THE
MERGER (PROPOSAL 1)
This
discussion of the merger is qualified in its entirety by reference to the merger agreement, which is attached to this proxy statement
as Annex A and incorporated herein by reference. You should read the entire merger
agreement carefully as it is the legal document that governs the merger.
The
merger agreement provides that Merger Sub will merge with and into the Company and the Company will be the surviving corporation
in the merger. As a result of the merger, the common stock will cease to be publicly traded and the Company will become a subsidiary
of Advisor Group.
Merger
Consideration
In
the merger, each share of common stock issued and outstanding at the effective time, (other than (i) shares owned by Advisor Group
or any of its direct or indirect wholly owned subsidiaries or the Company (and in each case not held on behalf of third parties)
and (ii) Company restricted shares) will be converted into the right to receive cash in the amount of $3.50 per share, without
interest.
At
the effective time, (i) each share owned by Advisor Group or any of its direct or indirect wholly owned subsidiaries or the Company
(and in each case not held on behalf of third parties) will be cancelled and will cease to exist, and no consideration will be
payable for such shares and (ii) all outstanding Company restricted shares will be accelerated and entitle the holder to receive
cash equal to the product of (A) the number of Company restricted shares held by such holder and (B) the per share merger consideration,
less applicable withholding taxes.
Background
of the Merger
The
Board regularly reviews the near-term and long-term strategy, performance, positioning, and operating prospects of the Company
with a view toward enhancing shareholder value. Beginning in early 2019, the Board focused on the Company’s share price,
outlook and long-term prospects on a standalone basis.
In
February 2019, a third party, which we refer to as Party B, suggested to Company management that the Company consider a potential
sale of the Company to Party B. After updating the Board on this outreach, Company management asked Jefferies, an investment banking
firm with expertise in the financial services industry and familiarity with the Company, to assist the Company in its evaluation
of a potential sale of the Company to Party B.
On
February 25, 2019, Party B signed a non-disclosure agreement with the Company and began receiving confidential Company information.
This led to further discussions regarding a potential strategic transaction.
On
March 26, 2019, Party B communicated to Company management that it was interested in acquiring all of the outstanding shares of
common stock of the Company at purchase price range of $4.75-$5.00 per share. The Company’s common stock price closed at
$2.87 per share on the NYSE American on March 26, 2019. Representatives of Jefferies, on behalf of the Company, asked Party
B to submit a written indication of interest for consideration by the Board.
One
week later, on April 2, 2019, Party B informed Company management and representatives of Jefferies that, despite its initial indication,
it was not prepared to proceed with an acquisition of the Company at that time, but that it may be interested in resuming discussions
in the next several months. Party B indicated that it was withdrawing its interest because its management team did not then have
the bandwidth to devote the necessary resources to pursue an acquisition of the Company. Company management then updated the Board
on the latest development.
On
April 23, 2019, the Board held a meeting with members of management present. At the meeting, the Board and management discussed
the Company’s strategic plans going forward and reviewed a management presentation provided to the Board in advance of the
meeting, which included new cost-savings initiatives to better position the Company given the changing industry dynamics. The
Company’s common stock price closed at $3.91 per share on the NYSE American on April 23, 2019.
Following
the Board meeting on April 23, 2019, Company management began implementing cost-cutting and other efficiency initiatives as discussed
with the Board.
In
early July 2019, at the request of the Board, management asked Jefferies to assist it in a preliminary evaluation of whether the
Company should more broadly consider potential strategic alternatives, including a sale of the Company at that time in light of
continued consolidation in the industry and the need for greater scale in order to compete effectively. Management asked Jefferies
to give its preliminary perspective on a potential process at an upcoming meeting of the Board scheduled for July 8, 2019. The
Company’s common stock price closed at $3.14 per share on the NYSE American on July 8, 2019.
On
July 8, 2019, the Board held a meeting with representatives of Sullivan & Cromwell LLP, which we refer to as Sullivan &
Cromwell, the Company’s outside legal counsel, present. The Board convened to consider whether the Board should initiate
a formal process for the consideration of potential strategic alternatives for the Company, including a potential sale of the
Company. At the meeting, representatives of Sullivan & Cromwell discussed the legal framework governing the Board’s
consideration of a sale of the Company and gave a presentation on the directors’ fiduciary duties in a change of control
context. The Board discussed the Company’s growth, performance, recent consolidation in the industry, and the risks of remaining
independent, among others, as reasons for exploring a sale process, and also discussed the potential retention of Jefferies to
advise on a strategic review. Representatives of Jefferies joined the meeting and discussed current market conditions and certain
preliminary perspectives on its recommendation with respect to the process and timeline for exploring the potential sale of the
Company, including Jefferies’ perspectives on companies that the Board could consider including in
a potential outreach.
At
the conclusion of the meeting on July 8, 2019, the Board determined (i) that it would be advisable and in the best interests of
the shareholders of the Company for the Board to initiate a process for the consideration of potential strategic alternatives
for the Company, including a potential sale of the Company, (ii) to engage Jefferies to act as the Company’s financial advisor
in connection with the exploratory process and (iii) to establish a transaction committee of the Board, which we refer to as the
transaction committee, to oversee and manage the process on behalf of the Board and to provide regular updates to the Board regarding
the status of the process. The Board adopted resolutions to authorize and approve the foregoing, including authorizing the officers
of the Company, subject to the oversight of the transaction committee, to solicit third parties to determine their interest in
a potential strategic transaction with the Company, to enter into customary non-disclosure agreements with any interested parties,
to negotiate definitive transaction documents with one or more interested parties (subject to Board approval), and to take any
other actions consistent with such resolutions of the Board and approved by the transaction committee.
Between
July 8, 2019 and September 5, 2019, the date of the next meeting of the Board, management, with the assistance of Jefferies,
established a process for interested parties to submit indications of interest and to conduct due diligence on the Company
and populated a virtual data room for due diligence purposes, which we refer to as the virtual data room.
On
July 9, 2019, the transaction committee approved the execution of an engagement letter with Jefferies, as discussed with the Board.
On
July 19, 2019, Company management updated the transaction committee on the process, including providing a summary of developments.
On
July 26, 2019, Company management updated the Board on the process, including providing a summary of developments.
On
August 9, 2019, Company management updated the Board on the process, including providing a summary of developments, status of
management’s efforts to populate the virtual data room, which was expected to be completed by August 26, 2019 or the week
thereafter, and preliminary perspectives of Company management and representatives of Jefferies on next steps to launch the outbound
process.
From
July 8, 2019 to September 5, 2019, the Company’s common stock price declined, reaching a low of $1.81 per share on
the NYSE American on August 27, 2019 and closing at $2.09 per share on the NYSE American on September 5, 2019.
On
September 5, 2019, the Board held a meeting with representatives of Jefferies and Sullivan & Cromwell present. At the meeting,
Jefferies updated the Board on progress made by the Company in preparation for a potential outbound process since the July
8, 2019 meeting of the Board. Jefferies also presented its perspectives on process and timing considerations, and the
parties (including a mix of strategic and financial parties) who could be interested in a potential acquisition of
the Company, including Advisor Group and Party B. The Board determined that the 13 parties discussed with Jefferies should
be contacted on a no-names basis regarding the opportunity, with interested parties (and their financing sources, if applicable)
obtaining access to the virtual data room after executing a non-disclosure agreement with the Company. The Board authorized Jefferies
to begin the outreach to potentially interested parties.
Between
September 6, 2019 and the end of September 2019, Jefferies, acting at the instruction of the Board, contacted the 13 parties
previously discussed with the Board. An additional six parties either reached out directly to Jefferies or management to
inquire about the process based on rumors in the market or were determined by management to be potentially interested parties.
Representatives of Jefferies engaged in preliminary, confidential discussions with each of these 19 parties to determine whether
there was an interest in pursuing a potential transaction with the Company.
On
September 16, 2019, Company management updated the transaction committee on the process, including providing a summary of initial
outreach to the previously identified third parties.
On
September 18, 2019, Jefferies and Company management updated the transaction committee, including that Jefferies had received
inbound inquiries from parties that were not among the 13 parties previously identified at the September 5, 2019 meeting of the
Board.
On
September 25, 2019, Company management updated the transaction committee on the process, including providing a summary of developments.
On
October 7, 2019, Company management updated the Board on the process, including providing a summary of developments.
Of
the 19 parties who discussed the opportunity with Jefferies or management, 15 signed non-disclosure agreements with the Company
and obtained access to the virtual data room, which included confidential Company information and a bid instruction letter requesting
that preliminary indications of interest be submitted by October 14, 2019. On October 10, 2019, two of the 19 parties, Advisor
Group and Party B, attended in-person meetings in New York, New York with Company management. A third strategic party was invited
to an in-person meeting with management but such party declined the invitation and ultimately did not submit a preliminary indication
of interest. Only these three parties were invited to management meetings as they were believed to be the most likely to be in
a position to pay the highest value in a transaction with the Company given the potential for synergies.
On
October 14, 2019, four of the 19 parties, including Advisor Group, Party B and two other parties, which we refer to as Party C
and Party D, respectively, submitted preliminary indications of interest for a strategic transaction involving the Company. One
of the 19 parties, which we refer to as Party E, communicated an interest to partner with another bidder but did not submit a
written proposal.
Advisor
Group’s preliminary indication of interest proposed that the Company enter into exclusivity with Advisor Group to accelerate
its ability to finalize a transaction on an expedited timeline. Along with its preliminary indication of interest, Advisor Group
also submitted “highly confident” letters from Barclays, Credit Suisse, Deutsche Bank, RBC and UBS to demonstrate
its ability to finance a transaction.
On
October 15, 2019, the Board held a meeting with representatives of Jefferies and Sullivan & Cromwell present. At the meeting,
Jefferies provided an update to the Board on the status of discussions with the 19 parties and described the preliminary indications
of interest submitted on October 14, 2019 by Advisor Group, Party B, Party C and Party D, each proposing to acquire all of the
outstanding shares of common stock of the Company: Advisor Group at a purchase price of $3.75 per share; Party B at a purchase
price of $2.50 per share; Party C at a purchase price range of $2.30-$2.60 per share; and Party D at a purchase price range of
$2.30-$2.91 per share. Jefferies noted that Party B verbally communicated on a call with Jefferies on October 15, 2019, prior
to the Board meeting, that there was potential room to raise its offer price per share if it was invited into the second round
of the process. Party B and its financial advisor also noted that there were a number of constraints that informed its $2.50 offer
price per share and would limit its ability to raise the price significantly with a likely maximum price in the low $3.00 per
share range. The Company’s common stock price closed at $2.10 per share on the NYSE American on October 14, 2019. Jefferies
discussed its perspectives on the preliminary indications of interest. In light of the price per share offered by Advisor Group
and Party B, respectively, including Party B’s verbal communication that it could potentially raise its offer price per
share if invited to the second round and that, of the 19 parties, Advisor Group and Party B had conducted the most in-depth due
diligence to date, including meeting with management, the Board determined, after discussions with its financial and legal
advisors, to invite only Advisor Group and Party B into the second round of the process. The Board also determined not
to grant exclusivity to Advisor Group in order to give Party B more time to conduct its due diligence and potentially
increase its offer. The Board discussed with Jefferies the fact that Party C, Party D and Party E were financial
bidders that would be unable to generate synergies or the returns that strategic bidders, including Advisor Group and Party B,
would be able to generate and thus were unlikely to increase their bids to the level proposed by Advisor Group if invited to the
second round. The Board also discussed with Jefferies the likelihood that inclusion of Party C, Party D and/or Party
E in the second round would require even more time from management since these parties were not as far along in their due diligence
of the Company as either of Advisor Group or Party B and would increase the risk of information leakage with respect to the process
and level of the bids. After further discussion of the preliminary indications of interest, as well as the risks described above
concerning potential diversion of management resources and information leaks, the Board determined to pursue a limited second
round process with Advisor Group and Party B only and to have Jefferies contact Advisor Group and Party B to inform them they
were each invited into the second round.
Between
October 16, 2018 and October 26, 2018, management, with the assistance of Jefferies, continued due diligence discussions
and negotiations with Advisor Group and Party B and continued to make available in the virtual data room additional confidential
information about the Company. On October 18, 2019, an initial draft of the merger agreement prepared by Sullivan & Cromwell
was uploaded to the virtual data room.
On
October 25, 2019, Advisor Group’s legal counsel, Eversheds Sutherland (US) LLP, which we refer to as Eversheds, sent to
Sullivan & Cromwell an initial draft of an exclusivity agreement along with a revised draft of the merger agreement.
On
October 26, 2019, Advisor Group communicated to Company management and Jefferies that, based on its due diligence, it was reducing
its proposed purchase price from $3.75 to $3.25. Company management directed Jefferies to inform Advisor Group that the Company
was unwilling to enter into exclusivity at $3.25 per share.
Later
on October 26, 2019, Advisor Group submitted to Jefferies a revised indication of interest, proposing to acquire all of the outstanding
shares of common stock of the Company at a purchase price of $3.50 per share, up $0.25 per share from the purchase price that
Advisor Group had proposed earlier on October 26, 2019, but down $0.25 per share from the purchase price per share set forth in
Advisor Group’s preliminary indication of interest. Advisor Group noted that its revised indication of interest was conditioned
on the Company entering into an exclusivity agreement with Advisor Group by no later than 1:00 p.m., Eastern Time,
on October 27, 2019. The Company’s common stock price closed at $1.98 per share on the NYSE American on October 25, 2019.
Also
on October 26, 2019, the Board met with representatives of Jefferies and Sullivan & Cromwell present. At the meeting, representatives
of Sullivan & Cromwell summarized key issues in the draft exclusivity agreement and revised draft of the merger agreement
provided by Eversheds on October 25, 2019, and Jefferies provided an update to the Board on the status of discussions with Advisor
Group and Party B. After carefully analyzing Advisor Group’s written proposal, considering the $2.50 price per share previously
submitted by Party B, taking into account Party B’s communication to Jefferies that its ability to raise the offer price
significantly was constrained by a number of factors, as well as consulting with representatives of Sullivan & Cromwell and
Jefferies, the Board determined to enter into exclusivity with Advisor Group at a price of $3.50 per share.
On
October 27, 2019, the Company entered into the exclusivity agreement with Advisor Group, which provided for a 19-day period
of exclusivity through November 15, 2019, which would automatically be extended an additional seven-day period through
November 22, 2019 if, upon expiration of the initial 19-day period, the parties continued to engage in good faith
discussions regarding a proposed transaction at a price of $3.50 per share and upon terms and conditions that were at least
as favorable to the Company and its shareholders as the terms and conditions reflected in the revised draft of the merger
agreement that Eversheds sent to Sullivan & Cromwell on October 25, 2019.
Later on
October 27, 2019, representatives of Jefferies, at the direction of the Board, communicated to Party B that the Company had
entered into exclusivity with another party. Party B indicated its continuing interest but did not increase its offer to
acquire all of the outstanding shares of common stock of the Company above a purchase price of $2.50 per share.
On
October 29, 2019, Sullivan & Cromwell sent Eversheds comments to the latest draft of the merger agreement that had been provided
by Eversheds on October 25, 2019.
Also
on October 29, 2019, various news outlets including Bloomberg News published articles disclosing that the Company was exploring
a sale. The Company’s common stock price closed at $2.01 per share on the NYSE American on October 28, 2019, the day before
the publication of the Bloomberg News article, and at $2.25 per share on the NYSE American on October 29, 2019, the day of publication
of the Bloomberg News article.
On
October 30, 2019, Eversheds sent Sullivan & Cromwell a list of open issues in the merger agreement and initial drafts of the
equity commitment letter and a form of voting agreement that Advisor Group would require from each director of the Company as
well as Vector Group, Ltd., a greater than 10% shareholder of the Company, in connection with the signing of the merger
agreement. Sullivan & Cromwell and Eversheds discussed changes to various provisions in the merger agreement during the remainder
of the week.
From
November 1, 2019 through November 11, 2019, representatives of the Company, Advisor Group and their respective advisors extensively
negotiated and exchanged drafts of the transaction documents, including the merger agreement, the disclosure letter to the merger
agreement, the form of voting agreement to be entered into by the Company’s directors and Advisor Group, and Advisor Group’s
equity commitment letter and debt commitment letter. Negotiated issues included, among other things, the amount of the termination
fee payable by the Company in the event of a superior proposal, the elimination of a “force-the-vote” provision proposed
by Advisor Group that the Company still hold a shareholder vote in the event of a superior proposal, the amount of and circumstances
under which a reverse break fee would become payable by Advisor Group and remedies available to the Company upon a breach or failure
to close by Advisor Group, and the elimination of a requirement proposed by Advisor Group that the voting obligations under the
director voting agreements would survive the termination of the merger agreement. The Board was focused on an effective “fiduciary-out”
in the event of a superior proposal and certainty of closing if a transaction were announced. Concurrently, Advisor Group, Vector
Group, Ltd., and their respective counsel negotiated and exchanged drafts of the Vector voting agreement, which were always provided
to the Company’s counsel.
On
November 8, 2019, Company management updated the transaction committee on the status of negotiations, including with respect to
Advisor Group’s debt commitment.
On
November 10, 2019, just prior to a scheduled meeting of the Board to approve the merger, Advisor Group communicated to Company
management and Jefferies that, based on its due diligence, it was reducing its proposed purchase price from $3.50 to $3.23 per
share. Advisor Group indicated a willingness to allow for recovery of up to half of the $0.27 per share reduction two years after
the closing through a contingent value structure.
The
Board then met with representatives of Jefferies and Sullivan & Cromwell present. At the meeting, Company management and representatives
of Jefferies described Advisor Group’s proposed reduction in the purchase price. After carefully analyzing Advisor Group’s
revised proposal, considering the timing of the revised proposal and consulting with representatives of Sullivan & Cromwell
and Jefferies, the Board determined to reject Advisor Group’s revised proposal and directed Jefferies to communicate to
Advisor Group that the Company was prepared to approve the transaction with Advisor Group at a price of $3.50 per share in cash
but otherwise would wait for Advisor Group’s exclusivity to expire on November 15, 2019 and reopen the process to other
interested parties.
On
November 11, 2019, Advisor Group communicated to Company management and Jefferies that it was prepared to proceed with the transaction
at a price of $3.50 per share in cash.
Later
on November 11, 2019, the Board, together with members of management, and representatives of Sullivan & Cromwell and Jefferies,
met to discuss and review the draft definitive merger agreement and other transaction documents and to consider the proposed transaction.
Representatives of Sullivan & Cromwell reviewed the fiduciary duties of the directors and the terms of the transaction documents.
Representatives of Jefferies then reviewed its financial analyses with respect to the proposed per share merger consideration
and rendered an oral opinion, which was confirmed by delivery of a written opinion, dated November 11, 2019, to the effect that,
as of such date, and based on and subject to the various assumptions made, procedures followed, matters considered
and limitations and qualifications on the scope of the review undertaken as described in its opinion, the cash consideration
of $3.50 per share of common stock to be received by the holders of common stock pursuant to the merger agreement was fair
from a financial point of view to such holders, which opinion is summarized in “—Opinion of the Company’s Financial
Advisor” beginning on page 37. The Board also discussed the risks and uncertainties facing the Company as a standalone entity.
Following extensive discussion, the Board unanimously determined that the merger agreement, the merger and the other transactions
contemplated by the merger agreement were fair to, advisable and in the best interests of the Company and its shareholders and
adopted, approved and declared advisable the execution, delivery and performance of the merger agreement, the merger and the other
transactions contemplated by the merger agreement and resolved to submit the merger agreement to the Company’s shareholders
to approve the merger agreement, the merger and the other transactions contemplated thereby.
Following
the Board meeting, the parties executed the definitive merger agreement and other transaction documents and the Company and Advisor
Group issued a joint press release on November 11, 2019, announcing the proposed transaction.
Reasons
for the Merger; Recommendation of the Company’s Board of Directors
The
Board has unanimously determined that the merger agreement, the merger and the other transactions contemplated by the merger agreement
are fair to, advisable and in the best interests of the Company and its shareholders and adopted, approved and declared advisable
the execution, delivery and performance of the merger agreement, the merger and the other transactions contemplated by the merger
agreement, resolved to submit the merger agreement to the Company’s shareholders at a special meeting of shareholders to
approve the merger agreement, the merger and the other transactions contemplated thereby and recommended that the shareholders
of the Company vote to approve the merger agreement, the merger and the other transactions contemplated thereby.
The
Board unanimously recommends that you vote (1) “FOR” the merger proposal; (2) “FOR” the non-binding,
advisory proposal to approve compensation that will or may become payable to the Company’s named executive officers in connection
with the merger; and (3) “FOR” approval of the proposal to adjourn the special meeting, if necessary or appropriate,
including if there are not holders of a sufficient number of shares of common stock present or represented by proxy at the special
meeting to constitute a quorum.
In
the course of reaching its determination and recommendation, the Board consulted with and received the advice and assistance of
its legal and financial advisors. In recommending that shareholders vote in favor of approval of the merger agreement, the Board
considered a number of factors, including the following (which factors are not necessarily presented in order of relative importance):
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Per
Share Merger Consideration. The Board considered the $3.50 per share merger consideration relative to the current and
historical trading prices and anticipated future trading prices of the common stock, including the fact that the per share
merger consideration constituted a premium of approximately:
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74%
to the closing price per share of $2.01 on October 28, 2019, which was the last full trading day prior to the publication
of the Bloomberg News article disclosing that the Company was considering a sale;
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22.8%
to the closing price per share of $2.85 on November 8, 2019, which was the last full trading day prior to the announcement
of the transaction; and
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56%
to the volume-weighted average price during the two months ended November 8, 2019 and 26% to the volume-weighted average price
during the four months ended November 8, 2019, which two-month and four-month periods include eight full trading days after
publication of the Bloomberg News article disclosing that the Company was considering a sale.
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Thorough
Process. The Board considered the Company’s thorough exploratory process covering 19 potentially interested parties,
including a mix of strategic and financial buyers, of which 15 signed non-disclosure agreements with the Company and four
submitted preliminary indications of interest for a strategic transaction involving the Company, and that Advisor Group’s
per share offer price substantially exceeded the other three offers received. The Board also considered that the Company’s
exploratory process was made public in the Bloomberg News article published on October 29, 2019 and no additional parties
indicated interest for a strategic transaction involving the Company following such publication.
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Business
and Financial Condition of the Company. The Board considered, after discussions with its financial advisor and members
of management, the per share merger consideration relative to other alternatives reasonably available to the Company, including
the continued standalone operation of the Company as an independent public company and especially in light of the current
environment in the industry as well as broader economic and commercial trends affecting the Company’s business and financial
results, including:
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the
Board’s assessment of the Company’s business, assets and prospects, its competitive position and historical and
projected financial performance and the nature of the industry in which the Company operates, including anticipated industry
consolidation trends and changing competitive dynamics;
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the
strategic alternatives reasonably available to the Company and the risks and uncertainties associated with those alternatives;
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the
risks and uncertainties relating to possible future headwinds for companies operating in the industry in which the Company
operates, including the potential need for greater scale to be able to compete effectively in the markets in which the Company
operates;
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the
risks and uncertainties relating to anticipated structural changes in the Company’s industry due to technological changes
and regulatory uncertainties; and
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the
impact of interest rate policy tightening by the Board of Governors of the Federal Reserve System on the Company’s outlook,
including the impact of interest rate cuts in July 2019, September 2019 and October 2019, which could adversely
impact service fee revenues received from our clearing firms and from cash sweep programs.
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Certainty
of Consideration. The Board considered that the all-cash merger consideration provides the shareholders with certainty
of value and, upon closing, immediate liquidity for their shares, especially when viewed against the potential risks and uncertainties
inherent in the Company’s business, including risks associated with remaining a standalone entity and changing competitive
dynamics.
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Receipt
of Fairness Opinion from Jefferies. The Board considered that in connection with the merger, Jefferies rendered its oral
opinion, subsequently confirmed in writing, to the effect that, as of November 11, 2019, and based on and subject to the various
assumptions made, procedures followed, matters considered and limitations and qualifications on the scope of the
review undertaken as described in its opinion, the merger consideration of $3.50 per share in cash to be received by
the holders of shares of common stock pursuant to the merger agreement, was fair, from a financial point of view,
to such holders, as more fully described below in the section titled “—Opinion of the Company’s Financial
Advisor” and which written opinion is attached in its entirety as Annex D hereto. The summary of the opinion
of Jefferies herein is qualified in its entirety by reference to the full text of the opinion.
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Likelihood
of Completion; Certainty of Payment. The Board considered its belief that, absent a superior proposal, the merger represented
a transaction that would likely be consummated based on, among other factors:
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the
absence of any financing condition to consummation of the merger and the fact that Advisor Group provided evidence of committed
sources of equity and debt financing that would enable it to consummate the merger;
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Advisor
Group’s reputation and its credibility as an acquiror;
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the
fact that there are not expected to be significant antitrust or other regulatory impediments to completing the merger; and
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the
fact that the conditions to the closing of the merger are specific and limited in 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 “material
adverse effect” qualification.
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Other
Terms of the Merger Agreement. The Board considered other terms and conditions of the merger agreement and related transaction
documents, including:
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the
provision of the merger agreement allowing the Board to change its recommendation prior to obtaining the company shareholder
approval in order to enter into an alternative agreement with respect to a superior proposal, subject to (i) the Company’s
notification and good faith negotiation obligations in relation to Advisor Group’s matching rights and (ii) Advisor
Group’s right to terminate the merger agreement and receive payment of the applicable termination fee;
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the
provisions of the merger agreement entitling the Company to seek specific performance of Advisor Group’s obligation
to consummate the merger and, if not specific performance, uncapped monetary damages or, in the event that, despite Advisor
Group’s compliance with its covenants to obtain debt financing, Advisor Group fails to obtain financing to consummate
the merger, a reverse termination fee of $35.3 million;
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the
provisions of the merger agreement requiring Advisor Group to use its commercially reasonable efforts to obtain applicable
regulatory approvals to consummate the merger;
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the
termination date of the merger agreement on which date either party, subject to certain exceptions, can terminate the merger
agreement, and the Board’s view that the termination date, and the provisions of the merger agreement providing for
an extension of the termination date under certain circumstances, allow for sufficient time to consummate the merger; and
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the
Board’s belief that the other terms of the merger agreement, taken as a whole, are reasonable.
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Support
of the Company’s Largest Shareholders. The Board considered the fact that the Company’s directors and its
largest shareholder entered into voting agreements with Advisor Group and agreed to support the merger, subject to certain
exceptions, including in the event that the merger agreement is terminated by the Company in order to enter into an alternative
agreement with respect to a superior proposal.
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In
the course of reaching its recommendation, the Board also considered a variety of risks and potentially negative factors concerning
the merger and the merger agreement, including the following:
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that
the shareholders will have no ongoing equity participation in the Company following the merger and the shareholders will cease
to participate in the Company’s future earnings or growth, if any, and will not benefit from increases, if any, in the
value of the Company following the merger;
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the
risk that the merger will be delayed or will not be completed, including the failure to satisfy the conditions to the completion
of the merger, as well as the potential loss of value to the shareholders and the potential negative impact on the operations
and prospects of the Company if the merger agreement is terminated or the merger is not completed for any reason;
|
|
|
|
|
●
|
the
significant effort and cost involved in connection with negotiating the merger agreement and completing the merger (including
certain costs and expenses if the merger is not consummated), the substantial management time and effort required to effectuate
the merger and the related disruption to the Company’s day-to-day operations during the pendency of the merger;
|
|
|
|
|
●
|
the
possibility that the financing contemplated by Advisor Group will not be obtained, resulting in Advisor Group not having sufficient
funds to complete the merger;
|
|
|
|
|
●
|
the
risk, if the merger is not consummated, that the pendency of the merger could affect adversely the relationship of the Company
and its subsidiaries with their respective employees and financial advisors (including making it more difficult to attract
and retain key personnel and the possible loss of key personnel) and customers;
|
|
|
|
|
●
|
the
requirement that the Company pay Advisor Group a termination payment of $19 million under certain circumstances following
termination of the merger agreement, including if Advisor Group terminates the merger agreement as a result of the Board changing
its recommendation or the Company terminates the merger agreement to enter into an alternative agreement with respect to a
superior proposal;
|
|
|
|
|
●
|
the
restrictions imposed by the terms of the merger agreement on the conduct of the Company’s business prior to completion
of the merger, which may delay or prevent the Company from undertaking business opportunities that may arise pending completion
of the merger, and the resultant risk if the merger is not consummated;
|
|
|
|
|
●
|
as
the transaction has a potential outside date as late as June 10, 2020, that the shareholders could be asked to vote
on approval of the merger agreement in advance of completion of the transaction, depending on when the transaction actually
closes;
|
|
|
|
|
●
|
the
receipt of cash in exchange for the common stock pursuant to the merger will be a taxable transaction for U.S. federal income
tax purposes for many of the shareholders; and
|
|
|
|
|
●
|
the
Company’s officers and directors may have interests in the merger that are different from, or in addition to, the interests
of the shareholders, including the acceleration of Company options and Company restricted shares held by officers and directors,
change of control and retention bonuses that will be payable to certain officers at or following the closing, the payment
of severance to officers if a termination of employment were to occur in connection with the merger, and the interests of
the Company’s directors and officers in being entitled to continued indemnification, advancement of expenses and insurance
coverage from the surviving corporation under the merger agreement.
|
The
above discussion of the information and factors considered by the Board is not intended to be exhaustive, but indicates the material
matters considered. In reaching its determination and recommendation, the Board did not quantify, rank or assign any relative
or specific weight to any of the foregoing factors, and individual members of the Board may have considered various factors differently.
The Board did not undertake to make any specific determination as to whether any specific factor, or any particular aspect of
any factor, supported or did not support its ultimate recommendation. Moreover, in considering the information and factors described
above, individual members of the Board each applied his or her own personal business judgment to the process and may have given
differing weights to differing factors. The Board based its unanimous recommendation on the totality of the information presented.
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 entitled “Cautionary Statements Regarding Forward-Looking Information.”
Certain
Unaudited Company Forecasts
The
Company does not, as a matter of course, publicly disclose long-term forecasts or projections as to future revenues, earnings
or other results due to, among other reasons, the uncertainty, unpredictability and subjectivity of the underlying assumptions
and estimates. However, the Company is including in this proxy statement certain unaudited prospective financial information that
was included in the unaudited prospective financial information made available to the Board for purposes of evaluating the merger
and to representatives of Jefferies for purposes of rendering its fairness opinion and performing its related financial analyses,
as described in the section titled “—Opinion of the Company’s Financial Advisor” beginning on page 37.
Such unaudited prospective financial information included, among other things, consolidated total revenue, total expenses, income
before income taxes and adjusted EBITDA for the years 2019 through 2023 that were prepared by management of the Company and not
for public disclosure, which we refer to as the Management Projections. The Company also made available certain unaudited prospective
financial information to Advisor Group in connection with the merger. The unaudited prospective financial information made available
to Advisor Group was the same as the Management Projections except with respect to public company costs, which were excluded
from the information made available to Advisor Group but were included in the Management Projections.
The
Management Projections were prepared by management in good faith based on management’s best available estimates, judgments
and assumptions with respect to the Company’s future financial performance at the time they were prepared and speak only
as of that time. The summaries of the Management Projections are not included in this proxy statement to induce any shareholder
of the Company to vote in favor of the merger proposal or any other proposals to be voted on at the special meeting.
The
Management Projections were prepared by the Company’s management in August 2019 based on certain assumptions that management
then believed to be potentially achievable. While the Management Projections were prepared in good faith by management, no assurance
can be made regarding future events and actual results may be significantly higher or lower than forecasted by the Management
Projections. The Management Projections also reflect assumptions as of their respective time of preparation as to certain business
decisions that are subject to change. Although presented with numerical specificity, the Management Projections are based upon
a variety of estimates and numerous assumptions made by management with respect to, among other matters, cost-savings (including
from the cost-savings initiatives discussed in the section titled “The Merger—Background of the Merger” beginning
on page 27), interest rate cuts by the Board of Governors of the Federal Reserve System, financial advisor growth and attrition
and costs of being a public company. Furthermore, the Management Projections do not take into account any failure of the merger
to be completed and should not be viewed as reflective of management’s expectations under those circumstances. In addition,
because the Management Projections cover multiple years, such information by its nature becomes less reliable with each successive
year. As a result, there can be no assurance that the estimates and assumptions made in preparing the Management Projections will
prove accurate, that the projected results will be realized or that actual results will not be significantly higher or lower than
projected results. The Management Projections cannot, therefore, be considered a guaranty of future operating results, and this
information should not be relied on as such.
Except
to the extent required by law, the Company does not intend to update or otherwise revise the Management Projections to reflect
circumstances existing after the date they were prepared or to reflect the occurrence of future events, even in the event that
any or all of the assumptions underlying such prospective financial information are no longer appropriate.
The
Management Projections were not prepared with a view toward public disclosure, soliciting proxies or complying with U.S. Generally
Accepted Accounting Principles, which we refer to as GAAP, the published guidelines of the SEC regarding financial projections
and forecasts or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation
of financial projections and forecasts. Neither the Company’s independent registered public accounting firm nor any other
independent registered public accounting firm has examined, compiled or otherwise performed any procedures with respect to the
prospective financial information contained in the Management Projections and, accordingly, neither the Company’s independent
registered public accounting firm nor any other independent registered public accounting firm has expressed any opinion or given
any other form of assurance on such information or its achievability, and assumes no responsibility for, and disclaims any association
with, the prospective financial information.
The
Management Projections include “non-GAAP financial measures,” which are financial measures that are not calculated
in accordance with GAAP. These non-GAAP financial measures should not be viewed as a substitute for GAAP financial measures and
may be different from non-GAAP financial measures used by other companies. Furthermore, there are limitations inherent in non-GAAP
financial measures because they exclude items, including charges and credits, that are required to be included in a GAAP presentation.
The
following table summarizes the Management Projections:
|
|
|
2019E
|
|
|
|
2020E
|
|
|
|
2021E
|
|
|
|
2022E
|
|
|
|
2023E
|
|
|
|
|
($
in millions)
|
|
Total Revenues
|
|
$
|
1,466.8
|
|
|
$
|
1,594.3
|
|
|
$
|
1,695.0
|
|
|
$
|
1,818.6
|
|
|
$
|
1,984.7
|
|
% Growth Y/Y
|
|
|
5.4
|
%
|
|
|
8.7
|
%
|
|
|
6.3
|
%
|
|
|
7.3
|
%
|
|
|
9.1
|
%
|
Total Expenses
|
|
$
|
1,418.3
|
|
|
$
|
1,531.8
|
|
|
$
|
1,606.8
|
|
|
$
|
1,710.9
|
|
|
$
|
1,858.6
|
|
%
Growth Y/Y
|
|
|
5.5
|
%
|
|
|
8.0
|
%
|
|
|
4.9
|
%
|
|
|
6.5
|
%
|
|
|
8.6
|
%
|
Income Before Income Taxes
|
|
$
|
48.2
|
|
|
$
|
62.3
|
|
|
$
|
88.2
|
|
|
$
|
107.7
|
|
|
$
|
126.0
|
|
Adjusted EBITDA
|
|
$
|
113.5
|
|
|
$
|
129.9
|
|
|
$
|
154.7
|
|
|
$
|
178.4
|
|
|
$
|
199.2
|
|
Opinion
of the Company’s Financial Advisor
Opinion
of Jefferies LLC
The
Company retained Jefferies as its financial advisor in connection with the potential sale of the Company. In connection with this
engagement, the Company requested that Jefferies evaluate the fairness, from a financial point of view, of the per share merger
consideration to be received by holders of shares of common stock pursuant to the merger agreement. At a meeting of the Board
held on November 11, 2019, Jefferies rendered an oral opinion, subsequently confirmed by delivery of a written opinion dated November
11, 2019, to the Board to the effect that, as of that date and based on and subject to the various assumptions made, procedures
followed, matters considered and limitations and qualifications on the scope of review undertaken as described in its opinion,
the per share merger consideration to be received by the holders of shares of common stock pursuant to the merger agreement was
fair, from a financial point of view, to such holders.
The
full text of Jefferies’ opinion, which describes the assumptions made, procedures followed, matters considered and limitations
and qualifications on the scope of review undertaken by Jefferies in rendering its opinion, is attached as Annex D to this
proxy statement and is incorporated herein by reference. Jefferies’ opinion is for the use and benefit of the Board (in
its capacity as such) in its consideration of the merger, and Jefferies’ opinion did not address the relative merits of
the merger contemplated by the merger agreement as compared to any alternative transaction or opportunity that might be available
to the Company, nor did it address the underlying business decision by the Company to engage in the merger or the terms of the
merger agreement or the documents referred to therein. Jefferies’ opinion did not constitute a recommendation to any holder
of shares of common stock as to how any such shareholder should vote in the merger or how any such holder should act with respect
to the merger or any matter related thereto. The following summary is qualified in its entirety by reference to the full text
of Jefferies’ opinion.
In
arriving at its opinion, Jefferies, among other things:
|
(i)
|
reviewed
a draft dated November 10, 2019 of the merger agreement;
|
|
|
|
|
(ii)
|
reviewed
certain publicly available financial and other information about the Company;
|
|
|
|
|
(iii)
|
reviewed
certain information furnished to it by the Company’s management, including financial forecasts and analyses under various
business assumptions, relating to the business, operations and prospects of the Company;
|
|
|
|
|
(iv)
|
held
discussions with members of senior management of the Company concerning the matters described in clauses (ii) and (iii) above;
|
|
|
|
|
(v)
|
reviewed
the share trading price history and valuation multiples for the common stock and compared them with those of certain publicly
traded companies that Jefferies deemed relevant;
|
|
|
|
|
(vi)
|
reviewed
the proposed financial terms of the merger and compared them with the publicly available financial terms of certain other
transactions that Jefferies deemed relevant; and
|
|
|
|
|
(vii)
|
conducted
such other financial studies, analyses and investigations as Jefferies deemed appropriate.
|
In
its review and analysis and in rendering its opinion, Jefferies assumed and relied upon, but did not assume any responsibility
to independently investigate or verify, the accuracy and completeness of all financial and other information that was supplied
or otherwise made available by the Company or that was publicly available to Jefferies (including, without limitation, the information
described above), or that was otherwise reviewed by Jefferies. Jefferies relied on assurances of the management of the Company
that it is not aware of any facts or circumstances that would make such information inaccurate or misleading. In its review, Jefferies
did not obtain any independent evaluation or appraisal of any of the assets or liabilities of, nor did Jefferies conduct a physical
inspection of any of the properties or facilities of, the Company, and Jefferies was not furnished with, and assumed no responsibility
to obtain, any such evaluations, appraisals or physical inspections.
With
respect to the financial forecasts provided to and examined by Jefferies, Jefferies noted that projecting future results of any
company is inherently subject to uncertainty. The Company informed Jefferies, however, and Jefferies assumed, that such financial
forecasts were reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of the
management of the Company as to the future financial performance of the Company under various business assumptions. Jefferies
expressed no opinion as to the Company’s financial forecasts or the assumptions on which they are made.
Jefferies’
opinion is based on economic, monetary, regulatory, market and other conditions existing and which could be evaluated as of the
date of Jefferies’ opinion. Jefferies expressly disclaimed any undertaking or obligation to advise any person of any change
in any fact or matter affecting its opinion of which Jefferies becomes aware after the date of its opinion.
