DEFM14A 1 tm2032423-3_defm14a.htm DEFM14A tm2032423-3_defm14a - none - 23.1756946s
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
Filed by the Registrant   ☒
Filed by a Party other than the Registrant   ☐
Check the appropriate box:

Preliminary Proxy Statement

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

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material under §240.14a-12
VIRTUSA 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):

No fee required.

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1)
Title of each class of securities to which transaction applies:
(2)
Aggregate number of securities to which transaction applies:
(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):
(4)
Proposed maximum aggregate value of transaction:
(5)
Total fee paid:

Fee paid previously with preliminary materials.

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
(1)
Amount Previously Paid:
(2)
Form, Schedule or Registration Statement No.:
(3)
Filing Party:
(4)
Date Filed:

 
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Dear Stockholders:
You are cordially invited to attend a special meeting of stockholders of Virtusa Corporation, a Delaware corporation (referred to as “Virtusa” or the “Company”), which will be held virtually on November 20, 2020 at 10:00 AM, Eastern Time, at https://www.cesonlineservices.com/vrtu20_vm, referred to as the “special meeting”.
At the special meeting, you will be asked to consider and vote upon the adoption of the Agreement and Plan of Merger, dated as of September 9, 2020 (as it may be amended, supplemented or otherwise modified from time to time, referred to as the “merger agreement”), by and among Austin HoldCo Inc., a Delaware corporation, referred to as “Parent”, Austin BidCo Inc., a Delaware corporation and wholly owned subsidiary of Parent, referred to as the “merger subsidiary”, and the Company, which provides for the merger of the merger subsidiary with and into the Company, with the Company surviving as a wholly owned subsidiary of Parent, referred to as the “merger”, on the terms in the merger agreement. Parent and the merger subsidiary are each controlled by investment funds affiliated with Baring Private Equity Asia Pte. Limited (referred to as “BPEA”), a private equity firm. If the merger is completed, immediately prior to the consummation of the merger, each share of preferred stock of the Company, designated as the Company’s 3.875% Series A Convertible Preferred Stock, par value $0.01 per share, referred to as “Virtusa Series A preferred stock”, shall be converted into shares of common stock, par value $0.01 per share, referred to as the “Virtusa common stock”, of the Company, and you will be entitled to receive $51.35 in cash, without interest and less any applicable withholding taxes, for each share of Virtusa common stock that you own as of immediately prior to the effective time of the merger, unless you seek and perfect your statutory appraisal rights under Delaware law. If you are a holder of Virtusa Series A preferred stock, pursuant to the merger agreement, the Company has agreed to take all actions necessary to facilitate any request by you to convert its Virtusa Series A preferred stock into Virtusa common stock. Under the voting agreement, which is described below in “How do the Company’s directors and executive officers intend to vote?”, you agree to submit all of your shares of Virtusa Series A preferred stock for conversion into shares of Virtusa common stock in accordance with the Certificate of Powers, Designations, Preferences and Rights of your Virtusa Series A preferred stock, with such conversion to only become effective immediately prior to the effective time of the merger in connection with the consummation of the merger.
After careful consideration, the Company’s board of directors (referred to as the “Virtusa Board”) unanimously: (i) approved and declared advisable the merger agreement and the other agreements contemplated by the merger agreement, the merger and the other transactions contemplated by the merger agreement and approved the execution, delivery and performance of the merger agreement and the other agreements contemplated by the merger agreement, (ii) determined that the terms of the merger and the other transactions contemplated by the merger agreement are fair to and in the best interests of the Company and its stockholders, (iii) resolved to recommend that the Company’s stockholders adopt the merger agreement and approve the merger in accordance with the General Corporation Law of the State of Delaware (referred to as the “DGCL”), (iv) rendered the limitations on business combinations contained in Section 203 of the DGCL inapplicable to the merger, the merger agreement, the other agreements contemplated by the merger agreement and the transactions contemplated thereby, and (v) elected that the merger not be subject to any “moratorium,” “control share acquisition,” “business combination,” “fair price” or other form of anti-takeover laws or regulations of any jurisdiction that may purport to be applicable to the merger agreement. Accordingly, the Virtusa Board recommends a vote “FOR” the proposal to adopt the merger agreement and “FOR” each of the other proposals to be voted on at the special meeting.
The proxy statement accompanying this letter provides you with more specific information concerning the special meeting, the merger agreement, the merger and the other transactions contemplated by the merger agreement. A copy of the merger agreement is attached as Annex A to the proxy statement. We encourage you to read the proxy statement, the accompanying annexes and any documents incorporated by reference in the proxy statement carefully and in their entirety.
Your vote is important, regardless of the number of shares of Virtusa capital stock you own. The merger cannot be completed unless the merger agreement is adopted by stockholders holding a majority of the
 

 
outstanding shares of Virtusa common stock and Virtusa Series A preferred stock (voting on an as-converted basis, voting together as a single class) entitled to vote thereon at the special meeting. If you abstain from voting, fail to vote (via the Internet during the special meeting or by proxy) or fail to give voting instructions to your bank, broker or other nominee, it will have the same effect as a vote against the proposal to adopt the merger agreement. Whether or not you plan to attend the special meeting virtually, we urge you to submit your proxy as soon as possible, whether over the Internet, by telephone or by completing, signing and returning the enclosed proxy card by mail in the prepaid reply envelope. If you attend the special meeting and vote via the Internet, your vote will revoke any proxy that you have previously submitted. If you are a beneficial owner of shares of Virtusa common stock held in “street name,” you should instruct your bank, broker or other nominee how to vote your shares in accordance with the voting instruction form that you will receive from your bank, broker or other nominee. Your bank, broker or other nominee cannot vote on any of the proposals, including the proposal to adopt the merger agreement, without your instructions.
If you have any questions or need assistance voting your shares, please contact Virtusa’s proxy solicitor:
MacKenzie Partners, Inc.
1407 Broadway, 27th Floor
New York, NY 10018
Stockholders may call toll free: 1 (800) 322-2885
Banks and Brokers may call collect: 1 (212) 929-5500
Thank you for your ongoing support and continued interest in the Company. We look forward to seeing you virtually at the special meeting.
Very truly yours,
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Kris Canekeratne
Chairman and Chief Executive Officer
The merger has not been approved or disapproved by the Securities and Exchange Commission or any state securities commission. Neither the Securities and Exchange Commission nor any state securities commission has passed upon the merits or fairness of the merger or upon the adequacy or accuracy of the information contained in this document or the accompanying proxy statement. Any representation to the contrary is a criminal offense.
The accompanying proxy statement is dated October 20, 2020 and is first being mailed to holders of Virtusa common stock on or about October 20, 2020.
 

 
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132 Turnpike Road, Suite 300
Southborough, Massachusetts 01772
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 20, 2020
Time and Date:
10:00 AM, Eastern Time, on November 20, 2020
Place:
Virtually via https://www.cesonlineservices.com/vrtu20_vm. If you plan to participate in the virtual meeting, you will need to pre-register by 10:00 AM, Eastern Time, on November 19, 2020. To pre-register for the meeting, please follow the instructions provided under “General Information” in the proxy statement accompanying this notice. Stockholders will be able to listen, vote, and submit questions from their home or from any remote location that has Internet connectivity. There will be no physical location for stockholders to attend. Stockholders may only participate online and must pre-register.
Purpose:
1.
To consider and vote on a proposal to adopt the Agreement and Plan of Merger, dated as of September 9, 2020 (as it may be amended, supplemented or otherwise modified from time to time, referred to as the “merger agreement”), by and among the Company, Austin HoldCo Inc., a Delaware corporation, referred to as “Parent”, and Austin BidCo Inc., a Delaware corporation and wholly owned subsidiary of Parent, referred to as the “merger subsidiary” (referred to as the “merger proposal”);
2.
To consider and vote on a non-binding, advisory proposal to approve the compensation that may be paid or may become payable to the Company’s named executive officers in connection with the merger (referred to as the “advisory, non-binding compensation proposal”); and
3.
To consider and vote on a proposal to adjourn or postpone the special meeting to a later date or time, if necessary or appropriate as determined by the Company, to solicit additional proxies if there are insufficient votes at the time of the special meeting or any adjournment or postponement thereof to approve the merger proposal (referred to as the “adjournment proposal”).
Record Date:
Only holders of shares of common stock, par value $0.01 per share (referred to as “Virtusa common stock”) and holders of shares of voting convertible preferred stock of the Company, designated as the Company’s 3.875% Series A Convertible Preferred Stock, par value $0.01 per share (referred to as “Virtusa Series A preferred stock” and, together with the common stock, the “Virtusa capital stock”), as of the close of business on October 9, 2020, are entitled to notice of, and to vote at, the special meeting and any adjournments or postponements thereof.
General:
The Company’s board of directors (referred to as the “Virtusa Board”) unanimously: (i) approved and declared advisable the merger agreement and the other agreements contemplated by the merger agreement, the merger and the other transactions contemplated by the merger agreement and approved the execution, delivery and performance of the merger agreement and the other agreements contemplated by the merger agreement, (ii) determined that the terms of the merger and the other transactions contemplated by the merger agreement are fair to and in the best interests of the Company and its stockholders, (iii) resolved to recommend that the Company’s stockholders adopt the merger agreement and approve the merger in accordance with the General Corporation Law of the State of Delaware (referred to as the “DGCL”), (iv) rendered the limitations on business combinations contained in Section 203 of the DGCL inapplicable
 

 
to the merger, the merger agreement, the other agreements contemplated by the merger agreement and the transactions contemplated thereby, and (v) elected that the merger not be subject to any “moratorium,” “control share acquisition,” “business combination,” “fair price” or other form of anti-takeover laws or regulations of any jurisdiction that may purport to be applicable to the merger agreement. Accordingly, the Virtusa Board unanimously recommends that the Company’s stockholders vote “FOR” the merger proposal, “FOR” the advisory, non-binding compensation proposal and “FOR” the adjournment proposal.
Assuming a quorum is present, the merger proposal requires the affirmative vote of holders of a majority of the outstanding shares of Virtusa common stock and Virtusa Series A preferred stock (voting on an as-converted basis, voting together as a single class) entitled to vote on the merger proposal, and each of the advisory, non-binding compensation proposal and the adjournment proposal require the affirmative vote of the majority of shares of Virtusa common stock and Virtusa Series A preferred stock (voting on an as-converted basis, voting together as a single class) cast by all holders of Virtusa capital stock present virtually or represented by proxy at the special meeting and entitled to vote on the subject matter.
Completion of the merger is conditioned on, among other things, approval of the merger proposal by the holders of Virtusa capital stock.
Under Delaware law, Virtusa stockholders who do not vote in favor of the adoption of the merger agreement will have the right to seek appraisal of the fair value of their shares of Virtusa common stock as determined by the Delaware Court of Chancery if the merger is completed, but only if they submit a written demand for appraisal prior to the vote on the merger proposal and comply with the other Delaware law procedures for exercising statutory appraisal rights, which are summarized in the section titled “Appraisal Rights” in the accompanying proxy statement. The applicable Delaware appraisal statute is also reproduced in its entirety in Annex C to the accompanying proxy statement.
Your vote is important, regardless of the number of shares of Virtusa capital stock you own. Whether or not you plan to attend the special meeting virtually, we urge you to submit your proxy as soon as possible, whether over the Internet, by telephone or by completing, signing and returning the enclosed proxy card by mail in the prepaid reply envelope. If you attend the special meeting and vote via the Internet during the special meeting, your vote will revoke any proxy that you have previously submitted. If you are a beneficial owner of shares of Virtusa common stock held in “street name,” you should instruct your bank, broker or other nominee how to vote your shares in accordance with the voting instruction form that you will receive from your bank, broker or other nominee. Your bank, broker or other nominee cannot vote on any of the proposals, including the merger proposal, without your instructions.
The foregoing matters are more fully described in the accompanying proxy statement, which forms a part of this notice and is incorporated herein by reference. A copy of the merger agreement is attached as Annex A to the proxy statement. We encourage you to read the proxy statement, the accompanying annexes and any documents incorporated by reference in the proxy statement carefully and in their entirety. If you have any questions concerning the merger agreement, the merger or the other transactions contemplated by the merger agreement, the special meeting or the accompanying proxy statement, would like additional copies of the accompanying proxy statement, or need help submitting a proxy to have your shares of Virtusa capital stock voted, please contact Virtusa’s proxy solicitor:
MacKenzie Partners, Inc.
1407 Broadway, 27th Floor
New York, NY 10018
Stockholders may call toll free: 1 (800) 322-2885
Banks and Brokers may call collect: 1 (212) 929-5500
By order of the Board of Directors
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Ranjan Kalia
Executive Vice President, Chief Financial Officer, Treasurer and Secretary
Southborough, Massachusetts
October 20, 2020
 

 
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SUMMARY TERM SHEET
This summary term sheet highlights selected information in this proxy statement and may not contain all of the information about the merger agreement, the voting agreement or the merger and other transactions contemplated by the merger agreement and voting agreement that are important to you. You should carefully read this proxy statement in its entirety, including the annexes hereto and the other documents to which we have referred you, for a more complete understanding of the matters being considered at the special meeting. You may obtain, without charge, copies of any of the documents we file with the Securities and Exchange Commission (referred to as the “SEC”) by following the instructions under the section of this proxy statement titled “Where You Can Find Additional Information.”
In this proxy statement,(i) the terms “we,” “us,” “our,” the “Company” and “Virtusa” refer to Virtusa Corporation; (ii) the term “Parent” refers to Austin HoldCo Inc.; (iii) the term “merger subsidiary” refers to Austin BidCo Inc.; (iv) the term “BPEA” refers individually and collectively, as applicable, to Baring Private Equity Asia Pte. Limited and its affiliated funds; (v) the term “merger agreement” refers to the Agreement and Plan of Merger, dated as of September 9, 2020, by and among Parent, the merger subsidiary and the Company, as the same may be amended, supplemented or otherwise modified from time to time; (vi) the term “Virtusa common stock” refers to the common stock, par value $0.01 per share, of the Company; (vii) the term “Virtusa Series A preferred stock” refers to the 3.875% Series A Convertible preferred stock, par value $0.01 per share, of the Company; (viii) the term “Virtusa capital stock” refers to Virtusa common stock and the Virtusa Series A preferred stock and (ix) the term “voting agreement” refers to the Voting Agreement, dated as of September 9, 2020, by and among Parent and the holders of Virtusa capital stock party thereto.
The Parties (page  24)
Virtusa Corporation.   Virtusa Corporation is a global provider of digital engineering and information technology outsourcing services that accelerate business outcomes for its clients. We support Forbes Global 2000 clients across large, consumer-facing industries like banking, financial services, insurance, healthcare, communications, technology, and media and entertainment, as these clients seek to improve their business performance through accelerating revenue growth, delivering compelling consumer experiences, improving operational efficiencies, and lowering overall IT costs. We provide services across the entire spectrum of the IT services lifecycle, from consulting, to technology and user experience design, development of IT applications, systems integration, digital engineering, testing and business assurance, and maintenance and support services, including cloud, infrastructure and managed services. We help our clients solve critical business problems by leveraging a combination of our distinctive consulting approach, unique platforming methodology, and deep domain and technology expertise.
We were formed in 1996 as Technology Providers, Inc., and changed our name to Virtusa Corporation in 2002. Our shares of Virtusa common stock are quoted on the Nasdaq Stock Market LLC (referred to as “Nasdaq”) under the symbol “VRTU.” Our principal executive office is located at:
Virtusa Corporation
132 Turnpike Road, Suite 300
Southborough, Massachusetts 01772
(508) 389-7300
Additional information about Virtusa is contained in its public filings, certain of which are incorporated by reference herein. See the sections of this proxy statement titled “Where You Can Find Additional Information” and “The Parties — Virtusa Corporation.”
Austin HoldCo Inc.   Parent was formed by entities affiliated with BPEA solely for the purpose of engaging in the transactions contemplated by the merger agreement and has not engaged in any business activities other than in connection with the transactions contemplated by the merger agreement and arranging of the equity financing and any debt financing in connection with the merger. BPEA is one of the largest and most established private alternative investment firms in Asia. Upon completion of the merger, Virtusa will be a direct wholly owned subsidiary of Parent. See the section of this proxy statement titled “The Parties — Austin HoldCo Inc.”
 
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Austin HoldCo Inc.
c/o Baring Private Equity Asia Pte. Limited
50 Collyer Quay
#11-03/04 OUE Bayfront
Singapore 049321
+65 6232 6330
Austin BidCo Inc.   The merger subsidiary is a wholly owned subsidiary of Parent and was formed by Parent solely for the purpose of engaging in the transactions contemplated by the merger agreement and has not engaged in any business activities other than in connection with the transactions contemplated by the merger agreement and arranging of the equity financing and any debt financing in connection with the merger. Upon completion of the merger, the merger subsidiary will cease to exist. See the section of this proxy statement titled “The Parties — Austin BidCo Inc.”
Austin Bidco Inc.
c/o Baring Private Equity Asia Pte. Limited
50 Collyer Quay
#11-03/04 OUE Bayfront
Singapore 049321
+65 6232 6330
The Merger (page  34)
The Company, Parent and the merger subsidiary entered into the merger agreement on September 9, 2020. A copy of the merger agreement is included as Annex A to this proxy statement. On the terms and subject to the conditions set forth in the merger agreement and in accordance with the General Corporation Law of the State of Delaware (referred to as the “DGCL”), at the effective time of the merger, the merger subsidiary will merge with and into the Company, the separate corporate existence of the merger subsidiary will thereupon cease, and the Company will continue as the surviving corporation of the merger as a wholly owned subsidiary of Parent. From time to time in this proxy statement, we refer to the Company as it will exist after the completion of the merger as the “surviving corporation.”
At the effective time of the merger, and without any action by any stockholder, each share of Virtusa common stock that is outstanding immediately prior to the effective time of the merger (other than shares held by the Company as treasury stock, owned by Parent or the merger subsidiary or as to which holders thereof have properly and validly exercised their statutory rights of appraisal in accordance with Section 262 of the DGCL) will be automatically converted into the right to receive cash in an amount equal to $51.35, without interest and less any applicable withholding taxes, which is referred to as the “merger consideration.” Immediately prior to the effective time of the merger, each share of Virtusa Series A preferred stock will be converted into shares of Virtusa common stock, such shares of Virtusa common stock will be automatically converted into the right to receive the merger consideration in the merger.
The Special Meeting (page  25)
The special meeting will be held on November 20, 2020, at 10:00 AM Eastern Time, virtually via https://www.cesonlineservices.com/vrtu20_vm. At the special meeting, holders of Virtusa capital stock will be asked to, among other things, vote for the adoption of the merger agreement. Please see the section of this proxy statement titled “The Special Meeting” for additional information on the special meeting, including how to vote your shares of Virtusa capital stock.
Record Date and Stockholders Entitled to Vote; Vote Required (page  26)
Only holders of Virtusa capital stock of record as of the close of business on October 9, 2020, the record date for the special meeting, are entitled to receive notice of and to vote the shares of Virtusa capital stock they held on the record date at the special meeting. As of the close of business on the record date, 33,309,509, shares of Virtusa common stock were eligible to vote at the special meeting, of which 30,309,509 shares of Virtusa common stock were issued and outstanding and 3,000,000 shares of Virtusa common stock were issuable upon conversion of the 108,000 shares of Virtusa Series A preferred stock, which are
 
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issued and outstanding. On each of the proposals presented at the special meeting, each holder of Virtusa common stock and Virtusa Series A preferred stock is entitled to one vote for each share of Virtusa common stock held by such stockholder on the record date, with Virtusa Series A preferred stock voting on an as-converted to common stock basis. The adoption of the merger agreement by the holders of Virtusa capital stock requires the affirmative vote of stockholders holding a majority of the outstanding shares of Virtusa common stock and Virtusa Series A preferred stock (voting together as a single class on an as-converted basis) entitled to vote thereon as of the close of business on the record date. The approval of the advisory, non-binding compensation proposal and adjournment proposal each require the affirmative vote of the holders having a majority of the shares of Virtusa common stock and Virtusa Series A preferred stock (voting together as a single class on an as-converted basis to Virtusa common stock basis) cast by the holders of all Virtusa capital stock present virtually or represented by proxy at the meeting and entitled vote thereon.
Background of the Merger (page  34)
A description of the process we undertook that led to the proposed merger, including our discussions with Parent, is included in this proxy statement under “The Merger — Background of the Merger.”
Reasons for the Merger; Recommendation of the Virtusa Board (page  49)
After careful consideration, the Virtusa Board unanimously: (i) approved and declared advisable the merger agreement and the other agreements contemplated by the merger agreement, the merger and the other transactions contemplated by the merger agreement and approved the execution, delivery and performance of the merger agreement and the other agreements contemplated by the merger agreement, (ii) determined that the terms of the merger and the other transactions contemplated by the merger agreement are fair to and in the best interests of the Company and its stockholders, (iii) resolved to recommend that the Company’s stockholders adopt the merger agreement and approve the merger in accordance with the DGCL, (iv) rendered the limitations on business combinations contained in Section 203 of the DGCL inapplicable to the merger, the merger agreement, the other agreements contemplated by the merger agreement and the transactions contemplated thereby, and (v) elected that the merger not be subject to any “moratorium,” “control share acquisition,” “business combination,” “fair price” or other form of anti-takeover laws or regulations of any jurisdiction that may purport to be applicable to the merger agreement. Accordingly, the Virtusa Board recommends a vote “FOR” the merger proposal. The Virtusa Board also recommends a vote “FOR” the advisory, non-binding compensation proposal and “FOR” the adjournment proposal.
For a discussion of the material factors that the Virtusa Board considered in determining to recommend the adoption of the merger agreement, please see the section of this proxy statement titled “The Merger — Reasons for the Merger; Recommendation of the Virtusa Board.”
Opinion of Virtusa’s Financial Advisor (page  53)
Pursuant to an engagement letter, dated September 8, 2020, the Company retained J.P. Morgan Securities LLC (referred to as “J.P. Morgan”) as its financial advisor in connection with a possible acquisition of the Company and to deliver a fairness opinion in connection with the proposed merger.
At the meeting of the Virtusa Board on September 9, 2020, J.P. Morgan rendered its oral opinion to the Virtusa Board that, as of such date and based upon and subject to the factors and assumptions set forth in its opinion, the merger consideration to be paid to the holders of shares of Virtusa common stock in the merger was fair, from a financial point of view, to such holders. J.P. Morgan subsequently confirmed its oral opinion by delivering its written opinion to the Virtusa Board, dated September 9, 2020, that, as of such date and based upon and subject to the factors and assumptions set forth in its opinion, the merger consideration to be paid to the holders of shares of Virtusa common stock in the merger was fair, from a financial point of view, to such holders.
The full text of the written opinion of J.P. Morgan, dated September 9, 2020, which sets forth the assumptions made, matters considered and limits on the review undertaken, is attached as Annex B to this proxy statement and is incorporated herein by reference. The summary of the opinion of J.P. Morgan set forth
 
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in this proxy statement is qualified in its entirety by reference to the full text of such opinion. The Company’s stockholders are urged to read the opinion in its entirety.
J.P. Morgan’s written opinion was addressed to the Virtusa Board (in its capacity as such) in connection with and for the purposes of its evaluation of the merger, was directed only to the merger consideration to be paid in the proposed merger and did not address any other aspect of the merger. J.P. Morgan expressed no opinion as to the fairness of the consideration to the holders of any class of securities, creditors or other constituencies of the Company, other than the holders of Virtusa common stock, or as to the underlying decision by the Company to engage in the merger. The issuance of J.P. Morgan’s opinion was approved by a fairness committee of J.P. Morgan. The opinion does not constitute a recommendation to any stockholder of the Company as to how such stockholder should vote with respect to the merger or any other matter.
For more information, see the section of this proxy statement titled “The Merger — Opinion of Virtusa’s Financial Advisor.”
Certain Effects of the Merger (page  64)
Upon the consummation of the merger, the merger subsidiary will be merged with and into the Company, the separate corporate existence of the merger subsidiary will thereupon cease, and the Company will continue to exist following the merger as a wholly owned subsidiary of Parent.
Following the consummation of the merger, shares of Virtusa common stock will be delisted from Nasdaq, and the registration of shares of Virtusa common stock under the Securities Exchange Act of 1934, as amended (referred to as the “Exchange Act”), will be terminated.
Effects on the Company if the Merger Is Not Completed (page  67)
In the event that the merger proposal does not receive the required approval from the holders of Virtusa capital stock, or if the merger is not completed for any other reason, the holders of Virtusa capital stock will continue to own their shares and will not receive any payment for their shares of Virtusa capital stock in connection with the merger. Instead, the Company will remain an independent public company, with the Virtusa common stock listed and traded on Nasdaq. Under certain circumstances, if the merger agreement is terminated, the Company may be obligated to pay to Parent a termination fee and reimburse Parent for certain expenses incurred in connection with the merger. Please see the section of this proxy statement titled “The Merger Agreement — Termination Fees and Expenses.”
Treatment of Equity and Equity-Based Awards (page  68)
For additional information regarding beneficial ownership of Virtusa capital stock by each of the Company’s directors and executive officers and beneficial ownership of Virtusa capital stock by all of such directors and executive officers as a group, please see the section titled “Security Ownership of Certain Beneficial Owners and Management.” Immediately prior to the effective time of the merger, each share of Virtusa Series A preferred stock will be converted into shares of Virtusa common stock. Upon the closing of the merger, each of the Company’s directors and executive officers will be entitled to receive, for each share of Virtusa common stock he or she holds as of the effective time of the merger, the same merger consideration in cash in the same manner as other holders of Virtusa common stock.
Treatment of Virtusa RSUs
The merger agreement provides that, at the effective time of the merger (i) each Virtusa restricted stock unit award (each referred to as a “Virtusa RSU”), whether vested or unvested, that is outstanding and held by a non-employee member of the Virtusa Board immediately prior to the effective time of the merger, (ii) each employee Virtusa RSU that is vested (after taking into account the effect of the merger) and outstanding immediately prior to the effective time of the merger and (iii) the “applicable percentage” (as defined below) of each employee Virtusa RSU that is unvested as of the effective time of the merger (after taking into account the effect of the merger), with the applicable percentage for any holder to be applied by the Company pro-rata across all of such holder’s unvested and outstanding Virtusa RSUs, by grant date (each Virtusa RSU in (i), (ii) and (iii), referred to as a “closing Virtusa RSU”) shall, immediately prior to the effective time
 
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of the merger, be cancelled and extinguished and, in exchange therefor, each former holder of any closing Virtusa RSU shall have the right to receive an amount in cash equal to the product of (x) the aggregate number of shares of Virtusa common stock subject to such closing Virtusa RSU immediately prior to the effective time of the merger and (y) the merger consideration (such amounts are referred to as “closing Virtusa RSU payments”). From and after the effective time of the merger, any such closing Virtusa RSU shall no longer be settleable in Virtusa common stock, but shall entitle the holder only to the closing Virtusa RSU payments. “Applicable percentage” as defined with more specificity in the merger agreement means the lesser of (i) 70% and (ii) the percentage of the aggregate number of Virtusa RSUs and Virtusa PRSUs that are unvested (after taking into account the effect of the merger) and outstanding immediately prior to the effective time of the merger with an aggregate value of at least $13,000,000.
In addition, at the effective time of the merger, by virtue of the merger and without any action on the part of the holders, each Virtusa RSU other than a closing Virtusa RSU (each referred to as an “assumed Virtusa RSU”) shall, immediately prior to the effective time of the merger, be cancelled and replaced with a conditional right to receive an amount in cash equal to the product of (x) the aggregate number of shares of Virtusa common stock subject to such assumed Virtusa RSU immediately prior to the effective time of the merger and (y) the merger consideration. Such cash amounts shall be paid no later than the Company’s next regular payday following the earliest of (A) the applicable vesting date, (B) the date that is 12 months following the closing date of the merger (referred to as the “retention date”) or (C) the date that is 60 days after the date the holder’s employment is terminated by the Company without “cause” (as defined in the merger agreement) or by the holder for “good reason” (as defined in the merger agreement).
Treatment of Virtusa PRSUs
The merger agreement provides that, at the effective time of the merger (i) each Virtusa performance stock unit award (each referred to as a “Virtusa PRSU”) that is vested (after taking into account the effect of the merger) and outstanding immediately prior to the effective time of the merger and (ii) the applicable percentage of any Virtusa PRSU that is unvested as of the effective time of the merger (after taking into account the effect of the merger), with the applicable percentage for any holder to be applied by the Company pro-rata across all of such holder’s unvested and outstanding Virtusa PRSUs, by grant date (each Virtusa PRSU in (i) and, (ii) referred to as a “closing Virtusa PRSU”) shall, immediately prior to the effective time of the merger, be cancelled and extinguished and, in exchange therefor, each former holder of any such closing Virtusa PRSU shall have the right to receive an amount in cash equal to the product of (x) the aggregate number of shares of Virtusa common stock subject to such closing Virtusa PRSU (with the aggregate number of shares of Virtusa common stock subject to such award deemed to be the target number of shares set forth in the applicable award agreement) immediately prior to the effective time of the merger and (y) the merger consideration (such amounts are referred to as “closing Virtusa PRSU payments”). From and after the effective time of the merger, any such closing Virtusa PRSU shall no longer be settleable in Virtusa common stock, but shall entitle the holder only to the payment of the closing Virtusa PRSU payments.
In addition, at the effective time of the merger, by virtue of the merger and without any action on the part of the holders, each Virtusa PRSU other than a closing Virtusa PRSU (each referred to as an “assumed Virtusa PRSU”) shall, immediately prior to the effective time of the merger, be cancelled and replaced with a conditional right to receive an amount in cash equal to the product of (x) the aggregate number of shares of Virtusa common stock subject to such assumed Virtusa PRSU (with the aggregate number of shares of Virtusa common stock subject to such award deemed to be the target number of shares set forth in the applicable award agreement and such awards will no longer be subject to any performance-based vesting conditions) immediately prior to the effective time of the merger and (y) the merger consideration. Such cash amounts shall be paid no later than the Company’s next regular payday following the earliest of (A) the applicable vesting date, (B) the retention date or (C) the date that is 60 days after the date the holder’s employment is terminated by the Company without cause or by the holder for good reason.
Treatment of Virtusa Options
The merger agreement provides that, at the effective time of the merger, each option to purchase Virtusa common stock that is outstanding immediately prior to the effective time (referred to as a “Virtusa
 
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option”), all of which were vested prior to the time the merger agreement was entered into, shall, immediately prior to the effective time of the merger, be cancelled and extinguished and, in exchange therefor, each former holder of any such Virtusa option shall have the right to receive an amount in cash equal to the product of (x) the aggregate number of shares of Virtusa common stock subject to such Virtusa option immediately prior to the effective time of the merger and (y) the merger consideration, less any per share exercise or purchase price of such Virtusa option immediately prior to such cancellation (such amounts referred to as “closing Virtusa option payments”). From and after the effective time of the merger, any such Virtusa option shall no longer be exercisable by the former holder thereof, but shall entitle such holder only to the payment of the closing Virtusa option payments.
Any Virtusa option that that has an exercise price equal to or greater than the merger consideration shall be cancelled without any cash payment or other consideration.
Interests of the Company’s Directors and Executive Officers in the Merger (page  67)
The Company’s directors and executive officers have interests in the merger that may be different from, or in addition to, the interests of the Company’s stockholders generally. The members of the Virtusa Board were aware of and considered these interests in reaching the determination to approve the merger agreement and deem the merger agreement, the merger and the other transactions and agreements contemplated by the merger agreement to be advisable, fair to and in the best interests of the Company and its stockholders, and in recommending that the stockholders vote for the adoption of the merger agreement. These interests include:

the Company’s directors hold Virtusa RSUs and Virtusa options and the Company’s executive officers hold Virtusa RSUs, Virtusa PRSUs and Virtusa options that will be afforded the treatment described immediately above under “Treatment of Equity and Equity-Based Awards”;

the Company’s executive officers are party to executive agreements with the Company that provide for severance in the case of a qualifying termination of employment within 24 months following a change in control, which will include completion of the merger;

one director of the Company is affiliated with an entity that owns Virtusa Series A preferred stock, which Virtusa Series A preferred stock will be converted into Virtusa common stock immediately prior to the consummation of the merger and which conversion shall be a “Make-Whole Fundamental Change” (as defined in the Certificate of Powers, Designations, Preferences and Rights of such Virtusa Series A preferred stock) and entitle the holder to receive additional shares of Virtusa common stock upon the conversion of the Virtusa Series A preferred stock; and

the Company’s directors and executive officers are entitled to continued indemnification and insurance coverage following the merger under the merger agreement. Please see the section below titled “The Merger — Director and Officer Indemnification” and the section of this proxy statement titled “— The Merger Agreement — Indemnification of Directors and Officers and Insurance.”
Please see the section titled “The Merger — Interests of the Company’s Directors and Executive Officers in the Merger” for additional information about these financial interests.
Virtusa Capital Stock Ownership of Directors and Executive Officers (page  107)
As of October 9, 2020, the directors and executive officers of Virtusa beneficially owned in the aggregate approximately 4,761,711 shares of Virtusa common stock, or approximately 14.3% of the outstanding shares of Virtusa capital stock (on an as converted to Virtusa common stock basis). In connection with the execution of the merger agreement, Parent entered into a voting agreement (referred to as the “voting agreement”), as further described in the in the section titled “Agreements Related to the Merger — Voting Agreement”, with The Orogen Group (referred to as “Orogen”) and the Company’s directors as of the date of the merger agreement and certain executive officers and stockholders. Orogen holds 108,000 shares of the Virtusa Series A preferred stock, and its chief executive officer, Vikram Pandit, is an independent member of the Virtusa Board. Orogen entered into the voting agreement under which it has agreed to vote all of Orogen’s Virtusa Series A preferred stock in favor of the merger. Orogen’s shares of Virtusa Series A preferred stock are convertible into approximately 3,000,000 shares of Virtusa common
 
