking statements made in this proxy statement or elsewhere as a result of new information, future events or otherwise. In addition to other factors and matters contained or incorporated in this document, we believe the following factors could cause actual results to differ materially from those discussed in the forward-looking statements:

    the risk that the merger may not be consummated in a timely manner or at all, which may adversely affect the Company's business and the price of the Company common stock;

    the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement;

    the outcome of any legal proceedings that may be instituted against the Company and others relating to the merger agreement;

    the inability to complete the merger due to the failure to obtain stockholder approval or the failure to satisfy other conditions to consummation of the merger;

    the failure of the merger to close for any other reason;

    risks that the proposed transaction disrupts current plans and operations and the potential difficulties in employee retention as a result of the merger;

    the effect of the announcement of the merger on our customer relationships, operating results and business generally;

    risks related to diverting management's attention from the Company's ongoing business operations;

    the ability to recognize the benefits of the merger;

    the amount of the costs, fees, expenses and charges related to the merger

    political instability; and

    other risks detailed in our current filings with the SEC, including our Annual Report on Form 10-K for the year ended December 31, 2017. See "Where You Can Find More Information," beginning on page 110.

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THE PARTIES TO THE MERGER

The Company

        RMG Networks Holding Corporation (the "Company") is a Delaware corporation with its headquarters in Addison, Texas, and additional offices in the United States, United Kingdom and the United Arab Emirates. The Company goes beyond traditional communications to help businesses increase productivity, efficiency, and engagement through intelligent digital signage messaging. By combining leading software, hardware, business applications, and services, we offer a single point of accountability for integrated data visualization and real-time performance management.

        We provide enterprise communication solutions that empower organizations to visualize critical business data to better run their businesses in contact center, supply chain, internal communications, hospitality, retail and other applications primarily in the financial services, telecommunications, manufacturing, healthcare, pharmaceutical, utility and transportation industries, and for federal, state and local governments. We differentiate ourselves through dynamic business data visualization delivering real-time intelligent visual content that enhances the ways in which organizations communicate with employees and customers. The solutions we provide are designed to integrate seamlessly with a customer's IT infrastructure and data and security environments. Our solutions are comprised of a suite of products that include proprietary software, software-embedded hardware, maintenance and support services, content and creative services, installation services and third-party displays.

        We power thousands of digital screens and end-points, and the diversity of products that we offer, combined with our technical expertise, provide our customers and partners with business data visualization solutions that differentiate us from our competitors. We are led by an experienced senior management team.

        Our operations span over 30 years with our principal subsidiary having been in operation since 1980.

        The Company's principal executive offices are located at 15301 North Dallas Parkway, Suite 500, Addison, Texas 75001, and our telephone number is (800) 827-9666. The Company is publicly traded on the Nasdaq Capital Market under the symbol "RMGN."

        Additional information about the Company is contained in reports we have filed with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K, which is attached as Annex D, and our most recent Quarterly Report on Form 10-Q, which is attached as Annex E, both of which are incorporated by reference into this proxy statement, and on our website at www.rmgnetworks.com. Our website address is provided as an inactive textual reference only. The information provided on our website is not a part of, and is not incorporated by reference into, this proxy statement. See "Where You Can Find Additional Information," beginning on page 110.

Parent

        SCG Digital, LLC ("Parent") is a Delaware limited liability company formed in 2018 in order to effect the merger and the other transactions contemplated by the merger agreement.

        Parent's principal executive offices are located at 2132 Deep Water Lane, Suite 232, Naperville, IL 60564, and its telephone number is (312) 784-3956.

Merger Sub

        SCG Digital Merger Sub, Inc. ("Merger Sub") is a Delaware corporation formed in 2018 in order to effect the merger and the other transactions contemplated by the merger agreement.

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        Merger Sub's principal executive offices are located at 2132 Deep Water Lane, Suite 232, Naperville, IL 60564, and its telephone number is (312) 784-3956.

Lender

        SCG Digital Financing, LLC ("Lender") is a Delaware limited liability company formed in 2018 in order to provide the bridge financing and to be a party to the merger agreement (solely for the purposes of Sections 6.19, 8.03 and 8.04 of the merger agreement).

        Lender's principal executive offices are located at 2132 Deep Water Lane, Suite 232, Naperville, IL 60564, and its telephone number is (312) 784-3956.

        For additional information regarding Parent, Merger Sub and Lender, see the section entitled "Important Information About the Parent Parties," beginning on page 100.

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THE SPECIAL MEETING

        This section contains information about the special meeting that the Company has called to allow the Company stockholders to consider and vote on the merger proposal and other proposals described in this proxy statement. The Company is mailing this proxy statement to you, as a Company stockholder, on or about [    ·    ], 2018. This proxy statement is accompanied by a notice of the special meeting and a form of proxy card that the Company board is soliciting for the Company at the special meeting and at any adjournments or postponements thereof.

Date, Time and Place of the Special Meeting

        The special meeting is scheduled to be held as follows:

Date:   [·], 2018

Time:

 

[·] [a.m./p.m.], local time

Place:

 

15301 North Dallas Parkway, Suite 100
Addison, Texas 75001

Purpose of the Special Meeting

        At the special meeting, you will be asked to vote on a proposal to adopt and approve the merger agreement (which we refer to as the "merger proposal"), to approve, on a non-binding advisory basis, the compensation that named executive officers of the Company may receive in connection with the merger pursuant to agreements or arrangements with the Company, and, if necessary or appropriate, to approve one or more adjournment or postponement of the special meeting to solicit additional proxies if there are insufficient votes at the time of the meeting to approve the merger proposal. A copy of the merger agreement is attached as Annex A to this proxy statement.

Recommendation of the Company Board of Directors

        Our board of directors, in a meeting attended by each member of the board of directors except Gregory H. Sachs who recused himself due to his interest in the transaction and Alan Swimmer who was unable to attend due to a personal matter, unanimously (1) declared that the merger agreement and the transactions contemplated by the merger agreement (other than any rollover by any rollover investor) were advisable, fair to, and in the best interests of the Company and its stockholders (other than certain affiliates of Mr. Sachs and any rollover investors), (2) approved the merger agreement and the transactions contemplated by the merger agreement, including the merger, (3) directed that the approval of the adoption of the merger agreement be submitted to the Company stockholders, and (4) recommended that the Company stockholders vote in favor of adoption of the merger agreement. This recommendation is based, in large part, upon the unanimous recommendation of the special committee of the board of directors in a meeting attended by each member of the special committee except for Mr. Swimmer who was unable to attend due to a personal matter.

        The Company board of directors recommends that the Company stockholders vote "FOR" the merger proposal, "FOR" the compensation proposal and "FOR" the adjournment proposal. See "Special Factors—Reasons for the Merger; Recommendation of the Special Committee and of Our Board of Directors; Fairness of the Merger," beginning on page 30.

Record Date, Quorum, Voting Rights

        We have fixed the close of business on [    ·    ], 2018 as the record date for the special meeting, and only holders of record of Company common stock on the record date are entitled to vote at the

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special meeting. On the record date, there were [11,156,257] shares of Company common stock issued and outstanding and entitled to vote.

        Each share of Company common stock entitles its holder to one vote on all matters properly coming before the special meeting. The presence in person or by proxy of holders of shares of Company common stock representing a majority of the voting power of all outstanding shares of Company common stock, shall constitute a quorum for the purpose of considering the proposals. Shares of Company common stock represented at the special meeting but not voted, including shares of Company common stock for which proxies have been received but for which stockholders have abstained and broker non-votes (described below), will be treated as present at the special meeting for purposes of determining the presence or absence of a quorum for the transaction of all business. In the event that a quorum is not present at the special meeting, it is expected that the meeting will be adjourned or postponed to solicit additional proxies.

Vote Required

        The vote to approve each proposal at the special meeting is as follows:

Merger Proposal:

    Vote Required:    Approval of the merger proposal requires the affirmative vote in person or by proxy of holders of at least both (1) a majority of the outstanding shares of Company common stock entitled to vote at the special meeting and (2) a majority of the outstanding shares of Company common stock, excluding shares held by (i) Parent or Merger Sub or any of their respective affiliates, including Gregory H. Sachs, the Company's executive chairman, (ii) any rollover investors, and (iii) any of the Company's executive officers. Parent and the Company may, if they choose, elect to waive the voting requirement set forth in clause (2) above, but may not waive the requirement set forth in clause (1).

    Effect of abstentions and broker non-votes:    If you mark "Abstain" on your proxy card, fail to submit a proxy card or vote in person at the special meeting, or fail to instruct your bank, broker or other nominee how to vote, it will have the same effect as a vote "AGAINST" the merger proposal.

Compensation Proposal:

    Vote Required:    Approval, on a non-binding, advisory basis, of the compensation proposal requires the affirmative vote of a majority of the votes cast at the special meeting by Company stockholders present in person or by proxy at the special meeting and entitled to vote thereon.

    Effect of abstentions and broker non-votes:    If you mark "Abstain" on your proxy card, it will have the same effect as a vote "AGAINST" the compensation proposal. If you fail to submit a proxy card or vote in person at the special meeting, or fail to instruct your bank, broker or other nominee how to vote with respect to the compensation proposal, it will have no effect on the compensation proposal.

Adjournment Proposal:

    Vote Required:    Whether or not a quorum is present, approval of the adjournment proposal requires the affirmative vote of a majority of the votes cast at the special meeting by Company stockholders present in person or by proxy at the special meeting and entitled to vote thereon.

    Effect of abstentions and broker non-votes:    If you mark "Abstain" on your proxy card, it will have the same effect as a vote "AGAINST" the adjournment proposal. If you fail to submit a proxy card or vote in person at the special meeting, or fail to instruct your bank, broker or other

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      nominee how to vote with respect to the adjournment proposal, it will have no effect on the adjournment proposal.

        For each proposal, you may vote "FOR," "AGAINST" or "ABSTAIN." Abstentions will be counted for the purpose of determining whether a quorum is present and will have the same effect as a vote "AGAINST" each proposal. In addition, if your shares are held in the name of a bank, broker or other nominee, your bank, broker or other nominee will not be entitled to vote your shares in the absence of specific instructions. These non-voted shares, or "broker non-votes," will be counted for purposes of determining a quorum and will have the same effect as a vote "AGAINST" the merger proposal and will have no effect on the compensation proposal or the adjournment proposal. Your bank, broker or other nominee will vote your shares only if you provide instructions on how to vote by following the instructions provided to you by your bank, broker or other nominee.

        The directors and executive officers of the Company have informed the Company that, as of the date of the filing of this proxy statement, and to the extent they own shares of Company common stock, they intend to vote in favor of the proposal to adopt and approve the merger agreement. In addition, the directors and executive officers of the Company have informed the Company that, as of the date of the filing of this proxy statement, and to the extent they own shares of Company common stock, they intend to vote in favor of the compensation proposal and the adjournment proposal. As of the record date, our directors and executive officers (other than Mr. Sachs) owned, in the aggregate, [3]% of the outstanding shares of Company common stock.

        Certain Company stockholders, who are affiliates of Gregory H. Sachs and who collectively own approximately [18]% of the outstanding shares of Company common stock as of the record date, entered into a voting agreement with the Company pursuant to which, among other things, each of them has agreed to vote its shares of Company common stock in favor of the merger proposal.

Voting and Revocation of Proxies

        Stockholders of record may submit proxies by mail. Stockholders who wish to submit a proxy by mail should mark, date, sign and return the accompanying proxy card in the enclosed postage-paid envelope. If you hold your shares in your name as a stockholder of record, you may vote by telephone or by Internet by following the instructions included with your proxy card. Stockholders who hold shares in "street name" through a bank, broker or other nominee should check their proxy card or contact their bank, broker or other nominee to determine whether they will be able to vote by telephone or by Internet.

        Proxies received at any time before the special meeting, and not revoked or superseded before being voted, will be voted at the special meeting. Where a specification is indicated by the proxy, it will be voted in accordance with the specification. If you sign your proxy card without indicating your vote, your shares will be voted "FOR" the merger proposal, "FOR" the compensation proposal and "FOR" the adjournment proposal, and, if any other business properly comes before the special meeting or any adjournment or postponement thereof, your shares will be voted by those named in the proxy card in their best judgment.

        You have the right to revoke your proxy at any time before the vote taken at the special meeting:

    delivering a signed written notice of revocation bearing a date later than the date of the proxy, stating that the proxy is revoked to the Company's Corporate Secretary at 15301 North Dallas Parkway, Suite 500, Addison, Texas 75001;

    signing and delivering a new proxy relating to the same shares of Company common stock and bearing a later date to the Company's Corporate Secretary at 15301 North Dallas Parkway, Suite 500, Addison, Texas 75001;

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    submitting another proxy by telephone or by Internet by the date and time indicated on the applicable proxy card(s); or

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

        Please do not send in your stock certificates with your proxy card.    When the merger is completed, a separate letter of transmittal will be mailed to you that will enable you to receive the merger consideration.

Rights of Stockholders Who Object to the Merger

        Company stockholders are entitled to appraisal rights under Delaware law in connection with the merger. This means that, if you properly elect to exercise your appraisal rights, you will be entitled to have the value of your shares determined by the Delaware Court of Chancery and to receive payment based on that valuation, which valuation will be exclusive of any element of value arising from the accomplishment or expectation of the merger. The ultimate amount you receive as a dissenting stockholder 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 submit a written demand for appraisal to the Company before the vote is taken on the merger agreement and you must not vote in favor of the adoption of the merger agreement. Your failure to follow exactly the procedures specified under Delaware law will result in the loss of your appraisal rights. See "Appraisal Rights," beginning on page 102, and the text of the Delaware appraisal rights statute reproduced in its entirety as Annex C.

Solicitation of Proxies

        This proxy solicitation is being made and paid for by the Company on behalf of its board of directors. We have not retained a proxy solicitor to assist with the solicitation. Our directors, officers and employees may also solicit proxies by personal interview, mail, e-mail, telephone, facsimile or other means of communication. These persons will not be paid additional remuneration for their efforts. We will also request bank, brokers and other nominees to forward proxy solicitation material to the beneficial owners of shares of Company common stock that the bank, brokers and other nominees hold of record. We will reimburse them for their reasonable out-of-pocket expenses.

Questions and Additional Information

        If you have questions about the merger or how to submit your proxy, or if you need additional copies of this proxy statement or the enclosed proxy card or voting instructions, please contact our information agent, Broadridge Corporate Issuer Solutions, Inc., by telephone at (855) 793-5068 (toll free) or contact the Company in writing at our principal executive offices at 15301 North Dallas Parkway, Suite 500, Addison, Texas 75001, Attention: Investor Relations, or by telephone at (800) 827-9666.

        If you hold your shares in "street name" through a bank, broker or other nominee, please also contact your bank, broker or other nominee for additional information.

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THE MERGER AGREEMENT

        This section of the proxy statement describes the material provisions of the merger agreement but does not purport to describe all of the terms of the merger agreement. The following summary is qualified in its entirety by reference to the complete text of the merger agreement, which is attached as Annex A to this proxy statement and incorporated by reference into this proxy statement. We urge you to read the full text of the merger agreement because it is the legal document that governs the merger. It is not intended to provide you with any other factual information about us. Such information can be found elsewhere in this proxy statement and in the public filings we make with the SEC, as described in the section entitled "Where You Can Find More Information," beginning on page 110.

The Merger

        The merger agreement provides that, subject to the terms and conditions of the merger agreement and in accordance with Delaware law, at the effective time, Merger Sub will merge with and into the Company. As a result of the merger, the Company will be the surviving corporation, the separate corporate existence of Merger Sub will cease and the Company will continue as a wholly-owned subsidiary of Parent. As the surviving corporation, the Company will possess the rights, powers, privileges, immunities and franchises and be subject to all of the obligations, liabilities, restrictions and disabilities of the Company and Merger Sub, all as provided under Delaware law.

        The closing of the merger will occur as soon as practicable but in any event within two business days after satisfaction or, to the extent permitted by the terms of the merger agreement, waiver of all of the conditions set forth in the merger agreement and described under the section entitled "—Conditions to the Merger," beginning on page 84, unless another time or date is agreed to in writing by the parties to the merger agreement.

        The merger will become effective when the certificate of merger has been duly filed with the Secretary of State of the State of Delaware or at such later time and date as agreed to by the parties in writing and specified in the certificate of merger. The merger is expected to be completed during the third quarter of 2018. However, the parties cannot predict the exact timing of the completion of the merger or whether the merger will be completed at an earlier or later time, as agreed by the parties, or at all.

The Merger Consideration and Conversion of Capital Stock

        At the effective time, each share of Company common stock issued and outstanding immediately prior to the effective time will be canceled and converted into the right to receive $1.27 in cash, without interest, other than the following excluded shares:

    shares of Company common stock owned by the Company or shares owned by Parent or Merger Sub or their respective affiliates, including those shares held by Gregory H. Sachs, our executive chairman, all of which will be canceled, and no payment will be made with respect thereto;

    the rollover shares; and

    shares of Company common stock held by a stockholder who has properly exercised, and has not failed to perfect, withdrawn or otherwise lost, appraisal rights in accordance with Delaware law.

Rollover Investors; Rollover Shares

        From the date of the merger agreement until two business days prior to the special meeting, SCG Digital Holdings, LLC (as successor by conversion of SCG Digital Holdings, Inc.) may from time to time enter into one or more rollover agreements (which we refer to as the "rollover agreements")

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pursuant to which stockholders as determined by Parent in its discretion (which we refer to as the "rollover investors") agree to contribute to SCG Digital Holdings, LLC the number of shares of Company common stock set forth in the rollover agreements (which we refer to as the "rollover shares"). Rollover investors will receive an equity interest in SCG Digital Holdings, LLC. All of the rollover shares will be cancelled at the effective time.

        Each share of common stock of Merger Sub issued and outstanding immediately prior to the effective time will be converted into and become one fully paid, nonassessable share of common stock, par value $0.01 per share, of the surviving corporation with the same rights, powers and privileges as the shares so converted and will constitute the only outstanding shares of capital stock of the surviving corporation.

Treatment of Company Stock Options

        At the effective time, each stock option granted under the Company stock plan, whether or not vested and exercisable, that is outstanding and unexercised as of immediately prior to the effective time, will be converted by virtue of the merger into the right to receive an amount in cash, without interest, equal to the product obtained by multiplying (i) the amount, if any, by which the merger consideration exceeds the exercise price per share of such stock option by (ii) the total number of shares of Company common stock issuable in respect of such stock option. Any stock option that has an exercise price per share that equals or exceeds the merger consideration will be cancelled at the effective time for no consideration or payment. Any payments made to holders of the Company's stock options in connection with the merger will be made through the Company's payroll systems, subject to withholding in accordance with the merger agreement.