Jefferies
made no independent investigation of any legal or accounting matters affecting the Company or the merger, and Jefferies assumed
the correctness in all respects material to its analysis of all legal and accounting advice given to the Company and its Board,
including, without limitation, advice as to the legal, accounting and tax consequences of the terms of, and transactions contemplated
by, the merger agreement to the Company and its shareholders. In addition, in preparing the opinion, Jefferies did not take into
account any tax consequences of the merger to any holder of shares of common stock. Jefferies assumed that the final form of the
merger agreement would be substantially similar to the last draft reviewed by it in all respects material to its opinion. Jefferies
assumed that the merger will be consummated in accordance with the terms of the merger agreement without waiver, modification
or amendment of any term, condition or agreement and in compliance with applicable laws, documents and other requirements. Jefferies
also assumed that in the course of obtaining the necessary regulatory or third party approvals, consents and releases for the
merger, no delay, limitation, restriction or condition would be imposed that would have an adverse effect on the Company or the
contemplated benefits of the merger in any respect material to its opinion.
Jefferies’
opinion was provided for the use and benefit of the Board (in its capacity as such) in its consideration of the merger, and its
opinion did not address the relative merits of the transactions contemplated by the merger agreement as compared to any alternative
transaction or opportunity that might be available to the Company, nor did it address the underlying business decision by the
Company to engage in the merger or the terms of the merger agreement or the documents referred to therein. Jefferies’ opinion
does not constitute a recommendation to any holder of shares of common stock as to how any such holder should vote in the merger
or how any such holder should act with respect to the merger or any matter related thereto. In addition, Jefferies was not asked
to address, and its opinion did not address, the fairness to, or any other consideration of, the holders of any class of securities,
creditors or other constituencies of the Company, other than the holders of shares of common stock. Jefferies expressed no opinion
as to the price at which shares will trade at any time. Furthermore, Jefferies did not express any view or opinion as to the fairness,
financial or otherwise, of the amount or nature of any compensation payable or to be received by any of the Company’s officers,
directors or employees, or any class of such persons, in connection with the merger relative to the per share merger consideration
to be received by the holders of shares of common stock or otherwise. Jefferies’ opinion was authorized by the Fairness
Committee of Jefferies LLC.
In
connection with rendering its opinion to the Board, Jefferies performed a variety of financial and comparative analyses, which
are summarized below. The following summary is not a complete description of all analyses performed and factors considered by
Jefferies in connection with its opinion. The preparation of a fairness opinion is a complex process involving various determinations
as to the most appropriate and relevant quantitative and qualitative methods of financial analysis and the applications of those
methods to the particular circumstances and, therefore, is not necessarily susceptible to partial analysis or summary description.
Jefferies believes that its analyses must be considered as a whole. Considering any portion of Jefferies’ analyses or the
factors considered by Jefferies or focusing on information presented in tabular format, without considering all analyses and factors
or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying Jefferies’
analyses and opinion. Jefferies did not draw, in isolation, conclusions from or with regard to any one factor or method of analysis
for purposes of its opinion, but rather arrived at its ultimate opinion based on the results of all analyses undertaken by it
and assessed as a whole.
With
respect to the selected public companies and selected transactions analyses summarized below, no company or transaction used as
a comparison was identical or directly comparable to the Company or the merger. These analyses necessarily involved complex considerations
and judgments concerning financial and operating characteristics and other factors that could affect the public trading, acquisition
or other values of the companies or transactions concerned.
The
estimates of the future performance of the Company in or underlying Jefferies’ analyses are not necessarily indicative of
future results or values, which may be significantly more or less favorable than those estimates. In performing its analyses,
Jefferies considered industry performance, general business, economic, monetary, regulatory, market and other conditions and other
matters, many of which were beyond the control of the Company. Estimates of the financial value of companies do not purport to
be appraisals or necessarily reflect the prices at which companies or securities actually may be sold or acquired. Accordingly,
the estimates used in, and the range of the valuations resulting from, any particular analysis described below are inherently
subject to substantial uncertainty and should not be taken as Jefferies’ view of the actual value of the Company or its
securities.
The
per share merger consideration to be received by the holders of shares of common stock pursuant to the merger agreement was determined
through negotiations between the Company and Advisor Group, and the decision by the Company to enter into the merger agreement
was solely that of the Board. Jefferies’ opinion and financial analyses were only one of many factors considered by the
Board in its evaluation of the per share merger consideration and should not be viewed as determinative of the views of the Board
or management with respect to the merger or the per share merger consideration payable in the merger.
Financial
Analyses
The
following is a summary of the material financial analyses provided to the Board and performed by Jefferies in connection with
its opinion. The financial analyses summarized below include information presented in tabular format. In order to fully understand
Jefferies’ financial analyses, the tables must be read together with the text of each summary. The tables alone do not constitute
a complete description of the financial analyses. Considering the data below without considering the full narrative description
of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete
view of Jefferies’ financial analyses.
Selected
Public Companies Analysis. Jefferies reviewed publicly available financial, stock market and operating information of the
Company and the following six selected publicly traded companies in the wealth management or securities brokerage industries that,
given business and financial characteristics, Jefferies considered generally relevant for purposes of its analysis, which, collectively,
we refer to as the selected companies.
Selected
Companies
Blucora,
Inc.
Focus
Financial Partners, LLC
LPL
Financial Holdings Inc.
Raymond
James Financial
Stifel
Financial Corp.
Waddell & Reed Financial Inc.
Jefferies
reviewed, among other information, enterprise values, which we refer to as TEV, of the selected companies, calculated as fully-diluted equity values based on closing stock prices on November 8, 2019 plus total debt, preferred stock and non-controlling interests
(as applicable), less excess cash (either disclosed by the companies or estimated by Jefferies based on its professional judgment),
as a multiple of their calendar year 2019 and calendar year 2020 estimated earnings before interest, taxes, depreciation and amortization,
which we refer to as EBITDA, as adjusted for non-cash compensation, advisor loan amortization and one-time non-recurring items,
as applicable, which we refer to as adjusted EBITDA. Estimated financial data of the selected companies were based on publicly
available Wall Street research analysts’ estimates, public filings and other publicly available information. Estimated financial
data of the Company was based on financial forecasts and estimates of Company management.
The
overall low to high latest 12 month EBITDA multiples observed for the selected transactions were 7.9x to 16.8x, with a median
of 11.1x. Jefferies applied a selected range of latest 12 months EBITDA multiples of 8.0x to 10.0x derived from the selected transactions
to the Company’s latest 12 months (as of June 30, 2019) run-rate adjusted EBITDA. For purposes of this analysis, Jefferies
calculated run-rate adjusted EBITDA as latest 12 months adjusted EBITDA (as of June 30, 2019) further adjusted to reflect the
full annualized impact of savings achieved as part of the Company’s efficiency initiatives, the negative impact of interest
rate cuts on the Company’s cash sweep revenues, the annualized impact of net new advisors that joined the Company during
the latest 12 month period (as of June 30, 2019), the impact of increased clearing business credits and the impact of the Kestler
acquisition. Jefferies then calculated the Company’s equity value by subtracting the Company’s total debt as of
October 31, 2019 from the Company’s TEV and adding parent company cash as of October 31, 2019, and used the result to calculate
implied per share equity reference ranges.
This analysis indicated the following approximate implied per share reference ranges for the Company, as compared
to the per share merger consideration:
Implied
Per Share Equity Reference Ranges Based on:
|
|
TEV/2019E
Adjusted
EBITDA
|
|
|
TEV/2020E
Adjusted
EBITDA
|
|
|
Per
Share
Merger
Consideration
|
|
$
|
1.30-$2.03
|
|
|
$
|
1.68-$2.51
|
|
|
$
|
3.50
|
|
Selected
Transactions Analysis. Jefferies reviewed, to the extent publicly available, financial data relating to the following 14 selected
transactions announced since January 1, 2011, involving targets in the wealth management or securities brokerage industries that
Jefferies considered relevant for purposes of its analysis, which, collectively, we refer to as the selected transactions.
Announcement
Date
|
|
Buyer
|
|
Target
|
5/10/2019
|
|
Reverence
Capital Partners
|
|
Advisor
Group
|
3/19/2019
|
|
Blucora,
Inc.
|
|
1st
Global, Inc.
|
2/25/2019
|
|
Warburg
Pincus
|
|
Kestra
Financial Inc.
|
7/17/2018
|
|
Genstar
Capital
|
|
Cetera
Financial Group
|
8/16/2017
|
|
LPL
Financial LLC
|
|
National
Planning Holdings, Inc.
|
4/4/2016
|
|
Stone
Point Capital
|
|
Kestra
Financial Inc.
|
10/14/2015
|
|
Blucora,
Inc.
|
|
HD
Vest Financial Services
|
1/17/2014
|
|
RCS
Capital Corporation
|
|
J.P.
Turner & Company, LLC
|
1/16/2014
|
|
RCS
Capital Corporation
|
|
Cetera
Financial Group
|
11/16/2013
|
|
RCS
Capital Corporation
|
|
Summit
Financial Services Group, Inc.
|
10/2/2013
|
|
RCS
Capital Corporation
|
|
Investors
Capital Holdings, Ltd.
|
6/12/2013
|
|
RCAP
Holdings, LLC
|
|
First
Allied Holdings Inc.
|
7/31/2012
|
|
AIG
Advisor Group
|
|
Woodbury
Financial Services, Inc.
|
8/16/2011
|
|
Ladenburg
Thalmann Financial Services Inc.
|
|
Securities
America Financial Corporation
|
Jefferies
reviewed transaction values of the selected transactions as a multiple of each target company’s latest 12 months revenue
as of the applicable announcement date. Jefferies also reviewed transaction values of the selected transactions as a multiple
of such target company’s latest 12 months EBITDA. Financial data of the selected transactions were based on public filings,
other publicly available information and, in certain instances, non-public information which Jefferies included in the median
but did not explicitly present for each target. In certain instances, and where information was available, Jefferies used its
professional judgment to utilize run-rate financial revenue and EBITDA metrics in the calculation of transaction multiples.
Financial data of the Company was based on internal estimates of management.
The
overall low to high latest 12 months revenue multiples observed for the selected transactions were 0.2x to 1.8x, with a median
of 0.8x. Jefferies applied a selected range of latest 12 months revenue multiples of 0.7x to 0.9x derived from the selected transactions
to the Company’s latest 12 months (as of September 30, 2019) revenue. Jefferies then applied the same selected range of
latest 12 months revenue multiples to the Company’s latest 12 months (as of September 30, 2019) revenue, excluding revenue
from the Company’s insurance brokerage business which has lower margins than the Company’s independent broker-dealer
and investment banking businesses, and which was not a business line in any of the target companies reviewed in the selected transactions
analysis. Jefferies noted that the insurance business, which was acquired for $42 million in August 2014, generated $169.9 million
of revenue and $6.2 million of adjusted EBITDA for the 12 months ended September 30, 2019.
The
overall low-to-high latest 12-month EBITDA multiples observed for the selected transactions were 7.9x to 16.8x,
with a median of 11.1x. Jefferies applied a selected range of latest 12 months EBITDA multiples of 8.0x to 10.0x derived from
the selected transactions to the Company’s latest 12 months (as of June 30, 2019) run-rate adjusted EBITDA. For purposes
of this analysis, Jefferies calculated run-rate adjusted EBITDA as latest 12 months adjusted EBITDA (as of June 30, 2019) further
adjusted to reflect the full annualized impact of savings achieved as part of the Company’s efficiency initiatives, the
negative impact of interest rate cuts on the Company’s cash sweep revenues, the annualized impact of net new advisors that
joined the Company during the latest 12-month period (as of June 30, 2019), the impact of increased clearing business
credits and the impact of the Kestler acquisition. Jefferies then calculated the Company’s equity value by subtracting
the Company’s total debt as of October 31, 2019 from the Company’s TEV and adding parent company cash as of October
31, 2019, and used the result to calculate implied per share equity reference ranges.
This
analysis indicated the following approximate implied per share equity value reference range for the Company, as compared to the
per share merger consideration.
Revenue
Implied
Per Share Equity Reference Range
|
|
Per
Share Merger Consideration
|
|
$2.26-$4.02
|
|
$
|
3.50
|
|
$1.50-$3.09
|
|
$
|
3.50
|
|
(excluding revenues
from insurance brokerage business)
|
|
|
|
|
Adjusted
EBITDA
Implied Per Share Equity Reference
Range
|
|
Per Share Merger Consideration
|
|
$1.64-$3.06
|
|
$
|
3.50
|
|
Discounted
Cash Flow Analysis. Jefferies performed a discounted cash flow analysis of the Company, using a terminal multiple approach,
to calculate a range of implied present values of the unlevered, after-tax free cash flows that the Company was forecasted to
generate through the full fiscal year ending December 31, 2023, utilizing the Management Projections (which are summarized
in the section titled “The Merger—Certain Unaudited Company Forecasts” beginning on page 36). Terminal values
of the Company were calculated by applying to the Company’s projected adjusted EBITDA for the fiscal year ending
December 31, 2023 a selected range of adjusted EBITDA multiples of 7.0x to 9.0x, which range was selected by Jefferies in its
professional judgment. The present values (as of December 31, 2019) of the cash flows and terminal values were then calculated
using a selected discount rate range of 11.50% to 12.50% which were based on the estimated weighted average cost of capital calculation.
This analysis indicated the following approximate implied per share equity value reference range for the Company, as compared
to the per share merger consideration:
Implied Per Share Equity Reference
Range
|
|
Per Share Merger Consideration
|
|
$3.02-$4.81
|
|
$
|
3.50
|
|
The
discounted cash flow analysis is a widely used valuation methodology, but the results of such methodology are highly dependent
on the assumptions that must be made, including revenue growth rates, EBITDA estimates, terminal values and discount rates. The
analysis did not purport to be indicative of the actual values or expected values of the Company.
Certain
Additional Information
Jefferies
observed certain additional factors that were not considered part of its financial analyses for its opinion but rather were noted
for informational purposes, including, the following:
Jefferies
observed the premiums paid or proposed to be paid in selected mergers and acquisition transactions announced from January 1, 2017
to October 16, 2019. Jefferies applied a selected range of premiums of approximately 20% to 26% (reflecting the overall 25th
and 75th percentile premiums derived from such transactions based on the closing stock prices of the target companies involved
in such transactions one trading day prior to public announcement of such transactions) to the closing price of the shares of
common stock of $2.01 on October 28, 2019, the trading day immediately prior to the first media reports of a proposed transaction
involving the Company. Jefferies’ observations indicated an implied equity reference range for the shares of common stock
of approximately $2.41 to $2.53 per share. Jefferies also applied a selected range of premiums of approximately 21% to 32% (reflecting
the overall 25th and 75th percentile premiums derived from such transactions based on the closing stock prices of the target companies
involved in such transactions 30 calendar days prior to public announcement of such transactions) to the closing price of the
shares of common stock of $2.01 on October 28, 2019, which indicated an implied equity reference range for the shares of approximately
$2.43 to $2.65 per share.
Miscellaneous
The
Company has agreed to pay Jefferies for its financial advisory services in connection with the merger an aggregate fee of approximately
$13.0 million, of which $1.5 million became payable upon delivery of Jefferies’ opinion and approximately $11.5 million
of which is payable contingent upon consummation of the merger. The Company has also agreed to reimburse Jefferies for expenses,
including fees and expenses of counsel, reasonably incurred in connection with Jefferies’ engagement, and to indemnify Jefferies
and related parties against liabilities arising out of or in connection with the services rendered and to be rendered by Jefferies
under its engagement.
In
the ordinary course of business, Jefferies and its affiliates may trade or hold securities in the Company, Advisor Group and certain
of their respective affiliates, as the case may be, for Jefferies’ own account and for the accounts of Jefferies’
customers and, accordingly, may at any time hold long or short positions in those securities. As the Board was aware, Jefferies
may seek to in the future provide financial advisory and financing services unrelated to the merger to Advisor Group, or entities
that are affiliated with Advisor Group, for which services Jefferies and its affiliates would expect to receive fees. In the past
two years, Jefferies has not provided financial advisory or financing services to the Company, Advisor Group or Advisor Group’s
controlling shareholder.
Jefferies
was selected to act as the Company’s financial advisor in connection with the merger because, among other factors, Jefferies
is an internationally recognized investment banking firm with substantial experience in merger and acquisition transactions, its
familiarity with the Company and its business and its reputation. Jefferies is regularly engaged in the valuation of businesses
and securities in connection with mergers and acquisitions, leveraged buyouts, negotiated underwritings, competitive bids, secondary
distributions of listed and unlisted securities and private placements.
Financing
of the Merger
The
obligations of Advisor Group and Merger Sub to complete the merger are not contingent upon the receipt of any financing. Advisor
Group intends to finance its payment obligations under the merger agreement with a combination of cash on hand, equity financing
pursuant to an equity commitment letter with certain private equity funds sponsored by Reverence Capital Partners, the private
investment firm that indirectly controls Advisor Group, and debt financing pursuant to a debt commitment letter with the debt
financing sources, which are further described below and are collectively referred to as the commitment letters.
Although
obtaining the proceeds of any financing, including any financing under the commitment letters, is not a condition to the completion
of the merger, the failure of Advisor Group and Merger Sub to obtain any portion of the committed financing (or alternative financing)
is likely to result in the failure of the merger to be completed. In that case, Advisor Group may be obligated to pay the reverse
termination fee to the Company, as described under “The Merger Agreement—Termination Fee” on page 68.
Equity
Financing
On
November 11, 2019, in connection with the entry into the merger agreement, Advisor Group entered into an equity commitment letter
with investment funds sponsored by Reverence Capital Partners, including Reverence Capital Partners Opportunities Fund II, L.P.,
Reverence Capital Partners Opportunities Fund II (Cayman), L.P., Reverence Capital Partners Opportunity Fund II (AI) L.P.
and Reverence Capital Partners Opportunities Fund II (Parallel), L.P., which we refer to as the equity financing sources. Pursuant
to the equity commitment letter, the equity financing sources will (i) collectively invest $230 million in equity financing
to fund or to cause the funding of capital to Advisor Group, which will use the funds to satisfy its payment obligations under
the merger agreement and (ii) guaranteed to the Company, on a pro rata basis, Advisor Group’s obligation under the
merger agreement with respect to the full amount of the reverse termination fee should it become payable. The description of the
equity commitment letter in this section and elsewhere in this proxy statement is qualified in its entirety by reference to the
complete text of the equity commitment letter, a copy of which is attached as Exhibit A to the merger agreement attached as Annex
A to this proxy statement.
Debt
Financing
On
November 11, 2019, in connection with the entry into the merger agreement, Advisor Group entered into a debt commitment letter
with Bank of America, N.A., BofA Securities, Inc., UBS AG, Stamford Branch, UBS Securities LLC, Barclays Bank PLC, Deutsche Bank
AG New York Branch, Deutsche Bank AG Cayman Islands Branch, Deutsche Bank Securities Inc. and Goldman Sachs Bank USA, which we
refer to collectively as the debt financing sources. Pursuant to the debt commitment letter, the debt financing sources have committed
to provide, severally but not jointly, an aggregate of $875 million to Advisor Group, consisting of (i) an incremental revolving
facility in an aggregate principal amount of $100 million and (ii) a senior bridge facility in an aggregate principal of $775
million, which, collectively, we refer to as the debt facilities. The debt financing is conditioned upon, among other things,
consummation of the merger and delivery of certain customary closing documents (including, among others, a customary solvency
certificate) and certain Company audited and unaudited financial statements. The description of the debt commitment letter in
this section and elsewhere in this proxy statement is qualified in its entirety by reference to the complete text of the equity
commitment letter, a copy of which is attached as Exhibit B to the merger agreement attached as Annex A to this proxy statement.
Advisor
Group’s Obligations to Obtain the Financing
Advisor
Group and Merger Sub are obligated under the merger agreement to use their respective reasonable best efforts to obtain and consummate
the financing on the terms of the commitment letters, and Advisor Group has agreed that it will not, without the Company’s
consent, agree to any amendment, restatement, replacement, supplement, termination, repudiation, rescission, cancellation, expiration
or other modification or waiver of, any condition, remedy or other provision under any commitment letter if doing so would (i)
reduce the aggregate amount of the financing contemplated by the commitment letters, (ii) impose new or additional conditions
or expand any of the conditions to the receipt of the financing or otherwise make it less likely that the financing would be funded
at closing, (iii) prevent, impair, adversely affect or delay the funding of the financing at closing or (iv) adversely affect
the ability of Advisor Group or the Company to enforce its rights against the other parties to the commitment letters. Advisor
Group has also agreed with it will not, without the prior written consent of the Company, terminate or permit the termination
of any commitment letter unless prior to or in concurrence with such termination, the commitment letter is replaced with a new
commitment that would satisfy the requirements listed in this paragraph.
In
the event all or any portion of the debt financing becomes unavailable or Advisor Group or Merger Sub becomes aware of an event
that would reasonably be expected to make any portion of the debt financing unavailable, Advisor Group and Merger Sub must use
their reasonable best efforts to arrange for and obtain alternative financing from alternative sources in an amount sufficient
to cover its financial obligations in connection with the merger which do not involve any conditions precedent that are materially
less favorable to Advisor Group than those contained in the debt commitment letter and would not reasonably be expected to prevent,
materially impede or materially delay the consummation of the debt financing or the transactions contemplated by the merger agreement.
Closing
and Effective Time of the Merger
The
closing of the merger is scheduled to occur at 9:00 a.m., Eastern Time, on the third business day following the
satisfaction or waiver of the conditions set forth in the merger agreement (other than those conditions that by their nature are
to be satisfied at the closing, but subject to the satisfaction or waiver of those conditions), which we refer to as the closing.
Notwithstanding the foregoing, if the first period of 10 consecutive business days after January 13, 2020, through which (i) the
conditions listed in the closing conditions of the merger agreement (other than those conditions that by their nature can only
be satisfied at or on the date of closing) have been satisfied, (ii) Advisor Group has received the appropriate audited consolidated
balance sheets and consolidated statements of income and cash flows and the unaudited consolidated balance sheets and statements
of income, stockholders’ equity and cash flows of the Company, which we refer to as the required information, from the Company,
and (iii) the required information is and remains compliant, such period which we refer to as the marketing period, has not ended
at the time of the satisfaction or waiver of the conditions set forth in the merger agreement (other than those conditions that
by their nature can only be satisfied at the closing, but subject to the satisfaction or waiver of those conditions), then the
closing will occur instead on the date following the satisfaction or waiver of such conditions that is the earlier to occur of
(x) any business day as may be specified by Advisor Group on no less than three business days’ prior notice to the Company
and (y) the third business day following the final day of the marketing period.
As
soon as practicable following the closing, the Company and Advisor Group will cause articles of merger with respect to the merger
to be executed, acknowledged and filed with the Secretary of State of the State of Florida as provided in the FBCA. The merger
will become effective at the effective time.
Payment
of Merger Consideration and Surrender of Stock Certificates
As
soon as reasonably practicable after the effective time (but in any event within three business days thereafter), each holder
of record of a stock certificate representing shares of common stock that is entitled to receive the per share merger consideration
will be sent a letter of transmittal and instructions describing how such record holder may surrender his, her or its shares of
our common stock (or affidavits of loss in lieu thereof) in exchange for the per share merger consideration.
You
should not return your stock certificates with the enclosed proxy card.
Any
holder of book-entry shares not held, directly or indirectly, through the Depository Trust Company, which we refer to as DTC,
will not be required to deliver a stock certificate or an executed letter of transmittal to the paying agent to receive the per
share merger consideration that such holder is entitled to receive. In lieu thereof, each holder of record of one or more book-entry
shares not held, directly or indirectly, through DTC whose shares of common stock were converted into the right to receive the
per share merger consideration will upon receipt by the paying agent of an “agent’s message” in customary form
(or such other reasonable evidence, if any, as the paying agent may reasonably request), be entitled to receive the per share
merger consideration in respect of each such share of common stock and the book-entry shares of such holder will forthwith be
cancelled. With respect to book-entry shares held, directly or indirectly, through DTC, Advisor Group and the Company have agreed
to cooperate to establish procedures with the paying agent and DTC to ensure that the beneficial owners of such shares will receive
the per share merger consideration in respect of each such share once such shares have been surrendered.
No
interest will be paid or accrued on the cash payable as the per share merger consideration upon your surrender of your book-entry
shares or stock certificates. Advisor Group, the surviving corporation and the paying agent will be entitled to deduct and withhold
any required taxes from the per share merger consideration with respect to Company options and Company restricted shares.
If
you have lost a stock certificate, or if it has been stolen or destroyed, then before you will be entitled to receive the per
share merger consideration, you will have to make an affidavit of the loss, theft or destruction of such stock certificate, and
post a bond in such customary amount and upon such terms as may be reasonably required by Advisor Group or the paying agent pursuant
to the paying agent agreement or otherwise as indemnity against any claim that may be made against it, Merger Sub or the surviving
corporation with respect to such lost, stolen or destroyed stock certificate. These procedures will be described in the letter
of transmittal and instructions that you will receive, which you should read carefully and in their entirety.
Interests
of the Company’s Directors and Executive Officers in the Merger
In
considering the recommendation of the Board with respect to the merger proposal, you should be aware that executive officers and
directors of the Company have certain interests in the merger that may be different from, or in addition to, the interests of
the Company’s shareholders generally. The Board was aware of these interests and considered them at the time it evaluated
and approved the merger agreement and the merger, and in recommending that the merger agreement be approved by the shareholders
of the Company. Company shareholders should take these interests into account in deciding whether to approve the merger agreement.
Nothing in this proxy statement should be interpreted as providing any executive officer or director of the Company with an entitlement
to any payments or other benefits in excess of the payments or other benefits to which he or she would otherwise be entitled in
connection with the merger pursuant to the terms of these arrangements.
Treatment
of Company Options and Company Restricted Shares
Company
Options. At the effective time, each Company option outstanding as of the effective time will be accelerated and entitle the
holder to receive an amount in cash equal to the product of (i) the number of shares of common stock subject to such Company option
and (ii) the excess, if any, of the per share merger consideration over the exercise price per share of the Company option, less
applicable withholding taxes.
Company
Restricted Shares. At the effective time, all Company restricted shares outstanding as of the effective time will be accelerated
and entitle the holder to receive an amount in cash equal to the product of (i) the number of Company restricted shares held by
such holder and (ii) the per share merger consideration, less applicable withholding taxes.
For
an estimate of the amounts that would become payable to each of the Company’s named executive officers in settlement of
his or her unvested equity awards, see “—Golden Parachute Compensation.” The estimated aggregate amount that
would be payable to the Company’s seven non-employee directors in settlement of their unvested Company equity awards that
are outstanding on December 2, 2019 if the merger were to be completed on February 1, 2020 is $1,102,500. The amounts in this
paragraph were calculated based on the per share merger consideration of $3.50.
Executive
Officer Employment Agreements
The
Company’s named executive officers, Richard Lampen, Mark Zeitchick, Adam Malamed, Brett H. Kaufman and Joseph Giovanniello,
have employment agreements with the Company that provide for potential payments in the event of their termination. Under each
of Mr. Lampen’s, Mr. Zeitchick’s and Mr. Malamed’s employment agreements, if the executive’s employment
is terminated by the Company without “cause” or by the executive for “good reason” within two years after
the completion of the merger (which will constitute a “change in control” as defined in the employment agreements),
the executive will be entitled to receive a lump sum severance payment equal to 1.5 times (2 times in the case of Mr. Lampen)
the sum of (i) the executive’s base salary and (ii) the bonus (inclusive of any amounts deferred and retention amounts)
paid to the executive in respect of the performance period that ended immediately prior to the performance period in which the
termination occurred (or, if greater, the bonus paid in respect of 2014 for Messrs. Lampen and Zeitchick and 2017 for Mr. Malamed),
and for Messrs. Zeitchick and Malamed, each executive and his dependents will be entitled to continued participation, at the Company’s
expense, in the Company’s health and welfare plans for up to 18 months (or, if earlier, until such time the executive becomes
eligible for replacement coverage). Under each of Mr. Kaufman’s and Mr. Giovanniello’s employment agreements, if the
executive’s employment is terminated by the Company without “cause” or by the executive for “good reason”,
then subject to execution of a general release of claims, the executive will be entitled to receive a lump sum severance payment
equal to 1.0 times his annual base salary, and each executive and his dependents will be entitled to continued participation,
at the Company’s expense, in the Company’s health and welfare plans for up to 18 months (or, if earlier, until such
time the executive becomes eligible for replacement coverage). For each of the named executive officers, the applicable definitions
of “cause” and “good reason” are set forth in their respective employment agreements; provided, that the
parties have agreed that “good reason” for each executive will be triggered upon the completion of the merger.
Supplemental
Severance Arrangements
In
connection with the Company’s entry into the merger agreement, the Company entered into supplemental severance arrangements
with each of Messrs. Kaufman and Giovanniello. The supplemental severance arrangements provide that in the event either executive’s
employment is terminated following the completion of the merger in a manner qualifying such executive for severance pursuant to
the terms of his existing employment agreement with the Company, such executive will be entitled to receive an incremental severance
payment in the amount of $550,000. The incremental severance will be paid in a single lump sum, subject to the executive’s
execution of a general release of claims. The supplemental severance arrangements do not otherwise amend or supersede the terms
of the executives’ respective employment agreements with the Company.
For
an estimate of the value of the payments and benefits described above that would be payable to the Company’s named executive
officers under their employment agreements upon a qualifying termination of employment immediately following consummation of the
merger, see “—Golden Parachute Compensation.”
Golden
Parachute Compensation
This
section sets forth the information required by Item 402(t) of Regulation S-K regarding the compensation for each named executive
officer of the Company that is based on or otherwise relates to the merger and that will or may become payable to each such named
executive officer at the effective time or on a qualifying termination of employment in connection with the merger. The “named
executive officers” are the individuals listed as such in the Company’s most recent annual proxy statement.
The
estimated potential payments in the table below are based on (i) per share merger consideration of $3.50; (ii) base salary and
equity award holdings as of December 2, 2019; (iii) each named executive officer receiving a 2019 annual bonus equal to that received
in respect of 2018; (iv) a merger closing on February 1, 2020 (the assumed date of the closing of the merger solely for purposes
of this golden parachute compensation disclosure); and (v) a termination of each named executive officer by the Company without
“cause” or by the executive for “good reason” on the closing date. Depending on when the merger occurs,
certain equity awards that are now unvested and included in the table below may vest pursuant to the terms of the equity awards
based on the completion of continued service with the Company, independent of the merger. The amounts indicated below are estimates
based on multiple assumptions that may or may not actually occur, including assumptions described in this proxy statement, and
do not reflect certain compensation actions that may occur before completion of the merger. As a result, the actual amounts, if
any, to be received by a named executive officer may materially differ from the amounts set forth below. All dollar amounts have
been rounded to the nearest whole dollar.
For
purposes of this discussion, “single-trigger” refers to benefits that arise as a result of the closing of the merger
and “double-trigger” refers to benefits that require two conditions, which are the closing of the merger as well as
a qualifying termination of employment or specified date following the effective time of the merger, as applicable.
Golden
Parachute Compensation
Named
Executive Officers
|
|
Cash
($)(1)
|
|
|
Equity
($)(2)
|
|
|
Health
and Welfare Continuation ($)(3)
|
|
|
Total
($)
|
|
Richard
J. Lampen
|
|
$
|
4,200,000
|
|
|
$
|
1,859,375
|
|
|
|
―
|
|
|
$
|
6,059,375
|
|
Mark
Zeitchick
|
|
$
|
3,990,000
|
|
|
$
|
1,859,375
|
|
|
$
|
19,002
|
|
|
$
|
5,868,377
|
|
Adam
Malamed
|
|
$
|
3,427,500
|
|
|
$
|
1,203,125
|
|
|
$
|
61,368
|
|
|
$
|
4,691,993
|
|
Brett
H. Kaufman
|
|
$
|
925,000
|
|
|
$
|
280,000
|
|
|
$
|
59,120
|
|
|
$
|
1,264,120
|
|
Joseph
Giovanniello
|
|
$
|
900,000
|
|
|
$
|
280,000
|
|
|
$
|
58,329
|
|
|
$
|
1,238,329
|
|
(1)
|
For
Messrs. Lampen, Zeitchick and Malamed, the cash payments payable to each such executive consist of a lump sum severance payment
equal to 1.5 times (2 times in the case of Mr. Lampen) the sum of (i) the executive’s base salary and (ii) the bonus
(inclusive of any amounts deferred and retention amounts) paid to the executive in respect of the performance period
that ended immediately prior to the performance period in which the termination occurred (or, if greater, the bonus paid in
respect of 2014 for Messrs. Lampen and Zeitchick and 2017 for Mr. Malamed).
|
|
|
|
For
Messrs. Kaufman and Giovanniello, the cash payments payable to each such executive consist of a lump sum severance payment
in an amount equal to 1.0 times his annual base salary. Additionally, as described in more detail in “The Merger—Interests
of the Company’s Directors and Executive Officers in the Merger”, Messrs. Kaufman and Giovanniello are entitled
to a supplemental severance payment in the amount of $550,000 upon a qualifying termination.
|
|
|
|
Set forth below are the separate values of each component of the severance payable to the named executive officers.
|
|
|
Base
Salary Component
|
|
|
Bonus
Component
|
|
|
Supplemental
Severance
|
|
|
Total
($)
|
|
Richard
J. Lampen
|
|
$
|
650,000
|
|
|
$
|
3,550,000
|
|
|
|
―
|
|
|
$
|
4,200,000
|
|
Mark
Zeitchick
|
|
$
|
637,500
|
|
|
$
|
3,352,500
|
|
|
|
―
|
|
|
$
|
3,990,000
|
|
Adam
Malamed
|
|
$
|
600,000
|
|
|
$
|
2,827,500
|
|
|
|
―
|
|
|
$
|
3,427,500
|
|
Brett
H. Kaufman
|
|
$
|
375,000
|
|
|
|
―
|
|
|
$
|
550,000
|
|
|
$
|
925,000
|
|
Joseph
Giovanniello
|
|
$
|
350,000
|
|
|
|
―
|
|
|
$
|
550,000
|
|
|
$
|
900,000
|
|
(2)
|
As
described in more detail in “The Merger Agreement—Treatment of Company Securities,” each Company restricted
share that is outstanding when the merger is completed will vest upon completion of the merger and entitle the holder thereof
to receive an amount in cash equal to the product of (i) the number of Company restricted shares held by such holder multiplied
by (ii) the per share merger consideration, less applicable withholding taxes. These values represent the “single-trigger”
payments in respect of the following number of Company restricted shares which would be outstanding and held by each of our
named executive officers as of February 1, 2020: Mr. Lampen, 531,250; Mr. Zeitchick, 531,250; Mr. Malamed, 343,750; Mr. Kaufman,
80,000; and Mr. Giovanniello, 80,000. All of the named executive officers’ outstanding Company options will be
vested pursuant to their terms as of February 1, 2020, and accordingly, have been excluded from this quantification
in accordance with Item 402(t) of Regulation S-K.
|
|
|
(3)
|
Upon
a qualifying termination, each of Messrs. Zeitchick, Malamed, Kaufman and Giovanniello and his eligible dependents will be
entitled to continued participation, at the Company’s expense, in the Company’s health and welfare plans for up
to 18 months. All such benefits are “double-trigger.”
|
Material
U.S. Federal Income Tax Consequences of the Merger
The
following is a summary of the material U.S. Federal income tax consequences of the merger to U.S. holders (as defined below) whose
shares of common stock are converted into the right to receive cash in the merger. This summary does not purport to consider all
aspects of U.S. Federal income taxation that might be relevant to our shareholders. For purposes of this discussion, we use the
term “U.S. holder” to mean a beneficial owner of shares of our common stock that is, for U.S. Federal income tax purposes:
|
●
|
an
individual who is a citizen or resident of the United States;
|
|
|
|
|
●
|
a
corporation (or other entity taxable as a corporation for U.S. Federal income tax purposes) created or organized under the
laws of the United States or any of its political subdivisions;
|
|
|
|
|
●
|
a
trust that (i) is subject to the supervision of a court within the United States and the control of one or more U.S. persons
or (ii) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person; or
|
|
|
|
|
●
|
an
estate that is subject to U.S. Federal income tax on its income regardless of its source.
|
If
a partnership (including an entity or arrangement treated as a partnership for U.S. Federal income tax purposes) holds our common
stock, the U.S. Federal income tax treatment of a partner generally will depend on the status of the partner and the activities
of the partner and the tax treatment of the partnership. A partner of a partnership holding our common stock should consult the
partner’s tax advisor regarding the U.S. Federal income tax consequences of the merger to such partner.
This
discussion is based on the Internal Revenue Code of 1986, as amended, which we refer to as the Code, its legislative history,
existing and proposed regulations under the Code, published rulings and court decisions, all as currently in effect. These laws
are subject to change or differing interpretation, possibly on a retroactive basis. The discussion applies only to beneficial
owners who hold shares of our common stock as capital assets, and does not apply to shares of our common stock received in connection
with the exercise of employee stock options or otherwise as compensation, shareholders who hold an equity interest, actually or
constructively, in Advisor Group or the surviving corporation after the merger, or to certain types of beneficial owners who may
be subject to special rules (such as insurance companies, banks, tax-exempt organizations, financial institutions, broker-dealers,
partnerships, S corporations or other pass-through entities, mutual funds, traders in securities who elect the mark-to-market
method of accounting, shareholders subject to the alternative minimum tax, shareholders that have a functional currency other
than the U.S. dollar or shareholders who hold our common stock as part of a hedge, straddle, wash sale, constructive sale or conversion
transaction). This discussion also does not address the U.S. tax consequences to any shareholder who, for U.S. Federal income
tax purposes, is a non-resident alien individual, foreign corporation, foreign partnership or foreign estate or trust, and does
not address the receipt of cash in connection with the treatment of restricted stock units, performance stock units, company awards
or any other matters relating to equity compensation or benefit plans (including the stock plans). This discussion does not address
any aspect of state, local or foreign tax laws. Holders of common stock should consult their own tax advisors to determine the
particular tax consequences to them of the merger, including the applicability and effect of any state, local, foreign or other
tax laws.
Exchange
of Shares of Common Stock for Cash Pursuant to the Merger Agreement
The
exchange of shares of our common stock for cash in the merger will generally be a taxable transaction for U.S. Federal income
tax purposes. In general, a U.S. holder whose shares of our common stock are converted into the right to receive cash in the merger
will recognize capital gain or loss for U.S. Federal income tax purposes equal to the difference, if any, between the amount of
cash received with respect to such shares (determined before the deduction of any applicable withholding taxes, as described below
in the section titled “Backup Withholding and Information Reporting”) and the U.S. holder’s adjusted tax basis
in such shares. A U.S. holder’s adjusted tax basis will generally equal the price the U.S. holder paid for such shares.