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stock, as well as 31,912 shares of Virtusa common stock pursuant to a make-whole fundamental change payment as defined in the certificate of designations of the Series A preferred stock, which 31,912 shares of Virtusa common stock will not be issued or outstanding until conversion of the Virtusa Series A preferred stock and therefore are not eligible to vote at the special meeting, and represent approximately 9% of the voting power of the Company after giving effect to the conversion of the Virtusa Series A preferred stock. The Company’s directors as of the date of the merger agreement and executive officers have also entered into the voting agreement, and hold an additional approximate 5.3% of the voting power of the Company. We expect that each of these individuals will vote all of his or her shares of Virtusa capital stock in favor of each of the proposals to be presented at the special meeting.
Financing of the Merger; Limited Guarantee (page  67)
The obligation of Parent and the merger subsidiary to consummate the merger is not subject to any financing condition.
We anticipate that the total amount of funds necessary at closing to complete the merger and the related transactions will be approximately $2.3 billion in cash. This amount includes the funds needed to make the payment of the aggregate merger consideration and pay all other amounts required to be paid by Parent or the merger subsidiary in connection with the transactions contemplated by the merger agreement or the equity and debt commitment letters (including, without limitation, the repayment of indebtedness of the Company and its subsidiaries and the payment of all fees, costs and expenses required to be paid by Parent or the merger subsidiary at closing in connection with the transactions contemplated by the merger agreement or the equity and debt commitment letters).
In connection with the merger, the merger subsidiary received a debt commitment letter, entered into on September 9, 2020 (referred to as the “original debt commitment letter”), from Bank of America, N.A. and BofA Securities, Inc. (referred to as the “original debt commitment parties”) and a joinder letter, entered into on September 25, 2020 (referred to as the “joinder letter,” and the original debt commitment letter, as amended by the joinder letter, referred to as the “debt commitment letter”), among the Company, the original debt commitment parties, Barclays Bank PLC, Goldman Sachs Bank USA, Deutsche Bank Securities Inc., Deutsche Bank AG New York Branch, Deutsche Ban Cayman Islands Branch, HSBC Bank USA, National Association, HSBC Securities (USA) Inc. and Nomura Securities International, Inc. (collectively, together with the original debt commitment parties, referred to as the “debt commitment parties”) pursuant to which certain debt commitment parties will provide, subject to the conditions set forth in the debt commitment letter, to the merger subsidiary (and, after the closing of the merger, the surviving corporation) (each of the merger subsidiary and the Company in its capacity as borrower thereunder, the “borrower”) debt financing in an aggregate amount of up to $950 million, consisting of (i) a $125 million senior secured revolving credit loan facility (referred to as the “revolving facility”); (ii) a $600 million senior secured term loan facility (referred to as the “term facility” and together with the revolving facility, the “senior facilities”); and (iii) a senior unsecured bridge loan facility (referred to as the “senior bridge facility,” and together with the senior facilities, the “facilities”) in an aggregate amount of up to $300 million to the extent that some or all of the senior unsecured notes referred to in the next sentence are unable to be issued at or prior to the closing of the merger. In connection with the debt commitment letter, the merger subsidiary has engaged lead arrangers for an offering of up to $300 million aggregate principal amount of senior unsecured notes (referred to as the “senior notes”) in a Rule 144A or other private placement. The term loan facility, the senior notes and/or the senior bridge facility, and a portion of the revolving facility are expected to be drawn on the closing date of the merger for the purpose of financing a portion of the merger consideration, paying certain related fees and expenses and repaying certain indebtedness of the Company. The revolving facility is expected to be available on and after the closing date to provide funding for working capital and other general corporate purposes of the Company and its subsidiaries (such committed debt financing, together with any debt securities issued in lieu thereof unless the context requires otherwise, referred to as the “debt financing”).
Under the merger agreement, the Company is required to allow Parent a period of 17 consecutive business days to market the debt financing, provided that for purposes of the marketing period, November 26, 2020 and November 27, 2020 will not constitute a business day, if the marketing period has not ended on or prior to December 18, 2020, then the marketing period cannot commence earlier than January 4, 2021, and
 
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if the marketing period has not ended on or prior to August 20, 2021, then the marketing period cannot commence earlier than September 7, 2021. This marketing period is a period commencing upon the latest to occur of (i) the date that the quarterly financial statements for the fiscal quarter ended September 30, 2020 are received, (ii) the first day of the CFIUS review period, (iii) the date on which this proxy statement is mailed to the Company’s stockholders and (iv) November 9, 2020. Throughout that period, Parent shall have the Required Information (as defined in the merger agreement) and such Required Information shall be Compliant (as defined in the merger agreement).
In connection with the merger, Parent has received an equity commitment letter from each of The Baring Asia Private Equity Fund VII, L.P., The Baring Asia Private Equity Fund VII, L.P.1, and The Baring Asia Private Equity Fund VII, SCSp (referred to as, the “guarantors”) pursuant to which the guarantors committed, subject to the conditions set forth in the equity commitment letters, to contribute to Parent an aggregate maximum cash purchase price equal to the amount set forth in such guarantor’s equity commitment letter, with the three guarantors’ respective equity commitments collectively equaling in the aggregate up to approximately $1.39 billion, (subject to adjustments as set forth in the equity commitment letters) solely for the purpose of funding, to the extent necessary, a portion of the aggregate merger consideration required to be paid by Parent to consummate the transactions contemplated by the merger agreement. We refer to the financing contemplated by the equity commitment letters, as may be amended, restated, supplemented or otherwise modified from time to time, as the “equity financing,” and together with the debt financing, the “financing.”
In the merger agreement, Parent and the merger subsidiary have represented and warranted to the Company that the net proceeds of the financing when funded in accordance with the debt and equity commitment letters will in the aggregate be sufficient for the merger subsidiary and the surviving corporation to, pay the aggregate merger consideration and pay all other amounts required to be paid by Parent or the merger subsidiary in connection with the transactions contemplated by the merger agreement or the debt commitment letter or the equity commitment letters. In addition, to induce the Company to enter into the merger agreement, each of the three guarantors have executed a limited guarantee (referred to as the “limited guarantees”), each dated as of September 9, 2020, in favor of the Company. Under the limited guarantees, subject to the limitations described therein, each of the guarantors has absolutely, irrevocably and unconditionally guaranteed to the Company the due and punctual performance and discharge of a percentage of Parent’s obligation to pay (a) the Parent termination fee payable under the merger agreement, if, as and when the Parent termination fee becomes payable under the merger agreement or (b) monetary damages that may become payable under the merger agreement, together with any collection costs and any financing expenses (clauses (a) and (b) together referred to as the “guaranteed obligations”), provided that in no event will such amount exceed the Cap as defined in such guarantor’s limited guarantee. The three guarantors’ respective Caps collectively equal in the aggregate approximately $112 million.
For more information regarding the debt commitment letter, equity commitment letters and the financing, see the section of this proxy statement titled “The Merger — Financing of the Merger.” For more information regarding the limited guarantees, see the section of this proxy statement titled “The Merger — Limited Guarantees.”
Conditions of the Merger (page  98)
The obligations of the Company, Parent and the merger subsidiary to consummate the merger are subject to the satisfaction or waiver of various conditions on or prior to the effective time of the merger, including the following:

adoption of the merger agreement by the Company’s stockholders;

expiration or early termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (referred to as the “HSR Act” ), obtaining or making any consents, approvals or filings under any foreign antitrust laws, the absence of which would prohibit the consummation of the merger, and receipt of all clearances, approvals and or authorizations required by foreign antitrust laws, including approval from Australia’s Foreign Investment Review Advisory Board (see the section titled “The Merger — Regulatory Approvals Required for the Merger”);
 
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the absence of any legal or regulatory restraints enjoining or otherwise prohibiting or making illegal the consummation of the merger; and

the obtaining of CFIUS approval.
Each party’s obligation to consummate the merger is also subject to the satisfaction or waiver of certain additional conditions, including:

subject to certain materiality and other qualifiers, the accuracy of the representations and warranties of the other party;

performance in all material respects by the other party of its obligations under the merger agreement;

the delivery of a customary closing certificate signed on behalf of the respective party by an officer of the party certifying certain conditions have been satisfied; and

in the case of Parent’s and the merger subsidiary’s obligations, the absence of a Company material adverse effect (which term is described in the section titled “The Merger Agreement — Representations and Warranties”); the conversion of all issued and outstanding shares of Virtusa Series A preferred stock into shares of Virtusa common stock immediately prior to the consummation of the merger; and the delivery of a customary payoff letter in connection with the repayment of all outstanding indebtedness under the Loan Agreement (as defined in the merger agreement).
The consummation of the merger is not conditioned upon Parent’s receipt of financing.
Before the closing, each of the Company, Parent and the merger subsidiary may waive any of the conditions to its obligation to consummate the merger even though one or more of the conditions described above has not been met, except where waiver is not permissible under applicable law. Please see the section of this proxy statement titled “The Merger Agreement — Conditions of the Merger.”
Regulatory Approvals Required for the Merger (page  78)
U.S. Antitrust.   The consummation of the merger is subject to review under the HSR Act. As described above in the section titled “— Conditions of the Merger,” the obligations of Parent and the Company to consummate the merger are subject to expiration or early termination of any applicable waiting period under the HSR Act. Under the HSR Act and the rules and regulations promulgated thereunder, the merger may not be completed until notifications have been filed and certain information has been furnished to the Federal Trade Commission (referred to as the “FTC”) and the Antitrust Division of the Department of Justice (referred to as the “DOJ”) and the specified waiting period has expired or been terminated. The Company and Parent each filed or caused to be filed the requisite notification forms under the HSR Act with the DOJ and the FTC on September 23, 2020, and both requested “early termination” of the waiting period. Both before and after the expiration or termination of the applicable waiting period, the FTC and the DOJ retain the authority to challenge the merger on antitrust grounds.
Other Regulatory Notifications.   The consummation of the merger is also conditional on (1) foreign antitrust approvals from the German Federal Cartel Office and the Competition Commission of India, and (2) foreign investment and screening laws in Australia and New Zealand. The obligation of the parties to the merger agreement to consummate the merger is subject to receipt of such regulatory consents.
CFIUS Approval.   Under the merger agreement, the parties agreed to cooperate to submit a draft joint voluntary notice of the merger to the Committee on Foreign Investment in the United States (referred to as “CFIUS”) as soon as practicable after the date of the merger agreement. After receipt of confirmation that CFIUS has no further comments or inquiries related to the draft joint voluntary notice, the parties must promptly submit a formal joint voluntary notice to CFIUS. The parties will use their reasonable best efforts to comply at the earliest practicable time required by CFIUS or any CFIUS member agency with any request for additional information, documents or other materials, and will use their reasonable best efforts to cooperate with each other to resolve any investigation or other inquiry of CFIUS or any CFIUS member agency. Approval of the merger by CFIUS is a condition to each party’s obligations to complete the merger, and the parties’ completion of the merger is therefore contingent upon approval by CFIUS.
 
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The merger agreement includes covenants obligating each of the parties to use reasonable best efforts to cause the merger to be consummated and to take certain actions to resolve objections under any antitrust laws. Among other things, the Company, Parent and the merger subsidiary have agreed to use their reasonable best efforts to (i) obtain all necessary actions or nonactions, waivers, consents and approvals from governmental entities and the making of all necessary registrations and filings (including filings with governmental entities, if any) and the taking of all steps as may be necessary to obtain an approval or waiver from, or to avoid an action or proceeding by, any governmental entity, (ii) obtain all necessary consents, approvals or waivers from third parties (provided, that neither the Company nor any of its subsidiaries will make or agree to make any payment of a consent fee, “profit sharing” payment or other consideration (including increased or accelerated payments) or concede anything of monetary or economic value, for the purposes of obtaining any such third party consents without the prior consent of Parent), (iii) defend any lawsuits or other legal proceedings, whether judicial or administrative, challenging the merger agreement and (iv) execute and deliver any additional instruments necessary to consummate the transactions contemplated by the merger agreement and the other agreements contemplated thereby.
For more information regarding these covenants, see the section of this proxy statement titled “The Merger Agreement — Reasonable Best Efforts; Antitrust Filings.”
No-Shop; Virtusa Board Recommendation Change (page  89)
The merger agreement generally restricts the Company’s ability to solicit, initiate or encourage the submission of acquisition proposals (as defined below in the section titled “The Merger Agreement — No-Shop; Virtusa Board Recommendation Change”), from third parties (including by furnishing non-public information), to enter into, participate in or continue any discussions or negotiations with third parties regarding any acquisition proposals, to enter into any acquisition agreement with respect to an acquisition proposal or waive, terminate, modify, fail to enforce or release any person under any “standstill” or similar agreement.
Between the signing of the merger agreement and the adoption of the merger agreement by the Company’s stockholders, if the Virtusa Board receives an unsolicited, written bona fide acquisition proposal that was not solicited in breach of the merger agreement, and the Virtusa Board determines in good faith (after consultation with outside legal counsel and a financial advisor of nationally recognized reputation) constitutes or would reasonably be expected to lead to a superior proposal (as defined below in the section titled “The Merger Agreement — No-Shop; Virtusa Board Recommendation Change — Virtusa Board Recommendation Change”) and the Virtusa Board determines in good faith, after consultation with outside legal counsel, that the failure to take certain actions with respect to such acquisition would be inconsistent with its fiduciary duties under Delaware law, then, subject to providing Parent with prior notice thereof, the Virtusa Board may furnish non-public information to, and participate in discussions or negotiations with, the party that made the acquisition proposal.
The Virtusa Board generally is not permitted under the merger agreement to change its recommendation in favor of the adoption of the merger agreement. However, in certain circumstances, the Virtusa Board is permitted to withdraw, qualify or modify its recommendation in response to certain unforeseen, intervening events or to accept a superior proposal if, in either case, the Virtusa Board determines in good faith, after consultation with outside legal counsel and consultation with a financial advisor of nationally recognized reputation, that the failure to do so would reasonably be expected to be inconsistent with its fiduciary duties under Delaware law, and subject to the procedures set forth in the merger agreement, the Company negotiates in good faith with Parent, if requested by Parent, for five business days (and for each subsequent material modification to a superior proposal or material change to an intervening event, over a three business day period) to make adjustment to the terms of the merger agreement and other transactions referenced therein so that the Virtusa Board’s fiduciary duties no longer require it to make a Virtusa Board recommendation change in response to the intervening event or so that the acquisition proposal no longer constitutes a superior proposal. See the section of this proxy statement titled “The Merger Agreement — No-Shop; Virtusa Board Recommendation Change — Virtusa Board Recommendation Change.
Termination (page  99)
The merger agreement may be terminated at any time prior to the effective time of the merger in the following circumstances:
 
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by mutual written consent of Parent, the merger subsidiary and the Company at any time prior to the effective time of the merger;

by either Parent or the Company if:

the merger is not consummated on or before the day that is nine months after the date of the merger agreement (and if such day shall not be a business day, then the next following business day) (referred to as the “outside date”); provided, however, that no party shall be permitted to terminate the merger agreement on this basis if such party’s failure to fulfill any of its obligations under the merger agreement shall have been the primary reason that the closing shall not have occurred on or before the outside date; provided further, that if the antitrust and competition approvals or CFIUS approval closing conditions have not been satisfied by the outside date, then the outside date shall automatically extend by one three-month period (the outside date may not be extended in this manner more than once), it being understood that in no event shall the outside date be so extended to a date that is later than 12 months following the date of the merger agreement (an “outside date termination”);

if any legal restraint that has the effect of preventing the consummation of the merger shall have become final and nonappealable; provided, however, that to the right to terminate the merger agreement on this basis is not be available to any party (or any affiliate of such party) whose breach of any representation, warranty, covenant or agreement set forth in the merger agreement has been the primary cause of, or resulted in, the issuance, promulgation, enforcement or entry of any such legal restraint; or

if, upon a vote at a duly held meeting to obtain the requisite approval of the Company’s stockholders, the Company’s stockholders fail to adopt the merger agreement (referred to as a “stockholder vote termination”);

by Parent if:

the Company breaches or fails to perform in any material respect any of its representations, warranties or covenants contained in the merger agreement or any agreement contemplated by the merger agreement, which breach or failure to perform (i) would give rise to the failure of any of the closing conditions and (ii) cannot be or has not been cured within 20 business days (or, if earlier, the outside date) after the giving of written notice to the Company of such breach (provided that Parent is not then in material breach of any representation, warranty or covenant contained in the merger agreement or any agreement contemplated by the merger agreement) (referred to as a “Company breach termination”); or

(i) an adverse recommendation change has occurred; or (ii) the Company shall have breached in any material respect the no-shop provisions in the merger agreement (referred to as a “recommendation change termination”); and

by the Company if:

Parent breaches or fails to perform in any material respect any of its representations, warranties or covenants contained in the merger agreement or any agreement contemplated by the merger agreement, which breach or failure to perform (i) would give rise to the failure of any of the closing conditions and (ii) cannot be or has not been cured within 20 business days (or, if earlier, the outside date) after the giving of written notice to Parent of such breach (provided that the Company is not then in material breach of any representation, warranty or covenant in the merger agreement or any agreement contemplated by the merger agreement) (referred to as a “Parent breach termination”);

prior to the receipt of the requisite stockholder approval, the Company receives a superior proposal and determines to terminate the merger agreement in order to enter into a definitive agreement for such superior proposal; provided, however, that the Company shall have prior to or concurrently with such termination paid to Parent the Company termination fee (summarized below) (referred to as a “superior proposal termination”); or

(i) all of the mutual closing conditions or conditions to the obligations of Parent and the merger subsidiary to effect the merger have been and remain satisfied or waived (by the party entitled
 
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to the benefit of such condition) (other than delivery of items to be delivered at the closing and other than satisfaction of those conditions that by their nature are to be satisfied by actions taken at the closing, which deliveries and conditions are capable at the time of termination of being satisfied if the closing were to occur at such time), (ii) Parent and the merger subsidiary fail to consummate the merger on the date on which the closing should have occurred pursuant to the merger agreement (referred to as the “scheduled closing date”), (iii) the Company has, on or after the scheduled closing date, notified Parent in writing at least three business days prior to termination that (A) Parent and the merger subsidiary failed to consummate the merger on the scheduled closing date, (B) during such three business day period, the Company stands ready and willing to consummate the transactions contemplated by the merger agreement and (C) the mutual closing conditions or conditions to the obligations of Parent and the merger subsidiary to effect the merger have been satisfied or waived (by the party entitled to the benefit of such condition) (other than delivery of items to be delivered at the closing and other than satisfaction of those conditions that by their nature are to be satisfied by actions taken at the closing, which deliveries and conditions are capable at the time of termination of being satisfied if the Closing were to occur at such time) and will remain satisfied or waived throughout such three business day period, and (iv) Parent and the merger subsidiary fail to consummate the transactions contemplated by the merger agreement within three business days following the delivery of such notice specified in the immediately preceding clause (iii) (for the avoidance of doubt, it being understood that during such period of three business days following delivery of such notice, Parent shall not be entitled to terminate the merger agreement pursuant to the outside date termination) (referred to as a “closing failure termination”).
Termination Fees and Expenses (page  101)
Upon termination of the merger agreement under specified circumstances, including by the Company to accept a superior proposal, the Company will be required to pay Parent a termination fee (which is referred to as the “Company termination fee”) of $54,330,000 if (i) Parent terminates the merger agreement pursuant to the recommendation change termination; (ii) the Company terminates the merger agreement pursuant to the superior proposal termination; or (iii) an acquisition proposal has been made to the Company or to the stockholders of the Company generally or shall have otherwise become publicly known or any person shall have publicly announced an intention (whether or not condition and whether or not withdrawn) to make an acquisition proposal and thereafter (A) the merger agreement is terminated pursuant to the outside date termination, the stockholder vote termination or the Company breach termination and (B) within 12 months of such termination the Company or any of its subsidiaries enters into an acquisition agreement with respect to any acquisition proposal or any acquisition proposal is consummated, subject to certain limitations (solely for this clause (iii), the term acquisition proposal means an acquisition proposal, except that all references to 15% are instead deemed references to 50%).
If the merger agreement is terminated by either Parent or the Company pursuant to the stockholder vote termination, or by Parent pursuant to the Company breach termination, then the Company must pay to Parent, upon demand by Parent, the expenses (as defined in the merger agreement) incurred by Parent, up to $3,500,000 in the aggregate.
The merger agreement also provides that Parent will pay the Company a fee (which is referred to as the “Parent termination fee”) of $108,660,000 if a Parent breach termination occurs (with respect to a breach or failure to perform by Parent that this is the primary reason for the failure of the closing to be consummated) or a closing failure termination occurs. See “The Merger Agreement — Termination Fees and Expenses.”
Appraisal Rights (page  112)
Pursuant to Section 262 of the DGCL, Virtusa stockholders who do not vote in favor of adoption of the merger agreement, who continuously hold their shares of Virtusa common stock through the effective time of the merger and who otherwise comply with the applicable requirements of Section 262 of the DGCL have the right to seek appraisal of the fair value of their shares of Virtusa common stock, as determined by the Delaware Court of Chancery, if the merger is completed. The “fair value” of shares of Virtusa common stock as determined by the Delaware Court of Chancery could be greater than, the same as, or less than
 
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the per share merger consideration that stockholders would otherwise be entitled to receive under the terms of the merger agreement if they did not seek appraisal of their shares of Virtusa common stock.
The right to seek appraisal will be lost if a Virtusa stockholder votes “FOR” the merger proposal. However, abstaining or voting against adoption of the merger agreement is not in itself sufficient to perfect appraisal rights because additional actions must also be taken to perfect such rights. To exercise appraisal rights, Virtusa stockholders who wish to exercise the right to seek an appraisal of their shares must so advise the Company by submitting a written demand for appraisal (or by electronic transmission directed to an information processing system, if any, expressly designated for that purpose in the notice of appraisal) to the Company prior to the taking of the vote on the merger proposal at the special meeting, and must otherwise follow the applicable procedures and requirements prescribed by Section 262 of the DGCL. A person having a beneficial interest in shares of Virtusa common stock held of record in the name of another person, such as bank, broker or other nominee, must act promptly to cause the record holder to follow the steps required by Section 262 of the DGCL and in a timely manner to perfect appraisal rights. In view of the complexity of Section 262 of the DGCL, Virtusa stockholders that may wish to pursue appraisal rights are urged to consult their legal and financial advisors. In addition, under Section 262 of the DGCL, the Delaware Court of Chancery will dismiss any appraisal proceedings as to all stockholders who have perfected their appraisal rights unless (i) the total number of shares entitled to appraisal exceeds 1% of the outstanding shares of Virtusa common stock, (ii) the value of the per share merger consideration multiplied by the total number of shares of Virtusa common stock entitled to appraisal exceeds $1 million or (iii) the merger was approved pursuant to Sections 253 or 267 of the DGCL. See the section of this proxy statement titled “Appraisal Rights.”
Material U.S. Federal Income Tax Considerations (page  75)
The receipt of cash by a holder of Virtusa common stock who is a U.S. holder (as defined below in the section of this proxy statement titled “The Merger — Material U.S. Federal Income Tax Considerations”) in exchange for shares of Virtusa common stock pursuant to the merger will generally be a taxable transaction for U.S. federal income tax purposes and may also be a taxable transaction under applicable state, local or foreign income or other tax laws. Generally, for U.S. federal income tax purposes, if you are a U.S. holder, you will recognize gain or loss equal to the difference, if any, between the amount of cash you receive (or are deemed to receive) in the merger and your adjusted tax basis in the shares of Virtusa common stock converted into cash in the merger. If you are a holder of Virtusa common stock who is a non-U.S. holder (as defined below in the section of this proxy statement titled “The Merger — Material U.S. Federal Income Tax Considerations”), the merger will generally not be a taxable transaction to you under U.S. federal income tax laws unless you have certain connections to the United States, or the Company is, or was during the relevant period, a U.S. real property holding corporation. Further, the merger may be a taxable transaction to you under non-U.S. tax laws, and you are encouraged to seek tax advice regarding such matters. Because individual circumstances may differ, we urge you to consult your own tax advisor to determine the particular tax effects to you.
You are urged to read the section of this proxy statement titled “The Merger — Material U.S. Federal Income Tax Considerations” for a more complete discussion of the material U.S. federal income tax consequences of the merger.
Current Price of Virtusa Common Stock (page  118)
The closing sale price of Virtusa common stock on Nasdaq on October 19, 2020, the most recent practicable date before the filing of this proxy statement, was $50.25. You are encouraged to obtain current market quotations for Virtusa common stock in connection with voting your shares of Virtusa common stock.
Additional Information (page  120)
You can find more information about the Company in the periodic reports and other information we file with the SEC. The information is available at the SEC’s public reference facilities and at the website maintained by the SEC at www.sec.gov. See the section of this proxy statement titled “Where You Can Find Additional Information.”
 
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Additionally, if you have any questions concerning the merger, the special meeting or accompanying proxy statement, would like additional copies of the accompanying proxy statement or need help voting your shares of Virtusa common stock, please contact our proxy solicitor:
MacKenzie Partners, Inc.
1407 Broadway, 27th Floor
New York, NY 10018
Stockholders may call toll free: 1 (800) 322-2885
Banks and Brokers may call collect: 1 (212) 929-5500
 
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QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER
The following questions and answers are intended to briefly address some commonly asked questions regarding the special meeting and the merger. These questions and answers may not address all questions that may be important to you as a holder of Virtusa capital stock. You should read the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents referred to in this proxy statement.
Why am I receiving this proxy statement?
On September 9, 2020, the Company entered into the merger agreement with Parent and the merger subsidiary. Pursuant to the merger agreement, the merger subsidiary will be merged with and into the Company, with the Company surviving the merger as a wholly owned subsidiary of Parent.
You are receiving this proxy statement in connection with the solicitation of proxies by the Virtusa Board in favor of the proposal to adopt the merger agreement and the other matters to be voted on at the special meeting described below under “— What proposals will be considered at the special meeting?
As a holder of Virtusa capital stock, what will I receive in the merger?
Each share of Virtusa common stock that is outstanding immediately prior to the effective time of the merger (other than shares held by the Company as treasury stock, owned by Parent or the merger subsidiary or as to which the holders thereof have properly and validly exercised their statutory rights of appraisal in accordance with Section 262 of the DGCL) will be automatically converted into the right to receive cash in an amount equal to $51.35, without interest and less any applicable withholding taxes, which is referred to as the “merger consideration.”
Under the voting agreement, which is described below in “How do the Company’s directors and executive officers intend to vote?”, the holder of Virtusa Series A preferred stock, that is party to the voting agreement, which represent the only holders of Virtusa Series A preferred stock, has agreed to submit all of its shares of Virtusa Series A preferred stock for conversion into shares of Virtusa common stock in accordance with the Certificate of Powers, Designations, Preferences and Rights of such Virtusa Series A preferred stock, with such conversion to only become effective immediately prior to the effective time of the merger in connection with the consummation of the merger. It is a condition to Parent’s and the merger subsidiary’s obligations to effect the merger that all of the issued and outstanding shares of Series A preferred stock have been converted into shares of Virtusa common stock immediately prior to the consummation of the merger. Pursuant to the merger agreement, the Company agrees to take all actions necessary to facilitate any request by a holder of Virtusa Series A preferred stock to convert its Virtusa Series A preferred stock into Virtusa common stock immediately prior to the closing of the merger.
The exchange of shares of Virtusa common stock for cash pursuant to the merger will generally be a taxable transaction for U.S. federal income tax purposes. Please see the section of this proxy statement titled “The Merger — Material U.S. Federal Income Tax Considerations” for a more detailed description of the U.S. federal income tax consequences of the merger. You are urged to consult your own tax advisor for a full understanding of how the merger will affect you for federal, state, local and/or non-U.S. tax purposes.
How does the merger consideration compare to the recent trading price of Virtusa common stock?
The merger consideration of $51.35 per share represents a premium of approximately 27% over the Company’s closing stock price on September 9, 2020 (the last full trading day before the announcement of the transactions contemplated by the merger agreement). On October 19, 2020, the most recent practicable date before the filing of this proxy statement, the closing price of the Virtusa common stock was $50.25 per share.
What will happen to outstanding Company equity awards in the merger?
Vested Company Stock Awards: each Virtusa option, Virtusa RSU, and Virtusa PRSU (collectively referred to as “Company stock awards”) that is by its terms unexpired, unexercised, and outstanding and vested as of immediately prior to the effective time of the merger will be canceled and converted into the right
 
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to receive an amount in cash equal to the merger consideration, less any per share exercise or purchase price of such Company stock award.
Independent Director Stock Awards: each Company stock award, whether vested or unvested, that is outstanding and held by a non-employee member of the Virtusa Board as of immediately prior to the effective time of the merger will be canceled and converted into the right to receive an amount in cash equal to the merger consideration, less any per share exercise or purchase price of such Company stock award.
Unvested Company Stock Awards: the applicable percentage of each Company stock award that is by its terms unexpired, unexercised, and outstanding and unvested as of immediately prior to the effective time of the merger will be canceled and converted into the right to receive an amount in cash equal to the merger consideration, less any per share exercise or purchase price of such Company stock award, with the applicable percentage for any holder to be applied by the Company pro-rata across all of such holder’s unvested and outstanding Company stock awards, by grant date and award type. The “applicable percentage” means the lesser of (i) 70% and (ii) the percentage of the aggregate number of shares subject to Company stock awards that are unvested (after taking into account the effect of the merger) and outstanding immediately prior to the effective time of the merger with an aggregate value of at least $13,000,000.
Each Company stock award that is by its terms unexpired, unexercised, and outstanding, and unvested, as of immediately prior to the effective time of the merger and that is not cancelled and converted into the right to receive an amount in cash as described in the immediately preceding paragraph will instead be cancelled and replaced with a conditional right to receive an amount in cash payable upon the earliest of (A) the applicable vesting date of the converted Company stock award, (B) the date that is 12 months after the closing date of the merger, or (C) the date that is 60 days after the holder’s employment is terminated by the Company without “cause” or by the holder for “good reason” (each as defined in the merger agreement).
When and where is the special meeting of our stockholders?
The special meeting will be held on November 20, 2020, at 10:00 AM, Eastern Time, virtually via https://www.cesonlineservices.com/vrtu20_vm.
Who is entitled to vote at the special meeting?
Only holders of record of Virtusa common stock and Virtusa Series A preferred stock as of the close of business on October 9, 2020, the record date for the special meeting, are entitled to vote the shares of Virtusa common stock and Virtusa Series A preferred stock they held as of the record date at the special meeting. As of the close of business on the record date, there were 30,309,509 shares of Virtusa common stock and 108,000 shares of Virtusa Series A preferred stock outstanding and entitled to vote. On each of the proposals presented at the special meeting, each holder of Virtusa common stock and Virtusa Series A preferred stock is entitled to one vote for each share of Virtusa common stock held by such stockholder on the record date, with Virtusa Series A preferred stock voting on an as-converted to common stock basis.
May I attend the special meeting and vote in person?
Virtusa is hosting the special meeting virtually via https://www.cesonlineservices.com/vrtu20_vm. There will be no physical location for stockholders to attend. Stockholders may only participate online and must pre-register. In order to attend the virtual-only meeting, you will need to pre-register by 10:00 AM, Eastern Time on November 19, 2020. If you are a stockholder of record, you may vote your shares virtually at the special meeting. In order to attend the virtual-only meeting, you will need to pre-register by 10:00 AM Eastern Time on November 19, 2020. To pre-register for the meeting, please follow these instructions:

If your shares are registered in your name with our transfer agent and you wish to attend the virtual meeting, please go to https://www.CESVote.com, enter the control number you received on your proxy card to access the voting page, then click on the “Click here to pre-register for the online meeting” link at the top of the page.

If you do not have your proxy card, you may pre-register to attend the virtual meeting by emailing your proof of ownership of shares of Virtusa capital stock as of October 9, 2020 to
 
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VRTURegister@Proxy-Agent.com. After pre-registering, and upon verification of your ownership, you will receive a confirmation email prior to the special meeting with instructions for attending the virtual special meeting online.

If your shares are not registered in your name with our transfer agent, but you are a beneficial owner and your shares are held by a broker, bank, financial institution or other nominee or intermediary in “street name” as of October 9, 2020, you may pre-register to attend the annual meeting by emailing VRTURegister@Proxy-Agent.com and attaching evidence that you beneficially owned shares of Virtusa capital stock as of October 9, 2020, which evidence may consist of a copy of the Voting Instruction Form (or Notice) provided by your broker, bank, financial institution or other nominee or intermediary, an account statement, or a letter or legal proxy from such custodian. After pre-registering, and upon verification of your ownership, you will receive a confirmation email prior to the special meeting with instructions for attending the virtual special meeting online.
If you hold your Virtusa capital stock in “street name,” you must obtain the appropriate documents from your broker, bank, trustee, or nominee, giving you the right to vote the shares at the special meeting. For beneficial owners of shares of Virtusa capital stock held in “street name,” in addition to providing identification as outlined for record holders above, you will need a legal proxy from your broker or a recent brokerage statement or letter from your broker reflecting your stock ownership as of the record date. Please note, however, that unless you have a legal proxy from your bank, broker or other nominee, you will not be able to vote any shares held in street name virtually at the special meeting. Please note that even if you plan to attend the special meeting, we recommend that you vote using the enclosed proxy card in advance, to ensure that your shares will be represented.
What proposals will be considered at the special meeting?
At the special meeting, holders of Virtusa capital stock will be asked to consider and vote on the following proposals:

a proposal to approve and adopt the merger agreement (referred to as the “merger proposal”);

a proposal to approve, on an advisory, non-binding basis, the specified compensation that may become payable to Virtusa’s named executive officers in connection with the merger (referred to as the “advisory, non-binding compensation proposal”); and

a proposal to adjourn or postpone the stockholder meeting (referred to as the “adjournment proposal”).
Pursuant to Virtusa’s Amended and Restated By-Laws (referred to as the “by-laws”), the only business that will be transacted at the special meeting are the merger proposal, the advisory, non-binding compensation proposal and the adjournment proposal, as stated in the accompanying notice of the special meeting.
What constitutes a quorum for purposes of the special meeting?
The presence at the meeting in person, by means of remote communication in a manner, if any, authorized by the Virtusa board in its sole discretion, or represented by proxy, of the holders of a majority of the shares of Virtusa capital stock issued and outstanding and entitled to vote at the meeting, or 16,654,755 shares of Virtusa common stock, calculated on an as-converted to Virtusa common stock basis, will constitute a quorum for the transaction of business at the special meeting. The inspector of election appointed for the special meeting will determine whether a quorum is present. The inspector of election will treat abstentions as present for purposes of determining the presence of a quorum.
If a quorum is not present, the only business that can be transacted at the special meeting is the adjournment or postponement of the meeting to another date or time.
What vote of our stockholders is required to approve each of the proposals?
The approval of the merger proposal requires the affirmative vote of stockholders holding a majority of the outstanding shares of Virtusa common stock and Virtusa Series A preferred stock, voting together as a single class on an as-converted to Virtusa common stock basis, entitled to vote thereon as of the close of
 
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business on the record date. Accordingly, shares deemed not in attendance at the special meeting, whether due to a record holder’s failure to vote or a “street name” holder’s failure to provide any voting instructions to such holder’s bank, broker or other nominee, abstentions and broker non-votes will have the same effect as a vote “AGAINST” the merger proposal.
The approval of the advisory, non-binding compensation proposal requires the affirmative vote of the holders having a majority of shares of Virtusa common stock and Virtusa Series A preferred stock, voting together as a single class on an as-converted to Virtusa common stock basis, cast by the holders of all Virtusa capital stock present virtually or represented by proxy at the meeting and entitled to vote on the subject matter. Accordingly, abstentions, shares deemed not in attendance at the special meeting, whether due to a record holder’s failure to vote or a “street name” holder’s failure to provide any voting instructions to such holder’s bank, broker or other nominee, and broker non-votes will have no effect on the outcome of the advisory, non-binding compensation proposal.
The approval of the adjournment proposal requires the affirmative vote of the holders having a majority of shares of Virtusa common stock and Virtusa Series A preferred stock, voting together as a single class on an as-converted to Virtusa common stock basis, cast by the holders of all Virtusa capital stock present virtually or represented by proxy at the meeting and entitled to vote on the subject matter. Accordingly, abstentions, shares deemed not in attendance at the special meeting, whether due to a record holder’s failure to vote or a “street name” holder’s failure to provide any voting instructions to such holder’s bank, broker or other nominee, and broker non-votes will have no effect on the outcome of the advisory, non-binding compensation proposal.
What is a “broker non-vote”?
If a beneficial owner of shares of Virtusa common stock held in “street name” by a bank, broker or other nominee does not provide the organization that holds its shares with specific voting instructions, then, under applicable rules, the organization that holds its shares may generally vote on “discretionary” matters but cannot vote on “non-discretionary” matters. The merger proposal and the advisory, non-binding compensation proposal are “non-discretionary” matters. The adjournment proposal is a “discretionary” matter. If the organization that holds the beneficial owner’s shares does not receive instructions from such stockholder on how to vote its shares on any proposal to be voted on at the special meeting, that bank, broker or other nominee will inform the inspector of election at the special meeting that it does not have authority to vote on any proposal at the special meeting with respect to such shares, and, furthermore, such shares will not be deemed to be in attendance at the meeting. This is generally referred to as a “broker non-vote.” However, if the bank, broker or other nominee receives instructions from such stockholder on how to vote its shares as to at least one proposal but not all of the proposals, the shares will be voted as instructed on the proposal as to which voting instructions have been given but will not be voted on the other, uninstructed proposal(s).
How does the Virtusa Board recommend that I vote?
The Virtusa Board recommends a vote “FOR” the merger proposal, “FOR” the advisory, non-binding compensation proposal and “FOR” the adjournment proposal.
For a discussion of the factors that the Virtusa Board considered in determining to recommend that the Company’s stockholders adopt and approve of the merger agreement, please see the section of this proxy statement titled “The Merger — Reasons for the Merger; Recommendation of the Virtusa Board.” In addition, in considering the recommendation of the Virtusa Board with respect to the merger agreement, you should be aware that certain of the Company’s directors and executive officers have interests that may be different from, or in addition to, the interests of the Company’s stockholders generally. Please see the section of this proxy statement titled “The Merger — Interests of the Company’s Directors and Executive Officers in the Merger.”
How do the Company’s directors and executive officers intend to vote?
As of October 9, 2020, the directors and executive officers of Virtusa beneficially owned in the aggregate approximately 4,761,711 shares of Virtusa common stock, or approximately 14.3% of the
 
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outstanding shares of Virtusa common stock calculated on a fully-diluted basis, at such time. In connection with the execution of the merger agreement, Parent entered into the voting agreement, as further described in the in the section titled “Agreements Related to the Merger — The Voting Agreement,” with The Orogen Group (referred to as “Orogen”) and the Company’s directors as of the date of the merger agreement and certain executive officers and stockholders. Orogen holds 108,000 shares of the Virtusa Series A preferred stock, and its chief executive officer, Vikram Pandit, who is an independent member of the Virtusa Board. Orogen entered into the voting agreement under which it has agreed to vote all of Orogen’s Virtusa Series A preferred stock in favor of the merger. Orogen’s shares of Virtusa Series A preferred stock are convertible into approximately 3,000,000 shares of Virtusa common stock, as well as 31,912 shares of Virtusa common stock pursuant to a make-whole fundamental change payment as defined in the certificate of designations of the Series A preferred stock, which 31,912 shares of Virtusa common stock will not be issued or outstanding until conversion of the Virtusa Series A preferred stock and therefore are not eligible to vote at the special meeting, and represent approximately 9% of the voting power of the Company after giving effect to the conversion of the Virtusa Series A preferred stock. The Company’s directors as of the date of the merger agreement and executive officers have also entered into the voting agreement, and hold an additional approximate 5.3% of the voting power of the Company.
Have any other of the Company’s stockholders agreed to vote in favor of the merger agreement?
Pursuant to a settlement agreement, dated October 6, 2020, between the Company and New Mountain Vantage Advisers, L.L.C. (referred to as “NMV”), NMV entered into a voting agreement, as further described in the section titled “Agreements Related to the Merger — NMV Voting Agreement”, with the Company, pursuant to which NMV agreed to vote in favor of the merger proposal. NMV economically owns approximately 10.8% of the outstanding shares of Virtusa common stock.
Why am I being asked to cast an advisory, non-binding vote to approve the compensation that may be paid or may become payable to the Company’s named executive officers in connection with the merger?
The SEC, in accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, adopted rules that require the Company to seek an advisory (non-binding) vote with respect to certain payments that may be made to the Company’s named executive officers in connection with the merger.
What will happen if the Company’s stockholders do not approve the advisory, non-binding compensation proposal?
The vote on the advisory, non-binding compensation proposal is a vote separate and apart from the vote to adopt the merger agreement. Because the vote on the advisory, non-binding compensation proposal is advisory only, it will not be binding on Virtusa, the Virtusa Board, Parent or the surviving corporation. Accordingly, because Virtusa is contractually obligated to pay the compensation, if the merger agreement is adopted by the holders of Virtusa common stock and the merger is completed, the compensation will be payable, subject only to the conditions applicable thereto, regardless of the outcome of the advisory, non-binding vote.
What happens if I sell my shares of Virtusa capital stock before the special meeting?
The record date for the special meeting is earlier than the date of the special meeting. If you sell or transfer your shares of Virtusa capital stock after the record date, but before the special meeting, you will retain your right to vote such shares at the special meeting. However, the right to receive the merger consideration will pass to the person to whom you transferred your shares. In order to receive the merger consideration in connection with the merger, you must hold your shares of Virtusa capital stock through the effective time of the merger.
How do I cast my vote if I am a stockholder of record?
If your shares are registered directly in your name with our transfer agent, Computershare Trust Company, N.A., you are considered, with respect to those shares, to be the “stockholder of record.” In this case, this proxy statement and your proxy card have been sent directly to you by the Company.
 