Payment Procedures

        Prior to the effective time, Parent will appoint Broadridge Corporate Issuer Solutions, Inc. as the exchange agent for the purpose of exchanging for the merger consideration the certificated and uncertificated shares of Company common stock. At or prior to the effective time, Parent will deposit, or cause to be deposited, with the exchange agent the aggregate merger consideration to be paid in respect of the certificated and uncertificated shares of Company common stock. To the extent such fund diminishes for any reason below the level required to make prompt payment of the merger consideration, Parent and the surviving corporation will promptly replace or restore the lost portion of such fund so as to ensure that it is, at all times, maintained at a level sufficient to make such payments.

        Each holder of shares of Company common stock that have been converted into the right to receive the merger consideration will be entitled to receive the merger consideration in respect of their shares of Company common stock upon (1) surrender to the exchange agent of a certificate, together with a duly completed and validly executed letter of transmittal and such other documents as may reasonably be requested by the exchange agent, or (2) 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 of Company common stock. Until so surrendered or transferred, each such certificated or uncertificated share will represent after the effective time for all purposes only the right to receive such merger consideration. No interest will be paid or accrued on the cash payable upon the surrender or transfer of such certificated or uncertificated share.

        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 (1) either such certificate will be properly endorsed or will otherwise be in proper form for transfer or such uncertificated share will be properly transferred and (2) the person requesting such payment will pay to the exchange agent any transfer or other tax required as a result of

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such payment to a person other than the registered holder of such certificate or uncertificated share or establish to the satisfaction of the exchange agent that such tax has been paid or is not payable.

        All merger consideration paid upon the surrender of certificated or uncertificated shares in accordance with the terms of the merger agreement will be deemed to have been paid in full satisfaction of all rights pertaining to the shares of Company common stock formerly represented by such certificated or uncertificated shares. From and after the effective time, there will be no further registration of transfers of shares of Company common stock on the stock transfer books of the surviving corporation. If, after the effective time, certificated or uncertificated shares of Company common stock are presented to the surviving corporation, they will be canceled and exchanged for the merger consideration in accordance with the procedures described in the two paragraphs immediately above.

        Any portion of the payment fund deposited with the exchange agent that remains unclaimed by the holders of shares of Company common stock 12 months after the effective time will be delivered to the surviving corporation, upon demand, and any such holder who has not exchanged shares of Company common stock for the merger consideration in accordance with the merger agreement prior to that time will thereafter look only to Parent or the surviving corporation for payment of the merger consideration, without interest.

Company Representations and Warranties

        The merger agreement contains representations and warranties made by the Company to Parent and Merger Sub and representations and warranties made by Parent and Merger Sub to the Company. The assertions embodied in those representations and warranties were made for purposes of the merger agreement and are subject to qualifications and limitations agreed to by the respective parties in connection with negotiating the terms of the merger agreement, including information contained in confidential disclosure schedules that the parties exchanged in connection with signing the merger agreement. Accordingly, investors and security holders should not rely on such representations and warranties as characterizations of the actual state of facts or circumstances, since they were only made as of a specific date and are modified in important part by the underlying disclosure schedules. In addition, certain representations and warranties may be subject to a contractual standard of materiality different from what might be viewed as material to stockholders or may have been used for purposes of allocating risk between the respective parties rather than establishing matters of fact. Moreover, information concerning the subject matter of such representations and warranties may change after the date of the merger agreement, which subsequent information may or may not be fully reflected in the Company's or Parent's public disclosures.

        In the merger agreement, we have made representations and warranties to Parent and Merger Sub with respect to, among other things:

    the due incorporation, valid existence, good standing and power of the Company;

    our power and authority to enter into the merger agreement and to complete the transactions contemplated by the merger agreement and the enforceability of the merger agreement against the Company;

    the required consents and approvals of governmental authorities in connection with the transactions contemplated by the merger agreement;

    the absence of conflicts with, violations or defaults under the Company's governing documents, applicable laws or certain agreements as a result of entering into the merger agreement and the consummation of the merger;

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    our capitalization, including in particular the number of outstanding shares of Company common stock and preferred stock, and the number of shares of common stock issuable upon the exercise of stock options and warrants;

    our subsidiaries and their due incorporation or organization, valid existence, good standing, power and authority;

        Many of the representations and warranties in the merger agreement made by the Company are qualified by a "materiality" or "material adverse effect on the Company" standard (that is, they will not be deemed to be untrue or incorrect unless their failure to be true or correct, individually or in the aggregate, would, as the case may be, be material or have a material adverse effect on the Company). For purposes of the merger agreement, a "material adverse effect on the Company" means any effect, change, event, or circumstance that has a material adverse effect on (1) the financial condition or results of operations of the Company and our subsidiaries, taken as a whole, or (2) the ability of the Company to consummate the transactions contemplated by the merger agreement.

        The definition of "material adverse effect on the Company" excludes any adverse effect resulting from or arising out of:

    a)
    the identity of Parent or any of its affiliates as the acquirer of the Company;

    b)
    general business, economic, financial market or political conditions;

    c)
    general conditions in or affecting the industry in which we operate or in any specific jurisdiction or geographical area in the United States or elsewhere in the world;

    d)
    the taking of any specific action, or refraining from taking any specific action, in each case at the written direction of Parent or Merger Sub or as expressly required by the merger agreement;

    e)
    any acts of terrorism or war or any weather-related event, fire or natural disaster or any escalation thereof; or

    f)
    any failure of the Company to meet internal or analysts' estimates or projections, performance measures, operating statistics or revenue or earnings predictions for any period or a decline in the price or change in trading volume of shares of Company common stock (provided that the underlying causes of such failure or decline may be taken into account in determining whether a material adverse effect has occurred);

provided that, in the case of (c), (d), (e), (f) or (h) above, such effect may be taken into account in determining whether or not there has been a material adverse effect on the Company if such effect has a materially disproportionate adverse effect on the Company as compared to other participants in the Company's industry, in which case only the incremental disproportionate impacts may be taken into account in determining whether a material adverse effect has occurred.

        In the merger agreement, Parent and Merger Sub made customary representations and warranties to us with respect to, among other things:

    the due incorporation, valid existence and good standing of Parent and Merger Sub;

    the power and authority of each of Parent and Merger Sub to enter into the merger agreement and to complete the transactions contemplated by the merger agreement and the enforceability of the merger agreement against each of Parent and Merger Sub;

    the required consents and approvals of governmental authorities in connection with the transactions contemplated by the merger agreement;

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    the absence of conflicts with, violations or defaults under Parent's or Merger Sub's governing documents, applicable laws or certain agreements as a result of entering into the merger agreement and the consummation of the merger;

    capitalization of Merger Sub, including in particular the number of outstanding shares of Merger Sub common stock;

    that the vote or consent of Parent as the sole stockholder of Merger Sub is the only vote or consent of the holders of any class or series of capital stock of Merger Sub necessary to approve the merger agreement, which consent will be given immediately following the execution of the merger agreement;

    the absence of certain litigation;

    the sufficiency of funds to pay the merger consideration;

    the absence of certain agreements with the Company's officers, directors or holders of the Company's common stock;

    the absence of ownership of any Company common stock by Parent and Merger Sub;

    that neither Parent, Merger Sub nor any of their affiliates own interests in any entity that derives a significant portion of its revenues from business in the industries in which the Company and our subsidiaries operate that would reasonably be expected to have an adverse effect on Parent's ability to consummate the merger; and

    the absence of undisclosed brokers' fees and expenses.

        The representations and warranties contained in the merger agreement and in any certificate or other writing delivered pursuant to the merger agreement will not survive the effective time. This limit does not apply to any covenant or agreement of the parties which by its terms contemplates performance after the effective time.

        Certain of the representations and warranties in the merger agreement made by Parent and Merger Sub are qualified by a "materiality" or "material adverse effect on Parent" standard (that is, they will not be deemed to be untrue or incorrect unless their failure to be true or correct, individually or in the aggregate, would, as the case may be, be material or have a material adverse effect on Parent). For purposes of the merger agreement, a "material adverse effect on Parent" means any effect, change, event, circumstance or occurrence that (1) would reasonably be expected to prevent or materially delay consummation of the merger or (2) materially impair or delay the ability of Parent or Merger Sub to perform their respective obligations under the merger agreement.

Conduct of the Company's Business During the Pendency of the Merger

        Except for matters permitted or contemplated by the merger agreement, as required by applicable law or the rules or regulations of the Nasdaq Capital Market or undertaken with the prior written consent of Parent, from the date of the merger agreement until the effective time, the Company will, and will cause each of our subsidiaries to, conduct its business in the ordinary course, consistent with past practice, and use our commercially reasonable efforts to:

    preserve intact our business organization and material assets;

    keep available the services of our officers and key employees who are integral to the operations of their businesses as presently conducted;

    maintain in effect all of our government authorizations; and

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    maintain satisfactory relationships with our customers, lenders, suppliers, licensors, licensees, distributors and others, in each case who have a material business relationship with the Company or any of our subsidiaries.

        In addition, except for matters permitted or contemplated by the merger agreement, as required by applicable law, the terms of the bridge loan agreement or the rules or regulations of the Nasdaq Capital Market or undertaken with the prior written consent of Parent, from the date of the merger agreement until the effective time, the Company will not, nor will it permit any of our subsidiaries to:

    amend any certificate of incorporation, bylaws or other comparable charter or organizational documents (whether by merger, consolidation or otherwise);

    establish a record date, declare, set aside or pay any dividends on, or make any other distributions (whether in cash, stock, property or otherwise) in respect of, or enter into any agreement with respect to the voting of, any capital stock of the Company or any of our subsidiaries, other than dividends and distributions by a direct or indirect wholly-owned subsidiary of the Company to the Company or any of our other wholly-owned subsidiaries (except distributions resulting from the vesting, settlement, exercise or terms of Company stock options or other equity awards);

    split, combine, subdivide or reclassify any capital stock of the Company or any of our subsidiaries;

    except as described below, issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for, shares of capital stock of the Company or any of its subsidiaries;

    purchase, redeem or otherwise acquire any securities of the Company, except in accordance with the terms of Company stock options or other equity awards in effect as of the date of the merger agreement;

    amend, modify or change of any term of any of our indebtedness;

    issue, deliver, sell, grant, pledge, transfer, subject to any lien or otherwise encumber or dispose of any securities of the Company, other than the issuance of shares of Company common stock upon the exercise of Company stock options or warrants that are outstanding as of the date of the merger agreement in accordance with the applicable equity award's terms;

    amend any term of any securities of the Company or any of our subsidiaries (whether by merger, consolidation or otherwise);

    adopt a plan or agreement of, or resolutions providing for or authorizing, complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization with respect to the Company or any of its subsidiaries;

    increase the salary, wages, benefits, bonuses or other compensation payable or to become payable to the Company's current or former directors or executive officers, except as permitted by the merger agreement;

    hire any new employees, unless such hiring is in the ordinary course of business consistent with past practice and is with respect to employees having an annual base salary not to exceed, for each new hire, $150,000;

    pay or agree to pay any pension, retirement allowance, termination or severance pay, bonus or other employee benefit not required by any existing Company employee plan;

    enter into or amend any employment contracts or any consulting, bonus, severance, retention, retirement or similar agreement for existing employees, except in the ordinary course of business consistent with past practice;

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    except as required to ensure that the Company employee plan is not then out of compliance with applicable law (other than annual renewals of benefit plans and arrangements in the ordinary course of business and consistent with past practice), enter into or adopt any new, or increase benefits under or renew, amend or terminate any existing Company employee plan or benefit arrangement or any collective bargaining agreement;

    acquire any business, assets or capital stock of any person or entity or division of an entity, whether in whole or in part (and whether by purchase of stock, purchase of assets, merger, consolidation, or otherwise);

    enter into or acquire any interest in any joint venture or similar agreement or arrangement;

    sell, assign, lease, license, pledge, transfer, subject to any lien or otherwise abandon or dispose of any of our intellectual property, material assets or material properties or any material interest therein except (1) pursuant to existing contracts or commitments, (2) nonexclusive licenses of intellectual property to our customers, contractors, partners or suppliers in the ordinary course of business consistent with past practice, (3) sales of inventory or used equipment or vehicles in the ordinary course of business consistent with past practice or (4) permitted liens incurred in the ordinary course of business consistent with past practice or (5) pursuant to the bridge loan agreement;

    agree to any exclusivity, non-competition or similar provision or covenant restricting us or our affiliates from competing in any line of business or with any person or in any area or engaging in any activity or business (including with respect to the marketing or distribution of their respective products or services);

    agree to any exclusivity, non-competition or similar provision or covenant pursuant to which any benefit or right would be required to be given or lost as a result of so competing or engaging;

    make any material change to any accounting methods, except as required by GAAP or Regulation S-X promulgated under the Exchange Act;

    incur or assume any indebtedness, except (1) for borrowings under or permitted by the bridge loan agreement, (2) for borrowings or issuances of letters of credit or capital leases under our current credit facilities in the ordinary course of business and which constitutes permitted indebtedness under the bridge loan agreement or (3) in respect of indebtedness owing by any wholly owned subsidiary to the Company or another wholly-owned subsidiary of the Company;

    assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any third party;

    disclose any trade secrets, other than in the ordinary course of business and pursuant to a reasonable confidentiality agreement or obligation;

    make or change any material tax election, change any annual tax accounting period or adopt or change any material method of tax accounting, enter into any material closing agreement, tax sharing agreement or tax indemnity agreement, settle any material tax claim, audit or assessment, or surrender any right to claim a material tax refund;

    other than in the ordinary course of business consistent with past practice, make or authorize any capital expenditures in an aggregate amount in excess of $250,000;

    enter into any contract that would reasonably be expected to involve annual payments in excess of $250,000, which contains a change in control or similar provision that would be triggered in connection with the merger;

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    settle or compromise, or propose to settle or compromise, any claim or proceeding, other than settlements or compromises involving only monetary payment by us in an amount not to exceed $50,000 individually or $250,000 in the aggregate;

    except for (1) any contract for indebtedness permitted by the bridge loan agreement and (2) amendments, terminations, or non-renewals in the ordinary course of business consistent with past practice that would not be material and adverse to the Company, modify, amend, waive, fail to enforce (in each case, in any material respect), assign or terminate any material contract or enter into a contract that would be a material contract if entered into prior to the date of the merger agreement, other than customer contracts entered into in the ordinary course of business and consistent with past practice;

    implement any employee layoffs that could implicate the WARN Act; or

    authorize, commit or agree to take any of the actions described above.

Company Stockholders Meeting

        Pursuant to the terms of the merger agreement and in accordance with applicable law and the Company's governing documents, the Company agreed to, as promptly as reasonably practicable, duly set a record date for, call, give notice of, convene and hold a special meeting of its stockholders, which we refer to as the special meeting, for the purpose of considering and taking action upon the adoption of the merger agreement by Company stockholders.

        Unless our board of directors (acting upon the recommendation of the special committee) has effected an adverse recommendation change, we will use our reasonable best efforts to cause this proxy statement to be mailed to Company stockholders and to solicit from Company stockholders proxies in favor of the adoption and approval of the merger agreement and will take all other action necessary or advisable to secure the vote or consent of the Company stockholders required by applicable law to effect the merger. The merger agreement provides that this proxy statement and the Transaction Statement on Schedule 13E-3 shall be filed with the SEC within fifteen business days of the date of the merger agreement (which date was subsequently extended by the parties to May 11, 2018 by a letter agreement, dated May 3, 2018, by and among the parties to the merger agreement). Unless our board of directors has effected an adverse recommendation change, our board of directors will cause the board recommendation (as defined in the section entitled "—Company Board of Directors Recommendation," beginning on page 79) to be included in this proxy statement.

Go-Shop; Non-Solicitation; Competing Acquisition Proposals

        From the date of the merger agreement until 11:59 p.m. Eastern Time on May 17, 2018 (which we refer to as the "initial go-shop end date"), or, if the Company chooses, in its sole discretion, to extend the period prior to the initial go-shop end date, June 1, 2018 (which period, as it may be extended, we refer to as the "go-shop period"), we, our subsidiaries and our representatives have, subject to certain conditions, the right to:

    initiate, solicit, facilitate and encourage any inquiry, proposal or offer that constitutes an acquisition proposal (as defined below), including by way of providing non-public information pursuant to acceptable confidentiality agreements, provided that we promptly (and in any event within 24 hours thereafter) provide to Parent and Merger Sub any material non-public information concerning the Company and our subsidiaries that we provide to any person, to the extent such information was not previously made available to Parent or Merger Sub;

    engage in, continue, enter into or otherwise participate in any discussions or negotiations with any person with respect to any acquisition proposal; and

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    otherwise cooperate with or assist or participate in, or facilitate any such inquiries, proposals, discussions or negotiations or any effort or attempt to make any acquisition proposals.

        After the expiration of the go-shop period, we, our subsidiaries and our respective representatives must immediately cease any discussions or negotiations with any person (except as noted below with respect to an excluded party) with respect to, or that could reasonably be expected to lead to, an acquisition proposal; and must promptly request the return or destruction of all confidential information from any person who has received non-public information or otherwise entered into a confidentiality or similar agreement in connection with a potential acquisition proposal.

        From the first calendar day immediately following the go-shop period, (which we refer to as the "no-shop period start date"), until the effective time, or, if earlier, the valid termination of the merger agreement, we, our subsidiaries and our respective representatives may not (except as noted below with respect to an excluded party):

    initiate, solicit, or knowingly facilitate or encourage any inquiry, proposal or offer that constitutes, or that would reasonably be expected to lead to, an acquisition proposal;

    knowingly engage in, continue or otherwise participate in any discussions or negotiations with respect to an acquisition proposal, or provide any information or data concerning the Company or its subsidiaries for the purpose of encouraging or facilitating, or that could reasonably be expected to lead to, an acquisition proposal;

    approve, endorse, recommend or enter into any agreement or arrangement with respect to an acquisition proposal; or

    resolve to do any of the foregoing.

        However, we are permitted to take any of the actions noted in the above four bullets with any person who is an excluded party (as defined below) until the date that such person ceases to be an excluded party or we cease to be in continuous active discussions with such person with respect to any alternative proposal. Any such person or group shall cease to be an excluded party if such person or group withdraws or terminated its offer or proposal, such offer or proposal expires, or the special committee determines in good faith that such offer or proposal has ceased to constitute, or is no longer reasonably likely to lead to, a superior proposal.

        In addition, at any time following the no-shop period start date and prior to receipt of the requisite stockholder approval, if we receive an unsolicited written acquisition proposal from a third party that did not, directly or indirectly, result from or arise out of a breach of the go-shop or non-solicitation provisions of the merger agreement, and that the board of directors (acting upon the recommendation of the special committee) determines in good faith, after consultation with outside legal counsel and the financial advisor, (i) constitutes or could reasonably be expected to lead to a superior proposal and (ii) that the failure to act would be inconsistent with the directors' fiduciary duties under applicable laws, then we may furnish to such third party non-public information relating to the Company and our subsidiaries pursuant to a confidentiality agreement meeting certain requirements as set forth in the merger agreement and afford such third party access to our businesses, properties, assets and personnel and enter into, maintain and participate in discussions or negotiations with such third party or otherwise cooperate with or assist or participate in, or facilitate, any such discussions or negotiations; provided we promptly (and in any event within 24 hours thereafter) provide to Parent any material non-public information concerning the Company or access provided to such third party which was not previously provided to Parent.