Gain or loss will be determined separately for each block of shares of our common stock (i.e., shares of common stock acquired
at the same cost in a single transaction). Such capital gain or loss will be long-term capital gain or loss where the U.S. holder’s
holding period for such shares of common stock is more than one year at the effective time. Long-term capital gain of a non-corporate
U.S. holder is generally taxed at preferential rates. There are limitations on the deductibility of capital losses. In addition,
a 3.8% tax is imposed on all or a portion of the “net investment income” (within the meaning of the Code) of certain
individuals and on the undistributed net investment income of certain estates and trusts. The 3.8% tax generally is imposed on
the lesser of (1) the U.S. holder’s “net investment income” for the relevant taxable year and (2) the excess
of the U.S. holder’s modified adjusted gross income for the taxable year over a certain threshold (which in the case of
individuals is between $125,000 and $250,000, depending on the individual’s circumstances). For these purposes, “net
investment income” generally will include any gain recognized on the receipt of cash for shares pursuant to the merger.
Backup
Withholding and Information Reporting
A
U.S. holder may be subject to information reporting. In addition, backup withholding of tax will apply at the statutory rate to
cash payments to which a non-corporate U.S. holder is entitled under the merger agreement, unless the U.S. holder or other payee
provides a taxpayer identification number, certifies that such number is correct, and otherwise complies with the backup withholding
rules. Each U.S. holder should complete and sign, under penalty of perjury, an Internal Revenue Service Form W-9 (or appropriate
successor form) to be included as part of the letter of transmittal and return it to the paying agent, in order to provide the
information and certification necessary to avoid backup withholding, unless an exemption applies and is established in a manner
satisfactory to the paying agent.
Backup
withholding is not an additional tax. Any amounts withheld from cash payments to a U.S. holder pursuant to the merger under the
backup withholding rules will generally be allowable as a refund or a credit against such U.S. holder’s U.S. Federal income
tax liability provided the required information is timely furnished to the Internal Revenue Service. U.S. holders are urged to
consult their independent tax advisors as to qualifications for exemption from backup withholding and the procedure for obtaining
the exemption.
The
U.S. Federal income tax consequences described above are not intended to constitute a complete description of all tax consequences
relating to the merger. Because individual circumstances may differ, each shareholder should consult the shareholder’s tax
advisor regarding the applicability of the rules discussed above to the shareholder and the particular tax effects to the shareholder
of the merger in light of such shareholder’s particular circumstances, the application of state, local and foreign tax laws,
and, if applicable, the treatment of company equity awards or any other matters relating to equity compensation or benefit plans
(including the stock plans).
Regulatory
Approvals
HSR
Clearance. Under the HSR Act and the rules promulgated thereunder, certain transactions, including the merger, may not be
completed until notifications have been given and information furnished to the Antitrust Division of the Department of Justice,
which we refer to as the Antitrust Division, and the Federal Trade Commission, which we refer to as the FTC, and all statutory
waiting period requirements have been satisfied. Completion of the merger is subject to the expiration or earlier termination
of the applicable waiting period under the HSR Act and the expiration or earlier termination of all agreements with governmental
entities that govern the ability of the parties to close the merger. The merger may not be completed until the expiration of a
30 calendar day waiting period, which begins when the Company and Advisor Group file Premerger Notification and Report Forms under
the HSR Act with the Antitrust Division and the FTC, unless such waiting period is earlier terminated by the Antitrust Division
and the FTC. In connection with the merger, the Company filed its Premerger Notification and Report Form on December 2, 2019 and
Advisor Group filed its Premerger Notification and Report Form on November 27, 2019.
FINRA
Approvals. FINRA (National Association of Securities Dealers) Rule 1017 requires that FINRA broker-dealer members file a Continuing
Membership Application for approval of a change in the equity ownership of such member that results in a third party indirectly
owning or controlling 25% or more of the equity of such member. The Company’s subsidiaries that are FINRA broker-dealer
members are: Ladenburg Thalmann & Co. Inc., Investacorp, Inc., KMS Financial Services, Inc., Triad Advisors, LLC, Securities
America, Inc., and Securities Service Network, LLC. The indirect change of control of these Company subsidiaries resulting from
the merger is therefore subject to FINRA’s approval of each subsidiaries’ Continuing Membership Application required
to be filed with FINRA. The Company’s broker-dealer subsidiaries filed a joint Continuing Membership Application with FINRA
on December 3, 2019.
Other
Notifications and Approvals. Completion of the merger is further subject to notification or receipt of certain other regulatory
approvals, including notification, clearance and/or approval from:
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The
Texas Department of Insurance with respect to the indirect change of control of the Company’s insurance brokerage subsidiaries
licensed in Texas, including SSN Agency of Texas, Inc., Ladenburg Thalmann Annuity Insurance Services LLC, Triad Insurance,
Inc., Highland Capital Brokerage, Valor Insurance Agency and KMS Financial Services, Inc. On November 27, 2019, counsel to
Advisor Group submitted a letter to the Texas Department of Insurance to give notice of the merger and to request confirmation
that the merger does not require any additional submission to or approval from the Texas Department of Insurance.
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The
Bermuda Monetary Authority with respect to the indirect change of control of the Company’s insurance brokerage subsidiary
licensed in Bermuda, Highland Capital Brokerage. On December 5, 2019, counsel to Highland Capital Brokerage submitted
a letter to the Bermuda Monetary Authority to give notice of the merger and to request the Bermuda Monetary Authority’s
non-objection to the indirect change of control.
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The
Nevada Division of Financial Institutions with respect to the indirect change of control of the Company’s trust company
subsidiary, Premier Trust, licensed in Nevada. On November 22, 2019, counsel to Premier Trust submitted a letter to the Nevada
Financial Institutions Division to give notice of the merger.
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There
can be no assurance that all of the regulatory approvals described above, or any other regulatory approvals that might
be required to consummate the merger, will be obtained and, if obtained, there can be no assurance as to the timing of any approvals,
ability to obtain the approvals on satisfactory terms or the absence of any litigation challenging such approvals. There can also
be no assurance that the Department of Justice, the FTC, FINRA or any other governmental entity or any private party will not
attempt to challenge the merger on regulatory grounds or refuse to grant required approvals, and, in each case, if any such challenge
is made, there can be no assurance as to the result.
THE
MERGER AGREEMENT
This
section describes the material terms of the merger agreement. The description of the merger agreement in this section and elsewhere
in this proxy statement is qualified in its entirety by reference to the complete text of the merger agreement, a copy of which
is attached as Annex A and is incorporated by reference into this proxy statement.
This summary does not purport to be complete and may not contain all of the information about the merger agreement that is important
to you. We encourage you to read the merger agreement carefully and in its entirety.
Explanatory
Note Regarding the Merger Agreement
The
merger agreement and this summary are included to provide you with information regarding the merger agreement’s material
terms. Factual disclosures about the Company contained in this proxy statement or in the Company’s public reports filed
with the SEC may supplement, update or modify the factual disclosures about the Company contained in the merger agreement. The
representations, warranties and covenants contained in the merger agreement were made only for purposes of the merger agreement
and as of specific dates, were solely for the benefit of the parties to the merger agreement, may be subject to limitations, qualifications
or other particulars agreed upon by the contracting parties (including being qualified by confidential disclosures made for the
purposes of allocating contractual risk between the parties to the merger agreement instead of establishing such matters as facts
or made for other purposes), and may be subject to standards of materiality applicable to the contracting parties that differ
from those applicable to investors. Investors are not third-party beneficiaries under the merger agreement and may not rely on
the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or
condition of the parties thereto or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject
matter of representations and warranties may change after the date of the merger agreement, which subsequent information will
not necessarily be fully reflected in the Company’s public disclosures. For further information regarding the representations
and warranties contained in the merger agreement, please refer to “—Representations and Warranties” beginning
on page 53.
Effects
of the Merger (Directors and Officers; Articles of Incorporation and Bylaws)
The
merger agreement provides that Merger Sub will merge with and into the Company with the Company continuing as the surviving corporation.
Following the merger, Advisor Group will be the sole common shareholder of the Company and the common stock will cease to be publicly
traded. The merger will have the effects specified in the FBCA.
The
members of the board of directors of Merger Sub immediately prior to the effective time will, from and after the effective time,
be the members of the board of directors of the surviving corporation until their successors have been duly elected or appointed
and qualified or until their earlier death, resignation or removal in accordance with applicable law, the articles of incorporation
and bylaws of the surviving corporation.
At
the effective time, the articles of incorporation of the surviving corporation will be the articles of incorporation of the Company
as in effect immediately prior to the effective time. The bylaws of the surviving corporation will be the bylaws of the Company
as in effect immediately prior to the effective time.
Treatment
of Company Securities
Common
Stock
At
the effective time, by virtue of the merger and without any action on the part of any holder of any capital stock of the Company,
each share of common stock issued and outstanding at the effective time (other than (i) shares owned by Advisor Group or any of
its direct or indirect wholly owned subsidiaries or the Company (and in each case not held on behalf of third parties) and (ii)
Company restricted shares) will be converted into the right to receive the per share merger consideration, without interest.
At
the effective time, each share that will be converted into the right to receive cash will be cancelled and will cease to
exist and will thereafter represent only the right to receive the merger consideration and other amounts payable with respect
thereto. Also at the effective time, (i) the shares owned by Advisor Group, Merger Sub or any other direct or indirect wholly
owned subsidiary of Advisor Group and shares owned by the Company and, in each case, not held on behalf of third parties and
(ii) Company restricted shares will cease to be outstanding, will be cancelled without any payment and will cease to exist as
of the effective time.
Company
Options
At
the effective time, each Company option outstanding as of the effective time will be accelerated and entitle the holder to receive
an amount in cash equal to the product of (i) the number of shares of common stock subject to such Company option and (ii) the
excess, if any, of the per share merger consideration over the exercise price per share of the Company option, less applicable
withholding taxes.
Company
Restricted Shares
At
the effective time, all Company restricted shares outstanding as of the effective time will be accelerated and entitle the holder
to receive an amount in cash equal to the product of (i) the number of Company restricted shares held by such holder and (ii)
the per share merger consideration, less applicable withholding taxes.
Company
Preferred Shares and Debt Securities
Each
preferred share will remain outstanding at the effective time, but the closing of the merger will constitute a “Change of
Control” within the meaning of the Company’s articles of incorporation, as amended. At the effective time, upon the
occurrence of such Change of Control, each holder of preferred shares will have the right to convert some or all of such holder’s
preferred shares into cash (unless, prior to the change of control conversion date, the surviving corporation in the merger has
provided notice of its election to redeem some or all of the preferred shares for cash) in accordance with the Company’s
articles of incorporation, as amended.
At
the effective time, the debt securities issued by the Company will remain outstanding as debt securities of the surviving corporation
in the merger.
The
merger agreement requires the Company, upon Advisor Group’s request, to use its reasonable best efforts prior to closing
to enable the surviving corporation in the merger to delist and deregister the preferred shares and the debt securities as promptly
as practicable after the effective time.
Exchange
and Payment Procedures
Immediately
prior to the effective time, Advisor Group will deposit, or cause to be deposited, with the paying agent cash in immediately available
funds in an amount sufficient to pay the aggregate merger consideration payable to holders of common stock and the amounts payable
to holders of Company options and Company restricted shares to the extent any such holder is not and was not during the applicable
vesting period an employee of the Company or its subsidiaries.
As
soon as reasonably practicable after the effective time (but in any event within three business days after the effective time),
each holder of record of a stock certificate representing shares of common stock that is entitled to receive the per share merger
consideration will be sent a notice advising such holders of the effectiveness of the merger, with a letter of transmittal and
instructions included in the notice describing how such record holder may surrender his, her or its shares of our common stock
(or affidavits of loss in lieu thereof) in exchange for the per share merger consideration.
You
should not return your stock certificates with the enclosed proxy card.
Any
holder of book-entry shares not held, directly or indirectly, through DTC will not be required to deliver a stock certificate
or an executed letter of transmittal to the paying agent to receive the per share merger consideration that such holder is entitled
to receive. In lieu thereof, each holder of record of one or more book-entry shares not held, directly or indirectly, through
DTC whose shares of common stock were converted into the right to receive the per share merger consideration will upon receipt
by the paying agent of an “agent’s message” in customary form (or such other reasonable evidence, if any, as
the paying agent may reasonably request), be entitled to receive the per share merger consideration in respect of each such share
of common stock and the book-entry shares of such holder will forthwith be cancelled. With respect to book-entry shares held,
directly or indirectly, through DTC, Advisor Group and the Company have agreed to cooperate to establish procedures with the paying
agent and DTC to ensure that the beneficial owners of such shares will receive the per share merger consideration in respect of
each such share once such shares have been surrendered.
If
you have lost a stock certificate, or if it has been stolen or destroyed, then before you will be entitled to receive the per
share merger consideration, you will have to make an affidavit of the loss, theft or destruction of such stock certificate, and
post a bond in such customary amount and upon such terms as may be reasonably required by Advisor Group or the paying agent pursuant
to the paying agent agreement or otherwise as indemnity against any claim that may be made against it, Merger Sub or the surviving
corporation with respect to such lost, stolen or destroyed stock certificate. These procedures will be described in the letter
of transmittal and instructions that you will receive, which you should read carefully and in their entirety.
No
interest will be paid or accrued on the cash payable as the per share merger consideration upon your surrender of your book-entry
shares or stock certificates
From
and after the effective time, there will be no transfers on the stock transfer books of the Company of the shares of common stock
that were outstanding immediately prior to the effective time. If, after the effective time, any stock certificate formerly representing
any common stock that entitled its holder to receive the per share merger consideration is presented to the surviving corporation,
Advisor Group or the paying agent for transfer, it will be cancelled and exchanged for the cash amount in immediately available
funds to which the holder of such stock certificate is entitled pursuant to the merger agreement.
Any
portion of the per share merger consideration deposited with the paying agent that remains unclaimed by shareholders 12
months after the effective time will be delivered to Advisor Group or the surviving corporation, as determined by Advisor Group.
Holders of shares of common stock entitled to receive the per share merger consideration who have not complied with the above-described
exchange and payment procedures, and any holder of Company equity awards who has not received the applicable Company equity payment
by the paying agent may thereafter only look to the surviving corporation for payment of the per share merger consideration upon
due surrender of stock certificates representing certificated shares of common stock (or affidavits of loss in lieu thereof) or
book-entry shares, without any interest thereon.
None
of Advisor Group, the surviving corporation, the paying agent or any other person will be liable to any former holder of common
stock, Company options or Company restricted shares for any amount properly delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
Representations
and Warranties
The
merger agreement contains representations and warranties made, on the one hand, by the Company to Advisor Group and Merger Sub
and, on the other hand, by Advisor Group and Merger Sub to the Company. Certain of the representations and warranties in the merger
agreement are subject to materiality or material adverse effect qualifications (that is, they will not be deemed to be untrue,
inaccurate or incorrect unless their failure to be true or correct is material or would result in a material adverse effect, as
defined below).
In
addition, certain of the representations and warranties in the merger agreement are subject to knowledge qualifications, which
means that those representations and warranties would not be deemed untrue, inaccurate or incorrect as a result of matters of
which certain officers of the party making the representation did not and do not have knowledge following a reasonable inquiry,
as described in the merger agreement.
Further,
the representations and warranties made by the Company in the merger agreement are subject to specified exceptions and qualifications
in the Company’s public filings with the SEC. The representations and warranties made by the parties in the merger agreement
may be further subject to specified exceptions and qualifications contained in the confidential disclosure letters that the parties
exchanged in connection with signing the merger agreement, which disclosure letters are not reflected in the merger agreement
and will not otherwise be publicly disclosed, and that were included for the purpose of, among other things, allocating contractual
risk between Advisor Group and Merger Sub, on the one hand, and the Company, on the other hand, rather than establishing matters
as facts, and may be subject to standards of materiality that differ from the standards relevant to investors. You should not
rely on the representations, warranties, covenants or any description thereof as actual characterizations of the actual state
of facts or condition of Advisor Group, the Company, or any of their respective subsidiaries or affiliates. 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 public disclosures by Advisor Group and the Company. The representations and
warranties and other provisions of the merger agreement should not be read alone but, instead, should be read only in conjunction
with the information provided elsewhere in this proxy statement and in the documents incorporated by reference into this proxy
statement. See “Where You Can Find More Information” beginning on page 77.
Representations
and Warranties of the Company
The
Company made customary representations and warranties to Advisor Group and Merger Sub in the merger agreement relating to a number
of matters, including, among other things:
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our
organization, valid existence, good standing and authority and power to carry on our
business and that of our subsidiaries;
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our
corporate power and authority to execute, deliver and perform our obligations under,
and consummate the transactions under, the merger agreement, and the enforceability
of the merger agreement against us;
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the
approval and declaration of advisability of the merger agreement and the merger by the
Board;
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the
absence of conflicts, breaches or violations of organizational documents, contracts or
applicable law as a result of the Company entering into and consummating the transactions
contemplated by the merger agreement;
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the
effectiveness of our constituent documents and those of our subsidiaries;
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our
capital structure;
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our
public filings with the SEC;
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our
compliance with NYSE American listing requirements;
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our
disclosure controls and procedures, internal controls over financial reporting and compliance
with the certification requirements of the Sarbanes-Oxley Act of 2002;
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our
compliance with GAAP in our financial statements and the absence of undisclosed liabilities;
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our
compliance with applicable laws and certain permits, licenses and other governmental
authorizations;
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the
governmental filings, notices and approvals required in connection with the transactions
contemplated by the merger agreement;
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the
absence of changes in our business since September 30, 2019;
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the
absence of litigation, governmental inquiries, investigations and other actions against
the Company;
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tax
matters;
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employee
benefit plans and other agreements, plans and policies with or concerning employees;
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labor
matters and compliance with labor and employment laws;
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leased
real property;
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intellectual
property matters;
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certain
of our material contracts;
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our
investment adviser subsidiaries;
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our
broker-dealer subsidiaries;
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our
financial advisor agreements and loans;
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the
inapplicability of anti-takeover laws;
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finder’s
fees (none except for fees payable to Jefferies in connection with the merger); and
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environmental
matters.
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Company
Material Adverse Effect
Many
of our representations and warranties are qualified by exceptions relating to the absence of a “company material adverse
effect,” which means any event, change, development, circumstance, fact or effect that, individually or in the aggregate,
(i) has had or is reasonably expected to have a material and adverse effect on the business, financial condition or the results
of operations of the Company or its subsidiaries, taken as a whole, or (ii) that would reasonably be expected to prevent or materially
impair the ability of the Company or any of its subsidiaries to perform their respective obligations under the merger agreement
or to consummate the transactions contemplated by the merger agreement in a timely matter. However, with respect to clause (i)
above, none of the following (or the results thereof), either alone or in combination with any other events, changes, developments,
circumstances, facts or effects, shall constitute or contribute to a company material adverse effect:
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(1)
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any
change in applicable accounting principles or any adoption, proposal, implementation
or change in law (including any law in respect of taxes or any fiduciary or similar duties
of investment advisors, broker dealers or registered representatives), or any interpretation
thereof;
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(2)
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any
change in global, national or regional political conditions (including protests, strikes,
riots, acts of terrorism or war) or in general global, national or regional economic
business, regulatory, political or market conditions or in national or global financial
or capital markets (including any changes in debt or equity trading market volume, volatility
or performance or interest rates);
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(3)
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any
change generally affecting the industries or market sectors in which one or more of the
Company and its subsidiaries operate;
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(4)
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any
change resulting from or arising out of hurricanes, earthquakes, floods or other natural
disasters;
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(5)
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the
negotiation, execution, announcement or performance of the merger agreement or consummation
of the transactions contemplated by the merger agreement (including any loss of, or adverse
change in, the relationship of the Company with its customers, employees, registered
representatives, investment adviser representatives or marketing sponsors resulting from
the pendency or the announcement of the transactions contemplated by the merger agreement
or the identity of, or any facts or circumstances related to, Advisor Group) or any litigation
relating to the merger agreement or the transactions contemplated by the merger agreement;
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(6)
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the
failure of one or more of the Company and its subsidiaries to meet any internal or public
projections, forecasts or estimates of performance, revenues or earnings (it being understood
that the underlying factors or occurrences giving rise or contributing to such failure
shall, unless otherwise excluded, be taken into account in determining whether there
has been a company material adverse effect);
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(7)
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any
actions (or the effects of any action) taken (or omitted to be taken) upon the written
request or instruction of, or with the written consent of, Advisor Group, consistent
with the terms of the merger agreement; and
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(8)
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any
action (or effects of any action) taken (or omitted to be taken) by the Company or any
of its subsidiaries as required pursuant to the merger agreement, except in the case
of clauses (1), (2) and (3) above, to the extent the Company and the Company subsidiaries,
taken as a whole, are disproportionately affected thereby as compared with other similarly
situated participants in the applicable industry or industries in which the Company and
the Company subsidiaries operate.
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Representations
and Warranties of Advisor Group
Advisor
Group made customary representations and warranties to the Company in the merger agreement relating to a number of matters with
respect to Advisor Group and Merger Sub, including, among other things:
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their
organization, valid existence, good standing and authority to carry on their businesses;
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their
corporate power and authority to execute, deliver and perform their obligations, and
consummate the transactions under, the merger agreement, and the enforceability
of the merger agreement against them;
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the
absence of conflicts, breaches or violations of organizational documents, contracts or
applicable law as a result of their entry into and consummation of the transactions contemplated
by the merger agreement;
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their
ability to provide sufficient funding to consummate the transactions contemplated by
the merger agreement and to pay all of their payment obligations under the merger agreement;
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the
governmental filings, notices and approvals required in connection with the transactions
contemplated by the merger agreement;
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the
absence of legal actions, investigations and governmental orders;
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their
beneficial ownership of securities of the Company;
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the
inapplicability of anti-takeover laws;
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the
absence of any fees payable to brokers and financial advisors in connection with the
merger;
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their
solvency after the effective time; and
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the
truthfulness and inclusion of material facts in certain information supplied by Advisor
Group or Merger Sub in connection with the merger, including for purposes of this proxy
statement.
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Conduct
of Our Business Pending the Merger
Under
the merger agreement, we have agreed, subject to certain exceptions contemplated by the merger agreement and listed below or as
may be approved by Advisor Group (such approval may not be unreasonably conditioned, withheld or delayed), to carry on our business
and the business of our subsidiaries in the ordinary course of business in all material respects consistent with past practice
and use commercially reasonable efforts to maintain and preserve intact in all material respects our business organizations and
advantageous business relationships.
Furthermore,
we have also agreed not to (subject to certain general exceptions listed in the next sentence or as may be approved by Advisor
Group) take any of the following actions or permit our subsidiaries to take such actions:
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amend
any provision of the organizational documents of the Company other than ministerial amendments;
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sell,
pledge, transfer, dispose of, encumber (other than permitted encumbrances), create, redeem,
repurchase, acquire, allot or issue, or grant an option to subscribe for, any equity
interest in the Company or any of its subsidiaries (except in each case the net share
settlement or issuance of equity interests in respect of Company options and Company
restricted shares outstanding as of the date of the merger agreement in accordance with
their terms (or, with respect to net share settlement, consistent with past practice)
and, as applicable, the stock plans as in effect on the date of the merger agreement),
as described under “The Merger Agreement—Treatment of Company Securities”;
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acquire
or agree to acquire any equity interest in, or make any investments in, any third party
(other than as between the Company and its subsidiaries and advances of expenses to employees
in the ordinary course of business consistent with past practice);
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make
any loans or advances to any third party or make any capital contributions to any third
party (other than as between the Company and its subsidiaries and advances of expenses
to employees in the ordinary course of business consistent with past practice);
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merge
or consolidate the Company or any of its subsidiaries with any third party (other than
with any affiliate of the Company or any of its subsidiaries);
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adopt
a plan of complete or partial liquidation, dissolution, restructuring, recapitalization
or other reorganization of the Company or any of its subsidiaries;
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form
any subsidiary or affiliate of the Company;
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declare,
set aside, make or pay any dividend or other distribution with respect to any of its
capital stock (except for dividends paid by any subsidiary of the Company to the Company
or to any other subsidiary of the Company and regular quarterly or monthly dividends
(as applicable) declared and paid with respect to the shares of common stock and/or preferred
shares made in the ordinary course of business consistent with past practice);
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split,
combine or reclassify any of its capital stock or other equity interests or issue or
authorize the issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock or other equity interests (except in each case the issuance
of equity interests in respect of Company options and Company restricted shares outstanding
as of the date of this Agreement in accordance with their terms and, as applicable, the
stock plans as in effect on the date of the merger agreement);
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except
as required by the terms of any benefit plan or as required by applicable law: (i) grant
any new long-term incentive or equity-based awards, or amend, modify or waive the terms
or conditions of any such outstanding awards under any benefit plan; (ii) grant any transaction-related
retention bonuses (other than a portion of the annual bonus in respect of the 2019 calendar
year in the form of cash retention awards consistent with past practice); (iii) increase
employee compensation (except for employees who are not executive officers of the Company
and, subject to limits set forth in the merger agreement, increases implemented in the
ordinary course of business consistent with past practice); (iv) terminate the employment
of any executive officer (other than for cause), hire any new employee (except for new
employees with an annual salary or wage rate of less than $100,000 annually and who are
replacement hires receiving substantially similar terms of employment) or promote or
grant merit increases to any employees (except in the ordinary course of business in
connection with the Company’s annual or quarterly compensation review cycle or
as the result of the termination or resignation of any employee); (v) adopt, enter into,
terminate or amend any benefit plan or any collective bargaining agreement or other contract
with any labor organization or other representative of the Company’s or any Company
subsidiary’s employees or make any contribution to any benefit plan other than
contributions required by applicable law or the terms of existing benefit plans (except
with respect to benefit plans providing for health and welfare benefits, the Company
may (A) negotiate and enter into new contracts and extensions of existing contracts with
benefit plan providers in the ordinary course of business consistent with past practice,
provided that duration of such contracts or extensions do not extend beyond calendar
year 2020 and (B) take such other actions so long as the aggregate cost of any such benefit
plan is not materially increased); (vi) enter into or amend any employment, services,
change in control, severance, deferred compensation, retention or similar contract with
any officer, director or employee of the Company; (vii) accelerate or otherwise change
the payment timing of any compensation or benefit under any benefit plan; or (viii) change
any actuarial or other assumption used to calculate funding obligations with respect
to any benefit plan or change the manner in which contributions are made or the basis
on which contributions are calculated except as may be required by GAAP;
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make,
change or revoke any material tax election, change any tax accounting method or
period, file any amended tax return, enter into any closing agreement with respect to
taxes, request any tax ruling, waive or extend the statute of limitations in respect
of a material amount of taxes or settle or compromise any material tax liability or refund;
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other
than the sale of obsolete equipment or assets in the ordinary course of business, sell,
lease, license or otherwise dispose of (whether by way of merger, consolidation, sale
of stock or assets, or otherwise), grant an encumbrance on or permit an encumbrance to
exist on, or agree to do any of the foregoing on, any properties or assets of the Company
or any of its subsidiaries (in each case, other than any permitted encumbrances and other
than with respect to any assets with a value of less than $500,000 individually or $2
million in the aggregate);
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acquire
or agree to acquire all or a substantial portion of the assets or business of any third
party or any division or line of business thereof;
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commence
any action or file any petition in any court relating to the bankruptcy, reorganization,
insolvency, dissolution, liquidation or relief from debtors, in any case, in respect
of the Company or any of its subsidiaries;
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amend,
modify, waive or terminate, in each case, any existing material contract or enter into
any material contract (other than (i) any termination or renewal for one year or less
in accordance with the terms of any existing material contract on substantially similar
terms, (ii) the entry into new material contracts in replacement of existing material
contracts on terms not materially worse to the Company or the relevant subsidiary, in
the aggregate, than the current terms and (iii) immaterial ministerial amendments, modifications
or waivers in the ordinary course);
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incur,
redeem or prepay any indebtedness, except for (i) indebtedness for borrowed money incurred
in the ordinary course of business not to exceed $2 million in the aggregate, (ii) indebtedness
in replacement of existing indebtedness for borrowed money on terms substantially consistent
with or more favorable to the Company than the indebtedness being replaced or (iii) guarantees
of indebtedness of its wholly owned subsidiaries otherwise incurred in compliance with
this clause;
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make
any material change in business operations as defined in FINRA (NASD) Rule 1011(k);
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change
its fiscal year or make any material changes with respect to accounting methods, principles
or practices, except as may be required by GAAP or applicable law;
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make
any capital expenditure or expenditures, or incur any obligations or liabilities in connection
with such capital expenditure (other than in accordance with the Company’s capital
expenditures budget for calendar year 2019 or any capital expenditures budget for calendar
year 2020), which, individually, is in excess of $500,000 or, in the aggregate, are in
excess of $2 million;
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settle
or compromise any action (other than settlements or compromises of claims that exclusively
require the payment of money by the Company or its subsidiaries of unreimbursed out-of-pocket
settlement amounts that are (i) accrued or reserved for as of the date of the merger
agreement or (ii) not in excess of $250,000 per action or $2 million in the aggregate)
or enter into any consent, decree, injunction or similar restraint or form of equitable
relief or deferred prosecution agreement or similar agreement with any government authority
that would impose any conduct conditions or remedies that would have a restrictive impact
on the business of the Company or any of its subsidiaries, or would reasonably be expected
to impede or delay in any material respect the consummation of the transactions contemplated
by the merger agreement;
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cancel,
compromise, waive or release any material right or claim of the Company and its subsidiaries;
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cancel,
terminate or modify in any material respect any insurance policy (other than the renewal
of any insurance policy in place as of the date hereof in the ordinary course of business
consistent with past practice);
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enter
into any real property lease or modify, amend, renew, extend, waive or exercise any material
right or remedy under or terminate any lease, other than (i) any renewal for one year
or less of any existing lease in the ordinary course of business consistent with past
practice, (ii) immaterial ministerial amendments, modifications or waivers of any existing
lease in the ordinary course of business consistent with past practice or (iii) with
respect to any lease that requires a monthly rent payment of less than $3,000;
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other
than ordinary course director compensation, ordinary course compensation and employee
benefit entitlements, ordinary course reimbursement of travel and entertainment expenses
or advances regarding the same, in each case that are payable in the ordinary course
of business consistent with past practice or as otherwise permitted under the merger
agreement, enter into any transaction or arrangement with any (i) director, officer or
employee of the Company, (ii) third party who is or was, since the applicable
date, a greater than 5% shareholder of the Company or (iii) any of their respective affiliates;
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acquire
any equity interests in, assets or accounts of, or make any investments in, any financial
advisor of the Company or any of its subsidiaries, which we refer to as a financial
advisor, or a prospective financial advisor or any party affiliated with any such
financial advisor in excess of $500,000 individually or $5 million in the aggregate (if
closing does not occur on or prior to March 31, 2020, $10 million in the aggregate);
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make
any recruiting loans or similar advances to any prospective financial advisor in excess
of $500,000 individually or $2.5 million in the aggregate (if closing does not occur
on or prior to March 31, 2020, $5 million in the aggregate);
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make
any change to the financial advisor payout grids or substantially similar compensation
table or make any change to any other methodology affecting the rate of any other compensation
with respect to the financial advisors applicable to the financial advisor field force
taken as a whole, provided that the Company or its subsidiaries may make changes to the
compensation payable to individual financial advisors on a case-by-case basis consistent
with past practices; or
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affirmatively
authorize, agree or commit, or publicly announce an intention, to do any of the foregoing.
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Notwithstanding
the prohibitions listed above, neither we nor our subsidiaries are prohibited from effecting any of the following:
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any
matter required by law or by a government authority or requested by a government authority
as part of its supervision of the Company or its subsidiaries;
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the
implementation of any transaction or taking any action required by or otherwise permitted
under the merger agreement;
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any
matter disclosed in the Company’s disclosure letter;
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the
performance of an obligation under any contract existing as of the date of the merger
agreement;
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any
action on behalf of or at the direction of a client or customer of the Company or any
subsidiary thereof (so long as such action is taken in the ordinary course of business
consistent with past practice);
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the
release or discharge of any liability owed by any subsidiary of the Company to the Company
or its affiliates or owed by the Company to any of its subsidiaries or affiliates; or
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any
action taken in connection with disaster recovery or emergency response efforts (the
Company must notify Advisor Group of such efforts).
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Acquisition
Proposals
Restrictions
Upon
the signing of the merger agreement, the Company was required to, and required to cause its subsidiaries and all of its and their
respective directors, officers and representatives to, immediately (i) cease all solicitation, encouragement, discussions
and negotiations regarding any inquiry, proposal or offer pending on the date of the merger agreement that constitutes, or would
reasonably be expected to lead to, an acquisition proposal, (ii) request the prompt return or destruction of all confidential
information previously furnished to any third party in connection with a possible acquisition proposal and (iii) terminate access
to any physical or electronic data rooms relating to a possible acquisition. The Company also agreed that neither it nor any of
its subsidiaries nor any of their respective directors, officers and representatives will, and that the Company will instruct
and use its reasonable best efforts to cause its and its subsidiaries’ representatives not to, directly or indirectly:
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initiate,
solicit or knowingly encourage any inquiries or the making of any proposal or offer that
constitutes, or could reasonably be expected to lead to, any acquisition proposal;
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engage
in, continue or otherwise participate in any discussions or negotiations regarding, or
provide any non-public information or data to any third party relating to, any acquisition
proposal; or
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knowingly
facilitate the efforts of a third party to make an acquisition proposal.
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Exceptions
Notwithstanding
the restrictions on solicitation, negotiation and facilitation described above, and subject to the notice provisions described
below, prior to the time the merger agreement is approved by our shareholders, we may provide non-public and other information
in response to a request by a third party that has made an unsolicited bona fide written acquisition proposal and may participate
in discussions and negotiations with such third party regarding such unsolicited bona fide written acquisition proposal,
in each such case if such third party has executed a confidentiality agreement and the Board determines in good faith after consultation
with outside legal counsel and its financial advisor that such acquisition proposal either constitutes a superior proposal (defined
below) or could reasonably be expected to result in a superior proposal and that failure to take such action would reasonably
be expected to be inconsistent with the Board’s fiduciary duties.
An
“acquisition proposal” means (i) any proposal or offer with respect to a merger, joint venture, partnership, consolidation,
dissolution, liquidation, tender offer, recapitalization, reorganization, share exchange, business combination or similar transaction
involving the Company or any of its significant subsidiaries and (ii) any acquisition by any third party resulting in, or proposal
or offer, in each case, which if consummated would result in, any third party becoming the beneficial owner of, directly or indirectly,
in one or a series of related transactions, 15% or more of the total voting power of any class of equity securities of the Company
(or of the surviving entity in a merger involving the Company, as applicable) or 15% or more of the consolidated net revenues,
net income or total assets (it being understood that total assets include equity securities of its subsidiaries and shall be determined
by the Board, acting reasonably, on both a book-value and fair-market-value basis) of the Company, in each case other than the
transaction contemplated by the merger agreement.
A
“superior proposal” means any bona fide written acquisition proposal (with the percentages set forth in the
definition of such term changed from 15% to 50%) that would result in a third party, other than Advisor Group or any of its subsidiaries
or controlled affiliates, becoming the beneficial owner of, directly or indirectly, more than 50% of the total voting power of
the equity securities of the Company (or of the surviving entity in a merger involving the Company, as applicable) or more than
50% of the consolidated net revenues, net income or total assets (it being understood that total assets include equity securities
of its subsidiaries and shall be determined by the Board, acting reasonably, on both a book-value and fair-market value basis)
of the Company that the Board has determined in good faith, after consultation with outside legal counsel and its financial advisor
that (a) if consummated, would result in a transaction more favorable to the Company’s shareholders from a financial point
of view than the merger, and (b) is reasonably likely to be consummated on the terms proposed, taking into account any legal,
financial, regulatory and shareholder approval requirements, the sources, availability and terms of any financing, financing market
conditions, the likelihood of termination, the timing of closing and the identity of the third party making the proposal and any
other aspects considered, in good faith, relevant by the Board; provided, that such acquisition proposal did not result from a
breach of the Company’s obligations under the merger agreement with respect to acquisition proposals.
Notice
Requirements
The
Company must, as promptly as practicable (and, in any event, within 48 hours), notify Advisor Group if any inquiries, proposals
or offers with respect to an acquisition proposal are received by it or any of its representatives indicating, in connection with
the notice, the name of the third party and the material terms and conditions of any proposals or offers (including, if applicable,
copies of any written requests, proposals or offers, including proposed agreements). Additionally, the Company must keep Advisor
Group informed, on a current basis, of the status and terms of such proposals or offers (including any amendments thereto).
Change
of Board Recommendation
Except
as permitted by the terms of the merger agreement as described below, the Board may not make a change of Board recommendation,
which includes any of the following:
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withhold,
withdraw, qualify or modify (or publicly propose or resolve to withhold, withdraw, qualify
or modify), in a manner adverse to Advisor Group in any material respect, the Board recommendation;
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fail
to reaffirm the Board recommendation or fail to publicly state that the merger agreement
is in the best interests of its shareholders, within 10 business days after Advisor Group
requests in writing that it take such action, (or within one day if the special meeting
called to vote on the merger is scheduled to be held within two days);
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fail
to publicly announce that, within 10 business days after a tender offer or exchange relating
to the Company’s securities has been commenced, it recommends rejecting the tender
offer or exchange offer; or
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approve,
endorse, recommend or publicly propose to take those actions toward any acquisition proposal.
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Notwithstanding
the foregoing, prior to obtaining shareholder approval of the merger proposal and subject to the terms and conditions set forth
in the merger agreement, including the notice, good faith negotiation and determination requirements described below, the Board
may change its recommendation in the event the Company receives an unsolicited bona fide written acquisition that the Board
determines in good faith after consultation with outside legal counsel and its financial advisor that such acquisition proposal
constitutes a superior proposal and that failure to effect a change of Board recommendation would be inconsistent with the directors’
fiduciary duties under applicable law, so long as the Board intends to terminate the merger agreement with Advisor Group to enter
into an alternative acquisition agreement with respect to a superior proposal.
As
described above, before making a change in Board recommendation, the Company must, as promptly as practicable (and, in any event,
within 48 hours), notify Advisor Group if any inquiries, proposals or offers with respect to an acquisition proposal are received
by it or any of its representatives indicating, in connection with the notice, the name of the third party and the material terms
and conditions of any proposals or offers (including, if applicable, copies of any written requests, proposals or offers, including
proposed agreements). Additionally, the Company must keep Advisor Group informed, on a current basis, of the status and terms
of such proposals or offers (including any amendments thereto). Further, before the Company may effect the change of Board recommendation,
it must give Advisor Group three business days, during which, at Advisor Group’s option, the parties will negotiate in good
faith, to match the superior proposal. After such three day period, and after the Company has delivered to Advisor Group written
notice of the Board’s intention to make a change of Board recommendation (including its reasons for making such change and
attaching the most current version of the agreement in relation to such superior proposal and its intention to terminate the merger
agreement), the Company may effect the change of Board recommendation. Any material amendment to any acquisition proposal will
be deemed to be a new acquisition proposal for the purposes of making a change of Board recommendation and for the purposes of
the notice requirements.
Shareholder
Meeting
We
are required to, as soon as reasonably practicable following the date this proxy statement is cleared by the SEC, to duly call,
give notice of, convene and hold a special meeting for the purposes of seeking the approval of the merger proposal by our shareholders.
We have agreed to (i) cause this proxy statement to be mailed to the shareholders and to hold the special meeting as promptly
as reasonably practicable following the date it is cleared by the SEC and (ii) solicit and use reasonable best efforts to obtain
approval of the merger proposal by our shareholders, including engaging a proxy solicitation firm for the purposes of assisting
in the solicitation of proxies for the special meeting.