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If you are a stockholder of record as of the record date, you may vote such shares via the Internet during the special meeting or by submitting your proxy via the Internet, by telephone or by completing, signing and returning the enclosed proxy card by mail in the prepaid reply envelope. For more detailed instructions on how to vote using one of these methods, please see the section of this proxy statement titled “The Special Meeting — Voting Procedures.”
If you are a holder of record of shares of Virtusa capital stock and you submit a proxy card or voting instructions but do not direct how to vote on each item, the persons named as proxies will vote your shares in favor of each of the merger proposal, the advisory, non-binding compensation proposal and the adjournment proposal.
How do I cast my vote if my shares of Virtusa capital stock are held in “street name” by my bank, broker or other nominee?
If your shares are held through a bank, broker or other nominee, you are considered the “beneficial owner” of shares of Virtusa capital stock held in “street name.” In that case, this proxy statement has been forwarded to you by your bank, broker or other nominee who is considered, with respect to those shares, to be the stockholder of record.
If you are a beneficial owner of shares of Virtusa capital stock held in “street name,” you must follow the instructions from your bank, broker or other nominee in order to vote such shares. Your bank, broker or other nominee will vote your shares only if you provide instructions on how to vote by properly completing the voting instruction form sent to you by your bank, broker or other nominee with this proxy statement. Without providing those instructions, your shares will not be voted, which will have the same effect as a vote “AGAINST” the merger proposal.
What will happen if I abstain from voting or fail to vote on any of the proposals?
If you abstain from voting, fail to cast your vote via the Internet during the special meeting or by proxy or fail to give voting instructions to your broker, it will have the same effect as a vote “AGAINST” the merger proposal.
Assuming a quorum is present at the special meeting, abstentions, failures to vote and “broker non-votes” will have no effect on the outcome of the advisory, non-binding compensation proposal or the adjournment proposal.
Can I change my vote after I have delivered my proxy or my voting instructions?
Yes. If you are a stockholder with shares of Virtusa capital stock registered in your name, unless you have executed a voting agreement, you may revoke your proxy at any time prior to the time it is voted by filing with the Secretary of the Company an instrument revoking the proxy (by submitting a new proxy bearing a later date, by using the telephone or Internet proxy submission procedures described under “The Special Meeting — Voting Procedures”) or by attending the special meeting and voting by ballot. Merely attending the special meeting will not, by itself, revoke a proxy. Please note, however, that only your last-dated proxy or your vote by ballot will count. If you want to revoke your proxy by sending a new proxy card or an instrument revoking the proxy to the Company, you should ensure that you send your new proxy card or instrument revoking the proxy in sufficient time for it to be received by the Company prior to the special meeting. If you are a beneficial owner of shares of Virtusa capital stock held in “street name,” you must contact your bank, broker or other nominee to change your vote or obtain a legal proxy to vote your shares by ballot via the Internet at the special meeting.
What should I do if I receive more than one set of voting materials?
You may receive more than one set of voting materials, including multiple copies of this proxy statement or multiple proxy or voting instruction cards. For example, if you hold your shares of Virtusa capital stock in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares of Virtusa capital stock. If you are a holder of Virtusa capital stock of record and your shares of Virtusa capital stock are registered in more than one name, you will receive
 
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more than one proxy card. Please submit each proxy and voting instruction card that you receive to ensure that all your shares of Virtusa capital stock are voted.
If I hold my shares of Virtusa capital stock in certificated form, should I send in my stock certificates now?
No. Promptly after the effective time of the merger, each holder of a certificate representing shares of Virtusa capital stock that have been converted into the right to receive the merger consideration will be sent a letter of transmittal describing the procedure for surrendering his, her or its shares in exchange for the merger consideration. If you hold your shares in certificated form, you will receive your cash payment after the paying agent receives your stock certificates and any other documents requested in the instructions. You should not return your stock certificates with the enclosed proxy card, and you should not forward your stock certificates to the paying agent without a letter of transmittal. If you hold shares of Virtusa capital stock in uncertificated, book-entry form, you will not be required to deliver a stock certificate, and you will receive your cash payment after the payment agent receives an “agent’s message” and any other documents requested in the instructions.
Where can I find the voting results of the special meeting?
If available, the Company may announce preliminary voting results at the conclusion of the special meeting. The Company intends to publish final voting results in a Current Report on Form 8-K to be filed with the SEC following the special meeting. All reports that the Company files with the SEC are publicly available when filed. For more information, please see the section of this proxy statement titled “Where You Can Find Additional Information.”
Am I entitled to rights of appraisal under the DGCL?
If the merger is completed, holders of Virtusa common stock who do not vote in favor of the adoption of the merger agreement and who properly demand appraisal of their shares will be entitled to appraisal rights in connection with the merger under Section 262 of the DGCL. This means that holders of shares of Virtusa common stock are entitled to have their shares appraised by the Delaware Court of Chancery and to receive payment in cash of the “fair value” of their shares of Virtusa common stock, exclusive of any elements of value arising from the accomplishment or expectation of the merger, together with interest on the amount determined to be fair value, if any, as determined by the court (or, in certain circumstances described below, on the difference between the amount determined to be the fair value and the amount paid to each stockholder entitled to appraisal prior to the entry of judgment in the appraisal proceeding). Holders of Virtusa common stock who wish to seek appraisal of their shares are in any case encouraged to seek the advice of legal counsel with respect to the exercise of appraisal rights due to the complexity of the appraisal process. The requirements under Section 262 of the DGCL for exercising appraisal rights are described in additional detail in this proxy statement, and Section 262 of the DGCL regarding appraisal rights is reproduced in Annex C to this proxy statement. Failure to comply with the provisions of Section 262 of the DGCL in a timely and proper manner may result in the loss of appraisal rights. See the section of this proxy statement titled “Appraisal Rights.”
When is the merger expected to be completed?
We are working toward completing the merger as promptly as possible, but as of the date of this proxy statement we cannot accurately estimate the closing date of the merger because the merger is subject to the satisfaction (or, to the extent permitted by applicable law, waiver) of the conditions to Parent, the merger subsidiary and the Company’s respective obligations to consummate the merger, some of which are not within the parties’ control. However, we currently expect the merger to close in the first half of 2021.
What effect will the merger have on the Company?
If the merger is consummated, the merger subsidiary will be merged with and into the Company, the separate corporate existence of the merger subsidiary will thereupon cease, and the Company will continue to exist following the merger as a wholly owned subsidiary of Parent. Following such consummation of the merger, shares of Virtusa common stock will be delisted from Nasdaq, and the registration of shares of Virtusa common stock under the Exchange Act will be terminated.
 
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What happens if the merger is not completed?
If the merger proposal is not approved by the Company’s stockholders, or if the merger is not completed for any other reason, the holders of Virtusa capital stock will not receive any payment for their shares of Virtusa capital stock in connection with the merger. Instead, the Company will remain an independent public company and stockholders will continue to own their shares of Virtusa capital stock. The Virtusa common stock will continue to be registered under the Exchange Act and listed and traded on Nasdaq. Under certain circumstances, if the merger is not completed, the Company may be obligated to pay to Parent a termination fee and reimburse Parent for certain expenses incurred in connection with the merger. For more information, please see the section of this proxy statement titled “The Merger Agreement — Termination Fees and Expenses.”
What is householding and how does it affect me?
The SEC permits companies to send a single set of proxy materials to any household at which two or more stockholders reside, unless contrary instructions have been received, but only if the Company provides advance notice and follows certain procedures. In such cases, each stockholder continues to receive a separate notice of the meeting and proxy card. If your shares are held in “street name,” you will receive your proxy card or other voting information from your broker and you will return your proxy card(s) to your broker. You should vote on and sign each proxy card you receive. To request that only one copy of any of these materials be mailed to your household, please contact your broker.
Who can help answer my questions?
If you need assistance in completing your proxy card or have questions regarding the special meeting, please contact Virtusa’s proxy solicitor:
MacKenzie Partners, Inc.
1407 Broadway, 27th Floor
New York, NY 10018
Stockholders may call toll free: 1 (800) 322-2885
Banks and Brokers may call collect: 1 (212) 929-5500
 
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement, and the documents incorporated by reference in this proxy statement, contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The Company generally identifies forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar words. These statements are only predictions. The Company has based these forward-looking statements largely on its then-current expectations and projections about future events and financial trends as well as the beliefs and assumptions of management. Forward-looking statements are subject to a number of risks and uncertainties, many of which involve factors or circumstances that are beyond the Company’s control. The Company’s actual results could differ materially from those stated or implied in forward-looking statements due to a number of factors, including but not limited to:

the possibility that competing offers will be made;

the fact that under the terms of the merger agreement, the Company is unable to solicit other acquisition proposals;

the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement, including in circumstances which would require the Company to pay the Company termination fee or other expenses;

the failure of the parties to satisfy conditions to completion of the merger, including the failure of our stockholders to adopt and approve the merger agreement;

the fact that receipt of the all-cash merger consideration would be taxable to stockholders that are treated as U.S. Holders (as defined under the caption “The Merger — Material U.S. Federal Income Tax Considerations”) for U.S. federal income tax purposes;

the risk that regulatory or other approvals are delayed or are subject to terms and conditions that are not anticipated;

changes in the Company’s business or in the Company’s businesses’ operating prospects;

the effect of the announcement or pendency of the transactions contemplated by the merger agreement on the Company’s ability to retain and hire key personnel, its ability to maintain relationships with its customers, suppliers and others with whom it does business, or its operating results and business generally;

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

the outcome of any legal proceedings that may be instituted against the Company, Parent or others following announcement of the merger agreement and transactions contemplated therein; and changes in domestic and global economic, political and market conditions;

risks that the Company’s stock price may decline significantly if the merger is not completed;

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

the response of activist investors to the merger.
Other factors that may cause actual results to differ materially include those set forth in the Company’s most recent Annual Report on Form 10-K, as amended, and subsequent reports filed with the SEC, as well as other documents that may be filed by the Company from time to time with the SEC. See the section of this proxy statement titled “Where You Can Find Additional Information.” These forward-looking statements reflect Virtusa’s expectations as of the date of this proxy statement. Virtusa undertakes no obligation to update the information provided herein. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date hereof.
 
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THE PARTIES
Virtusa Corporation.
Virtusa Corporation is a global provider of digital engineering and information technology outsourcing services that accelerate business outcomes for its clients. We support Forbes Global 2000 clients across large, consumer-facing industries like banking, financial services, insurance, healthcare, communications, technology, and media and entertainment, as these clients seek to improve their business performance through accelerating revenue growth, delivering compelling consumer experiences, improving operational efficiencies, and lowering overall IT costs. We provide services across the entire spectrum of the IT services lifecycle, from consulting, to technology and user experience design, development of IT applications, systems integration, digital engineering, testing and business assurance, and maintenance and support services, including cloud, infrastructure and managed services. We help our clients solve critical business problems by leveraging a combination of our distinctive consulting approach, unique platforming methodology, and deep domain and technology expertise.
We were formed in 1996 as Technology Providers, Inc., and changed our name to Virtusa Corporation in 2002. Our shares of Virtusa common stock are quoted on Nasdaq under the symbol “VRTU.” Our principal executive office is located at:
Virtusa Corporation
132 Turnpike Road, Suite 300
Southborough, Massachusetts 01772
(508) 389-7300
Austin HoldCo Inc.
Parent was formed by entities affiliated with BPEA solely for the purpose of engaging in the transactions contemplated by the merger agreement and has not engaged in any business activities other than in connection with the transactions contemplated by the merger agreement and arranging of the equity financing and any debt financing in connection with the merger. BPEA is one of the largest and most established private alternative investment firms in Asia, with assets under management of approximately $20 billion. The firm runs a private equity investment program, sponsoring buyouts and providing growth capital to companies for expansion or acquisitions with a particular focus on the Asia Pacific region, as well as investing in companies globally that can benefit from further expansion into the Asia Pacific region. BPEA also manages dedicated funds focused on private real estate and private credit. The firm has a 23-year history and over 190 employees located across offices in Hong Kong, China, India, Japan, Singapore, Australia, and the US. BPEA currently has over 40 portfolio companies active across Asia with a total of 224,000 employees and sales of approximately $39 billion. Upon completion of the merger, Virtusa will be a direct wholly owned subsidiary of Parent.
Austin HoldCo Inc.
c/o Baring Private Equity Asia Pte. Limited
50 Collyer Quay
#11-03/04 OUE Bayfront
Singapore 049321
+65 6232 6330
Austin BidCo Inc.
The merger subsidiary is a wholly owned subsidiary of Parent and was formed by Parent solely for the purpose of engaging in the transactions contemplated by the merger agreement and has not engaged in any business activities other than in connection with the transactions contemplated by the merger agreement and arranging of the equity financing and any debt financing in connection with the merger. Upon completion of the merger, the merger subsidiary will cease to exist.
Austin BidCo Inc.
c/o Baring Private Equity Asia Pte. Limited
50 Collyer Quay
#11-03/04 OUE Bayfront
Singapore 049321
+65 6232 6330
 
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THE SPECIAL MEETING
We are furnishing this proxy statement to the holders of Virtusa capital stock as part of the solicitation of proxies by the Virtusa Board for use at the special meeting and at any adjournments or postponements thereof.
Date, Time and Place
The special meeting will be held virtually on November 20, 2020, at 10:00 AM, Eastern Time, virtually via https://www.cesonlineservices.com/vrtu20_vm, where you, or your proxy, will be able to vote electronically and examine the list of stockholders entitled to vote at the special meeting during the special meeting.
If you plan to participate in the virtual meeting, you will need to pre-register by 10:00 AM, Eastern Time on November 19, 2020. To pre-register for the meeting, please follow the instructions provided under “General Information” in the proxy statement accompanying this notice. Stockholders will be able to listen, vote, and submit questions from their home or from any remote location that has Internet connectivity. There will be no physical location for stockholders to attend. Stockholders may only participate online and must pre-register. In addition, if you are a beneficial owner who holds shares of Virtusa capital stock in “street name,” which means your shares are held in an account at a bank, broker or other nominee, you will need a legal proxy from such entity or a recent brokerage statement or letter from such entity reflecting your stock ownership as of the record date for the meeting. Please note, however, that unless you have a legal proxy from your bank, broker or other nominee, you will not be able to vote any shares held in street name via the Internet at the special meeting.
Purpose of the Special Meeting
At the special meeting, holders of Virtusa capital stock will be asked to consider and vote on the following proposals:

a proposal to approve and adopt the merger agreement (referred to as the “merger proposal”) (see the section of this proxy statement titled “The Merger Agreement”);

a proposal to approve, on an advisory, non-binding basis, the specified compensation that may become payable to Virtusa’s named executive officers in connection with the merger (referred to as the “advisory, non-binding compensation proposal”) (see the section of this proxy statement titled “The Merger — Interests of the Company’s Directors and Executive Officers in the Merger”); and

a proposal to adjourn or postpone the stockholder meeting (referred to as the “adjournment proposal”) (see the section of this proxy statement titled “Proposal 3: Adjournment Proposal”).
A copy of the merger agreement is attached as Annex A to this proxy statement.
Recommendation of the Virtusa Board
After careful consideration, the Virtusa Board unanimously: (i) approved and declared advisable the merger agreement and the other agreements contemplated by the merger agreement, the merger and the other transactions contemplated by the merger agreement and approved the execution, delivery and performance of the merger agreement and the other agreements contemplated by the merger agreement, (ii) determined that the terms of the merger and the other transactions contemplated by the merger agreement are fair to and in the best interests of the Company and its stockholders, (iii) resolved to recommend that the Company’s stockholders adopt the merger agreement and approve the merger in accordance with the DGCL, (iv) rendered the limitations on business combinations contained in Section 203 of the DGCL inapplicable to the merger, the merger agreement, the other agreements contemplated by the merger agreement and the transactions contemplated thereby, and (v) elected that the merger not be subject to any “moratorium” “control share acquisition,” “business combination,” “fair price” or other form of anti-takeover laws and regulations of any jurisdiction that may purport to be applicable to the merger agreement. Accordingly, the Virtusa Board recommends a vote “FOR” the merger proposal. The Virtusa Board also recommends a vote “FOR” the advisory, non-binding compensation proposal and “FOR” the adjournment proposal.
 
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For a discussion of the material factors that the Virtusa Board considered in determining to recommend the adoption of the merger agreement, please see the section of this proxy statement titled “The Merger — Reasons for the Merger; Recommendation of the Virtusa Board.”
Record Date and Stockholders Entitled to Vote
Only holders of Virtusa capital stock of record as of the close of business on October 9, 2020, the record date for the special meeting, are entitled receive notice of and to vote the shares of Virtusa capital stock and Virtusa Series A preferred stock they held on the record date at the special meeting. As of the close of business on the record date, 33,309,509 shares of Virtusa common stock were eligible to vote at the special meeting, of which 30,309,509 shares of Virtusa common stock were issued and outstanding and 3,000,000 shares of Virtusa common stock were issuable upon conversion of the 108,000 shares of Virtusa Series A preferred stock, which are issued and outstanding. On each of the proposals presented at the special meeting, each holder of Virtusa common stock and Virtusa Series A preferred stock is entitled to one vote for each share of Virtusa common stock held by such stockholder on the record date, with Virtusa Series A preferred stock voting on an as-converted to common stock basis. The adoption of the merger agreement by the holders of Virtusa capital stock requires the affirmative vote of stockholders holding a majority of the outstanding shares of Virtusa common stock and Virtusa Series A preferred stock (voting on an as-converted basis, voting together as a single class) entitled to vote thereon as of the close of business on the record date.
A list of stockholders entitled to vote at the special meeting will be available for examination by any stockholder for any purpose germane to the special meeting beginning ten days prior to the special meeting, and ending on the date of the special meeting via the Internet at https://www.cesonlineservices.com/vrtu20_vm. Such list will also be available at the special meeting during the duration of the meeting.
Quorum
Under our by-laws, the holders of a majority of the shares of Virtusa capital stock issued and outstanding and entitled to vote at the meeting, present virtually or represented by proxy, shall constitute a quorum at any meeting of stockholders. If less than a quorum is present at a meeting, the holders of shares representing a majority of the voting power present at the meeting or the presiding officer may adjourn the meeting from time to time. The inspector of election appointed for the special meeting will determine whether a quorum is present. The inspector of election will treat abstentions as present for purposes of determining the presence of a quorum.
If a beneficial owner of shares held in “street name” by a bank, broker or other nominee does not provide the organization that holds its shares with specific voting instructions, then, under applicable rules, the organization that holds its shares may generally vote on “discretionary” matters but cannot vote on “non-discretionary” matters. The merger proposal and the advisory, non-binding compensation proposal are “non-discretionary” matters. The adjournment proposal is a “discretionary” matter. If the organization that holds the beneficial owner’s shares does not receive instructions from such stockholder on how to vote its shares on any proposal to be voted on at the special meeting, that bank, broker or other nominee will inform the inspector of election at the special meeting that it does not have authority to vote on any proposal at the special meeting with respect to such shares, and, furthermore, such shares will not be deemed to be in attendance at the meeting. This is generally referred to as a “broker non-vote.” However, if the bank, broker or other nominee receives instructions from such stockholder on how to vote its shares as to at least one proposal but not all of the proposals, the shares will be voted as instructed on any proposal which voting instructions have been given but will not be voted on the other, uninstructed proposal(s).
If a quorum is not present, the only business that can be transacted at the special meeting is the adjournment or postponement of the meeting to another date or time.
Vote Required
Adoption of the Merger Proposal
The approval of the merger proposal requires the affirmative vote of stockholders holding a majority of the outstanding shares of Virtusa common stock and Virtusa Series A preferred stock, voting together as
 
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a single class on an as-converted to Virtusa common stock basis, entitled to vote thereon as of the close of business on the record date. Accordingly, shares deemed not in attendance at the special meeting, whether due to a record holder’s failure to vote or a “street name” holder’s failure to provide any voting instructions to such holder’s bank, broker or other nominee, abstentions and broker non-votes will have the same effect as a vote “AGAINST” the merger proposal.
Under the merger agreement, stockholder approval of the merger proposal is a condition to the consummation of the merger.
Approval of the Advisory, Non-binding Compensation Proposal
Assuming a quorum is present, the approval of the advisory, non-binding compensation proposal requires the affirmative vote of the holders having a majority of the shares of Virtusa common stock and the Virtusa Series A preferred stock,voting together as a single class on an as-converted to Virtusa common stock basis, cast by the holders of all Virtusa capital stock present virtually or represented by proxy at the special meeting and entitled to vote on the subject matter. Accordingly, abstentions and shares deemed not in attendance at the special meeting, whether due to a record holder’s failure to vote or a “street name” holder’s failure to provide any voting instructions to such holder’s bank, broker or other nominee, and broker non-votes will have no effect on the outcome of the advisory, non-binding compensation proposal.
The vote on the advisory, non-binding compensation proposal is a vote separate and apart from the vote to adopt the merger agreement. Because the vote on the advisory, non-binding compensation proposal is advisory only, it will not be binding on Virtusa, the Virtusa Board, Parent or the surviving corporation. Accordingly, because Virtusa is contractually obligated to pay the compensation, if the merger agreement is adopted by the holders of Virtusa common stock and the merger is completed, the compensation will be payable, subject only to the conditions applicable thereto, regardless of the outcome of the advisory, non-binding vote.
Approval of the Adjournment Proposal
The approval of the adjournment proposal requires the affirmative vote of the holders having a majority of the shares of Virtusa common stock and Virtusa Series A preferred stock (voting on an as-converted basis, voting together as a single class) cast by the holders of all Virtusa capital stock present virtually or represented by proxy at the special meeting and entitled to vote on the subject matter. Accordingly, abstentions, shares deemed not in attendance at the special meeting, whether due to a record holder’s failure to vote or a “street name” holder’s failure to provide any voting instructions to such holder’s bank, broker or other nominee, and broker non-votes will have no effect on the outcome of the adjournment proposal.
The vote on the adjournment proposal is a vote separate and apart from the vote to adopt the merger agreement. Virtusa does not intend to call a vote on this proposal if the merger proposal is approved at the special meeting.
Tabulation of Votes; Results
The Company will retain an independent party to receive and tabulate the proxies and ballots, and to serve as the inspector of election to certify the results of the special meeting.
Voting Procedures
Whether or not you plan to attend the special meeting virtually and regardless of the number of shares of Virtusa capital stock you own, your careful consideration of, and vote on, the merger agreement is important and we encourage you to vote promptly.
To ensure that your shares of Virtusa capital stock are voted at the special meeting, we recommend that you promptly submit your proxy, even if you plan to attend the special meeting virtually, using one of the following three methods:
 
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Vote via the Internet. Follow the instructions for internet voting shown on the proxy card mailed to you.

Vote by Telephone. Follow the instructions for telephone voting shown on the proxy card mailed to you.

Vote by Proxy Card. Complete, sign, date and return the enclosed proxy card by mail in the prepaid reply envelope.
The internet and telephone voting procedures are designed to authenticate your identity and to allow you to vote your shares of Virtusa capital stock for the matters brought before the special meeting as described in this proxy statement and confirm that your proxy has been properly recorded.
Votes submitted by telephone or via the internet for the matters brought before the special meeting as described in this proxy statement must be received by 11:59 PM, Eastern Time, November 19, 2020.
If you submit your proxy via the Internet, by telephone or by completing, signing and returning the enclosed proxy card by mail, the persons named as proxies will vote your shares according to your instructions. If you are a stockholder with shares of Virtusa capital stock registered in your name and submit your proxy but do not direct the persons named as proxies how to vote your shares on a proposal to be brought before the special meeting, the persons named as proxies will vote your shares in favor of the merger proposal, the advisory, non-binding compensation proposal and the adjournment proposal, as applicable.
If you are a beneficial owner of shares of Virtusa capital stock held in “street name” by a bank, broker or other nominee, you must follow the instructions from your bank, broker or other nominee in order to vote your shares. If you follow the instructions from your bank, broker or other nominee for voting your shares, then your bank, broker or other nominee will vote your shares according to your instructions. Under applicable rules, your bank, broker or other nominee has authority to vote your shares only if you provide instructions on how to vote by properly completing the voting instruction form sent to you by your bank, broker or other nominee with this proxy statement. If you do not provide voting instructions to your bank, broker or other nominee on a proposal to be brought before the special meeting, your shares will not be voted on that proposal, and if you do not provide voting instructions on any of the proposals to be brought before the special meeting, your shares will not be deemed to be in attendance at the special meeting.
Revocation of Proxies
If you are a stockholder with shares of Virtusa capital stock registered in your name, you may revoke your proxy at any time prior to the time it is voted by filing with the Secretary of the Company an instrument revoking the proxy, by submitting a new proxy (by submitting a new proxy bearing a later date, by using the telephone or internet proxy submission procedures described above) or by attending the special meeting and voting by ballot. Merely attending the special meeting will not, by itself, revoke a proxy. Please note, however, that only your last-dated proxy or your vote by ballot will count. If you want to revoke your proxy by sending a new proxy card or an instrument revoking the proxy to the Company, you should ensure that you send your new proxy card or instrument revoking the proxy in sufficient time for it to be received by the Company prior to the special meeting.
If you are a beneficial owner of shares of Virtusa capital stock held in “street name,” you must contact your bank, broker or other nominee to change your vote or obtain a legal proxy to vote your shares via the Internet at the special meeting.
Voting in Person
The special meeting will be held virtually via https://www.cesonlineservices.com/vrtu20_vm. There will be no physical location for stockholders to attend. Stockholders may only participate online and must pre-register. In order to attend the virtual-only special meeting, you will need to pre-register by 10:00 AM, Eastern Time on November 19, 2020. If you are a stockholder of record, you may vote your shares virtually at the special meeting. In order to attend the virtual-only special meeting, you will need to pre-register by 10:00 AM, Eastern Time on November 19, 2020. To pre-register for the special meeting, please follow these instructions:
 
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If your shares are registered in your name with our transfer agent and you wish to attend the virtual special meeting, please go to https://www.CESVote.com, enter the control number you received on your proxy card to access the voting page, then click on the “Click here to pre-register for the online meeting” link at the top of the page.

If you do not have your proxy card, you may pre-register to attend the virtual meeting by emailing your proof of ownership of shares of Virtusa capital stock as of October 9, 2020 to VRTURegister@Proxy-Agent.com. After pre-registering, and upon verification of your ownership, you will receive a confirmation email prior to the special meeting with instructions for attending the virtual special meeting online.

If your shares are not registered in your name with our transfer agent, but you are a beneficial owner and your shares are held by a broker, bank, financial institution or other nominee or intermediary in “street name” as of October 9, 2020, you may pre-register to attend the special meeting by emailing VRTURegister@Proxy-Agent.com and attaching evidence that you beneficially owned shares of Virtusa capital stock as of October 9, 2020, which evidence may consist of a copy of the Voting Instruction Form (or Notice) provided by your broker, bank, financial institution or other nominee or intermediary, an account statement, or a letter or legal proxy from such custodian. After pre-registering, and upon verification of your ownership, you will receive a confirmation email prior to the special meeting with instructions for attending the virtual special meeting online.
If you hold your shares in “street name,” you must obtain the appropriate documents from your broker, bank, trustee, or nominee, giving you the right to vote the shares at the special meeting. For beneficial owners of shares of Virtusa capital stock held in “street name,” in addition to providing identification as outlined for record holders above, you will need a legal proxy from your broker or a recent brokerage statement or letter from your broker reflecting your stock ownership as of the record date. Please note, however, that unless you have a legal proxy from your bank, broker or other nominee, you will not be able to vote any shares held in street name virtually at the special meeting. Please note that even if you plan to attend the special meeting, we recommend that you vote using the enclosed proxy card in advance, to ensure that your shares will be represented.
Solicitation of Proxies
The Virtusa Board is soliciting proxies for the special meeting from its stockholders. The Company will bear the cost of soliciting proxies, including the expense of preparing, printing and distributing this proxy statement. In addition to soliciting proxies by mail, telephone or electronic means, we may request banks, brokers and other nominees to solicit their customers who have Virtusa capital stock registered in their names and will, upon request, reimburse them for the reasonable, out-of-pocket costs of forwarding proxy materials in accordance with customary practice. We may also use the services of our directors, officers and other employees to solicit proxies, personally, by telephone or by electronic means, without additional compensation. In addition, the Company has retained MacKenzie Partners, Inc. to solicit stockholder proxies at a total cost to the Company of approximately $30,000 plus reasonable expenses. We have also agreed to indemnify MacKenzie Partners, Inc. against certain losses, damages and expenses.
Adjournments
The special meeting may be adjourned or postponed from time to time to another hour, date or place. Under our by-laws, notice need not be given of any such adjournment of less than 30 days if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned special meeting, the Company may transact any business which might have been transacted at the original meeting, unless after such adjournment a new record date is fixed for the adjourned meeting. If the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, notice of the adjourned meeting and the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present virtually and vote at such adjourned meeting will be given to each stockholder of record entitled to receive notice of or to vote at the meeting. All proxies will be voted in the same manner as they would have been voted at the original convening of the special meeting, except for any proxies that have been validly revoked or withdrawn prior to the time such proxies are voted at the reconvened meeting.
 
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Voting by Company Directors and Executive Officers
As of September 9, 2020, the directors and executive officers of Virtusa beneficially owned in the aggregate approximately 1,745,979 shares of Virtusa common stock, or approximately 5.8% of the outstanding shares of Virtusa common stock. In connection with the execution of the merger agreement, Parent entered into the voting agreement with Orogen and the Company’s directors as of the date of the merger agreement and certain executive officers and stockholders. Orogen holds 108,000 shares of Virtusa Series A preferred stock, and its chief executive officer, Vikram Pandit, is an independent member of the Virtusa Board. Orogen entered into the voting agreement under which it has agreed to vote all of Orogen’s Virtusa Series A preferred stock in favor of the merger. Orogen’s shares of Virtusa Series A preferred stock are convertible into 3,000,000 shares of Virtusa common stock, as well as 31,912 shares of Virtusa common stock pursuant to a make-whole fundamental change payment as defined in the certificate of designations of the Series A preferred stock, which 31,912 shares of Virtusa common stock will not be issued or outstanding until conversion of the Virtusa Series A preferred stock and therefore are not eligible to vote at the special meeting, and represent approximately 9.0% of the voting power of the Company after giving effect to the conversion of the Virtusa Series A preferred stock. The Company’s directors and executive officers have also entered into the voting agreement, and hold an additional approximate 5.3% of the voting power of the Company.
The voting agreement provides that, among other things, each of the stockholders has agreed to vote or cause to be voted, all of the shares of Virtusa capital stock beneficially owned by such stockholder in favor of the stockholder proposals submitted at the Company’s stockholders meeting to be held in is party to the voting agreement has agreed to submit all of its shares of Virtusa Series A preferred stock for conversion into shares of Virtusa common stock in accordance with the Certificate of Powers, Designations, Preferences and Rights of such Virtusa Series A preferred stock, with such conversion to only become effective immediately prior to the effective time of the merger in connection with the consummation of the merger.
Certain of the Company’s directors and executive officers have interests in the merger that may be different from, or in addition to, those of the Company’s stockholders generally. For more information, please see the section of this proxy statement titled “The Merger — Interests of the Company’s Directors and Executive Officers in the Merger.”
Assistance; Proxy Solicitor
If you need assistance in completing your proxy card or have questions regarding the special meeting, please contact Virtusa’s proxy solicitor:
MacKenzie Partners, Inc.
1407 Broadway, 27th Floor
New York, NY 10018
Stockholders may call toll free: 1 (800) 322-2885
Banks and Brokers may call collect: 1 (212) 929-5500
 
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PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT
As discussed elsewhere in this proxy statement, at the special meeting holders of Virtusa capital stock will consider and vote on a proposal to adopt the merger agreement (referred to as the “merger proposal”). The merger cannot be completed without the adoption of the merger agreement by Virtusa’s stockholders. You are urged to carefully read this proxy statement in its entirety for more detailed information concerning the merger agreement and the merger, including the information set forth under the sections of this proxy statement titled “The Merger” and “The Merger Agreement.” A copy of the merger agreement is attached as Annex A to this proxy statement. You are urged to read the merger agreement carefully and in its entirety.
The approval of the merger proposal requires the affirmative vote of the holders of a majority of the outstanding shares Virtusa common stock and Virtusa Series A preferred stock (voting on an as-converted basis, voting together as a single class). Accordingly, shares deemed not in attendance at the special meeting, whether due to a record holder’s failure to vote or a “street name” holder’s failure to provide any voting instructions to such holder’s bank, broker or other nominee, abstentions and broker non-votes will have the same effect as a vote “AGAINST” the merger proposal.
The Virtusa Board recommends a vote “FOR” the approval of the merger proposal.
 