        In this proxy statement, an "acquisition proposal" generally means any inquiry, proposal, offer or indication of interest from any third party relating to a transaction or series of related transactions involving (i) any acquisition or purchase by any third party, directly or indirectly, of 25% or more of

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any class of outstanding voting or equity securities of the Company, or any tender offer (including a self-tender) or exchange offer that, if consummated, would result in any third party beneficially owning 25% or more of any class of outstanding voting or equity securities of the Company, (ii) any merger, amalgamation, consolidation, share exchange, business combination, joint venture or other similar transaction involving the Company or any of its Subsidiaries, the business of which constitutes 25% or more of the net revenues, net income or assets of the Company and its subsidiaries, taken as a whole, (iii) any sale, lease, exchange, transfer, license (other than licenses in the ordinary course of business), acquisition or disposition of 25% or more of the consolidated assets of the Company and its subsidiaries (measured by the lesser of book or fair market value), or (iv) any liquidation, dissolution, recapitalization, extraordinary dividend or significant corporate reorganization of the Company and its Subsidiaries, the business of which constitutes 25% or more of the net revenues, net income or assets of the Company and its subsidiaries, taken as a whole.

        In this proxy statement, an "excluded party" generally means any person or group of persons from whom the Company has received a written acquisition proposal after the execution of the merger agreement and prior to the no-shop period start date, which the Company board of directors (or any committee thereof) has determined in good faith (after consultation with its outside legal counsel and financial advisor) is, or would reasonably be expected to lead to, a superior proposal and who are actively engaged in discussions or negotiations with the Company or its representatives with respect to such acquisition proposal as of the expiration of the go-shop period. A person will cease to be an excluded party upon the earlier of (x) the withdrawal, termination or expiration of such written acquisition proposal or (y) the good faith determination of the special committee that such acquisition proposal is no longer, or is no longer reasonably likely to lead to, a superior proposal.

        In this proxy statement, a "superior proposal" generally means any bona fide written acquisition proposal that the Company board of directors (acting upon the recommendation of the special committee) determines in good faith, after consultation with its outside legal counsel and financial advisor, taking into account, among other things, the legal, financial, regulatory, financing and other aspects of the acquisition proposal and the third party making the acquisition proposal, including the form of consideration, financing terms (and certainty of financing) thereof and the likelihood of consummation (in each case, if applicable, taking into account any revisions to the merger agreement or the rollover agreements made or proposed in writing by Parent prior to the time of determination), which, if consummated, would result in a transaction that is more favorable to Company stockholders (solely in their capacity as such, and excluding the rollover investors) than the merger (after taking into account the expected timing and risk and likelihood of consummation). For purposes of the definition of superior proposal, the references to "25% or more" in the definition of acquisition proposal shall be deemed to be references to "more than 80%".

Company Board of Directors Recommendation

        In connection with our board of directors' recommendation to the Company stockholders of the adoption and approval of the merger agreement (which we refer to as the "RMG recommendation"), and subject to the provisions described below, the merger agreement provides that neither our board of directors nor any committee of our board of directors will:

    (a)
    fail to make, withdraw, amend or modify, or publicly propose to withhold, withdraw, amend or modify, in any manner adverse to the transactions contemplated by the merger agreement, Parent or Merger Sub, the RMG recommendation;

    (b)
    adopt or recommend, or publicly propose to adopt or recommend, an acquisition proposal or superior proposal;

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    (c)
    fail to recommend against acceptance of any third party tender offer or exchange offer for shares of Company common stock within ten business days after the commencement of such offer;

    (d)
    approve or recommend, or publicly propose to approve or recommend, or cause or permit the Company or any of its subsidiaries to execute or enter into any alternative acquisition agreement;

    (e)
    fail to include the RMG recommendation to adopt and approve the merger agreement in this proxy statement;

    (f)
    fail to publicly reaffirm the RMG recommendation to adopt and approve the merger agreement within five business days after receipt of a written request by Parent to provide such affirmation; or

    (g)
    resolve or publicly propose to take any of the foregoing actions.

        We refer to the actions listed in the bullets (a) through (e) above as an "adverse recommendation change".

        Notwithstanding anything to the contrary contained in the merger agreement, prior to the adoption of the merger agreement by the Company stockholders and subject to the Company's and our board of directors' compliance with the go-shop and non-solicitation covenants of the merger agreement, our board of directors (acting upon the recommendation of the special committee) may, if our board of directors (acting upon the recommendation of the special committee) determines in good faith, after consultation with its outside legal counsel and financial advisor, that the failure to do so would be inconsistent with the directors' fiduciary duties under applicable law, (1) make an adverse recommendation change in response to either a superior proposal received after the date of the merger agreement or any material fact, event, change, development or circumstances not known or reasonably foreseeable by our board of directors as of the date of the merger agreement, which fact, event, change, development or circumstances becomes known to our board of directors prior to the Company stockholder approval (other than the receipt, existence or terms of an acquisition proposal, or any inquiry, indication of interest, proposal or offer that could reasonably be expected to lead to an acquisition proposal) (which we refer to as an "intervening event"), or (2) cause us to terminate the merger agreement and authorize us to enter into an alternative acquisition agreement concerning a transaction that constitutes a superior proposal, subject to the provisions described below.

        Our board of directors will not make an adverse recommendation change or terminate the merger agreement:

    until four business days after we provide written notice to Parent advising Parent that our board of directors (acting upon the recommendation of the special committee) intends to make an adverse recommendation change or terminate the merger agreement with respect to a superior proposal and specifies the reasons therefor, including the material terms and conditions of, and identifying the third party making, such superior proposal and a copy of all relevant transaction documents (and the Company provides a subsequent four business days written notice to Parent with respect to any amendment to the financial terms or any other material term of such superior proposal);

    unless during such four-business day period, we negotiate, to the extent requested by Parent, with Parent in good faith to make such adjustments in the terms and conditions of the merger agreement and the rollover agreements as would enable the board of directors (acting upon the recommendation of the special committee) to maintain the RMG recommendation and not make an adverse recommendation change or terminate the merger agreement;

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    Unless, prior to the expiration of the four business day period, Parent does not make a sufficient proposal to adjust the terms and conditions of the merger agreement and the rollover agreements such that our board of directors (acting upon the recommendation of the special committee) determines again in good faith after consultation with its outside legal counsel and financial advisor, that (i) the failure to make an adverse recommendation change or authorize the termination of the merger agreement would be inconsistent with its fiduciary duties under applicable law, and (ii) after taking into account any adjustment or modification to the terms of the merger agreement and the rollover agreements proposed by Parent, that the acquisition proposal continues to be a superior proposal.

        None of the Company, our board of directors or any committee of our board of directors will enter into any agreement with any third party to limit or prohibit the Company from giving prior notice to Parent of its intention to effect an adverse recommendation change or to terminate the merger agreement in light of a superior proposal.

        Our board of directors (acting upon the recommendation of the special committee) also may, in response to an intervening event, make an adverse recommendation change if:

    the Company provides written notice to Parent at least four business days in advance of its intention to make an adverse recommendation change and specifies the facts underlying the determination that an intervening event has occurred and the reason for the adverse recommendation change;

    during the four-business day period, if requested by Parent, the Company negotiates in good faith with Parent to amend the merger agreement and the rollover agreement in such a manner that obviates the need for an adverse recommendation change; and

    within the four-business day period, our board of directors (acting upon the recommendation of the special committee) determines in good faith, taking into consideration any amendments to the merger agreement and the rollover agreement proposed by Parent (after consultation with its outside legal counsel and financial advisor), that the failure to effect an adverse recommendation change would be inconsistent with the directors' fiduciary duties under applicable law.

        Any material change to the facts and circumstances relating to such intervening event requires a new notice and the Company will be required to comply again with the requirements above.

        The merger agreement does not prohibit the Company from (1) taking and disclosing a position contemplated by Rule 14d-9, Rule 14e-2(a) or Item 1012(a) of Regulation M-A promulgated under the Exchange Act or (2) making any disclosure to Company stockholders if, in the good faith judgment of our board of directors (acting upon the recommendation of the special committee), after consultation with outside legal counsel, the failure to do so would be inconsistent with the directors' fiduciary duties under applicable law or any disclosure requirements under applicable law. For purposes of the merger agreement, a factually accurate public statement by the Company that describes the Company's receipt of an acquisition proposal and the operation of the merger agreement with respect thereto, or any "stop, look and listen" communication by our board of directors pursuant to Rule 14d-9(f) of the Exchange Act, or any similar communication to the Company stockholders, will not constitute an adverse recommendation change or a proposal by our board of directors to withdraw or modify its recommendation of the merger agreement, the merger or the other transactions contemplated by the merger agreement.

Company Employee Compensation and Benefits

        Employee Benefits and Severance.    With respect to our employees immediately prior to the effective date of the merger agreement who continue employment with Parent, the surviving corporation or any subsidiary of Parent or the surviving corporation immediately following the effective

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time (which we refer to as "continuing employees"), Parent will cause the service of each such continuing employee to be recognized for purposes of eligibility to participate, levels of benefits (but not for benefit accruals under any defined benefit pension plan) and vesting under each compensation, retirement, vacation, fringe or other welfare benefit plan, program or arrangement of Parent, the surviving corporation or any of their subsidiaries, but not including any defined benefit pension, nonqualified deferred compensation, post-termination welfare or equity-based compensation plans, programs, agreements or arrangements in which any continuing employee is or becomes eligible to participate in the year in which the effective time occurs, but solely to the extent service was credited to such employee for such purposes under a comparable Company employee plan immediately prior to the effective date of the merger and to the extent such credit would not result in a duplication of benefits. For a period of not less than 6 months after the closing date of the merger, Parent will provide each continuing employee with (1) base salary or base hourly rate and (2) cash incentive compensation opportunities, in each case in an amount at least equal to the level that was provided to each such continuing employee immediately prior to the closing date of the merger, and (3) employee benefits (other than equity-based, defined benefit pension, post-termination welfare or nonqualified deferred compensation benefits, except to the extent provided for in any agreements or arrangements existing as of the date of the merger agreement) that are substantially similar in the aggregate to those provided to each such continuing employee immediately prior to the closing date of the merger under the Company employee plans.

        Additionally, Parent has agreed that with respect to each health benefit plan of Parent in which any Continuing Employee is or becomes eligible to participate in the plan year of the effective time, Parent will use all commercially reasonable efforts to waive all limitations as to pre-existing conditions, waiting period, required physical examinations, and participation and coverage requirement exclusions that would have been waived under the Company health benefit plan in which such Continuing Employee would have been eligible to participate.

Agreement as to Director and Officer Indemnification and Insurance

        As discussed under the above header "Special Factors—Interests of the Company's Directors and Officers in the Merger—Director and Officer Indemnification and Insurance," beginning on page 56, for a period of six years following the consummation of the merger, Parent will, and will cause the surviving corporation to, maintain directors' and officers' liability insurance policies with respect to acts or omissions occurring prior to the effective time with respect to each current and former Company director and officer covered by our current policy; provided, that in no event shall Parent be required to expend annually in the aggregate an amount in excess of 250% of the annual premiums currently paid by us. In lieu of the foregoing, following consultation with Parent, we may purchase, prior to the consummation of the merger, a six-year "tail" prepaid directors' and officers' liability insurance policy in respect of acts or omissions occurring prior to and including the consummation of the merger. In the event that we purchase such a "tail" policy prior to the consummation of the merger, Parent will cause the surviving corporation to maintain such "tail" policy for its full term and continue to honor the obligations thereunder.

        In addition, Parent will, and will cause the surviving corporation to, indemnify to the fullest extent of the law any individual who is or was a director or officer of the Company or any of its subsidiaries prior to the effective time, for any and all costs and expenses (including fees and expenses of legal counsel, which shall be advanced as they are incurred provided that the indemnified party provides an undertaking to repay such expenses if it is later determined that such party was not entitled to indemnification hereunder) imposed upon or relating to (i) the fact that such person is or was a director or officer of the Company prior to the effective time or (ii) the merger agreement or any transactions related to the merger agreement, whether arising prior to or after the effective time. All rights to indemnification and exculpation from liabilities for acts or omissions occurring at or prior to

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the effective time now existing in favor of any indemnified party as provided in the applicable certificates or articles of incorporation or bylaws (or comparable organizational documents) will survive the merger and will continue in full force and effect.

Other Covenants and Agreements

        Access to Information.    Subject to applicable law and certain other exceptions described in the merger agreement, we will afford Parent's officers and other authorized representatives and any proposed rollover investors who sign non-disclosure agreements reasonably acceptable to the Company, reasonable access, during normal business hours throughout the period prior to the effective time, to those properties, personnel, books, contracts, records, tax returns and work papers as Parent may reasonable request.

        Notice of Certain Events.    From the date of the merger agreement until the effective time, each of the Company, Parent and Merger Sub will promptly notify the other in writing of (1) any inaccuracy or breach of any representation or warranty or breach of covenant or agreement in the merger agreement that could reasonably be expected to cause the conditions to the merger not to be satisfied and (2) any notice or other communication received alleging that the consent from any entity or person is or may be required in connection with the transactions contemplated by the merger agreement.

        State Takeover Laws.    If any "control share acquisition," "fair price," "moratorium" or other anti-takeover law or regulation becomes or is deemed to be applicable to the Company, Parent, Merger Sub, the merger or any other transaction contemplated by the merger agreement, then each of the Company, Parent, Merger Sub, and their respective boards of directors will grant such approvals and take such actions as are necessary so that the transactions contemplated by the merger agreement may be consummated as promptly as practicable on the terms contemplated by the merger agreement and otherwise act to render such laws or regulations inapplicable.

        Voting of Shares.    Parent and Merger Sub will vote any shares of Company common stock beneficially owned by them in favor of adoption of the merger agreement at the special meeting.

        Public Announcements.    Parent and the Company will consult with the other before issuing any press release or making any other public statement or scheduling a press conference or conference call with investors or analysts, with respect to the merger agreement or the transactions contemplated by the merger agreement. Neither will issue any such press release or make any such public statement without the consent of the other party, which will not be unreasonably withheld, except as such release or announcement may be required by applicable law or any listing agreement with or rule of any national securities exchange or association upon which the securities of the Company are listed, in which case the party required to make the release or announcement will consult with the other party about, and allow the other party reasonable time (taking into account the circumstances) to comment on, such release or announcement in advance of such issuance, and the party will consider such comments in good faith. The Company will not be required to consult with Parent before issuing any press release or making any other public statement with respect to an adverse recommendation change effected in accordance with the merger agreement or with respect to its receipt and consideration of any acquisition proposal.

        Litigation.    The Company will as promptly as reasonably practicable (and in any event within two business days) notify Parent in writing of, and will give Parent the opportunity to review and comment on all material filings and responses to be made by the Company in connection with (which comments the Company will in good faith take into account), and participate and consult in the defense and settlement of, any stockholder litigation related to the merger agreement or the merger or any related transaction, and no such settlement, or other compromise or arrangement, of any such stockholder

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litigation will be agreed to without Parent's prior written consent. The Company will keep the Parent reasonably informed with respect to the status of any such stockholder litigation.

Commercially Reasonable Efforts

        The Company and Parent will cooperate with each other and use their commercially reasonable efforts to take, or cause to be taken, all actions and do, or cause to be done, all things reasonably necessary, proper or advisable under the merger agreement and applicable law to consummate the transactions contemplated by the merger agreement as soon as reasonably practicable including preparing and filing as promptly as reasonably practicable all documentation to effect all necessary notices, reports and other filings and to obtain as promptly as practicable all consents, registrations, approvals, permits and authorizations necessary or advisable to be obtained from any governmental authority, including without limitation under the antitrust laws, in order to consummate the merger and to fully carry out the purposes of the merger agreement. The Company will use commercially reasonable efforts to take all actions reasonably requested by Parent to obtain waivers or consents from any material customers (as defined in the merger agreement), if required under any contracts with material customers, and any third parties whose waiver or consent is required under any material contract.

Conditions to the Merger

        The obligations of the Company, Parent and Merger Sub to consummate the merger are subject to the satisfaction or, to the extent permitted by applicable law, waiver of, at or prior to the closing of the merger, of the following conditions:

    adoption and approval of the merger agreement by an affirmative vote of holders of at least both (1) a majority of the outstanding shares of Company common stock entitled to vote at the special meeting and (2) a majority of the outstanding shares of Company common stock, excluding shares held by (i) Parent or Merger Sub or any of their respective affiliates, including Gregory H. Sachs, the Company's executive chairman, (ii) any rollover investors and (iii) any of the Company's executive officers; and

    no governmental authority with jurisdiction over any party will have issued any order, injunction, judgment, decree or ruling or taken any other action that is in effect (whether temporary, preliminary or permanent) restraining, enjoining or otherwise prohibiting the consummation of the merger and no applicable law or regulation will have been adopted that makes the consummation of the merger illegal or otherwise prohibited provided that the party seeking to assert this condition will have used those efforts required by the merger agreement provision (including its obligations under the header entitled "—Commercially Reasonable Efforts," beginning on page 84) to resist, lift or resolve such order or applicable law.

        The obligations of Parent and Merger Sub to consummate the merger are subject to the satisfaction, at or prior to the closing of the merger, of the additional following conditions:

    the representations and warranties of the Company made in the merger agreement, subject to certain exceptions, will be true and correct when made and as of immediately prior to the effective time (other than those representations and warranties that were made only as of a specified date, which need only be true and correct as of such specified date), except where the failure of such representations and warranties to be true and correct (disregarding materiality or material adverse effect qualifications) would not, individually or in the aggregate, have a material adverse effect on the Company;

    the Company will have performed, in all material respects, its obligations under the merger agreement on or prior to the consummation of the merger;

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    no event, change, effect or development has occurred and is continuing that would have a material adverse effect on the Company; and

    The number of shares of Company common stock that are "Dissenting Shares" as defined in the merger agreement must be less than ten percent (10%) of the number of shares of Company common stock outstanding immediately prior to the effective time.

        The obligation of the Company to consummate the merger is subject to the satisfaction of the following additional conditions:

    the representations and warranties of Parent and Merger Sub made in the merger agreement will be true and correct when made and as of immediately prior to the effective time (other than those representations and warranties that were made only as of a specified date, which need only be true and correct as of such specified date), except where the failure of such representations and warranties to be true and correct (disregarding materiality or material adverse effect qualifications) would not, individually or in the aggregate, prevent, materially delay or materially impair Parent's or Merger Sub's ability to consummate the transactions contemplated by the merger agreement; and

    Parent and Merger Sub will have performed in all material respects their respective obligations under the merger agreement.