Unless
the merger agreement has been terminated in accordance with its terms prior to the date of the special meeting, the special meeting
shall be convened and the merger agreement shall be submitted to our shareholders at the special meeting.
The
merger agreement provides that except to the extent that the Board changed its recommendation, the Company must include the Board
recommendation in this proxy statement and the Company may, after consulting with Advisor Group, adjourn, recess or postpone the
special meeting only (i) to the extent required by applicable law to ensure that any required supplement or amendment to the proxy
statement is provided to the shareholders within a reasonable amount of time in advance of the special meeting, (ii) to the extent
required by a court in connection with any legal action in connection with the merger agreement or the merger, (iii) if, as of
the time for which the special meeting is originally scheduled there are insufficient shares represented to constitute a quorum
necessary to conduct the business of the special meeting (provided that the Company will not be required to adjourn the special
meeting for this reason on more than two occasions and will not be required to adjourn the special meeting past the outside date)
or (iv) with the prior written consent of Advisor Group.
Financing
Cooperation
The
Company has agreed to use its reasonable best efforts to deliver to Advisor Group and the debt financing sources certain required
information, including certain Company audited and unaudited financial statements (other than any financial statements that are
not required to be included in any company reports). The Company has also agreed to use reasonable best efforts to provide, and
use reasonable best efforts to cause its subsidiaries to and cause their representatives to use reasonable best efforts to provide,
to Advisor Group and the debt financing sources, at Advisor Group’s sole cost and expense (other than in respect of the
required information), all customary cooperation reasonably requested in writing by Advisor Group and the debt financing sources
to cause the conditions in the debt commitment letter to be satisfied or as otherwise reasonably requested, in each case, solely
with respect to information regarding the Company and its subsidiaries, in connection with the financing, including using its
reasonable best efforts to, among other things:
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participate
in meetings, presentations, a road show and due diligence sessions and sessions with
rating agencies;
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deliver
to Advisor Group and the debt financing sources financial and other information regarding
the Company and its subsidiaries;
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assist
Advisor Group and the debt financing sources in their preparation of offering documents
for the debt financing;
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cooperate
with Advisor Group and the debt financing sources in their marketing and due diligence
efforts with respect to the debt financing;
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assist
in facilitating the granting of a security interest in collateral;
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cause
its independent accountants to deliver customary comfort letters with respect to any
financial statement included in the required information; and
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assist
in obtaining customary payoff letters relating to the repayment of existing third party
indebtedness for borrowed money of the Company or its subsidiaries required by the debt
commitment letter to be repaid on at the date of closing.
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The
parties agreed that the Company will not, among other things, be required to cooperate to the extent that it would interfere unreasonably
with the Company’s or any of its subsidiaries’ business or operations, cause the Company or any of its subsidiaries
significant competitive harm or create unreasonable risk of harm to any property or assets of the Company or any of its subsidiaries.
Employee
Benefits Matters
The
merger agreement provides that for a one year period after the effective time, Advisor Group will provide each continuing Company
employee compensation (base salary, base wage rate, commission schedule, target annual and long-term incentive opportunities),
severance benefits and retirement and employee welfare benefits that are no less favorable in the aggregate than those provided
to similarly situated employees of Advisor Group and its affiliates.
Additionally,
the merger agreement requires Advisor Group to (i) cause any pre-existing conditions or limitations and eligibility waiting periods
under any group health plans of Advisor Group or its affiliates to be waived with respect to the continuing Company employees
and their eligible dependents, (ii) give each continuing Company employee credit for the plan year in which the effective time
occurs towards applicable deductibles and annual out-of-pocket limits for medical expenses incurred prior to the effective time
for which payment has been made and (iii) give each continuing Company employee service credit for such continuing Company employee’s
years of service with the Company and its subsidiaries for purposes of vesting, benefit accrual and eligibility to participate
under each applicable Advisor Group benefit plan, as if such service had been performed with Advisor Group, except for purposes
of qualifying for subsidized early retirement benefits or to the extent it would result in a duplication of benefits.
The
merger agreement also requires that, as soon as reasonably practicable following the effective time, the Company must take all
actions necessary and appropriate so as to directly transfer to a 401(k) plan maintained or established by Advisor Group or one
of its affiliates the assets and liabilities of each of the Company’s 401(k) plans, including all outstanding loans to participants
under such plans and employer contributions through the effective time. The parties agreed to take all reasonable and necessary
steps so as to cooperate and effectuate the foregoing transfer. The Company also agreed to the termination of any and all sick,
vacation, personal days, floating days, voluntary paid time off and other paid time off policies, programs and plans, and to freeze
the accrual of any additional paid time off under such plans effective as of December 31, 2019, and, to the extent permitted by
applicable law, pay out any accrued but unused benefits under such plans through December 31, 2019 to participants of such plans
no later than the normally scheduled payroll immediately prior to the effective time. From January 1, 2020 through the effective
time, continuing employees will continue to accrue (and use) any and all paid time off under such plans. Following the effective
time, continuing employees will accrue paid time off under the policies of Advisor Group and its affiliates, who will provide
continuing employees to be credited with paid time off for the period between January 1, 2020 and the effective time.
Advisor
Group has acknowledged that a “change in control” (or similar phrase) within the meaning of the benefit plans of the
Company and its subsidiaries will occur from and after the effective time. From and after the effective time, Advisor Group will,
and will cause its affiliates to, honor all obligations and rights under the Company’s benefit plans which are not terminated
pursuant to the merger agreement in accordance with their terms, provided that Advisor Group and its affiliates are not required
to continue the Company benefit plans indefinitely or for any period of time following the effective time.
Delisting
and Deregistration of the Common Stock
If
the merger is completed, our common stock will be delisted from the NYSE American and deregistered under the Exchange Act.
Conditions
to the Merger
The
respective obligations of the Company, Advisor Group and Merger Sub to consummate the merger are subject to the satisfaction or
waiver, at or prior to closing, of the following conditions:
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the
merger proposal has been duly approved by the affirmative vote of holders of a majority
of the shares of common stock entitled to vote at the special meeting;
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all
required governmental approvals have been obtained and any applicable waiting periods
relating to any required governmental approvals have expired or been terminated early;
and
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no
court or other governmental authority of competent jurisdiction may have enacted, issued,
promulgated, enforced or entered any law that is effective and restrains, enjoins or
otherwise prohibits the consummation of the merger or other transactions contemplated
by the merger agreement.
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The
obligations of Advisor Group and Merger Sub to consummate the merger are also subject to the satisfaction or waiver, at or prior
to closing, of the following conditions:
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our
representations and warranties set forth in the merger agreement (other than those described
in the bullet below) must have been true and correct as of the date of the merger agreement
and as of the date of closing (except to the extent such representations and warranties
expressly related to a specific date in which case such representations and warranties
need only to be so true and correct as of such specific date (but excluding the reference
to “as of the date hereof” in the lead-in of the article of the merger agreement
that outlines our representations and warranties)) except where the failures of such
representations and warranties to be true and correct have not had, individually or in
the aggregate, a company material adverse effect (disregarding for purposes of these
conditions any limitations as to materiality or company material adverse effect set forth
in our representations and warranties, except for any such limitations regarding the
Company’s and its subsidiaries’ undisclosed liabilities and the absence of
certain changes as of September 30, 2019 or with respect to any list of items that is
qualified by materiality, which will not be disregarded for purposes these conditions);
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our
representations and warranties regarding our organization; corporate authorization; binding
effect and approval; capital structure; and finder’s fees must have been true and
correct in all respects as of the date of the merger agreement and of the date of closing,
except that information regarding our capital structure could have had de minimis
inaccuracies;
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we
must have performed in all material respects our covenants and agreements set forth in
the merger agreement at or prior to the date of closing;
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Advisor
Group and Merger Sub must have been delivered a certificate, dated as of the date of
closing and signed by a duly authorized officer of the Company certifying that the conditions
described above have been satisfied; and
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no
company material adverse effect has occurred since the date the merger agreement was
signed.
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Our
obligation to consummate the merger is subject to the satisfaction or waiver, at or prior to closing, of the following conditions:
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the
representations and warranties of Advisor Group and Merger Sub set forth in the merger
agreement (other than those described in the bullet below) must have been true and correct
as of the date of the merger agreement and as of the date of closing (except to the extent
such representations and warranties expressly related to a specific date in which case
such representations and warranties need only to be so true and correct as of such specific
date (but excluding the reference to “as of the date hereof” in the lead-in
of the article of the merger agreement that outlines their representations and warranties))
except where the failure of such representations and warranties to be true and correct
have not had, individually or in the aggregate, a parent material adverse effect (disregarding
for purposes of these conditions any limitation as to materiality or parent material
adverse effect set forth in their representations and warranties);
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their
representations and warranties regarding their organization; corporate authorization;
binding effect and approval; and finder’s fees must have been true and correct
in all respects as of the date of the merger agreement and as of the date of closing;
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Advisor
Group and merger sub must have performed in all material respects their covenants and
agreements set forth in the merger agreement at or prior to the date of closing; and
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●
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we
must have been delivered a certificate, dated as of the date of closing and signed by
a duly authorized officer of Advisor Group certifying that all of the conditions to obligations
of the Company have been satisfied.
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Indemnification
The
merger agreement provides that all rights, existing as of the date of the merger agreement, to indemnification, advancement of
expenses and exculpation from liabilities for acts or omissions occurring at or prior to the completion of the merger in favor
of the current or former officers, directors or employees of the Company or any of its subsidiaries will continue in full force
and effect. The merger agreement also provides that, following completion of the merger, the surviving corporation will indemnify
and hold harmless, to the fullest extent permitted by applicable law, all individuals who are, as of the date of the merger agreement
and at any time from and after the date of the merger agreement until the completion of the merger, directors, officers or employees
of the Company and its subsidiaries (in their capacity as such), against any costs, claims, expenses and liabilities, whether
arising before or after the effective time, arising out of the fact that such person is or was a director, officer or employee
of the Company or its subsidiaries, and pertaining to matters existing or occurring at or prior to the effective time, and will
also advance expenses to such persons, provided that such person provides an undertaking to repay such advances if it is ultimately
determined that such person is not entitled to indemnification.
From
and after the effective time, the surviving corporation and Advisor Group will indemnify and hold harmless each individual who
is as of the date of the merger agreement, or who becomes prior to the effective time, a director, officer or employee of the
Company or any of its subsidiaries or who is as of the date of the merger agreement, or who thereafter commences prior to the
effective time, serving at the request of the Company or any of its subsidiaries as a director, officer or employee of another
third party, against all liabilities, including attorney’s fees and disbursements, incurred or arising in connection with
any claim, action, investigation, suit or proceeding (including with respect to matters existing or occurring or alleged to have
existed or occurred at or prior to the effective time (including the merger agreement and the transactions and actions contemplated
by the merger agreement)) arising out of or pertaining to the fact that such indemnified party is or was serving at the request
of the Company or any of its subsidiaries as a director, officer or employee of a third party or any act or omission by such indemnified
party while serving in such capacity, whether asserted or claimed prior to, at or after the effective time, to the fullest extent
permitted under applicable law.
Termination
We
and Advisor Group may, by mutual written consent, terminate the merger agreement and abandon the merger at any time prior to the
effective time, notwithstanding any approval of the merger agreement by our shareholders.
The
merger agreement may also be terminated and the merger abandoned at any time prior to the effective time as follows:
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by
either Advisor Group or the Company, if:
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○
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the
merger has not been consummated by the outside date; provided, however, that if all conditions
to the closing of the merger, other than with respect to the FINRA approvals, have been
satisfied or waived as of such date (except those conditions which by their nature are
to be satisfied at the consummation of the merger), the outside date will automatically
be extended for up to one additional 30-day period to allow for the FINRA approval to
be obtained, provided that this right to terminate is not available to any party that
has breached any representation, warranty, covenant or agreement contained in the merger
agreement that has been the primary cause of or resulted in the failure of the transactions
contemplated by the merger agreement to occur on or before the outside date (except that
if the closing did not occur on or before the outside date as a result of a financing
failure, then Advisor Group may terminate the merger agreement if Advisor Group pays
the reverse termination fee required and as described in further detail below in the
section titled “—Termination Fee”);
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our
shareholders do not approve the merger agreement at the special meeting or at any adjournment
or postponement of the special meeting; or
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○
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any
government order permanently restrains, enjoins or prohibits or makes illegal the consummation
of the merger, and such government order becomes effective (and final and non-appealable)
or any law becomes enacted, entered, promulgated or enforced by any government authority
that prohibits or makes illegal consummation of the merger, provided that the terminating
party must have complied in all material respects with its obligations under the merger
agreement.
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○
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there
has been a breach of any representation, warranty, covenant or agreement made by the
Company in the merger agreement or if any representation or warranty of the Company becomes
untrue after the date of the merger agreement, and such breach or failure to be true
gives rise to the failure of the condition to the closing of the merger relating to the
accuracy and representations and warranties of the Company or compliance by the Company
with its obligations under the merger agreement, and such breach or failure to be true
cannot be cured or, if curable, is not cured within 30 days after Advisor Group provides
written notice of such breach or failure to be true; or
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prior
to the approval by our shareholders of the merger agreement, the Board has made a change
of Board recommendation in light of its intentions to enter into an alternative acquisition
agreement with respect to a superior proposal.
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there
has been a breach of any representation, warranty, covenant or agreement made by Advisor
Group or Merger Sub in the merger agreement or if any representation or warranty of Advisor
Group or Merger Sub becomes untrue after the date of the merger agreement, and such breach
or failure to be true gives rise to the failure of the condition to the closing of the
merger relating to the accuracy of the representations and warranties of Advisor Group
and Merger Sub or compliance by Advisor Group and Merger Sub with their respective obligations
under the merger agreement, and such breach or failure to be true cannot be cured or,
if curable, is not cured within 30 days after the Company provides written notice of
such breach or failure to be true; or
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prior
to the approval by our shareholders of the merger agreement, the Board authorizes the
Company to enter into an alternative acquisition agreement with respect to a superior
proposal in compliance with the terms of the merger agreement, including its notice obligations
and giving Advisor Group the opportunity to match the superior proposal.
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Termination
Fees
Termination
Fees Payable by the Company
A
termination fee of $19 million would be payable to Advisor Group by us in the event the merger agreement were terminated:
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by
either Advisor Group or the Company if (i) the merger has not been consummated by the
outside date or our shareholders do not approve the merger agreement at the special meeting
or at any adjournment or postponement of the special meeting, (ii) at the time of such
termination, a third party has publicly announced (and not withdrawn) a proposed acquisition
transaction with the Company and (iii) within 12 months of such termination, the Company
enters into an agreement with respect to an alternative transaction that results in a
change in control of at least 50% of total voting power of any class of equity securities
of the Company or at least 50% of the net revenues, net income or total assets of the
Company, in which case, the termination fee would be payable prior to or concurrently
with entering into an agreement with respect to such alternative transaction;
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by
Advisor Group if the Board has made a change of Board recommendation in favor of the
merger agreement, in which case, the termination fee would be payable within five business
days of such termination; or
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by
the Company if prior to the approval by our shareholders of the merger agreement, the
Board authorizes the Company to enter into an alternative acquisition agreement in compliance
with the terms of the merger agreement, including the requirements described under “The
Merger Agreement—Acquisition Proposals” beginning on page 60, in which
case the termination fee would be payable within five business days of such termination.
|
In
each case, the Company will be required to reimburse Advisor Group’s documented transaction-related third-party expenses,
which reimbursement is capped at $10 million and will be applied as credit to any required payment of the termination fee. If
the merger agreement is terminated by either Advisor Group or the Company because our shareholders do not approve the merger agreement
at the special meeting or at any adjournment or postponement of the special meeting, then the Company is required to reimburse
Advisor Group’s expenses up to the $10 million cap.
Reverse
Termination Fees Payable by Advisor Group
A reverse termination
fee of $35,300,000 would be payable by Advisor Group to us in the event the merger agreement is terminated by either Advisor Group
or the Company if the merger has not been consummated by the outside date and at the time of such termination that (i) all of
the closing conditions have been satisfied (other than those conditions that by their nature are to be satisfied at the date of
closing) and (ii) there exists a financing failure, except in the case (A) where the Company has materially breached its obligations
to cooperate with Advisor Group in its attempt to receive financing (described in more detail under “The Merger Agreement
— Financing Cooperation”)
and such breach is not cured within 15 days after written notice of such a breach by Advisor Group to the Company specifying such
breach in particularity and, without such a breach there would be no financing failure, or (B) where (x) the applicable auditors
who prepared the required information have withdrawn any of their audit opinions with respect to the audited financial statements
contained in the required information or (y) the financial statements included in the required information are deemed to be stale
or otherwise unusable under customary practices for offerings and private placements of high-yield debt securities or insufficient
to permit the Company’s independent public accountants to issue a customary “comfort” letter to the debt financing
sources, which circumstances in (A) and (B) we refer to as the Company causation exception.
Remedies
Specific
Performance
The
parties agreed that irreparable damage would occur in the event that any of the provisions of the merger agreement were not performed
in accordance with their specific terms or were otherwise breached. Accordingly, each of the parties is entitled to seek specific
performance of the terms and provisions of the merger agreement and to obtain or to seek an injunction restraining any breach
or violation or threatened breach or violation of the provision of the merger agreement. Each party agreed that it will not oppose
the granting of an injunction, specific performance and other equitable relief on the basis that either party has an adequate
remedy at law or an award of specific performance is not an appropriate remedy for any reason at law or equity and that it will
not require the party seeking relief to post a bond or other form of security as a prerequisite to obtaining equitable relief.
Specifically,
this entitles the Company to seek specific performance and monetary damages if Advisor Group does not close when it is otherwise
obligated to close (i.e., when the Company has satisfied its obligations and all closing conditions have been satisfied other
than those conditions that by their nature are to be satisfied at the closing), except in the event of a financing failure, where
the parties have agreed that Advisor Group may pay liquidated damages to the Company of $35,300,000 in lieu of closing, as described
below.
Liquidated
Damages
In
the event the termination fee becomes payable by the Company, such termination fee will be the sole and exclusive remedy for monetary
damages to which Advisor Group and Merger Sub will be entitled (except that in the event the merger agreement is terminated because
our shareholders do not approve the merger agreement at the special meeting and as a result the Company reimburses Advisor Group
for its out-of-pocket expenses, Advisor Group still will have the right to receive the termination fee, with the amount reimbursed
by the Company for such out-of-pocket expenses applied as a credit against the additional payment of the termination fee).
In
the event the Advisor Group pays the Company the reverse termination fee of $35,300,000 in liquidated damages, such fee will be
the sole and exclusive remedy of the Company and its affiliates against Advisor Group and its subsidiaries, the debt financing
sources and any of their respective former, current, or future general or limited partners, stockholders, managers, members, directors,
officers, affiliates, employees, representatives or agents, for any losses suffered as a result of any breach of any representation,
warranty, covenant or agreement in the merger agreement or the failure of the consummation of the merger, and none of such parties
will have any further liability or obligation relating to or arising out of the merger agreement or the transactions contemplated
by the merger agreement.
Uncapped
Damages
Notwithstanding
the foregoing, no payment of liquidated damages, either the Company termination fee or the Advisor Group reverse termination fee,
will relieve any party of any liability or damages incurred or suffered by the Company or Advisor Group or Merger Sub, as applicable,
to the extent such liability or damages are the result of or arise out of any fraud or willful breach of any provision of the
merger agreement.
In
the event that Advisor Group or Merger Sub commit any fraud of willful breach of any provision of the merger agreement, the Company
will be entitled to recover damages that will be determined by reference to the total amount that would have been recoverable
by the Company’s shareholders if all such shareholders brought an action against Advisor Group and were recognized as third-party
beneficiaries under the merger agreement.
Fees
and Expenses
All
fees and expenses incurred in connection with the merger agreement and the transactions contemplated by the merger agreement will
be paid by the party incurring such fees and expenses whether or not the merger is completed, subject to exceptions for expenses
(i) incurred by Advisor Group if the merger agreement is terminated in specified circumstances, as described above, (ii) incurred
by the Company as a result of cooperating with Advisor Group in order to obtain or assist Advisor Group in obtaining any actions,
consents, undertakings, approvals or waivers by or from any person for or in connection with, and to reasonably assist Advisor
Group in litigating or otherwise contesting any objections to or proceedings or other actions challenging, the consummation of
the merger or (iii) incurred by the Company and its subsidiaries in connection with the performance of its financing cooperation
covenant (other than with respect to the preparation of audited and other historical financial statements).
Amendments;
Waiver
Any
provisions of the merger agreement may be amended if such amendment is in writing and signed by and on behalf of each party, and
any provision of the merger agreement may be waived if such waiver is in writing and signed by and on behalf of the party against
whom such waiver is to be enforced, except that any amendment of certain provisions that is adverse to the rights of the lenders
and commitment parties under the debt financing obtained by Advisor Group for the purpose of financing the merger will also require
the consent of such lenders and commitment parties.
Governing
Law
The
merger agreement and its enforcement will be governed by the laws of the state of Florida without regard to conflicts of law provisions,
except that each of the parties agreed that except as specifically set forth in the debt commitment letter, all claims or causes
of action against any of the debt financing sources or their representatives, affiliates, and agents in any way relating to the
debt financing or the performance thereof or the financing contemplated thereby will be exclusively governed by the laws of the
state of New York without regard to conflicts of law provisions. The parties agreed that New York is the exclusive jurisdiction
for purpose of any action arising out of or relating to the merger agreement or the confidentiality agreement, and each party
agrees that all claims in respect to such action may be heard and determined exclusively in any New York state or federal court
sitting in New York County, New York.
THE
VOTING AGREEMENTS
This
section describes the material terms of the voting agreements. The description of the voting agreements in this section and elsewhere
in this proxy statement is qualified in its entirety by reference to the complete text of the form of director voting agreement,
a copy of which is attached as Annex B, and the Vector voting agreement, a copy
of which is attached as Annex C, both of which are incorporated by
reference into this proxy statement. This summary does not purport to be complete and may not contain all of the information about
the voting agreements that is important to you. We encourage you to read the voting agreements carefully and in their entirety.
In
connection with the merger agreement, on November 11, 2019, (1) the directors of the Company (solely in their capacities as shareholders
of the Company) and (2) Vector Group, Ltd., a greater than 10% shareholder of the Company, each entered into a voting agreement
with Advisor Group. Such shareholders beneficially own and are entitled to vote shares of our common stock representing approximately
21% of the outstanding shares entitled to vote at the special meeting in the aggregate (not including any shares of common stock
deliverable upon exercise of any Company options, but including any Company restricted shares).
Pursuant
to the voting agreements, such shareholders agreed to, among other things, (i) vote all shares of common stock that they beneficially
owned as of November 11, 2019 or thereafter acquired by such shareholders (including pursuant to the exercise of any options)
in favor of adopting the merger proposal and (ii) vote against any alternative acquisition proposal or any action which
is intended or would reasonably be expected to prevent, materially delay, materially interfere with, or materially impair the
consummation of the merger. Such shareholders have granted Advisor Group an irrevocable proxy granting Advisor Group the right
to vote on their behalf to the extent such shareholders fail to comply with their voting obligations under the voting agreements.
In
addition, pursuant to the voting agreements, such shareholders also agreed, among other things, not to transfer any of their respective
shares of common stock during the term of the voting agreements, except for certain limited purposes described in the voting agreements.
Each voting agreement terminates upon the earliest to occur of (i) the effective time; (ii) the termination of the merger agreement
in accordance with its terms (including termination by the Company to enter into an alternative acquisition agreement with respect
to a superior proposal, as described herein); (iii) the time of any amendment, modification, waiver or other change to any provision
of the merger agreement that reduces the amount or changes the form of consideration payable to any shareholder of the Company;
and (iv) the written agreement of the relevant shareholder and Advisor Group to terminate the applicable voting agreement.
SUBMISSION
OF SHAREHOLDER PROPOSALS
If
the merger is consummated, we will not have public shareholders and there will be no public participation in any future meeting
of shareholders. However, if the merger is not completed by, or shortly after, June 2020, the time of year at which the Company’s
annual meeting would normally take place, we expect to hold our 2020 annual meeting of shareholders, in which case we will provide
notice of or otherwise publicly disclose the date on which such annual meeting will be held.
If
the Company’s 2020 annual meeting of shareholders is held, any eligible Company shareholder may present proposals or nominations
to be considered for inclusion in the proxy statement and form of proxy for our 2020 annual meeting only if such shareholder complies
with the requirements of Rule 14a-8 under the Exchange Act. In order for a Company shareholder proposal or nomination for director
to be considered for inclusion in the Company’s proxy statement and form of proxy relating to its annual meeting in 2020,
the Company must have received the proposal or nomination at 277 Park Avenue, 26th Floor, New York, New York 10172, Attention:
Corporate Secretary, by no later than January 1, 2020.
Any
proposal submitted with respect to our 2020 annual meeting of shareholders that is submitted outside the requirements of Rule
14a-8 under the Exchange Act will be considered timely if we receive written notice of that proposal not fewer than 45 days prior
to the first anniversary of the date on which we first mail the proxy statement for the 2020 annual meeting. However, if the date
of our 2020 annual meeting of shareholders is changed by more than 30 days from the date of our 2019 annual meeting of shareholders,
June 13, 2019, then the notice and proposal will be considered untimely if it is not received at least a reasonable time before
we mail the proxy statement in respect of our 2020 annual meeting.
WHERE
YOU CAN FIND MORE INFORMATION
The
Company files annual, quarterly and current reports, proxy statements and other information with the SEC. The Company’s
public filings are available in electronic format to the public from commercial document retrieval services and at the website
maintained by the SEC at http://www.sec.gov. Information contained on the SEC’s website is expressly not incorporated
by reference into this proxy statement. You can also review the Company’s SEC filings on its website at https://ir.stockpr.com/ladenburg/sec-filings.
Information included on, or otherwise accessible through, the Company’s website is not incorporated into, and does not form
a part of, this proxy statement.
Shareholders
may also obtain copies of any of the documents we file with the SEC, without charge, by requesting them in writing or by telephone
from the Company at the following address:
Investor
Relations Department
Ladenburg
Thalmann Financial Services Inc.
4400
Biscayne Boulevard, 12th Floor
Miami,
Florida 33137
Telephone:
(212) 409-2000
If
you would like to request documents, please do so at least five business days prior to the special meeting in order to receive
them before the special meeting. If you have any questions or need assistance voting your shares, please contact our proxy solicitor:
Georgeson
LLC
1290 Avenue of the Americas, 9th Floor
New York, New York 10104
Call Toll-Free (North America): (866) 357-4029
The
SEC allows us to “incorporate by reference” into this proxy statement documents we file with the SEC. This means that
we can disclose important information to you by referring you to those documents. The information incorporated by reference is
considered to be a part of this proxy statement, and later information that we file with the SEC will update and supersede that
information. Information in documents that is deemed, in accordance with SEC rules, to be furnished and not filed will not be
deemed to be incorporated by reference into this proxy statement. We incorporate by reference the documents listed below and any
documents filed by us pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this proxy statement,
and before the date of the special meeting:
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the
Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018,
as amended;
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the
Company’s Quarterly Reports on Form 10-Q for the quarterly periods ended March
31, 2019, June 30, 2019 and September 30, 2019;
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the
Company’s Definitive Proxy Statement for the 2019 annual meeting; and
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the
Company’s Current Reports on Form 8-K, in each case to the extent filed and not
furnished with the SEC on January 30, 2019, May 21, 2019, May 29, 2019, June 14, 2019
and November 14, 2019.
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YOU
SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROXY STATEMENT TO VOTE YOUR SHARES AT THE SPECIAL MEETING OF SHAREHOLDERS.
THE COMPANY HAS NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT DIFFERS FROM THAT CONTAINED IN THIS PROXY STATEMENT.
THIS PROXY STATEMENT IS DATED ________, ________. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS PROXY STATEMENT
IS ACCURATE AS OF ANY DATE OTHER THAN THAT DATE, AND THE MAILING OF THIS PROXY STATEMENT TO SHAREHOLDERS SHOULD NOT CREATE ANY
IMPLICATION TO THE CONTRARY.
Annex
A to the Proxy Statement
EXECUTION
VERSION
AGREEMENT
AND PLAN OF MERGER
by
and among
LADENBURG
THALMANN FINANCIAL SERVICES INC.,
ADVISOR
GROUP HOLDINGS, INC.
and
HARVEST
MERGER SUB, INC.
Dated
as of November 11, 2019
TABLE
OF CONTENTS
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Page
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ARTICLE
I
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DEFINITIONS;
INTERPRETATION
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Section
1.1
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Definitions
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2
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Section
1.2
|
Interpretation
|
2
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ARTICLE
II
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|
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THE
MERGER
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|
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Section
2.1
|
The
Merger
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3
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Section
2.2
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Closing
|
4
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Section
2.3
|
Effective
Time
|
4
|
|
|
|
|
ARTICLE
III
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|
|
CONSTITUENT
DOCUMENTS AND DIRECTORS OF THE SURVIVING CORPORATION
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Section
3.1
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Articles
of Incorporation
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4
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Section
3.2
|
By-Laws
|
4
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Section
3.3
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Directors
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4
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ARTICLE
IV
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EFFECT
OF THE MERGER ON CAPITAL STOCK; PAYMENT MECHANICS
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Section
4.1
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Effect
on Capital Stock
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4
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Section
4.2
|
Payment
Mechanics
|
5
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Section
4.3
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Lost,
Stolen or Destroyed Certificates
|
8
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Section
4.4
|
Dissenting
Shares
|
8
|
Section
4.5
|
Treatment
of Company Stock Plans
|
9
|
Section
4.6
|
Adjustments
to Prevent Dilution
|
10
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ARTICLE
V
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REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
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Section
5.1
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Organization,
Authorization, Enforceability, Non-Contravention
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11
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Section
5.2
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Capital
Structure
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13
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Section
5.3
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Company
Reports; Financial Statements
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14
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Section
5.4
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Approvals
and Filings
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16
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Section
5.5
|
Absence
of Changes
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17
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Section
5.6
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No
Litigation
|
17
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Section
5.7
|
Taxes
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17
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Section
5.8
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Employee
Benefit Plans
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18
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Section
5.9
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Labor
Matters
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20
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Section
5.10
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No
Violation of Law; Required Licenses and Permits
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20
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Section
5.11
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FCPA,
Other Anti-Bribery Laws, and Sanctions
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21
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TABLE
OF CONTENTS
(continued)
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Page
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Section
5.12
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Real
Property
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22
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Section
5.13
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Intellectual
Property
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23
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Section
5.14
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Material
Contracts
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24
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Section
5.15
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Insurance
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26
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Section
5.16
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Investment
Adviser Subsidiaries
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26
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Section
5.17
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Broker-Dealer
Subsidiaries
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27
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Section
5.18
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Financial
Advisor Agreements and Loans
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28
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Section
5.19
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Takeover
Statutes
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28
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Section
5.20
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Finder’s
Fees
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28
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Section
5.21
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Environmental
Matters
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29
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Section
5.22
|
No
Other Representations or Warranties
|
29
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ARTICLE
VI
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|
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REPRESENTATIONS
AND WARRANTIES OF PARENT
|
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Section
6.1
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Organization,
Authorization, Enforceability, Non-Contravention
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30
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Section
6.2
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Capitalization
of Merger Sub
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31
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Section
6.3
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Financial
Ability
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31
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Section
6.4
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Approvals
and Filings
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32
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Section
6.5
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No
Litigation
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32
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Section
6.6
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Beneficial
Ownership of Shares; Takeover Statutes
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32
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Section
6.7
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Finder’s
Fees
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32
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Section
6.8
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Solvency
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32
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Section
6.9
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Information
Supplied
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32
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Section
6.10
|
No
Other Representations or Warranties
|
33
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ARTICLE
VII
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COVENANTS
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|
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Section
7.1
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Interim
Operations
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33
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Section
7.2
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Preparation
of the Proxy Statement; Shareholders Meeting
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38
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Section
7.3
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Acquisition
Proposals
|
40
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Section
7.4
|
Regulatory
Actions; Reasonable Best Efforts
|
43
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Section
7.5
|
Public
Announcements
|
44
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Section
7.6
|
Notification
of Certain Matters
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44
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Section
7.7
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Access
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45
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Section
7.8
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Stock
Exchange Delisting
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45
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Section
7.9
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Employee
Matters
|
46
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Section
7.10
|
Treatment
of Company Preferred Stock
|
47
|
Section
7.11
|
Indemnification;
Directors’ and Officers’ Insurance
|
48
|
Section
7.12
|
Section
16 Matters
|
49
|
Section
7.13
|
Approval
of the Sole Shareholder of Merger Sub
|
49
|
Section
7.14
|
Fund
Client Consents
|
50
|
Section
7.15
|
Financing
|
52
|
Section
7.16
|
Financing
Assistance
|
54
|
Section
7.17
|
Further
Assurances
|
55
|
TABLE
OF CONTENTS
(continued)
|
|
Page
|
|
ARTICLE
VIII
|
|
|
CONDITIONS
TO CLOSING
|
|
|
|
|
Section
8.1
|
Conditions
to Each Party’s Obligations
|
56
|
Section
8.2
|
Conditions
to Obligations of Parent and Merger Sub
|
56
|
Section
8.3
|
Conditions
to Obligations of the Company
|
57
|
|
|
|
|
ARTICLE
IX
|
|
|
TERMINATION
|
|
|
|
|
Section
9.1
|
Termination
by Mutual Consent
|
58
|
Section
9.2
|
Termination
by Either Parent or the Company
|
58
|
Section
9.3
|
Termination
by the Company
|
58
|
Section
9.4
|
Termination
by Parent
|
59
|
Section
9.5
|
Effect
of Termination and Abandonment
|
59
|
|
|
|
|
ARTICLE
X
|
|
|
MISCELLANEOUS
|
|
|
|
|
Section
10.1
|
Non-survival
of Representations and Warranties and Agreements
|
62
|
Section
10.2
|
Notices
|
63
|
Section
10.3
|
Assignment
|
64
|
Section
10.4
|
No
Third-Party Beneficiaries
|
64
|
Section
10.5
|
Expenses
|
65
|
Section
10.6
|
Entire
Agreement
|
65
|
Section
10.7
|
Enforcement
|
65
|
Section
10.8
|
Governing
Law; Consent to Jurisdiction; Venue
|
66
|
Section
10.9
|
Waiver
of Trial by Jury
|
67
|
Section
10.10
|
Counterparts
|
68
|
Section
10.11
|
Severability
|
68
|
Section
10.12
|
Amendments;
Waiver
|
68
|
|
|
|
Schedule
and Exhibits
|
|
|
|
|
Schedule
A
|
Definitions
and Terms
|
|
Exhibit
A
|
Equity
Letter
|
|
Exhibit
B
|
Debt
Commitment Letter
|
|
|
|
|
Disclosure
Letter
|
|
|
|
|
Company
Disclosure Letter
|
|
AGREEMENT
AND PLAN OF MERGER, dated as of November 11, 2019 (this “Agreement”), by and among Ladenburg Thalmann
Financial Services Inc., a Florida corporation (the “Company”), Advisor Group Holdings, Inc., a Delaware
corporation (“Parent”), and Harvest Merger Sub, Inc., a Florida corporation and wholly owned subsidiary of
Parent (“Merger Sub” and, together with the Company and Parent, the “Parties” and each,
a “Party”).
RECITALS
WHEREAS,
the Parties intend that, on the terms and subject to the conditions set forth in this Agreement, Merger Sub shall merge with and
into the Company (the “Merger”), with the Company surviving the Merger, pursuant to the provisions of the Florida
Business Corporation Act (the “FBCA”);
WHEREAS,
the board of directors of the Company (the “Company Board”) has: (i) determined that this Agreement and the
transactions contemplated hereby, including the Merger, are fair to, advisable and in the best interests of the Company and its
shareholders; (ii) adopted resolutions approving and declaring advisable the execution, delivery and performance of this Agreement
and the transactions contemplated hereby; and (iii) determined to recommend that the shareholders of the Company approve this
Agreement in accordance with the FBCA, in each case subject to the terms and conditions set forth in this Agreement;
WHEREAS,
the board of directors of each of Parent and Merger Sub has: (i) determined that this Agreement and the transactions contemplated
hereby, including the Merger, are fair to, advisable and in the best interests of Parent and its shareholders or Merger Sub and
its sole shareholder (as the case may be) and (ii) adopted resolutions approving and declaring advisable the execution, delivery
and performance of this Agreement and the transactions contemplated hereby;
WHEREAS,
concurrently with the execution and delivery of this Agreement, and as a condition and inducement to Parent’s and Merger
Sub’s willingness to enter into this Agreement, certain Company Shareholders, each solely in his or her capacity as a Company
Shareholder, are executing and delivering voting agreements, pursuant to which those shareholders, among other things, will agree
to vote all Shares beneficially owned by them in favor of adoption and approval of this Agreement and the Merger at the Company
Shareholders Meeting; and
WHEREAS,
the Parties desire to make certain representations, warranties, covenants and agreements in connection with this Agreement and
the transactions contemplated by this Agreement.
NOW,
THEREFORE, in consideration of the foregoing and of the representations, warranties, covenants and agreements contained in this
Agreement, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, agree as
follows:
Article
I
DEFINITIONS; INTERPRETATION
Section
1.1 Definitions. Capitalized terms used
in this Agreement shall have the meanings set forth on Schedule A.
Section
1.2 Interpretation.
(a)
Unless the context otherwise specifically requires:
(i)
the words “hereof,” “herein,” “hereby” and “hereunder” and words of similar import,
when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement;
(ii)
all terms defined in the singular have a comparable meaning when used in the plural, and vice versa;
(iii)
the terms “Dollars” and “$” mean United States Dollars;
(iv)
references to words of inclusion herein shall not be construed as terms of limitation, and thus references to “included”
matters or items shall be regarded as non-exclusive, non-characterizing illustrations;
(v)
references herein to either gender includes the other gender;
(vi)
references to this Agreement shall include the Company Disclosure Letter, the Preamble and any Recitals, Schedules and Exhibits
to this Agreement;
(vii)
references herein to the Preamble or to any Recital, Article, Section, Subsection or Schedule shall refer, respectively, to the
Preamble or to a Recital, Article, Section, Subsection or Schedule to this Agreement;
(viii)
references to any statute, rule or regulation are to the statute, rule or regulation as amended, modified, supplemented or replaced
from time to time (and, in the case of statutes, include any rules and regulations promulgated under the statute) and all references
to any section of any statute, rule or regulation include any successor to the section;
(ix)
references to any Government Authority include any successor to such Government Authority;
(x)
references to any agreement or other document are to such agreement or document as amended, modified, supplemented or replaced
from time to time (other than for purposes of the Company Disclosure Letter);
(xi)
references to books, records or other information mean books, records or other information in any form including paper, electronically
stored data, magnetic media, film and microfilm;
(xii)
references to a time of day are, unless otherwise specified, references to New York City time;
(xiii)
references to “made available” (or words of similar import) in respect of information made available (or words of
similar import) by the Company means any information made available to Parent by the Company or its Representatives (including
any information made available prior to the date hereof in the Virtual Data Room or filed by the Company with the SEC and publicly
available on EDGAR prior to the date hereof);
(xiv)
references to writing shall include any mode of reproducing words in a legible and non-transitory form; and
(xv)
the rule known as the ejusdem generis rule shall not apply and, accordingly, general words introduced by the word “other”
shall not be given a restrictive meaning by reason of the fact that they are preceded by words indicating a particular class of
acts, matters or things.