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PROPOSAL 2: ADVISORY VOTE ON MERGER-RELATED COMPENSATION
In accordance with Section 14A of the Exchange Act and the applicable SEC rules issued thereunder, the Company is providing holders of Virtusa capital stock with the opportunity to cast an advisory, non-binding vote on the compensation that may be payable to the Company’s named executive officers in connection with the merger (referred to as the “advisory, non-binding compensation proposal”). As required by those rules, the Company is asking holders of Virtusa capital stock to vote on the adoption of the following resolution:
“RESOLVED, that the compensation that may be paid or become payable to the Company’s named executive officers in connection with the merger, as disclosed in the table titled “Potential Payments to Named Executive Officers,” including the associated narrative discussion, and the agreements or understandings pursuant to which such compensation may be paid or become payable, is hereby APPROVED.”
The vote on executive compensation payable in connection with the merger is a vote separate and apart from the vote to adopt the merger agreement. Because the vote is advisory in nature only, it will not be binding on the Company or the Virtusa Board. Accordingly, because the Company is contractually obligated to pay the compensation, such compensation will be paid or become payable, subject only to the conditions applicable thereto, if the merger is consummated and regardless of the outcome of the advisory vote.
The approval of the advisory, non-binding compensation proposal requires the affirmative vote of the holders having a majority of the shares of Virtusa common stock and Virtusa Series A preferred stock, voting together as a single class on an as-converted to Virtusa common stock basis, cast by the holders of all Virtusa capital stock present virtually or represented by proxy at the meeting and entitled to vote on the subject matter. Abstentions and broker non-votes will not count as votes cast on the advisory, non-binding compensation proposal. Accordingly, abstentions, shares deemed not in attendance at the special meeting, whether due to a record holder’s failure to vote or a “street name” holder’s failure to provide any voting instructions to such holder’s bank, broker or other nominee, and broker non-votes will have no effect on the outcome of the advisory, non-binding compensation proposal.
The Virtusa Board recommends a vote “FOR” the approval of the advisory, non-binding compensation proposal.
 
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PROPOSAL 3: ADJOURNMENT PROPOSAL
The special meeting may be adjourned or postponed to another time and place to permit further solicitation of proxies, if necessary or appropriate as determined by the Company, to solicit additional proxies if there are insufficient votes at the time of the special meeting or any adjournment or postponement thereof to approve the merger proposal (referred to as the “adjournment proposal”).
Virtusa is asking you to authorize the holder of any proxy solicited by the Virtusa Board to vote in favor of any adjournment or postponement of the special meeting, if necessary or appropriate as determined by the Company, to solicit additional proxies if there are not sufficient votes to approve the merger proposal at the time of the special meeting.
The approval of the adjournment proposal requires the affirmative vote of the holders having a majority of the shares of Virtusa common stock and Virtusa Series A preferred stock, voting together as a single class on an as-converted to Virtusa common stock basis, cast by the holders of all Virtusa capital stock present virtually during the meeting or represented by proxy at the meeting and entitled to vote on the subject matter. Abstentions and broker non-votes (if any) will not count as votes cast on the adjournment proposal. Accordingly, abstentions, shares deemed not in attendance at the special meeting, whether due to a record holder’s failure to vote or a “street name” holder’s failure to provide any voting instructions to such holder’s bank, broker or other nominee, and broker non-votes (if any) will have no effect on the outcome of the adjournment proposal.
The vote on the adjournment proposal is a vote separate and apart from the vote to adopt the merger agreement. Virtusa does not intend to call a vote on this proposal if the merger proposal is approved at the special meeting.
The Virtusa Board recommends a vote “FOR” the approval of the adjournment proposal.
 
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THE MERGER
Background of the Merger
The following chronology summarizes the key meetings and events that led to the signing of the merger agreement. The following chronology does not purport to catalogue every conversation among the Virtusa Board, members of Company management or the Company’s representatives and other parties.
The Virtusa Board, together with Company management and with the assistance of the Company’s advisors, periodically reviews and considers various strategic and other opportunities available to the Company to enhance stockholder value, taking into consideration the Company’s performance, competitive dynamics, macroeconomic developments and industry trends. These reviews have included discussions as to whether the continued execution of the Company’s strategy as a standalone company (including possible operational and capital structure changes) or the possible sale of the Company to, or combination of the Company with, a third party offered the best avenue to enhance stockholder value, and the potential benefits and risks of any such course of action. For purposes of conducting these reviews, and in the ordinary course of business, Company management has maintained regular dialogues with representatives of other industry participants, including certain strategic and financial sponsor parties, regarding trends and developments in the industries in which the Company operates and potential strategic transactions.
In April 2018, a large publicly-traded company (referred to as “Company A”) submitted an initial indication of interest for an acquisition of the Company, entered into a confidentiality agreement and engaged in extensive due diligence over the following months. In late September 2018, Company A submitted a non-binding proposal, subject to due diligence, negotiation of transaction documents and final approval of Company A’s board of directors, to acquire the Company. The Company and Company A continued to engage in discussions, due diligence and negotiation of transaction documents until late October 2018, when Company A terminated its consideration of a transaction because Company A’s board of directors had determined that it did not want Company A to proceed with the transaction.
From November 2018 through July 2020, members of Company management and representatives of Company A had periodic discussions regarding ongoing commercial matters and entered into various commercial agreements. During this time, at Company A’s request, and under the 2018 confidentiality agreement between the parties, the Company provided to Company A certain nonpublic information regarding the Company, including financial information, to facilitate the partnership discussions. No proposals regarding an acquisition of the Company were made during these discussions.
On March 2, 2020, representatives of BPEA and Citigroup Global Markets Inc. (referred to as “Citi”) and members of Company management, including the Company’s chief executive officer, had an introductory meeting in New York City organized by Citi at the request of BPEA. The representatives of BPEA indicated that they remained interested in learning more about the Company and that they would contact the Company if they determined they wanted to take any additional steps towards exploring a possible acquisition. The meeting was conducted referencing only public information about the Company, and no proposals were made during this discussion.
From late April through June 2020, members of the Virtusa Board and management engaged in discussions with representatives of New Mountain Vantage Advisers, L.L.C. (referred to as “NMV”), an investor in the Company. These discussions covered a broad range of topics, including the Company’s business and results of operations, its earnings performance, long-term business strategies, capital allocation and the composition of the Virtusa Board.
On June 19, 2020, the Company announced it had received a notice of nomination of director candidates from NMV, and stated that the Virtusa Board welcomed the opportunity to interview NMV’s independent director candidates.
On June 29, 2020, members of Company management, including the Company’s chief executive officer, had a call with representatives of BPEA and Citi to discuss the Company’s performance, and BPEA’s continued interest in the Company. No proposals regarding a transaction involving the Company were made during this discussion and nonpublic information regarding the Company was neither disclosed nor discussed.
 
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On July 6, 2020, NMV filed a Schedule 13D with the SEC disclosing that it beneficially owned approximately 8.98% of the Company’s outstanding shares of common stock, plus economic exposure through derivatives to approximately 1.79% of the Company’s outstanding shares of the Company’s common stock. During the first half of August 2020, representatives of the Company engaged in settlement discussions with representatives of NMV. Ultimately, the Company and NMV did not reach a settlement, and on August 17, 2020, the Company filed with the SEC a definitive proxy statement with respect to a contested director election at the Company’s October 2, 2020 annual stockholder meeting.
On July 9, 2020, at the request of Company A, members of Company management, including the Company’s chief executive officer, had a call with representatives of Company A to discuss a commercial partnership. During the call, the representatives of Company A indicated that Company A was interested in reengaging in discussions regarding a potential acquisition of the Company and would be sending a written acquisition proposal to the Company.
On July 20, 2020, Company A delivered a written non-binding preliminary proposal to acquire the Company for $41.00 to $43.00 per share in cash that was subject to satisfactory completion of due diligence, among other conditions. The proposal stated that execution of definitive documentation for a transaction with the Company would require the final approval of Company A’s board of directors. The proposal also stated that Company A would require an exclusivity period of 30 days and that the proposal would expire if not accepted by July 30, 2020. The closing price for the Company’s common stock on July 20, 2020 was $32.61 per share.
On July 22, 2020, the Virtusa Board met to discuss, among other things, Company A’s July 20 proposal. Members of Company management and representatives of the Company’s outside legal counsel, Goodwin Procter LLP (referred to as “Goodwin”), were present at this meeting. Also present at the meeting, at the invitation of the Virtusa Board, were representatives of J.P. Morgan Securities LLC (referred to as “J.P. Morgan”). The Virtusa Board considered J.P. Morgan as a potential investment banking firm candidate to assist and advise the Virtusa Board with regard to any business combination overtures because of J.P. Morgan’s substantial knowledge of and familiarity with the Company and the industries in which it operates, and because J.P. Morgan assisted the Virtusa Board during the 2018 acquisition discussions with Company A.
Representatives of J.P. Morgan discussed with the Virtusa Board certain financial aspects of Company A’s proposal and representatives of Goodwin discussed with the Virtusa Board its fiduciary duties. The Virtusa Board considered the potential advantages and disadvantages of discussing a potential strategic transaction or acquisition transaction with third parties at this time, including the potential market leaks, disruptions to the Company’s business, distraction of management, impact on the Company’s employees, particularly in light of the ongoing proxy contest with NMV, and the Company’s expected improved financial performance for its first quarter of fiscal year 2021. The Virtusa Board also considered that Company management needed to focus on executing its business plan and did not want Company management to become distracted by protracted acquisition discussions if it was not likely to result in an actionable transaction with Company A, as was the case in 2018. The Virtusa Board discussed its views of the Company’s prospects, including the potential for enhancing stockholder value through execution of management’s business plan, and that any proposal to acquire the Company at this time would need to deliver substantial value to the Company’s stockholders. The Virtusa Board also discussed potential risks to the Company’s ability to execute its long-term plan as a standalone company, including the impact of general economic and market trends on the Company’s sales, as well as the general risks of market conditions that could reduce the Company’s stock price. Risks considered by the Virtusa Board included, among others, the increasing impact of the COVID-19 pandemic and related economic conditions on the Company’s business and results of operations, including that many of the Company’s customers and prospects continue operating under challenging circumstances and may reduce or re-evaluate their spend, the likely continuation of reduced spend from customers, particularly regarding some of the Company’s significant customers in the banking and financial services industries, and the concentration of the Company’s customers in the banking and financial services industries, which may be disproportionately adversely impacted by a recessionary economic environment. The Virtusa Board also considered the highly competitive environment in which the Company operates and the fact that some of the Company’s competitors have substantially greater resources than the Company, including greater operational and solutions capabilities, and the impact of an expanding competitive environment on the Company’s ability to effectively sell its services.
 
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Following discussion, the Virtusa Board requested that management review its long-term operating plan and the assumptions underlying that plan for presentation to the Virtusa Board for its consideration in further evaluating Company A’s July 20 proposal, noting that the plan was last reviewed by the Virtusa Board three months prior, and global macroeconomic and geopolitical conditions had materially changed since such time. The Virtusa Board also authorized management, with the assistance of J.P. Morgan, to engage with Company A to encourage it to improve its proposal, including by providing Company A with limited due diligence information in an effort to improve its proposed purchase price, and provide assurances regarding deal certainty (in particular due to the lack of any commitment on obtaining antitrust or other regulatory approvals, and certain stringent closing conditions) and expediency to execution of a merger agreement if a transaction were to be agreed to by the parties. The Virtusa Board also concluded that it was not appropriate at this time to consider or respond to Company A’s request to engage in exclusive negotiations. Also at the meeting, Company management provided an update on the Company’s preliminary financial outlook for the current fiscal quarter, which management expected to be above Wall Street forecasts.
Later on July 22, 2020, as authorized by the Virtusa Board, members of Company management had a call with representatives of Company A. During the call, Company management informed representatives of Company A that in order for the Virtusa Board to engage with Company A in acquisition discussions, Company A would have to improve its offer price and provide assurance that the Company A board of directors would approve the transaction on an expedited basis, particularly given that the Company A board of directors had terminated the protracted discussions with the Company in 2018.
On July 23, 2020, Company A and the Company entered into a mutual confidentiality agreement to facilitate further discussions. The confidentiality agreement was substantially identical to the prior mutual confidentiality agreement between the parties under which the standstill had expired in October 2019. The confidentiality agreement contained customary provisions, including a one-year standstill provision that allowed Company A to make confidential proposals to the Company at any time and automatically terminated upon the Company’s execution of a definitive agreement with a third party to effect a sale of the Company. Following execution of the confidentiality agreement, as authorized by the Virtusa Board, members of Company management had various calls and virtual meetings with representatives of Company A to facilitate Company A’s due diligence and provided Company A with nonpublic information about the Company, including financial information, to encourage Company A to improve its proposal on price.
On July 24, 2020, as authorized by the Virtusa Board, representatives of J.P. Morgan had a discussion with representatives of Company A’s financial advisor. Representatives of J.P. Morgan indicated that for the Virtusa Board to consider entering into a strategic transaction with Company A, Company A would need to improve its offer price and provide assurances that it could move quickly to execute a transaction with the Company. Representatives of J.P. Morgan also indicated that the Company expected to announce unexpected positive news and possibly reinstate guidance on the Company’s upcoming earnings call. Representatives of Company A’s financial advisor indicated that Company A would need to receive approval from the Company A board of directors at their scheduled meeting on September 16, 2020 before Company A could enter into a merger agreement with the Company. Representatives of Company A’s financial advisor also indicated that entering into an exclusive negotiating period with the Company was important to Company A. Representatives of J.P. Morgan emphasized that Company A should find a way to obtain the approval of its board of directors on an expedited basis, and in any event prior to September 16, 2020, in order to provide assurance that Company A was committed to a transaction with the Company and could move expeditiously, particularly given that the Virtusa Board wanted Company management to focus on executing its business plan and did not want Company management to become distracted by protracted acquisition discussions if it was not likely to result in an actionable transaction, as was the case in 2018. Representatives of J.P. Morgan also indicated that, based on the interactions between the parties in 2018, Company A would have to agree to more Company favorable merger agreement terms than Company A had proposed in 2018. Also on that day, a representative of Goodwin had a discussion with a representative of Company A’s outside counsel and conveyed a similar message regarding the Company’s expectations regarding timing and that Company A would have to agree to more Company favorable merger agreement terms with respect to deal certainty in order to address antitrust and regulatory efforts and other closing condition matters and less restrictive “deal protection” terms (i.e., the “no shop” covenant, the Company’s ability to enter into negotiations with competing bidders, the board’s right to withdraw the recommendation to
 
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Company stockholders, the terms of the Company’s ability to terminate to accept a superior proposal and the related matching right, the break-up fee amount and triggers, among other matters) than Company A had proposed in 2018.
On July 27, 2020, the Virtusa Board held a meeting with members of Company management and representatives of Goodwin were present. At the meeting, Company management presented its long-term financial forecasts reflected in its long-term plan, which included management’s projections for the fiscal years ended March 31, 2021 through March 31, 2024 (referred to as the “base plan projections”). In the context of reviewing the long-term plan, the Virtusa Board discussed the risks, challenges, and strategic opportunities facing the Company, the increasing uncertainty due to the COVID-19 pandemic and asked questions of management regarding various matters relating to the long-term plan, including the assumptions on which it was based.
On July 30, 2020, the Company announced financial results for the first quarter of fiscal year 2021 ended June 30, 2020. On July 31, 2020, the closing price of the Company’s common stock was $40.60, which represented a 15% increase from the previous trading day’s closing price of $35.27.
Also on July 30, 2020, J.P. Morgan received unsolicited inbound inquiries from two separate financial sponsors (referred to as “Sponsor 1” and “Sponsor 2”) inquiring about the Company’s interest in considering acquisition proposals. Representatives of J.P. Morgan indicated to each of these financial sponsors that they would inform the Virtusa Board of their inquiry.
On July 31, 2020, the Virtusa Board met to discuss, among other things, the status of the discussions with Company A. Members of Company management and representatives of J.P. Morgan and Goodwin were present. Company management provided an overview of management’s current financial forecast for the second quarter of fiscal year 2021. Company management and representatives of J.P. Morgan updated the Virtusa Board on the status of the discussions with Company A, including Company A’s due diligence efforts and stated level of interest in an acquisition of the Company as well as potential timetable for Company A to present a revised proposal. Representatives of J.P. Morgan also updated the Virtusa Board on the inquiries from the two financial sponsors the previous day.
In consideration of the recent interest that had been expressed by Company A and the two financial sponsors, the Virtusa Board engaged in a general discussion concerning whether and at what time it might be advisable to approach and discuss a potential acquisition transaction with other parties. The Virtusa Board discussed that in 2018, following protracted discussions, Company A ultimately terminated discussions with the Company regarding a strategic transaction. The Virtusa Board also discussed the potential risks and benefits of commencing a process in which one or more parties could be invited to review confidential information and submit indications of interest with respect to a potential business combination involving the Company. In particular, the Virtusa Board discussed the potential disruptions to the Company’s business during a protracted process, the risk of leaks that might arise from making contact with other parties, and the impact on the Company’s business of such leaks, including the potential impact on customers, partners and employees. The Virtusa Board also discussed the potential need to disclose proprietary and confidential information to competitors and potential competitors during such process.
Representatives of J.P. Morgan discussed with the Virtusa Board a preliminary financial analysis of the Company and reviewed with the Virtusa Board potential strategic parties and financial sponsors who might have an interest in acquiring the Company. At this time, and from time to time during the period prior to the signing of the merger agreement, the Virtusa Board evaluated the relative competitiveness of proposals from strategic bidders and financial sponsors. In particular, the Virtusa Board and representatives of J.P. Morgan discussed that a strategic bidder may have a higher likelihood of submitting a competitively priced proposal, and discussed that a financial sponsor may have challenges (including due to the lack of synergies, valuation parameters and the amount of equity and debt financing that would be required) that would increase the level of difficulty for a financial sponsor to be able to submit a competitively priced proposal. The Virtusa Board determined to prioritize seeking competitive proposals from strategic bidders. However, the Virtusa Board remained open to accepting a proposal from a financial sponsor if one submitted a competitively priced proposal. Following discussion, the Virtusa Board determined to defer a decision on whether to approach other parties about a potential strategic transaction, and directed management and the
 
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Company’s advisors to continue to prioritize the discussions with Company A. The independent directors then met in executive session to continue discussions.
Also on July 31, 2020, as authorized by the Virtusa Board, representatives of J.P. Morgan had a discussion with Company A’s financial advisor. During the discussion, the representatives of J.P. Morgan again emphasized that in order for the Virtusa Board to fully engage with Company A, it would need to improve its proposed offer price, expedite the timing for obtaining approval from its board of directors to enter into a transaction with the Company, and agree to merger agreement terms that were more favorable to the Company regarding deal certainty and deal protection than Company A had proposed in 2018.
On August 4, 2020, members of Company management, including the Company’s chief executive officer, spoke with representatives of Company A, and generally discussed the status of discussions between the parties and their respective representatives. During the call, Company management indicated that Company A would need to improve its offer price materially, and into the $50’s, for the Virtusa Board to consider entering into a transaction with Company A. Representatives of Company A indicated that it would continue its diligence work and expected to submit a revised proposal, and that it was important to Company A that it enter into an exclusive negotiating period with the Company. Company management also advised Company A to provide assurance that the Company A board of directors would be able to approve a transaction with the Company prior to September 16, 2020.
Also on August 4, 2020, a representative of BPEA contacted the Company’s chief executive officer to congratulate the Company on a successful fiscal quarter and schedule a time to speak the following day.
On August 5, 2020, at BPEA’s request, the Company’s chief executive officer had a call with a representative of BPEA who indicated that BPEA was interested in exploring a potential acquisition of the Company and that BPEA would be providing a proposal to the Company shortly. No proposals were made during this call.
On August 5 and 10, 2020, the Virtusa Board met to discuss, among other things, the status of the discussions with Company A. Members of Company management and representatives of J.P. Morgan and Goodwin were present. Company management and representatives of J.P. Morgan updated the Virtusa Board on the status of the discussions with Company A. The Virtusa Board directed management and the Company’s advisors to continue to proceed with the discussions with Company A.
On August 7, 2020, a representative of a publicly-traded company (referred to as “Company B”) contacted the Company’s chief executive officer to schedule a call to discuss Company B’s possible interest in a strategic alliance with the Company, which call was scheduled for August 25, 2020.
On August 11, 2020, Company A delivered a revised written non-binding proposal to acquire the Company for $47.50 per share in cash that was subject to satisfactory completion of due diligence, among other conditions. The proposal stated that final approval of Company A’s board of directors at a scheduled meeting on September 16, 2020 would be required prior to the execution of a definitive agreement following satisfactory completion of due diligence. The proposal also stated that as a result of the September 16 meeting date, Company A would require an exclusivity period through September 16, 2020. The closing price for the Company’s common stock on August 11, 2020 was $40.17 per share.
On August 11 and 12, 2020, the Virtusa Board met to discuss, among other things, Company A’s August 11 proposal. Members of Company management and representatives of J.P. Morgan and Goodwin were present. Company management and representatives of J.P. Morgan updated the Virtusa Board on the status of the discussions with Company A, including Company A’s due diligence efforts and stated level of interest in an acquisition of the Company. The Virtusa Board discussed Company A’s improved proposal of $47.50 per share. Representatives of J.P. Morgan discussed certain financial aspects of Company A’s August 11 proposal based in part on the Company’s internal financial forecasts and Wall Street estimates of the Company’s financial prospects. Representatives of Goodwin reviewed with the Virtusa Board its fiduciary duties in the context of evaluating the proposal and considering a potential sale of the Company. Following discussion, the Virtusa Board authorized management and the Company’s advisors to continue discussions with Company A and to encourage it to improve its proposal.
 
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On August 12, 2020, at the request of Company A’s financial advisor, representatives of J.P. Morgan had a call with representatives of Company A’s financial advisor. During the call, representatives of Company A’s financial advisor inquired about valuation and representatives of J.P. Morgan indicated, as authorized by the Virtusa Board, that Company A would have to offer $54.00 per share or higher to put Company A in the best possible competitive position and to enable the Virtusa Board to consider Company A’s request for exclusivity. Representatives of J.P. Morgan also confirmed Company A’s financial advisor’s speculation that the Virtusa Board would not consider any proposal below $50.00 per share.
Also on August 12, 2020, as authorized by the Virtusa Board, members of Company management had a call with representatives of Company A. During the call, Company management informed representatives of Company A that in order for the Virtusa Board to engage with Company A in further acquisition discussions, Company A would have to improve its offer price to be in the $50’s, and provide assurance that the Company A board of directors would approve the transaction on an expedited basis (and in advance of Company A’s September 16, 2020 board meeting), particularly given that the Company A board of directors had terminated discussions with the Company in 2018 after protracted acquisition discussions.
Also on August 12, 2020 members of the Company’s management discussed adding Citi as a financial advisor based on Citi’s substantial knowledge and familiarity with the Company and its industry.
On August 13, 2020, the Virtusa Board met to discuss, among other things, the discussions with Company A. Members of Company management and representatives of J.P. Morgan and Goodwin were present. The Virtusa Board considered the potential risks associated with a protracted negotiation with Company A, including the potential disruptions to the Company’s business and impact on the Company’s employees and management’s focus on executing its business plan, particularly in light of the protracted discussions with Company A in 2018. The Virtusa Board also discussed the fact that a sale of the Company at a compelling valuation would eliminate the risks associated with executing on the Company’s business plan, including risks posed by the increasing impact of the COVID-19 pandemic and related economic conditions on the Company’s business and results of operations, including that many of the Company’s customers and prospects continue operating under challenging circumstances and may reduce or re-evaluate their spend, the likely continuation of reduced spend from customers, particularly regarding some of the Company’s significant customers in the banking and financial services industries, the concentration of the Company’s customers in the banking and financial industries which may be disproportionately adversely impacted by a recessionary economic environment. The Virtusa Board authorized management, with the assistance of J.P. Morgan and Goodwin, to continue to engage with Company A and encourage Company A to improve its proposed purchase price, terms and timing for receiving approval from its board of directors.
Also at the meeting, the Virtusa Board again discussed potential advantages and disadvantages of discussing a potential transaction with additional third parties at this time, including the potential disruptions to the Company’s business and impact on the Company’s employees and management’s focus on executing its business plan. Following discussion, the Virtusa Board determined that it was an appropriate time to pursue discussions with an additional limited number of third parties to determine their interest in a potential strategic transaction or acquisition transaction involving the Company (referred to as the “strategic process”). The Virtusa Board discussed the parties identified at the July 31 Virtusa Board meeting that were perceived as most likely to be interested in exploring a potential strategic transaction with the Company and capable of acquiring the Company, taking into account such parties’ prior interest in the Company and perceived financial strength and resources to pursue a strategic transaction in a timely manner. Following this discussion, the Virtusa Board directed J.P. Morgan to contact three potentially interested strategic parties (referred to as “Company C, Company D and Company E”) to determine whether they had an interest in exploring a potential strategic transaction with the Company, and authorized management and J.P. Morgan to have discussions with other potentially interested parties. The Virtusa Board did not direct J.P. Morgan to contact Company B because Company B was already arranging a discussion with the Company’s chief executive officer. Again, at this time, and from time to time during the period prior to the signing of the merger agreement, the Virtusa Board evaluated the relative potential competitiveness of proposals from strategic bidders and financial sponsors, and also discussed the factors related to this evaluation that were described in the July 31 Virtusa Board meeting. Representatives of J.P. Morgan then discussed with the Virtusa Board the overall timetable for the outreach and related matters. Following the meeting, representatives of J.P. Morgan contacted Companies C, D and E, as directed by the Virtusa Board.
 
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Later on August 13, 2020, the Company’s chief executive officer reviewed a written non-binding preliminary proposal from BPEA, dated August 11, 2020, to acquire the Company for $50.00 per share in cash that was subject to satisfactory completion of due diligence, among other conditions. The proposal indicated that the purchase price would be financed by a combination of third party debt financing and equity capital from BPEA. In the proposal, BPEA indicated that it had accumulated an equity stake in the Company’s stock of less than 0.5%, with the belief that the Company has significant potential, which BPEA could help it realize over time. In the proposal, BPEA also stated its belief that it could complete its diligence review within as little as four weeks. The proposal was provided to the other directors on August 14, 2020.
Also on August 13, 2020, members of Company management had a call with representatives of BPEA. During the call, members of Company management and representatives of BPEA discussed BPEA’s August 11 proposal.
On August 14, 2020, a financial sponsor with a demonstrated track record as an investor in the Company’s industry and who had previously indicated that it had been tracking the Company for some time (referred to as “Sponsor 3”) contacted J.P. Morgan to inquire about the Company’s interest in a potential acquisition transaction. Representatives of J.P. Morgan indicated to Sponsor 3 that they would inform the Company of its inquiry.
Also on August 14, 2020, Company C informed representatives of J.P. Morgan that it was not interested in discussing an acquisition of the Company because it was not consistent with Company C’s latest strategy.
Later on August 14, 2020, members of Company management had a call with representatives of Company A. During the call, representatives of Company A informed Company management that Company A would be delivering a written revised proposal to acquire the Company for $50.00 per share in cash, which was the maximum amount that Company A was authorized to offer.
On August 15, 2020, Company A delivered a written best and final, non-binding, proposal to acquire the Company for $50.00 per share in cash that was subject to satisfactory completion of due diligence, among other conditions. The proposal stated that final approval of Company A’s board of directors at a scheduled meeting on September 16, 2020 would be required prior to the execution of a definitive agreement following satisfactory completion of due diligence. The proposal also stated that Company A would require an exclusivity period through September 17, 2020.
On August 16, 2020, BPEA and the Company entered into a confidentiality agreement to facilitate further discussions. The confidentiality agreement contained customary provisions, including a one-year standstill provision that allowed BPEA to make confidential proposals to the Company at any time and automatically terminated upon the Company’s execution of a definitive agreement with a third party to effect a sale of the Company.
Also on August 16, 2020, the Company made available to BPEA the base plan projections and the upside sensitivity projections (as discussed below).
On August 17, 2020, in light of Company A’s improved proposal of $50.00 per share, and as authorized by the Virtusa Board, Company A was provided access to an online data room containing nonpublic information regarding the Company.
Also on August 17, 2020, the Company filed with the SEC a definitive proxy statement with respect to the contested director election at the Company’s 2020 annual stockholder meeting.
On August 18, 2020, following discussion with Company management, representatives of J.P. Morgan had a call with Sponsor 3 and informed Sponsor 3 that the Company could be interested in discussing a strategic transaction if Sponsor 3 could offer more than $50.00 per share and be prepared to execute a merger agreement by mid-September. Sponsor 3 indicated that it would follow up with a response.
On August 19, 2020, BPEA delivered a revised written non-binding proposal to acquire the Company for $51.00 per share in cash that was subject to satisfactory completion of due diligence, among other conditions. The proposal indicated that the purchase price would be financed by a combination of equity capital from BPEA and fully committed debt financing from BPEA’s debt financing source. The proposal
 
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stated that BPEA would complete its due diligence no later than September 11, 2020. The proposal also stated that BPEA had begun work on a draft merger agreement which it would deliver to the Company by August 25, 2020.
On August 19, 2020, the Virtusa Board met to discuss, among other things, the strategic process. Company management and representatives of J.P. Morgan and Goodwin were present. Company management and representatives of J.P. Morgan updated the Virtusa Board on the status of the discussions with Company A and BPEA. The Virtusa Board discussed Company A’s improved proposal of $50.00 per share. The Virtusa Board also discussed BPEA’s proposal of $51.00 per share and stated level of interest in an acquisition of the Company, and determined to continue discussions with BPEA and seek to use the BPEA proposal to encourage a higher price and better terms from one of the strategic bidders in the process. Representatives of J.P. Morgan updated the Virtusa Board on the status of discussions with other interested parties, including their due diligence efforts and stated level of interest in an acquisition of the Company. Representatives of Goodwin reviewed with the Virtusa Board its fiduciary duties in the context of evaluating the proposals and considering a potential sale of the Company. The Virtusa Board directed Company management and the Company’s advisors to continue to proceed with the discussions with Company A, BPEA and the other interested parties. The Virtusa Board also authorized J.P. Morgan to inform interested parties that had not yet submitted an acquisition proposal to that they should do so by September 4, 2020.
At the meeting, Company management presented an upside sensitivity case of its standalone plan, which included increased forecasts for the fiscal year ended March 31, 2021 (referred to as the “upside sensitivity projections”), and the assumptions on which the projections were based. In the context of reviewing the upside sensitivity projections, the Virtusa Board discussed the risks, challenges, and strategic opportunities facing the Company and asked questions of management regarding various matters relating to the projections, including the assumptions on which the projections were based.
Also on August 19, 2020, Company D and the Company entered into a confidentiality agreement to facilitate further discussions. The confidentiality agreement contained customary provisions, including a one-year standstill provision that automatically terminated upon the Company’s execution of a definitive agreement with a third party to effect a sale of the Company.
Also on August 19, 2020, the Company’s chief executive officer had a call with representatives of BPEA to discuss BPEA’s continued interest in the Company.
On August 20, 2020, Company A’s outside counsel provided a draft merger agreement to Goodwin. The draft merger agreement contemplated, among other things (i) a termination fee equal to 4% of the transaction’s equity value in all circumstances when the termination fee would be payable by the Company to Parent (referred to as a “Company termination fee”), (ii) reimbursement of Parent’s expenses up to a to be determined amount, payable by the Company upon the termination of the merger agreement due to failure of the Company’s stockholders to adopt the merger agreement, or the Company’s uncured material breach (referred to as the “Parent expense reimbursement”) and (iii) Company equity awards that are vested as of the closing would be cashed out at the merger price, while Company equity awards subject to time-based vesting that remain unvested as of the closing would be assumed and substituted by Company A at the merger price and remain subject to the same vesting and other terms applicable prior to closing.
Also on August 20, 2020, BPEA was provided access to an online data room containing nonpublic information regarding the Company.
Also on August 20, 2020, Sponsor 1 followed up with representatives of J.P. Morgan on their prior interest and indicated that it had heard the Company was having conversations with financial sponsors. Representatives of J.P. Morgan indicated that they had nothing to discuss with Sponsor 1 and that they would again inform the Virtusa Board of Sponsor 1’s interest. Following this time, the Virtusa Board determined to focus on ongoing discussions with Company A and BPEA, rather than prioritizing inquiries from Sponsor 1 and Sponsor 2.
Also on August 20, 2020, representatives of J.P. Morgan had a call with representatives of Company A’s financial advisor, during which representatives of J.P. Morgan again emphasized that in order for the Virtusa
 
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Board to further engage with Company A, Company A needed to improve its price, merger agreement terms, deal certainty and speed to execution of a merger agreement.
From August 20 through September 8, 2020, representatives of the Company, J.P. Morgan, Goodwin, Company A and its advisors, had various telephonic and virtual meetings to facilitate Company A’s due diligence. As part of these meetings, members of Company management made management presentations to representatives of Company A. Representatives of J.P. Morgan also attended each of the management presentations.
On August 21, 2020, the Virtusa Board held a meeting to discuss, among other things, the strategic process. Company management and representatives of J.P. Morgan and Goodwin were present. Company management and representatives of J.P. Morgan updated the Virtusa Board on the status of the discussions with the interested parties, including their due diligence efforts and stated levels of interest. Representatives of Goodwin discussed with the Virtusa Board the material terms of the draft merger agreement provided by Company A. Representatives of J.P. Morgan then discussed with the Virtusa Board the overall timetable for the discussions with the interested parties and related matters. The Virtusa Board also discussed the upside sensitivity projections presented at the prior Virtusa Board meeting, and asked questions of management regarding various matters relating to the projections, including the assumptions on which the projections were based.
From August 21 through September 9, 2020, representatives of the Company, J.P. Morgan, Goodwin, BPEA and BPEA’s outside counsel, Ropes & Gray LLP (referred to as “Ropes & Gray”), had various telephonic and virtual meetings to finalize BPEA’s confirmatory due diligence. As part of these meetings, members of Company management made management presentations to representatives of BPEA. Representatives of J.P. Morgan also attended each of the management presentations.
Also on August 21, 2020, Company D was provided access to an online data room containing nonpublic information regarding the Company.
Also on August 21, 2020, representatives of J.P. Morgan had a call with Company E and discussed the status of the draft confidentiality agreement between Company E and the Company and informed Company E that its final proposal for an acquisition of the Company and a mark-up of the merger agreement would be due by September 4, 2020.
Also on August 21, 2020, Sponsor 3 informed J.P. Morgan that it was declining interest in a potential acquisition of the Company because it was not able to offer the value that the Company was seeking nor execute a transaction with the Company on an expedited basis.
On August 25, 2020, representatives of Ropes & Gray, on behalf of BPEA, provided a draft merger agreement, voting agreement, equity commitment letter and limited guarantee to representatives of Goodwin. The draft merger agreement contemplated, among other things (i) a marketing period in connection with BPEA’s efforts to obtain debt financing during which BPEA would not be required to close the merger until the expiration of such marketing period despite the satisfaction of all other closing conditions (which is referred to as a “marketing period”), (ii) a Company termination fee equal to 4% of the transaction’s equity value, (iii) a termination fee, equal to 4% of the transaction’s equity value, to be payable by Parent to the Company upon the Company’s termination of the merger agreement due to Parent’s failure to close the merger when required to do so (which is referred to as a “Parent termination fee”), (iv) Parent expense reimbursement of up to $10 million payable by the Company upon the termination of the merger agreement due to failure of the Company’s stockholders to adopt the merger agreement, or the Company’s uncured material breach and (v) noted the treatment of Company equity awards in connection with the merger as subject to further discussion.
Also on August 25, 2020, Goodwin provided Company A’s outside counsel a revised draft of the merger agreement. Among other things, the revised draft of the merger agreement provided for (i) a Company termination fee equal to 2% of the transaction’s equity value, (ii) no Parent expense reimbursement, (iii) modification of various covenants relating to the Company’s operations between signing and closing, Parent’s and Merger Sub’s obligations with respect to obtaining regulatory approvals and Parent’s obligations with respect to employee compensation and benefits matters after closing, and (iv) the Company equity
 