Termination of the Merger Agreement

        The merger agreement may be terminated, and the merger may be abandoned at any time before the consummation of the merger, if:

    the Company and Parent mutually agree in writing (notwithstanding any approval of the merger agreement by the Company stockholders);

    the merger has not been consummated on or before August 30, 2018 (which we refer to as the "end date") (notwithstanding any approval of the merger agreement by the Company stockholders);

    the adoption of the merger agreement by the Company stockholders has not been obtained by reason of the failure to obtain the required vote upon a final vote taken at the special meeting (or any adjournment or postponement thereof); or

    any governmental authority of competent jurisdiction has issued a final and non-appealable order or taken any other action enjoining, restraining or otherwise prohibiting the consummation of the transactions contemplated by the merger agreement (notwithstanding any approval of the merger agreement by the Company stockholders); provided that such right to terminate the merger agreement will not be available to any party who has materially breached the commercially reasonable efforts provision of the merger agreement resulting in such order.

        Parent may also terminate the merger agreement if:

    (i) the Company has breached any of its representations, warranties, covenants or other agreements contained in the merger agreement in such a manner that would result in any of the conditions to Parent's obligations to close not being satisfied and such breach either has not been cured by the Company prior to the earlier of the end date or the 30th calendar day following Parent's delivery of written notice describing such breach to the Company (provided that neither Parent nor Merger Sub is in material breach of any representation, warranty, covenant or agreement contained in the merger agreement) or (ii) the Company has materially breached the go-shop; board recommendation and stockholder approval covenants in the merger agreement; or

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    our board of directors (or any committee thereof) has, prior to the stockholder approval, effected an adverse recommendation change.

        The Company may also terminate the merger agreement if:

    either of Parent or Merger Sub has breached any of its representations, warranties, covenants or other agreements contained in the merger agreement in such a manner that would result in any of the conditions to the Company's obligations to close not being satisfied, and such breach either has not been cured by Parent or Merger Sub prior to the earlier of the end date or the 30th calendar day following the Company's delivery of written notice describing such breach to Parent (provided that the Company is not in material breach of any representation, warranty, covenant or agreement contained in the merger agreement);

    our board of directors has, prior to the stockholder approval, effected an adverse recommendation change in respect of a superior proposal in accordance with the terms of the merger agreement, the Company has not breached any of its obligations under the non-solicitation provisions in the merger agreement (other than immaterial non-compliance) and, substantially concurrently with such termination, the Company enters into a binding acquisition agreement with respect to such superior proposal; provided that, in such instance occurring after the initial go-shop end date, the Company pays the applicable termination fee described below; or

    all of the closing conditions have been satisfied (other than those conditions that are to be satisfied by actions taken at the closing, each of which is capable of being satisfied at the closing) and Parent and Merger Sub fail to consummate the merger at the closing and the Company has notified Parent in writing that we are ready, willing and able to consummate the merger, in which case Lender must make the penalty loan described below to the Company.

Termination Fees, Penalty Loan

        The Company will not pay any termination fee to Parent if we terminate the merger agreement on or before the initial go-shop end date to enter into a superior proposal. The Company has agreed to pay Parent a $150,000 termination fee (representing approximately 1.1% of our equity value based on a price of $1.27 per share, which is the consideration offered in the merger agreement) if we terminate the merger agreement after the initial go-shop end date but on or before the end of the go-shop period to enter into a superior proposal. The Company has agreed to pay Parent a $500,000 termination fee (representing approximately 3.5% of our equity value based on a price of $1.27 per share, which is the consideration offered in the merger agreement) if we terminate to enter into a superior proposal after the end of the go-shop period.

        The Company is also required to pay the $500,000 termination fee (i) if Parent terminates because our board of directors made an adverse recommendation change or the Company materially breached the go-shop, board recommendation or stockholder approval covenants, or (ii) if the merger agreement is terminated by the Company or Parent because the Company fails to obtain the stockholder approval or by Parent for certain uncured breaches by the Company, and (a) an acquisition proposal was made and not withdrawn prior to the special meeting or (b) the board of directors fails to publicly reaffirm the board recommendation in favor of the merger within ten (10) business days of a request to do so by Parent following any stockholder of the Company having publicly commenced a withhold or "vote no" campaign in respect of the merger; provided that in the case of clause (ii) the Company will pay $250,000 upon the termination of the merger agreement and the remaining $250,000 only upon consummation of an acquisition proposal for at least 50% of the assets or voting equity of the Company that is accepted by the Company within 12 months after such termination. In no event would the Company be required to pay a termination fee on more than one occasion.

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        The merger agreement provides that Parent shall fund to the Company (through the escrow agreement) a $1 million penalty loan on terms more fully set forth below in the section entitled "The Bridge Loan Agreement and the Penalty Loan," beginning on page 88 (which we refer to as the "penalty loan") if the Company terminates the merger agreement due to uncured material breaches of the merger agreement by the Buyer Entities or if Parent fails to consummate the merger when all conditions to closing are satisfied or waived (other than those conditions that would be and are capable of being satisfied at closing) and the Company has irrevocably notified Parent that it is ready, willing and able to consummate the merger.

        If the merger agreement is terminated and the Company is obligated to pay any termination fee (or if the Company terminates the merger agreement on or before the initial go-shop end date to enter into a superior proposal), then Parent is also entitled to reimbursement of certain reasonable, out of pocket costs and expenses, which reimbursement is payable in addition to the applicable termination fee.

Costs and Expenses

        Except as expressly set forth in the merger agreement, all other costs and expenses incurred in connection with the merger agreement will be paid by the party incurring such costs and expenses.

Governing Law

        The merger agreement is governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflicts of law rules of such state.

Amendments and Waiver

        Any provision of the merger agreement may be amended or waived prior to the effective time only by an amendment or waiver in writing and signed, in the case of an amendment, by each party to the merger agreement or, in the case of a waiver, by each party against whom the waiver is to be effective. However, without the further approval of the Company stockholders, no such amendment or waiver may be made or given after Company stockholders have adopted and approved the merger agreement as described in this proxy statement that requires the approval of the Company stockholders under the DGCL unless the required further approval of the Company stockholders is obtained.

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THE VOTING AGREEMENT

        The Gregory H. Sachs Revocable Trust UDT Dtd. 4/24/98, White Knight Capital Management LLC and 2011 Sachs Family Trust, which are each Company stockholders affiliated with Mr. Sachs, entered into a Voting Agreement (which we refer to as the "voting agreement") with the Company, dated as of April 2, 2018, pursuant to which such stockholders have agreed to vote all shares of Company common stock held by such stockholders in favor of the merger proposal and not to transfer such shares during the term of the voting agreement. These stockholders collectively own approximately [18]% of the outstanding shares of Company common stock as of the record date. The voting agreement will terminate upon the consummation of the merger or the termination of the merger agreement.


THE BRIDGE LOAN AND THE PENALTY LOAN

        In connection with the merger agreement, on April 2, 2018, the Company and certain of its subsidiaries (which we refer to as the "Borrowers") entered into a Subordinated Loan and Security Agreement (which we refer to as the "bridge loan agreement") with SCG Digital Financing, LLC (which we refer to as the "Lender"), dated as of April 2, 2018, pursuant to which the Lender agreed to make available to the Borrowers a bridge loan (which we refer to as the "bridge loan") in the principal amount of $2 million. The Lender is an affiliate of Mr. Sachs, Parent and Merger Sub. In the event that the merger agreement is terminated by the Company due to a material breach of the merger agreement by Parent or Merger Sub or in the event that Parent or Merger Sub fail to consummate the merger when otherwise obligated to do so pursuant to the terms and conditions of the merger agreement, the merger agreement provides for Parent to make a penalty loan to the Company upon termination of the merger agreement (which we refer to as the "penalty loan," and the bridge loan together with the penalty loan we refer to as the "subordinated loans"). The penalty loan would be funded through the Escrow Agreement (which we refer to as the "escrow agreement"), dated as of April 23, 2018, among the Company, Parent, Merger Sub, Lender and Citibank, as escrow agent, pursuant to which Lender has deposited a letter of credit in the amount of $1,000,000 to secure Parent's obligation to fund the penalty loan, if required pursuant to the merger agreement. If the penalty loan is funded pursuant to the terms of the merger agreement, the penalty loan will also be a credit extension under the bridge loan agreement and subject to its terms. The subordinated loans are secured by a second priority lien in all of the assets of the Borrowers. The bridge loan matures on the later of April 2, 2019 or, if the penalty loan is funded, one year following the funding of the penalty loan, at which time all outstanding principal and interest on the subordinated loans are due. No principal payments are required under either the bridge loan or the penalty loan prior to maturity and, except in limited circumstances, no principal payments are permitted prior to the first anniversary of the closing date. Interest on the bridge loan accrues at a per annum cash interest rate equal to 8.0% above the prime rate plus 2.0% paid-in-kind and interest on the penalty loan will accrue at a per annum paid-in-kind interest rate equal to 5% above the prime rate. If the bridge loan is prepaid prior to the stated maturity date thereof in connection with the Company entering into a superior proposal, the Borrowers are obligated to pay a prepayment premium equal to the interest the loans would have accrued if they had remained outstanding through maturity. During an event of default, the rate of interest on the subordinated loans would increase to 2.5% above the otherwise applicable rate, until such event of default is cured or waived. All accrued and unpaid cash interest is payable quarterly on the last day of each fiscal quarter. Upon the occurrence of certain events (including the failure of the merger agreement to be adopted and approved by holders of a majority of the outstanding shares of Company common stock, excluding shares held by (i) Parent or Merger Sub or any of their respective affiliates, including Gregory H. Sachs, the Company's executive chairman, (ii) any rollover investors and (iii) any of the Company's executive officers), the Lender has the right to convert principal and accrued interest outstanding under the bridge loan into shares of Series A Preferred Stock of the Company on the terms set forth in the bridge loan agreement.

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PROPOSAL 1—VOTE ON ADOPTION AND APPROVAL OF THE MERGER AGREEMENT

        As discussed elsewhere in this proxy statement, at the special meeting Company stockholders will consider and vote on a proposal to adopt and approve the merger agreement. You should carefully read this proxy statement in its entirety for more detailed information concerning the merger agreement, the merger and the other transactions contemplated by the merger agreement. In particular, you should read in its entirety the merger agreement, which is attached as Annex A to this proxy statement. For more information please see the discussion in the sections entitled "Special Factors," beginning on page 20, and "The Merger Agreement," beginning on page 70, in this proxy statement.

        The Company board of directors recommends that you vote "FOR" the proposal to adopt and approve the merger agreement (which we refer to as the "merger proposal").

        If you submit your proxy, but do not indicate instructions to vote your shares of Company common stock for, against or abstain on the merger proposal, your shares will be voted "FOR" the merger proposal.

        The merger proposal requires the affirmative vote in person by proxy of holders of at least both (1) a majority of the outstanding shares of Company common stock entitled to vote at the special meeting and (2) a majority of the outstanding shares of Company common stock, excluding shares held by (i) Parent or Merger Sub or any of their respective affiliates, including Gregory H. Sachs, the Company's executive chairman, (ii) any rollover investors, and (iii) any of the Company's executive officers. Parent and the Company may, if they choose, elect to waive the voting requirement set forth in clause (2) above, but may not waive the requirement set forth in clause (1). If you mark "Abstain" on your proxy card, fail to submit a proxy card or vote in person at the special meeting, or fail to instruct your bank, broker or other nominee how to vote, it will have the same effect as a vote "AGAINST" the merger proposal.

        Certain Company stockholders, who are affiliates of Gregory H. Sachs and who collectively own approximately [18]% of the outstanding shares of Company common stock as of the record date, entered into a voting agreement with the Company pursuant to which, among other things, each of them has agreed to vote its shares of Company common stock in favor of the adoption and approval of the merger agreement.

        The directors and executive officers of the Company have informed the Company that, as of the date of the filing of this proxy statement, and to the extent they own shares of Company common stock, they intend to vote in favor of the merger proposal.


PROPOSAL 2—ADVISORY VOTE ON MERGER-RELATED COMPENSATION FOR THE COMPANY'S NAMED EXECUTIVE OFFICERS

Merger-Related Compensation Proposal

        Pursuant to Section 14A of the Exchange Act and Rule 14a-21(c) thereunder, the Company is seeking a non-binding, advisory stockholder approval of the compensation that named executive officers of the Company may receive in connection with the merger pursuant to agreements or arrangements with the Company as disclosed in this proxy statement in the section entitled "Special Factors—Interests of the Company's Directors and Officers in the Merger," beginning on page 51 (which we refer to as the "compensation proposal"). The proposal gives the Company stockholders the opportunity to express their views on the merger-related compensation of the Company's executive officers.

        Accordingly, the Company is requesting stockholders to adopt the following resolution, on a non-binding, advisory basis:

    "RESOLVED, that the compensation that will or may be paid or become payable to the Company's named executive officers, in connection with the merger, and the agreements or

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    understandings pursuant to which such compensation will or may be paid or become payable, in each case as disclosed pursuant to Item 402(t) of Regulation S-K in the section entitled 'Special Factors—Interests of the Company's Directors and Officers in the Merger' are hereby APPROVED."

The Company board of directors recommends that you vote "FOR" the compensation proposal.

        If you submit your proxy, but do not indicate instructions to vote your shares of Company common stock for, against or abstain on the compensation proposal, your shares will be voted "FOR" the compensation proposal.

        Approval, on a non-binding, advisory basis, of the compensation proposal requires the affirmative vote of a majority of the votes cast at the special meeting by Company stockholders present in person or by proxy at the special meeting and entitled to vote thereon. If you mark "Abstain" on your proxy card, it will have the same effect as a vote "AGAINST" the compensation proposal. If you fail to submit a proxy card or vote in person at the special meeting, or fail to instruct your bank, broker or other nominee how to vote with respect to the compensation proposal, it will have no effect on the compensation proposal.

        The directors and executive officers of the Company have informed the Company that, as of the date of the filing of this proxy statement, and to the extent they own shares of Company common stock, they intend to vote in favor of the compensation proposal.


PROPOSAL 3—VOTE ON ONE OR MORE ADJOURNMENTS OR POSTPONEMENTS OF THE SPECIAL MEETING, IF NECESSARY OR APPROPRIATE

        If, at the special meeting, the number of shares of Company common stock present or represented by proxy and voting in favor of the merger proposal is insufficient to approve the merger proposal, the Company intends to ask its stockholders to vote to adjourn the special meeting to another time or place to allow for the solicitation of additional proxies to approve the merger proposal. In this event, the Company will request that the stockholders vote on the adjournment proposal and not the merger proposal. The Company does not intend to call a vote on the adjournment proposal if the merger proposal has been approved at the special meeting.

        Accordingly, the Company board of directors is asking its stockholders to authorize the holder of any proxy solicited by the Company board, and each of them individually, to vote in favor of adjourning the special meeting to another time and place for the purpose of soliciting additional proxies. If the Company requests a vote on the adjournment proposal and the Company stockholders approve this proposal, the Company could adjourn the special meeting and use this additional time to solicit proxies from its stockholders, including those stockholders who have previously voted.

The Company board of directors recommends that you vote "FOR" the adjournment proposal.

        If you submit your proxy, but do not indicate instructions to vote your shares of Company common stock for, against or abstain on the adjournment proposal, your shares will be voted "FOR" the adjournment proposal.

        Whether or not a quorum is present, approval of the adjournment proposal requires the affirmative vote of a majority of the votes cast at the special meeting by Company stockholders present in person or by proxy at the special meeting and entitled to vote thereon. If you mark "Abstain" on your proxy card, it will have the same effect as a vote "AGAINST" the adjournment proposal. If you fail to submit a proxy card or vote in person at the special meeting, or fail to instruct your bank, broker or other nominee how to vote with respect to the adjournment proposal, it will have no effect on the adjournment proposal.

        The directors and executive officers of the Company have informed the Company that, as of the date of the filing of this proxy statement, and to the extent they own shares of Company common stock, they intend to vote in favor of the adjournment proposal.

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PROVISIONS FOR UNAFFILIATED STOCKHOLDERS

        No provision has been made (i) to grant the Company's unaffiliated stockholders access to the corporate files of the Company, any other party to the merger or any of their respective affiliates, or (ii) to obtain counsel or appraisal services at the expense of the Company, any other such party or affiliate.

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IMPORTANT INFORMATION ABOUT THE COMPANY

Directors and Executive Officers

        The following information sets forth the names, ages, titles of our directors and executive officers, their present principal occupation and their business experience during the past five years. During the last five years, none of the Company, its executive officers or directors has been (i) convicted in a criminal proceeding (excluding traffic violations and similar misdemeanors) or (ii) a party to any judicial or administrative proceeding (except for matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining such person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws. All of the directors and executive officers listed below are U.S. citizens. The business address of each of the director or officer listed below is c/o RMG Networks Holding Corporation, 15301 North Dallas Parkway, Suite 500, Addison, Texas 75001; (800) 827-9666.

Directors

        Robert Michelson, 62, has served as our Chief Executive Officer and President and a member of our board of directors since July 2014. Prior to joining us, Mr. Michelson served as President of Share Rocket, Inc., a company that provides social media ratings globally, from April 2014 to July 2014. From January 2009 to December 2012, Mr. Michelson was an operating partner with Sterling Partners, a private equity firm, overseeing portfolio companies in the technology services, business services, and education sectors. Prior to joining Sterling Partners, Mr. Michelson served as Chief Executive Officer of Goliath Solutions, a technology and marketing services company providing data and data analytics to Fortune 500 companies, and as a Division President of IXL, a digital technology solutions and consulting services company. Prior to that, Mr. Michelson held a number of sales, marketing and senior roles with technology and services companies and began his career with IBM as a systems engineer and marketing representative in 1978. Mr. Michelson received a B.S. degree in Marketing and Finance from Indiana University and sits on the boards of several education-focused non-profit companies.

        Gregory H. Sachs, 52, served as our Chairman, Chief Executive Officer, and President from inception until the consummation of our acquisition of Reach Media Group Holdings in April 2013, at which time he became our executive chairman. Since 2008, he has been Chairman and Chief Executive Officer of Sachs Capital Group LP. From 1993 to 2008 he was Chairman and Chief Executive Officer of Deerfield Capital Management which he founded and oversaw its growth from a fixed income hedge fund with $15 million in assets under management to a global diversified alternative fixed income investment manager with approximately $15 billion in assets under management. While at Deerfield, Mr. Sachs oversaw the management of Deerfield Capital Corp, a publicly traded (NYSE/NASDAQ: DFR) specialty finance company that invested in various credit related asset classes. Deerfield Capital Corp. had gross assets in excess of $8 billion at the time Mr. Sachs sold his interest in Deerfield. Prior to founding Deerfield, Mr. Sachs was Vice President and Trading Manager for Harris Trust and Savings Bank's Global Fixed Income Trading Division. Mr. Sachs is an Adjunct Professor at USC Marshall School of Business in Los Angeles where he teaches a course on building an Alternative Asset Management business to second-year Graduate Students in the Lloyd Greif Center for Entrepreneurial Studies. Mr. Sachs also serves on the Board of Trustees of Chicago's Shedd Aquarium, is Vice-Chairman of the Federal Enforcement Homeland Security Foundation and is a former board member of the Ann & Robert H. Lurie Children's Hospital of Chicago Foundation. He is a former board member of the Triarc Companies (NYSE: TRY) from 2004 to 2007, Deerfield Capital Corp. (NYSE/NASDQ: DFR) from 2005 to 2007 and the Futures Industry Association. Mr. Sachs also has extensive experience investing in public and private companies for his own account. Mr. Sachs graduated from the University of Wisconsin at Madison in 1988 with both an M.S. degree in Quantitative Analysis and Finance and a B.B.A. degree in Actuarial Science and Quantitative Analysis.