(b)
The table of contents and headings contained in this Agreement are for reference purposes only and do not limit or otherwise affect
any of the provisions of this Agreement.
(c)
The Parties have participated jointly in negotiating and drafting this Agreement. In the event that an ambiguity or a question
of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties, and no presumption
or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any provision of this Agreement.
(d)
Whenever a provision of this Agreement provides that an action is to be effected as of, on or by a certain date, and such date
is not a business day, this Agreement shall be read so that such action is required to be effected as of, on or by (as applicable)
the next succeeding business day.
Article
II
THE MERGER
Section
2.1 The Merger. Upon the terms and subject
to the conditions set forth in this Agreement, at the Effective Time (as defined in Section 2.3), Merger Sub shall be merged
with and into the Company in accordance with the FBCA, whereupon the separate corporate existence of Merger Sub shall cease and
the Company shall continue as the surviving corporation (sometimes hereinafter referred to as the “Surviving Corporation”)
under the Laws of the State of Florida. The Merger shall be governed by Section 607.1104 of the FBCA. The Merger shall have the
effects set forth herein and in the applicable provisions of the FBCA. Without limiting the generality of the foregoing, and subject
thereto, from and after the Effective Time, all property, rights, privileges, immunities, powers, franchises, licenses and authority
of the Company and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities, obligations, restrictions and
duties of each of the Company and Merger Sub shall become the debts, liabilities, obligations, restrictions and duties of the
Surviving Corporation.
Section
2.2 Closing. Unless otherwise mutually
agreed in writing between the Company and Parent, the closing for the Merger (the “Closing”) shall take place
at the offices of Sullivan & Cromwell LLP, 125 Broad Street, New York, New York, at 9:00 A.M. on the third business day following
the day on which the last to be satisfied or waived of the conditions set forth in Article VIII (other than those conditions
that by their nature are to be satisfied at the Closing, but subject to the fulfillment or waiver of those conditions) shall be
satisfied or waived in accordance with this Agreement (the day on which the Closing takes place being referred to hereinafter
as the “Closing Date”). Notwithstanding the foregoing, if the Marketing Period has not ended at the time of
the satisfaction or waiver of the conditions set forth in Article VIII (other than those conditions that by their nature
can only be satisfied at the Closing, but subject to the satisfaction or waiver of those conditions), then the Closing shall occur
instead on the date following the satisfaction or waiver of such conditions that is the earlier to occur of (a) any business day
as may be specified by Parent on no less than three business days’ prior notice to the Company and (b) the third business
day following the final day of the Marketing Period.
Section
2.3 Effective Time. As soon as practicable
following the Closing, the Company and Parent will cause articles of merger with respect to the Merger (the “Articles
of Merger”) to be executed, acknowledged and filed with the Secretary of State of the State of Florida as provided in
the FBCA. The Merger shall become effective at the time when the Articles of Merger have been duly filed with the Secretary of
State of the State of Florida or at such later time as may be agreed by the Parties in writing and specified in the Articles of
Merger in accordance with the FBCA (the “Effective Time”).
Article
III
CONSTITUENT DOCUMENTS AND DIRECTORS OF THE SURVIVING CORPORATION
Section
3.1 Articles of Incorporation. At the Effective
Time, the articles of incorporation of the Surviving Corporation shall be the articles of incorporation of the Company as in effect
immediately prior to the Effective Time.
Section
3.2 By-Laws. At the Effective Time, the
by-laws of the Surviving Corporation shall be the by-laws of the Company as in effect immediately prior to the Effective Time.
Section
3.3 Directors. Each of the Parties shall
take all necessary action to cause the directors of Merger Sub immediately prior to the Effective Time to be the directors of
the Surviving Corporation immediately following the Effective Time, until their respective successors are duly elected and qualified
or their earlier death, resignation or removal in accordance with the Constituent Documents of the Surviving Corporation.
Article
IV
EFFECT OF THE MERGER ON CAPITAL STOCK; PAYMENT MECHANICS
Section
4.1 Effect on Capital Stock. At the Effective
Time, as a result of the Merger and without any action on the part of the holder of any capital stock of the Company or on the
part of the sole shareholder of Merger Sub:
(a) Merger
Consideration. Each share of common stock, par value $0.0001 per share (a “Share” or,
collectively, the “Shares”), of the Company issued and outstanding immediately prior to the Effective Time
(other than (i) Shares owned by Parent, Merger Sub or any other direct or indirect wholly owned Subsidiary of Parent and
Shares owned by the Company and, in each case, not held on behalf of third parties, (ii) Dissenting Shares and (iii) Company
Restricted Shares (each Share referenced in clauses (i), (ii) or (iii), an “Excluded Share” and
collectively, “Excluded Shares”)) shall be converted into the right to receive $3.50 per Share (the
“Per Share Merger Consideration”). Each Share (other than any Excluded Shares) shall cease to be
outstanding, shall be cancelled and shall cease to exist as of the Effective Time, and each certificate formerly representing
any Shares (other than Excluded Shares) (each, a “Certificate”) and each book-entry account formerly
representing any non-certificated Shares (other than Excluded Shares) (each, a “Book-Entry Share”) shall
thereafter represent only the right to receive the Per Share Merger Consideration, without interest.
(b)
Cancellation of Excluded Shares. Each Excluded Share shall cease to be outstanding, shall be cancelled without any payment
of any consideration thereof and shall cease to exist as of the Effective Time, subject to any rights the holder thereof may have
pursuant to Section 4.4 with respect to any Excluded Shares that are Dissenting Shares or pursuant to Section 4.5(b)
with respect to any Excluded Shares that are Company Restricted Shares.
(c)
Company Preferred Stock. Each share of the 8.00% Series A Cumulative Redeemable Preferred Stock, par value $0.0001 per
share (a “Preferred Share” or, collectively, the “Preferred Shares”), of the Company shall
remain outstanding.
(d)
Merger Sub Common Stock. Each share of common stock, par value $0.01 per share, of Merger Sub issued and outstanding immediately
prior to the Effective Time shall be converted into one share of common stock, par value $0.0001 per share, of the Surviving Corporation.
Section
4.2 Payment Mechanics.
(a)
Deposit of Merger Consideration and Paying Agent.
(i)
Immediately prior to the Effective Time, Parent shall deposit, or cause to be deposited, with a paying agent selected by Parent
(subject to the consent, not to be unreasonably withheld, of the Company) (the “Paying Agent”), an amount in
cash in immediately available funds sufficient in the aggregate to provide all funds necessary for the Paying Agent to make payments
in respect of the Shares pursuant to Section 4.1(a) and the Company Equity Payments to be paid by the Paying Agent pursuant
to Section 4.5(d) (such cash, the “Exchange Fund”).
(ii)
Prior to the Closing Date, Parent shall enter into an agreement (the “Paying Agent Agreement”) pursuant to
which Parent shall appoint the Paying Agent, which shall be in form and substance reasonably acceptable to the Company (such acceptance
not to be unreasonably conditioned, withheld or delayed). Pursuant to the Paying Agent Agreement, among other things, the Paying
Agent shall (A) act as the paying agent for the payment and delivery of the Per Share Merger Consideration pursuant to the terms
and conditions of this Agreement and for the payment of the Company Equity Payments to be paid by the Paying Agent pursuant to
Section 4.5(d) and (B) invest the Exchange Fund, if and as directed by Parent; provided, however, that any
investment shall be in obligations of or guaranteed as to principal and interest by the U.S. government in commercial paper obligations
rated A-1 or P-1 or better by Moody’s Investors Service, Inc. or Standard & Poor’s Financial Services, LLC, respectively,
in certificates of deposit, bank repurchase agreements or banker’s acceptances of commercial banks with capital exceeding
$10 billion (based on the most recent financial statements of such bank that are then publicly available), or in money market
funds having a rating in the highest investment category granted by a recognized credit rating agency at the time of acquisition
or a combination of the foregoing and, in any such case, no such instrument shall have a maturity exceeding three months. To the
extent that there are losses with respect to such investments, or the Exchange Fund diminishes for other reasons below the level
required to make prompt payment and delivery of the aggregate Per Share Merger Consideration as contemplated by Section 4.1(a)
and the Company Equity Payments to be paid by the Paying Agent pursuant to Section 4.5(d), Parent shall promptly restore
or cause the restoration of the cash in the Exchange Fund diminished through such investments or other events so as to ensure
that the Exchange Fund is at all relevant times maintained at a level sufficient to make such cash payments. Any interest and
other income resulting from such investment (if any) in excess of the amounts payable pursuant to Section 4.2(b) and Section
4.5(d) shall be promptly returned to Parent or the Surviving Corporation, as determined by Parent in accordance with the terms
and conditions of the Paying Agent Agreement.
(b)
Procedures for Surrender.
(i)
As soon as reasonably practicable after the Effective Time and in any event not later than the third business day following the
Effective Time, Parent shall cause the Paying Agent to mail or otherwise provide each holder of record of Shares that are (A)
Certificates or (B) Book-Entry Shares not held, directly or indirectly, through DTC notice advising such holders of the effectiveness
of the Merger, which notice shall include (1) appropriate transmittal materials (including a customary letter of transmittal)
specifying that delivery shall be effected, and risk of loss and title to the Certificates or such Book-Entry Shares shall pass
only upon delivery of the Certificates (or affidavits of loss in lieu of the Certificates, as provided in Section 4.3)
or the surrender of such Book-Entry Shares to the Paying Agent (which shall be deemed to have been effected upon the delivery
of a customary “agent’s message” with respect to such Book-Entry Shares or such other reasonable evidence, if
any, of such surrender as the Paying Agent may reasonably request pursuant to the terms and conditions of the Paying Agent Agreement),
as applicable (such materials to be in such form and have such other provisions as Parent and the Company may reasonably agree),
and (2) instructions for effecting the surrender of the Certificates (or affidavits of loss in lieu of the Certificates, as provided
in Section 4.3) or such Book-Entry Shares to the Paying Agent in exchange for the Per Share Merger Consideration that such
holder is entitled to receive as a result of the Merger pursuant to this Article IV.
(ii)
With respect to Book-Entry Shares held, directly or indirectly, through the Depository Trust Company (“DTC”),
Parent and the Company shall cooperate to establish procedures with the Paying Agent, DTC, DTC’s nominees and such other
necessary or desirable third-party intermediaries to ensure that the Paying Agent will transmit to DTC or its nominees as promptly
as practicable after the Effective Time, upon surrender of Shares held of record by DTC or its nominees in accordance with DTC’s
customary surrender procedures and such other procedures as agreed by Parent, the Company, the Paying Agent, DTC, DTC’s
nominees and such other necessary or desirable third-party intermediaries, the Per Share Merger Consideration to which the beneficial
owners thereof are entitled to receive as a result of the Merger pursuant to this Article IV.
(iii)
Upon surrender to the Paying Agent of Shares that (A) are Certificates, by physical surrender of such Certificates (or affidavits
of loss in lieu of the Certificates, as provided in Section 4.3) together with the letter of transmittal, duly completed
and executed, and such other documents as may be reasonably required by the Paying Agent in accordance with the terms of the materials
and instructions provided by the Paying Agent, (B) are Book-Entry Shares not held through DTC, by book-receipt of an “agent’s
message” by the Paying Agent in connection with the surrender of Book-Entry Shares (or such other reasonable evidence, if
any, of surrender with respect to such Book-Entry Shares, as the Paying Agent may reasonably request pursuant to the terms and
conditions of the Paying Agent Agreement), in each case of the foregoing clauses (A) and (B) of this Section 4.2(b)(iii),
pursuant to such materials and instructions as contemplated by Section 4.2(b)(i), and (C) are Book-Entry Shares held, directly
or indirectly, through DTC, in accordance with DTC’s customary surrender procedures and such other procedures as agreed
by the Company, Parent, the Paying Agent, DTC, DTC’s nominees and such other necessary or desirable third-party intermediaries
pursuant to Section 4.2(a)(ii), the holder of such Certificate or Book-Entry Share shall be entitled to receive in exchange
therefor, and Parent shall cause the Paying Agent to pay and deliver, out of the Exchange Fund, as promptly as practicable to
such holders, an amount in cash in immediately available funds equal to the product obtained by multiplying (1)
the number of Shares represented by such Certificates (or affidavits of loss in lieu of the Certificates, as provided in Section
4.3) or such Book-Entry Shares by (2) the Per Share Merger Consideration.
(iv)
In the event of a transfer of ownership of any Certificate that is not registered in the stock transfer books or ledger of the
Company or if the consideration payable is to be paid in a name other than that in which the Certificate or Certificates surrendered
or transferred in exchange therefor are registered in the stock transfer books or ledger of the Company, a check for any cash
to be exchanged upon due surrender of any such Certificate or Certificates may be issued to such a transferee if the Certificate
or Certificates is or are (as applicable) properly endorsed and otherwise in proper form for surrender and presented to the Paying
Agent, accompanied by all documents required to evidence and effect such transfer and to evidence that any applicable transfer
Taxes have been paid or are not applicable, in each case, in form and substance, reasonably satisfactory to Parent and the Paying
Agent. Payment of the Per Share Merger Consideration with respect to Book-Entry Shares shall only be made to the Person in whose
name such Book-Entry Shares are registered in the stock transfer books or ledger of the Company.
(v)
For the avoidance of doubt, no interest will be paid or accrued for the benefit of any holder of Shares on any amount payable
upon the surrender of any Shares pursuant to this Section 4.2(b).
(c)
Termination of Exchange Fund.
(i)
Any portion of the Exchange Fund (including any interest and other income resulting from any investments thereof (if any)) that
remains unclaimed by the holders of Shares entitled thereto for 12 months from and after the Closing Date shall be delivered to
Parent or the Surviving Corporation, as determined by Parent. Any holder of Shares (other than Excluded Shares) who has not theretofore
complied with the procedures, materials and instructions contemplated by this Section 4.2 and any holder of Company Equity
Awards who has not received the applicable Company Equity Payment to be paid by the Paying Agent pursuant to Section 4.5(d)
shall thereafter look only to the Surviving Corporation as a general creditor thereof for such payments in respect thereof.
(ii)
Notwithstanding anything to the contrary set forth in this Article IV, none of the Surviving Corporation, Parent, the Paying
Agent or any other Person shall be liable to any former holder of Shares or Company Equity Awards for any amount properly delivered
to a public official pursuant to applicable abandoned property, escheat or similar Laws.
Section
4.3 Lost, Stolen or Destroyed Certificates.
In the event any Certificate 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 or the Paying Agent pursuant to the Paying
Agent Agreement or otherwise, the posting by such Person of a bond in customary amount and upon such terms as may be required
by Parent or the Paying Agent pursuant to the Paying Agent Agreement or otherwise as indemnity against any claim that may be made
against it or the Surviving Corporation with respect to such Certificate, the Paying Agent shall, in exchange for such Certificate,
issue a check in the amount equal to the product obtained by multiplying (i) the number of Shares represented by
such lost, stolen or destroyed Certificate by (ii) the Per Share Merger Consideration.
Section
4.4 Dissenting Shares. Notwithstanding
anything in this Agreement to the contrary, if required by the FBCA (but only to the extent required thereby), any Shares that
are held by holders (i) that are entitled to and properly demand and exercise their dissenters’ rights and who comply in
all respects with the provisions of Section 607.1301 to 607.1333 of the FBCA and (ii) who have not effectively withdrawn such
demand (collectively, the “Dissenting Shares”) shall not be converted into the right to receive, as of the
Effective Time, the Per Share Merger Consideration as provided in Section 4.1(a), unless and until such Person shall have
effectively withdrawn or otherwise lost or failed to perfect such Person’s right to appraisal or payment under the FBCA,
at which time such Shares shall be treated as if they had been converted into and become exchangeable for the right to receive,
as of the Effective Time, the Per Share Merger Consideration as provided in Section 4.1(a), without interest, and such
Shares shall not be deemed Dissenting Shares, and such holder thereof shall cease to have any other rights with respect to such
Shares. Each holder of Dissenting Shares shall be entitled to receive only the payment provided by the provisions of Sections
607.1301 through 607.1333 of the FBCA with respect to such Dissenting Shares, unless and until such Person shall have effectively
withdrawn or otherwise lost or failed to perfect such Person’s right to appraisal or payment under the FBCA. The Company
shall give Parent (i) prompt notice of any written demands for appraisal, withdrawals or attempted withdrawals of such demands,
and any other instruments served pursuant to applicable Law that are received by the Company relating to shareholders’ rights
of appraisal and (ii) the opportunity to direct all negotiations and proceedings with respect to demand for appraisal under the
FBCA. The Company shall not, except with the prior written consent of Parent, voluntarily make any payment with respect to any
demands for appraisal, offer to settle or settle any such demands or approve any withdrawal of any such demands.
Section
4.5 Treatment of Company Stock Plans.
(a)
Company Options. At the Effective Time, (i) any vesting conditions applicable to each outstanding option award to purchase
Shares (a “Company Option”) under the Stock Plans shall, automatically and without any required action on the
part of the holder thereof, accelerate in full, and (ii) each Company Option shall, automatically and without any required action
on the part of the holder thereof, be cancelled and shall only entitle the holder of such Company Option to receive, without interest,
an amount in cash equal to the product obtained by multiplying (A) the number of Shares subject to such Company
Option immediately prior to the Effective Time by (B) the excess, if any, of (1) the Per Share Merger Consideration over (2) the
exercise price per Share of such Company Option, less applicable Taxes required to be withheld with respect to such
payment. For the avoidance of doubt, any Company Option which has an exercise price per Share that is greater than or equal to
the Per Share Merger Consideration shall be cancelled at the Effective Time for no consideration, payment or right to consideration
or payment.
(b)
Company Restricted Shares. At the Effective Time, (i) any vesting conditions applicable to each outstanding restricted
stock award (a “Company Restricted Share”) under the Stock Plans shall, automatically and without any required
action on the part of the holder thereof, accelerate in full, and (ii) each Company Restricted Share shall, automatically and
without any required action on the part of the holder thereof, be cancelled and shall only entitle the holder of such Company
Restricted Share to receive, without interest, an amount in cash equal to the product obtained by multiplying (A)
the number of such Company Restricted Shares outstanding immediately prior to the Effective Time by (B) the Per Share Merger Consideration,
less applicable Taxes required to be withheld with respect to such payment.
(c)
Employee Stock Purchase Plan. As soon as reasonably practicable following the date of this Agreement and in any event prior
to the Effective Time, the Company shall take all actions (including obtaining any necessary determinations and/or resolutions
of the Company Board or a duly authorized committee thereof and, if appropriate, amending the terms of the Company’s Qualified
Employee Stock Purchase Plan as Amended and Restated (the “ESPP”)) that may be necessary or required under
the ESPP and applicable Laws to ensure that (A) except for the three-month offering period under the ESPP that commenced on October
1, 2019 (the “Final Offering”), no offering period shall be authorized or commenced on or after the date of
this Agreement, (B) the Final Offering shall end on a date no later than the business day immediately preceding the Closing Date
(the earlier of the date the Final Offering ends and the business day immediately preceding the Closing Date, the “ESPP
Termination Date”), (C) each ESPP participant’s accumulated contributions under the ESPP shall be used to purchase
Shares in accordance with the ESPP as of the end of the Final Offering, with any remaining contributions returned to the participant
(without interest) as soon as administratively practicable thereafter, (D) the applicable purchase price for Shares shall not
be decreased below the levels set forth in the ESPP as of the date of this Agreement and (E) the ESPP shall terminate in its entirety
upon the ESPP Termination Date and no further rights shall be granted or exercised under the ESPP thereafter other than in accordance
with the preceding clause (C).
(d)
Company Equity Payments. As promptly as reasonably practicable (but no later than five business days after the Closing
Date), the Surviving Corporation shall, through the payroll system of the Surviving Corporation, pay or cause to be paid to the
holders of Company Options and Company Restricted Shares (collectively, the “Company Equity Awards”), the amounts
contemplated by this Section 4.5 and, for the avoidance of doubt, any accrued but unpaid dividends with respect to any
Company Equity Awards (collectively, the “Company Equity Payments”); provided, however, that
to the extent the holder of a Company Equity Award is not and was not at any time during the applicable vesting period an employee
of the Company or a Subsidiary thereof, such amounts shall not be paid through the payroll system, but shall be paid by the Paying
Agent pursuant to Section 4.2. Parent shall ensure that the Surviving Corporation shall have an amount in cash sufficient
to pay all amounts required by the foregoing sentence.
(e)
Corporate Actions. At or prior to the Effective Time, the Company, the Company Board and the compensation committee of
the Company Board, as applicable, shall adopt any resolutions and take any actions which are necessary to effectuate the provisions
of this Section 4.5.
Section
4.6 Adjustments to Prevent Dilution. Notwithstanding
anything to the contrary set forth in this Agreement, if, from the execution and delivery of this Agreement to the earlier of
the Effective Time and the termination of this Agreement and abandonment of the transactions contemplated by this Agreement pursuant
to Article IX, the issued and outstanding Shares or securities convertible or exchangeable into or exercisable for Shares
shall have been changed into a different number of Shares or securities or a different class by reason of any reclassification,
stock split, stock dividend or distribution, recapitalization, merger, issuer tender or exchange offer, or other similar transaction,
or a stock dividend with a record date within such period shall have been declared, then the Per Share Merger Consideration and
any other amounts payable pursuant to this Agreement shall be equitably adjusted to provide the holders of Shares the same economic
effect as contemplated by this Agreement prior to such event; provided, however, that nothing in this Section
4.6 shall be construed to permit the Company or any other Person to take any action except to the extent consistent with,
and not otherwise limited or prohibited by, the terms and conditions of this Agreement.
Article
V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except
as set forth (x) in the Company Reports filed with the SEC after January 1, 2018 and publicly available on the internet at least
24 hours prior to the date of this Agreement (excluding, in each case, any disclosures set forth under the heading “Risk
Factors” or “Cautionary Statement Regarding Forward-Looking Statements” or other disclosures that are similarly
cautionary, predictive or forward-looking in nature) or (y) in the corresponding sections of the confidential disclosure letter,
dated the date of this Agreement and delivered by the Company to Parent and Merger Sub prior to the execution of this Agreement
(the “Company Disclosure Letter”), or in another section of the Company Disclosure Letter to the extent that
it is reasonably apparent on the face of such disclosure that such disclosure relates to such Section, it being agreed that the
mere inclusion of an item in the Company Disclosure Letter as an exception to a representation, warranty or covenant shall not
be deemed an admission by the Company that such item (or any non-disclosed item or information of comparable or greater significance)
represents a material exception or fact, event or circumstances or that such item has had a Company Material Adverse Effect, the
Company represents and warrants to Parent, as of the date hereof (except to the extent any such representation and warranty relates
to a specific date, in which case the Company hereby makes to Parent such representation and warranty only as of such date), as
follows:
Section
5.1 Organization, Authorization, Enforceability,
Non-Contravention.
(a)
Organization. The Company is a corporation duly incorporated, validly existing and in good standing under the Laws of the
State of Florida and has the requisite corporate or other organizational power to own, operate or lease the properties and assets
owned, operated or leased by it and to conduct its business as presently conducted in all material respects. Each Subsidiary of
the Company is a corporation or other organization duly organized, validly existing and in good standing (or the equivalent, if
any, in the applicable jurisdiction) under the Laws of its respective jurisdiction of incorporation or organization and has the
requisite corporate or other organizational power to own, operate or lease the properties and assets owned, operated or leased
by it and to conduct its business as presently conducted, except, in each case, where the failure to be so qualified or in good
standing would not, individually or in the aggregate, have a Company Material Adverse Effect.
(b)
Corporate Authorization. The Company has full corporate or other organizational power and authority to execute, deliver
and perform its obligations under, and consummate the transactions contemplated by, this Agreement. Subject only to the approval
of this Agreement and the Merger and other transactions contemplated by this Agreement by the holders of a majority of the Shares
entitled to vote on such matters at the Company Shareholders Meeting duly called and held for such purpose (the “Company
Shareholder Approval”), the execution, delivery and performance of this Agreement by the Company have been duly and
validly authorized by all necessary corporate action on the part of Company.
(c)
Binding Effect; Approval.
(i)
This Agreement has been duly executed and delivered by the Company and constitutes a valid and binding agreement of the Company
enforceable against the Company in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar Laws of general applicability relating to or affecting creditors’ rights and to general equity principles
(the “Bankruptcy and Equity Exception”).
(ii)
The Company Board, by resolutions duly adopted and not subsequently rescinded or modified in any way, has (A) determined that
this Agreement and the Merger and other transactions contemplated hereby are fair to, and in the best interests of, the Company
and the Company’s shareholders, (B) approved and declared advisable this Agreement, including the execution, delivery and
performance thereof, and the consummation of the Merger and other transactions contemplated by this Agreement upon the terms and
subject to the conditions set forth herein, (C) directed that this Agreement be submitted to the holders of Shares for approval
at the Company Shareholders Meeting in accordance with the FBCA (the “Company Board Recommendation”) and (D)
received the opinion of its financial advisor, Jefferies LLC, to the effect that the Per Share Merger Consideration is fair from
a financial point of view, as of the date of such opinion, to such holders (other than Parent and its Subsidiaries) of Shares.
(d)
Non-Contravention. Assuming the receipt of all Required Governmental Approvals and the expiration of any related waiting
periods, and the receipt of all Client consents contemplated by Section 7.14, the execution, delivery and performance of
this Agreement, and the consummation of the transactions contemplated hereby, will not (i) violate or conflict with any provision
of the Constituent Documents of the Company or the Constituent Documents of any of its Subsidiaries, (ii) violate or conflict
with any Law or Permit applicable to the Company, or (iii) constitute a breach (or event which, with the giving of notice or the
lapse of time, would constitute a breach) under, or give any third party any rights of termination, acceleration or cancellation
of, or result in the creation of any Encumbrance (other than Permitted Encumbrances) on any of the assets or properties of the
Company or the Shares pursuant to any Contract to which the Company is a party, except in cases of clauses (ii) and (iii), for
any such conflicts, violations, breaches, terminations, accelerations, cancellations or creations that would not, individually
or in the aggregate, have a Company Material Adverse Effect.
(e)
Constituent Documents. The Company has made available to Parent complete and correct copies of the Company’s and
each of its Subsidiary’s Constituent Documents, each as amended to the date of this Agreement, and each as so delivered
is in full force and effect.
Section
5.2 Capital Structure.
(a)
The authorized capital stock of the Company consists of (i) 1,000,000,000 Shares, of which 148,738,127 Shares were
outstanding as of November 8, 2019, and (ii) 50,000,000 Preferred Shares, of which 17,401,282 Preferred Shares were
outstanding as of November 8, 2019. All of the outstanding Shares and Preferred Shares have been duly authorized and are
validly issued, fully paid and nonassessable. Other than 45,000,000 Shares reserved for issuance under the Company’s
Amended and Restated 2009 Incentive Compensation Plan, 25,000,000 Shares reserved for issuance under the 1999 Performance
Equity Plan (together with the Amended and Restated 2009 Incentive Compensation Plan, the “Stock Plans”),
10,000,000 Shares reserved for issuance under the ESPP and Shares reserved for issuance with respect to the conversion right
of holders of Preferred Shares set forth in the Constituent Documents of the Company, the Company has no Shares reserved for
issuance. Section 5.2(a) of the Company Disclosure Letter contains a correct and complete list of Company Options and Company
Restricted Shares outstanding under the Stock Plans as of November 8, 2019, including the number of Shares subject to each
Company Equity Award, grant date and strike price and whether vested or unvested. Other than such items listed in Section
5.2(a) of the Company Disclosure Letter, no Shares are subject to nor would any participant be entitled to Shares (either
directly or indirectly) pursuant to any award outstanding under any of the Stock Plans. Each of the outstanding shares of
capital stock or other securities of the Company and each of its Subsidiaries is duly authorized, validly issued, fully paid
and nonassessable and each outstanding share of capital stock or other securities of each Subsidiary is owned by the Company
or by a direct or indirect wholly owned Subsidiary of the Company, free and clear of any Encumbrance. Except as set forth
above and in the Constituent Documents of the Company with respect to the Preferred Shares, there are no preemptive or other
outstanding rights, options, warrants, conversion rights, stock appreciation rights, “phantom stock”
rights, redemption rights, repurchase rights, agreements, arrangements, calls, commitments or rights of any kind that
obligate the Company or any of its Subsidiaries to issue or sell any shares of capital stock or other securities of the
Company or any of its Subsidiaries or any securities or obligations convertible or exchangeable into or exercisable for, or
giving any Person a right to subscribe for or acquire, any securities of the Company or any of its Subsidiaries, and no
securities or obligations evidencing such rights are authorized, issued or outstanding. The Company does not have outstanding
any bonds, debentures, notes or other obligations the holders of which have the right to vote (or convertible into or
exercisable for securities having the right to vote) with Company Shareholders on any matter. Neither the Company nor any of
the Company Subsidiaries is party to any agreement with respect to the voting, transfer, issuance, grant, purchase or
registration of any capital stock or voting securities of, or other equity interests in, the Company or any Company
Subsidiary. Except as contemplated by this Agreement, neither the Company nor any of the Company Subsidiaries is party to any
agreement pursuant to which any Person is entitled to elect, designate or nominate any director of the Company or any of the
Company Subsidiaries.
(b)
Section 5.2(b) of the Company Disclosure Letter sets forth (i) each of the Company’s Subsidiaries and the ownership interest
of the Company in each such Subsidiary, as well as the ownership interest of any other Person or Persons in each such Subsidiary
and (ii) the Company’s or its Subsidiaries’ capital stock, equity interest or other direct or indirect ownership interest
in any other Person other than securities held by the Company or any of its Subsidiaries (x) and consisting of less than 5% of
the outstanding capital stock of such company or (y) on behalf or at the direction of any Client or customer of the Company or
any Subsidiary thereof (including investments in securities for or on behalf of customers or Clients). Neither the Company nor
any of the Company Subsidiaries has any obligation to acquire any capital stock, equity interest or other direct or indirect ownership
interest in any other Person, or any agreement or commitment to provide funds to or make any investment (in the form of a loan,
capital contribution or otherwise) in, any Person except as described on the list furnished to Parent pursuant to Section 5.18
or as would be permitted by Section 7.1 if such action were taken after the date hereof.
(c)
Each Company Option (A) was granted in compliance with all applicable Laws and all of the terms and conditions of the Stock Plan
pursuant to which it was issued, (B) has an exercise price per Share equal to or greater than the fair market value of a Share
on the date of such grant, (C) has a grant date identical to the date on which the Company Board or compensation committee thereof
actually awarded such Company Option, and (D) qualifies for the Tax and accounting treatment afforded to such Company Option in
the Company’s Tax Returns and the Company Reports, respectively.
(d)
Neither Company nor, to the Company’s Knowledge, any other party thereto, has breached in any material respect any of the
indentures or other agreements entered into in connection with the Registered Debt Securities, and the Company and has paid all
dividends on the Preferred Shares in accordance with the Constituent Documents of the Company.
Section
5.3 Company Reports; Financial Statements.
(a)
The Company has filed or furnished, as applicable, on a timely basis, all forms, statements, schedules, certifications, reports
and documents required to be filed or furnished by it with the SEC pursuant to the Exchange Act or the Securities Act since December
31, 2016 (the “Applicable Date”) (the forms, statements, schedules, certifications, reports and documents filed
or furnished since the Applicable Date and those filed or furnished subsequent to the date of this Agreement, including any amendments
thereto, the “Company Reports”). Each of the Company Reports, at the time of its filing or being furnished
complied or, if not yet filed or furnished, will comply in all material respects with the applicable requirements of the Securities
Act, the Exchange Act and the Sarbanes-Oxley Act, and any rules and regulations promulgated thereunder applicable to the Company
Reports. As of the date hereof, there are no outstanding or unresolved comments in any comment letters of the staff of the SEC
received by the Company relating to the Company Reports. As of their respective dates (or, if amended prior to the date of this
Agreement, as of the date of such amendment), the Company Reports did not, and any Company Reports filed with or furnished to
the SEC subsequent to the date of this Agreement will not, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in
which they were made, not misleading. The Company has made available to Parent true, correct and complete unredacted copies of
all documents filed as exhibits to the Company Reports subject to a request to the staff of the SEC for confidential treatment
or for which the Company has otherwise claimed confidential treatment. The Company has not submitted any request for confidential
treatment of documents filed as exhibits to the Company Reports that as of the date of this Agreement is currently pending or
that has otherwise not been acted upon by staff of the SEC.
(b)
The Company is, and has been since the Applicable Date, in compliance in all material respects with the applicable listing and
corporate governance rules and regulations of the NYSE American (the “NYSE”).
(c)
The Company maintains internal control over financial reporting (as defined in Rule 13a-15 or 15d-15, as applicable, under the
Exchange Act). Such internal control over financial reporting is effective in providing reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes
policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect
the transactions and dispositions of the asset of the Company, (ii) provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the
Company are being made only in accordance with authorizations of management and directors of the Company, and (iii) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets
that could have a material effect on its financial statements. The Company has disclosed, based on the most recent evaluation
of its chief executive officer and its chief financial officer prior to the date of this Agreement, to the Company’s auditors
and the audit committee of the Company Board (A) any significant deficiencies in the design or operation of its internal controls
over financial reporting that are reasonably likely to adversely affect the Company’s ability to record, process, summarize
and report financial information and has identified for the Company’s auditors and audit committee of the Company Board
any material weaknesses in internal control over financial reporting and (B) any fraud, whether or not material, that involves
management or other employees who have a significant role in the Company’s internal control over financial reporting. The
Company has made available to Parent (i) a summary of any such disclosure made by management to the Company’s auditors and
audit committee since the Applicable Date and (ii) any material communication since the Applicable Date made by management or
the Company’s auditors to the audit committee required or contemplated by listing standards of the NYSE, the audit committee’s
charter or professional standards of the Public Company Accounting Oversight Board. Since the Applicable Date, (i) no material
complaints from any source regarding accounting, internal accounting controls or auditing matters have been received by the Company;
and (ii) to the Company’s Knowledge, no material concerns from employees of the Company or its Subsidiaries regarding questionable
accounting or auditing matters or any whistle-blower complaints, have been received by the Company. Neither the Company nor any
of its Subsidiaries is a party to, nor does it have any commitment to become a party to, any off-balance sheet partnership or
any similar Contract (including any Contract relating to any transaction or relationship between or among the Company or one of
the Company Subsidiaries, on the one hand, and any unconsolidated affiliate, on the other hand) or any “off-balance sheet
arrangements” (as defined in Item 303(a) of Regulation S-K of the SEC).
(d)
The Company has established and maintains “disclosure controls and procedures” (as such term is defined in paragraph
(e) of Rule 13a-15 under the Exchange Act) as required by Rule 13a-15 under the Exchange Act. The Company’s disclosure controls
and procedures are sufficient to ensure that all information required to be disclosed by the Company in the reports that it files
or furnishes under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules
and forms of the SEC, and that all such information is accumulated and communicated to the Company’s management as appropriate
to allow timely decisions regarding required disclosure and to make the certifications required pursuant to Sections 302 and 906
of the Sarbanes-Oxley Act. Neither the Company nor any of the Company Subsidiaries has outstanding, or has arranged any outstanding,
“extensions of credit” to directors or executive officers within the meaning of Section 402 of the Sarbanes-Oxley
Act.
(e)
The Company and its Subsidiaries do not have any Liabilities (whether or not required to be recorded or reflected in a balance
sheet prepared in accordance with GAAP), other than Liabilities: (i) disclosed, reflected or reserved against in the financial
statements included in the Company Reports filed with the SEC and publicly available at least 24 hours prior to the date of this
Agreement or the notes thereto; (ii) that, individually or in the aggregate, have not had a Company Material Adverse Effect; or
(iii) incurred pursuant to or in connection with this Agreement and the transactions contemplated hereby in accordance with this
Agreement.
(f)
Each of the balance sheets included in or incorporated by reference into the Company Reports (including the related notes and
schedules) fairly presents, or, in the case of Company Reports filed after the date of this Agreement, will fairly present the
consolidated financial position of the Company and its consolidated Subsidiaries as of its date and each of the statements of
income, changes in shareholders’ equity and cash flows included in or incorporated by reference into the Company Reports
(including any related notes and schedules) fairly presents, or in the case of Company Reports filed after the date of this Agreement,
will fairly present the results of operations, retained earnings (loss) and changes in financial position, as the case may be,
of such companies for the periods set forth therein (subject, in the case of unaudited statements, to notes and normal year-end
audit adjustments that will not be material in amount or effect), in each case in accordance with GAAP consistently applied during
the periods involved, except as may be noted therein.
(g)
Other than ordinary course director compensation, ordinary course compensation and employee benefit entitlements, ordinary course
reimbursement of travel and entertainment expenses or advances regarding the same, in each case that are payable in the ordinary
course consistent with past practice and/or that would be permitted by Section 7.1(a)(xx) if taken after the date hereof
or as disclosed in the Company Reports or Section 5.18 of the Company Disclosure Letter, since the Applicable Date neither the
Company nor any of its Subsidiaries has entered into any transaction or arrangement with any (A) director or officer of the Company,
(B) Person who is or was, since the Applicable Date, a greater than 5% shareholder of the Company or (C) any of their respective
Affiliates.
Section
5.4 Approvals and Filings. Neither the
Company nor any of its Affiliates is required to obtain any authorization, waiver, consent or approval of, make any filing or
registration with or give any notice to, any Government Authority in connection with or as a condition to the execution, delivery
and performance of this Agreement or the consummation of the Merger, other than, in each case, (1) the Required Governmental Approvals,
(2) compliance with, and filings under, the Exchange Act and the Securities Act and the rules and regulations promulgated thereunder,
including the filing with the SEC of the Proxy Statement, and the applicable requirements of the NYSE, (3) the filing of proxy
solicitation and other Client materials for Public Funds with the SEC, as contemplated by Section 7.14, (4) the filing
of the Articles of Merger with the Secretary of State of the State of Florida as provided in the FBCA and any other filing and
recordation of appropriate merger documents as required by the FBCA, and (5) as would be required solely as a result of the identity
or regulatory status of Parent or its Affiliates. No fact or condition exists with respect to the business, operations or assets
of the Company or its Affiliates which the Company has reason to believe would be reasonably expected to cause any Required Governmental
Approval to be denied or unduly delayed. The information supplied or to be supplied by the Company for inclusion in the Proxy
Statement shall not at the time the definitive Proxy Statement is filed with the SEC contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
Section
5.5 Absence of Changes. From September
30, 2019 through the date of this Agreement, (i) the business of the Company and its Subsidiaries has been conducted in all material
respects in the ordinary course of business consistent with past practice, and during such period neither the Company nor any
of its Subsidiaries has undertaken or effected, or authorized or agreed to undertake or effect, any action that would be prohibited
pursuant to Section 7.1(a)(iii), (v), (vi), (vii), (viii), (ix), (xii), (xiii), (xv), (xvi), (xx)
or (xxi) without the consent of Parent if taken after the date hereof, and (ii) there has not been any event, change
or occurrence of which the Company has Knowledge that, individually or in the aggregate, has had a Company Material Adverse Effect.