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awards that are vested as of the closing would be cashed out at the merger price and the Company equity awards that are unvested as of the closing would be fully accelerated and cashed out at the merger price.
Also on August 25, 2020, the Company’s chief executive officer had the scheduled call with a representative of Company B who expressed an interest in discussing a potential strategic transaction with the Company. The Company’s chief executive officer instructed Company B to contact J.P. Morgan. No proposals were made during the call. Following the call, Company B indicated that it would send an M&A questionnaire to the Company.
On August 26, 2020, the Virtusa Board met to discuss, among other things, the strategic process. Members of Company management and representatives of J.P. Morgan and Goodwin were present. Company management and representatives of J.P. Morgan updated the Virtusa Board on the status of the discussions with the interested parties, including their due diligence efforts and stated levels of interest. Representatives of Goodwin discussed with the Virtusa Board the material terms of the draft merger agreement provided by BPEA. Representatives of J.P. Morgan then discussed with the Virtusa Board the overall timetable for the discussions with the interested parties and related matters.
Company management again presented the base plan projections and the upside sensitivity projections (which are summarized below under the section titled “— Certain Financial Projections by the Management of Virtusa”), and the assumptions on which the projections were based. Following discussion and questions of management regarding various matters relating to the projections, including the assumptions on which the projections were based, the Virtusa Board approved the base plan projections and the upside sensitivity projections for disclosure to prospective bidders and for use by J.P. Morgan in conducting its financial analyses of the Company.
Also on August 26, 2020, Company E and the Company entered into a confidentiality agreement to facilitate further discussions. The confidentiality agreement contained customary provisions, including a one-year standstill provision that automatically terminated upon the Company’s execution of a definitive agreement with a third party to effect a sale of the Company. That day Company E was provided access to an online data room containing nonpublic information regarding the Company.
Also on August 26, 2020, Company D informed representatives of J.P. Morgan that Company D was no longer interested in pursuing a transaction with the Company because Company D had earmarked M&A investment capital for other purposes, and the Company’s large India footprint could present integration challenges for Company D, and it was not able to act quickly for an acquisition of the size of the Company.
On August 27, 2020, representatives of J.P. Morgan had a call with representatives of Company A’s financial advisor, during which representatives of J.P. Morgan again emphasized that in order for the Virtusa Board to further engage with Company A, Company A needed to improve its price, merger agreement terms, deal certainty and speed to execution of a merger agreement. Representatives of Company A’s financial advisor indicated that it was important to Company A that Company A enter into an exclusive negotiating period with the Company.
Also on August 27, 2020, representatives of Company B and representatives of J.P. Morgan had a discussion. Representatives of J.P. Morgan informed Company B that while the Company would work to respond to the questionnaire, Company B would have to move quickly if it was interested in pursuing a strategic transaction.
Also on August 27, 2020, as authorized by the Virtusa Board, J.P. Morgan provided a draft merger agreement prepared by Goodwin to Company E.
On August 28, 2020, representatives of J.P. Morgan in India received unsolicited inbound inquiries from two financial sponsors (referred to as “Sponsor 4” and “Sponsor 5”) inquiring about market rumors that the Company was considering acquisition proposals. Representatives of J.P. Morgan indicated to these financial sponsors that they would inform the Virtusa Board of their inquiry. Sponsor 4 indicated that it would contact representatives of J.P. Morgan in the U.S. to express its interest in the Company, but did not do so.
On August 29, 2020, Goodwin provided revised drafts of the merger agreement and related transaction documents to representatives of Ropes & Gray. Among other things, the revised draft of the merger
 
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agreement provided for (i) an inside date in lieu of a marketing period, (ii) a Company termination fee equal to 2% of the transaction’s equity value, (v) a Parent termination fee equal to 7% of the transaction’s equity value, (iv) no Parent expense reimbursement, (vi) modification of various covenants relating to the Company’s operations between signing and closing, Parent’s and Merger Sub’s obligations with respect to obtaining regulatory approvals and Parent’s obligations with respect to employee compensation and benefits matters after closing, and (vii) the Company equity awards that are vested as of the closing would be cashed out at the merger price and the Company equity awards that are unvested as of the closing would be fully accelerated and cashed out at the merger price.
Also on August 29, 2020, representatives of J.P. Morgan had a discussion with a representative of Company B and suggested that Company B execute a confidentiality agreement with the Company to facilitate discussions.
From August 29 through September 9, 2020, representatives of Goodwin, with input from Company management and with the benefit of the views of the directors provided at the Virtusa Board meetings, and Company’s A outside counsel exchanged drafts and participated in discussions regarding the terms of the merger agreement and related agreements. The key issues negotiated in the draft merger agreement and related agreements included the scope of the representations and warranties, the rights of the parties to terminate the transaction and related remedies, the terms under which the Company would be permitted to respond to unsolicited proposals, the amount of and conditions to payment by the Company of a termination fee, and the terms of the related voting agreement.
On August 30, 2020, Company B and the Company entered into a confidentiality agreement to facilitate further discussions. The confidentiality agreement contained customary provisions, including a one-year standstill provision that automatically terminated upon the Company’s execution of a definitive agreement with a third party to effect a sale of the Company. Following execution of the confidentiality agreement, representatives of J.P. Morgan informed Company B that it should present a proposal for a strategic transaction with the Company by September 4, 2020, including a firm price and a mark-up of the Company’s draft merger agreement.
On August 30, 2020, a junior executive at a publicly traded company (referred to as “Company F”) contacted J.P. Morgan to inquire about market rumors that the Company was considering acquisition proposals. Representatives of J.P. Morgan informed Company management of Company F’s inquiry, which management discussed with a member of the Virtusa Board who was affiliated with Company F. The member of the Virtusa Board confirmed that Company F was not seriously considering a proposal to acquire the Company. On September 1, 2020, as authorized by Company management, representatives of J.P. Morgan informed the junior executive of Company F that it would make the Virtusa Board aware of its inquiry.
On August 31, 2020, the Company’s chief executive officer spoke with a representative of BPEA, and generally discussed the status of discussions between the parties and their respective representatives. During the call, the Company’s chief executive officer indicated that if the Company was going to enter into a strategic transaction with a third party, it would prefer to do so expeditiously and that, given the competition for such a transaction, if BPEA wanted to be in an advantageous position to acquire the Company, it should move quickly and improve its offer price.
Following the call, the representative of BPEA indicated to the Company that BPEA would work towards presenting a final proposal to the Company, and being in a position to execute a merger agreement with the Company, by September 9, 2020.
Also on August 31, 2020, J.P. Morgan, as authorized by the Virtusa Board, provided a draft merger agreement prepared by Goodwin to Company B.
On September 1, 2020, representatives of J.P. Morgan had a call with representatives of Company A’s financial advisor, during which representatives of J.P. Morgan again emphasized that in order for the Virtusa Board to engage with Company A, Company A needed to improve its price, merger agreement terms, deal certainty and speed to execution of a merger agreement. Company A had not made any material progress on the open points in the merger agreement since receiving the revised merger agreement on August 25, 2020.
 
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Also on September 1, 2020, representatives of J.P. Morgan had a call with representatives of BPEA and encouraged BPEA to complete its due diligence, be accommodating on merger agreement terms, finalize its financing arrangements, and be aggressive with its final offer price. Representatives of BPEA indicated that they expected to secure a debt financing commitment to be executed at the time of signing of definitive transaction documents and would proceed expeditiously.
From September 1 through 9, 2020, representatives of Goodwin, with input from Company management and with the benefit of the views of the directors provided at the Virtusa Board meetings, and representatives of Ropes & Gray exchanged drafts and participated in discussions regarding the terms of the merger agreement and related documents. Substantial progress on the terms of the merger agreement with BPEA were made during this call. The items negotiated with respect to the merger agreement and related documents included, among other things: the representations and warranties to be made by the parties; the restrictions on the conduct of the Company’s business until completion of the transaction; the definition of material adverse effect; the conditions to completion of the merger; the Company’s obligations to cooperate with BPEA’s debt financing efforts; the length of the marketing period; the provisions regarding the Company’s employee benefit plans, severance and other compensation matters; the remedies available to each party under the merger agreement, including the triggers of the Company termination fee payable to Parent and the Parent termination fee payable to the Company and the terms of the guaranty of certain payment obligations by BPEA; and the amounts of the Company termination fee, the Parent termination fee and the Parent expense reimbursement.
On September 1, 2020, Company B was provided access to an online data room containing nonpublic information regarding the Company. Also on that day, the Company provided responses to Company B’s M&A questionnaire.
On September 2, 2020, the Virtusa Board held a meeting to discuss, among other things, the strategic process. Members of Company management and representatives of J.P. Morgan and Goodwin were present. Company management and representatives of J.P. Morgan updated the Virtusa Board on the status of the discussions with the interested parties, including their due diligence efforts, stated levels of interest and expected timing for providing final proposals on price and being prepared to execute a transaction with the Company. Representatives of Goodwin discussed with the Virtusa Board the key open points in the draft merger agreements with Company A and BPEA. Representatives of Goodwin also discussed with the Virtusa Board its fiduciary duties in the context of evaluating the proposal and considering a potential sale of the Company.
The Virtusa Board also discussed again the engagement of J.P. Morgan to serve as the Company’s financial advisor in connection with a potential strategic transaction. Following this discussion, the Virtusa Board authorized management to finalize the engagement of J.P. Morgan as a financial advisor in connection with a potential transaction and the parties executed a customary engagement letter on September 8, 2020. The Virtusa Board also discussed and authorized management to engage Citi as a financial advisor given its historical relationship with the Company as a large customer and its substantial knowledge of and familiarity with the Company and the industries in which it operates. Citi executed an engagement letter with the Company on September 9, 2020 and will be paid a fee in connection with the transaction with BPEA, but Citi did not advise the Virtusa Board or deliver a fairness opinion in connection with the transaction with BPEA.
Later on September 2, 2020, Company A provided a written status update that reconfirmed Company A’s proposed $50.00 per share cash price and indicated that Company A targeted to close out all outstanding business-level points by the early part of the week of September 7, 2020. No material progress had been made on the open points in the merger agreement with Company A since August 25, 2020.
Later on September 2, 2020, Company management and representatives of J.P. Morgan had a call with representatives of Company A and its financial advisor. Company management and representatives of J.P. Morgan informed Company A that in order for the Virtusa Board to accept Company A’s proposal, it would have to improve its offer price, make concessions on the terms of its merger agreement and obtain final approval from the Company A board of directors to execute a merger agreement prior to September 16, 2020. Representatives of Company A indicated that it was not possible for the Company A board of directors
 
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to approve the transaction prior to September 16, 2020 and that Company A would not be able to execute a merger agreement before then.
On September 4, 2020, the Virtusa Board held a meeting to discuss, among other things, the strategic process. Members of Company management and representatives of J.P. Morgan and Goodwin were present. Company management and representatives of J.P. Morgan updated the Virtusa Board on the status of the discussions with the interested parties, including their due diligence efforts, stated levels of interest and expected timing for providing final proposals on price and being prepared to execute a transaction with the Company. Representatives of Goodwin discussed with the Virtusa Board the status of the merger agreement negotiations with Company A and BPEA and the key open points in both merger agreements, and that substantial progress had been made with BPEA. Representatives of J.P. Morgan discussed with the Virtusa Board that both Company C and Company D had declined interest in the strategic process and that neither Company B nor Company E submitted a proposal or a revised merger agreement by the September 4, 2020 bid deadline. Representatives of J.P. Morgan also reviewed with the Virtusa Board certain financial aspects of revised proposals from Company A and BPEA and preliminary financial analyses with respect to the Company based on management’s base case and upside sensitivity projections. The Virtusa Board asked questions of J.P. Morgan regarding various matters relating to the preliminary financial analyses. The Virtusa Board authorized management and the Company’s advisors to continue discussions with Company A and BPEA and to encourage them to improve their proposals on price and merger agreement terms, as well as being in a position to execute a merger agreement the following week. The Virtusa Board authorized J.P. Morgan to inform Company B and Company E that they would be removed from the strategic process because they did not submit a proposal by the September 4, 2020 bid deadline.
Representatives of Goodwin discussed with the Virtusa Board the disclosure that J.P. Morgan provided to the Virtusa Board regarding its then current relationships with each of Company A, BPEA and their respective affiliates. Following review of this information, the Virtusa Board determined, with input from Goodwin, that based on the information provided by J.P. Morgan, the disclosed information would not impact J.P. Morgan’s ability to act effectively as financial advisor to the Company or the Company’s decision to continue to retain J.P. Morgan.
On September 5, 2020, as authorized by the Virtusa Board, representatives of J.P. Morgan informed Company B and Company E that they were removed from the strategic process because they had not submitted a firm price and revised merger agreement by the stated September 4 deadline. The following day, Company B’s and Company E’s data room access was terminated.
On September 6, 2020, Company management and representatives of J.P. Morgan had a call with representatives of Company A and its financial advisor. Company management and representatives of J.P. Morgan informed Company A that in order for the Virtusa Board to accept Company’s A proposal, it would have to improve its offer price, make concessions on the terms of its merger agreement and obtain final approval from the Company A board of directors to execute a merger agreement at the latest by end of the week, if not sooner. Representatives of Company A indicated that it was not possible for the Company A board of directors to approve the transaction prior to September 16, 2020 and that Company A would not be able to execute a merger agreement with the Company by the end of the week. Representatives of Company A asked whether the Company would enter into an exclusive negotiating period with Company A. Representatives of J.P. Morgan indicated Company A would have to improve its price into the mid-$50s and make concessions on the merger agreement terms before the Virtusa Board would consider granting exclusivity to Company A.
Also on September 6, 2020, Company E informed representatives of J.P. Morgan that Company E remained interested in the Company and intended to submit a proposal for an acquisition of the Company later in the week. Representatives of J.P. Morgan informed the Company of this correspondence. Company E did not submit a proposal.
On September 7, 2020, the Company’s chief executive officer spoke with a representative of Company A, and generally discussed the status of discussions between the parties and their respective representatives. During the call, the Company’s chief executive officer encouraged Company A to improve its offer price and finalize merger agreement negotiations by the middle of the week, if not sooner. The representative of Company A acknowledged the Company’s encouragement, but indicated that Company A would not be
 
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able to execute a merger agreement until such time as Company A received board approval which could not happen prior to its September 16, 2020 board meeting.
On September 8, 2020, the Virtusa Board held a meeting to discuss, among other things, the strategic process. Members of Company management and representatives of J.P. Morgan and Goodwin were present. Company management and representatives of J.P. Morgan updated the Virtusa Board on the status of the discussions with Company A and BPEA since the last Virtusa Board meeting. Representatives of Goodwin discussed with the Virtusa Board the status of the merger agreement negotiations with Company A and BPEA and the key open points in both merger agreements. Representatives of J.P. Morgan and Goodwin discussed with the Virtusa Board that BPEA had made significant progress on improving the merger agreement terms over the recent days, and that BPEA and its advisors were working to have final transaction documents ready for execution imminently. Representatives of J.P. Morgan and Goodwin also discussed with the Virtusa Board that despite several directives from management and representatives of J.P. Morgan, Company A had not improved its offer price, nor indicated it would make concessions on the merger agreement terms or accelerate the timing for obtaining their own board approval for a transaction, and that Company A had not made any material progress on the open points in the merger agreement since August 25, 2020, despite repeated requests by the Company and its advisors to do so. Following discussion, the Virtusa Board authorized management and the Company’s advisors to encourage BPEA to improve its offer price. The Virtusa Board also concluded that it was not appropriate at this time to consider or respond to Company A’s request to engage in exclusive negotiations.
Later on September 8, 2020, BPEA delivered a written revised proposal to acquire the Company for a price of $51.00 per share. The proposal indicated that it was BPEA’s final offer and that BPEA had completed its due diligence and received all internal approvals to execute the transaction documents. The proposal included executed versions of the merger agreement, equity commitment letters, limited guarantees, debt commitment letter from its debt financing source, and voting agreement. The proposal stated that BPEA was prepared to immediately execute the transaction documents, but in no event later than 11:59 p.m. on September 9, 2020.
Later on September 8, 2020, as authorized by the Virtusa Board, representatives of J.P. Morgan had discussions with representatives of BPEA in which they asked BPEA to increase its price by at least one dollar per share, and to put forth its best and final proposal as soon as possible for the Virtusa Board to consider. Representatives of J.P. Morgan, as authorized by management, also requested that BPEA agree to a Company termination fee reduced by one-half under the circumstance where the Company terminates the BPEA merger agreement within 30 days following execution of the BPEA merger agreement to accept a superior proposal from a party that had executed a confidentially agreement with the Company prior to execution of the BPEA merger agreement.
On September 9, 2020, representatives of Goodwin had a call with Company A’s outside counsel to discuss the remaining open points in the merger agreement and voting agreement, which included the triggers and amounts of the Company termination fee and Parent expense reimbursement, the terms of the voting agreement and open points in the Company’s disclosure letter. These open points were not resolved during the call.
Also on September 9, 2020, BPEA delivered a written final proposal to acquire the Company for an improved price of $51.35 per share. The proposal stated that it was BPEA’s best and final offer on price, and that is was conditioned upon the Company executing the transaction documents no later than 11:59 p.m. that night, at which time the proposal would expire if not accepted. BPEA also rejected the Company’s request for a Company termination fee reduced by one-half in certain circumstances.
Also on September 9, 2020, Company E informed representatives of J.P. Morgan that they should contact representatives of Company E’s financial advisor to discuss Company E’s interest in the Company. Representatives of J.P. Morgan informed the Company of this correspondence.
Later on September 9, 2020, the Virtusa Board met to discuss the final terms of the proposed transaction with BPEA and the status of the discussions with Company A. Members of Company management and representatives of J.P. Morgan and Goodwin were present. Representatives of Goodwin reviewed the fiduciary duties of the Virtusa Board in connection with a potential sale of the Company. Representatives of J.P.
 
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Morgan and Goodwin provided an update on the discussions with BPEA since the last board meeting, including that negotiations between the Company and BPEA were complete, noting that BPEA had submitted a best and final improved price of $51.35 per share and had rejected the Company’s request for a reduced Company termination fee in certain circumstances, and that this revised proposal was conditioned upon the parties reaching an agreement and executing a merger agreement that evening and announcing the agreement before the stock market opened the next day. The Virtusa Board also discussed that to date BPEA had not had, and had not requested to have, discussions with Company management regarding their future roles, compensation, retention or investment arrangements in connection with the proposed transaction.
Representatives of J.P. Morgan and Goodwin also informed the Virtusa Board on the status of the discussions with Company A since the last board meeting, including that there remained unresolved open issues on the merger agreement and voting agreement, and that Company A had not provided a revised draft of the merger agreement or assurance that it could execute a definitive merger agreement by the end of the week or prior to Company A’s board of directors meeting on September 16, 2020 or otherwise made meaningful progress on the merger agreement since August 25, 2020. The Virtusa Board discussed Company A’s proposal and that despite several directives by management and the Company’s advisors since July 24, 2020, Company A had not improved its price nor submitted a revised merger agreement with concessions on key merger agreement terms. The Virtusa Board also discussed that there was no assurance that the Company A board of directors would approve a transaction with the Company on September 16, 2020, particularly in light of the 2018 discussions which were terminated by the Company A board of directors. The Virtusa Board also discussed the risk of losing the BPEA offer, which was at a higher price and with final terms acceptable to the Virtusa Board, if the Company attempted to further delay signing a merger agreement with BPEA.
The Virtusa Board then further discussed the advantages and risks of the proposed transaction with BPEA that are described below in greater detail under the heading “— Reasons for the Merger; Recommendation of the Virtusa Board.” In light of these discussions, the Virtusa Board concluded that BPEA’s improved and final offer would, if consummated, provide greater certainty of value (and less risk) to the Company’s stockholders relative to the potential trading price of the Company’s shares over a longer period after accounting for the long-term risks to the Company’s business resulting from operational execution risk and evolving industry dynamics. After considering the Company’s strategic alternatives to the BPEA transaction and the Company’s ability to continue as a standalone company and the terms of the proposal from Company A, and the risk that further delay might cause the loss of the BPEA offer, the Virtusa Board concluded that BPEA’s final proposal was the best alternative for the Company’s stockholders.
Representatives of Goodwin discussed with the Virtusa Board the updated disclosure that J.P. Morgan provided to the Virtusa Board regarding its then current relationships with BPEA and its affiliates and the disclosure that Citi provided to the Virtusa Board regarding its then current relationships with BPEA and its affiliates. Following review of this information, the Virtusa Board determined, with input from Goodwin, that based on the updated information provided by J.P. Morgan, the disclosed information would not impact J.P. Morgan’s ability to act effectively as financial advisor to the Company or the Company’s decision to continue to retain J.P. Morgan. The Virtusa Board also determined, with input from Goodwin, that based on the information provided by Citi, the disclosed information would not impact Citi’s ability to act effectively as financial advisor to the Company or the Company’s decision to retain Citi.
Also at this meeting, a representative of J.P. Morgan presented J.P. Morgan’s financial analyses and rendered to the Virtusa Board the oral opinion of J.P. Morgan, subsequently confirmed by the delivery of a written opinion of J.P. Morgan, dated September 9, 2020, to the Virtusa Board, that, as of such date and based upon and subject to the factors and assumptions set forth in its written opinion, the consideration to be paid to the holders of the Company’s common stock in the proposed merger was fair, from a financial point of view, to such holders, all as more fully summarized below under the heading “— Opinion of Virtusa’s Financial Advisor”.
After further discussions, and taking into account the factors described below in greater detail under the heading “— Reasons for the Merger; Recommendation of the Virtusa Board,” including the Virtusa Board’s belief that the merger is more favorable to the Company’s stockholders than other strategic alternatives available to the Company, including remaining as an independent public company, the Virtusa Board
 
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unanimously adopted resolutions which, among other things, approved the merger agreement, the voting agreement, the merger and the other transactions contemplated by the merger agreement and recommended that the Company’s stockholders adopt the merger agreement, the merger and the other transactions contemplated by the merger agreement.
Later on September 9, 2020, following the meeting of the Virtusa Board, the Company, Parent and Merger Sub executed the merger agreement and all signatories to the voting agreement, equity commitment letters, limited guarantees and debt commitment letter executed such documents.
On the morning of September 10, 2020, prior to the opening of trading on the NASDAQ market, the Company and BPEA issued a joint press release announcing their entry into the merger agreement.
On October 6, 2020, the Company announced that it entered into a settlement agreement with NMV (referred to as the “settlement agreement”), which economically owns approximately 10.8% of the outstanding shares of Virtusa common stock. Pursuant to the settlement agreement, NMV withdrew its nominations for directors at the Company’s 2020 annual stockholders meeting and the Company appointed Patricia “Patty” Morrison as a new independent director, effective immediately. Additionally, pursuant to the settlement agreement, NMV entered into a voting agreement with the Company under which NMV will vote in favor of the merger proposal.
Reasons for the Merger; Recommendation of the Virtusa Board
In evaluating the merger agreement, the merger and the other transactions contemplated by the merger agreement, the Virtusa Board consulted with Company management and its financial advisors. The Virtusa Board also consulted with its outside legal counsel regarding its fiduciary duties, the terms and conditions of the merger agreement and other related matters. The Virtusa Board unanimously determined that the merger agreement, the merger and the other transactions contemplated by the merger agreement are advisable, fair to and in the best interests of the Company and its stockholders, and unanimously approved and adopted the merger agreement, the merger and the other transactions contemplated by the merger agreement. Accordingly, on September 9, 2020, the Virtusa Board unanimously resolved to recommend that the Company’s stockholders approve the adoption of the merger agreement and approve the transactions contemplated thereby.
In the course of reaching its recommendation, the Virtusa Board considered a number of positive factors relating to the merger agreement and the merger, each of which the Virtusa Board believed supported its decision, including the following:

Merger Consideration.   The Virtusa Board considered that the Company’s stockholders will be entitled to receive merger consideration of $51.35 per share in cash upon the closing of the merger. The Virtusa Board considered the current and historical market prices of the Company common stock, including the fact that $51.35 per share in cash represented a premium of approximately 27% over the Company’s closing price on September 9, 2020, the last trading day prior to execution of the merger agreement, and premiums of approximately 29% and 46% to the Company’s volume-weighted average prices (referred to as “VWAP”) for the last 30 and 60 trading days prior to the execution of the merger agreement, respectively, and, that the merger consideration of $51.35 per share implies a valuation of 16.2x Firm Value / Last Twelve Months EBITDA as of June 30, 2020.

Best Alternative for Maximizing Stockholder Value.   The Virtusa Board considered that the merger consideration was more favorable to the Company’s stockholders than the potential value that would reasonably be expected to result from other alternatives reasonably available to the Company, including the continued operation of the Company on a standalone basis, taking into account its acquisition opportunities, strategic alternatives and financing plans on an ongoing basis, in light of a number of factors, including:

the fact that if the Company remained an independent public company its stockholders would continue to be subject to the risks and uncertainties of the Company executing on its standalone plan including the increasing impact of the COVID-19 pandemic and related economic conditions on the Company’s business and results of operations, including: that many of the Company’s customers and prospects continue operating under challenging circumstances and
 
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may reduce or re-evaluate their spend; the likely continuation of reduced spend from customers, particularly regarding some of the Company’s significant customers in the banking and financial services industries; the concentration of the Company’s customers in the banking and financial industries which may be disproportionately adversely impacted by a recessionary economic environment; the fact that some of the Company’s competitors have substantially greater resources than the Company, including greater operational and solutions capabilities; and the impact of an expanding competitive environment on the Company’s ability to effectively sell its services;

the anticipated future trading prices of the Company common stock on a standalone basis, and the operational, financial and market risks of continuing on a standalone basis as an independent public company and the certainty of realizing a compelling value for the Company common stock in the merger compared to the uncertainty that trading values would approach the per share merger consideration in the foreseeable future, even if the Company were able to execute on it standalone plan;

its belief that, in light of the strategic process we engaged in, the responses we received from participants in the process and the best and final offers received from each of BPEA and Company A, it was unlikely that any other party would be willing to acquire the Company at an all-cash price in excess of $51.35 per share, or agree to terms as favorable as the BPEA transaction, or would even be able to reach a signed merger agreement in the near term;

the course and history of competitive negotiations between BPEA and the Company, as described in the section of this proxy statement titled “— Background of the Merger,” and the Virtusa Board’s belief that it had obtained BPEA’s best and final offer and that it was unlikely that any other party would be willing to acquire the Company at a higher price; and

the Virtusa Board’s belief that the terms of the merger agreement, taken as a whole, are reasonable.

Greater Certainty of Value.   The Virtusa Board considered that the merger consideration payable for shares is a fixed all cash amount, thereby providing the Company’s stockholders with immediate certainty of value and liquidity for their shares upon the closing of the merger, while eliminating the uncertainty of long-term business and execution risk to stockholders, especially when viewed in light of a number of factors, including the recent increased volatility in equity markets, particularly with respect to comparable companies, and the even greater volatility in the Company’s stock.

Receipt of Fairness Opinion from its Financial Advisor Regarding the Merger.   The Virtusa Board considered the financial analyses presented by J.P. Morgan to the Virtusa Board and the oral opinion of J.P. Morgan rendered to the Virtusa Board, subsequently confirmed by the delivery of a written opinion of J.P. Morgan, dated September 9, 2020, to the Virtusa Board, that, as of such date and based upon and subject to the factors and assumptions set forth in its written opinion, the consideration to be paid to the holders of the Company’s common stock in the proposed merger was fair, from a financial point of view, to such holders, all as more fully summarized below under the heading “— Opinion of Virtusa’s Financial Advisor”. The full text of the written opinion of J.P. Morgan, dated September 9, 2020, which sets forth the assumptions made, matters considered and limits on the review undertaken, is attached as Annex B to this proxy statement. The opinion of J.P. Morgan is more fully described in the section of this proxy statement titled “— Opinion of Virtusa’s Financial Advisor.”

Likelihood of Completion.   The Virtusa Board considered the likelihood of completion of the merger to be significant, in light of, among other things:

the commitment of Parent in the merger agreement to use its reasonable best efforts to complete the merger as soon as practicable (see the section of this proxy statement titled “The Merger Agreement — Reasonable Best Efforts; Antitrust Filings”);

the absence of a financing condition and the commitment of Parent in the merger agreement to use its reasonable best efforts to cause its equity financing sources and their affiliates to assist and cooperate as necessary and appropriate with the other parties to complete the merger as soon as practicable;
 
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the commitment of Parent in the merger agreement to pay the Company a termination fee in an amount equal to $108,660,000 in certain circumstances in the event that the merger is not completed, which payment is guaranteed by the guarantors (see the section of this proxy statement titled “The Merger Agreement — Termination Fees and Expenses”);

the fact that Merger Sub has entered into a debt commitment letter pursuant to which the debt commitment parties have committed, upon certain terms and subject to certain conditions, to lend up to $950,000,000 in the aggregate in connection with the financing of the amounts payable pursuant to the merger agreement and the transactions contemplated thereby, and the representations and covenants of Parent and Merger Sub in the merger agreement as to its financing (see the section of this proxy statement titled “— Financing of the Merger”);

the limited conditions to closing contained in the merger agreement, which the Virtusa Board believes are reasonable and customary in number and scope, and which, in the case of the condition related to the accuracy of the Company’s representations and warranties, are generally subject to a “company material adverse effect” qualification (see the section of this proxy statement titled “The Merger Agreement — Conditions of the Merger”);

the Company’s entitlement, under certain conditions, to seek specific performance of Parent’s obligations under the merger agreement, including Parent’s and Merger Sub’s obligation to close the merger when required; and

the positive business reputation of BPEA, its history of successful acquisitions, its substantial financial resources and its strong strategic interest in the Company and familiarity with the Company and the Company’s products.