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        Jeffrey Hayzlett, 57, has been a member of our board of directors since April 2013. Mr. Hayzlett is the Chief Executive Officer of The Hayzlett Group, a provider of strategic business consulting services he founded in May 2010, and of TallGrass Public Relations, a public relations firm he founded in July 2010. From May 2006 to May 2010, Mr. Hayzlett served as Chief Marketing Officer at Eastman Kodak Company. Prior to that, he founded a private business development and public relations firm specializing in the technology and visual communications industries, and held senior management positions in strategic business development and marketing at several companies, including Cenveo, Webprint and Colorbus, Inc. He has also served in staff positions in the United States Senate and House of Representatives. Mr. Hayzlett serves on the boards of several private companies, including itracks and Vdopia and the board of publicly traded LiveWorld, Inc. (LVWD).

        Alan Swimmer, 58, has been a member of our board of directors since April 2013. Currently, he is a private investor focusing on both public and non-public types of investments. He has served as Managing Director of Environmental Financial Products, a derivatives research and new product development firm. Previously, he served as President of Prescient Ridge Management (which we refer to as "PRM"), a commodity trading advisor. Prior to PRM Mr. Swimmer spent over 26 years in the futures and options industry, building and running futures commission merchant businesses including from 2002 to 2008 as head of U.S. futures at Bear Stearns and then as head of North American futures sales at JP Morgan following its purchase of Bear Stearns. Prior to Bear Stearns, Mr. Swimmer was with Citigroup from 1990-2002 and was head of its Chicago futures office. Mr. Swimmer received a B.A. in psychology from Washington University in St. Louis, where he is currently Vice Chair of the Alumni Board of Governors. Mr. Swimmer has been on the Board of Directors of the Minneapolis Grain Exchange since 2008.

        Jonathan Trutter, 60, has been a member of our board of directors since April 2013. Mr. Trutter previously served as the Chief Executive Officer of the Deerfield Capital Corp. (NYSE/NASDAQ: DFR) from its founding in December 2004 until April 2011 and the Chief Executive Officer and Chief Investment Officer of Deerfield Capital Management LLC, an indirect wholly-owned subsidiary of Deerfield Capital Corp., from 2007 to 2011. Upon the merger of CIFC Corp. and Deerfield Capital Corp. in 2011, Mr. Trutter became Vice Chairman of the board of CIFC Corp. Mr. Trutter left the board of CIFC Corp. in May 2012. From 1989 to 2000 Mr. Trutter was a Managing Director of Scudder Kemper Investments, and served as a member of the firm's Fixed Income Management Committee. Mr. Trutter received a B.A. from the University of Southern California and M.M. from the J.L. Kellogg Graduate School of Management at Northwestern University. He is a Certified Public Accountant.

        Larry Weber, 61, has been a member of our board of directors since June 2017. He has served as the Chief Executive Officer and Chairman of the Board of Racepoint Global, Inc., a digital marketing services ecosystem of marketing service companies organized to help chief marketing officers in their role as builders of communities and content aggregators, since he founded the company in September 2004. Mr. Weber has served on the board of directors of Pegasystems, Inc., a software company listed on the Nasdaq stock market, since August 2012. From 2011 to 2013, Mr. Weber also served on the board of Avectra, a provider of web-based association management software (AMS) and social CRM software. In 2001, Mr. Weber founded Weber Shandwick, one of the largest public relations agencies in the world. He also served on the board of Vertro, Inc., an online advertising and search company, from June 2005 to March 2012, and as its Chairman from April 2006 to March 2012. Mr. Weber is also a co-Founder and Chairman of the Board of the Massachusetts Innovation & Technology Exchange (MITX), one of the largest interactive advocacy organizations in the world. Mr. Weber has authored five books: Marketing to the Social Web: How Digital Customer Communities Build Your Business; Everywhere: Comprehensive Digital Business Strategy for the Social Media Era; Sticks and Stones: How Digital Business Reputations are Built Over Time and Lost in a Click; The Digital Marketer: Ten New Skills You Must Learn to Stay Relevant and Customer-Centric; and The Provocateur: How a New Generation of

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Leaders are Building Communities, Not Just Companies. Mr. Weber holds a B.A. in English from Denison University, Ohio and an M.F.A. in Writing and Literature from Antioch College, Oxford.

Executive Officers

        Jana Ahlfinger Bell, 54, was appointed as our Executive Vice President and Chief Financial Officer in April 2015. Prior to joining the Company, Ms. Bell served as Chief Financial Officer of EF Johnson Technologies, Inc., a provider of secure communications solutions, from March 2005 to April 2015. Prior to that, Ms. Bell served as President and Chief Executive Officer of Simple Products Inc., an early stage developer of innovative handset and network technologies for the disposable wireless market, from January 2003 until February 2005. She served as Chief Executive Officer, President, and a director of @TRACK Communications, Inc., a provider of integrated wireless voice, data, and location technologies from September 1998 until September 2002. From June 1998 until September 1998, she served as Executive Vice President and Chief Financial Officer of @TRACK. From March 1992 to June 1998, she was employed in a variety of capacities by AT&T Wireless Services and by its predecessors, LIN Broadcasting and McCaw Cellular Communications, Inc. including Vice President and Chief Financial Officer of the Southwest Region. Ms. Bell practiced public accounting for Ernst & Young LLP, last serving as an audit manager, and is a Certified Public Accountant. She holds a BBA in Accounting from Texas A&M University.

        Robert R. Robinson, 55, joined as our Senior Vice President and General Counsel in August 2015 and was appointed Secretary in November 2015. Prior to joining the Company, Mr. Robinson served as Chief Legal Officer of Hyla, Inc., a provider of cell phone recycling services, from November 2012 to April 2015. Prior to that, Mr. Robinson served as Senior Vice President, General Counsel & Secretary of BancTec, Inc., a manufacturer of large scanning and document handling equipment and a provider of outsourcing services, from June 2008 until November 2012. Before then, Mr. Robinson served in a variety of legal roles for Affiliated Computer Services, Inc., concluding with the title of Senior Vice President and Deputy General Counsel—Corporate, from July 2003 until January 2008. Prior to then, Mr. Robinson served as General Counsel and Vice President of Business Development for Renew Data Corp, Vice President and General Counsel—Americas for Vignette Corp., Staff Counsel for Fair, Isaac & Co., Inc., and as an associate attorney for Pillsbury Madison & Sutro LLP. Mr. Robinson also served for six years on active duty with the United States Navy and retired from the Navy Reserves in 2005. He holds a B.S. in Materials Science & Engineering from the Massachusetts Institute of Technology and a J.D. from the University of California at Berkeley.

Ratio of Earnings to Fixed Charges

        The following presents our ratio of earnings to fixed charges for the three months ended March 31, 2018 and 2017 and the years ended December 31, 2017 and 2016, which should be read in conjunction with our consolidated financial statements included in our Quarterly Report on Form 10-Q for the three months ended March 31, 2018 and our Annual Report on Form 10-K for the year ended December 31, 2017, which are attached as Annex E and Annex D, respectively, and are incorporated by reference into this proxy statement.

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Computation of Ratio of Earnings to Fixed Charges

 
  Three Months
Ended March 31,
  Years Ended
December 31,
 
 
  2018   2017   2017   2016  
 
  (Unaudited, Dollars in thousands)
 

Earnings

                         

Loss before income taxes and discontinued operations

  $ (2,859 ) $ (1,274 ) $ (5,141 ) $ (4,367 )

Add: Fixed charges, exclusive of capitalized interest

    39     40     144     283  

Total

  $ (2,820 ) $ (1,234 ) $ (4,997 ) $ (4,084 )

Fixed Charges

                         

Interest expense

  $ 39   $ 39   $ 143   $ 275  

Interest portion of rental expense

        1     1     8  

Capitalized interest

                 

Total

  $ 39   $ 40   $ 144   $ 283  

Ratio of earnings to fixed charges

    *     *     *     *  

*
Earnings were insufficient to cover fixed charges by approximately $5.1 million and $4.4 million for the years ended December 31, 2017 and 2016, respectively, and by approximately $2.9 million and $1.3 million for the three months ended March 31, 2018 and 2017, respectively.

Book Value Per Share

        Our net book value per share as of March 31, 2018 was approximately $0.27 (calculated based on 11,156,257 shares of Company common stock outstanding as of such date).

Market Price and Dividend Data

Market Price

        The Company common stock is listed for trading on the Nasdaq Capital Market under the symbol "RMGN". On May 9, 2018, the latest practicable date prior to the filing of this proxy statement, there were 20 holders of record. The table below shows the high and low sales prices of shares of Company common stock, as reported on the Nasdaq Capital Market, for the periods indicated (after giving effect to a 1-for-4 reverse stock split effected in August 2017).

 
  High   Low  

Fiscal Year 2016

             

First quarter

  $ 4.68   $ 2.40  

Second quarter

  $ 4.76   $ 3.28  

Third quarter

  $ 5.20   $ 3.24  

Fourth quarter

  $ 3.60   $ 2.36  

Fiscal Year 2017

             

First quarter

  $ 4.44   $ 2.48  

Second quarter

  $ 3.60   $ 2.36  

Third quarter

  $ 3.00   $ 1.55  

Fourth quarter

  $ 2.73   $ 0.75  

Fiscal Year 2018

   
 
   
 
 

First quarter

  $ 2.50   $ 0.76  

Second quarter (April 1, 2018 through May 9, 2018)

  $ 1.51   $ 1.01  

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        At the effective time, each share of Company common stock issued and outstanding immediately prior to the effective time (except for the excluded shares) will be cancelled and converted into the right to receive the merger consideration of $1.27 in cash without interest.

        On May 9, 2018, the latest practicable date prior to the filing of this proxy statement, the closing price for Company common stock on the Nasdaq Capital Market was $1.17 per share. You are encouraged to obtain current market quotations for shares of Company common stock in connection with voting your shares.

Dividend Data

        The Company has not declared or paid dividends on Company common stock during fiscal years 2016, 2017 or 2018.

        Under the terms of the merger agreement, from the date of the merger agreement until the effective time, the Company may not, nor may we permit any of our subsidiaries to, establish a record date, declare, set aside or pay any dividends on, or make any other distributions (whether in cash, stock, property or otherwise) in respect of any capital stock of the Company or any of our subsidiaries, other than dividends and distributions by a direct or indirect wholly-owned subsidiary of the Company to the Company or any of our other wholly-owned subsidiaries (except distributions resulting from the vesting, settlement, exercise or terms of Company stock options or other equity awards).

        Under the terms of the Company's senior loan agreement and the bridge loan agreement, the Company may not, nor may we permit any of our subsidiaries to, pay any dividends or make any distribution or payment or redeem, retire or repurchase any capital stock other than the repurchase of capital stock from former employees or consultants pursuant to stock repurchase agreements (so long as an event of default does not exist at the time of such repurchase and would not exist after giving effect to such repurchase, and provided that the aggregate amount of all such repurchases does not exceed $250,000 per fiscal year).

Security Ownership of Certain Beneficial Owners and Management

        The Company has determined beneficial ownership in accordance with the rules of the SEC. Except as indicated by the footnotes below, the Company believes, based on the information furnished to us, that the persons and entities named in the tables below have voting and investment power with respect to all shares of Company common stock that they beneficially own, subject to applicable community property laws. A person is deemed to be a beneficial owner of any security of which that person has the right to acquire beneficial ownership within 60 days from the date of determination. The footnotes to the tables indicate how many shares each person has the right to acquire within 60 days of April 15, 2018, along with any Company equity awards that vest within 60 days of April 15, 2018. The Company has based the calculation of the percentage of beneficial ownership on 11,156,257 shares of Company common stock outstanding as of April 15, 2018 plus, with respect to each person, the number of shares that person has the right to acquire within 60 days of April 15, 2018 including shares resulting from Company equity awards that vest within 60 days of April 15, 2018.

        SCG Digital Merger Sub, Inc., SCG Digital, LLC, SCG Digital Holdings, LLC, SCG Digital Financing, LLC, and Sachs Capital Group LP do not currently have any beneficial ownership in the Company.

Security Ownership of Certain Beneficial Owners

        The following table sets forth the Company common stock beneficially owned as of April 15, 2018 by each stockholder known to the Company, based on public filings made with the SEC as of April 15, 2018, to beneficially own more than 5% of the Company's outstanding common stock. Except as

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indicated in the footnotes to this table, the persons or entities named have sole voting and investment power with respect to all shares of our common stock shown as beneficially owned by them.

Name of Beneficial Owner
  Number of
Shares
Beneficially
Owned
  Approximate
percentage of
outstanding
Shares
 

Children's Trust C/U the Donald R. Wilson 2009 GRAT #1(1)

    3,078,584     27.6 %

Gregory H. Sachs(2)

    2,012,258     18.0 %

Donald R. Wilson, Jr.(3)

    1,172,800     10.5 %

(1)
Based on a Schedule 13D (as adjusted for a 1-for-4 reverse stock split effected on August 14, 2017) filed by 2012 DOOH Investments LLC ("DOOH Investments"), DOOH Investment Manager LLC ("DOOH Manager"), DRW Holdings, LLC ("DRW Holdings"), DRW Commodities, LLC ("DRW Commodities"), Donald R. Wilson, Jr. ("Wilson") and Children's Trust C/U The Donald R. Wilson 2009 GRAT #1 (the "Children's Trust"), as amended (including by Amendment No. 10 filed on January 4, 2017) (as so amended, the "Schedule 13D"), the natural person with ultimate voting and investment control over the shares directly held by the selling securityholder is Jennifer Wilson, trustee, and the principal business address of the Children's Trust is 540 W. Madison Street, Suite 2500, Chicago, Illinois 60661.

(2)
Includes (i) 1,873,656 shares held by White Knight Capital Management LLC, an affiliate of Mr. Sachs, (ii) 109,364 shares held by The Gregory H. Sachs Revocable Trust (the "Revocable Trust") and (iii) 29,238 shares held by the 2011 Sachs Family Trust (the "Family Trust"). Mr. Sachs is the trustee and beneficiary of the Revocable Trust and the children of Mr. Sachs are the beneficiaries under the Family Trust. Mr. Sachs disclaims beneficial ownership of any securities of the Company over which he does not have a pecuniary interest. The principal business address of Mr. Sachs is 2132 Deep Water Lane, Suite 232, Naperville, IL 60564.

(3)
Based on the Schedule 13D (as adjusted for a 1-for-4 reverse stock split effected on August 14, 2017). Consists of (i) 712,229 shares held by DRW Commodities and (ii) 460,571 shares held by DOOH Investments. Each of Wilson, DOOH Manager and DOOH Investments may be deemed to have sole voting and sole dispositive power with respect to the shares of Common Stock held by DOOH Investments. In addition, Wilson is the sole manager of DRW Commodities and DRW Holdings, which owns 100% of the outstanding equity of DRW Commodities, and, as such, each of Wilson, DRW Holdings and DRW Commodities may be deemed to have sole voting and sole dispositive power with respect to the shares of Common Stock held by DRW Commodities. The principal business address of Mr. Wilson is 540 W. Madison Street, Suite 2500, Chicago, Illinois 60661.

Security Ownership of Management

        The following table sets forth information about the beneficial ownership as of April 15, 2018 of Company common stock for each named executive officer, each director and all executive officers and directors as a group.

        Except as indicated in the footnotes to this table, the persons or entities named have sole voting and investment power with respect to all shares of our common stock shown as beneficially owned by

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them. Unless otherwise noted below, the address of each beneficial owner listed on the table is c/o RMG Networks Holding Corporation, 15301 North Dallas Parkway, Suite 500, Addison, TX 75001.

Name of Beneficial Owner
  Number of
Shares
Beneficially
Owned
  Approximate
percentage of
outstanding
Shares
 

Gregory H. Sachs(1)

    2,012,258     18.0 %

Robert Michelson(2)

    210,105     1.9 %

Alan Swimmer

    77,312     0.7 %

Jana Ahlfinger Bell(3)

    62,385     0.6 %

Robert R. Robinson(4)

    16,917     *  

Jonathan Trutter

    4,808     *  

Jeffrey Hayzlett

    2,670     *  

Lawrence Weber

        *  

All directors and executive officers as a group (eight individuals)

    2,386,455     21.0 %

*
Less than 1%.

(1)
Includes (i) 1,873,656 shares held by White Knight Capital Management LLC, an affiliate of Mr. Sachs, (ii) 109,364 shares held by the Revocable Trust and (iii) 29,238 shares held by the Family Trust. Mr. Sachs is the trustee and beneficiary of the Revocable Trust and the children of Mr. Sachs are the beneficiaries under the Family Trust. Mr. Sachs disclaims beneficial ownership of any securities of the Company over which he does not have a pecuniary interest. The principal business address of Mr. Sachs is 2132 Deep Water Lane, Suite 232, Naperville, IL 60564.

(2)
Includes 154,167 shares which Mr. Michelson has the right to acquire upon the exercise of options exercisable within 60 days of April 15, 2018.

(3)
Includes 26,667 shares which Ms. Bell has the right to acquire upon the exercise of options exercisable within 60 days of April 15, 2018.

(4)
Includes 16,667 shares which Mr. Robinson has the right to acquire upon the exercise of options exercisable within 60 days of April 15, 2018.

Prior Public Offerings

        In December 2016, the Company completed a rights offering (which we refer to as the "December 2016 Rights Offering") whereby the Company sold 7,741,908 shares of Company common stock at a price of $0.62 per share. As adjusted for a 1-for-4 reverse stock split effected on August 14, 2017, the Company sold 1,935,477 shares of Company common stock at a price of $2.48 per share. The Company received aggregate net proceeds from the December 2016 Rights Offering of approximately $4.4 million, net of $0.4 million in transaction expenses payable by the Company.

Transactions in Common Stock

Transactions in Company Common Stock During the Past 60 Days

        Other than the merger agreement and agreements entered into in connection therewith, including the voting agreement, discussed under "The Voting Agreement," beginning on page 88, the Company, Parent, Merger Sub and Lender and their respective affiliates have not made any transactions with respect to the Company common stock during the past 60 days.

        The outstanding warrants of the Company expired in accordance with their terms on April 8, 2018.

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Transactions in Company Common Stock by the Company During the Past Two Years

        The Company has not made any repurchases of Company common stock during the past two years.

Transactions in Company Common Stock by the Parent Parties During the Past Two Years

        White Knight Capital Management, LLC acquired 161,291 shares of the Company common stock in the December 2016 Rights Offering for a purchase price of $0.62 a share.