Section
5.6 No Litigation. The Company has made
available to Parent a complete and accurate list of all material Actions pending or, to the Company’s Knowledge, threatened
against the Company and its Subsidiaries as of the date hereof. There is no Action by any Person pending or to the Company’s
Knowledge, threatened, against the Company or any of its Subsidiaries or any of their respective directors, officers, employees,
Financial Advisors, properties or assets, that would result in monetary damages, injunctive action or the taking of any other
action that are or would be reasonably likely to be (in any of the foregoing cases), individually or in the aggregate, material
to the Company and its Subsidiaries, taken as a whole. There are no unsatisfied or outstanding Government Orders against the Company
or any of its Subsidiaries, any of their directors or officers or, to the Company’s Knowledge, their employees or Financial
Advisors or any of the properties or businesses of the Company and its Subsidiaries.
Section
5.7 Taxes.
(a)
All Tax Returns that are required to be filed under applicable Laws on or before the Closing (taking into account any extensions
of time in which to file) by the Company or its Subsidiaries have been or will be timely filed on or before the Closing, and all
such Tax Returns are true, correct and complete in all material respects.
(b)
The Company and each of its Subsidiaries has paid all material Taxes that are due and payable by the Company or any of its Subsidiaries
(including Taxes required to be withheld from payments to employees, creditors, shareholders or other Persons) on any Tax Return
of the Company or any Subsidiary thereof, as applicable, required to be filed on or before the Closing for any Pre-Closing Period
except for those amounts that are being contested in good faith and are not material.
(c)
There is no outstanding claim, assessment, or deficiency against the Company or any of its Subsidiaries for any Taxes that has
been asserted or threatened in writing by any Government Authority, except for such claim, assessment or deficiency for which
adequate reserves have been established on the GAAP financial statements of the Company or any of its Subsidiaries to which such
deficiency pertains. Neither the Company nor any of its Subsidiaries is a party to any audit, examination, investigation, action
or proceeding for assessment or collection of any material amount of Taxes, nor has such an event been threatened in a written
document delivered to the Company or any of its Subsidiaries from a Government Authority, other than as a result of the Company
and its Subsidiaries being members of any affiliated, consolidated, combined or unitary Tax group.
(d)
No agreements, consents or waivers of any statute of limitations or extension of time with respect to a Tax assessment or deficiency
is in effect with respect to any material Taxes of the Company or any of its Subsidiaries, other than as a result of the Company
and its Subsidiaries being members of any affiliated, consolidated, combined or unitary Tax group and other than in the ordinary
course of the Company’s or such Subsidiary’s business, as applicable.
(e)
There are no Encumbrances for Taxes on any of the assets of such Company or any of its Subsidiaries, other than Permitted Encumbrances.
(f)
Neither the Company nor any of its Subsidiaries has participated in, or is currently participating, in a “listed transaction”
within the meaning of Treasury Regulation Section 1.6011-4(b)(2) (or any similar or analogous provision of state, local, or foreign
law).
(g)
Within the past two years, neither the Company nor any of its Subsidiaries has been a “distributing corporation” or
a “controlled corporations” within the meaning of section 355(a)(1)(A) of the Code in a distribution of stock intended
to qualify for tax-free treatment under Section 355 of the Code.
(h)
Notwithstanding anything in this Agreement to the contrary, the representations and warranties made by the Company in this Section
5.7 are the sole and exclusive representations and warranties made regarding Taxes or other Tax matters.
Section
5.8 Employee Benefit Plans.
(a)
Section 5.8(a) of the Company Disclosure Letter sets forth an accurate and complete list of each Benefit Plan as of the date hereof
and separately identifies the Benefit Plans that are sponsored by the Company or any of its Subsidiaries. With respect to each
Benefit Plan listed in Section 5.8(a) of the Company Disclosure Letter, the Company has made available to Parent, to the extent
applicable, accurate and complete copies of (1) the plan document, including any amendments thereto, (2) a written description
of such Benefit Plan if it is not set forth in a written document, (3) the most recently prepared actuarial report, (4) the most
recent summary plan description and annual reports together with any summaries of all material modifications thereto, (5) the
most recent IRS determination or opinion letter, (6) a copy of the most recent Form 5500 filed for each plan, including attachments,
audit reports and schedules thereto, and (7) all non-routine communications received from or sent to the IRS, the Pension Benefit
Guarantee Corporation or the U.S. Department of Labor in the last three years.
(b)
Each Benefit Plan has been administered in accordance with its terms and is in compliance with applicable Laws, except for any
failures to so administer or be in compliance that would not, individually or in the aggregate, be material to the Company or
its Subsidiaries, taken as a whole. As of the date hereof, there is no pending or, to the Company’s Knowledge, threatened
material litigation or any audit, proceeding or investigation by a Government Authority relating to any Benefit Plans nor, to
the Company’s Knowledge, are there any facts that would reasonably be expected to give rise to such a claim. All material
contributions that the Company or any of its Subsidiaries are required to make to any Benefit Plan have been fully and timely
paid when due. Each Benefit Plan that is intended to be qualified under Section 401(a) of the Code has been determined by the
Internal Revenue Service to be qualified under Section 401(a) of the Code, and to the Company’s Knowledge, nothing has occurred
that would adversely affect the qualification or tax exemption of any such Benefit Plan. None of the Company, its Subsidiaries
or, to the Company’s Knowledge, any “party-in-interest” to a Benefit Plan, has engaged in a transaction with
respect to any Benefit Plan that would reasonably be expected to subject the Company or any of its Subsidiaries or any Benefit
Plan to a Tax or penalty imposed by either Section 4975 of the Code or Section 502(i) of ERISA in an amount which could be material.
(c)
The Company and its Subsidiaries are in compliance with the continuation coverage requirements of Section 4980B(f) of the Code
in all material respects. The Company will provide Parent with a complete and accurate list as of immediately prior to the Closing,
of all qualified beneficiaries, as defined under Section 4980B(g)(1) of the Code (including qualified beneficiaries who are in
the election period for continuation coverage but who have not yet elected continuation coverage), the date of the applicable
qualifying event and the nature of the qualifying event relating to the duration of such coverage.
(d)
None of the Company, its Subsidiaries nor any of their ERISA Affiliates has sponsored, maintained, administered or contributed
to (or had any obligation of any sort) in the last six (6) years, or has or is reasonably expected to have any direct or indirect
liability with respect to, any plan or Benefit Plan that is or was, (i) subject to Title IV of ERISA, including any “multiemployer
plan” as defined in Section 3(37) of ERISA, (ii) a “defined benefit pension plan” within the meaning of Section
3(35) of ERISA, (iii) a “multiple employer welfare arrangement” as defined in Section 3(40)(A) of ERISA, (iv) subject
to the minimum funding standards of Section 302 of ERISA or Section 412 of the Code, (v) a voluntary employees’ beneficiary
association within the meaning of Section 501(c)(9) of the Code, or (vi) a post-employment or post-retirement medical, dental,
disability, hospitalization, life or similar benefits (whether insured or self-insured) for any current or former employee of
the Company or any Subsidiary (other than coverage mandated by applicable Law, including COBRA). Except as set forth in Section
5.8(a) of the Company Disclosure Letter, none of the Company or its ERISA Affiliates have made any loan or advance, or provided
any other form of material financial assistance (excluding, in each case, any loans allowed by Benefit Plans, including 401(k)
loans, and representative loans described on the list furnished to Parent pursuant to Section 5.18) to any current or former
employee of the Company or any Subsidiary or independent contractor that is or are still outstanding at the Closing.
(e)
Each Benefit Plan that is subject to Section 409A of the Code complies, and has been operated in compliance, in all material respects
with the requirements of Section 409A of the Code. Except with respect to the actions described in Section 4.5 and in Section
5.8(e)(i) of the Company Disclosure Letter, neither the execution of this Agreement nor the consummation of the transactions contemplated
hereby (either alone or together with any other event, including change in employment title or employment termination) will: (i)
entitle any current or former employee of the Company or any Subsidiary to any payment or benefit, including any bonus, retention,
severance, retirement or job security payment or benefit; (ii) enhance any benefits or accelerate the time of payment or vesting
or trigger any payment or funding (through a grantor trust or otherwise) of compensation or benefits under, or increase the amount
payable or trigger any other obligation under, any Benefit Plan; or (iii) limit or restrict the right of the Company or its Subsidiaries
or, after the Closing, Parent, the Surviving Corporation or any of their respective Affiliates to merge, amend or terminate any
Benefit Plan. Except as set forth in Section 5.8(e)(ii) of the Company Disclosure Letter, neither the execution of this Agreement
nor the consummations of the transactions contemplated hereby (either alone or together with any other event, including change
in employment title or employment termination) will result in the payment of any amount that would not be deductible under Section
280G of the Code. None of the Company nor any of its Subsidiaries has any obligation to gross-up, indemnify or otherwise reimburse
any current or former employee of the Company or any Subsidiary for any tax incurred by such employee, including under Section
409A or 4999 of the Code.
Section
5.9 Labor Matters.
(a)
The Company and its Subsidiaries are in compliance with all applicable Law relating to labor and employment, including those relating
to labor management relations, wages, hours, overtime, employee classification (including FLSA), discrimination, sexual harassment,
civil rights, affirmative action, work authorization, immigration, safety and health, employee information privacy and security,
workers compensation, continuation coverage under group health plans, the payment and withholding of Taxes and other similar Laws,
in each case except as would not be material to the Company or its Subsidiaries, taken as a whole. The Company and its Subsidiaries
have not failed to pay any of their current or former employees for any wages (including overtime), salaries, commissions, bonuses,
benefits or other direct compensation for any services performed by them or amounts required to be reimbursed to such individuals
in amounts that in aggregate would or would be reasonably be likely to be material in amount.
(b)
None of the Company or any of its Subsidiaries is currently a party to, bound by or covered by any labor agreements, works council
agreements, union contracts or collective bargaining agreements. To the Company’s Knowledge, there is not, and there has
not been since the Applicable Date, any organizational effort made or threatened by or on behalf of any labor union or works council
or employee committee, in each case, to organize any employees of the Company or any of its Subsidiaries.
Section
5.10 No Violation of Law; Required Licenses
and Permits.
(a)
Since the Applicable Date, the Company and each of its Subsidiaries has been in compliance with all applicable Law, and has not
received any written notice or, to the Company’s Knowledge, oral notice from any Government Authority regarding any actual
or alleged failure to comply with any applicable Law, in each case, except as would not be material to the Company or its Subsidiaries,
taken as a whole. Neither the Company nor any of its Subsidiaries, nor any of their respective directors or officers or, to the
Company’s Knowledge, employees is a party or subject to any Government Order with any Government Authority which is charged
with regulating or supervising the Company or any of its Subsidiaries, as applicable, which imposes any material restrictions
on the business of the Company or any of its Subsidiaries. The Company and its Subsidiaries have all Permits necessary for the
conduct of their respective businesses as presently conducted, such Permits are not subject to any administrative or judicial
proceeding or other Action by a Government Authority that could result in any material modification, termination, suspension or
revocation thereof and, to the Company’s Knowledge, there is no basis for any such proceeding or Action, and the business
of the Company and its Subsidiaries is being conducted in compliance with all such Permits in all material respects. This Section
5.10 does not apply to any matters covered in the representations and warranties in Sections 5.7, 5.8, 5.9,
5.11, 5.13, 5.16, 5.17 or 5.21.
(b)
To the Company’s Knowledge, since the Applicable Date, all Persons engaged in the marketing, solicitation, placement and
sale of insurance services or insurance, annuity or similar products by any Subsidiary of the Company (each, an “Insurance
Services Subsidiary”) are and have been appropriately licensed and registered under applicable Law, in each case, in
the particular jurisdiction in which such Persons transacted such business. To the Company’s Knowledge, all compensation
paid to such Persons by or on behalf of an Insurance Services Subsidiary was paid in accordance with applicable Law, except as
would not be material to the Company or its Subsidiaries, taken as a whole. No Insurance Services Subsidiary has directly or indirectly
conducted an insurance business with or for any insurance carrier that is not authorized to issue insurance in the jurisdiction
in which the sale of insurance occurred.
Section
5.11 FCPA, Other Anti-Bribery Laws, and Sanctions.
(a)
The Company, its Subsidiaries and their respective directors and employees (including officers) acting in such capacity are in
compliance and, since the Applicable Date, have complied in all material respects with, the FCPA and the Other Anti-Bribery Laws.
(b)
Since the Applicable Date, none of the Company, any of its Subsidiaries and/or any of their respective directors and employees
(including officers) or, to the Company’s Knowledge, any Person acting on behalf or at the direction of any of them, have,
directly or indirectly, paid, offered or promised to pay, or authorized or ratified the payment, directly or indirectly, of any
monies or anything of value to any official or representative (including anyone elected, nominated or appointed to be a representative)
of, or any Person acting in an official capacity for or on behalf of, any Government Authority (including any official or employee
of any entity directly or indirectly owned or controlled by any Government Authority), any royal or ruling family member or any
political party or candidate for public or political office for the purpose of influencing any act or decision of any such Government
Authority or Person to obtain or retain business, or direct business to any Person or to secure any other improper benefit or
advantage in each case in violation, in any material respect, of the FCPA or any of the Other Anti-Bribery Laws. The Company and
its Subsidiaries maintain an effective compliance program that is designed to detect and prevent (i) their directors, officers
and employees and (ii) agents and representatives acting on their behalf, in each case from taking any action that would or would
be reasonably likely to constitute a violation of the FCPA and the Other Anti-Bribery Laws.
(c)
There is no Action pending or, to the Company’s Knowledge, threatened against the Company or any of its Subsidiaries pending
by or before any Government Authority with respect to the FCPA and the Other Anti-Bribery Laws and none of the Company or any
of its Subsidiaries has received any notice of deficiency or similar notice in connection with Sanctions or Other Anti-Bribery
Laws from OFAC or any other Government Authority nor made any voluntary disclosures to OFAC or any other Government Authority
of facts that would be reasonably likely to result in an adverse action being taken or penalty being imposed on by a Government
Authority against the Company, any of its Subsidiaries or, to the Company’s Knowledge, any Persons acting on behalf or at
the direction of them.
(d)
Neither the Company nor any of its Subsidiaries and none of the directors, officers or employees or agents or representatives
of the Company or any of its Subsidiaries (acting in such capacity), is a Sanctioned Person or has transacted business with a
Sanctioned Person in violation of or otherwise violated applicable Sanctions. Since the Applicable Date, the Company and each
of its Subsidiaries has been in compliance with all applicable Sanctions and all applicable anti-money laundering and counter-terrorism
financing provisions of applicable Law including the Bank Secrecy Act of 1970.
Section
5.12 Real Property.
(a)
Section 5.12(a)(i) of the Company Disclosure Letter sets forth a list of all real property that is leased or subleased from any
other Person by the Company or any of its Subsidiaries (the “Leased Real Property”) as of the date hereof.
Section 5.12(a)(ii) of the Company Disclosure Letter sets forth a list of the leases, subleases, occupancy agreements or other
Contracts, together with all assignments thereof and amendments, supplements and modifications thereto, related to the occupancy
of the Leased Real Property (collectively, the “Leases”).
(b)
With respect to each Leased Real Property and the accompanying Lease, (i) each of the Company and its Subsidiaries has a good
and valid leasehold interest in all Leased Real Property, free and clear of any Encumbrance other than Permitted Encumbrances;
(ii) neither the Company nor the applicable Company Subsidiary has subleased, licensed or otherwise granted anyone a material
right to use or occupy the Leased Real Property or any portion thereof or has collaterally assigned or granted any other security
interest in any such leasehold estate or any interest therein; and (iii) to the Knowledge of the Company, there is no condemnation
or other proceeding in eminent domain, pending or threatened in writing, affecting any portion of the Leased Real Property.
(c)
With respect to each Leased Real Property and the accompanying Lease: (i) the Lease or the Leased Real Property (as applicable)
is valid, binding and enforceable by the Company or the Company Subsidiary, as the case may be, and, to the Company’s Knowledge,
each other party thereto (in each case subject to the Bankruptcy and Equity Exception), and is in full force and effect; (ii)
there is no material default under the Lease (as applicable) by the Company or any Company Subsidiary or, to the Company’s
Knowledge, any other party thereto, and no event has occurred that with the lapse of time or the giving of notice or both would
constitute a default thereunder by the Company or any Company Subsidiary or, to the Knowledge of the Company, any other party
thereto; and (iii) there are no disputes pending or, to the Knowledge of the Company, threatened with respect to the Lease and
neither the Company nor the applicable Company Subsidiary has received any notice of the intention of any other party to the Lease
to amend, terminate, not renew or reduce any commitment under the Lease, nor, to the Company’s Knowledge, is any such party
threatening to do so, except as has not had a Company Material Adverse Effect. Neither the Company nor any Company Subsidiary
owns any real property.
Section
5.13 Intellectual Property.
(a)
As of the date hereof, Section 5.13(a) of the Company Disclosure Letter sets forth a list of all Registered Intellectual Property
owned by the Company and its Subsidiaries that is material to the operation of the Company and its Subsidiaries as of the date
hereof (the “Company Registered Intellectual Property”), indicating for each item of such Company Registered
Intellectual Property, the registration or application number and the applicable filing jurisdiction.
(b)
All Company Registered Intellectual Property (excluding any applications) is subsisting, and to the Company’s Knowledge,
valid and enforceable, except as would not be material to the Company or its Subsidiaries, taken as a whole.
(c)
(i) The Company and the Company Subsidiaries own, are validly licensed or otherwise have the valid and enforceable right to use
all Intellectual Property (including the Company Registered Intellectual Property) used by the Company or any Company Subsidiary
in the conduct of the business of the Company and the Company Subsidiaries (the “Company Intellectual Property”),
free and clear of any Encumbrances, other than Permitted Encumbrances, and (ii) such ownership or valid right to use the Company
Intellectual Property will not be affected by the execution, delivery and performance of this Agreement or the consummation of
the Merger, except, in each case of the foregoing clauses (i) and (ii), as would not be material to the Company or its Subsidiaries,
taken as a whole. As of the date hereof, there is no action, suit or proceeding pending or, to the Company’s Knowledge,
since the Applicable Date threatened, against the Company or a Company Subsidiary by any Person challenging the ownership, validity
or enforceability of any Company Registered Intellectual Property, and since the Applicable Date neither the Company nor any of
the Company Subsidiaries has received any written claim or notice from any Person asserting any such challenge.
(d)
To the Company’s Knowledge, the operation of the businesses of the Company and its Subsidiaries as presently conducted does
not infringe or misappropriate the Intellectual Property of any third party, except as would not be material to the Company or
its Subsidiaries, taken as a whole.
(e)
To the Company’s Knowledge, no third party is infringing or misappropriating any Intellectual Property owned by the Company
or any of its Subsidiaries, except as would not be material to the Company or its Subsidiaries, taken as a whole.
(f)
The Company and its Subsidiaries have taken commercially reasonable measures to protect the confidential nature of the trade secrets
that they own or use, except as would not be material to the Company or its Subsidiaries, taken as a whole.
(g)
The IT Assets of the Company and its Subsidiaries operate and perform in accordance with their documentation and functional specifications
and otherwise as required by the Company and its Subsidiaries in connection with their respective businesses. The Company has
implemented commercially reasonable backup and disaster recovery technology processes, as well as a commercially reasonable business
continuity plan, in each case consistent with customary industry practices and applicable Law, except as would not be material
to the Company or its Subsidiaries, taken as a whole. To the Knowledge of the Company, since the Applicable Date no Person has
gained unauthorized access to the IT Assets of the Company and its Subsidiaries.
(h)
Except for those events that are not material to the Company or any of its Subsidiaries, since the Applicable Date: (i) the Company
and its Subsidiaries’ collection, storage, use, disclosure and transfer of any personally identifiable information has been
and is in compliance with all applicable Laws and contractual obligations relating to privacy, data security and data protection,
(ii) none of the Company and its Subsidiaries has received a complaint from any Government Authority regarding its collection,
use or disclosure of personally identifiable information and (iii) there has been no security breach or other compromise of personally
identifiable information of the customers, employees, independent contractors, suppliers, or vendors of the Company or its Subsidiaries.
(i)
Notwithstanding anything to the contrary set forth herein, this Section 5.13 contains all of the representations and warranties
provided by the Company with respect to matters related to Intellectual Property and IT Assets.
Section
5.14 Material Contracts.
(a)
Except for this Agreement, the Contracts listed in Section 5.14 of the Company Disclosure Letter, the Contracts filed as exhibits
to the Company Reports and the Benefit Plans, as of the date of this Agreement, none of the Company or its Subsidiaries is a party
to or bound by any Contract as of the date hereof (each, a “Material Contract”):
(i)
that would be required to be filed by the Company
as a “material contract” pursuant to Item 601(b)(10) of Regulation S-K under the Securities Act;
(ii)
involving the payment by or to the Company or
any of its Subsidiaries of more than $600,000 in any twelve-month period, and which by its terms does not terminate or is not
terminable without material penalty by the Company or such Subsidiary, as applicable, upon 90 days or less prior notice (other
than any Contract with Clients or customers for services provided by the Company or any Subsidiary in the ordinary course of business);
(iii)
containing covenants limiting in any material
respect the freedom of the Company or any of its Subsidiaries to compete or operate in any line of business or geographical area,
including non-competition, non-solicitation, exclusivity and most favored nations covenants, other than any customary non-solicitation
agreements in vendor contracts;
(iv)
relating to (A) any Indebtedness for borrowed
money which creates payment obligations of, or from, any party to the Company or any of its Subsidiaries individually in excess
of $600,000 or (B) mortgaging, pledging or otherwise placing an Encumbrance on any material portion of the assets of the Company
or any Company Subsidiary;
(v)
under which the Company or any of its Subsidiaries
has directly or indirectly guaranteed or otherwise agreed to be responsible for Indebtedness for borrowed money or other Liabilities
of any Person (except for Indebtedness for borrowed money or other Liabilities among the Company and its Subsidiaries) in excess
of $600,000;
(vi)
establishing any partnership or joint venture
involving the Company or any of its Subsidiaries;
(vii)
under which the Company or any Company Subsidiary
is obligated to pay or is entitled to receive royalty payments, “earn-out” payments or similar contingent payments
in excess of $600,000, whether in one or a series of payments;
(viii)
that as a result of a change of control of the
Company or any Company Subsidiary (A) requires the Company or any Company Subsidiary, or any successor thereto or acquirer thereof,
to make any payment to any Person; or (B) gives any Person a right to receive or elect to receive a payment in excess of $600,000
from the Company or any Company Subsidiary, or any successor thereto or acquirer thereof;
(ix)
that relates to an Action pursuant to which (A)
the Company or any Company Subsidiary will be required to pay after the date of this Agreement any monetary amount in excess of
$250,000 or (B) that contains material obligations or limitations on the conduct of the Company or any Company Subsidiary (other
than customary confidentiality obligations); or
(x)
that was entered into outside the ordinary course
of business and is material to the Company or its Subsidiaries or any Contract not described above that is otherwise material
to the Company or any Company Subsidiary.
(b)
Each Material Contract is a valid and binding obligation of, and is an enforceable obligation against, the Company or relevant
Subsidiary that is a party thereto (subject in each case to the effect of any applicable bankruptcy, reorganization, insolvency,
moratorium, rehabilitation, liquidation, fraudulent conveyance, preferential transfer or similar Laws now or hereafter in effect
relating to or affecting creditors’ rights and remedies generally and subject, as to enforceability, to the effect of general
equitable principles (regardless of whether enforcement is sought in a proceeding in equity or law)), except for such failures
to be valid, binding or enforceable as would not, individually or in the aggregate, have a Company Material Adverse Effect. Neither
the Company nor any of its Subsidiaries or, to the Company’s Knowledge, any other party to a Material Contract is in breach
of a Material Contract, and no event has occurred that, with or without the lapse of time or the giving of notice or both, would
constitute a breach thereof by the Company or any of its Subsidiaries or, to the Company’s Knowledge, any other party thereto,
in each case except for any such breaches that would not, individually or in the aggregate, have a Company Material Adverse Effect.
Except for matters which have not had and would not reasonably expected to have a Company Material Adverse Effect, there are no
disputes pending or, to the Company’s Knowledge, threatened with respect to any of the Material Contracts and neither the
Company nor any of its Subsidiaries has received any notice of the intention of any other party to any Material Contract to amend,
terminate, not renew or reduce any commitment under any Material Contract, nor, to the Company’s Knowledge, is any such
party threatening to do so. The execution, delivery and performance of this Agreement by the Company and the consummation by it
of the Merger and the other transactions contemplated by this Agreement to which it is a party will not violate, or result in
a right to terminate, recapture, rescind or modify, accelerate any rights under, any Material Contract or, as applicable, any
coverage provided by any party thereto. Except for matters which have not had and would not reasonably expected to have a Company
Material Adverse Effect, no Material Contract contains any provision providing that any party thereto (other than the Company
or any of its Subsidiaries) may terminate or cancel the same by reason of the consummation of the Merger.
Section
5.15 Insurance. All of the Insurance Policies
are in full force and effect and all insurance premiums due thereon have been paid in full when due, except, in each case, as
would not be material to the Company and its Subsidiaries, taken as a whole. Between the Applicable Date and the date of this
Agreement, neither the Company nor any of its Subsidiaries has received in writing any notice of cancellation or termination or
denial of coverage with respect to any Insurance Policy, except to the extent such policy has expired and been replaced in the
ordinary course of business consistent in all material respects with past practice. As of the date hereof, there are no material
outstanding claims related to the business of the Company or its Subsidiaries under any Insurance Policy or default with respect
to the provisions in any Insurance Policy.
Section
5.16 Investment Adviser Subsidiaries.
(a)
Each Advisory Entity is registered as an investment adviser under the Investment Advisers Act and has operated since the Applicable
Date, and is currently operating, in compliance with all Laws applicable to it or its business, except for instances of non-compliance
that would not be material to the operation of such Advisory Entity’s business, and has all material registrations, permits,
licenses, exemptions, orders and approvals required for the operation of its business or ownership of its properties and assets
substantially as presently conducted. To the Company’s Knowledge, each natural person whose functions require him or her
to be licensed as an agent of an Advisory Entity is so registered in all relevant jurisdictions. There is no Action pending or,
to the Company’s Knowledge, threatened that, individually or in the aggregate, has led to or would reasonably be likely
to lead to the revocation, material amendment, failure to renew, material limitation, material suspension or material restriction
of any such registrations, permits, licenses, exemptions, orders and approvals.
(b)
None of the Advisory Entities nor any “person associated with an investment adviser” (as defined in the Investment
Advisers Act) of any of them is ineligible pursuant to Section 203 of the Investment Advisers Act to serve as an investment adviser
or as a person associated with an investment adviser.
(c)
Each Advisory Entity has established, maintains and enforces written compliance and supervisory policies and procedures (including
those required by Rule 206(4)-7 under the Investment Advisers Act) and such compliance and supervisory policies and procedures
are, and have been since the Applicable Date, in compliance with applicable Law, except for instances of non-compliance that would
not be material to the operation of such Advisory Entity’s business.
(d)
The Company has made available to Parent true and complete copies of each Uniform Application for Investment Adviser Registration
on Form ADV filed since the Applicable Date by each Advisory Entity that is required to be registered as an investment adviser
under the Investment Advisers Act, reflecting all amendments thereto to the date hereof (each, a “Form ADV”).
The Forms ADV for each Advisory Entity are in compliance with the applicable requirements of the Investment Advisers Act and Form
ADV, except for instances of non-compliance that would not be material to the operation of such Advisory Entity’s business.
Since the Applicable Date, each Advisory Entity has delivered or made available to each advisory client its brochure to the extent
required by the Investment Advisers Act.
Section
5.17 Broker-Dealer Subsidiaries.
(a)
Each Broker-Dealer Subsidiary is duly registered under the Exchange Act as a broker-dealer with the SEC and since the Applicable
Date has been in compliance with the applicable provisions of the Exchange Act except for instances of non-compliance that would
not be material to the operation of such Broker-Dealer Subsidiary’s business. Each Broker-Dealer Subsidiary is a member
of FINRA and all other Self-Regulatory Organizations of which it is required to be a member and in compliance with all applicable
rules and regulations of FINRA and any such Self-Regulatory Organization of which it is a member or which otherwise has authority
over it, except for instances of non-compliance that would not be material to the operation of such Broker-Dealer Subsidiary’s
business. Each natural person whose functions require him or her to be registered as a representative or principal of a Broker-Dealer
Subsidiary is so registered with FINRA. Each Broker-Dealer Subsidiary (and each person thereof) is duly registered, licensed or
qualified under, and in compliance with, the applicable Laws of all jurisdictions in which it is required to be so registered,
licensed or qualified, except for instances of non-compliance that would not be material to the operation of such Broker-Dealer
Subsidiary’s business, and each such registration, license or qualification is in full force and effect and in good standing.
(b)
The Company has made available to Parent true, correct and complete copies of each Broker-Dealer Subsidiary’s Uniform Application
for Broker-Dealer Registration on Form BD filed since the Applicable Date, reflecting all amendments thereto to the date hereof
(each, a “Form BD”). The Forms BD of the Broker-Dealer Subsidiaries are in compliance with the applicable requirements
of the Exchange Act and Form BD, except for instances of non-compliance that would not be material to the operation of the applicable
Broker-Dealer Subsidiary’s business.
(c)
Each Broker-Dealer Subsidiary currently maintains and at all times since the Applicable Date has maintained “net capital”
(as such term is defined in Rule 15c3-1(c)(2) under the Exchange Act) equal to or in excess of the minimum “net capital”
required to be maintained by such Broker-Dealer Subsidiary under applicable Law. No Broker-Dealer Subsidiary is currently a party
to, or to the Company’s Knowledge, has any plans to enter into, any agreement or arrangement to increase the amount of regulatory
capital it is required to maintain above the amount required under Rule 15c3-1(c)(2).
(d)
Each Broker-Dealer Subsidiary has established, maintains and enforces written compliance and supervisory policies and procedures
(including those required by applicable FINRA rules) and such compliance and supervisory policies and procedures are, and have
been since the Applicable Date, in compliance with all applicable Laws, except for instances of non-compliance that would not
be material to the operation of such Broker-Dealer Subsidiary’s business.
(e)
Each Broker-Dealer Subsidiary meeting the definition of “municipal securities dealer” within the meaning of Section
3(a)(3) of the Exchange Act required to be registered with the MSRB under the Exchange Act is, and at all times since the Applicable
Date has been, duly registered as a municipal securities dealer.
(f)
Since the Applicable Date, none of the Broker-Dealer Subsidiaries nor any “associated person” thereof (i) is or has
been ineligible to serve as a broker-dealer or an associated person of a broker-dealer under Section 15(b) of the Exchange Act,
(ii) is subject to a “statutory disqualification” as defined in Section 3(a)(39) of the Exchange Act or (iii) is subject
to a disqualification that would be a basis for censure, limitations on the activities, functions or operations of, or suspension
or revocation of the registration of any Broker-Dealer Subsidiary as broker-dealer, municipal securities dealer, government securities
broker or government securities dealer under Section 15, Section 15B or Section 15C of the Exchange Act, and there is no action,
suit, proceeding or investigation pending or, to the Company’s Knowledge, threatened, that is reasonably likely to result
in any such person being deemed ineligible as described in clause (i), subject to a “statutory disqualification” as
described in clause (ii) or subject to a disqualification as described in clause (iii).
Section
5.18 Financial Advisor Agreements and Loans.
The Company and/or its applicable Subsidiaries have entered into an independent contractor agreement with each independent contractor
Financial Advisor. The Company has made available to Parent (i) the current standard form Financial
Advisor agreements being used by any Company Subsidiary and (ii) a true and complete list of all representative loans as of the
date hereof attributable to such Financial Advisors (setting forth the name of the borrower, the date on which the loan was granted,
the date on which the loan must be repaid (if such loan is not forgivable), the original loan amount, and the outstanding amount
of outstanding principal and accrued interest as of the date hereof).
Section
5.19 Takeover Statutes. The
Company Board has taken all the action necessary to render inapplicable to this Agreement, the Merger and the other transactions
contemplated by this Agreement, the provisions of Sections 607.0901 and 607.0902 of the FBCA to the extent, if any, such sections
would otherwise be applicable to this Agreement, the Merger and the other transactions contemplated by this Agreement.
Section
5.20 Finder’s Fees. Except
for Jefferies LLC, there is no investment banker, broker, finder or other intermediary that has been retained by or is authorized
to act on behalf of the Company or its Affiliates who would be entitled to any fee or commission in connection with the transactions
contemplated by this Agreement.
Section
5.21 Environmental Matters. Except as
has not had, individually or in the aggregate, a Company Material Adverse Effect, since the Applicable Date: (i) no notice, notification,
demand, request for information, citation, summons or order has been received, no complaint has been filed, no penalty has been
assessed, and no investigation, action, claim, suit, proceeding or review (or any basis therefor) is pending or, to the Knowledge
of the Company, threatened by any Government Authority or any other Person against the Company or any of its Subsidiaries and
relating to or arising out of any Environmental Law; (ii) the Company and its Subsidiaries are in compliance in all material respects
with all Environmental Laws and all Environmental Permits and possesses and is and has been in compliance in all material respects
with all Permits required under Environmental Laws for it to conduct its business, and none of such Permits are subject to any
administrative or judicial proceeding that would reasonably be expected to result in any modification, termination or revocation
thereof; (iii) to the Knowledge of the Company, there are no Liabilities of the Company or any of its Subsidiaries arising under
or relating to any Environmental Law and there is no condition, occurrence, situation or set of circumstances, including, without
limitation, the release of any Hazardous Substance, that would reasonably be expected to result in or be the basis for any such
Liabilities; (iv) the Company is not obligated to conduct or pay for, and is not conducting or paying for, any response or corrective
action under any Environmental Law at any location; and (v) the Company is not party to any order, judgment or decree that imposes
any obligations under any Environmental Law. This Section 5.21 contains the sole and exclusive representations and warranties
of the Company in this Agreement with respect to Environmental Laws and Hazardous Substances.
Section
5.22 No Other Representations or Warranties.
Except for the representations and warranties contained in this Article V (as qualified in accordance with the terms of
this Article V), neither the Company nor any other Person makes any express or implied representation or warranty on behalf
of the Company or any of its Affiliates, and the Company disclaims any other representations or warranties. Parent and Merger
Sub each acknowledges and agrees that, except for the representations and warranties contained in this Article V (as qualified
in accordance with the terms of this Article V), neither the Company nor any of its Affiliates is making any representation
or warranty regarding any documents, projections, forecasts, statement or other information made, communicated or furnished (orally,
in writing, in the Virtual Data Room, in management presentations (including any questions posed and answers given and any related
discussions, whether formal or informal) or otherwise) to Parent, any of its Affiliates, or any of their respective Representatives
(including any opinion, information, projection or advice that may have been or may be provided to such Person by any Representatives
of the Company or any of its Affiliates). No Person makes any representations or warranties to Parent or Merger Sub regarding
the probable success or profitability of the Company or any of its Subsidiaries.
Article
VI
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent
represents and warrants to the Company, as of the date hereof (except to the extent any such representation and warranty relates
to a specific date, in which case Parent hereby makes to the Company such representation and warranty only as of such date), as
follows:
Section
6.1 Organization, Authorization, Enforceability,
Non-Contravention.
(a)
Organization. Parent is a corporation duly incorporated, validly existing and in good standing under the laws of Delaware
and has the requisite corporate or other organizational power to own, operate or lease the properties and assets owned, operated
or leased by it and to conduct its business as presently conducted. Merger Sub is a corporation duly incorporated, validly existing
and in good standing under the Laws of Florida and has the requisite corporate or other organizational power to own, operate or
lease the properties and assets owned, operated or leased by it and to conduct its business as presently conducted.
(b)
Corporate Authorization. Each of Parent and Merger Sub has full corporate or other organizational power and authority to
execute, deliver and perform its obligations under, and consummate the transactions contemplated by, this Agreement. Subject only
to the approval of this Agreement and the Merger and other transactions contemplated by this Agreement by Parent, as the sole
shareholder of Merger Sub, which approval will occur immediately following the execution of this Agreement pursuant to Section
7.13, the execution, delivery and performance of this Agreement by each of Parent and Merger Sub have been duly and validly
authorized by all necessary corporate action on the part of Parent and Merger Sub.
(c)
Binding Effect; Approval.
(i)
This Agreement has been duly executed and delivered
by Parent and Merger Sub and constitutes a valid and binding agreement of Parent and Merger Sub enforceable against Parent and
Merger Sub in accordance with its terms, subject to the Bankruptcy and Equity Exception.
(ii)
Each of the respective boards of directors of
Parent and Merger Sub, by resolutions duly adopted and not subsequently rescinded or modified in any way, has (A) determined that
this Agreement and the Merger and other transactions contemplated hereby are fair to, and in the best interests of, Parent or
Merger Sub, as applicable, and its shareholders, (B) approved and declared advisable this Agreement, including the execution,
delivery and performance thereof, and the consummation of the Merger and other transactions contemplated by this Agreement upon
the terms and subject to the conditions set forth herein and (C), in the case of the board of directors of Merger Sub, directed
that this Agreement be submitted to Parent for approval as the sole shareholder of Merger Sub.
(d)
Non-Contravention. The execution, delivery and performance of this Agreement, and the consummation of the transactions
contemplated hereby, will not (i) violate or conflict with any provision of the Constituent Documents of Parent or Merger Sub,
(ii) violate or conflict with any Law or Permit applicable to Parent or Merger Sub, or (iii) constitute a breach (or event which,
with the giving of notice or the lapse of time, would constitute a breach) under, or give any third party any rights of termination,
acceleration or cancellation of, or result in the creation of any Encumbrance (other than Permitted Encumbrances) on any of the
assets, properties or capital stock of Parent or Merger Sub, pursuant to any Contract or Government Order to which Parent or Merger
Sub is a party, except in the case of clauses (ii) and (iii) of this Section 6.1(d), for any such conflicts, violations,
breaches, terminations, accelerations, cancellations or creations that would not be reasonably likely to be material.
Section
6.2 Capitalization of Merger Sub.
The authorized capital stock of Merger Sub consists solely of 100 shares of common stock, par value $0.01 per share, all of
which are validly issued and outstanding. All of the issued and outstanding capital stock of Merger Sub is, and at the
Effective Time will be, owned by Parent or a direct or indirect wholly owned Subsidiary of Parent. Merger Sub has not
conducted any business prior to the date of this Agreement and has no, and prior to the Effective Time will have no, assets,
liabilities or obligations of any nature other than those incident to its formation and pursuant to this Agreement and the
Merger and the other transactions contemplated by this Agreement.