Opportunity to Receive Alternative Acquisition Proposals and to Terminate or Change Recommendation in Response to a Superior Proposal or Intervening Event.   The Virtusa Board considered the terms of the merger agreement relating to the Company’s ability to respond to unsolicited acquisition proposals, and the other terms of the merger agreement, including:

the Company’s right, subject to certain conditions, to provide information in response to, and to discuss and negotiate with, certain third parties regarding unsolicited acquisition proposals made before the Company stockholder approval is obtained (see the section of this proxy statement titled “The Merger Agreement — No-Shop; Virtusa Board Recommendation Change”);

the provision of the merger agreement allowing the Company to terminate the merger agreement prior to obtaining the company stockholder approval in order to substantially concurrently enter into an alternative acquisition agreement, subject to Parent’s right to receive payment of a termination fee equal to $54,330,000, which amount the Virtusa Board believes to be reasonable under the circumstances given the size of the transaction and taking into account the range of such termination fees in similar transactions and believes not to preclude or substantially impede a possible competing proposal (see the sections of this proxy statement titled “The Merger Agreement — No-Shop; Virtusa Board Recommendation Change — Termination Fees and Expenses”);

the provision of the merger agreement allowing the Virtusa Board to make a change of recommendation prior to obtaining the Company stockholder approval in specified circumstances relating to a superior proposal or intervening event, subject to Parent’s right to terminate the merger agreement and receive payment of a termination fee equal to $54,330,000, which amount the Virtusa Board believes to be reasonable under the circumstances given the size of the transaction and taking into account the range of such termination fees in similar transactions and believes not to preclude or substantially impede a possible competing proposal (see the sections of this proxy statement titled “The Merger Agreement — No-Shop; Virtusa Board Recommendation Change — Termination Fees and Expenses”);

the $54,330,00 termination fee payable by the Company in certain circumstances (representing approximately 3.0% of our equity value, based on the merger consideration) was viewed by our Virtusa Board, after consultation with its legal advisors, as reasonable and not likely to preclude any other party from making a competing acquisition proposal, and was significantly lower than the termination fee proposed by Company A of 4% of our equity value; and
 
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Opportunity for the Company Stockholders to Vote.   The Virtusa Board also considered the fact that the merger would be subject to the approval of the Company’s stockholders, and the Company’s stockholders would be free to evaluate the merger and vote for or against the adoption of the merger agreement at the special meeting; and

Opportunity for Appraisal of Shares.   The Virtusa Board also considered the fact that the Company’s stockholders who do not vote in favor of the adoption of the merger will have the right to demand appraisal of their fair value of the shares under Delaware law (see the section of this proxy statement titled “Appraisal Rights”).
In the course of reaching its recommendation, the Virtusa Board also considered certain risks and potentially adverse factors relating to the merger agreement and the merger, including:

the risks related to the announcement and pendency of the merger, including the potential impact on our employees and our relationships with existing and prospective customers, vendors and business partners;

the need to make antitrust filings, and obtain antitrust clearance, in the United States and certain other foreign jurisdictions, and receive approval from the Committee on Foreign Investment in the United States;

that the Company stockholders will have no ongoing equity participation in the Company following the merger, and that such stockholders will therefore cease to participate in the Company’s future earnings or growth, if any, or to benefit from increases, if any, in the value of the Company common stock following the merger;

the provisions of the merger agreement that restrict the Company’s ability to solicit or participate in discussions or negotiations regarding alternative acquisition proposals, subject to certain exceptions, and that restrict the Company from entering into alternative acquisition agreements;

the possibility that the merger is not completed in a timely manner or at all for any reason, as well as the risks and costs to the Company if the merger is not completed or if there is uncertainty about the likelihood, timing or effects of completion of the merger, including uncertainty about the effect of the merger on the Company’s employees, existing and prospective customers, suppliers, partners and other third parties, which could impair the Company’s ability to attract, retain and motivate key personnel and could cause third parties to seek to terminate, change or not enter into business relationships with the Company, as well as the risk of diverting management and employee attention from ongoing business operations as a result of the merger, and the effect on the trading price of the Company common stock if the merger agreement is terminated or the merger is not completed for any reason;

the merger agreement’s customary restrictions on the conduct of the Company’s business before completion of the merger, generally requiring the Company to use commercially reasonable efforts to conduct its business in all material respects in the ordinary course of business and prohibiting the Company from taking specified actions, which could delay or prevent the Company from undertaking certain business opportunities that arise pending completion of the merger (see the section of this proxy statement titled “The Merger Agreement — Covenants Regarding Conduct of Business by the Company Pending the Effective Time”);

the possibility that the Company could be required under the terms of the merger agreement to pay a termination fee equal to $54,330,000 under certain circumstances (see the section of this proxy statement titled “The Merger Agreement — Termination Fees and Expenses”), and that such termination fee could discourage other potential bidders from making a competing bid to acquire the Company;

the possibility that the Company would be required to pay BPEA an expense reimbursement of up to $3,500,000 if, upon being put to a vote, the Company’s stockholders do not approve the merger, or that the Company experiences an uncured breach of its representations, warranties or covenants (see the section of this proxy statement titled “The Merger Agreement — Termination Fees and Expenses”);
 
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the potential risk of losing the opportunity to enter into the merger agreement with Parent in the event the Company continued trying to obtain any additional offers at higher prices;

the significant costs involved in connection with entering into the merger agreement and completing the merger (some of which are payable whether or not the merger is consummated), including in connection with any litigation that may result from the announcement or pendency of the merger;

that the receipt of cash by the Company stockholders in exchange for their shares of common stock pursuant to the merger will be a taxable transaction to the Company’s stockholders for U.S. federal income tax purposes (see the section of this proxy statement titled “— Material U.S. Federal Income Tax Considerations”); and

that some of the Company’s directors and executive officers have interests that may be different from, or in addition to, the interests of the Company stockholders generally (see the section of this proxy statement titled “— Interests of the Company’s Directors and Executive Officers in the Merger”).
The foregoing discussion of the information and factors considered by the Virtusa Board includes the material factors considered by the Virtusa Board but is not intended to be exhaustive and does not necessarily include all of the factors considered by the Virtusa Board. In view of the complexity and variety of factors considered in connection with its evaluation of the merger agreement and the merger, the Virtusa Board did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determination and recommendation. Rather, in considering the information and factors described above, individual members of the Virtusa Board each applied his or her own business judgment to the process and may have given different weights to different factors. The above factors are not presented in any order of priority. The explanation of the factors and reasoning set forth above contain forward-looking statements that should be read in conjunction with the section of this proxy statement titled “Cautionary Statement Regarding Forward-Looking Statements.”
The Virtusa Board, at a meeting duly called and held at which all directors of the Company were present, duly and unanimously adopted resolutions: (i) approving and declaring advisable the merger agreement and the other agreements contemplated by the merger agreement, the merger and the other transactions contemplated by the merger agreement and approving the execution, delivery and performance of the merger agreement and the other agreements contemplated by the merger agreement, (ii) determining that the terms of the merger and the other transactions contemplated by the merger agreement are fair to and in the best interests of the Company and its stockholders, (iii) recommending that the Company’s stockholders adopt the merger agreement and approve the merger in accordance with the DGCL, (iv) rendering the limitations on business combinations contained in Section 203 of the DGCL inapplicable to the merger, the merger agreement, the other agreements contemplated by the merger agreement and the transactions contemplated thereby, and (v) electing that the merger not be subject to any “moratorium” “control share acquisition,” “business combination,” “fair price” or other form of anti-takeover laws and regulations of any jurisdiction that may purport to be applicable to the merger agreement, which resolutions have not been rescinded, modified or withdrawn in any way.
Opinion of Virtusa’s Financial Advisor
Pursuant to an engagement letter dated September 8, 2020, the Company retained J.P. Morgan as its financial advisor in connection with the proposed merger and to deliver a fairness opinion in connection with the proposed merger.
At the meeting of the Virtusa Board on September 9, 2020, J.P. Morgan rendered its oral opinion to the Virtusa Board that, as of such date and based upon and subject to the factors and assumptions set forth in its opinion, the consideration to be paid to Virtusa’s common stockholders in the proposed merger was fair, from a financial point of view, to such stockholders. J.P. Morgan has confirmed its September 9, 2020 oral opinion by delivering its written opinion to the Virtusa Board, dated September 9, 2020, that, as of such date, the consideration to be paid to Virtusa’s common stockholders in the proposed merger was fair, from a financial point of view, to such stockholders.
The full text of the written opinion of J.P. Morgan dated September 9, 2020, which sets forth the assumptions made, matters considered and limits on the review undertaken, is attached as Annex B to this proxy statement and is incorporated herein by reference. The summary of the opinion of J.P. Morgan set forth
 
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in this proxy statement is qualified in its entirety by reference to the full text of such opinion. The Company’s stockholders are urged to read the opinion in its entirety. J.P. Morgan’s written opinion was addressed to the Virtusa Board (in its capacity as such) in connection with and for the purposes of its evaluation of the proposed merger, was directed only to the consideration to be paid in the proposed merger and did not address any other aspect of the proposed merger. J.P. Morgan expressed no opinion as to the fairness of the consideration to the holders of any class of securities, creditors or other constituencies of the Company or as to the underlying decision by Company to engage in the proposed merger. The issuance of J.P. Morgan’s opinion was approved by a fairness committee of J.P. Morgan. The summary of the opinion of J.P. Morgan set forth in this proxy statement is qualified in its entirety by reference to the full text of such opinion. The opinion does not constitute a recommendation to any stockholder of the Company as to how such stockholder should vote with respect to the proposed merger or any other matter.
In arriving at its opinions, J.P. Morgan, among other things:

reviewed the merger agreement;

reviewed certain publicly available business and financial information concerning the Company and the industries in which it operates;

compared the proposed financial terms of the proposed merger with the publicly available financial terms of certain transactions involving companies J.P. Morgan deemed relevant and the consideration received for such companies;

compared the financial and operating performance of the Company with publicly available information concerning certain other companies J.P. Morgan deemed relevant and reviewed the current and historical market prices of Virtusa common stock and certain publicly traded securities of such other companies;

reviewed certain internal financial analyses and forecasts prepared by the management of the Company relating to its business as described below under the heading “— Certain Financial Projections by the Management of Virtusa”; and

performed such other financial studies and analyses and considered such other information as J.P. Morgan deemed appropriate for the purposes of its opinion.
In addition, J.P. Morgan held discussions with certain members of the management of the Company with respect to certain aspects of the proposed merger, and the past and current business operations of the Company, the financial condition and future prospects and operations of the Company, and certain other matters J.P. Morgan believed necessary or appropriate to its inquiry.
In giving its opinion, J.P. Morgan relied upon and assumed the accuracy and completeness of all information that was publicly available or was furnished to or discussed with J.P. Morgan by the Company or otherwise reviewed by or for J.P. Morgan, and J.P. Morgan did not independently verify any such information or its accuracy or completeness and, pursuant to its engagement letter with the Company, J.P. Morgan did not assume any obligation to undertake any such independent verification. J.P. Morgan did not conduct or was not provided with any valuation or appraisal of any assets or liabilities, nor did J.P. Morgan evaluate the solvency of the Company or Parent under any applicable laws relating to bankruptcy, insolvency or similar matters. In relying on financial analyses and forecasts provided to J.P. Morgan or derived therefrom, J.P. Morgan assumed that they were reasonably prepared based on assumptions reflecting the best currently available estimates and judgments by management as to the expected future results of operations and financial condition of the Company to which such analyses or forecasts relate. J.P. Morgan expressed no view as to such analyses or forecasts or the assumptions on which they were based. J.P. Morgan also assumed that the proposed merger will be consummated as described in the merger agreement and this proxy statement. J.P. Morgan also assumed that the representations and warranties made by the Company, the merger subsidiary and Parent in the merger agreement and the related agreements were and will be true and correct in all respects material to its analysis. J.P. Morgan is not a legal, regulatory or tax expert and relied on the assessments made by advisors to the Company with respect to such issues. J.P. Morgan further assumed that all material governmental, regulatory or other consents and approvals necessary for the consummation of the proposed merger will be obtained without any adverse effect on the Company or on the contemplated benefits of the proposed merger.
 
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J.P. Morgan’s opinion was necessarily based on economic, market and other conditions as in effect on, and the information made available to J.P. Morgan as of, the date of such opinion. J.P. Morgan’s opinion noted that subsequent developments may affect J.P. Morgan’s opinion, and that J.P. Morgan does not have any obligation to update, revise, or reaffirm such opinion. J.P. Morgan’s opinion is limited to the fairness, from a financial point of view, of the consideration to be paid to Virtusa common stockholders in the proposed merger, and J.P. Morgan expressed no opinion as to the fairness of any consideration paid in connection with the merger to the holders of any other class of securities, creditors or other constituencies of the Company or as to the underlying decision by the Company to engage in the merger. Furthermore, J.P. Morgan expressed no opinion with respect to the amount or nature of any compensation to any officers, directors, or employees of any party to the proposed merger, or any class of such persons relative to the consideration to be paid to the holders of Virtusa common stock in the proposed merger or with respect to the fairness of any such compensation.
The terms of the merger agreement, including the merger consideration, were determined through arm’s length negotiations between the Company and Parent, and the decision to enter into the merger agreement was solely that of the Virtusa Board. J.P. Morgan’s opinion and financial analyses were only one of the many factors considered by the Virtusa Board in its evaluation of the proposed merger and should not be viewed as determinative of the views of the Virtusa Board or the Company’s management with respect to the proposed merger or the consideration.
In accordance with customary investment banking practice, J.P. Morgan employed generally accepted valuation methodology in rendering its opinion to the Virtusa Board on September 9, 2020 and in the presentation delivered to the Virtusa Board on such date in connection with the rendering of such opinion and this summary does not purport to be a complete description of the analyses or data presented by J.P. Morgan. Some of the summaries of the financial analyses include information presented in tabular format. The tables are not intended to stand alone, and in order to more fully understand the financial analyses used by J.P. Morgan, the tables must be read together with the full text of each summary. Considering the data set forth below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of J.P. Morgan’s analyses.
Public Trading Multiples
Using publicly available information, J.P. Morgan compared selected financial data of the Company with similar data for the following selected publicly traded global and offshore IT companies (referred to as “Global and Offshore Selected Companies”) and mid-cap companies publicly traded in India (referred to as “India Mid-Cap Selected Companies”).
These companies were selected, among other reasons, because they are publicly traded companies with operations and businesses that, for purposes of J.P. Morgan’s analysis, may be considered similar to those of the Company based on business sector participation, operation characteristics and financial metrics. However, none of the selected companies reviewed is identical to the Company, and the selected companies may have financial and operating characteristics that are materially different from those of the Company.
For each of the following analyses performed by J.P. Morgan, estimated financial data for the selected companies was based on information J.P. Morgan obtained from public filings, equity research, and publicly available information obtained from FactSet Research Systems. The multiples for each of the selected companies were based on such information. Among other calculations, with respect to the Company and the selected companies, J.P. Morgan calculated each company’s “firm value” (calculated as the value of outstanding equity securities (taking into account dilutive securities in accordance with the treasury stock method, as appropriate) based on the relevant company’s closing stock price, plus debt, minority interest and capitalized leases, less cash and cash equivalents and unconsolidated investments) to equity research analyst estimates of such company’s earnings before interest, tax, depreciation and amortization, not burdened by stock-based compensation and adjusted for non-recurring items (referred to as “Adjusted EBITDA”), for the calendar year ended 2021 (referred to as “FV/CY2021E Adjusted EBITDA”). In addition, using publicly available information, J.P. Morgan also calculated, for the Company and each selected company, the ratio of the company’s stock price to equity research analyst estimates of such company’s earnings per
 
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share, not burdened by stock-based compensation and adjusted for non-recurring and other items (referred to as “EPS”), for the calendar year ending December 31, 2021 (referred to as “P/CY 2021E EPS”).
The Company
FV/CY 2021E
Adjusted EBITDA
P/CY 2021E
EPS
The Company (Street Estimates)
10.5x 15.8x
Selected Companies
FV/CY 2021E
Adjusted EBITDA
P/CY 2021E
EPS
Global and Offshore Selected Companies
• Accenture plc
17.2x 27.9x
• Atos SE
5.4x 9.2x
• Capgemini SE
9.9x 15.5x
• CGI Inc.
10.3x 16.7x
• Cognizant Technology Solutions Corporation
10.3x 16.6x
• DXC Technology Company
4.0x 5.6x
• HCL Technologies Limited
9.9x 15.7x
• Infosys Limited
13.9x 20.8x
• Perficient, Inc.
12.9x 15.9x
• TATA Consultancy Services Limited
18.3x 25.6x
• Wipro Limited
10.0x 16.2x
India Mid-Cap Selected Companies
• Hexaware Technologies Limited
10.7x 17.4x
• Mindtree Limited
12.1x 21.0x
• Mphasis Limited
9.9x 15.9x
• Persistent Systems Limited
9.6x 17.7x
Based on the results of J.P. Morgan’s analysis with respect to FV/CY 2021E Adjusted EBITDA, and other considerations that J.P. Morgan deemed relevant in its professional judgment and experience, J.P. Morgan selected a multiple reference range of 9.5x – 10.5x for FV/CY 2021E Adjusted EBITDA. After applying such ranges to the Company’s forecasted Adjusted EBITDA for the calendar year 2021, based on the Company management’s base plan projections and upside sensitivity projections (in each case calendarized for calendar year 2021) provided by Company management (See “— Certain Financial Projections by the Management of Virtusa” below for a description of the base plan projections and upside sensitivity projections), the analysis resulted in the following implied per share equity values of the Virtusa common stock, as compared to (i) the closing price per share of Virtusa common stock of $39.86 as of September 8, 2020 and (ii) merger consideration of $51.35 per share of Virtusa common stock:
Implied Value Per Share
(rounded to the nearest $0.25)
FV/CY 2021E Adjusted EBITDA (Base Plan)
$ 40.00 – 44.75
FV/CY 2021E Adjusted EBITDA (Upside Sensitivity)
$ 44.00 – 49.00
Based on the results of J.P. Morgan’s analysis with respect to P/CY 2021E EPS, and other considerations that J.P. Morgan deemed relevant in its professional judgment and experience, J.P. Morgan selected a multiple reference range of 15.5x – 17.0x for the Company’s P/CY 2021E EPS. After applying such ranges to the projected EPS for the Company for calendar year 2021, based on the Company management’s base plan projections and upside sensitivity projections provided by the Company’s management (in each case calendarized for calendar year 2021), the analysis resulted in the following implied per share equity value
 
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range for Virtusa common stock as compared to (i) the closing price per share of Virtusa common stock of $39.86 as of September 8, 2020 and (ii) merger consideration of $51.35 per share of Virtusa common stock:
Implied Value Per Share
(rounded to the nearest $0.25)
P/CY 2021E EPS (Base Plan)
$ 41.25 – 45.25
P/CY 2021E EPS (Upside Sensitivity)
$ 46.25 – 50.75
Selected Transaction Analysis
Using publicly available information, J.P. Morgan examined selected transactions in the IT services sector. For purposes of this analysis, J.P. Morgan selected the transactions that J.P. Morgan considered most relevant to its analysis due to the similarity of their participants, size and other factors and identified a number of transactions that were, in its judgment, sufficient to permit J.P. Morgan to conduct its analysis. For each transaction, J.P. Morgan calculated the transaction-implied firm value, based on the reported purchase price paid in the transaction, as a multiple of the last 12-months Adjusted EBITDA (referred to as “FV/LTM Adjusted EBITDA”), and the transaction-implied firm value as a multiple of the next 12-months Adjusted EBITDA (referred to as “FV/NTM Adjusted EBITDA”) for each target company at the time of the transaction announcement. The transactions considered are as follows:
Announcement Date
Target
Acquirer
FV/LTM
Adjusted
EBITDA
FV/NTM
Adjusted
EBITDA
March 10, 2020
DXC Technology Company
(U.S. State and Local Health Businesses)
Veritas Capital 12.0x N/A*
June 24, 2019
Altran Technologies, SA Capgemini SE 11.2x 9.6x
January 6, 2019
Luxoft Holding, Inc.
DXC Technology Company
15.3x 14.7x
July 22, 2018
Syntel, Inc. Atos SE 13.1x 13.9x
November 30, 2017
Aricent Altran Technologies, SA 10.3x N/A*
April 27, 2015
IGate, Inc. Capgemini SE 16.9x 14.3x
January 22, 2015
Symphony Teleca Harman International 13.0x N/A*
November 3, 2014
Sapient Corporation Publicis Groupe 15.9x 13.9x
August 23, 2013
Hexaware Technologies Limited BPEA 8.3x 6.9x
*
N/A indicates that the information was not available.
Based on the results of these analyses and other factors that J.P. Morgan considered appropriate based on its experience and professional judgment, J.P. Morgan applied an FV/LTM Adjusted EBITDA multiple range of 11.0x – 16.0x to the Company’s Adjusted EBITDA of $121 million for the twelve months preceding June 30, 2020, and an FV/NTM Adjusted EBITDA multiple range of 9.5x – 14.0x to the Company’s Adjusted EBITDA of $153 million (Base Plan) and $165 million (Upside Sensitivity) for the twelve months following June 30, 2020, which were based on the base plan projections and upside sensitivity projections provided by the Company’s management. J.P. Morgan also noted that that the Company’s revenue growth and Adjusted EBITDA margins were lower than the targets in the selected transactions, including targets that informed the bottom end of its range. These analyses resulted in the following implied per share equity values for Virtusa common stock, as compared to (i) the closing price per share of Virtusa common stock of $39.86 as of September 8, 2020 and (ii) the merger consideration of $51.35 per share of Virtusa common stock:
Implied Value Per Share
(rounded to the nearest $0.25)
FV/LTM Adjusted EBITDA
$ 36.50 – 50.75
FV/NTM Adjusted EBITDA (Base Plan)
$ 36.75 – 56.75
FV/NTM Adjusted EBITDA (Upside Sensitivity)
$ 40.00 – 61.50
 
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No company, business or transaction used in this analysis is identical to the Company or the merger, and accordingly, an evaluation of the results of this analysis is not entirely mathematical. Rather, this analysis involves complex considerations and judgments concerning differences in financial and operating characteristics, market conditions and other factors that could affect the acquisition or other values of the companies, businesses or transactions to which the Company and the merger were compared or perspectives regarding the transactions selected for comparative purposes.
Discounted Cash Flow Analysis
J.P. Morgan conducted a discounted cash flow analysis for the purpose of determining an implied fully diluted equity value per share of Virtusa common stock. A discounted cash flow analysis is a method of evaluating an asset using estimates of the future unlevered free cash flows generated by the asset and taking into consideration the risk of generating such future cash flows, and the time value of money with respect to those future cash flows to calculate their present value. The unlevered free cash flows refers to a calculation of the future cash flows of an asset without including in such calculation any debt servicing costs. Specifically, unlevered free cash flow represents unlevered earnings before interest expense and after tax (burdened by stock-based compensation expenses), adjusted for depreciation and amortization, capital expenditures and changes in net working capital. Present value refers to the current value of the future cash flows generated by an asset, and is obtained by discounting those cash flows back to the present using a discount rate that takes into account macro-economic assumptions and estimates of risk, the opportunity cost of capital, capitalized returns and other appropriate factors. Terminal value refers to the capitalized value of all cash flows generated by an asset for periods beyond the projections period.
J.P. Morgan calculated the present value of unlevered free cash flows that the Company is expected to generate beginning with fiscal year ended 2021 through the end of fiscal year 2024 based upon the Company management’s forecasts for both its base plan projections and upside sensitivity projections as described below under the heading “— Certain Financial Projections by the Management of Virtusa”. J.P. Morgan also calculated a range of terminal values for the Company at March 31, 2024 by applying perpetual growth rates ranging from 2.5% to 3.5% to derive unlevered free cash flow of the Company during the terminal periods of the projections, reflecting guidance provided by Company management. The unlevered free cash flows and the range of terminal values were then discounted to present values as of June 30, 2020 using a discount rate range of 9.0% to 10.0%, which was chosen by J.P. Morgan based upon an analysis of the weighted average cost of capital of the Company derived using the capital asset pricing model and J.P. Morgan’s professional judgment and experience. The present value of unlevered free cash flows and range of terminal values were then adjusted for Virtusa’s net debt of $152 million as of June 30, 2020, and then divided by the number of fully diluted shares of Virtusa common stock outstanding as of August 31, 2020 as provided by Company management (based on approximately 30.3 million of basic shares outstanding and adjusted to reflect the impact of dilutive securities calculated in accordance with the treasury stock method, including approximately 3.1 million shares as part of the conversion of Virtusa preferred stock and related make-whole), to arrive at a range of implied equity values per share of the Virtusa common stock of $39.75 to $54.50, in the Company management’s base plan projections, and $44.25 to $60.25, in the upside sensitivity projections (in each case, rounded to the nearest $0.25), as compared to (i) the closing price per share of Virtusa common stock of $39.86 as of September 8, 2020 and (ii) the merger consideration of $51.35 per share of Virtusa common stock.
Other Information
J.P. Morgan observed certain additional information that was not considered part of J.P. Morgan’s financial analysis with respect to its opinion but was noted for informational purposes, including the following:
52-Week Historical Trading Range.   J.P. Morgan reviewed the 52-week trading range of Company’s share prices for the period ending September 8, 2020, which was $20.83 to $49.71 per share of Virtusa common stock, and compared it to (i) the closing price per share of Virtusa common stock of $39.86 as of September 8, 2020 and (ii) the merger consideration of $51.35 per share of Virtusa common stock. J.P. Morgan noted that historical trading range analyses were presented merely for reference purposes only, and were not relied upon for valuation purposes.
 
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Analyst Price Targets.   J.P. Morgan reviewed the price targets of certain publicly available equity research analyst price targets for the Virtusa common stock available as of September 8, 2020, which provided a reference range of $40.00 to $51.00 per share of Virtusa common stock, with a median of $48.00 per share of Virtusa common stock. J.P. Morgan compared the analyst price targets analysis to (i) the closing price per share of Virtusa common stock of $39.86 as of September 8, 2020 and (ii) the merger consideration of $51.35 per share of Virtusa common stock. J.P. Morgan noted that the analyst price targets were presented merely for reference purposes only, and were not relied upon for valuation purposes.
Miscellaneous.   The foregoing summary of certain material financial analyses does not purport to be a complete description of the analyses or data presented by J.P. Morgan. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. J.P. Morgan believes that the foregoing summary and its analyses must be considered as a whole and that selecting portions of the foregoing summary and these analyses, without considering all of its analyses as a whole, could create an incomplete view of the processes underlying the analyses and its opinion. As a result, the ranges of valuations resulting from any particular analysis or combination of analyses described above were merely utilized to create points of reference for analytical purposes and should not be taken to be the view of J.P. Morgan with respect to the actual value of the Company. The order of analyses described does not represent the relative importance or weight given to those analyses by J.P. Morgan. In arriving at its opinion, J.P. Morgan did not attribute any particular weight to any analyses or factors considered by it and did not form an opinion as to whether any individual analysis or factor (positive or negative), considered in isolation, supported or failed to support its opinion. Rather, J.P. Morgan considered the totality of the factors and analyses performed in determining its opinion.
Analyses based upon forecasts of future results are inherently uncertain, as they are subject to numerous factors or events beyond the control of the parties and their advisors. Accordingly, forecasts and analyses used or made by J.P. Morgan are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by those analyses. Moreover, J.P. Morgan’s analyses are not and do not purport to be appraisals or otherwise reflective of the prices at which businesses actually could be acquired or sold. None of the selected companies reviewed as described in the above summary is identical to the Company, and none of the selected transactions reviewed was identical to the merger. However, the companies selected were chosen because they are publicly traded companies with operations and businesses that, for purposes of J.P. Morgan’s analysis, may be considered similar to those of the Company. The transactions selected were similarly chosen because their participants, size and other factors, for purposes of J.P. Morgan’s analysis, may be considered similar to the merger. The analyses necessarily involve complex considerations and judgments concerning differences in financial and operational characteristics of the companies involved and other factors that could affect the companies compared to the Company and the transactions compared to the merger.
As a part of its investment banking business, J.P. Morgan and its affiliates are continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, investments for passive and control purposes, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements, and valuations for corporate and other purposes. J.P. Morgan was selected to advise the Company with respect to the merger on the basis of, among other things, such experience and its qualifications and reputation in connection with such matters and its familiarity with the Company and the industries in which it operates.
For services rendered in connection with the merger and the delivery of its opinion, the Company has agreed to pay J.P. Morgan a fee of approximately $29 million, of which $3 million became payable upon delivery of the opinion and the remainder will be payable upon the consummation of the merger. In addition, the Company has agreed to reimburse J.P. Morgan for its expenses incurred in connection with its services, including the fees and disbursements of counsel, and will indemnify J.P. Morgan against certain liabilities arising out of J.P. Morgan’s engagement. During the two years preceding the date of J.P. Morgan’s opinion, J.P. Morgan and its affiliates have had, and continue to have, commercial or investment banking relationships with the Company, Parent and certain of their respective affiliates, including the co-investor with Parent, Canadian Pension Plan Investment Board (referred to as “CPPIB”), which co-investor was contractually added in respect of the merger after the original date of delivery by J.P. Morgan of its opinion, for which J.P. Morgan and such affiliates have received, or will receive, customary compensation. Such services
 
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during such period have included acting as joint lead arranger and joint bookrunner on the Company’s credit facilities which closed in May 2020 and October 2019, respectively and financial advisor to the Company on its strategic planning as well as in various roles for securities offerings, credit facilities and financial advisory matters for affiliates of the Parent, CPPIB, and New Mountain Capital, a material shareholder of the Company unrelated to the proposed merger. In addition, J.P. Morgan and its affiliates hold, on a proprietary basis, less than 1% of the outstanding Virtusa common stock. During the two year period preceding delivery of its opinion, the aggregate fees recognized by J.P. Morgan from the Company were approximately $1 million (or approximately $2.0 million prior to the date hereof), from CPPIB were approximately $225 million, from New Mountain Capital were approximately $40 million and from BPEA were approximately $8 million. In the ordinary course of their businesses, J.P. Morgan and its affiliates may actively trade the debt and equity securities of the Company or BPEA for their own accounts or for the accounts of customers and, accordingly, they may at any time hold long or short positions in such securities or other financial instruments.
Citigroup Global Markets Inc.
The Company also engaged Citi as an additional financial advisor in connection with the strategic process, but Citi did not advise the Virtusa Board or deliver a fairness opinion in connection with the transaction with BPEA. The Company selected Citi to act as its financial advisor in connection with the merger based on Citi’s knowledge of the IT services industry, reputation, experience and familiarity with the Company and the potential buyers. Citi is an internationally recognized investment banking firm that regularly advises management and the boards of businesses as well as private equity sponsors on mergers and acquisitions, competitive bidding processes, leveraged buyouts, and valuations for estate, corporate and other purposes.
Pursuant to the terms of Citi’s engagement, the Company has agreed to pay Citi a cash fee equal to approximately $7.7 million upon completion of the transaction. In addition, the Company has agreed to reimburse Citi for certain out-of-pocket expenses and to indemnify Citi against certain liabilities arising out of its engagement.
Certain Financial Projections by the Management of Virtusa
The Company does not, as a matter of course, make public projections as to future performance or earnings beyond the current fiscal year and generally does not make public projections for extended periods due to, among other things, the inherent difficulty of predicting financial performance for future periods and the likelihood that the underlying assumptions and estimates may not be realized. In connection with the evaluation of potential strategic alternatives by the Virtusa Board, however, our management prepared certain unaudited prospective financial information for Virtusa based on our long-range plan. The financial projections were not prepared with a view toward public disclosure and, accordingly, do not necessarily comply with published guidelines of the SEC or established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information or generally accepted accounting principles (referred to as “GAAP”). Our independent registered public accounting firm has not compiled, examined, audited or performed any procedures with respect to the financial projections, and has not expressed any opinion or any other form of assurance regarding this information or its achievability.
The table below under “Summary of Management Base Plan Projections” presents a summary of the base plan projections for Virtusa for the period from fiscal year 2021 through fiscal year 2024 as prepared by our management and provided by our management to the Virtusa Board. The base plan projections were provided to J.P. Morgan and approved by the Virtusa Board for use by J.P. Morgan in connection with preparing its separate financial analysis and opinion to the Virtusa Board as described above under the heading “— Opinion of Virtusa’s Financial Advisor.” Certain aspects of the base plan projections were also provided to Parent as described below.
Also, set forth below under “Summary of Management Upside Sensitivity Projections” is a table containing a summary of a forecast for Virtusa for the period fiscal years 2021 through fiscal year 2024 reflecting the base plan projections plus the projected results of the Company’s potential fiscal year 2021 revenue benefits from approximately $15.0 million of incremental revenue from additional account upside and services to three of the Company’s largest customers, as prepared by the Company’s management for
 
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illustrative purposes and provided by the Company’s management to the Virtusa Board. The upside sensitivity projections were provided to J.P. Morgan and approved by the Virtusa Board for use by J.P. Morgan in connection with preparing its financial analysis and opinion to the Virtusa Board as described above under the heading “— Opinion of Virtusa’s Financial Advisor”. Certain aspects of the upside sensitivity projections were also provided to Parent as described below.
The forecasts summarized below are included solely to provide Virtusa’s stockholders access to certain financial projections that were made available to the Virtusa Board, J.P. Morgan and Parent in connection with the proposed merger, and are not included in this proxy statement to influence a Virtusa stockholder’s decision whether to vote for the adoption of the merger agreement or for any other purpose. The forecasts were prepared solely for internal use and in connection with Virtusa’s financial advisor’s work and are subjective in many respects.
The forecasts summarized below, while presented with numerical specificity, were based on numerous variables and assumptions that necessarily involve judgments with respect to, among other things, future economic, competitive, regulatory and financial market conditions, all of which are difficult or impossible to predict and many of which are beyond our control. The forecasts also reflect assumptions that are subject to change. The forecasts cover multiple years, and thus, by their nature, they become subject to greater uncertainty with each successive year. In addition, the upside sensitivity projections reflects the Company’s potential fiscal year 2021 revenue benefits from approximately $15.0 million of incremental revenue from additional account upside and services to three of the Company’s largest customers, which may not occur. Important factors that may affect actual results and the achievability of the forecasts include, but are not limited to, general economic conditions and disruptions in the financial, debt, capital, credit or securities markets, developing industry dynamics, acceptance of our products and services, competition, our ability to obtain financing, and those risks and uncertainties described in our Annual Report on Form 10-K for the fiscal year ended March 31, 2020, as amended, subsequent quarterly reports on Form 10-Q and current reports on Form 8-K. See also the section entitled “Cautionary Statement Concerning Forward-Looking Statements” in this proxy statement.
In addition, the forecasts reflect assumptions that are subject to change and are susceptible to multiple interpretations and periodic revisions based on actual results, revised prospects for our business, changes in general business or economic conditions, or any other transaction or event that has occurred or that may occur and that was not anticipated when the forecasts were prepared. In addition, the forecasts may be affected by our ability to achieve strategic goals, objectives and targets over the applicable period. Accordingly, actual results will differ, and may differ materially, from those contained in the forecasts. In addition, the forecasts do not take into account any circumstances, transactions or events occurring after the date on which the forecasts were prepared and do not give effect to any changes or expenses as a result of the merger or any effects of the merger. There can be no assurance that the financial results in the forecasts will be realized, or that future actual financial results will not materially vary from those estimated in the forecasts.
Virtusa uses financial information that has not been prepared in accordance with GAAP, including Adjusted EBITDA, which is calculated earnings before interest, tax, depreciation and amortization, not burdened by stock-based compensation and adjusted for non-recurring items, and EPS, which is presented not burdened by stock-based compensation and adjusted for non-recurring and other items. We use non-GAAP financial measures in analyzing our financial results and believe that they enhance investors’ understanding of our financial performance and the comparability of our results to prior periods, as well as against the performance of other companies. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Virtusa’s calculation of non-GAAP financial measures may differ from others in its industry and Adjusted EBITDA and EPS are not necessarily comparable with similar measures used by other companies.
Summary of Management Base Plan Projections
The base plan projections reflect management’s long-term projections for fiscal years 2021 through 2024, assuming pursuit of the Company’s existing long-term business plan. The base plan projections were based upon certain financial, operating and commercial assumptions developed solely using the information available to the Company’s management at the time the base plan projections were approved for use by J.P. Morgan in certain of its financial analyses by the Virtusa Board on August 26, 2020. In addition, at the
 
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direction of management, J.P. Morgan calculated from the base plan projections unlevered free cash flow for the Company as set forth below, which was approved by Virtusa management for use by J.P. Morgan in certain of its financial analyses.
(In USD $mm)
2021E
2022E
2023E
2024E
Total Revenue
$ 1,260 $ 1,363 $ 1,472 $ 1,575
Non-GAAP Income from Operations(1)(2)
$ 117 $ 154 $ 181 $ 208
Adjusted EBITDA (pre-SBC)(1)(3)
$ 135 $ 173 $ 202 $ 230
Stock based compensation (SBC)
$ 15 $ 19 $ 22 $ 25
Adjusted EBITDA (post-SBC)
$ 119 $ 154 $ 180 $ 205
D&A
$ 36 $ 38 $ 39 $ 40
Adjusted EBIT (post-SBC)
$ 83 $ 116 $ 141 $ 165
Capex(4) $ 13 $ 20 $ 22 $ 24
Change in net working capital
($ 9) ($ 16) ($ 19) ($ 22)
EPS(5) $ 2.12 $ 2.81 $ 3.37 $ 3.87
Unlevered free cash flow(6)
$ 75 $ 86 $ 101 $ 115
(1)
Provided to Parent. Adjusted EBITDA (pre-SBC) metrics provided to Parent reflected an incremental add-back for public company costs of $5.0 million, $6.0 million, $7.0 million and $8.0 million for fiscal years 2021, 2022, 2023 and 2024, respectively, in addition to metrics shown in above table.
(2)
Non-GAAP income from operations not burdened by stock-based compensation and acquisition-related charges, including amortization of purchased intangibles, and adjusted for non-recurring charges.
(3)
Calculated as earnings before interest, tax, depreciation and amortization, not burdened by stock-based compensation and adjusted for non-recurring items.
(4)
Only includes purchase of property and equipment (excludes acquisition and acquisition-related expenses).
(5)
EPS shown on a non-GAAP basis, not burdened by stock-based compensation and adjusted for non-recurring and other items.
(6)
J.P. Morgan calculated unlevered free cash flow as Adjusted EBIT (post-SBC), less taxes, plus depreciation and amortization, less capital expenditures (including purchase of property and equipment and excluding acquisition and acquisition-related investments), less the change in net working capital. Assumes a tax rate (federal and state) of 27%.
Summary of Management Upside Sensitivity Projections
The upside sensitivity projections reflect projections for fiscal years 2021 through 2024, reflecting the base plan projections plus the projected results of the Company receiving approximately $15.0 million of incremental revenue from additional account upside and services to three of the Company’s largest customers, as to which there can be no assurance, as prepared by our management for illustrative purposes.
In addition, at the direction of management, J.P. Morgan calculated from the upside sensitivity projections unlevered free cash flow for the Company as set forth below, which was approved by Virtusa management for use by J.P. Morgan in certain of its financial analyses.
(In USD $mm)
2021E
2022E
2023E
2024E
Total Revenue
$ 1,275 $ 1,390 $ 1,515 $ 1,651
Non-GAAP Income from Operations(1)(2)
$ 124 $ 163 $ 194 $ 228
Adjusted EBITDA (pre-SBC)(1)(3)
$ 142 $ 183 $ 215 $ 251
Stock based compensation (SBC)
$ 15 $ 19 $ 22 $ 26
Adjusted EBITDA (post-SBC)
$ 126 $ 164 $ 192 $ 225
D&A
$ 36 $ 38 $ 40 $ 41
 
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(In USD $mm)
2021E
2022E
2023E
2024E
Adjusted EBIT (post-SBC)
$ 90 $ 126 $ 153 $ 183
Capex(4) $ 13 $ 21 $ 23 $ 25
Change in net working capital
($ 7) ($ 18) ($ 22) ($ 29)
EPS(5) $ 2.29 $ 3.04 $ 3.69 $ 4.44
Unlevered free cash flow(6)
$ 83 $ 91 $ 107 $ 121
(1)
Provided to Parent. Adjusted EBITDA (pre-SBC) metrics provided to Parent reflected an incremental add-back for public company costs of $5.0 million, $6.0 million, $7.0 million and $8.0 million for fiscal years 2021, 2022, 2023 and 2024 respectively, in addition to metrics shown in above table.
(2)
Non-GAAP income from operations not burdened by stock-based compensation and acquisition-related charges, including amortization of purchased intangibles, and adjusted for non-recurring charges.
(3)
Calculated as earnings before interest, tax, depreciation and amortization, not burdened by stock-based compensation and adjusted for non-recurring items.
(4)
Only includes purchase of property and equipment (excludes acquisition and acquisition-related expenses).
(5)
EPS shown on a non-GAAP basis, not burdened by stock-based compensation and adjusted for non-recurring and other items.
(6)
J.P. Morgan calculated unlevered free cash flow as Adjusted EBIT (post-SBC), less taxes, plus depreciation and amortization, less capital expenditures (including purchase of property and equipment and excluding acquisition and acquisition-related investments), less the change in net working capital. Assumes a tax rate (federal and state) of 27%.
Unlevered free cash flow is a non-GAAP financial measure. Non-GAAP financial measures should not be considered a substitute for, or superior to, financial measures determined or calculated in accordance with GAAP. Additionally, non-GAAP financial measures as presented in this proxy statement may not be comparable to similarly titled measures reported by other companies.
The inclusion of selected elements of the forecasts in the tables and accompanying narrative above should not be regarded as an indication that Virtusa and/or any of our affiliates, officers, directors, advisors or other representatives consider the forecasts to be predictive of actual future events, and this information should not be relied upon as such. None of Virtusa and/or our affiliates, officers, directors, advisors or other representatives gives any Virtusa stockholder or any other person any assurance that actual results will not differ materially from the forecasts and, except as otherwise required by law, Virtusa and/or our affiliates, officers, directors, advisors or other representatives undertake no obligation to update or otherwise revise or reconcile the forecasts to reflect circumstances existing after the date on which the forecasts were prepared or to reflect the occurrence of future events, even in the event that any or all of the assumptions and estimates underlying the forecasts are shown to be in error or to not be appropriate, or to reflect changes in general economic or industry conditions, and the projections have not been so updated, revised or reconciled. We have made no representation to Parent or the merger subsidiary concerning the forecasts in the merger agreement or otherwise. We make no representation that the forecasts are current or that circumstances or assumptions underlying the forecasts have not changed since the date on which the forecasts were prepared. By including the forecasts in this proxy statement, neither the Company nor any of its affiliates, advisors, officers, directors or representatives has made or makes any representation to any security holder regarding the information included in the forecasts or the ultimate performance of the Company, Parent, the surviving corporation or any of their affiliates compared to the information contained in the forecasts. Furthermore, the base plan projections and the upside sensitivity projections do not take into account the effect of any failure of the merger to be consummated and should not be viewed as accurate or continuing in that context. The information set forth in the forecasts is not fact and should not be relied upon as being necessarily indicative of actual future results. Neither the Company nor any of its affiliates assumes any responsibility to holders of Virtusa capital stock for the accuracy of this information.
In light of the foregoing factors and the uncertainties inherent in the forecast, Virtusa stockholders are cautioned not to place undue, if any, reliance on such financial projections.
 