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IMPORTANT INFORMATION ABOUT THE PARENT PARTIES

SCG Digital Merger Sub, Inc.

        SCG Digital Merger Sub, Inc. is a Delaware corporation formed in 2018 solely for the purpose of acquiring the Company and is a wholly-owned subsidiary of SCG Digital, LLC. Upon completion of the merger, SCG Digital Merger Sub, Inc. will cease to exist. The business address of SCG Digital Merger Sub, Inc. is 2132 Deep Water Lane, Suite 232, Naperville, IL 60564 and its business telephone number is (312) 784-3956. The sole director and officer of SCG Digital Merger Sub, Inc. is Gregory H. Sachs.

SCG Digital, LLC

        SCG Digital, LLC, a Delaware limited liability company, is a special purpose vehicle formed in 2018 solely in anticipation of the merger by entities affiliated with Gregory H. Sachs, the Company's executive chairman. SCG Digital, LLC is owned by SCG Digital Holdings, LLC. Upon completion of the merger, the Company will be a direct wholly-owned subsidiary of SCG Digital, LLC. The business address of SCG Digital, LLC is 2132 Deep Water Lane, Suite 232, Naperville, IL 60564 and its business telephone number is (312) 784-3956. The sole officer of SCG Digital, LLC is Gregory H. Sachs.

SCG Digital Holdings, LLC

        SCG Digital Holdings, LLC is a Delaware limited liability company that is the result of the conversion of SCG Digital Holdings, Inc. from a Delaware corporation into a Delaware limited liability company in 2018. SCG Digital Holdings, Inc. was formed in 2018. SCG Digital Holdings, LLC is the parent of SCG Digital, LLC and is owned by Sachs Capital Group LP, a Delaware limited partnership that is controlled by Gregory H. Sachs. The purpose and principal business of SCG Digital Holdings, LLC is to be a holding entity for SCG Digital, LLC. Rollover investors will receive an equity interest in SCG Digital Holdings, LLC. The business address of SCG Digital Holdings, LLC is 2132 Deep Water Lane, Suite 232, Naperville, IL 60564 and its business telephone number is (312) 784-3956. The sole manager and officer of SCG Digital Holdings, LLC is Gregory H. Sachs.

SCG Digital Financing, LLC

        SCG Digital Financing, LLC, a Delaware limited liability company, is a special purpose vehicle formed in 2018 solely in anticipation of the merger and the bridge loan by entities affiliated with Gregory H. Sachs, the Company's executive chairman. Lender is owned by Sachs Capital Group LP, a Delaware limited partnership that is controlled by Gregory H. Sachs. The business address of SCG Digital Financing, LLC is 2132 Deep Water Lane, Suite 232, Naperville, IL 60564 and its business telephone number is (312) 784-3956. The sole officer of SCG Digital Financing, LLC is Gregory H. Sachs.

Sachs Capital Group LP

        Sachs Capital Group LP is a Delaware limited partnership whose primary business is to make investments. Sachs Capital Group LP is the parent of SCG Digital Holdings, LLC and is controlled by Gregory H. Sachs. The general partner of Sachs Capital Group LP is Redleaf Holdings, LLC. Redleaf Holdings, LLC is managed by Redleaf Management Company, LLC. The managers of Redleaf Management Company, LLC are Madhu Patel and Michelle Sibley. The business address of each of Sachs Capital Group LP, Redleaf Holdings, LLC, Redleaf Management Company, LLC, Madhu Patel and Michelle Sibley is 2132 Deep Water Lane, Suite 232, Naperville, IL 60564 and the business telephone number of each such person is (312) 784-3956. Redleaf Holdings, LLC is an Illinois limited liability company and its principal business is to serve as the general partner of Sachs Capital Group LP. Redleaf Management Company, LLC is a Delaware limited liability company and its principal business is to serve as the manager of Redleaf Holdings, LLC. Michelle Sibley's primary

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occupation is to be the chief financial officer of Sachs Capital Group LP and its affiliates. Madhu Patel's primary occupation is to be the controller of Sachs Capital Group LP and its affiliates. Ms. Sibley and Mr. Patel are both United States citizens.

The Gregory H. Sachs Revocable Trust UDT Dtd. 4/24/98

        The Gregory H. Sachs Revocable Trust UDT Dtd. 4/24/98 is an Illinois trust with the purpose and principal business of investing in enterprises and is controlled by Mr. Sachs. The business address of The Gregory H. Sachs Revocable Trust UDT Dtd. 4/24/98 is 2132 Deep Water Lane, Suite 232, Naperville, IL 60564 and its business telephone number is (312) 784-3956. The sole trustee of The Gregory H. Sachs Revocable Trust UDT Dtd. 4/24/98 is Gregory H. Sachs.

White Knight Capital Management LLC

        White Knight Capital Management LLC is an Illinois limited liability company formed with the purpose and principal business of investing in enterprises. The business address of White Knight Capital Management LLC is 2132 Deep Water Lane, Suite 232, Naperville, IL 60564 and its business telephone number is (312) 784-3956. White Knight Capital Management LLC is managed by Redleaf Management Company, LLC and does not have any other officers or managers.

2011 Sachs Family Trust

        2011 Sachs Family Trust is an Illinois trust with the purpose and principal business of investing in enterprises. The business address of 2011 Sachs Family Trust is 2132 Deep Water Lane, Suite 232, Naperville, IL 60564 and its business telephone number is (312) 784-3956. The sole trustee of 2011 Sachs Family Trust is Gerald M. Sachs. The business address of Gerald M. Sachs is 2132 Deep Water Lane, Suite 232, Naperville, IL 60564 and his business telephone number is (312) 784-3956. Gerald M. Sachs, a United States citizen, is retired.

Gregory H. Sachs

        Gregory H. Sachs is a natural person whose business address is 2132 Deep Water Lane, Suite 232, Naperville, IL 60564 and business telephone number is (312) 784-3956. Mr. Sachs primary occupation is to be an investor. In addition, Mr. Sachs was the Chairman, Chief Executive Officer, and President of the Company from inception until the consummation of our acquisition of Reach Media Group Holdings in April 2013, at which time he became our executive chairman. Since 2008, he has been Chairman and Chief Executive Officer of Sachs Capital Group LP. Mr. Sachs is an Adjunct Professor at USC Marshall School of Business in Los Angeles where he teaches a course on building an Alternative Asset Management business to second-year graduate students in the Lloyd Greif Center for Entrepreneurial Studies. Mr. Sachs also serves on the Board of Trustees of Chicago's Shedd Aquarium, is Vice-Chairman of the Federal Enforcement Homeland Security Foundation and is a former board member of the Ann & Robert H. Lurie Children's Hospital of Chicago Foundation. Mr. Sachs is a citizen of the United States.

Criminal and Other Judicial Matters

        No Parent Party nor their general partners, directors, managers, trustees and officers (as applicable) have been convicted in a criminal proceeding during the past five years (excluding traffic violations or similar misdemeanors). No Parent Party nor their general partners, directors, managers, trustees and officers (as applicable) has been a party to any judicial or administrative proceeding during the past five years (except for matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting

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activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws.


APPRAISAL RIGHTS

        If the Company stockholders adopt the merger agreement, stockholders who do not vote in favor of the proposal to adopt the merger agreement and who properly exercise and perfect their demand for appraisal of their shares of Company common stock, who do not effectively withdraw their demand or waive or lose the right to appraisal and who otherwise comply with the requirements for perfecting and preserving their appraisal rights will be entitled to appraisal rights in connection with the merger under Section 262 of the Delaware General Corporation Law (which we refer to as the "DGCL"), which we refer to as Section 262.

        The following discussion is not a complete statement of all applicable requirements pertaining to appraisal rights under the DGCL, and it is qualified in its entirety by reference to Section 262, the full text of which appears in Annex C to this proxy statement. The following summary does not constitute any legal or other advice, nor does it constitute a recommendation that stockholders exercise their appraisal rights under Section 262. Only a holder of record of the shares Company common stock is entitled to demand appraisal rights for the shares of Company common stock registered in that holder's name. A person having a beneficial interest in the shares of Company common stock held of record in the name of another person, such as a bank, broker, fiduciary, depositary or other nominee, who wished to exercise their appraisal rights must act promptly to cause the record holder to follow the steps summarized below properly and in a timely manner to perfect appraisal rights.

        As more fully described below, under Section 262, record holders of the shares of Company common stock who have neither voted in favor of, nor consented in writing to, the approval of the adoption of the merger agreement, who properly demand appraisal of their shares of Company common stock, who do not withdraw such demand or otherwise waive or lose their right to appraisal, who hold such shares of Company common stock, either of record or beneficially, on the date of making the demand for appraisal and continuously from the date of making the demand through the effective time and who otherwise follow the procedures set forth in Section 262 will be entitled to have their shares of Company common stock appraised by the Delaware Court of Chancery and to receive payment in cash of the fair value of such shares of Company common stock, exclusive of any element of value arising from the accomplishment or expectation of the merger, as determined by the Delaware Court of Chancery, together with interest, if any, to be paid upon the amount determined to be fair value. The "fair value" of your shares of Company common stock as determined by the Delaware Court of Chancery may be more or less than, or the same as, $1.27 the per share merger consideration that you are otherwise entitled to receive under the terms of the merger agreement. Strict compliance with the statutory procedures in Section 262 is required.

        Section 262 requires that, where a merger agreement is to be submitted for adoption at a meeting of stockholders, the corporation must, not less than 20 days before the meeting, notify each stockholder who was a stockholder on the record date set by the board of directors for such notice (or if no such record date is set, on the close of business on the day next preceding the day on which notice is given), with respect to such shares for which appraisal rights are available, that appraisal rights will be available. A copy of Section 262 must be included with such notice. This proxy statement constitutes the Company's notice to our stockholders that appraisal rights are available in connection with the merger, in compliance with the requirements of Section 262 and a copy of Section 262 is attached to this document as Annex C.

        ANY STOCKHOLDER WHO WISHES TO EXERCISE APPRAISAL RIGHTS, OR WHO WISHES TO PRESERVE SUCH STOCKHOLDER'S RIGHT TO DO SO, SHOULD CAREFULLY REVIEW THE FOLLOWING DISCUSSION AND ANNEX C BECAUSE FAILURE TO EXACTLY

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COMPLY WITH THE PROCEDURES SPECIFIED MAY RESULT IN THE LOSS OF APPRAISAL RIGHTS. MOREOVER, BECAUSE OF THE COMPLEXITY OF THE DGCL RELATING TO APPRAISAL RIGHTS, IF A STOCKHOLDER WISHES TO EXERCISE OR PRESERVE SUCH APPRAISAL RIGHTS, SUCH STOCKHOLDER SHOULD SEEK THE ADVICE OF LEGAL COUNSEL PROMPTLY.

        Company stockholders wishing to exercise the right to demand appraisal of their shares of Company common stock under Section 262 must satisfy each of the following conditions:

    The stockholder must not vote the stockholder's shares in favor of the adoption of the merger agreement. Because a proxy that does not contain voting instructions will, unless revoked, be voted in favor of the adoption of the merger agreement, a stockholder who wishes to exercise appraisal rights must provide instructions in any such proxy to vote against the adoption of the merger agreement or otherwise attend the special meeting and vote against the adoption of the merger agreement, or abstain from voting.

    As more fully described below, the stockholder must deliver to the Company a written demand for appraisal of the stockholder's shares before the vote on the adoption of the merger agreement at the special meeting is taken.

    The stockholder must hold the shares on the date of making the demand for appraisal and must continuously hold such shares from the date of making the demand through the effective time.

    The stockholder (or the surviving corporation in the merger) must file a petition in the Delaware Court of Chancery requesting a determination of the fair value of the shares within 120 days after the effective time. The surviving corporation of the merger is under no obligation to file any such petition and has no present intention of doing so. Accordingly, it is the obligation of the stockholder to initiate all necessary action to perfect his, her or its appraisal rights in respect of shares of Company common stock within the time prescribed in Section 262.

        If any stockholder who demands appraisal of shares of Company common stock under Section 262 fails to perfect, or otherwise loses or effectively withdraws, such holder's right to appraisal, the stockholder's shares will be deemed to have been converted at the effective time into the right to receive the merger consideration applicable to the shares, without interest and less applicable withholding taxes.

Written Demand

        If you elect to exercise your appraisal rights, you must deliver to the Company a written demand for appraisal of your shares of Company common stock before the vote is taken to approve the adoption of the merger agreement. That demand must be executed by or on behalf of the stockholder of record and must reasonably inform us of the identity of the holder of record of the shares and that the stockholder intends thereby to demand appraisal of his, her or its shares. Holders of the shares who desire to exercise their appraisal rights must not vote or submit a proxy in favor of the adoption of the merger agreement, nor consent thereto in writing. Voting against or failing to vote for the adoption of the merger agreement by itself does not constitute a demand for appraisal within the meaning of Section 262. The written demand for appraisal must be in addition to and separate from any proxy or vote on the merger agreement.

        A holder of record of the shares of Company common stock wishing to exercise appraisal rights must hold of record the shares on the date the written demand for appraisal is made and must continue to hold the shares of record through the effective time, because appraisal rights will be lost if the shares are transferred prior to the effective time. If you fail to comply with these conditions and the merger is completed, you will be entitled to receive payment for your shares as provided for in the merger agreement, but you will have no appraisal rights with respect to your shares. A proxy card that

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is submitted and does not contain voting instructions and a proxy submitted by telephone or by Internet that does not contain voting instructions, will, unless revoked, be voted in favor of the adoption of the merger agreement, and it will constitute a waiver of the stockholder's right of appraisal and will nullify any previously delivered written demand for appraisal. Therefore, a stockholder who submits a proxy and who wishes to exercise appraisal rights must either submit a proxy containing instructions to vote against the adoption of merger agreement or abstain from voting on the merger agreement. However, neither voting against the adoption of the merger agreement, nor abstaining from voting or failing to vote on adoption of the merger agreement, will in and of itself constitute a written demand for appraisal satisfying the requirements of Section 262. All demands for appraisal must be sent or delivered to:

RMG Networks Holding Corporation
Attention: Corporate Secretary
15301 North Dallas Parkway, Suite 500
Addison, TX 75001

        A demand for appraisal in respect of the shares of Company common stock should be executed by or on behalf of the holder of record of such shares, fully and correctly, should specify the holder's name and mailing address and the number of the shares registered in the holder's name and must state that the person intends thereby to demand appraisal of the holder's shares in connection with the merger. The demand for appraisal cannot be made by the beneficial owner if he, she or it does not also hold the shares of record. The beneficial holder must, in such cases, have the record owner, such as a bank, broker or other nominee, submit the required demand for appraisal in respect of those shares. If you hold your shares through a bank, broker or other nominee and you wish to exercise appraisal rights, you should consult with your bank, broker or the other nominee to determine the appropriate procedures for the making of a demand for appraisal by the nominee.

        If the shares are owned of record by a person other than the beneficial owner, including a bank, broker or other nominee (e.g., a fiduciary such as a trustee, guardian or custodian), a demand for appraisal must be executed by or for such record holder. If the shares are owned of record by more than one person, as in a joint tenancy or tenancy in common, the demand should be executed by or for all joint owners. An authorized agent, including an authorized agent for two or more joint owners, may execute the demand for appraisal for a stockholder of record; however, the agent must identify the record holder or owners and expressly disclose the fact that, in executing the demand, such agent is acting as agent for the record holder. If a stockholder holds the shares through a bank, broker or other nominee who in turn holds the shares through a central securities depository nominee such as Cede & Co. (the nominee for The Depository Trust Company), a demand for appraisal of such shares must be made by or on behalf of the depository nominee and must identify the depository nominee as a record holder. A record holder, such as a broker, who holds the shares as a nominee for others, may exercise his, her or its right of appraisal with respect to the shares held for one or more beneficial owners, while not exercising this right for other beneficial owners. In that case, the written demand should state the number of the shares as to which appraisal is sought. Where no number of the shares is expressly mentioned, the demand will be presumed to cover all the shares in the name of the record holder.

Notice by the Company

        Within 10 days after the effective time, the Company must give notice of the date that the merger has become effective to each of our stockholders who did not vote in favor of or consent in writing to the adoption of the merger agreement and otherwise complied with Section 262. At any time within 60 days after the effective time, any stockholder who has demanded an appraisal but who has not commenced an appraisal proceeding or joined a proceeding as a named party shall have the right to withdraw such stockholder's demand for appraisal and accept the merger consideration for that

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stockholder's shares by delivering to the Company a written withdrawal of the demand for appraisal. However, any such attempt to withdraw the demand made more than 60 days after the effective time will require written approval of the Company. No appraisal proceeding in the Delaware Court of Chancery will be dismissed as to any stockholder without the approval of the Delaware Court of Chancery, and such approval may be conditioned upon such terms as the Delaware Court of Chancery deems just. If the Company does not approve a request to withdraw a demand for appraisal when that approval is required, or, except with respect to a stockholder that withdraws his, her or its demand for appraisal within 60 days after the effective date of the merger, if the Delaware Court of Chancery does not approve the dismissal of an appraisal proceeding, the stockholder will be entitled to receive only the appraised value determined in any such appraisal proceeding, which value could be less than, equal to or more than the consideration offered pursuant to the merger agreement and which value will be determined exclusive of any element of value arising from the accomplishment or expectation of the merger.

Filing a Petition for Appraisal

        Within 120 days after the effective time, but not thereafter, either the Company or any stockholder who has complied with the requirements of Section 262 and is entitled to appraisal rights under Section 262 may commence an appraisal proceeding by filing a petition in the Delaware Court of Chancery demanding a determination of the fair value of the shares of Company common stock held by all such stockholders. Upon the filing of such a petition by a stockholder, service of a copy of such petition shall be made upon the Company. The Company has no present intent to file such a petition and has no obligation to file such a petition, and holders should not assume that the Company will file a petition. Accordingly, it is the obligation of the stockholders who have complied with the requirements of Section 262 to initiate all necessary action to perfect their appraisal rights, and the failure of a stockholder to file such a petition within the period specified could nullify the stockholder's previous written demand for appraisal.

        In addition, within 120 days after the effective time, any stockholder who has properly filed a written demand for appraisal, who has complied with the requirements for exercise of appraisal rights under Section 262, upon written request to the Company, will be entitled to receive from the Company, a written statement setting forth the aggregate number of the shares of Company common stock not voted in favor of adoption of the merger agreement and with respect to which demands for appraisal have been received and the aggregate number of holders of such shares. The statement must be mailed to the requesting stockholder within 10 days after such written request has been received by the Company or within 10 days after the expiration of the period for delivery of demand for appraisal under Section 262, whichever is later. A person who is the beneficial owner of the shares held either in a voting trust or by a nominee on behalf of such person may, in such person's own name, file a petition or request to receive from the Company such statement.

