PDI INC

On May 10, 2021, (i) the Company and Ampersand amended the Ampersand Note to increase its principal amount to $4.5 million, (ii) the Company and 1315 Capital amended the 1315 Capital Note to increase its principal amount to $3.0 million and (iii) the Company and Ampersand amended the Security Agreement to include the new total principal amount of the Notes of $7.5 million. The maturity date and interest rate of the Notes remain June 30, 2021 and 8%, respectively and except with respect to their respective principal amounts, the terms of the Notes and the Security Agreement are otherwise unchanged.

In addition to the United States generally accepted accounting principles, or GAAP, results provided throughout this document, we have provided certain non-GAAP financial measures to help evaluate the results of our performance. We believe that these non-GAAP financial measures, when presented in conjunction with comparable GAAP financial measures, are useful to both management and investors in analyzing our ongoing business and operating performance. We believe that providing the non-GAAP information to investors, in addition to the GAAP presentation, allows investors to view our financial results in the way that management views financial results.

In this 10-Q, we discuss Adjusted EBITDA, a non-GAAP financial measure. Adjusted EBITDA is a metric used by management to measure cash flow of the ongoing business. Adjusted EBITDA is defined as income or loss from continuing operations, plus depreciation and amortization, acquisition related expenses, transition expenses, noncash stock based compensation, interest and taxes, and other non-cash expenses including asset impairment costs, bad debt expense, loss on extinguishment of debt, goodwill impairment and change in fair value of contingent consideration, and warrant liability. The table below includes a reconciliation of this non-GAAP financial measure to the most directly comparable GAAP financial measure.

On May 10, 2021 Company entered into an at-will employment agreement with Thomas Freeburg (the “Freeburg Employment Agreement”), as of February 1, 2021 (the “Effective Date”). Mr. Freeburg will serve as Chief Financial Officer of the Company. As previously reported on the Company’s current report on Form 8-K filed February 4, 2021, the Company agreed to pay to Mr. Freeburg a base salary of $225,000 annually during the initial term, increasing to $250,000 on August 1, 2021, to be paid in accordance with the Company’s payroll practices. Mr. Freeburg is also eligible to receive additional annual incentive compensation with an annual target of up to 40% of the base salary, paid out in cash, less applicable taxes and deductions and/or stock as determined by the Chief Executive Officer of the Company (“CEO”) and the Company’s Compensation and Management Development Committee (the “Compensation Committee”).

On March 10, 2021, the Company awarded to Mr. Freeburg under the Company’s 2019 Equity Incentive Plan, as amended, (the “Plan”) (i) an option to purchase 50,000 shares of the Company’s common stock, par value $0.01 per share (“Common Stock”) with an exercise price equal to $6.00 per share (such option, the “Initial Time-Vesting Option”), and (ii) restricted stock units with respect to 50,000 shares of Common Stock (such grant, the “Initial Time-Vesting RSUs”). The Initial Time-Vesting Option and the Initial Time-Vesting RSUs shall be subject to the terms of the Plan and an applicable award agreement by and between Mr. Freeburg and the Company, and shall vest in equal installments on each of the first three anniversaries of the date of grant, subject to Mr. Freeburg’s continued employment with the Company through the applicable vesting date; provided that, notwithstanding the terms of the Plan and the applicable award agreement, the Initial Time-Vesting Options, the Initial Time-Vesting RSUs and any other then-outstanding awards of Mr. Freeburg under the Plan shall vest and become exercisable in full immediately prior to the occurrence of a Change in Control, as defined in the Plan, subject to Mr. Freeburg’s continuous employment through such Change in Control following the grant of the Initial RSUs. Mr. Freeburg will be eligible to receive equity awards under the Plan as determined by the CEO and Board. Mr. Freeburg will also be entitled to receive certain other benefits such as housing and participation in retirement and welfare plans.

During employment with the Company through the twelve month period following termination of employment, Mr. Freeburg agrees not to set up or engage in any business enterprise that would be in competition with the Company in its oncology-based laboratory services and/or pharma services businesses. Mr. Freeburg is also subject to limitations on solicitation of Company personnel and on disclosure of confidential information (as defined in the Freeburg Employment Agreement), and Mr. Freeburg agreed to assign to the Company any work product developed or made while so employed.