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Certain Effects of the Merger
If the merger proposal is approved and the other conditions to the closing of the merger are either satisfied or waived, the merger subsidiary will be merged with and into the Company upon the terms set forth in the merger agreement. As the surviving corporation in the merger, the Company will continue to exist following the merger as a wholly owned subsidiary of Parent.
Following the merger, all of the Virtusa common stock will be beneficially owned by Parent and none of the Company’s current stockholders will, by virtue of the merger, have any direct ownership interest in, or be a stockholder of, the Company, the surviving corporation or Parent after the consummation of the merger. As a result, the Company’s current stockholders will no longer have the potential to benefit from any increase in the value, nor will they bear the risk of any decrease in the value, of Virtusa common stock. Following the merger, Parent will have the potential to benefit from any increase in the Company’s value and also will bear the risk of any decrease in the Company’s value.
At the effective time of the merger, and without any action by any stockholder, each share of Virtusa common stock that is outstanding immediately prior to the effective time of the merger (other than shares held by the Company as treasury stock, owned by Parent or the merger subsidiary or as to which the holders thereof have properly and validly exercised their statutory rights of appraisal in accordance with Section 262 of the DGCL) will be automatically converted into the right to receive cash in an amount equal to $51.35, without interest and less any applicable withholding taxes, which is referred to as the “merger consideration.” Please see the section of this proxy statement titled “The Merger Agreement — Consideration to be Received in the Merger.”
At the effective time of the merger:
Vested Company Stock Awards: each Virtusa option, Virtusa RSU, and Virtusa PRSU (collectively referred to as “Company stock awards”) that is by its terms unexpired, unexercised, and outstanding and vested as of immediately prior to the effective time will be canceled and converted into the right to receive an amount in cash equal to the merger consideration, less any per share exercise or purchase price of such Company stock award.
Independent Director Stock Awards: each Company stock award, whether vested or unvested, that is outstanding and held by a non-employee member of the Virtusa Board as of immediately prior to the effective time of the merger will be canceled and converted into the right to receive an amount in cash equal to the merger consideration, less any per share exercise or purchase price of such Company stock award.
Unvested Company Stock Awards: the applicable percentage of each Company stock award that is by its terms unexpired, unexercised, and outstanding and unvested as of immediately prior to the effective time of the merger will be canceled and converted into the right to receive an amount in cash equal to the merger consideration, less any per share exercise or purchase price of such Company stock award, with the applicable percentage for any holder to be applied by the Company pro-rata across all of such holder’s unvested and outstanding Company stock awards, by grant date and award type.
The “applicable percentage” means the lesser of (i) 70% and (ii) the percentage of the aggregate number of shares subject to Company stock awards that are unvested (after taking into account the effect of the merger) and outstanding immediately prior to the effective time of the merger with an aggregate value of at least $13,000,000.
Each Company stock award that is by its terms unexpired, unexercised, and outstanding, and unvested, as of immediately prior to the effective time of the merger and that is not cancelled and converted into the right to receive an amount in cash as described in the immediately preceding paragraph will instead be cancelled and replaced with a conditional right to receive an amount in cash, without interest, payable upon the earliest of (A) the applicable vesting date of the converted Company stock award, (B) the date that is 12 months after the closing date of the merger, or (C) the date that is 60 days after the holder’s employment is terminated by the Company without “cause” or by the holder for “good reason” (each as defined in the merger agreement).
The Virtusa common stock is currently registered under the Exchange Act and trades on Nasdaq under the ticker symbol “VRTU.” Following the consummation of the merger, shares of Virtusa common
 
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stock will be delisted from Nasdaq. In addition, the registration of shares of Virtusa common stock under the Exchange Act will be terminated and the Company will no longer be required to file periodic and other reports with the SEC with respect to the common stock. Termination of registration of the common stock under the Exchange Act will reduce the information required to be furnished by the Company to the Company’s stockholders and the SEC, and will make provisions of the Exchange Act, such as the requirement to file annual and quarterly reports pursuant to Section 13(a) or 15(d) of the Exchange Act, the short-swing trading provisions of Section 16(b) of the Exchange Act and the requirement to furnish a proxy statement in connection with stockholders’ meetings pursuant to Section 14(a) of the Exchange Act, no longer applicable to the Company.
Effects on the Company if the Merger Is Not Completed
If the merger proposal is not approved by the Company’s stockholders, or if the merger is not completed for any other reason, the Company’s stockholders will not receive any payment for their shares of Virtusa capital stock in connection with the merger. Instead, the Company will remain an independent public company, the Virtusa common stock will continue to be listed and traded on Nasdaq, the common stock will continue to be registered under the Exchange Act and the Company’s stockholders will continue to own their shares of the Virtusa capital stock and will continue to be subject to the same general risks and opportunities as they currently are with respect to ownership of Virtusa capital stock.
If the merger is not completed, there is no assurance as to the effect of these risks and opportunities on the future value of your shares of Virtusa capital stock, including the risk that the market price of Virtusa common stock may decline to the extent that the current market price of the Company’s stock reflects a market assumption that the merger will be completed. If the merger is not completed, there is no assurance that any other transaction acceptable to the Company will be offered or that the business, operations, financial condition, earnings or prospects of the Company will not be adversely affected. Pursuant to the merger agreement, under certain circumstances, the Company is permitted to terminate the merger agreement in order to enter into an alternative transaction and may be obligated to pay to Parent the Company termination fee. Please see the section of this proxy statement titled “The Merger Agreement — Termination.”
Under certain circumstances, if the merger is not completed, Parent may be obligated to pay to the Company the Parent termination fee. Please see the section of this proxy statement titled “The Merger Agreement — Termination Fees and Expenses.”
Financing of the Merger
The obligation of Parent and the merger subsidiary to consummate the merger is not subject to any financing condition.
We anticipate that the total amount of funds necessary at closing to complete the merger and the related transactions will be approximately $2.3 billion in cash. This amount includes the funds needed to make the payment of the aggregate merger consideration and pay all other amounts required to be paid by Parent or the merger subsidiary in connection with the transactions contemplated by the merger agreement or the equity and debt commitment letters (including, without limitation, the repayment of indebtedness of the Company and its subsidiaries and the payment of all fees, costs and expenses required to be paid by Parent or merger subsidiary at closing in connection with the transactions contemplated by the merger agreement or the equity and debt commitment letters).
Debt Financing.   The merger subsidiary has received a debt commitment letter, entered into on September 9, 2020 (referred to as the “original debt commitment letter”), from Bank of America, N.A. and BofA Securities, Inc. (referred to as the “original debt commitment parties”) and a joinder letter, entered into on September 25, 2020 (referred to as the “joinder letter”, and the original debt commitment letter, as amended by the joinder letter, referred to as the “debt commitment letter”), among the Company, the original debt commitment parties, Barclays Bank PLC, Goldman Sachs Bank USA, Deutsche Bank Securities Inc., Deutsche Bank AG New York Branch, Deutsche Bank Cayman Islands Branch, HSBC Bank USA, National Association, HSBC Securities (USA) Inc. and Nomura Securities International, Inc. (collectively, together with the original debt commitment parties, referred to as the “debt commitment parties”) pursuant to which certain debt commitment parties will provide, subject to the conditions set forth in the debt commitment
 
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letter, to the merger subsidiary (and, after the closing of the merger, the surviving corporation) (each of the merger subsidiary and the Company in its capacity as borrower thereunder, the “borrower”) debt financing in an aggregate amount of up to $950 million, consisting of (i) a $125 million senior secured revolving credit loan facility (referred to as the “revolving facility”); (ii) a $600 million senior secured term loan facility (referred to as the “term facility” and together with the revolving facility, the “senior facilities”); and (iii) a senior unsecured bridge loan facility (referred to as the “senior bridge facility,” and together with the senior facilities, the “facilities”) in an aggregate amount of up to $300 million to the extent that some or all of the senior unsecured notes referred to in the next sentence are unable to be issued at or prior to the closing of the merger. In connection with the debt commitment letter, the merger subsidiary has engaged lead arrangers for an offering of up to $300 million aggregate principal amount of senior unsecured notes (referred to as the “senior notes”) in a Rule 144A or other private placement. The term loan facility, the senior notes and/or the senior bridge facility and a portion of the revolving facility are expected to be drawn on the closing date for the purpose of financing the merger, paying related fees and expenses and repaying certain indebtedness of the Company. The revolving facility is expected to be available on and after the closing date to provide funding for working capital and other general corporate purposes of the Company and its subsidiaries (such committed debt financing, together with any debt securities issued in lieu thereof unless the context requires otherwise, referred to as the “debt financing”).
The commitments with respect to the facilities of the debt commitment parties providing such commitments will automatically terminate, unless the debt commitment parties agree to an extension, in the event that the initial borrowing in respect of the term facility and, to the extent the senior notes (or securities issued in lieu of the senior notes) have not been issued, or any replacement commitment facility (as defined in the debt commitment letter) has not been funded, in each case, in lieu of the senior bridge facility, the initial borrowing in respect of the senior bridge facility, does not occur on or before the date that is five business days after the outside date (June 16, 2021), or such earlier date which is the earlier of (i) the date on which the merger agreement is terminated in accordance with its terms and (ii) the date of the consummation of the merger without requiring the proceeds of the facilities.
The documentation governing the debt financing has not been finalized and, accordingly, the actual terms of the debt financing may differ from those described in this document. Parent and the merger subsidiary have agreed to use their reasonable best efforts to arrange the debt financing on the terms and conditions described in the debt commitment letter. If any portion of the debt financing becomes unavailable on the terms and conditions contemplated in the debt commitment letter, and such portion is required to satisfy amounts in connection with the merger, Parent and the merger subsidiary must use their reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to arrange, obtain and consummate, at its sole expense, in replacement thereof alternative financing from the same or alternative sources in an amount that is sufficient to cover the unavailable amount. The Company is required to use reasonable best efforts to, and to cause its subsidiaries and each of their respective affiliates and representatives to use their reasonable best efforts to, provide Parent and the merger subsidiary with all cooperation reasonably requested by Parent or the merger subsidiary to assist them in arranging the debt financing, subject to certain limitations.
Marketing Period.   Under the merger agreement, the Company is required to allow Parent a period of 17 consecutive business days to market the debt financing, provided that for purposes of the marketing period, November 26, 2020 and November 27, 2020 will not constitute a business day if the marketing period has not ended on or prior to December 18, 2020, then the marketing period cannot commence earlier than January 4, 2021, and if the marketing period has not ended on or prior to August 20, 2021, then the marketing period cannot commence earlier than September 7, 2021. This marketing period is a period commencing upon the latest of the date (i) the quarterly financial statements for the fiscal quarter ended September 30, 2020 are received, (ii) the first day of the CFIUS review period, (iii) on which this proxy statement is mailed to the Company’s stockholders and (iv) November 9, 2020. Throughout that period, Parent shall have the Required Information (as defined in the merger agreement) and such Required Information shall be Compliant (as defined in the merger agreement).
Equity Financing.   Parent has received an equity commitment letter from each of three guarantors, pursuant to which each guarantor has committed, subject to the conditions set forth in the equity commitment letters, to contribute to Parent an aggregate maximum cash purchase price equal to the amount
 
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set forth in such guarantor’s equity commitment letter, with the three guarantors’ respective equity commitments collectively equaling in the aggregate up to approximately $1.39 billion, (subject to adjustments as set forth in the equity commitment letters) solely for the purpose of funding, to the extent necessary, a portion of the aggregate merger consideration required to be paid by Parent to consummate the transactions contemplated by the merger agreement. We refer to the financing contemplated by the equity commitment letters, as may be amended, restated, supplemented or otherwise modified from time to time, as the “equity financing,” and together with the debt financing, the “financing.”
In the event Parent does not require the total equity commitment amount of approximately $1.39 billion, the amount of the equity commitment required to be funded under each equity commitment letter and the amount of the equity commitment of the other guarantors will be reduced dollar-for-dollar on a pro rata basis to the level sufficient, in combination with any other financing arrangements contemplated by Parent, for Parent to consummate the transactions contemplated by the merger agreement, but only to the extent that it would be possible for Parent to consummate the transactions contemplated by the merger agreement with the guarantors collectively contributing less than the full amount of the total equity commitment.
Pursuant to the equity commitment letters, the Company has the right to seek an injunction, or other appropriate form of specific performance or equitable relief, to cause Parent and the merger subsidiary to cause, or to directly cause, each of the guarantors to fund, directly or indirectly, the equity financing as, and only to the extent provided in, the equity commitment letters.
Each equity commitment letter will terminate upon the earliest to occur of: (a) the expiry, termination or rescission of the merger agreement pursuant to its terms; (b) the payment of the respective equity commitment and the performance of the other undertakings set forth in such equity commitment letter; (c) payment by Parent, the guarantor or any of their affiliates or the other guarantors of the Parent termination fee pursuant to the merger agreement (including, without limitation, any payment by the guarantor under the applicable limited guarantee); or (d) the Company or any of its affiliates (or any person claiming by, through or on behalf or for the benefit of any of the foregoing) asserting a claim against the guarantor or any non-recourse party (as defined in the limited guarantees) under or in connection with the applicable limited guarantee or equity commitment letter or the merger agreement or any of the transaction contemplated thereby other than the Company asserting any retained claim (as defined in the limited guarantees) against any non-recourse parties (as defined in the equity commitment letters) to the extent such retained claim may be asserted pursuant to the limited guarantee.
Limited Guarantees
To induce the Company to enter into the merger agreement, each of the three guarantors have executed a limited guarantee, each dated as of September 9, 2020, in favor of the Company. Under the limited guarantees, subject to the limitations described therein, each of the guarantors has absolutely, irrevocably and unconditionally guaranteed to the Company the due and punctual performance and discharge of a percentage of Parent’s obligation to pay (a) the Parent termination fee payable under the merger agreement, if, as and when the Parent termination fee becomes payable under the merger agreement or (b) monetary damages that may become payable under the merger agreement, together with any collection costs and any financing expenses (clauses (a) and (b) together referred to as the “guaranteed obligations”), provided that in no event will such amount exceed the Cap as defined in such guarantor’s limited guarantee. The three guarantors’ respective Caps collectively equal approximately $112 million in the aggregate.
Each limited guarantee terminates upon the earliest of (a) the closing, (b) the termination of the merger agreement by mutual written consent of Parent and the Company, (c) termination by the Company of any of the other limited guarantees, other than termination solely as a result of payment of all the other guarantor’s obligations under such other limited guarantee, and (d) the three month anniversary of the termination of the merger agreement in accordance with its terms, other than as provided in clause (b) above (unless, in the case of clause (c) above, the guaranteed party has commenced litigation against the guarantor under and pursuant to the limited guarantee prior to such termination, in which case the limited guarantee shall terminate upon the final, non-appealable resolution of such action and satisfaction by the guarantor of any obligations finally determined or agreed to be owed by the guarantor.
Interests of the Company’s Directors and Executive Officers in the Merger
Details of the beneficial ownership of Virtusa capital stock by the Company’s directors and executive officers are set out in the section of this proxy statement titled “Security Ownership of Certain Beneficial
 
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Owners and Management.” In addition to their interests in the merger as stockholders, the Company’s directors and executive officers have interests in the merger that may be different from, or in addition to, the interests of the Company’s stockholders generally. In considering the proposals to be voted on at the special meeting, you should be aware of these interests. The members of the Virtusa Board and special committee were aware of and considered these interests in reaching the determination to approve the merger agreement and deem the merger agreement, the merger and the other transactions contemplated by the merger agreement to be advisable, fair to and in the best interests of the Company and its stockholders, and in recommending that the holders of Virtusa common stock vote for the adoption of the merger agreement. These interests include:

the Company’s directors hold Virtusa RSUs and Virtusa options and the Company’s executive officers hold Virtusa RSUs, Virtusa PRSUs and Virtusa options that will be afforded the treatment described below in “— Treatment of Equity and Equity-Based Awards”;

the Company’s executive officers are party to executive agreements with the Company that provide for severance in the case of a qualifying termination of employment within 24 months following a change in control, which will include completion of the merger;

one director of the Company is affiliated with an entity that owns Virtusa Series A preferred stock, which Virtusa Series A preferred stock will be converted into Virtusa common stock immediately prior to the consummation of the merger and which conversion shall be a “Make-Whole Fundamental Change” (as defined in the Certificate of Powers, Designations, Preferences and Rights of such Virtusa Series A preferred stock) and entitle the holder to receive additional shares of Virtusa common stock upon the conversion of the Virtusa Series A preferred stock; and

the Company’s directors and executive officers are entitled to continued indemnification and insurance coverage following the merger under the merger agreement. Please see the section below titled “— Director and Officer Indemnification” and the section of this proxy statement titled “— The Merger Agreement — Indemnification of Directors and Officers and Insurance.”
Certain Assumptions
Except as otherwise specifically noted, for purposes of quantifying the potential payments and benefits described in this section, the following assumptions were used:

the relevant price per share of the Virtusa common stock is $51.35;

each executive officer’s employment is terminated by the Company without “cause” or by the executive officer for “good reason” (as such terms are defined in the merger agreement), in each case, immediately following the effective time of the merger;

each executive officer holds the outstanding equity awards that were held by each executive officer as of September 28, 2020, the latest practicable date before the filing of this proxy statement; and

the amounts set forth in the tables below regarding executive officer compensation are based on compensation levels as of September 28, 2020.
The Company’s executive officers for purposes of the discussion below are: Kris Canekeratne, Chairman and Chief Executive Officer; Ranjan Kalia, Executive Vice President and Chief Financial Officer; Samir Dhir, President, Head of Americas; Thomas R. Holler, Executive Vice President and Chief Strategy Officer; Keith Modder, Executive Vice President, Chief Operating Officer and Managing Director, EMEA; and Sundararajan Narayanan, Executive Vice President, Chief People Officer.
Treatment of Equity and Equity-Based Awards
For additional information regarding beneficial ownership of Virtusa common stock by each of the Company’s directors and executive officers and beneficial ownership of Virtusa common stock by all of such directors and executive officers as a group, please see the section of this proxy statement titled “Security Ownership of Certain Beneficial Owners and Management.” Each of the Company’s directors and executive
 
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officers will be entitled to receive, for each share of Virtusa common stock he or she holds as of the effective date of the merger, the same merger consideration in cash in the same manner as other holders of Virtusa common stock.
Treatment of Virtusa RSUs
The merger agreement provides that, at the effective time of the merger (i) each Virtusa RSU, whether vested or unvested, that is outstanding and held by a non-employee member of the Virtusa Board immediately prior to the effective time of the merger, (ii) each employee Virtusa RSU that is vested (after taking into account the effect of the merger) and outstanding immediately prior to the effective time of the merger and (iii) the “applicable percentage” (as defined below) of each employee Virtusa RSU that is unvested as of the effective time of the merger (after taking into account the effect of the merger), with the applicable percentage for any holder to be applied by the Company pro-rata across all of such holder’s unvested and outstanding Virtusa RSUs, by grant date (each such Virtusa RSU in (i), (ii) and (iii), referred to as a “closing Virtusa RSU”) shall, immediately prior to the effective time of the merger, be cancelled and extinguished and, in exchange therefor, each former holder of any closing Virtusa RSU shall have the right to receive an amount in cash equal to the product of (x) the aggregate number of shares of Virtusa common stock subject to such closing Virtusa RSU immediately prior to the effective time of the merger and (y) the merger consideration (such amounts are referred to as “closing Virtusa RSU payments”). From and after the effective time of the merger, any such closing Virtusa RSU shall no longer be settleable in Virtusa common stock, but shall entitle the holder only to the closing Virtusa RSU payments. “Applicable percentage” as defined with more specificity in the merger agreement means the lesser of (i) 70% and (ii) the percentage of the aggregate number of Virtusa RSUs and Virtusa PRSUs that are unvested (after taking into the effect of the merger) and outstanding immediately prior to the effective time of the merger with an aggregate value of at least $13,000,000.
In addition, at the effective time of the merger, by virtue of the merger and without any action on the part of the holders, each Virtusa RSU other than a closing Virtusa RSU (each referred to as an “assumed Virtusa RSU”) shall, immediately prior to the effective time of the merger, be cancelled and replaced with a conditional right to receive an amount in cash equal to the product of (x) the aggregate number of shares of Virtusa common stock subject to such assumed Virtusa RSU immediately prior to the effective time of the merger and (y) the merger consideration. Such cash amounts shall be paid no later than the Company’s next regular payday following the earliest of (A) the applicable vesting date, (B) the date that is 12 months following the closing date of the merger (referred to as the “retention date”) or (C) the date that is 60 days after the date the holder’s employment is terminated by the Company without “cause” (as defined in the merger agreement) or by the holder for “good reason” (as defined in the merger agreement).
Treatment of Virtusa PRSUs
The merger agreement provides that, at the effective time of the merger (i) each Virtusa PRSU that is vested (after taking into account the effect of the merger) and outstanding immediately prior to the effective time of the merger and (ii) the applicable percentage of any Virtusa PRSU that is unvested as of the effective time of the merger (after taking into account the effect of the merger), with the applicable percentage for any holder to be applied by the Company pro-rata across all of such holder’s unvested and outstanding Virtusa PRSUs, by grant date (each Virtusa PRSU in (i) and (ii) referred to as a “closing Virtusa PRSU”) shall, immediately prior to the effective time of the merger, be cancelled and extinguished and, in exchange therefor, each former holder of any such closing Virtusa PRSU shall have the right to receive an amount in cash equal to the product of (x) the aggregate number of shares of Virtusa common stock subject to such closing Virtusa PRSU (with the aggregate number of shares of Virtusa common stock subject to such award deemed to be the target number of shares set forth in the applicable award agreement) immediately prior to the effective time of the merger and (y) the merger consideration (such amounts are referred to as “closing Virtusa PRSU payments”). From and after the effective time of the merger, any such closing Virtusa PRSU shall no longer be settleable in Virtusa common stock, but shall entitle the holder only to the payment of the closing Virtusa PRSU payments.
In addition, at the effective time of the merger, by virtue of the merger and without any action on the part of the holders, each Virtusa PRSU other than a closing Virtusa PRSU (each referred to as an “assumed
 
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Virtusa PRSU”) shall, immediately prior to the effective time of the merger, be cancelled and replaced with a conditional right to receive an amount in cash equal to the product of (x) the aggregate number of shares of Virtusa common stock subject to such assumed Virtusa PRSU (with the aggregate number of shares of Virtusa common stock subject to such award will be deemed to be the target number of shares set forth in the applicable award agreement and such awards will no longer be subject to any performance-based vesting conditions) immediately prior to the effective time of the merger and (y) the merger consideration. Such cash amounts shall be paid no later than the Company’s next regular payday following the earliest of (A) the applicable vesting date, (B) the retention date or (C) the date that is 60 days after the date the holder’s employment is terminated by the Company without cause or by the holder for good reason.
Treatment of Virtusa Options
The merger agreement provides that, at the effective time of the merger, each Virtusa option, all of which were vested prior to the time the merger agreement was entered into, shall, immediately prior to the effective time of the merger, be cancelled and extinguished and, in exchange therefor, each former holder of any such Virtusa option shall have the right to receive an amount in cash equal to the product of (x) the aggregate number of shares of Virtusa common stock subject to such Virtusa option immediately prior to the effective time of the merger and (y) the merger consideration, less any per share exercise or purchase price of such Virtusa option immediately prior to such cancellation (such amounts referred to as “closing Virtusa option payments”). From and after the effective time of the merger, any such Virtusa option shall no longer be exercisable by the former holder thereof, but shall entitle such holder only to the payment of the closing Virtusa option payments.
Any Virtusa option that that has an exercise price equal to or greater than the merger consideration shall be cancelled without any cash payment or other consideration.
The tables below show the number of shares underlying outstanding unvested Virtusa RSUs and Virtusa PRSUs held by the Company’s executive officers as of September 28, 2020 and the consideration, in cash, they can expect to receive for the Virtusa RSUs and Virtusa PRSUs, assuming, for assumed Virtusa RSUs and assumed Virtusa PRSUs, continued employment through both (1) the assumed merger closing date and (2) the earliest of any remaining vesting dates, the retention date or an earlier qualifying termination. As of September 28, 2020, the Company’s executive officers do not hold any outstanding Virtusa options or Virtusa restricted shares.
Cash Payments to Executive Officers in Respect of Virtusa RSUs
Executive Officer
No. of
Virtusa RSUs
Consideration ($)(1)
Kris Canekeratne
192,004 9,859,405
Samir Dhir
65,070 3,341,345
Thomas R. Holler
47,528 2,440,563
Ranjan Kalia
58,861 3,022,512
Keith Modder
49,656 2,549,836
Sundararajan Narayanan
42,525 2,183,659
(1) The value of Virtusa RSUs shown in the table is based on the $51.35 per share merger consideration.
 
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Cash Payments to Executive Officers in Respect of Virtusa PRSUs
Executive Officer
No. of
Virtusa PRSUs
Consideration ($)(1)
Kris Canekeratne
353,543 18,154,433
Samir Dhir
86,165 4,424,573
Thomas R. Holler
81,168 4,167,977
Ranjan Kalia
92,206 4,734,778
Keith Modder
78,580 4,035,083
Sundararajan Narayanan
58,843 3,021,588
(1) The value of Company PRSUs shown in the table is based on the $51.35 per share merger consideration.
Severance Entitlements
Each of the Company’s executive officers is a party to an executive agreement (each referred to as an “executive agreement”) that provides for certain severance payments to be payable in the event of a (a) termination of the executive officer’s employment by the Company without “cause” (as defined below); or (b) resignation by the executive officer for “good reason” (as defined below) (each referred to as a “qualifying termination”). Upon an executive officer’s qualifying termination other than during the 24 months following a “change in control” (as such term is defined in the executive agreements), the executive officer is entitled to a lump-sum severance payment (less applicable withholding taxes) equal to: (i) 100% (or in the case of Mr. Canekeratne, 150%) of the executive officer’s annual base salary; (ii) 100% (or in the case of Mr. Canekeratne, 150%) of the executive officer’s annual target variable cash compensation; (iii) a prorated share of the executive officer’s annual target variable cash compensation bonus, if any, which the executive officer would have earned in the year in which the qualifying termination occurs; and (iv) 12 months (or in the case of Mr. Canekeratne, 18 months) of continued health benefits. Upon an executive officer’s qualifying termination within 24 months of a change in control, the executive officer is entitled to a lump-sum severance payment (less applicable withholding taxes) equal to: (i) 150% (or in the case of Mr. Canekeratne, 200%) of the executive officer’s annual base salary; (ii) 150% (or in the case of Mr. Canekeratne, 200%) of the executive officer’s annual target variable cash compensation; (iii) a prorated share of the executive officer’s annual target variable cash compensation for the year in which the qualifying termination occurs; and (iv) 18 months (or in the case of Mr. Canekeratne, 24 months) of continued health benefits.
The terms of the executive agreements with our executive officers also provide that any equity awards granted to the officer prior to November 2, 2017 will have their vesting accelerated by 12 months upon any change in control, regardless of whether there is a subsequent termination of employment. With respect to any outstanding, unvested time-based equity awards granted to our executive officers after November 2, 2017, (i) if the successor entity in a change in control does not assume, continue, or substitute such awards, the awards will immediately vest upon a change in control that occurs during the executive officer’s employment and (ii) if the successor entity in a change in control does assume, continue or substitute such awards, the awards would continue to vest and be paid according to their terms. The completion of the merger will be considered a change in control within the meaning of the executive agreements.
Each of the executive agreements also contains what is sometimes referred to as a “best-net” provision. If any amounts or benefits to be paid or provided under the executive agreements or otherwise would cause payments or benefits (or other compensation) to not be fully deductible by the Company for federal income tax purposes because of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”) (or that would subject the executive officer to the excise tax imposed by Section 4999 of the Code), such payments and benefits (and other compensation) will be reduced to the extent necessary such that no portion of such payments or benefits (or other compensation) will be subject to the excise tax imposed by Section 4999 of the Code, except that such a reduction will be made only if, by reason of such reduction, the executive officer’s net after-tax benefit exceeds the net after-tax benefit such executive officer would realize
 
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if such reduction were not made. To the extent that the parties agree that any such payments or benefits are not parachute payments for purposes of Section 280G of the Code, those payments or benefits will not be reduced.
As a condition of receiving the severance benefits under the executive agreements, the executive officers must execute a release of claims.
We have also entered into employee noncompetition, nondisclosure, nonsolicitation and developments agreements with each of our executive officers. Under the terms of such agreements, each executive officer has agreed (i) not to compete with us during his employment and for a period of one year after the termination of his employment, (ii) not to solicit our employees or customers during his employment and for a period of one year after the termination of his employment, (iii) to protect our confidential and proprietary information and (iv) to assign to us related intellectual property developed during the course of his employment.
The table below sets forth estimated aggregate severance payments and benefits each executive officer would be entitled to receive assuming each executive officer experiences a qualifying termination as of immediately following the completion of the merger.
Executive Officer
Severance ($)(1)
Kris Canekeratne
755,945
Samir Dhir
507,709
Thomas R. Holler
465,709
Ranjan Kalia
507,709
Keith Modder
401,612
Sundararajan Narayanan
417,709
(1)
These amounts are based only on each executive officer’s base salary in effect as of September 28, 2020, as each executive officer’s target bonus level for 2020 has been reduced to $0 in response to the COVID-19 pandemic (in addition to a corresponding reduction in each executive officer’s base salary). Accordingly, if any executive officer’s base salary or target bonus level is increased, the actual payments such executive officer may receive may be greater than those set forth in the table above.
For purposes of the executive agreements, “cause” means (A) conduct by the executive officer constituting a material act of willful misconduct in connection with the performance of his duties, including, without limitation, misappropriation of funds or property of the Company or any of its subsidiaries or affiliates other than the occasional, customary and de minimis use of Company property for personal purposes; or (B) the commission by the executive officer of any felony or a misdemeanor involving moral turpitude, deceit, dishonesty or fraud, or any conduct by the executive officer that would reasonably be expected to result in material injury to the Company or any of its subsidiaries and affiliates if he were retained in his position; or (C) continued, willful and deliberate non-performance by the executive officer of his duties to the Company (other than by reason of the executive officer’s physical or mental illness, incapacity or disability) which has continued for more than 30 days following written notice of such non-performance from the Virtusa Board; or (D) a violation by the executive officer of the Company’s employment policies which has continued following written notice of such violation from the Virtusa Board; or (E) willful failure by the executive officer to cooperate with a bona fide internal investigation or an investigation by regulatory or law enforcement authorities, after being instructed by the Company to cooperate, or the willful destruction or failure to preserve documents or other materials known to be relevant to such investigation or the willful inducement by the executive officer of others to fail to cooperate or to produce documents or other materials. For purposes of clauses (A), (C) and (E) hereof, no act, or failure to act, on the executive officer’s part shall be deemed “willful” unless done, or omitted to be done, by the executive officer without reasonable belief that the executive officer’s act, or failure to act, was in the best interests of the Company and its subsidiaries and affiliates.
For purposes of the executive agreements, “good reason” means that the executive officer has complied with the “good reason process” (defined below) following the occurrence of any of the following events: (A) a
 
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substantial diminution or other substantial adverse change, not consented to by the executive officer, in the nature or scope of the executive officer’s responsibilities, authorities, powers, functions or duties from the responsibilities, authorities, powers, functions or duties exercised by the executive officer immediately prior to a qualifying termination; or (B) a material reduction in the executive officer’s base salary or targeted total annual cash compensation (i.e., base salary and target bonus) as in effect on the date hereof or as the same may be increased from time to time hereafter except for across-the-board reductions similarly affecting all or substantially all management employees; or (C) the relocation of the Company’s offices at which the executive officer is principally employed immediately prior to the date of a qualifying termination (referred to as “current office”) to any other location more than 50 miles from the current office, or the requirement by the Company for the executive officer to be based anywhere other than the current office, except for required travel on the Company’s business to an extent substantially consistent with the executive officer’s business travel obligations immediately prior to the qualifying termination; or (D) the failure by the Company to obtain an effective agreement from any successor to assume and agree to perform the executive officer’s executive agreement, as required by such agreement. “Good reason process” means that (i) the executive officer reasonably determines in good faith that a good reason condition has occurred; (ii) the executive officer notifies the Company in writing of the first occurrence of the good reason condition within 90 days of the first occurrence of such condition; (iii) the executive officer cooperates in good faith with the Company’s efforts, for a period not less than 30 days following such notice (referred to as the “cure period”), to remedy the condition; (iv) notwithstanding such efforts, the good reason condition continues to exist; and (v) the executive officer terminates his employment within 30 days after the end of the cure period. If the Company cures the good reason condition during the cure period, good reason shall be deemed not to have occurred.
New Management Arrangements
As of the date of this proxy statement, none of the Company, Parent or the merger subsidiary has entered into any employment agreements with the Company’s executive officers in connection with the merger. Prior to or following the closing of the merger, however, certain executive officers of the Company may have discussions, or may enter into agreements with, Parent or the merger subsidiary or their respective affiliates regarding employment with, or the right to purchase or participate in the equity of, the surviving corporation or one or more of its affiliates.
Continuing Employee Benefits
The merger agreement provides that, for a period of not less than 12 months after the closing of the merger (referred to as the “continuation period”), Parent shall, or shall cause the surviving corporation to, provide employees of the Company and the Company’s subsidiaries who become employees of Parent or one of its subsidiaries following the closing (referred to as “continuing employees”) with (i) (A) base salary or base hourly wage rate (as applicable) and (B) any target cash incentive compensation opportunity (including bonuses and commissions, but excluding long-term incentive, equity or equity-based, change in control, retention or similar compensation or benefits), 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 of the merger and (ii) employee benefits (other than any defined benefits, long-term incentive, equity or equity-based, change in control, retention or similar compensation or benefits) on substantially similar terms in the aggregate to those provided to each such continuing employee immediately prior to the closing of the merger; except that Parent and its affiliates may modify any employee’s terms and conditions of employment, including such employee’s compensation or benefits, in respect of any adverse effect experienced by Parent or its applicable affiliate as a result of the COVID-19 pandemic, as determined by Parent or its applicable affiliate in good faith.
The foregoing summary is qualified in its entirety by reference to the merger agreement, which is filed as Annex A hereto and is incorporated herein by reference.
Director and Officer Indemnification
Pursuant to the terms of the merger agreement, members of the Virtusa Board and executive officers of the Company will be entitled to certain ongoing indemnification and coverage under directors’ and officers’ liability insurance policies following the merger. For a more detailed description of the provisions
 