Section
6.3 Financial Ability. The amount of funds
contemplated to be provided pursuant to the Commitment Letters (as defined below), together with cash on hand and other readily
available sources of cash, will be sufficient, when funded, to consummate the transactions contemplated by this Agreement and
to otherwise pay all of Parent’s and Merger Sub’s payment obligations under this Agreement, including payment of the
payments pursuant to Article IV and any fees and expenses (including any financing costs), and to redeem (or pay the Conversion
Consideration (as defined in the Articles of Incorporation of the Company) with respect to) all outstanding Preferred Shares (such
amounts, the “Required Amount”). Parent has furnished the Company with true, correct and complete copies of:
(i) the executed letter agreement, dated as of the date hereof, among Parent, Merger Sub, the Company, the Investor and the Sponsors
attached hereto as Exhibit A (including all exhibits, schedules, annexes and amendments thereto, the “Equity Letter”),
pursuant to which (x) each Sponsor and the Investor has committed, subject to the terms and conditions set forth therein, to invest
in the Investor or Parent, as applicable, the cash amount set forth therein (the “Equity Financing”) and (y)
each Sponsor has guaranteed, subject to the terms and conditions set forth therein, to the Company the due and punctual payment
by Parent to the Company of such Sponsor’s Pro Rata Percentage of the Reverse Termination Fee in the event that the Reverse
Termination Fee is required to be paid by Parent pursuant to Section 9.5(d); and (ii) the executed debt commitment letter, dated
as of the date hereof between Parent and each of the lenders and commitment parties party thereto from time to time (collectively,
the “Debt Financing Sources”) and each executed fee letter (subject to customary redactions with respect to
fees, pricing caps and similar commercially sensitive economic terms, provided that such redacted information does not adversely
affect the amount, availability or conditionality of the funding of the Debt Financing) and attached hereto as Exhibit B
(such commitment letter, including all exhibits, schedules, annexes and amendments thereto, and each such fee letter, collectively,
the “Debt Commitment Letter”, and together with the Equity Letter, the “Commitment Letters”),
pursuant to which the Debt Financing Sources have committed, subject to the terms and conditions set forth therein, to lend the
amounts set forth therein for the purposes of financing the transactions contemplated by this Agreement (the “Debt Financing”
and, together with the Equity Financing, the “Financing”). None of the Commitment Letters have been amended,
modified or supplemented prior to the date of this Agreement, and no such amendment, modification or supplementation is contemplated
or pending except to the extent permitted in Section 7.15. To the Knowledge of Parent, the respective commitments and/or guarantees
contained in the Commitment Letters have not been withdrawn, rescinded, terminated or repudiated in any respect and no such withdrawal,
rescission, termination or repudiation is contemplated. Except for customary fee credit letters and engagement letters with respect
to the fees and related arrangements (in each case that do not contain any conditions precedent to the funding of the Debt Financing
and do not adversely affect the amount, availability or conditionality of the funding of the Debt Financing) contemplated by the
Debt Financing, as of the date of this Agreement, there are no side letters or other written Contracts related to the funding
or investing, as applicable, of the full amount of the Financing other than as expressly set forth in the Commitment Letters delivered
to the Company on or prior to the date hereof. As of the date of this Agreement, there are no conditions precedent related to
the funding of the full amount of the Financing other than as expressly set forth in the Commitment Letters delivered to the Company
on or prior to the date hereof. Assuming (i) the satisfaction of the conditions set forth in Section 8.1 and Section 8.2, (ii)
the accuracy in all material respects of the representations and warranties set forth in Section 5.2(a), Section 5.3(e) and Section
5.5 and (iii) the completion of the Marketing Period, the aggregate proceeds contemplated by the Commitment Letters will be sufficient
when funded, together with cash on hand and other readily available sources of cash, to pay the Required Amount. As of the date
hereof, the Commitment Letters are in full force and effect. As of the date of this Agreement, the Commitment Letters are (i)
legal, valid and binding obligations of Parent, Merger Sub and the Investor, as applicable, and to the knowledge of Parent, each
of the other parties thereto and (ii) enforceable in accordance with their respective terms against Parent, Merger Sub and the
Investor, as applicable, and to the knowledge of Parent, each of the other parties thereto subject to the Bankruptcy and Equity
Exception. As of the date of this Agreement, none of Parent, Merger Sub or the Investor is in breach of any of its covenants or
other obligations set forth in, or is in default under the Commitment Letters, nor does Parent, Merger Sub or the Investor have
Knowledge of any breach of the Commitment Letters by any of the other parties thereto, in each case in any respect that could
reasonably be expected to prevent, delay, impair or adversely affect the ability of Parent to consummate the Closing. No event
has occurred which, with or without notice, lapse of time or both would or would reasonably be expected to (x) constitute a default
or breach on the part of Parent, Merger Sub or the Investor or, to the Knowledge of Parent, any other Person under any of the
Commitment Letters or (y) otherwise result in any portion of the Financing not being available at or prior to Closing. As of the
date of this Agreement, all commitment and other fees required to be paid under the Commitment Letters prior to the date hereof
have been fully paid. As of the date of this Agreement, Parent has no reason to believe (both before and after giving effect to
any “market flex” provisions contained in the Commitment Letters): (i) that any of the conditions to the funding of
the Financing contemplated by the Commitment Letters will not be satisfied on a timely basis and (ii) that the Financing will
not be made available to Parent on or prior to the Closing Date. Each of Parent and Merger Sub affirms that it is not a condition
to the Closing or to any of its other obligations under this Agreement that Parent or Merger Sub obtains financing for or related
to any of the transactions contemplated hereby.
Section
6.4 Approvals and Filings. Neither Parent
nor any of its Affiliates (including Merger Sub) is required to obtain any authorization, waiver, consent or approval of, make
any filing or registration with or give any notice to, any Government Authority in connection with or as a condition to the execution,
delivery and performance of this Agreement or the consummation of the Merger, other than, in each case, (1) the Required Governmental
Approvals and (2) the filing of the Articles of Merger with the Secretary of State of the State of Florida as provided in the
FBCA and any other filing and recordation of appropriate merger documents as required by the FBCA. No fact or condition exists
with respect to the business, operations or assets of Parent or its Affiliates which Parent has reason to believe would be reasonably
expected to cause any Required Governmental Approval to be denied or unduly delayed.
Section
6.5 No Litigation. There is no Action
by any Person pending or, to Parent’s Knowledge, threatened against Parent or its Affiliates (including Merger Sub) and
there are no unsatisfied or outstanding Government Orders against Parent or any of the properties or business of Parent that would,
in each case, be reasonably expected to have a Parent Material Adverse Effect.
Section
6.6 Beneficial Ownership of Shares; Takeover
Statutes. During the period three years prior to the date hereof (other than by reason of the execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated hereby), neither Parent nor any of its Subsidiaries or
Affiliates, including Merger Sub, nor, to the Knowledge of Parent, an “interested shareholder” of the Company, as
such term is defined in Section 607.0901 of the FBCA, or was required to file a Schedule 13D or Schedule 13G with respect to its
ownership of securities of the Company pursuant to the Exchange Act. Parent and Merger Sub have taken all the action necessary
to render inapplicable to this Agreement, the Merger and the other transactions contemplated by this Agreement, the provisions
of any state anti-takeover Laws to the extent, if any, such Laws would otherwise be applicable to this Agreement, the Merger and
the other transactions contemplated by this Agreement.
Section
6.7 Finder’s Fees. There is no investment
banker, broker, finder or other intermediary that has been retained by or is authorized to act on behalf of Parent who would be
entitled to any fee or commission in connection with the transactions contemplated by this Agreement.
Section
6.8 Solvency. Each of Parent and Merger
Sub is, and, after giving effect to the transactions contemplated by this Agreement, the payment of all amounts required to be
paid in connection therewith, including the Per Share Merger Consideration, Company Equity Payments, the redemption or conversion
into Conversion Consideration (as defined in the Constituent Documents of the Company) of the Preferred Shares and the payment
of any related fees and expenses, at and immediately after the Effective Time, will be, Solvent, and neither Parent nor Merger
Sub is entering into this Agreement with the intent to hinder, delay or defraud either present or future creditors of the Company
or any of its Subsidiaries or any other Person.
Section
6.9 Information Supplied.
(a)
None of the information supplied or to be supplied by Parent or Merger Sub specifically for inclusion or incorporation by reference
in the Proxy Statement will, at the date the Proxy Statement or any amendment or supplement thereto is first mailed to the Company’s
shareholders or at the time of the Company Shareholders Meeting, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading.
(b)
None of the information supplied or to be supplied by Parent or Merger Sub specifically for inclusion or incorporation by reference
in the Client materials contemplated by Section 7.14, including proxy solicitation materials and Transaction Notices, will,
at the date they are first sent or given to a Client or shareholders of a Client, as the case may be, contain any untrue statement
of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not misleading.
Section
6.10 No Other Representations or Warranties.
Except for the representations and warranties contained in this Article VI, neither Parent nor any other Person makes any other
express or implied representation or warranty on behalf of Parent or any of its Affiliates, and Parent disclaims any other representations
or warranties.
Article
VII
COVENANTS
Section
7.1 Interim Operations.
(a)
The Company shall, and shall cause its Subsidiaries to, between the date hereof and the Closing or earlier termination of this
Agreement (except in each case as referred to in Section 7.1(b) or as may be approved by Parent (such approval not to be
unreasonably withheld, conditioned or delayed)), (1) carry on their respective businesses in the ordinary course of business in
all material respects consistent with past practice and (2) use commercially reasonable efforts to maintain and preserve intact
in all material respects its business organization and advantageous business relationships. In addition to, and without limiting
the foregoing, between the date hereof and the Closing or earlier termination of this Agreement (except in each case as referred
to in Section 7.1(b) or as may be approved by Parent), the Company shall not, and shall cause its Subsidiaries not to (provided
only clauses (xxi) and (xxii) below shall apply to actions of the Company or its Subsidiaries taken with respect to Financial
Advisors or prospective Financial Advisors):
(i)
amend any provision of the Constituent Documents
of the Company other than amendments which are ministerial in nature;
(ii)
sell, pledge, transfer, dispose of, encumber
(other than Permitted Encumbrances), create, redeem, repurchase, acquire, allot or issue, or grant an option to subscribe for,
any Equity Interest in the Company or any of its Subsidiaries (except in each case the net share settlement or issuance of equity
interests in respect of Company Equity Awards outstanding as of the date of this Agreement in accordance with their terms (or,
with respect to net share settlement, consistent with past practice) and, as applicable, the Stock Plans as in effect on the date
of this Agreement);
(iii)
(A) acquire or agree to acquire any Equity Interest
in, or make any investments in, any Person, (B) make any loans or advances to any Person or make any capital contributions to
any Person (other than as between the Company and its Subsidiaries and advances of expenses to employees in the ordinary course
of business consistent with past practice);
(iv)
merge or consolidate the Company or any of its
Subsidiaries with any Person (other than with any Affiliate of the Company or any of its Subsidiaries), or adopt a plan of complete
or partial liquidation, dissolution, restructuring, recapitalization or other reorganization of the Company or any of its Subsidiaries
or establish any Person that would constitute a Subsidiary or Affiliate of the Company;
(v)
(A) declare, set aside, make or pay any dividend
or other distribution, payable in cash, stock, property or otherwise, with respect to any of its capital stock (including with
respect to the Company, for the avoidance of doubt, Shares), except for (x) dividends paid by any Subsidiary of the Company to
the Company or to any other Subsidiary of the Company and (y) regular quarterly or monthly dividends (as applicable) declared
and paid with respect to the Shares and/or Preferred Shares made in the ordinary course of business consistent with past practice;
or (B) split, combine or reclassify any of its capital stock or other equity interests or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its capital stock or other equity interests (except
in each case the issuance of equity interests in respect of Company Equity Awards outstanding as of the date of this Agreement
in accordance with their terms and, as applicable, the Stock Plans as in effect on the date of this Agreement);
(vi)
except as required pursuant to the terms of any
Benefit Plan or as otherwise required by applicable Law, the Company shall not: (A) grant any new long-term incentive or equity-based
awards, or amend, modify or waive the terms or conditions of any such outstanding awards under any Benefit Plan; (B) grant any
transaction-related retention bonuses (it being understood the Company may pay a portion of the annual bonus in respect
of the 2019 calendar year in the form of cash retention awards consistent with past practice); (C) increase the compensation payable
to any employee, except for (i) employees who are not executive officers of the Company and (ii) increases implemented in the
ordinary course of business consistent with past practice provided that the aggregate base salaries payable to all such employees
does not exceed 103% of the previous year’s base salaries payable to all such employees; (D) (i) terminate the employment
of any executive officer (other than for cause), (ii) hire any new employee (except for new employees with an annual salary or
wage rate of less than $100,000 annually and who are replacement hires receiving substantially similar terms of employment) or
(iii) promote or grant merit increases to any employees, except in the ordinary course of business in connection with the Company’s
annual or quarterly compensation review cycle or as the result of the termination or resignation of any employee; (E) adopt, enter
into, terminate or amend any Benefit Plan or program that would be a Benefit Plan if adopted or any collective bargaining agreement
or other Contract with any labor organization or other representative of the Company’s or any Company Subsidiary’s
employees or make any contribution to any Benefit Plan, other than contributions required by Law or the terms of such Benefit
Plans as in effect on the date hereof, except with respect to Benefit Plans providing for health and welfare benefits, the Company
may (i) negotiate and enter into new contracts and extensions of existing contracts with Benefit Plan providers in the ordinary
course of business consistent with past practice, provided that duration of such contracts or extensions do not extend beyond
calendar year 2020 and (ii) take such other actions so long as the aggregate cost of any such Benefit Plan is not materially increased;
(F) enter into or amend any employment, services, change in control, severance, deferred compensation, retention or similar Contract
with any officer, director, or employee of the Company; (G) take any action to accelerate or otherwise change the payment timing
of any compensation or benefit under any Benefit Plan; or (H) change any actuarial or other assumption used to calculate funding
obligations with respect to any Benefit Plan or change the manner in which contributions are made or the basis on which contributions
are calculated, except as may be required by GAAP;
(vii)
make, change or revoke any material Tax election,
change any Tax accounting method or period, file any amended Tax Return, enter into any closing agreement with respect to Taxes,
request any Tax ruling, waive or extend the statute of limitations in respect of a material amount of Taxes or settle or compromise
any material Tax liability or refund;
(viii)
other than the sale of obsolete equipment or
assets in the ordinary course of business, sell, lease, license or otherwise dispose of (whether by way of merger, consolidation,
sale of stock or assets, or otherwise), grant an Encumbrance on or permit an Encumbrance to exist on, or agree to sell, lease,
license, or otherwise dispose of, or grant or permit an Encumbrance on, any properties or assets of the Company or any of its
Subsidiaries, in each case, other than any Permitted Encumbrances and other than with respect to any assets with a value of less
than $500,000 individually or $2,000,000 in the aggregate;
(ix)
acquire or agree to acquire all or a substantial
portion of the assets or business of any Person or any division or line of business thereof;
(x)
commence any Action or file any petition in any
court relating to the bankruptcy, reorganization, insolvency, dissolution, liquidation or relief from debtors, in any case, in
respect of the Company or any of its Subsidiaries;
(xi)
amend, modify, waive or terminate, in each case,
any existing Material Contract or enter into any Contract that would be a Material Contract if in effect on the date of this Agreement
other than in each case (A) any termination or renewal for one year or less in accordance with the terms of any existing Material
Contract on substantially similar terms, (B) the entry into new Material Contracts in replacement of existing Material Contracts
on terms not materially worse to the Company or the relevant Subsidiary, in the aggregate, than the current terms and (C) immaterial
ministerial amendments, modifications or waivers of the terms of Material Contracts in the ordinary course (it being understood
that this provision shall not apply to any employment, services, change in control, severance, deferred compensation, retention
or similar Contract with any officer, director, or employee of the Company, which shall be governed by clause (vi) above);
(xii)
incur, redeem or prepay any Indebtedness (including
the issuance of any debt securities, warrants or other rights to acquire any debt security), except for (A) Indebtedness for borrowed
money incurred in the ordinary course of business not to exceed $2,000,000 in the aggregate, (B) Indebtedness in replacement of
existing Indebtedness for borrowed money on terms substantially consistent with or more favorable to the Company than the Indebtedness
being replaced, or (C) guarantees of Indebtedness of its wholly owned Subsidiaries otherwise incurred in compliance with this
clause (xii);
(xiii)
make any material change in business operations
as defined in FINRA (NASD) Rule 1011(k);
(xiv)
(A) change its fiscal year or (B) make any material
change in accounting methods, principles or practices used by it, except in each case as may be required (x) by GAAP or (y) by
applicable Law, including Regulation S-X under the Securities Act;
(xv)
other than in accordance with the Company’s
capital expenditures budget for calendar year 2019 or any capital expenditures budget for calendar year 2020 (which budget shall
not materially exceed the aggregate amount of capital expenditures provided in the capital expenditures budget for calendar year
2020), make any capital expenditure or expenditures, or incur any obligations or liabilities in connection therewith, which, individually,
is in excess of $500,000 or, in the aggregate, are in excess of $2,000,000;
(xvi)
settle or compromise any Action, other than settlements
or compromises of claims that exclusively require the payment of money by the Company or its Subsidiaries of unreimbursed out-of-pocket
settlement amounts that are (A) accrued or reserved for as of the date of this Agreement or (B) not in excess of $250,000 per
Action or $2,000,000 in the aggregate for all Actions pursuant to this clause (B), or enter into any consent, decree, injunction
or similar restraint or form of equitable relief or deferred prosecution agreement or similar agreement with any Government Authority
that would impose any conduct conditions or remedies that would have a restrictive impact on the business of the Company or any
of its Subsidiaries, or would reasonably be expected to impede or delay in any material respect the consummation of the transactions
contemplated by this Agreement, including obtaining the Company Shareholder Approval;
(xvii)
cancel, compromise, waive or release any material
right or claim of the Company and its Subsidiaries;
(xviii)
cancel, terminate or modify in any material respect,
or take any action that could permit cancellation, termination or material modification of, any Insurance Policy (other than the
renewal of any Insurance Policy in place as of the date hereof in the ordinary course of business consistent with past practice);
(xix)
enter into any real property lease or modify,
amend, renew, extend, waive or exercise any material right or remedy under or terminate any Lease, other than (A) any renewal
for one year or less, (B) immaterial ministerial amendments, modifications or waivers, in each case of the foregoing (A) and (B),
of any Lease in existence on the date hereof in the ordinary course of business consistent with past practice or (C) with respect
to any Lease that requires a monthly rent payment of less than $3,000;
(xx)
other than ordinary course director compensation,
ordinary course compensation and employee benefit entitlements, ordinary course reimbursement of travel and entertainment expenses
or advances regarding the same, in each case that are payable in the ordinary course of business consistent with past practice
or as otherwise permitted pursuant to Section 7.1(a)(vi), enter into any transaction or arrangement with any (A) director,
officer or employee of the Company, (B) Person who is or was, since the Applicable Date, a greater than 5% shareholder of the
Company or (C) any of their respective Affiliates;
(xxi)
(A) acquire or agree to acquire any Equity Interests
in, assets or accounts of, or make any investments in, any Financial Advisor or prospective Financial Advisor (including, for
this purpose, any Person affiliated with any such Financial Advisors) in excess of $500,000 individually or $5,000,000, in the
aggregate or (B) make any recruiting loans or similar advances (including advances of expenses) to any prospective Financial Advisor
in excess of $500,000 individually or $2,500,000 in the aggregate; provided, however, that if the Closing does not
occur on or prior to March 31, 2020, the aggregate limit set forth in sub-clause (A) shall increase to $10,000,000 and the aggregate
limit set forth in sub-clause (B) shall increase to $5,000,000;
(xxii)
(A) make any change to the Financial Advisor
“payout grids” or substantially similar compensation table (as in effect as of the date hereof) or (B) make any change
to any other methodology affecting the rate of any other compensation with respect to the Financial Advisors, in each case, where
such changes would be applicable to the Financial Advisor field force taken as a whole; provided that, in the case of (A)
or (B), the Company or its Subsidiaries may make changes to the compensation payable to individual Financial Advisors on a case-by-case
basis consistent with past practices; or
(xxiii)
affirmatively authorize, agree or commit, or
publicly announce an intention, to do any of the actions prohibited by this Section 7.1(a).
(b)
Notwithstanding anything to the contrary in Section 7.1(a), or any other provision of this Agreement, neither the Company
nor any of its Subsidiaries shall be prevented from undertaking, be required to obtain Parent’s consent in relation to,
or incur any Liability as a result of effecting any of the following:
(i)
any matter required by Law, required by any Government
Authority or requested by any Government Authority as part of its supervision of the Company or any of its Subsidiaries;
(ii)
the implementation of any transaction or the
taking of any action required by, or otherwise permitted under, this Agreement;
(iii)
any matter disclosed in the Company Disclosure
Letter;
(iv)
the performance of an obligation under any Contract
existing as at the date hereof;
(v)
any action by the Company or any Subsidiary thereof
for, on behalf or at the direction of any Client or customer of the Company or any Subsidiary thereof (including investments in
securities for or on behalf of customers or Clients), provided that such action is taken in the ordinary course of business
consistent with past practice;
(vi)
the release or discharge of any Liability owed
by any Subsidiary of the Company to the Company or any of its Affiliates, or owed by the Company to any of its Subsidiaries or
Affiliates; or
(vii)
any action taken in connection with disaster
recovery or related emergency response efforts with the intention of minimizing any adverse effect resulting from such efforts
(provided that the Company shall promptly notify Parent of any such efforts).
(c)
Neither Party shall knowingly take or permit any of their Affiliates to take any action that would reasonably be expected to prevent,
materially delay or materially impede the consummation of the Merger or the other transactions contemplated by this Agreement.
Section
7.2 Preparation of the Proxy Statement; Shareholders
Meeting.
(a)
Subject to Section 7.3(b)(i), as promptly as reasonably practicable following the date of this Agreement, the Company shall
prepare and cause to be filed with the SEC a preliminary proxy statement (together with any amendments or supplements thereto,
the “Proxy Statement”) to be sent to holders of Shares (the “Company Shareholders”) relating
to the meeting of Company Shareholders (the “Company Shareholders Meeting”) to seek to obtain the Company Shareholder
Approval. Parent and Merger Sub shall furnish all information concerning Parent, Merger Sub and their Affiliates to the Company,
and provide such other assistance, as may be reasonably requested in connection with the preparation, filing and distribution
of the Proxy Statement. The Company shall promptly notify Parent upon the receipt of any comments from the SEC or any request
from the SEC for amendments or supplements to the Proxy Statement and shall provide Parent with copies of all substantive correspondence
between it and its representatives, on the one hand, and the SEC, on the other hand. The Company shall use its reasonable best
efforts to resolve as promptly as reasonably practicable any comments from the SEC with respect to the Proxy Statement.
(b)
If prior to the Effective Time, any event occurs with respect to Parent, or any change occurs with respect to other information
supplied by Parent and Merger Sub for inclusion in the Proxy Statement, which is required to be described in an amendment of,
or a supplement to, the Proxy Statement, Parent shall promptly notify the Company of such event, and the Company and Parent and
Merger Sub shall cooperate in the prompt filing by the Company with the SEC of any necessary amendment or supplement to the Proxy
Statement and, if required by Law, in disseminating the information contained in such amendment or supplement to the Company’s
shareholders.
(c)
If prior to the Effective Time, any event occurs with respect to the Company, or any change occurs with respect to other information
supplied by the Company for inclusion in the Proxy Statement, which is required to be described in an amendment of, or a supplement
to, the Proxy Statement, the Company shall promptly notify Parent of such event, and the Company and Parent and Merger Sub shall
cooperate in the prompt filing by the Company with the SEC of any necessary amendment or supplement to the Proxy Statement and,
if required by Law, in disseminating the information contained in such amendment or supplement to the Company’s shareholders.
(d)
The Company shall provide Parent with a reasonable opportunity to review and comment on the Proxy Statement (such comments to
be provided as promptly as reasonably possible) and any amendment or supplement to the Proxy Statement and related communications
with the SEC and shall consider Parent’s comments in good faith.
(e)
The Company shall, as soon as reasonably practicable following the date the Proxy Statement is cleared by the SEC, duly call,
give notice of, convene and hold the Company Shareholders Meeting for the purpose of seeking the Company Shareholder Approval.
The Company shall (i) cause the Proxy Statement to be mailed to the Company Shareholders and to hold the Company Shareholders
Meeting as promptly as reasonably practicable following the date the Proxy Statement is cleared by the SEC and (ii) subject to
Section 7.3, solicit, and use reasonable best efforts to obtain, the Company Shareholder Approval, including engaging a
proxy solicitation firm for the purpose of assisting in the solicitation of proxies for the Company Shareholders Meeting. Except
to the extent that the Company Board shall have made a Qualifying Change of Recommendation in accordance with Section 7.3:
(A) the Company shall include the Company Board Recommendation in the Proxy Statement; and (B) the Company may, after consultation
with Parent, adjourn, recess or postpone the Company Shareholders Meeting only (1) to the extent required by applicable Law to
ensure that any required supplement or amendment to the Proxy Statement is provided to the Company Shareholders within a reasonable
amount of time in advance of the Company Shareholders Meeting; (2) to the extent required by a court of competent jurisdiction
in connection with any Action in connection with this Agreement or the Merger; (3) if, as of the time for which the Company Shareholders
Meeting is originally scheduled (as set forth in the Proxy Statement), there are insufficient Shares represented (either in person
or by proxy) to constitute a quorum necessary to conduct the business of the Company Shareholders Meeting; provided that
the Company shall not be required to adjourn the Company Shareholders Meeting under this provision on more than two occasions
and shall not be required to adjourn the Company Shareholders Meeting past the Outside Date; or (4) with the prior written consent
of Parent, in each case for the minimum duration reasonably necessary to remedy the circumstances giving rise to such adjournment,
recess or postponement.
(f)
The Company shall provide written notice to Parent of the record date in respect of the Company Shareholders Meeting.
(g)
Notwithstanding anything to the contrary herein (including any Change of Recommendation), unless this Agreement has been terminated
in accordance with its terms prior to the time of the Company Shareholders Meeting, the Company Shareholders Meeting shall be
convened and this Agreement shall be submitted to the Company Shareholders at the Company Shareholders Meeting for the purpose
of allowing the Company Shareholders to vote on the Company Shareholders Approval in accordance with the terms of this Agreement,
and nothing contained herein shall be deemed to relieve the Company of such obligations.
Section
7.3 Acquisition Proposals.
(a)
No Solicitation or Negotiation.
(i)
The Company agrees that, except as permitted
by this Section 7.3, neither it nor any of its Subsidiaries nor any of the officers and directors of it or its Subsidiaries
shall, and that it shall instruct and use its reasonable best efforts to cause its and its Subsidiaries’ employees, investment
bankers, attorneys, accountants and other advisors or representatives (such directors, officers, employees, investment bankers,
attorneys, accountants and other advisors or representatives, collectively, “Representatives”) not to, directly
or indirectly:
(A)
initiate, solicit or knowingly encourage any
inquiries or the making of any proposal or offer that constitutes, or could reasonably be expected to lead to, any Acquisition
Proposal;
(B)
engage in, continue or otherwise participate
in any discussions or negotiations regarding, or provide any non-public information or data to any Person relating to, any Acquisition
Proposal; or
(C)
otherwise knowingly facilitate any effort or
attempt to make an Acquisition Proposal.
(ii)
Notwithstanding anything in the foregoing to
the contrary, prior to the time, but not after, the Company Shareholder Approval is obtained, the Company may (A) provide non-public
and other information in response to a request therefor by a Person who has made an unsolicited bona fide written Acquisition
Proposal if the Company receives from the Person so requesting such information an executed confidentiality agreement on terms
that, if taken as a whole, are not materially less restrictive to the other party than those contained in the Confidentiality
Agreement; it being understood that such confidentiality agreement need not contain a standstill provision or otherwise
prohibit the making, or amendment, of an Acquisition Proposal; and promptly discloses (and, if applicable, provides copies of)
any such information to the Parent to the extent not previously provided to Parent, or (B) engage or otherwise participate in
any discussions or negotiations regarding such an unsolicited bona fide written Acquisition Proposal, if and only to the
extent that, (i) prior to taking any action described in clauses (A) or (B) of this Section 7.3(a)(ii), the Company Board
determines in good faith, after consultation with its financial advisor and outside legal counsel, that based on the information
then available (x) such Acquisition Proposal either constitutes a Superior Proposal or could reasonably be expected to result
in a Superior Proposal and (y) a failure to take such action, in light of the Acquisition Proposal and the terms of this Agreement,
would reasonably be expected to be inconsistent with the directors’ fiduciary duties under applicable Law.
(b)
No Change of Recommendation or Alternative Acquisition Agreement.
(i)
Except as permitted by Section 7.3(b)(ii)
and Section 7.3(c), the Company Board and each committee thereof shall not:
(A)
(1) withhold, withdraw, qualify or modify (or
publicly propose or resolve to withhold, withdraw, qualify or modify), in a manner adverse to Parent in any material respect,
the Company Board Recommendation with respect to the Merger, (2) fail to reaffirm the Company Board Recommendation or fail to
publicly state that the Merger is in the best interests of the Company Shareholders, within ten business days after Parent requests
in writing that such action be taken, (or if the Company Shareholders Meeting is scheduled to be held within two business days,
then within one business day after Parent requests), (3) fail to publicly announce, within ten business days after a tender offer
or exchange relating to the securities of the Company shall have been commenced, an unqualified statement disclosing that the
Company Board recommends rejection of such tender offer or exchange offer, or (4) approve, endorse or recommend, or publicly propose
to approve, endorse or recommend, any Acquisition Proposal (it being understood that, if the Company Board takes no position
with respect to an Acquisition Proposal initiated through a tender or exchange offer pursuant to Rule 14d-2 under the Exchange
Act until the earlier of the close of business as of the day prior to the Company Shareholders Meeting and the tenth business
day after the commencement of such Acquisition Proposal such failure to take a position shall not in and of itself be considered
adverse to Parent for purposes of this Section 7.3(b)(i)(A)) (any of the actions described above, a “Change of
Recommendation”); or
(B)
except as expressly permitted by, and after compliance
with, Section 9.3(a), cause or permit the Company to enter into any acquisition agreement, merger agreement or other similar
definitive acquisition agreement (other than a confidentiality agreement referred to in Section 7.3(a) entered into in
compliance therewith) relating to any Acquisition Proposal (an “Alternative Acquisition Agreement”).
(ii)
Notwithstanding anything to the contrary set
forth in this Agreement, prior to the time, but not after, the Company Shareholder Approval is obtained, the Company Board may:
(A) effect a Change of Recommendation if (1) an unsolicited, bona fide written Acquisition Proposal is received by the
Company and has not been withdrawn, (2) the Company Board determines in good faith, after consultation with its financial advisor
and outside legal counsel, that based on the information then available (x) such Acquisition Proposal constitutes a Superior Proposal,
and (y) a failure to effect a Change of Recommendation in connection with such Acquisition Proposal would reasonably be expected
to be inconsistent with the directors’ fiduciary duties under applicable Law, and (3) the Company Board intends to terminate
this Agreement pursuant to Section 9.3(a) in order to enter into an Alternative Acquisition Agreement in relation to such
Acquisition Proposal (the actions described clause (A) of this Section 7.3(b)(ii), a “Qualifying Change of Recommendation”);
or (B) cause or permit the Company or any of the Company’s Subsidiaries to enter into an Alternative Acquisition Agreement
with respect to a Superior Proposal (and the Company may enter into or cause a Subsidiary thereof to enter into such an Alternative
Acquisition Agreement) or agree, authorize or commit to do so, but in each case only after complying with (i) in the case of clause
(A) above, any applicable requirements in Section 7.3(e) and (ii) in the case of clause (B) above, any applicable requirements
in Section 9.3(a). Any material amendment to any Acquisition Proposal will be deemed to be a new Acquisition Proposal for
purposes of this Section 7.3(b), including with respect to the requirements in Section 7.3(e) and Section 9.3(a).
(c)
Certain Permitted Disclosure. Nothing contained in this Section 7.3 shall be deemed to prohibit either the Company
or Company Board from complying with its disclosure obligations under U.S. federal or state law with regard to an Acquisition
Proposal; provided, however, that if such disclosure has the effect of withdrawing or adversely modifying the Company
Board Recommendation, such disclosure shall be deemed to be a Change of Recommendation.
(d)
Existing Discussions and other Actions. The Company shall, and shall cause its Subsidiaries and all of its and their respective
Representatives to, immediately (i) cease all solicitation, encouragement, discussions and negotiations regarding any inquiry,
proposal or offer pending on the date of this Agreement that constitutes, or would reasonably be expected to lead to, an Acquisition
Proposal; (ii) request the prompt return or destruction of all confidential information previously furnished to any Person in
connection with a possible Acquisition Proposal; and (iii) terminate access to any physical or electronic data rooms relating
to a possible Acquisition Proposal.
(e)
Notice; Matching Rights. The Company agrees that it will promptly (and, in any event, within 48 hours) notify Parent if
any inquiries, proposals or offers with respect to an Acquisition Proposal are received by it or any of its Representatives indicating,
in connection with such notice, the name of such Person and the material terms and conditions of any proposals or offers (including,
if applicable, copies of any written requests, proposals or offers, including proposed agreements) and thereafter shall keep Parent
informed, on a current basis, of the status and terms of any such proposals or offers (including any amendments thereto). Notwithstanding
anything to the contrary in this Agreement, no termination of this Agreement pursuant to Section 9.3(a) may be effected
until the provision thereof have been complied with by the Company, and no Qualifying Change of Recommendation may be made until
after the third business day following receipt by Parent of written notice from the Company regarding the Company Board’s
intention to make a Qualifying Change of Recommendation (a “Notice of Change of Recommendation”), and specifying
the reasons for the Qualifying Change of Recommendation in reasonable detail and attaching to such notice the most current version
of such agreement shared between the proposed parties thereto. At Parent’s option, the Parties shall negotiate in good faith
during such three business day period to reach mutual agreement on revisions to this Agreement so that the conditions set forth
in Section 7.3(b)(ii)(A)(2) would not be satisfied. In determining whether to make a Change of Recommendation, or to enter
into an Alternative Acquisition Agreement, the Company Board shall take into account any revisions to the terms of this Agreement
and any other proposals or offers proposed in writing by Parent during such three business day period following Parent’s
receipt of a Notice of Change of Recommendation. For the avoidance of doubt, any material amendment to a Superior Proposal will
be deemed to be a new Acquisition Proposal for purposes of this Section 7.3, including with respect to the requirements
in this Section 7.3(e) and Section 9.3(a).
(f)
For the avoidance of doubt, any action taken by any Representative of the Company that would, if taken directly by the Company,
constitute a breach of this Section 7.3 shall be deemed a breach of this Section 7.3 by the Company.
Section
7.4 Regulatory Actions; Reasonable Best Efforts.
(a)
Subject to the terms and conditions of this Agreement, each of the Parties agrees to use its 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 consummate and
make effective as promptly as practicable, the Merger, and to cooperate with the other in connection with the foregoing, including
using its reasonable best efforts, in each case in connection with the consummation of the transactions contemplated by this Agreement,
(i) to obtain all material consents, approvals, rulings or authorizations that are required to be obtained under any applicable
Law (including any Required Governmental Approvals), (ii) to obtain any material consents required from third parties and to deliver
any negative consent letters, including those contemplated by Section 7.14, (iii) to lift or rescind any injunction or
restraining order or other order adversely affecting the ability of the Parties to consummate the Merger, and (iv) to effect as
promptly as practicable all necessary registrations, filings and responses to requests for additional information or documentary
material from a Government Authority, if any. Without limiting the generality of the foregoing, as soon as practicable and in
no event later than 30 days after the date of this Agreement (subject to, in the case of Parent and Merger Sub, the reasonable
cooperation of the Company, and in the case of the Company, the reasonable cooperation of Parent and Merger Sub, in each case
in accordance with this Section 7.4(a)) each of Parent, Merger Sub and the Company shall, and shall cause their respective
Subsidiaries to, submit (i) the Continuing Membership Application of any Broker-Dealer Subsidiary and (ii) the pre-merger notification
with respect to the transactions contemplated by this Agreement required under the HSR Act. Each of Parent, Merger Sub and the
Company shall use, and shall cause its applicable Subsidiaries to use, reasonable best efforts to obtain each such Required Governmental
Approvals as promptly as reasonably practicable. Each of Parent, Merger Sub and the Company shall have the right to review in
advance, and, to the extent practicable, each will consult the other on, in each case subject to applicable Laws relating to the
exchange of information, any filing made with, or written materials submitted to, any third party or any Government Authority
in connection with the transactions contemplated by this Agreement. In exercising the foregoing right, each of the Parties shall
act reasonably and as promptly as practicable. The Parties agree that they will consult with each other with respect to the obtaining
of all permits, consents, approvals and authorizations of all third parties and Government Authorities necessary or advisable
to consummate the transactions contemplated by this Agreement, and each Party will keep the other Parties apprised promptly of
the status of filings and applications, including communications with Government Authorities that cause such Party to believe
that there is a reasonable likelihood that any Required Governmental Approval will not be obtained or that the receipt of any
such approval will be delayed, and all other matters relating to completion of the transactions contemplated hereby. Each Party
shall consult with the other Parties in advance of any meeting or conference with any Government Authority in connection with
the transactions contemplated by this Agreement, and each Party shall, to the maximum extent possible, afford each other Party
and its Representatives the opportunity to participate in such meetings and conferences.
(b)
Further, and without limiting the generality of the rest of this Section 7.4, each of the Parties shall promptly (i) furnish
to the other such necessary information and reasonable assistance as the other Party may request in connection with the foregoing,
and (ii) subject to applicable Laws relating to the exchange of information, provide counsel for the other Party with copies of
all filings made by such Party, and all correspondence between such Party (and its advisors) with any Government Authority and
any other information supplied by such Party and such Party’s Subsidiaries to a Government Authority or received from such
a Government Authority in connection with the transactions contemplated hereby and as necessary to comply with contractual arrangements.
(c)
At Parent’s request and expense, the Company agrees to take all actions Parent reasonably deems prudent in order to obtain
or assist Parent in obtaining any actions, consents, undertakings, approvals or waivers by or from any Person for or in connection
with, and to reasonably assist Parent in litigating or otherwise contesting any objections to or proceedings or other actions
challenging, the consummation of the Merger; provided, however, that nothing in this Section 7.4(c) shall
obligate the Company to take any action that is not (i) conditioned on the consummation of the Merger and (ii) at the expense
of Parent.
Section
7.5 Public Announcements. Except with
respect to any Change of Recommendation made in accordance with the terms of this Agreement, Parent and the Company shall consult
with each other before issuing, and give each other the opportunity to review and comment in advance upon, any press release or
other public statements with respect to the Merger (including notices to Clients), and shall not issue any such press release
or make any such public statement prior to such consultation, except as such party may reasonably conclude may be required by
applicable Law, court process or by obligations pursuant to any listing agreement with any national securities exchange or national
securities quotation system. Parent and the Company agree that the initial press release to be issued with respect to the transactions
contemplated by this Agreement shall be in the form heretofore agreed to by the parties. Without limiting the generality of the
foregoing, except as permitted by a communications plan to be mutually agreed upon by the Company and Parent promptly following
the date of this Agreement, Parent shall not make any written broad-based communication to the employees or independent contractors
of the Company or any of its Subsidiaries without the prior written consent of the Company.