        If a petition for appraisal is duly filed by a stockholder, the stockholder must deliver a copy of the petition to the Company, and the Company will then be obligated, within 20 days after such service, to file in the Delaware Register in Chancery a duly verified list containing the names and addresses of all stockholders who have demanded an appraisal for their shares of Company common stock and with whom agreements as to the value of their shares have not been reached by the Company. After the Register in Chancery provides notice to those stockholders and the Company (if ordered by the Delaware Court of Chancery), the Delaware Court of Chancery is empowered to conduct a hearing upon the petition to determine those stockholders who have complied with Section 262 and who have become entitled to the appraisal rights provided by Section 262. The Delaware Court of Chancery may require that stockholders who demanded appraisal of their shares and who hold stock represented by certificates to submit their stock certificated to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings, and if any stockholder fails to comply with such direction, the

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Delaware Court of Chancery may dismiss the proceedings as that stockholder. In addition, the Delaware Court of Chancery will dismiss the proceedings as to all holders of such shares who are otherwise entitled to appraisal rights unless the total number of shares entitled to appraisal exceeds 1% of the outstanding shares eligible for appraisal or the value of the consideration provided in the merger for such total number of shares exceeds $1 million.

Determination of Fair Value

        After the Delaware Court of Chancery determines the stockholders entitled to appraisal of their shares, the appraisal proceeding shall be conducted in accordance with the rules of the Delaware Court of Chancery, including any rules specifically governing appraisal proceedings. Through such proceeding the Court shall determine the "fair value" of the shares exclusive of any element of value arising from the accomplishment or expectation of the merger, together with interest, if any, to be paid upon the amount determined to be the fair value. When the fair value is determined, the Delaware Court of Chancery will direct the payment of such fair value, with interest thereon accrued during the pendency of the proceeding, if the Court so determines, by the Company to stockholders entitled to receive the same, upon surrender by those stockholders of the certificates representing their shares or, in the case of holders of uncertificated shares, forthwith. Unless the Delaware Court of Chancery in its discretion determines otherwise for good cause shown, interest from the effective time through the date of payment of the judgment will be compounded quarterly and will accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the effective date of the merger and the date of payment of the judgment. At any time before the entry of judgment in the proceedings, the Company may pay to each stockholder entitled to appraisal an amount in cash, in which case interest shall accrue thereafter as provided in Section 262 only upon the sum of (1) the difference, if any, between the amount so paid and the fair value of the shares as determined by the Delaware Court of Chancery, and (2) interest theretofore accrued, unless paid at that time.

        You should be aware that an investment bank's opinion as to the fairness, from a financial point of view, of the consideration payable in a sale transaction, such as the merger, is not an opinion as to, and does not otherwise address, "fair value" under Section 262. Although we believe that the merger consideration is fair, no representation is made as to the outcome of the appraisal of fair value as determined by the Delaware Court of Chancery and stockholders should recognize that such an appraisal could result in a determination of a fair value higher or lower than, or the same as, the merger consideration. Moreover, we do not anticipate offering more than the merger consideration to any stockholder exercising appraisal rights and reserve the right to assert, in any appraisal proceeding, that, for purposes of Section 262, the "fair value" of a share is less than the merger consideration.

        In determining the "fair value" of the shares, a Delaware Court is required to take into account all relevant factors. In Weinberger v. UOP, Inc., the Delaware Supreme Court discussed the factors that could be considered in determining fair value in an appraisal proceeding, stating that "proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court" should be considered and that "[f]air price obviously requires consideration of all relevant factors involving the value of a company." The Delaware Supreme Court has stated that, in making this determination of fair value, the court must consider market value, asset value, dividends, earnings prospects, the nature of the enterprise and any other factors that could be ascertained as of the date of the merger that throw any light on future prospects of the merged corporation. Section 262 provides that fair value is to be "exclusive of any element of value arising from the accomplishment or expectation of the merger." In Cede & Co. v. Technicolor, Inc., the Delaware Supreme Court stated that such exclusion is a "narrow exclusion [that] does not encompass known elements of value," but which rather applies only to the speculative elements of value arising from such accomplishment or expectation. In Weinberger, the Delaware Supreme Court construed

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Section 262 to mean that "elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the merger and not the product of speculation, may be considered."

        Costs of the appraisal proceeding (which do not include attorneys' fees or the fees and expenses of experts) may be determined by the Delaware Court of Chancery and taxed upon the parties as the Delaware Court of Chancery deems equitable under the circumstances. Each stockholder seeking appraisal is responsible for his, her or its attorneys' and expert witness expenses, although, upon the application of a stockholder, the Delaware Court of Chancery may order all or a portion of the expenses incurred by any stockholder in connection with the appraisal proceeding, including, without limitation, reasonable attorneys' fees and the fees and expenses of experts used in the appraisal proceeding, to be charged pro rata against the value of all the shares entitled to appraisal.

        Any stockholder who duly demanded appraisal in compliance with Section 262 will not, after the effective time, be entitled to vote the shares subject to that demand for any purpose or to receive payments of dividends or any other distribution with respect to those shares, other than with respect to payment of dividends or distributions payable to stockholders of record as of a date prior to the effective time. However, if no petition for appraisal is filed within 120 days after the effective time, or if the stockholder otherwise fails to perfect his, her or its appraisal rights, successfully withdraws his, her or its demand for appraisal or loses his, her or its right to appraisal, then the right of that stockholder to appraisal will cease and that stockholder's shares will be deemed to have been converted at the effective time into the right to receive the merger consideration pursuant to the merger agreement. In addition, as indicated above, a stockholder may withdraw his, her or its demand for appraisal in accordance with Section 262 and accept the merger consideration offered pursuant to the merger agreement.

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OTHER MATTERS

        The Company does not know of any business to be presented for action at the special meeting other than those items referred to herein. If any other business properly come before the special meeting or any adjournments or postponements thereof, the proxies will be voted by those named in the proxy card in their best judgment.


IMPORTANT NOTICE REGARDING DELIVERY OF SECURITY HOLDER DOCUMENTS

        The SEC has adopted rules that permit companies and intermediaries (such as banks, brokers and other nominees) to satisfy the delivery requirement for proxy materials with respect to two or more stockholders sharing the same address by delivering a single copy of the proxy materials addressed to all stockholders at that address, unless one or more of the affected stockholder has provided contrary instructions to such company or intermediary, as applicable. This process is commonly known as "householding." To conserve resources and reduce expenses, we consolidate materials under these rules when possible. Stockholders sharing and address can request delivery of a single copy of our annual reports and proxy statements if they are receiving multiple copies by making an oral or written request to the telephone number or address listed below.

        Certain banks, brokers or other nominees holding shares of Company common stock for their customers may household notices or proxy materials. Stockholders sharing an address whose shares of our common stock are held in "street name" should contact their bank, broker or other nominee if they wish to receive separate copies of these materials in the future or if they are receiving multiple copies and wish to receive only one copy per household in the future. The Company will also promptly deliver a separate copy of the notice or proxy materials upon written or oral request if you contact us at the following address or telephone number: RMG Networks Holding Corporation, Attention: Corporate Secretary, 15301 North Dallas Parkway, Suite 500, Addison, Texas 75001; Telephone: (800) 827-9666.


STOCKHOLDER PROPOSALS

        If the merger is consummated, we will not have public stockholders and there will be no public participation in any future meeting of stockholders. However, if the merger is not consummated, we expect to hold our 2018 annual meeting of stockholders and will provide notice of or otherwise publicly disclose the date on which such meeting will be held, including instruction for submitting stockholder proposals to be considered at such 2018 annual meeting.

        Such stockholder proposals must comply with the SEC's rules concerning the inclusion of stockholder proposals in company-sponsored proxy materials as set forth in Rule 14a-8 promulgated under the Exchange Act and our bylaws. For other stockholder proposals (outside of Rule 14a-8), the Company's bylaws require that a stockholder's notice of a proposal to be brought before an annual meeting must be "timely." In order to be timely, the notice must be received by our Corporate Secretary at our principal executive offices not later than the close of business on the 90th day, nor earlier than the opening of business on the 120th day, before the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that if the annual meeting is called for a date that is not within 45 days before or after such anniversary date, notice must be so received not earlier than the opening of business on the 120th day before the meeting and not later than the later of (x) the close of business on the 90th day before the meeting or (y) the close of business on the 10th day following the day on which public announcement of the date of the annual meeting is first made by the Company.

        For a director nomination to be made by a stockholder, the Company's bylaws require that a stockholder's notice of such a nomination must be "timely" and in proper written form to the Secretary of the Company. To be timely, a stockholder's notice to the Secretary must be received by the Secretary

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at the principal executive offices of the Company (i) in the case of an annual meeting, not later than the close of business on the 90th day nor earlier than the opening of business on the 120th day before the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is called for a date that is not within 45 days before or after such anniversary date, notice by the stockholder to be timely must be so received not earlier than the opening of business on the 120th day before the meeting and not later than the later of (x) the close of business on the 90th day before the meeting or (y) the close of business on the 10th day following the day on which public announcement of the date of the annual meeting was first made by the Company; and (ii) in the case of a special meeting of stockholders called for the purpose of electing directors, not later than the close of business on the 10th day following the day on which public announcement of the date of the special meeting is first made by the Company.

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WHERE YOU CAN FIND MORE INFORMATION

        We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any document we file at the SEC's public reference room located at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. Our SEC filings are also available to the public at the SEC's website at http://www.sec.gov. You may also retrieve the Company's SEC filings at its website at http://www.rmgnetworks.com under the heading "Company" and then under the heading "SEC Filings" in the "Investor Relations" drop down menu. The information contained on our website, or any other Internet site described herein, is not a part of, and is not incorporated or deemed to be incorporated by reference into this proxy statement.

        Because the merger is a "going private" transaction, the Company has filed with the SEC a Transaction Statement on Schedule 13E-3 with respect to the merger. The Schedule 13E-3, including any amendments and exhibits (including any reports, opinions or appraisals) filed or incorporated by reference as a part of it, is available for inspection and copying at the principal executive offices of the Company during its regular business hours by any interested holder of Company common stock. The Schedule 13E-3 will be amended to report promptly any material change in the information set forth in the most recent Schedule 13E-3 filed with the SEC.

        The Company is subject to the information requirements of the Exchange Act, however, the Company cannot incorporate by reference certain information into this proxy statement because it is not eligible to do so. The documents listed below have been previously filed with the SEC by the Company, contain important information about the Company and its financial condition, and are included with this proxy statement in the applicable annex set forth below:

Company SEC Filing
 
Proxy Statement Annex

Annual Report on Form 10-K for the fiscal year ended December 31, 2017

  Annex D

Quarterly Report on Form 10-Q for the three months ended March 31, 2018

 

Annex E

        You may request a copy of the documents previously filed by the Company with the SEC or the documents attached as annexes to this proxy statement, excluding all exhibits unless specifically incorporated by reference into such documents, by writing to or calling us. Requests for documents should be directed to the Company at the following address and telephone number:

RMG Networks Holding Corporation
Attention: Corporate Secretary
15301 North Dallas Parkway
Suite 500
Addison, Texas 75001
Telephone: (800) 827-9666

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

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        THIS PROXY STATEMENT DOES NOT CONSTITUTE THE SOLICITATION OF A PROXY IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM OR FROM WHOM IT IS UNLAWFUL TO MAKE SUCH PROXY SOLICITATION IN THAT JURISDICTION. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE INTO THIS PROXY STATEMENT TO VOTE YOUR SHARES OF COMPANY COMMON STOCK AT THE SPECIAL MEETING. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS PROXY STATEMENT. THIS PROXY STATEMENT IS DATED [    ·    ], 2018. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS PROXY STATEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THAT DATE, AND THE MAILING OF THIS PROXY STATEMENT TO STOCKHOLDERS DOES NOT CREATE ANY IMPLICATION TO THE CONTRARY.

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Annex A

Execution Version


AGREEMENT AND PLAN OF MERGER

by and among

RMG NETWORKS HOLDING CORPORATION,

SCG DIGITAL, LLC

SCG DIGITAL MERGER SUB, INC.,

AND, SOLELY FOR THE PURPOSES OF SECTIONS 6.19, 8.03 AND 8.04,

SCG DIGITAL FINANCING, LLC

April 2, 2018



The Agreement and Plan of Merger (the "Agreement") contains representations, warranties and covenants that were made only for purposes of the Agreement and as of specific dates; were solely for the benefit of the parties to the Agreement; may be subject to limitations agreed upon by the parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Agreement instead of establishing these matters as facts; and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. RMG's stockholders and other investors are not third-party beneficiaries under the Agreement and should not rely on the representations, warranties and covenants or any description thereof as characterizations of the actual state of facts or condition of RMG, RMG Acquisition, or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date of the Agreement, which subsequent information may or may not be fully reflected in public disclosures by RMG and RMG Acquisition.


Table of Contents


TABLE OF CONTENTS

 
   
  Page  

Article 1 DEFINITIONS

    1  

Section 1.01

 

Definitions

    1  

Section 1.02

 

Other Definitional and Interpretative Provisions

    9  

Article 2 THE MERGER

    10  

Section 2.01

 

The Closing

    10  

Section 2.02

 

The Merger

    10  

Section 2.03

 

Conversion of Shares

    10  

Section 2.04

 

Surrender and Payment

    11  

Section 2.05

 

Dissenting Shares

    12  

Section 2.06

 

Company Stock Options

    13  

Section 2.07

 

Adjustments

    13  

Section 2.08

 

Withholding Rights

    13  

Section 2.09

 

Lost Certificates

    14  

Article 3 THE SURVIVING CORPORATION

    14  

Section 3.01

 

Certificate of Incorporation

    14  

Section 3.02

 

Bylaws

    14  

Section 3.03

 

Directors and Officers

    14  

Article 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY

    14  

Section 4.01

 

Corporate Existence and Power

    14  

Section 4.02

 

Corporate Authorization

    15  

Section 4.03

 

Governmental Authorization; Government Contracts

    15  

Section 4.04

 

Non-contravention

    16  

Section 4.05

 

Capitalization

    16  

Section 4.06

 

Subsidiaries

    17  

Section 4.07

 

SEC Filings and the Sarbanes-Oxley Act

    18  

Section 4.08

 

Financial Statements; Internal Controls

    18  

Section 4.09

 

Absence of Certain Changes

    19  

Section 4.10

 

No Undisclosed Material Liabilities

    19  

Section 4.11

 

Litigation

    20  

Section 4.12

 

Compliance with Applicable Law

    20  

Section 4.13

 

Anti-Corruption Laws; Trade Control Laws

    20  

Section 4.14

 

Material Contracts

    21  

Section 4.15

 

Taxes

    22  

Section 4.16

 

Employee Benefit Plans

    24  

Section 4.17

 

Labor and Employment Matters

    26  

Section 4.18

 

Insurance Policies

    26  

Section 4.19

 

Environmental Matters

    26  

Section 4.20

 

Intellectual Property

    27  

Section 4.21

 

Properties

    29  

Section 4.22

 

Material Clients

    29  

Section 4.23

 

Interested Party Transaction

    30  

Section 4.24

 

Brokers' Fees

    30  

Section 4.25

 

Opinion of Financial Advisor

    30  

Section 4.26

 

Proxy Statement and Schedule 13E-3

    30  

Section 4.27

 

No Additional Representations

    30  

Article 5 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

    31  

Section 5.01

 

Corporate Existence and Power

    31  

Section 5.02

 

Corporate Authorization

    31  

Section 5.03

 

Governmental Authorization

    31  

Section 5.04

 

Non-contravention

    31  

Section 5.05

 

Capitalization and Operation of Merger Sub

    32  

Section 5.06

 

No Vote of Parent Stockholders; Required Approval

    32  

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  Page  

Section 5.07

 

Litigation

    32  

Section 5.08

 

Available Funds

    32  

Section 5.09

 

Solvency

       

Section 5.10

 

Absence of Certain Agreements

       

Section 5.11

 

Stock Ownership

    32  

Section 5.12

 

Competing Businesses

    32  

Section 5.13

 

Brokers' Fees

    32  

Section 5.14

 

Proxy Statement and Schedule 13E-3

    32  

Section 5.16

 

No Additional Representations

    33  

Article 6 COVENANTS

    33  

Section 6.01

 

Conduct of the Company

    33  

Section 6.02

 

Go-Shop; Unsolicited Proposals

    36  

Section 6.03

 

Board Recommendation

    39  

Section 6.04

 

Approval of Merger

    41  

Section 6.05

 

Access to Information

    43  

Section 6.06

 

Notice of Certain Events

    44  

Section 6.07

 

Employee Benefit Plan Matters

    44  

Section 6.08

 

State Takeover Laws

    45  

Section 6.09

 

Obligations of Merger Sub

    45  

Section 6.10

 

Voting of Shares

    45  

Section 6.11

 

Director and Officer Liability

    45  

Section 6.12

 

Commercially Reasonable Efforts

    47  

Section 6.13

 

Stockholder Litigation

    48  

Section 6.14

 

Public Announcements

    48  

Section 6.15

 

Further Assurances

    48  

Section 6.16

 

Section 16 Matters

    48  

Section 6.17

 

Confidentiality

    49  

Section 6.18

 

Director Resignations

    49  

Article 7 CONDITIONS TO THE MERGER

    49  

Section 7.01

 

Conditions to the Obligations of Each Party

    49  

Section 7.02

 

Conditions to the Obligations of Parent and Merger Sub

    49  

Section 7.03

 

Conditions to the Obligations of the Company

    50  

Article 8 TERMINATION

    50  

Section 8.01

 

Termination

    50  

Section 8.02

 

Effect of Termination

    52  

Article 9 MISCELLANEOUS

    54  

Section 9.01

 

Notices

    54  

Section 9.02

 

Survival of Representations and Warranties

    55  

Section 9.03

 

Amendments and Waivers

    55  

Section 9.04

 

Expenses; Payment of Termination Fee

    56  

Section 9.05

 

Assignment; Benefit

    57  

Section 9.06

 

Governing Law

    57  

Section 9.07

 

Jurisdiction

    57  

Section 9.08

 

Waiver of Jury Trial

    58  

Section 9.09

 

Specific Performance

    58  

Section 9.10

 

Severability

    59  

Section 9.11

 

Parent Guarantee

    59  

Section 9.12

 

Entire Agreement

    59  

Section 9.13

 

Rules of Construction

    59  

Section 9.14

 

Schedules

    59  

Section 9.15

 

Counterparts; Effectiveness

    60  

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AGREEMENT AND PLAN OF MERGER

        THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated April 2, 2018 ("Execution Date"), is entered into by and among RMG Networks Holding Corporation, a Delaware corporation (the "Company"), SCG Digital, LLC, a Delaware limited liability company ("Parent"), SCG Digital Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Parent ("Merger Sub"), and, solely for the purposes of Sections 6.19, 8.03 and 8.04, SCG Digital Financing, LLC.