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of the merger agreement relating to director and officer indemnification, please see the section of this proxy statement titled “The Merger Agreement — Indemnification of Directors and Officers and Insurance.”
Quantification of Payments and Benefits
In accordance with Item 402(t) of Regulation S-K, the table below sets forth for each of the Company’s named executive officers the estimated amount of compensation based on or otherwise related to the merger and that will or may become payable to the named executive officer (i) solely as a result of the completion of the merger (i.e., on a “single-trigger” basis) or (ii) conditioned on a qualifying termination of employment following or in connection with the merger (i.e., on a “double-trigger” basis). The holders of Virtusa common stock are being asked to approve, on a non-binding, advisory basis, such compensation for the named executive officers. Because the vote to approve such compensation is advisory only, it will not be binding on the Company, Parent or the merger subsidiary. Accordingly, if the proposal to adopt the merger agreement is approved by the holders of Virtusa common stock and the merger is completed, the compensation will be payable regardless of the outcome of the vote to approve such compensation, subject only to the conditions applicable thereto, which are described in the footnotes to the table below and above under “— Interests of the Company’s Directors and Executive Officers in the Merger.”
The potential payments in the table below are based on the following assumptions:

the relevant price per share of Virtusa common stock is $51.35;

the effective time of the merger is September 28, 2020, which is the assumed date of the effectiveness of the merger solely for purposes of this golden parachute compensation disclosure;

each named executive officer’s employment is subject to a qualifying termination immediately following the effective time of the merger, which is assumed, for purposes of this golden parachute compensation disclosure, to be September 28, 2020; each named executive officer holds the outstanding equity awards that were held by each named executive officer as of September 28, 2020, the latest practicable date before the filing of this proxy statement;

the amounts set forth in the tables below regarding named executive officer compensation are based on compensation levels as of September 28, 2020; and

the “best-net” provision contained in the executive agreements, described above under “— Severance Entitlements,” will not apply.
The amounts shown are estimates of amounts that would be payable to the named executive officers based on multiple assumptions that may or may not actually occur, including the assumptions described above. Some of the assumptions are based on information not currently available and, as a result, the actual amounts received by a named executive officer may differ materially from the amounts shown in the following table.
The following table and footnotes describe the benefits each named executive officer is eligible to receive in connection with the completion of the merger.
Potential Payments to Named Executive Officers
Named Executive Officer
Cash
($)(1)
Equity
($)(2)
Perquisites/
Benefits
($)(1)
Total
($)
Kris Canekeratne
735,000 28,013,838 20,945 28,769,783
Samir Dhir
492,000 7,765,917 15,709 8,273,626
Thomas R. Holler
450,000 6,608,540 15,709 7,074,249
Ranjan Kalia
492,000 7,757,290 15,709 8,264,999
Keith Modder
390,000 6,584,919 11,612 6,986,531
(1)
As described above under “— Severance Entitlements,” these payments are “double-trigger,” as they will only be payable in the event of a qualifying termination of employment during the period beginning
 
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on the effective time of the merger and ending 24 months after such date. These payments are based only on each named executive officer’s base salary in effect as of September 28, 2020, as each named executive officer’s target bonus level for 2020 has been reduced to $0 in response to the COVID-19 pandemic (in addition to a corresponding reduction in each executive officer’s base salary). Accordingly, if any named executive officer’s base salary or target bonus is increased prior to the effective time of the merger, the actual payments such named executive officer may receive may be greater than those set forth in the table above. As a condition of receiving the severance benefits under the executive agreements, the named executive officers must execute a release of claims. As described above under “— Severance Entitlements,” we have entered into employee noncompetition, nondisclosure, nonsolicitation and developments agreements with each of our named executive officers. Under the terms of such agreements, each named executive officer has agreed (i) not to compete with us during his employment and for a period of one year after the termination of his employment, (ii) not to solicit our employees or customers during his employment and for a period of one year after the termination of his employment, (iii) to protect our confidential and proprietary information and (iv) to assign to us related intellectual property developed during the course of his employment.
(2)
As described above under “— Treatment of Equity and Equity-Based Awards,” these amounts represent the aggregate amount payable pursuant to the merger agreement to each named executive officer in respect of any outstanding unvested Virtusa RSUs and Virtusa PRSUs held as of September 28, 2020 (assuming the performance metrics applicable to the Virtusa PRSUs are achieved at target levels). Payments with respect to any closing Virtusa RSUs and closing Virtusa PRSUs are “single trigger” and will become payable upon the closing of the merger. Payments with respect to any assumed Virtusa RSUs and assumed Virtusa PRSUs are “double trigger” and will become payable subject to the named executive officer’s continued employment through the earliest of (a) the original vesting date of the assumed award, (b) the date that is 12 months after the closing date of the merger, or (c) the holder’s qualifying termination., in each case as described in further detail above under “— Treatment of Virtusa RSUs” and “— Treatment of Virtusa PRSUs,” respectively. The “single trigger” amounts payable with respect to the closing Virtusa RSUs and the closing Virtusa PRSUs and the “double trigger” amounts payable with respect to the assumed Virtusa RSUs and the assumed Virtusa PRSUs cannot be determined with certainty until the applicable percentage (as defined above under “— Treatment of Virtusa RSUs”) is determined, which will not occur until the effective time of the merger. Assuming that the “applicable percentage” of the Virtusa RSUs and Virtusa PRSUs, is 70%, the “single trigger” amounts payable to the named executive officers with respect to the closing Virtusa RSUs and the closing Virtusa PRSUs would be as follows: Mr. Canekeratne — $21,227,212; Mr. Dhir — $5,867,482; Mr. Holler — $5,165,163; Mr. Kalia — $5,969,278 and Mr. Modder — $5,040,783. Assuming that the “applicable percentage” of the Virtusa RSUs and Virtusa PRSUs is 70%, the “double trigger” amounts payable with respect to the assumed Virtusa RSUs and the assumed Virtusa PRSUs would be as follows: Mr. Canekeratne — $6,786,627; Mr. Dhir — $1,898,435; Mr. Holler — $1,443,387; Mr. Kalia — $1,788,012 and Mr. Modder — $1,544,136.
Material U.S. Federal Income Tax Considerations
The following discussion summarizes certain material U.S. federal income tax considerations applicable to holders of Virtusa common stock who receive cash in exchange for shares of Virtusa common stock pursuant to the merger. This discussion is for general informational purposes only and does not purport to be a complete analysis of all potential tax consequences of the merger. This discussion is based upon the provisions of the Code, the U.S. Treasury Regulations promulgated thereunder and judicial decisions and administrative rulings, all as in effect as of the date of this proxy statement and all of which are subject to change or varying interpretation, possibly with retroactive effect. Any such change or differing interpretation could affect the accuracy of the statements set forth herein. The U.S. federal income tax laws are complex and subject to varying interpretation. We have not sought, and do not intend to seek, any ruling from the Internal Revenue Service (referred to as the “IRS”) regarding any of the tax issues discussed herein. There can be no assurance that the IRS will not challenge one or more of the tax consequences of the merger described herein.
This discussion assumes that holders of Virtusa common stock hold their shares as “capital assets” within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion
 
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does not address all aspects of U.S. federal income taxation that may be relevant to a particular holder of Virtusa common stock in light of such holder’s individual circumstances, nor does it address U.S. state or local, non-U.S., or estate or gift taxes, the alternative minimum tax, the rules regarding qualified small business stock within the meaning of Section 1202 of the Code, the Medicare tax on net investment income or any other aspect of any U.S. federal tax other than the income tax. This discussion also does not address tax considerations that may be relevant to holders of Virtusa common stock subject to special treatment under the U.S. federal income tax laws, such as, for example, financial institutions, brokers or dealers in securities or currencies, mutual funds, partnerships or other entities or arrangements classified as partnerships for U.S. federal income tax purposes or other pass-through entities and their partners or members, S corporations, tax-exempt organizations, governmental organizations, retirement or other tax-deferred accounts, insurance companies, traders in securities who elect mark-to-market method of accounting, controlled foreign corporations, passive foreign investment companies, corporations that accumulate earnings to avoid U.S. federal income tax, U.S. expatriates and former citizens or long-term residents of the United States, holders who acquired their Virtusa common stock through the exercise of Company stock options or otherwise as compensation, holders who hold their Virtusa common stock as part of a hedge, straddle, constructive sale, conversion transaction, U.S. holders (as defined below) whose functional currency is not the U.S. dollar, real estate investment trusts, regulated investment companies, holders deemed to sell their shares of Virtusa common stock under the constructive sale provisions of the Code, persons who own (directly, indirectly or constructively) an equity interest in Parent or the surviving corporation, holders who exercise appraisal rights in connection with the merger under the DGCL, and holders who own or have owned (directly, indirectly or constructively) 5% or more of the Company’s stock (by vote or value).
If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds Virtusa common stock, the tax treatment of a partner in such partnership generally will depend on the status of the partner and activities of the partner and the partnership. If you are a partnership holding Virtusa common stock or a partner of a partnership holding Virtusa common stock, you are urged to consult your own tax advisor regarding the U.S. federal income tax consequences of the merger relevant to you.
This discussion is for informational purposes only and is not tax advice. Holders of Virtusa common stock are urged to consult their tax advisors with respect to the U.S. federal income tax consequences of the merger to them in light of their particular circumstances, as well as any tax consequences of the merger arising under the U.S. federal tax laws other than those pertaining to income tax, including estate or gift tax laws, or under any state, local or non-U.S. tax laws or under any applicable income tax treaty.
For purposes of this discussion, the term “U.S. holder” means a beneficial owner of Virtusa common stock that, for U.S. federal income tax purposes, is:

an individual who is a citizen or resident of the United States;

a corporation (including any entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States or any political subdivision thereof;

a trust if (1) its administration is subject to the primary supervision of a court within the United States and one or more U.S. persons as described in Section 7701(a)(30) of the Code have the authority to control all substantial decisions of the trust or (2) it has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a United States person (within the meaning of the Code); and

an estate, the income of which is subject to U.S. federal income tax regardless of its source.
For purposes of this discussion, a “non-U.S. holder” means a beneficial owner of Virtusa common stock that is, for U.S. federal income tax purposes, an individual, a corporation, a trust or an estate that is not a U.S. holder.
U.S. Holders
The receipt of cash in exchange for shares of Virtusa common stock pursuant to the merger will generally be a taxable transaction for U.S. federal income tax purposes. A U.S. holder generally will recognize gain or loss for U.S. federal income tax purposes equal to the difference, if any, between the amount of cash received pursuant to the merger (determined before the deduction of any applicable
 
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withholding taxes) and such U.S. holder’s adjusted tax basis in the shares exchanged for cash pursuant to the merger. A U.S. holder’s adjusted tax basis in a share of Virtusa common stock will generally be equal to the amount the U.S. holder paid for such share. Such gain or loss generally will be capital gain or loss, and will be long-term capital gain or loss if the U.S. holder’s holding period for such shares exceeds one year as of the date of the closing. Long-term capital gains for certain non-corporate U.S. holders, including individuals, are generally eligible for a reduced rate of federal income taxation. Short-term capital gains are taxed at ordinary income rates. The deductibility of capital losses is subject to limitations. Gain or loss must be calculated separately for each block of Virtusa common stock (i.e., common stock acquired at the same time and at the same price in a single transaction). U.S. holders who own separate blocks of Virtusa common stock should consult their own tax advisors with respect to these rules.
A U.S. holder may, unless an exception applies, be subject to information reporting and backup withholding (currently at a rate of 24%) with respect to the cash received pursuant to the merger, unless such U.S. holder provides its correct taxpayer identification number (referred to as the “TIN”) on IRS Form W-9 (or if appropriate, a substitute or successor form) and certifies under penalties of perjury that such TIN is correct and that such U.S. holder is not subject to backup withholding. Backup withholding is not an additional tax. Rather, any amounts withheld under the backup withholding rules may be refunded or credited against a U.S. holder’s U.S. federal income tax liability, if any; provided that such U.S. holder furnishes the required information to the IRS in a timely manner and other requirements are satisfied.
Non-U.S. Holders
Any gain recognized on the receipt of cash pursuant to the merger by a non-U.S. holder generally will not be subject to U.S. federal income tax unless:

the gain is effectively connected with the conduct of a U.S. trade or business of such non-U.S. holder (and, if required by an applicable income tax treaty, is also attributable to a permanent establishment or, in the case of an individual, a fixed base in the United States maintained by such non-U.S. holder), in which case the non-U.S. holder generally will be subject to tax on such gain in the same manner as a U.S. holder and, if the non-U.S. holder is a foreign corporation, such corporation may be subject to branch profits tax at the rate of 30% (or such lower rate as may be specified by an applicable income tax treaty) on after-tax profits effectively connected with a U.S. trade or business to the extent that such after-tax profits are not reinvested and maintained in the business;

the non-U.S. holder is a nonresident alien individual who is present in the United States for 183 days or more in the taxable year of the merger and certain other conditions are met, in which case the non-U.S. holder generally will be subject to a 30% tax (or tax at such lower rate as may be specified under an applicable income tax treaty) on the non-U.S. holder’s net gain realized in the merger, which may be offset by certain U.S. source capital losses of the non-U.S. holder, if any (even though the individual is not considered a resident of the United States), provided that such non-U.S. holder has timely filed U.S. federal income tax returns with respect to such losses; or

the Company is or has been a “United States real property holding corporation” for U.S. federal income tax purposes at any time during the shorter of (i) the five-year period ending on the date of the merger and (ii) the non-U.S. holder’s holding period in the Virtusa common stock, and, at any time during such period, the non-U.S. holder owned (directly, indirectly or constructively) more than 5% of the outstanding Virtusa common stock. Generally, a corporation is a U.S. real property holding corporation only if the fair market value of its U.S. real property interests equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests plus its other assets used or held for use in a trade or business. The Company does not believe that it is or was a “United States real property holding corporation” for U.S. federal income tax purposes during the applicable five-year period.
A non-U.S. holder will be subject to information reporting and, in certain circumstances, backup withholding (currently at a rate of 24%) with respect to the cash received by such non-U.S. holder pursuant to the merger, unless such non-U.S. holder provides the paying agent with an applicable and properly executed IRS Form W-8 certifying under penalties of perjury the holder’s non-U.S. status (and the payor or applicable withholding agent does not have actual knowledge or reason to know that the non-U.S. holder
 
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is a U.S. person as defined under the Code) or otherwise establishes an exemption. Copies of information returns that are filed with the IRS may be made available under an applicable tax treaty or information exchange agreement to the tax authorities of the country in which the non-U.S. holder resides or is established. Backup withholding is not an additional tax. Rather, any amounts withheld under the backup withholding rules may be refunded or credited against a non-U.S. holder’s U.S. federal income tax liability, if any, provided that the non-U.S. holder furnishes the required information to the IRS in a timely manner and other applicable requirements are satisfied. Non-U.S. holders should consult their tax advisors regarding the application of the information reporting and backup withholding rules to them.
You are urged to read the section of this proxy statement titled “The Merger — Material U.S. Federal Income Tax Considerations” for a more complete discussion of the material U.S. federal income tax consequences of the merger.
THE FOREGOING DISCUSSION IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OR DESCRIPTION OF ALL POTENTIAL U.S. FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE MERGER. THIS SUMMARY IS FOR GENERAL INFORMATION PURPOSES ONLY AND IS NOT TAX ADVICE. IN ADDITION, THIS DISCUSSION DOES NOT ADDRESS TAX CONSEQUENCES WHICH MAY VARY WITH, OR ARE CONTINGENT ON, A HOLDER’S INDIVIDUAL CIRCUMSTANCES. ACCORDINGLY, EACH HOLDER IS URGED TO CONSULT ITS OWN TAX ADVISOR REGARDING THE PARTICULAR TAX CONSEQUENCES OF THE MERGER TO SUCH HOLDER IN LIGHT OF SUCH HOLDER’S PARTICULAR CIRCUMSTANCES, INCLUDING THE TAX CONSEQUENCES WITH RESPECT TO ANY NON-INCOME TAX OR ANY STATE, LOCAL OR NON-U.S. TAX LAWS.
Regulatory Approvals Required for the Merger
U.S. Antitrust
Under the HSR Act and the rules and regulations promulgated thereunder, the merger may not be completed until notifications have been filed and certain information has been furnished to FTC and DOJ and the specified waiting period has expired or have been terminated. The Company and Parent each filed or caused to be filed the requisite notification forms under the HSR Act with the DOJ and the FTC on September 23, 2020, and both requested “early termination” of the waiting period. Both before and after the expiration or termination of the applicable waiting period, the FTC and the DOJ retain the authority to challenge the merger on antitrust grounds.
In addition, the merger may be reviewed by the state attorneys general in the various states in which Parent and the Company operate. These authorities may claim that there is authority, under the applicable state and federal antitrust laws and regulations, to investigate and/or seek to prohibit the merger under the circumstances and based on the standards set forth in applicable state laws and regulations. There can be no assurance that one or more state attorneys general will not attempt to file an antitrust action to challenge the merger. As of the date of this document, neither Parent nor the Company has been notified by any state attorney general indicating any plan to review the merger.
Other Regulatory Notifications
The consummation of the merger is also conditional on (1) foreign antitrust approvals from the German Federal Cartel Office and the Competition Commission of India, and (2) foreign investment and screening laws in Australia and New Zealand.
There can be no assurances that all of the regulatory approvals described above will be obtained and, if obtained, there can be no assurances as to the timing of any approvals, Parent’s or the Company’s ability to obtain the approvals on satisfactory terms or the absence of any litigation challenging such approvals.
Parent and the Company believe that the merger does not raise substantial antitrust or other significant regulatory concerns. Although Parent and the Company believe that all required regulatory approvals necessary to complete the transactions contemplated by the merger agreement can be obtained, Parent and the Company cannot be certain when or if these approvals will be obtained. The parties’ obligation to complete
 
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the merger is conditioned on the receipt or waiver of all the necessary governmental or regulatory approvals required to complete the transactions contemplated by the merger agreement.
It is presently contemplated that if any governmental approvals or actions are deemed by Parent or the Company to be necessary or appropriate, such approvals or actions will be sought. There can be no assurance, however, that any additional approvals or actions will be obtained.
The merger agreement includes covenants obligating each of the parties to use reasonable best efforts to cause the merger to be consummated and to take certain actions to resolve objections under any antitrust laws. Among other things, the Company, Parent and the merger subsidiary have agreed to use their reasonable best efforts to (i) obtain all necessary actions or nonactions, waivers, consents and approvals from governmental entities and the making of all necessary registrations and filings (including filings with governmental entities, if any) and the taking of all steps as may be necessary to obtain an approval or waiver from, or to avoid an action or proceeding by, any governmental entity, (ii) obtain all necessary consents, approvals or waivers from third parties (provided, that neither the Company nor any of its subsidiaries will make or agree to make any payment of a consent fee, “profit sharing” payment or other consideration (including increased or accelerated payments) or concede anything of monetary or economic value, for the purposes of obtaining any such third party consents without the prior consent of Parent), (iii) defend any lawsuits or other legal proceedings, whether judicial or administrative, challenging the merger agreement and (iv) execute and deliver any additional instruments necessary to consummate the transactions contemplated by the merger agreement. Parent shall pay all filing fees required to be paid in conjunction with the HSR filing or any other antitrust laws, and the Company shall not be required to pay any fees or other payments to any governmental entity in connection with any filings under, the HSR Act or such other filings as may be required under applicable antitrust laws in connection with the merger or the other transactions. For more information regarding these covenants, see the section of this proxy statement titled “The Merger Agreement — Reasonable Best Efforts; Antitrust Filings.”
CFIUS Approval
Under the merger agreement, the parties agreed to cooperate to submit a draft joint voluntary notice of the merger to CFIUS as soon as practicable after the date of the merger agreement. After receipt of confirmation that CFIUS has no further comments or inquiries related to the draft joint voluntary notice, the parties must promptly submit a formal joint voluntary notice to CFIUS. The parties will use their reasonable best efforts to comply at the earliest practicable time required by CFIUS or any CFIUS member agency with any request for additional information, documents or other materials, and will use their reasonable best efforts to cooperate with each other to resolve any investigation or other inquiry of CFIUS or any CFIUS member agency. The parties shall each use their best efforts to promptly inform the other party of any oral communication with, and provide copies of written communications with, CFIUS or any CFIUS member agency regarding any such filings; provided, that no party shall be required to share communications containing its confidential business information if such confidential information is unrelated to the transactions contemplated by the merger agreement. The parties shall undertake reasonable best efforts to promptly take, or cause to be taken, all action, and do, or cause to be done, all things necessary or advisable to obtain CFIUS approval as soon as practicable, and in any event prior to the outside date, including, but not limited to, using reasonable best efforts, if required, to execute a reasonable letter of assurance or entering into another reasonable form of mitigation agreement with CFIUS or CFIUS member agencies on terms, conditions, or measures sought by CFIUS, provided, however, that no party shall be required to take or agree to take any undertaking that is not conditioned on the consummation of the transactions contemplated by the merger agreement. Parent shall pay all filing fees required in connection with the CFIUS filing and the Company shall not be required to pay any fees or other payments to any governmental entity in connection with any filings under CFIUS. Approval of the merger by CFIUS is a condition to each party’s obligations to complete the merger, and the parties’ completion of the merger is therefore contingent upon approval by CFIUS.
Delisting and Deregistration of the Virtusa Common Stock
If the merger is completed, the shares of Virtusa common stock will be delisted from Nasdaq and deregistered under the Exchange Act, and shares of Virtusa common stock will no longer be publicly traded.
 
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Litigation Related to the Merger
On October 8, 2020, a purported stockholder of the Company filed a complaint in the United States District Court for the District of Delaware, captioned Stein v. Virtusa Corporation, et al., Case No. 1:20-CV-01363 (referred to as the “Stein complaint”), naming as defendants the Company and each member of the Virtusa Board as of the date of the merger agreement. On October 15, 2020, a purported stockholder of the Company filed a complaint in the United States District Court for the District of Delaware, captioned Williams v. Virtusa Corporation, et al., Case No. 1:20-CV-01389 (referred to as the “Williams complaint” and together with the Stein complaint, the “stockholder complaints”), naming as defendants the Company and each member of the Virtusa Board as of the date of the merger agreement.
The Stein complaint alleges, among other things, that the proxy statement filed by the Company with the SEC on October 7, 2020 in connection with the merger (referred to as the “preliminary proxy statement”), is materially incomplete and misleading by allegedly failing to disclose in violation of Section 14(a) and Section 20(a) of the Exchange Act, as well as Rule 14a-9 promulgated thereunder, allegedly material information concerning (i) certain financial projections prepared by the Company’s management and summarized in the preliminary proxy statement, (ii) certain inputs and assumptions used in the financial analyses conducted by J.P. Morgan in connection with rendering its fairness opinion to the Virtusa Board, and (iii) certain background regarding the Company’s retention of Citi. The relief sought in the Stein complaint includes equitable relief, including among other things, to enjoin the consummation of the merger unless and until certain additional and allegedly material information is disclosed to the Company’s stockholders, to rescind the merger agreement, to the extent already implemented, or to recover rescissory damages, to direct the defendants to account to plaintiff for all alleged damages suffered as a result of their alleged wrongdoing and to award plaintiff the cost and disbursements of the Stein complaint, including reasonable attorneys’ and expert fees and expenses.
The Williams complaint alleges, among other things, that the preliminary proxy statement is materially incomplete and misleading by allegedly failing to disclose in violation of Section 14(a) and Section 20(a) of the Exchange Act, as well as Rule 14a-9 promulgated thereunder, allegedly material information concerning (i) certain financial projections prepared by the Company’s management and summarized in the preliminary proxy statement, (ii) certain inputs and assumptions used in the financial analyses conducted by J.P. Morgan in connection with rendering its fairness opinion to the Virtusa Board, and (iii) certain background regarding the Company’s retention of Citi. The relief sought in the Williams complaint includes equitable relief, including among other things, to enjoin the consummation of the merger unless and until certain additional and allegedly material information is disclosed to the Company’s stockholders, to rescind the merger agreement, to the extent already implemented, or to recover rescissory damages, and to award plaintiff the cost and disbursements of the Williams complaint, including reasonable attorneys’ and expert fees and expenses.
The Company cannot predict the outcome of the stockholder complaints, nor can the Company predict the amount of time and expense that will be required to resolve the complaints. The Company believes that the stockholder complaints are without merit and the Company and the individual defendants intend to vigorously defend against the stockholder complaints and subsequently filed similar actions.
If additional similar complaints are filed, absent new or significantly different allegations, the Company will not necessarily disclose such additional filings.
 
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THE MERGER AGREEMENT
The following is a summary of the material provisions of the merger agreement, a copy of which is attached as Annex A to this proxy statement and is incorporated into this proxy statement by reference. We urge you to carefully read this entire proxy statement, including the annexes and the other documents to which we have referred you. You should also review the section titled “Where You Can Find Additional Information.”
The merger agreement has been included for your convenience to provide you with information regarding its terms, and we recommend that you read it in its entirety. The merger agreement is a contractual document that establishes and governs the legal relations between the Company, Parent and the merger subsidiary, and allocates risks between the parties, with respect to the merger, the other agreements contemplated by the merger agreement, and the transactions contemplated by the merger agreement.
The representations and warranties of the Company, Parent and the merger subsidiary contained in the merger agreement have been made solely for the benefit of the parties to the merger agreement. In addition, such representations and warranties (a) have been made only for purposes of the merger agreement, (b) have been qualified by certain documents filed with, or furnished to, the SEC by the Company prior to the date of the merger agreement, (c) are subject to important qualifications, limitations and supplemental information agreed to by the Company, Parent and the merger subsidiary in connection with negotiating the terms of the merger agreement, (d) are subject to materiality qualifications contained in the merger agreement which may differ from what may be viewed as material by investors, (e) were made only as of the date of the merger agreement or such other date as is specified in the merger agreement and (f) have been included in the merger agreement for the purpose of allocating risk between the Company, on the one hand, and Parent and the merger subsidiary, on the other hand, rather than establishing matters as facts. Accordingly, the merger agreement is included with this proxy statement only to provide investors with information regarding the terms of the merger agreement and not to provide investors with any other factual information regarding the Company or Parent or their respective subsidiaries or businesses. Investors should not rely on the representations and warranties or any descriptions thereof as characterization of the actual state of facts or condition of the Company or Parent or their respective subsidiaries or businesses. Moreover, information concerning the subject matter of the 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 public disclosures.
The representations and warranties in the merger agreement and the description of them in this proxy statement should not be read alone but instead should be read in conjunction with the other information contained in the reports, statements and filings the Company publicly files with the SEC. Such information can be found elsewhere in this proxy statement and in the public filings the Company makes with the SEC, as described in the section titled “Where You Can Find Additional Information.”
The Merger
Upon the terms and subject to the conditions of the merger agreement and in accordance with the DGCL, at the effective time of the merger, the merger subsidiary will merge with and into the Company, the separate corporate existence of the merger subsidiary will thereupon cease and the Company will continue as the surviving corporation of the merger as a wholly owned subsidiary of Parent.
Closing and Effective Time of the Merger
The closing of the merger will take place at 10:00 a.m., New York City time, on the second business day after the satisfaction or waiver (to the extent permitted by law) of all of the conditions described in the section below titled “— Conditions to the Merger”, provided, that if the marketing period has not ended at the time of the satisfaction or waiver of those conditions (other than those conditions that by their nature are to be satisfied at the closing of the merger, but subject to the satisfaction or waivers (to the extent permitted by law) of those conditions at such time), then, subject to the continued satisfaction or waiver of such conditions, Parent and the merger subsidiary shall not be required to effect the Closing until the earliest of (i) any business day during the marketing period as may be specified by Parent on no less than two business days’ prior notice to the Company (with date may be conditioned upon the simultaneous completion of
 
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Parent’s financing of the transactions contemplated by the merger agreement), (ii) the third business day following the final day of the marketing period or (iii) such other place, date and time as may be agreed in writing by the Company and Parent.
The merger will become effective at the time a certificate of merger is filed with the Secretary of State of the State of Delaware or at such later time stated in the certificate of merger and agreed to by the parties. The time that the merger becomes effective is referred to as the “effective time” of the merger.
Certificate of Incorporation and Bylaws; Directors and Officers
At the effective time of the merger, the Company’s certificate of incorporation will be amended and restated to be in the form of Exhibit A to the merger agreement. The bylaws of the merger subsidiary in effect immediately prior to the effective time of the merger become the bylaws of the surviving corporation.
Under the merger agreement, the directors of the merger subsidiary immediately prior to the effective time of the merger will be the directors of the surviving corporation immediately after the effective time of the merger. The officers of the Company immediately prior to the effective time of the merger become the officers of the surviving corporation immediately after the effective time of the merger.
Consideration to be Received in the Merger
At the effective time of the merger, each share of Virtusa common stock, including shares of Virtusa common stock issued upon the conversion of the Virtusa Series A preferred stock, that is outstanding immediately prior to the effective time of the merger (other than shares held by the Company as treasury stock, owned by Parent or the merger subsidiary or as to which the holders thereof have properly and validly exercised their statutory rights of appraisal in accordance with Section 262 of the DGCL) will be automatically converted into the right to receive cash in an amount equal to $51.35 in cash, without interest and less any applicable withholding taxes, which is referred to as the “merger consideration.” All shares of Virtusa Series A preferred stock will be converted to Virtusa common stock prior to the effective time of the merger at the conversion rate of approximately 28.07 shares of Virtusa common stock for each share of Virtusa Series A preferred stock, assuming a closing date of the merger of September 28, 2020. If the closing of the merger occurred on September 28, 2020, holders of Virtusa Series A preferred stock would receive approximately 3,000,000 shares of Virtusa common stock issued upon the conversion of the Series A preferred stock, as well as 31,912 shares of Virtusa common stock issued pursuant to a make-whole fundamental change payment, as defined in the certificate of designations of the Series A preferred stock, which 31,912 shares of Virtusa common stock will not be issued or outstanding until conversion of the Virtusa Series A preferred stock and therefore are not eligible to vote at the special meeting. As a result, holders of Virtusa Series A preferred stock will receive consideration in the merger solely with respect to the shares of Virtusa common stock into which their Virtusa Series A preferred stock is converted.
Treatment of Company Stock Awards
Vested Company Stock Awards:   each Virtusa option, and Virtusa RSU, Virtusa PRSU (collectively referred to as “Company stock awards”) that is by its terms unexpired, unexercised, and outstanding and vested as of immediately prior to the effective time will be canceled and converted into the right to receive an amount in cash equal to the merger consideration, less any per share exercise or purchase price of such Company stock award.
Independent Director Stock Awards:   each Company stock award, whether vested or unvested, that is outstanding and held by a non-employee member of the Virtusa Board as of immediately prior to the effective time will be canceled and converted into the right to receive an amount in cash equal to the merger consideration, less any per share exercise or purchase price of such Company stock award.
Unvested Company Stock Awards:   the applicable percentage of each Company stock award that is by its terms unexpired, unexercised, and outstanding and unvested as of immediately prior to the effective time will be canceled and converted into the right to receive an amount in cash equal to the merger consideration, less any per share exercise or purchase price of such Company stock award, with the applicable percentage for any holder to be applied by the Company pro-rata across all of such holder’s unvested and outstanding
 
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Company stock awards, by grant date and award type. The “applicable percentage” means the lesser of (i) 70% and (ii) the percentage of the aggregate number of shares subject to Company stock awards that are unvested (after taking into account the effect of the merger) and outstanding immediately prior to the effective time of the merger with an aggregate value of at least $13,000,000.
Each Company stock award that is by its terms unexpired, unexercised, and outstanding, and unvested, as of immediately prior to the effective time and that is not cancelled and converted into the right to receive an amount in cash as described in the immediately preceding paragraph will instead be cancelled and replaced with a conditional right to receive an amount in cash payable upon the earliest of (A) the applicable vesting date of the converted Company stock award, (B) the date that is 12 months after the closing date of the merger, or (C) the date that is 60 days after the holder’s employment is terminated by the Company without “cause” or by the holder for “good reason” (each as defined in the merger agreement).
Procedure for Receiving Merger Consideration
Prior to the effective time of the merger, Parent will select a bank or trust company reasonably acceptable to the Company for the payment of merger consideration upon surrender of certificated and uncertificated shares of Virtusa common stock. Parent will take all steps necessary to enable and cause the surviving corporation to, immediately prior to or at the effective time of the merger, provide the paying agent all the cash necessary to pay for the shares of Virtusa common stock converted into the right to receive cash pursuant to the merger agreement (which is referred to as the “exchange fund”).
As soon as reasonably practicable after the effective time of the merger, Parent will cause the paying agent to mail to (i) each holder of record of certificated Virtusa common stock a letter of transmittal and instructions for use in effecting the surrender of the holder’s certificates in exchange for the merger consideration and (ii) each holder of uncertificated shares of Virtusa common stock materials advising such holder of the effectiveness of the merger and the conversion of its uncertificated shares into the right to receive merger consideration and a check in an amount equal to the merger consideration to which such holder is entitled. Upon surrender of certificates for cancellation to the payment agent together with such letter of transmittal, duly executed, and such other documents as may reasonably be required by the paying agent (in the case of shares represented by certificates), the holders of such shares will be entitled to receive in exchange therefor an amount of cash into which the shares of Virtusa common stock theretofore represented by such certificate shall have been converted, and the certificate so surrendered shall forthwith be canceled. In the event of a transfer of ownership of Virtusa common stock that is not registered in the transfer records of the Company, payment may be made to a person other than the person in whose name the certificate so surrendered is registered, if such certificate shall be properly endorsed or otherwise be in proper form for transfer and the person requesting such payment shall pay any transfer or other taxes required by reason of the payment to a person other than the registered holder of such certificate or establish to the satisfaction of Parent that such tax has been paid or is not applicable. Until surrendered, each certificate shall be deemed at any time after the effective time of the merger to represent only the right to receive upon such surrender merger consideration. No interest shall be paid or accrue on any cash payable upon surrender of any certificate. You should not send in your Virtusa common stock certificates until you receive a letter of transmittal with instructions from the paying agent. Do not send Virtusa common stock certificates with your proxy card.
Following the effective time of the merger, each holder of Virtusa common stock will cease to have any rights with respect to such common stock, except for the right to receive the merger consideration or, in the case of stockholders who have properly and validly exercised their statutory rights of appraisal in accordance with Section 262 of the DGCL, such rights as are provided by Section 262 of the DGCL.
In the event any certificate representing Virtusa common stock shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such certificate to be lost, stolen or destroyed and, if required by Parent, the posting by such person of a bond in customary amount and upon such terms as may be required by Parent as indemnity against any claim that may be made against it or the surviving corporation with respect to such certificate, the paying agent will issue a check in the amount (after giving effect to any required tax withholdings) equal to the product obtained by multip