        WHEREAS, the Boards of Directors of each of the Company (acting upon the recommendation of the Special Committee), Parent and Merger Sub have unanimously with respect to those members present (other than Gregory Sachs, who was present but abstained from voting) approved this Agreement and deem it advisable and in the best interests of their respective stockholders to consummate the merger of Merger Sub with and into the Company (the "Merger"), with the Company surviving the Merger as a wholly owned Subsidiary of Parent in accordance with the Delaware General Corporation Law (the "DGCL");

        WHEREAS, concurrently with the execution and delivery of this Agreement, and as a condition and inducement to the Company's willingness to enter into this Agreement, certain stockholders of the Company are entering into a voting agreement (the "Voting Agreement") with the Company pursuant to which, among other things, such stockholders have agreed, on the terms and subject to the conditions set forth in their respective Voting Agreements, to (a) vote their shares of Company Common Stock in favor of adoption and approval of this Agreement and (b) take certain other actions in furtherance of the transactions contemplated by this Agreement;

        WHEREAS, prior to the date of this Agreement, SCG Digital Financing, LLC ("Lender") has loaned the Company two million dollars ($2,000,000) pursuant to the terms of the Bridge Loan Agreement with respect to an aggregate two million dollar ($2,000,000) bridge financing facility (the "Bridge Facility");

        WHEREAS, pursuant to Section 6.19 hereof, within ten (10) Business Days following execution of this Agreement, Lender will deposit the amount of the Penalty Loan with the Escrow Agent and, in connection therewith, the Company, Lender, Parent, Merger Sub and Citibank, N.A. (the "Escrow Agent") shall enter into that certain Escrow Agreement, substantially in the form of Exhibit A hereto, with respect to the Penalty Loan (the "Escrow Agreement") and;

        WHEREAS, (i) the Boards of Directors of each of the Company (acting upon the recommendation of the Special Committee), Parent and Merger Sub have (A) determined that this Agreement and the Merger are advisable and in the best interests of their respective stockholders, (B) approved the Merger on the terms and subject to the conditions set forth herein, and (C) adopted this Agreement, and (ii) the Company Board has resolved to recommend that the stockholders of the Company adopt and approve this Agreement; and

        NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth below, the parties hereto agree as follows:


ARTICLE 1
DEFINITIONS

        Section 1.01    Definitions.     

        (a)   As used herein, the following terms have the following meanings:

        "Acceptable Confidentiality Agreement" means a customary confidentiality agreement between the Company and any Third Party containing terms no less favorable, in the aggregate, to the Company than the terms of the Confidentiality Agreement; provided that, such agreement shall contain the

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Required Standstill Provision and in no event shall restrict the Company from disclosing to Parent at any time (i) the identity of such Third Party and any financing sources thereto, (ii) the terms of any Acquisition Proposal made by such Third Party or (iii) the status of any negotiations with such Third Party; provided, further, that such confidentiality agreement may contain provisions that permit the Company to comply with the provisions of Article 6. Notwithstanding the foregoing, a Person who has previously entered into a confidentiality agreement with the Company relating to a purchase of, or business combination with, the Company shall not be required to enter into a new or revised confidentiality agreement, and such existing confidentiality agreement shall be deemed to be an Acceptable Confidentiality Agreement.

        "Acquisition Proposal" means any inquiry (in writing or otherwise), offer, proposal or indication of interest from any Third Party relating to any transaction or series of related transactions involving (i) any acquisition or purchase by any Third Party, directly or indirectly, of 25% or more of any class of outstanding voting or equity securities of the Company, or any tender offer (including a self-tender) or exchange offer that, if consummated, would result in any Third Party beneficially owning 25% or more of any class of outstanding voting or equity securities of the Company, (ii) any merger, amalgamation, consolidation, share exchange, business combination, joint venture or other similar transaction involving the Company or any of its Subsidiaries, the business of which constitutes 25% or more of the net revenues, net income or assets of the Company and its Subsidiaries, taken as a whole, (iii) any sale, lease, exchange, transfer, license (other than licenses in the ordinary course of business), acquisition or disposition of 25% or more of the consolidated assets of the Company and its Subsidiaries (measured by the lesser of book or fair market value thereof) or (iv) any liquidation, dissolution, recapitalization, extraordinary dividend or other significant corporate reorganization of the Company or any of its Subsidiaries, the business of which constitutes 25% or more of the net revenues, net income or assets of the Company and its Subsidiaries, taken as a whole.

        "Affiliate" means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such Person. As used in this definition, the term "control" (including the terms "controlling," "controlled by" and "under common control with") means possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

        "Antitrust Laws" means applicable federal, state, local or foreign antitrust, competition, premerger notification or trade regulation laws, regulations or Orders.

        "Applicable Law" means, with respect to any Person, any international, national, federal, state or local law (statutory, common or otherwise), constitution, treaty, convention, ordinance, code, rule, regulation or other similar requirement enacted, adopted, promulgated, issued or applied by a Governmental Authority that is binding upon and applicable to such Person, as amended unless expressly specified otherwise.

        "Bridge Loan Agreement" means that certain Subordinated Loan and Security Agreement, dated as of the date hereof, by and among Lender, the Company and certain subsidiaries of the Company as set forth in the Bridge Loan Agreement.

        "Business Day" means a day, other than Saturday, Sunday or other day on which the Federal Reserve Bank sitting in New York, New York is closed.

        "Closing Date" means the date of the Closing.

        "Code" means the Internal Revenue Code of 1986, as amended.

        "Company Balance Sheet" means the consolidated balance sheet of the Company and its Subsidiaries as of September 30, 2017 and the footnotes thereto set forth in the Company's quarterly report on Form 10-Q for the fiscal quarter ended September 30, 2017.

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        "Company Balance Sheet Date" means September 30, 2017.

        "Company Board" means the Board of Directors of the Company.

        "Company Common Stock" means the shares of common stock, par value $0.0001 per share, of the Company.

        "Company Equity Awards" means the Company Stock Options and any other outstanding equity-based award (whether vested or unvested) denominated in shares of Company Common Stock.

        "Company Financial Advisor" means Lake Street Capital Markets, LLC or another independent financial advisor of nationally recognized reputation.

        "Company Material Adverse Effect" means any effect, change, event or circumstance that, individually or in the aggregate, has or would be reasonably excepted to have, a material adverse effect (i) on the financial condition or results of operations of the Company and its Subsidiaries, taken as a whole, or (ii) on the ability of the Company to consummate the Merger and the other transactions contemplated by this Agreement, excluding in the case of clause (i) above any such material adverse effect resulting from or arising out of: (A) the execution, announcement, pendency or consummation of the Merger or the other transactions contemplated by this Agreement (including any loss of or adverse change in the relationship of the Company and its Subsidiaries with their respective contractors, customers, partners, or suppliers related thereto); (B) the identity of Parent or any of its Affiliates as the acquirer of the Company; (C) general business, economic, financial market, or political conditions in the United States or elsewhere in the world; (D) general conditions in the industry in which the Company and its Subsidiaries operate or in any specific jurisdiction or geographical area in the United States or elsewhere in the world; (E) any changes in GAAP (or interpretations thereof) or Applicable Law (or interpretations thereof); (F) any changes, adoption, implementation, repeal, modification, reinterpretation or proposal of any law, regulation or policy (or interpretations thereof) by any Governmental Authority, or any panel or advisory body empowered or appointed thereby, in each case, after the date hereof; (G) the taking of any specific action, or refraining from taking any specific action, in each case at the written direction of Parent or Merger Sub or as expressly required by this Agreement; (H) any outbreak or escalation of acts of terrorism, hostilities, sabotage or war, or any weather-related event, fire or natural disaster or any escalation thereof; or (I) any failure by the Company to meet internal or analysts' estimates, or projections, performance measures, operating statistics, or revenue, earnings or any other financial or performance measures (whether made by the Company or any third parties) for any period, or any decline in the price, or change in trading volume, of shares of the Company Common Stock (it being understood and agreed that facts or occurrences giving rise to or contributing to such failure, decline or change set forth in this clause (I) that are not otherwise excluded from the definition of Company Material Adverse Effect may be taken into account in determining whether there has been a Company Material Adverse Effect); provided that, in the case of clauses (C), (D), (E), (F) and (H), such effect may be taken into account in determining whether or not there has been a Material Company Adverse Effect to the extent the adverse impact on the Company and its Subsidiaries, taken as a whole, is materially disproportionate to the adverse impact on similarly situated parties in the Company's industry.

        "Company Notice" shall have the meaning set forth in the Escrow Agreement.

        "Company Stock Option" means each option (whether vested or unvested) to purchase shares of Company Common Stock outstanding under any Company Stock Plan or otherwise, and any other outstanding equity-based award denominated in shares of Company Common Stock (whether vested or unvested).

        "Company Stock Plan" means any stock option, stock incentive, stock award or other equity compensation plan or agreement sponsored or maintained by the Company or any Subsidiary or Affiliate of the Company.

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        "Company Termination Fee" shall mean an amount equal to (a) $0 if this Agreement is terminated by the Company before the Initial Go Shop End Date pursuant to Section 8.01(h) so as to enter into an Alternative Acquisition Agreement with an Excluded Person, (b) $150,000 if (i) the Go Shop Period is extended pursuant to Section 6.2(a) and (ii) this Agreement is terminated by the Company before the Non-Solicitation Start Date pursuant to Section 8.01(h) so as to enter into an Alternative Acquisition Agreement with an Excluded Person and (c) $500,000 in all other cases.

        "Company Warrants" means each warrant (whether vested or unvested) to purchase shares of Company Common Stock.

        "Contract" means any legally binding written contract, agreement, note, bond, indenture, mortgage, guarantee, option, lease (or sublease), license or other instrument, obligation, arrangement or understanding of any kind to which the Company or any of its Subsidiaries is a party.

        "Credit Facility" means that certain Amended and Restated Loan and Security, dated as of October 13, 2017, by and among the Company, the other credit parties party thereto, and Silicon Valley Bank (as amended, restated, supplemented or otherwise modified from time to time).

        "Environmental Law" means any Applicable Law concerning pollution or protection of the environment or human health and safety (as such relates to the management of or exposure to Hazardous Substances), including any Applicable Law relating to the manufacture, handling, transport, use, treatment, storage, disposal or release of, or exposure to, any Hazardous Substance.

        "Environmental Permits" means any Governmental Authorizations issued or required under any Environmental Law.

        "Equity Interest" means any share, capital stock, partnership, member or similar interest in any entity, and any option, warrant, right or security convertible, exchangeable or exercisable therefor,

        "ERISA" means the Employee Retirement Income Security Act of 1974, as amended.

        "ERISA Affiliate" of any Person means any other Person that, together with such entity, would be treated as a single employer within the meaning of Section 414(b), (c), (m) or (o) of the Code or Section 4001 (b)(1) of ERISA.

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

        "Excluded Person" means any Person from whom the Company has received during the Go-Shop Period a written Acquisition Proposal that the Company Board or any committee thereof determines in good faith (such determination to be made no later than the Non-Solicitation Start Date), after consultation with its financial advisor and outside legal counsel, is, or would reasonably be expected to lead to, a Superior Proposal. A group of Persons that includes an Excluded Person shall itself be considered an Excluded Person, even if all members of such group are not each an Excluded Person individually. An Excluded Person shall cease to be an Excluded Person for all purposes of this Agreement immediately at such time as an offer or proposal by such Excluded Person is withdrawn, terminated or expires or the Special Committee determines in good faith, that such offer or proposal has ceased to constitute, or is no longer reasonably likely to lead to, a Superior Proposal.

        "executive officer" shall be as defined in Rule 16a-1 (f) under the Exchange Act.

        "Ex-lm Laws" means all applicable U.S. and non-U.S. laws relating to export, reexport, transfer, and import controls, including, without limitation, the Export Administration Regulations, the International Traffic in Arms Regulations, and the EU Dual Use Regulation.

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

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        "Governmental Authority" means (i) any government or any state, department, local authority or other political subdivision thereof, or (ii) any governmental or quasi-governmental body, agency, authority (including any central bank, Taxing Authority or trans governmental or supranational entity or authority), minister or instrumentality (including any court or tribunal or any arbitrator or arbitration panel) exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

        "Governmental Authorizations" means, with respect to any Person, all licenses, permits, certificates, waivers, registrations, consents, franchises (including similar authorizations or permits), exemptions, variances, expirations and terminations of any waiting period requirements and other authorizations and approvals issued to such Person by or obtained by such Person from any Governmental Authority, or of which such Person has the benefit under any Applicable Law.

        "Government Official" means any officer or employee of a Governmental Authority or any department, agency or instrumentality thereof, including state-owned entities, or of a public organization or any person acting in an official capacity for or on behalf of any such government, department, agency, or instrumentality or on behalf of any such public organization.

        "Hazardous Substance" means any pollutant, contaminant, toxic substance, hazardous waste, hazardous material, hazardous substance, petroleum or petroleum-containing product, asbestos-containing material or polychlorinated biphenyl, as listed or regulated under, or any other waste, substance or material which is regulated by or may give rise to standards of conduct or liability pursuant to, any Environmental Law.

        "Holdings" means SCG Digital Holdings, Inc., a Delaware corporation and an Affiliate of Parent.

        "Indebtedness" means, with respect to any Person, all obligations (including all obligations in respect of principal, accrued interest, penalties, fees and premiums, and any other fees, expenses, indemnities and other amounts, in each case payable as a result of prepayment or discharge) of such Person: (i) for borrowed money (including obligations in respect of drawings under overdraft facilities), (ii) evidenced by notes, bonds, debentures or similar instruments, (iii) for the deferred purchase price of property, goods or services (other than trade payables or accruals incurred in the ordinary course of business consistent with past practices), (iv) under capital leases (in accordance with GAAP), (v) in respect of outstanding letters of credit, surety bonds and bankers' acceptances, (vi) for contracts or agreements relating to interest rate or currency rate protection, swap agreements, collar agreements and similar hedging agreements or (vi) any guaranty of any of the foregoing with respect to any other Person.

        "Knowledge of the Company" means actual knowledge of each of the individuals identified in Schedule 1.01(a), after reasonable inquiry.

        "Lease Agreement" means any lease, sublease, license, concession or other agreement, including all amendments, extensions, renewals, guarantees and other agreements with respect thereto, pursuant to which the Company or any Subsidiary holds any Leased Real Property.

        "Leased Real Property" means all leasehold or subleasehold estates and other rights to use or occupy any land, buildings, structures, improvements, fixtures or other interest in real property held by the Company or any of its Subsidiaries.

        "Lender Notice" shall have the meaning set forth in the Escrow Agreement.

        "Lien" means, with respect to any property or asset, any mortgage, lien, pledge, charge, security interest, encumbrance, right of first refusal, preemptive right, community property right or other similar adverse claim in respect of such property or asset.

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        "Made Available" means that such information, document or material was (a) publicly available on the SEC EDGAR database as of 5:00 p.m. Eastern time on April 1, 2018; or (b) made available for review by Parent or Parent's Representatives in the virtual data room maintained by the Company in connection with the transactions contemplated by this Agreement as of 5:00 p.m. Eastern time on April 1, 2018.

        "Majority of the Minority Approval" means approval by the holders of a majority of the outstanding shares of Company Common Stock, voting together as a single class, excluding shares of Company Common Stock owned by the Rollover Investors and all shares of Company Common Stock owned by Parent, Merger Sub or any of their respective Affiliates (other than the Company and its Subsidiaries), or by any officer of the Company or any of its Subsidiaries who has been designated by the Board of Directors of the Company as an executive officer for purposes of Section 16 of the Exchange Act.

        "Nasdaq" means the Nasdaq Capital Market.

        "Order" means, with respect to any Person, any order, writ, injunction, judgment, decree, ruling, settlement or stipulation or other similar requirement enacted, adopted, promulgated or applied by a Governmental Authority or arbitrator that is binding upon or applicable to such Person or its property.

        "Parent Material Adverse Effect" means any event, condition, change, occurrence or development of a state of circumstances that, individually or in the aggregate, would reasonably be expected to prevent or materially delay consummation of the Merger or materially impair or delay the ability of Parent or Merger Sub to perform their respective obligations under this Agreement.

        "Parent Transaction Expenses" means the reasonable and documented out-of-pocket attorney's fees and expenses (including reasonable and documented out-of-pocket attorney's fees and expenses in connection with Parent's rights pursuant to Section 6.13), consulting fees and expenses and due diligence expenses incurred by Parent and its Affiliates on or prior to the termination of this Agreement in connection with the transactions contemplated by this Agreement.

        "Penalty Loan" means that certain one million dollar ($1,000,000) loan which loan amount will be deposited by Lender into the Escrow Account pursuant to the Bridge Loan Agreement and the Escrow Agreement within ten (10) Business Days following the execution of this Agreement and which loan may be drawn upon and released to the Parties as set forth in Sections 8.03 and 8.04. If drawn upon and released to the Company pursuant to the terms of this Agreement and the Escrow Agreement, the terms of the Penalty Loan shall be as set forth in the Bridge Loan Agreement.

        "Permitted Liens" means (i) Liens disclosed on the Company Balance Sheet (including Liens arising under the Credit Facility), (ii) Liens for Taxes that are not yet due and payable as of the Closing Date, (iii) Liens to secure landlords or lessors under leases or rental agreements, (iv) requirements and restrictions of zoning, building and other laws which are not violated by the current use or occupancy of such property; (v) mechanics', carriers', workmen's, repairmen's or other like liens or other similar encumbrances arising or incurred in the ordinary course of business consistent with past practice that, in the aggregate, do not materially impair the value or the present or the Company's currently intended use and operation of the assets to which they relate, and (vi) Liens imposed under Applicable Law.

        "Person" means an individual, corporation, partnership, limited liability company, association, trust, firm, joint venture, association or other entity or organization, including a Governmental Authority.

        "Proceeding" means any suit, claim, action, charge, complaint, litigation, arbitration, proceeding (including any civil, criminal, administrative, investigative or appellate proceeding), hearing, audit, examination or investigation commenced, brought, conducted or heard by or before, or otherwise involving, any court or other Governmental Authority.

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        "Representatives" means, with respect to any Person, the directors, managers, officers, employees, financial advisors, attorneys, accountants, consultants, agents and other authorized representatives of such Person, acting in such capacity.

        "Required Standstill Provision" means the standstill obligation set forth on Exhibit B.

        "Sanctioned Country" means any country or region that is the subject or target of a comprehensive embargo under Sanctions Laws (including, without limitation, Cuba, Iran, North Korea, Sudan, Syria, and the Crimea region of Ukraine).

        "Sanctions Laws" means all U.S. and non-U.S. laws relating to economic or trade sanctions, including, without limitation, the Applicable Laws administered or enforced by the United States (including by OFAC or the U.S. Department of State), the United Nations Security Council, and the European Union,

        "Sanctioned Person" means, at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained by OFAC, the U.S. Department of State, or by the United Nations Security Council, the European Union or any European Union member state, (b) any Person operating, organized or resident in a Sanctioned Country or (c) any Person owned or controlled by any such Person or Persons described in the foregoing clauses (a) or (b).

        "Sarbanes-Oxley Act" means the Sarbanes-Oxley Act of 2002, and the rules and regulations promulgated thereunder.

        "SEC" means the U.S. Securities and Exchange Commissio