Section
7.6 Notification of Certain Matters. Parent
shall give prompt notice to the Company and the Company shall give prompt notice to Parent (in such capacity, the “Notifying
Party”) of (i) any notice or other communication from any Person alleging that the consent of such Person is or may
be required in connection with the transactions contemplated by this Agreement; or (ii) the occurrence, or failure to occur, of
any event which occurrence or failure to occur (x) would cause or be reasonably likely to cause a Parent Material Adverse Effect
or a Company Material Adverse Effect, as applicable, or (y) which the Notifying Party believes would cause or would be reasonably
likely to cause or constitute a material breach of any of the Notifying Party’s representations, warranties or covenants
contained herein that reasonably could be expected to give rise, individually or in the aggregate, to the failure of a condition
set forth in, if Parent or Merger Sub is the Notifying Party, Section 8.1 or Section 8.3, or if the Company is the Notifying Party,
Section 8.1 or Section 8.2; provided that any failure to give notice in accordance with the foregoing with respect to any breach
shall not be deemed to constitute a violation of this or the failure of any condition set forth in Section 8.2 or Section 8.3
to be satisfied, or otherwise constitute a breach of this Agreement by the party failing to give such notice, in each case, unless
the underlying breach would independently result in a failure of the conditions set forth in Section 8.2 or Section 8.3 to be
satisfied.
Section
7.7 Access. Subject to applicable Law,
upon reasonable notice, the Company shall (and shall cause its Subsidiaries to) afford Parent’s officers and other authorized
Representatives of it and its Affiliates who are subject to confidentiality obligations no less restrictive than the confidentiality
obligations set forth in the Confidentiality Agreement, reasonable access, during normal business hours throughout the period
prior to the Effective Time, to its and its Subsidiaries’ employees, properties, books, contracts and records and instruct
the appropriate employees of the Company and its Subsidiaries to cooperate reasonably with Parent and its officers and other authorized
Representatives in connection with the foregoing (including for purposes of integration planning); and, during such period, the
Company shall (and shall cause its Subsidiaries to) furnish promptly to Parent all information concerning its business, properties
and personnel as may reasonably be requested, provided that no investigation pursuant to this Section 7.5 shall affect or be deemed
to modify any representation or warranty made by the Company herein, and provided, further, that the foregoing shall not require
the Company (i) to permit any inspection, or to disclose any information, that in the reasonable judgment of the Company would
result in the disclosure of any trade secrets of third parties or violate any of its obligations with respect to confidentiality
if the Company shall have used reasonable best efforts to obtain the consent of such third party to such inspection or disclosure
or (ii) to disclose any privileged information of the Company or any of its Subsidiaries. Without limiting the generality of the
foregoing, the Company shall reasonably cooperate and assist the Parent in its efforts to retain the Company’s Financial
Advisors following the Closing, including to (a) coordinate in-person meetings with key Financial Advisors (except as would unreasonably
interfere with the business of the Company or any of its Subsidiaries) and (b) provide Parent with reasonably prompt notice upon
becoming aware that any Financial Advisor with 12 month trailing gross dealer concessions equal to or greater than $300,000, or
any member of senior management of the Company or any of its Subsidiaries, resigns from his or her employment or terminates his
or her relationship (or clearly indicates to a member of management of the Company an intention to resign or terminate its relationship),
as the case may be, with the Company or any of its Subsidiaries. All requests for information made pursuant to this Section 7.7
shall be directed to the executive officer or other Person designated by the Company. All such information shall be governed by
the terms of the Confidentiality Agreement.
Section
7.8 Stock Exchange Delisting. Prior to
the Closing Date, the Company shall cooperate with Parent and, upon Parent’s request therefor, use reasonable best efforts
to take, or cause to be taken, all actions, and do or cause to be done all things, reasonably necessary, proper or advisable on
its part under applicable Laws and rules and policies of the NYSE, including filing post-effective amendments to deregister
unsold Registered Debt Securities, and Preferred Shares, from Securities Act registration statements, to enable the delisting
by the Surviving Corporation of the Registered Debt Securities, Shares and Preferred Shares, from the NYSE and the deregistration
of the Registered Debt Securities, Shares, and Preferred Shares, in each case, as promptly as practicable after the Effective
Time, and in any event no more than ten days after the Closing Date. The Surviving Corporation shall use its reasonable best efforts
to cause the Shares to no longer be quoted on the NYSE and deregistered under the Exchange Act as soon as practicable following
the Effective Time.
Section
7.9 Employee Matters.
(a)
Parent agrees that, during the period commencing at the Effective Time and ending one year after the Effective Time, Parent shall
provide, or shall cause to be provided to each Continuing Employee for so long as such Continuing Employee remains an employee
of Parent or the Surviving Corporation (or a Subsidiary thereof) during such period compensation (base salary, base wage rate,
commission schedule, target annual and long-term incentive opportunities), severance benefits and retirement and employee welfare
benefits that are no less favorable in the aggregate than those provided to similarly situated employees of Parent and its Affiliates.
Nothing in this Agreement shall confer upon any Continuing Employee any right to continue in the employ or service of Parent,
the Surviving Corporation or any affiliate of Parent.
(b)
Parent shall (i) cause any pre-existing conditions or limitations and eligibility waiting periods under any group health plans
of Parent or its Affiliates to be waived with respect to the Continuing Employees and their eligible dependents, (ii) give each
Continuing Employee credit for the plan year in which the Effective Time occurs towards applicable deductibles and annual out-of-pocket
limits for medical expenses incurred prior to the Effective Time for which payment has been made and (iii) give each Continuing
Employee service credit for such Continuing Employee’s employment with the Company and its Subsidiaries for purposes of
vesting, benefit accrual and eligibility to participate under each applicable Parent benefit plan, as if such service had been
performed with Parent, except for purposes of qualifying for subsidized early retirement benefits or to the extent it would result
in a duplication of benefits.
(c)
No later than immediately prior to the Effective Time, the Company shall take all reasonable and necessary steps so as to terminate
(with such termination effective subject to and contingent upon the Effective Time) (i) any Benefit Plan sponsored by the Company
or one of its Subsidiaries which is a defined contribution plan intended to be qualified under Code Section 401(a) (the “Company
401(k) Plans”) and (ii) those other Benefit Plans identified by Parent or one of its Affiliates in writing no later
than 20 business days prior to the Effective Time, in each case, with such termination to be implemented in accordance with the
terms of each such Benefit Plan, and in the case of the Company 401(k) Plans, with the Company taking all actions reasonably necessary
to cause each participant therein to become 100% vested in his or her account balance, to the extent required by applicable Law.
(i)
As soon as reasonably practicable following the Effective Time, the Company shall take all actions necessary and appropriate so
as to directly transfer to a 401(k) plan maintained or established by Parent or one of its Affiliates (the “Parent 401(k)
Plan”), those assets and liabilities of each Company 401(k) Plan, including all outstanding loans to participants under
such plans and employer contributions through the Effective Time. The Parties shall take all reasonable and necessary steps so
as to cooperate and effectuate the provisions of this Section 7.9(c)(i), including to conform such transfer with Section
414(l) of the Code, and, giving effect to the service credit provisions of Section 7.9(b), to ensure that each Continuing
Employee is eligible to participate in the Parent 401(k) Plan as soon as administratively practical after the Effective Time.
(ii)
The actions required under this Section 7.9(c) shall include, for the avoidance of doubt, the termination of any and all
sick, vacation, personal days, floating days, voluntary paid time off and other paid time off policies, programs and plans (collectively,
the “PTO Plans”), as provided for in this Section 7.9(c)(ii). No later than immediately prior to the
Effective Time, the Company shall take all reasonable and necessary actions so as to freeze the accrual of any additional paid
time off under the PTO Plans effective as of December 31, 2019, and, to the extent permitted by applicable Law, shall pay out
any accrued but unused benefits under such PTO Plans through such date to participants of such plans no later than the normally
scheduled payroll immediately prior to the Effective Time. From January 1, 2020 through the Effective Time (the “Transition
Period”), Continuing Employees shall continue to accrue (and use) any and all paid time off under the PTO Plans. Following
the Effective Time, Continuing Employees shall accrue paid time off under the policies of the Parent and its Affiliates and Parent
shall, or shall cause its Affiliates to, provide Continuing Employees to be credited with paid time off for the Transition Period
under the corresponding policies of Parent and its Affiliates.
(iii)
The Company shall pay out all 2019 annual bonuses prior to the Effective Time, consistent with past practice.
(iv)
Effective as of the Effective Time, Parent and its Affiliates shall take all actions necessary and appropriate so as to facilitate
the coverage of any participants and beneficiaries under any Benefit Plan that is a short term disability plan, long term disability
plan or providing COBRA continuation coverage to Parent’s corresponding plans so as to provide for uninterrupted coverage
to such individuals.
(d)
Parent hereby acknowledges that the transactions contemplated by this Agreement shall constitute a “change in control,”
“change of control” or term or concept of similar import of the Company and its Subsidiaries under the terms of the
Benefit Plans. From and after the Effective Time, Parent shall, and shall cause the Surviving Corporation to, honor all obligations
and rights under the Benefit Plans which are not terminated pursuant to Section 7.9(c) in accordance with their terms,
provided that, nothing in this Agreement shall require Parent or any of its Affiliates to continue the Benefit Plans indefinitely
or for any period of time following the Effective Time.
(e)
Nothing contained in this Agreement, including this Section 7.9, is intended to (i) be treated as an amendment of
any Benefit Plan, (ii) prevent Parent, the Surviving Corporation or any of their Affiliates from amending or terminating any Benefit
Plan or any of their benefit plans, (iii) prevent Parent, the Surviving Corporation or any of their Affiliates, after the
Effective Time, from terminating the employment of any Continuing Employee or independent contractor at any time, or (iv) create
any third-party beneficiary rights in any employee or independent contractor of the Company or any of its Subsidiaries, any beneficiary
or dependent thereof, or any collective bargaining representative thereof, with respect to the compensation, terms and conditions
of employment and/or benefits that may be provided to any Continuing Employee by Parent, the Surviving Corporation or any of their
Affiliates or under any benefit plan which Parent, the Surviving Corporation or any of their Affiliates may maintain.
Section
7.10 Treatment of Company Preferred Stock. Following the Effective Time, Parent shall cause the Surviving Corporation to
comply with its obligations under the Constituent Documents of the Surviving Corporation with respect to the Preferred Shares.
Section
7.11 Indemnification; Directors’ and Officers’ Insurance.
(a)
Each of the Surviving Corporation and Parent agrees that all rights, existing as of the date hereof, to indemnification, advancement
of expenses and exculpation from liabilities for acts or omissions occurring at or prior to the Effective Time in favor of the
current or former directors, officers or employees of the Company or any of its Subsidiaries as provided in their respective Constituent
Documents or in any indemnification, employment or other similar agreements of the Company or any of its Subsidiaries, in each
case as in effect on the date of this Agreement, shall continue in full force and effect in accordance with their terms. From
and after the Effective Time, the Surviving Corporation and Parent shall indemnify and hold harmless each individual who is as
of the date of this Agreement, or who becomes prior to the Effective Time, a director, officer or employee of the Company or any
of its Subsidiaries or who is as of the date of this Agreement, or who thereafter commences prior to the Effective Time, serving
at the request of the Company or any of its Subsidiaries as a director, officer or employee of another Person (all of the foregoing,
collectively, the “Company Indemnified Parties”), against all claims, losses, liabilities, damages, judgments,
inquiries, fines and reasonable fees, costs and expenses, including attorneys’ fees and disbursements (“Losses”),
incurred or arising in connection with any claim, action, investigation, suit or proceeding, whether civil, criminal, regulatory,
administrative or investigative (including with respect to matters existing or occurring or alleged to have existed or occurred
at or prior to the Effective Time (including this Agreement and the transactions and actions contemplated hereby)), arising out
of or pertaining to the fact that the Company Indemnified Party is or was a director, officer or employee of the Company or any
of its Subsidiaries or is or was serving at the request of the Company or any of its Subsidiaries as a director, officer or employee
of another Person or any act or omission by such Company Indemnified Party while serving in such capacity, whether asserted or
claimed prior to, at or after the Effective Time, to the fullest extent permitted under applicable Law. In the event of any such
claim, action, investigation, suit or proceeding (x) each Company Indemnified Party will be entitled to advancement of expenses
incurred in the defense of any such claim, action, investigation, suit or proceeding, from the Surviving Corporation and Parent
within ten business days of receipt by the Surviving Corporation from the Company Indemnified Party of a request therefor; provided
that any person to whom expenses are advanced provides an undertaking, if and only to the extent required by the FBCA, to
repay such advances if it is ultimately determined that such person is not entitled to indemnification and (y) the Surviving
Corporation and Parent shall cooperate in the defense of any such matter. Any Company Indemnified Party wishing to claim indemnification
under this Section 7.11, upon learning of any threatened or actual claim, Action, suit, demand, proceeding or investigation,
shall promptly notify the Company and, if so learning after the Effective Time, the Surviving Corporation thereof in writing;
provided that the failure promptly to so notify in writing shall not affect the obligations of the Surviving Corporation
except to the extent, if any, that it is materially prejudiced by such failure or delay.
(b)
For a period of six years from and after the Effective Time, the Surviving Corporation shall (i) cause to be maintained in
effect the current policies of directors’ and officers’ liability insurance and fiduciary liability insurance maintained
by the Company or its Subsidiaries or (ii) provide substitute polices for the Company and its current and former directors
and officers (and any individual who becomes an officer or director prior to the Effective Time) who are currently (or prior to
the Effective Time become) covered by the directors’ and officers’ and fiduciary liability insurance coverage currently
maintained by the Company in either case, of not less than the amount of existing coverage and have other terms and from carriers
not less favorable to the insured persons than the directors’ and officers’ liability insurance and fiduciary liability
insurance coverage currently maintained by the Company with respect to claims arising from facts or events that occurred on or
before the Effective Time, except that in no event shall the Surviving Corporation be required to pay with respect to such insurance
policies in respect of any one policy year more than 300% of the annual premium payable by the Company for such insurance for
the year ended December 31, 2018 (such 300% amount, the “Maximum Amount”), and if the Surviving Corporation
is unable to obtain the insurance required by this Section 7.11 it shall obtain as much comparable insurance as possible
for the years within such six-year period for an annual premium equal to the Maximum Amount, in respect of each policy year within
such period. In lieu of such insurance, prior to the Closing Date, Parent may direct that the Company, in which case the Company
shall, purchase a “tail” directors’ and officers’ liability insurance policy and fiduciary liability insurance
policy for the Company and its current and former directors and officers (and any individual who becomes an officer or director
prior to the Effective Time) who are currently (or prior to the Effective Time become) covered by the directors’ and officers’
and fiduciary liability insurance coverage currently maintained by the Company. In the event the Company purchases such tail coverage,
the Surviving Corporation shall cease to have any obligations under the first sentence of this Section 7.11(b).
(c)
The provisions of this Section 7.11: (i) shall survive consummation of the Merger, (ii) are intended to be for the
benefit of, and will be enforceable by, each indemnified or insured party (including the Company Indemnified Parties), his or
her heirs and (iii) are in addition to, and not in substitution for, any other rights to indemnification or contribution
that any such Person may have by contract or otherwise. In the event that Parent or the Surviving Corporation or any of its successors
or assigns (x) consolidates with or merges into any other Person and is not the continuing or Surviving Corporation or entity
of such consolidation or merger or (y) transfers or conveys all or substantially all of its properties and assets to any
Person, then, and in each such case, the Surviving Corporation shall cause proper provision to be made so that the successors
and assigns of the Surviving Corporation assume the obligations set forth in this Section 7.11.
Section
7.12 Section 16 Matters. The Company and the Company Board (or duly formed committees thereof consisting of non-employee
directors (as such term is defined for the purposes of Rule 16b-3 promulgated under the Exchange Act)), shall, prior to the Effective
Time, take all such actions as may be necessary or advisable to cause the transactions contemplated by this Agreement and any
other dispositions of equity securities of the Company (including derivative securities) in connection with the transactions contemplated
by this Agreement by any individual who is subject to the reporting requirements of Section 16(a) of the Exchange Act with respect
to the Company, to be exempt under Rule 16b-3 promulgated under the Exchange Act, to the extent permitted by applicable Law.
Section
7.13 Approval of the Sole Shareholder of Merger Sub. Immediately following the execution of this Agreement, Parent shall
execute and deliver, in accordance with the FBCA and in its capacity as the sole shareholder of Merger Sub, a written consent
approving this Agreement and the Merger and other transactions contemplated by this Agreement, and shall promptly provide a true,
correct and complete copy thereof to the Company.
Section
7.14 Fund Client Consents.
(a)
Public Funds. Subject in each case to the requirements of applicable Law and the fiduciary duties of the Company Board,
the board of directors (or Persons performing similar functions) of any Subsidiary of the Company and each Public Fund Board:
(i)
with respect to each Public Fund and the Public Fund Board thereof, the Company shall use its reasonable best efforts, and shall
cause each of its Subsidiaries to use their reasonable best efforts to: (A) request, as promptly as practicable following the
date of this Agreement, such Public Fund Board to approve (and to recommend that the shareholders of such Public Fund approve)
a new Advisory Contract with the applicable Subsidiary of the Company, to be effective as of the Effective Time, containing terms,
taken as a whole, that are substantially similar to the terms of the existing Advisory Contract between such Public Fund and such
Subsidiary of the Company; (B) request, as promptly as practicable following receipt of the approval and recommendation described
in the foregoing clause (A), such Public Fund Board to call a special meeting of the shareholders of such Public Fund to
be held as promptly as reasonably practicable for the purpose of voting upon a proposal to approve (in the requisite manner) such
new Advisory Contract; (C) to prepare and to file (or to cause to be prepared and filed) with the SEC and all other applicable
Government Authorities, as promptly as practicable following receipt of the approval and recommendation described in the foregoing
clause (A), all proxy solicitation materials required to be distributed to the shareholders of such Public Fund with respect
to the actions recommended for shareholder approval by such Public Fund Board and to mail (or to cause to be mailed) such proxy
solicitation materials as promptly as practical after clearance thereof by the SEC (if applicable); and (D) to submit (or to request
such Public Fund Board to submit), as promptly as practical following the mailing of the proxy materials to the shareholders of
such Public Fund for a vote at a shareholders meeting the proposal described in clause (B) above.
(ii)
Parent and the Company agree that a Public Fund shall be deemed to have consented for all purposes under this Agreement to the
continued management of such Public Fund by the applicable Subsidiary of the Company following the Effective Time, if a new Advisory
Contract has been approved by the Public Fund Board and shareholders of such Public Fund in the manner contemplated by clauses
(A)-(D) of Section 7.14(a)(i), unless at any time prior to the Closing the respective Public Fund Board notifies the applicable
Subsidiary of the Company, in writing, that such Public Fund has terminated its existing, interim, or new Advisory Contract prior
to or following the Effective Time.
(b)
Private Funds and Other Non-Fund Clients.
(i)
If consent or other action is required by applicable Law or by the Advisory Contract of any Client other than a Public Fund for
the Advisory Contract with such Client to continue after the Effective Time, as promptly as reasonably practicable following the
date of this Agreement, and in any event no less than 30 days before the Parties’ anticipated Closing Date, the Company
shall, and shall cause the applicable Company Subsidiaries to, send a notice (“Transaction Notice”) complying
with applicable Law and the terms of such Client’s Advisory Contract and requesting such Client’s written consent
for the Advisory Contract with such Client to continue after the Effective Time. Each Transaction Notice shall inform the applicable
Client: (1) of the intention to complete the transactions contemplated by this Agreement, which may result in a deemed assignment
of such Client’s Advisory Contract; (2) of the applicable Company Subsidiary’s intention to continue to provide the
advisory services pursuant to the existing Advisory Contract with such Client after the Effective Time if such Client does not
terminate such agreement prior to the Effective Time; and (3) that the consent of such Client will be deemed to have been granted
if such Client continues to accept such advisory services for a period of at least 30 days after the sending of the Transaction
Notice without termination.
(ii)
Parent and the Company agree that any consent required for any Advisory Contract with a Client (other than a Public Fund) to continue
after the Effective Time shall be deemed given for all purposes under this Agreement (A) upon receipt of a written consent requested
in the Transaction Notice prior to the Effective Time or (B) if no such written consent is received, if 30 days shall have passed
since the sending of the Transaction Notice to such Client; provided that no consent shall be deemed to have been given
for any purpose under this Agreement if at any time prior to the Effective Time such Client notifies the Company in writing that
such Client has not so consented or has terminated its Advisory Contract.
(iii)
The Company agrees that the information that is contained in any Transaction Notice to be furnished to any Client other than a
Public Fund (and other than information that is or will be provided in writing by or on behalf of Parent or its Affiliates specifically
for inclusion in such Transaction Notice) to the extent consent or other action is required under applicable Law or the applicable
Advisory Contract for the purpose of having the Advisory Contract continue after the Effective Time will be true, correct and
complete in all material respects. Parent agrees that the information provided by it or its Affiliates (or on their behalves)
in writing for inclusion in any Transaction Notice to be furnished to any Client other than a Public Fund to the extent consent
or other action is required under applicable Law or the applicable Advisory Contract for the purpose of having the Advisory Contract
continue after the Effective Time will be true, correct and complete in all material respects.
(c)
Prospective Clients. In addition to the foregoing, as promptly as practicable following the date of this Agreement, the
Company shall cause each of the Company Subsidiaries to use its reasonable best efforts, (i) to supplement the offering documentation
with respect to each Public Fund to inform prospective investors therein of the transactions contemplated by this Agreement; and
(ii) with respect to any new Clients following the date of this Agreement, to include a Transaction Notice along with the Advisory
Contract and other materials provided to such new Clients.
Section
7.15 Financing.
(a)
Each of Parent and Merger Sub shall use its respective reasonable best efforts (taking into account the expected timing of the
Marketing Period) 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 the Financing on the terms and conditions not materially less favorable to Parent and Merger
Sub than the terms and conditions described in the Commitment Letters (including, as necessary, the “market flex”
provisions contained in any related fee letter), including reasonable best efforts to (i) maintain in full force and effect the
Commitment Letters, (ii) satisfy (or obtain a waiver of) on a timely basis all conditions applicable to Parent in obtaining the
Debt Financing (including by consummating the Equity Financing at or prior to the Closing), (iii) enter into definitive agreements
(which, with respect to any bridge facility documentation, shall not be required until reasonably necessary in connection with
the funding of the Debt Financing) with respect to the Debt Financing on terms and conditions not materially less favorable to
Parent and Merger Sub than the terms and conditions described in or contemplated by the Debt Commitment Letter (including any
“market flex” provisions in the Debt Commitment Letter), and (iv) upon satisfaction of the conditions set forth in
Section 8.1 and Section 8.2 (other than those conditions that by their nature will not be satisfied until the Closing),
consummate the Equity Financing and the Debt Financing at or prior to the Closing and enforce its rights under the Commitment
Letters. Parent and Merger Sub shall obtain the Equity Financing contemplated by the Equity Letter at or prior to the Closing
Date upon satisfaction or waiver of the conditions to Closing in Section 8.1 and Section 8.2 (other than those conditions
that by their nature will not be satisfied until the Closing).
(b)
Without the prior written consent of the Company, Parent shall not agree to: (A) any amendment, restatement, replacement,
supplement, termination, repudiation, rescission, cancellation, expiration or other modification or waiver of, any condition,
remedy or other provision under any Commitment Letter if such amendment, restatement, replacement, supplement, termination, repudiation,
rescission, cancellation, expiration, modification or waiver would reasonably be expected to (i) reduce the aggregate amount of
the Financing from that contemplated by the Commitment Letters delivered as of the date hereof to fund the Required Amount (taking
into account cash on hand and other readily available sources of cash), (ii) impose new or additional conditions or expand
any of the conditions to the receipt of the Financing or otherwise make it less likely that the Financing would be funded at Closing
(including by making satisfaction of the conditions to the Financing less likely to occur), (iii) prevent, impair, adversely
affect or delay (other than in an immaterial manner) the funding of the Financing at Closing or (iv) adversely affect the
ability of Parent or the Company, as applicable, to enforce its rights against the other parties to the Commitment Letters or
(B) terminate, or permit the termination of, any Commitment Letter unless such Commitment Letter is, prior to or substantially
concurrently with such termination, replaced with a new commitment that, were it structured as an amendment to such existing Commitment
Letter, would satisfy the requirements of the foregoing clause (A). For the avoidance of doubt, Parent may customarily modify,
amend or supplement the Debt Commitment Letter to add (or assign or reassign commitments and roles to) lenders, lead arrangers,
bookrunners, syndication agents, documentation agents or entities in similar roles. Upon any amendment, modification or supplement
of, or waiver of, any Commitment Letter in accordance with this Section 7.15(b), Parent shall promptly deliver a copy thereof
to the Company and references herein to “Commitment Letter”, “Equity Letter” or “Debt Commitment
Letter”, as applicable, shall include and mean such documents as amended, modified, supplemented or waived in compliance
with this Section 7.15(b), and references to “Financing”, “Equity Financing” or “Debt Financing”,
as applicable, shall include and mean the financing contemplated by such Commitment Letter as amended, modified, supplemented
or waived in compliance with this Section 7.15(b), as applicable.
(c)
In the event all or any portion of the Debt Financing becomes unavailable or Parent or Merger Sub becomes aware of any event or
circumstance that would reasonably be expected to make any portion of the Debt Financing unavailable, on the terms and conditions
(including any “market flex” provisions applicable thereto) described in or contemplated by the Debt Commitment Letters
for any reason, Parent and Merger Sub shall use their reasonable best efforts to arrange for and obtain alternative financing
from alternative sources (the “Alternative Financing”) (it being understood and agreed that no provision hereof
shall require the Parent to draw upon Parent’s existing revolving credit facility under any circumstances) in an amount
sufficient to fund the Required Amount (taking into account the Equity Financing, any available portion of the Debt Financing,
cash on hand and other readily available sources of cash) which would not involve any conditions precedent that are materially
less favorable to Parent than those contained in the Debt Commitment Letter and would not reasonably be expected to prevent, materially
impede or materially delay the consummation of the Debt Financing or the transactions contemplated by this Agreement. The obligations
under this Section 7.15 shall apply equally to any such Alternative Financing (including any new financing commitment).
(d)
Parent shall keep the Company informed on a reasonable basis and in reasonable detail of the status of its efforts to arrange
the Financing upon the Company’s written request (including providing the Company with copies of all material definitive
agreements related to the Financing). Parent shall give the Company prompt written notice (i) of any actual breach or default
by any party to the Commitment Letters (or commitments for any Alternative Financing obtained in accordance with this Section
7.15) or definitive documents relating to the Financing of which Parent becomes aware that would reasonably be expected to
delay (other than in an immaterial manner) or impair the Closing or make funding less likely to occur at the Effective Time or
any termination of the Commitment Letters (or commitments for any Alternative Financing obtained in accordance with this Section
7.15), (ii) the receipt by any of Parent, Merger Sub or any of their respective Affiliates or Representatives of any
written notice or other written communication from any Debt Financing Source, any lender or any other Person with respect to any
(A) actual breach, default or termination by any party to any Commitment Letter or (B) dispute or disagreement between or among
any parties to any Commitment Letter, solely to the extent such dispute or disagreement relates to the obligation of the parties
thereto to fund their commitments thereunder or the availability of the Financing or (iii) any other circumstance that would reasonably
be expected to adversely affect the ability of Parent to obtain, prior to Closing, all or any portion of the Financing on the
terms and conditions contemplated by the Commitment Letters or the definitive documents related to the Financing.
(e)
Each of Parent and Merger Sub hereby acknowledges and agrees that obtaining the Financing is not a condition to the Closing.
Section
7.16 Financing Assistance.
(a)
The Company agrees to use its reasonable best efforts to deliver to Parent and the Debt Financing Sources the Required Information
upon such information becoming available (it being understood that (A) to the extent any Required Information is contained
in any Company Reports, such inclusion shall constitute delivery to Parent and Merger Sub hereunder and (B) notwithstanding
anything to the contrary, in no circumstances shall the Company be required to provide any financial statements hereunder that
are not required to be included in any Company Reports, including any Company Reports filed after the date hereof), and in addition,
to use reasonable best efforts to provide, and shall use its reasonable best efforts to cause its Subsidiaries to and cause its
and their respective Representatives, including legal and accounting, to use reasonable best efforts to provide, to Parent and
the Debt Financing Sources, at Parent’s sole cost and expense (other than in respect of the Required Information), all customary
cooperation reasonably requested in writing by Parent and the Debt Financing Sources to cause the conditions in the Debt Commitment
Letter to be satisfied or as otherwise reasonably requested, in each case, solely with respect to information regarding the Company
and its Subsidiaries, in connection with the Financing, including using its reasonable best efforts to: (i) upon reasonable
prior notice and at times and locations to be mutually agreed, participate in a reasonable number of meetings, presentations,
road shows, due diligence sessions and sessions with rating agencies; provided that the Company and its Representatives
shall not be required to participate in more than one road show or similar meeting in respect of marketing bond offerings; (ii)
deliver to Parent and the Debt Financing Sources from time to time such financial and other information regarding the Company
and its Subsidiaries as may be reasonably required by Parent in the preparation of materials by Parent for rating agency presentations,
offering documents, private placement memoranda, bank information memoranda, prospectuses and similar documents required in connection
with the Financing, and reasonably cooperate with updating and correcting any Required Information in order to ensure such Required
Information remains Compliant; (iii) assist Parent and the Debt Financing Sources in their preparation of offering documents for
any portion of the Debt Financing, including identifying any portion of the information that constitutes material, non-public
information, and including delivering customary representation and authorization letters with respect to and in accordance with
the Debt Commitment Letter, including materials for ratings agency presentations; (iv) cooperate with the marketing (including
cooperating in obtaining customary ratings) and due diligence efforts of Parent and the Debt Financing Sources in connection with
the Debt Financing; (v) to the extent requested at least ten business days prior to the Closing, furnish Parent or the Debt Financing
Sources at least three business days prior to the Closing with all documentation and other information as reasonably requested
by the Debt Financing Sources that is required in connection with applicable “know your customer”, “beneficial
ownership” and anti-money laundering rules and regulations; (vi) assist in facilitating the granting of a security interest
(and perfection thereof) in collateral (provided that no security interest shall be effective prior to Closing); (vii)
cause its independent accountants to deliver customary comfort letters (including as to customary “negative assurance”
and change period comfort) with respect to any financial statements included in the Required Information and (viii) assist
in obtaining customary payoff letters relating to the repayment of any existing third party indebtedness for borrowed money of
the Company or its Subsidiaries required by the Debt Commitment Letter (as of the date hereof) to be repaid on or coincidental
with the Closing and, upon repayment of such indebtedness, termination of any related Encumbrances securing any such obligations
to be repaid; provided, however, that, in each case, nothing herein shall require such cooperation to the extent
it would interfere unreasonably with the business or operations of the Company or any of its Subsidiaries, cause significant competitive
harm to the Company or any of its Subsidiaries or create an unreasonable risk of harm to any property or assets of the Company
and its Subsidiaries; and provided, further, that neither the Company nor any of its Subsidiaries shall (A) be
required to pay or commit to pay any commitment or other similar fee, bear any cost or expense or make any other payment or incur
any other liability prior to the Closing Date (other than with respect to delivering customary authorization letters) or agree
or agree to provide any indemnity in connection with the Financing or any of the foregoing matters, (B) have any liability or
obligation under any loan agreement, indenture and related documents, unless and until the Closing occurs (other than with respect
to delivering customary authorization letters), (C) be required to take any action that would subject any of the Company’s
or its Subsidiaries’ respective directors, managers, officers, employees, accountants, legal counsel or other Representatives
to any personal liability, (D) be required to take any action that will conflict with or violate the Company’s or any Subsidiary’s
Constituent Documents as in effect on the date hereof, any material contracts to which the Company or any Subsidiary is a party
in effect on the date hereof, or any Laws, (E) take any corporate action (including any approvals of its board of directors or
similar body), (F) take any other action that is not contingent upon the Closing or enter into or execute any agreement or document
(other than with respect to delivering customary authorization letters), (G) waive or amend any term of this Agreement or any
other contract to which it is a party or take any action in respect of the Financing to the extent that such action would cause
any condition to Closing set forth in Article VIII to fail to be satisfied or otherwise result in a breach of this
Agreement by the Company or (H) provide any information the disclosure of which is prohibited or restricted under any Laws. The
Company hereby consents to the use of its and its Subsidiaries’ logos in connection with the Debt Financing; provided,
however, that such logos are used solely in a manner that is not intended to nor reasonably likely to harm or disparage
the Company or any of its Subsidiaries or the reputation or goodwill of the Company or any of its Subsidiaries and its or their
marks.
(b)
None of the Company, any of its Subsidiaries nor its and their respective officers, directors, employees, accountants, consultants,
legal counsel, agents and other Representatives shall be required to take any action that would subject any such Person to liability,
to bear any out-of-pocket cost or expense or to pay any commitment or other similar fee or make any other payment or incur any
other liability or provide or agree to provide any indemnity in connection with the Debt Financing contemplated by the Debt Commitment
Letter or their performance of their respective obligations under this Section 7.16 and any information utilized in connection
therewith, and any information utilized in connection therewith, in each case other than with respect to the preparation of audited
and other historical financial statements and customary representation and authorization letters (including with respect to the
presence or absence of material non-public information and the accuracy of the information contained in the disclosure and marketing
materials related to the Debt Financing). Parent shall (i) indemnify and hold harmless the Company, its Subsidiaries and its and
their respective Representatives from and against any and all liabilities, losses, damages, claims, costs, expenses, interest,
awards, judgments and penalties suffered or incurred by them in connection with the arrangement of the Debt Financing contemplated
by the Debt Commitment Letter and the performance of their respective obligations in respect of the Debt Financing, and any information
utilized in connection therewith, except to the extent such liabilities or losses arise solely from misstatements contained in
information in respect of the Company and its Subsidiaries supplied by the Company, its Subsidiaries or any of their Representatives
or to the extent any liabilities, losses, damages, claims, costs, expenses, interest, awards, judgments and penalties are caused
by the gross negligence, bad faith or willful misconduct of the Company or any of its Subsidiaries or any of their respective
Representatives and other than with respect to the preparation of audited and other historical financial statements and customary
representation and authorization letters (including with respect to the presence or absence of material non-public information
and the accuracy of the information contained in the disclosure and marketing materials related to the Debt Financing) and (ii)
promptly upon written request of the Company, reimburse the Company and its Subsidiaries for all out-of-pocket costs and expenses
incurred by the Company or its Subsidiaries (including those of its accountants, consultants, legal counsel, agents and other
Representatives) in connection with the cooperation required for the Debt Financing (other than with respect to the preparation
of audited and other historical financial statements).
Section
7.17 Further Assurances. The Parties agree that, from time to time, whether before, on or after the Closing Date, each
of them shall execute and deliver such further instruments of conveyance and transfer and take such other action as may be reasonably
requested by the other Party to carry out the purposes and intents of this Agreement.
Article
VIII
CONDITIONS TO CLOSING
Section
8.1 Conditions to Each Party’s Obligations. The obligations of the Parties to effect the Closing are subject to the
satisfaction (or written waiver by each Party) on or prior to the Closing of each of the following conditions:
(a)
Shareholder Approval. The Company shall have duly obtained the Company Shareholder Approval.
(b)
Government Approvals. All Required Governmental Approvals shall have been obtained, and any applicable waiting periods
relating thereto shall have expired or been terminated early.
(c)
No Prohibition. No court or other Government Authority of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any Law (whether temporary, preliminary or permanent) that is in effect and restrains, enjoins or otherwise
prohibits consummation of the Merger or the other transactions contemplated by this Agreement (collectively, a “Government
Order”).
Section
8.2 Conditions to Obligations of Parent and Merger Sub. The obligation of Parent and Merger Sub to effect the Closing is
also subject to the satisfaction (or written waiver by Parent) on or prior to the Closing of the following conditions:
(a)
Representations and Warranties. Each of the representations and warranties of the Company contained in Article V was
true and correct as of the date of this Agreement and as of the Closing Date (except to the extent such representations and warranties
expressly related to a specific date in which case such representations and warranties need only to be so true and correct as
of such specific date, excluding, for the avoidance of doubt, the reference to “as of the date hereof” in the lead-in
to Article V) except where the failures of such representations and warranties to be true and correct have not had, individually
or in the aggregate, a Company Material Adverse Effect (disregarding for purposes of this Section 8.2(a) any limitations
as to materiality or Company Material Adverse Effect set forth therein, except for any such limitations set forth in Sections
5.3(e), 5.5 or with respect to any list of items that is qualified by materiality, which shall not be disregarded for
purposes of this Section 8.2(a)); provided that (i) the Company Fundamental Representations (other than Section
5.2(a)) were true and correct in all respects as of such dates, and (ii) Section 5.2(a) was true and correct in
all respects as of such dates except for any de minimis inaccuracies.
(b)
Covenants. The covenants and agreements of the Company set forth in this Agreement to be performed at or prior to the Closing
shall have been duly performed in all material respects. Notwithstanding anything in this Agreement and for purposes of determining
whether the covenant in Section 7.16 has been duly performed by the Company for purposes of this Section 8.2 and
whether there has been a breach of any representation, warranty, covenant or agreement set forth in Section 7.16, the Company
shall be deemed to have performed its obligations under Section 7.16 and not have breached any representation, warranty,
covenant or agreement set forth therein, except in the case where the Company has materially breached its obligations under Section
7.16 and such breach has not been cured within 15 days after written notice thereof by Parent to the Company specifying such
breach in particularity and, but for such breach, there would be no Financing Failure.
(c)
Officer’s Certificate. There shall have been delivered to Parent a certificate, dated the Closing Date and signed
by a duly authorized officer of the Company, certifying the satisfaction of the conditions in Section 8.2(a) and Section
8.2(b).
(d)
No Company Material Adverse Effect. Since the date of this Agreement, no Company Material Adverse Effect has occurred.
Section
8.3 Conditions to Obligations of the Company. The obligation of the Company to effect the Closing is also subject to the
satisfaction (or written waiver by the Company) on or prior to the Closing of the following conditions:
(a)
Representations and Warranties. Each of the representations and warranties of Parent contained in Article VI
shall be true and correct as of the date of this Agreement and as of the Closing Date (except to the extent such representations
and warranties expressly related to a specific date in which case such representations and warranties need only to be so true
and correct as of such specific date, excluding, for the avoidance of doubt, the reference to “as of the date hereof”
in the lead-in to Article VI) except where the failures of such representations and warranties to be true and correct have
not had, individually or in the aggregate, a Parent Material Adverse Effect (disregarding for purposes of this Section 8.3(a)
any limitations as to materiality or Parent Material Adverse Effect set forth therein); provided that the Parent Fundamental
Representations were true and correct in all respects as of such dates.
(b)
Covenants. The covenants and agreements of Parent and Merger Sub set forth in this Agreement to be performed at or prior
to the Closing shall have been duly performed in all material respects.
(c)
Officer’s Certificate. There shall have been delivered to the Company a certificate, dated the Closing Date and signed
by a duly authorized officer of Parent, certifying the satisfaction of the conditions in Section 8.3(a) and Section
8.3(b).
Article
IX
TERMINATION
Section
9.1 Termination by Mutual Consent. This Agreement may be terminated and the Merger may be abandoned at any time prior to
the Effective Time, whether before or after receipt of the Company Shareholder Approval, by mutual written consent of the Company
and Parent by action of their respective boards of directors.
Section
9.2 Termination by Either Parent or the Company. This Agreement may be terminated and the Merger may be abandoned at any
time prior to the Effective Time by action of the board of directors of either Parent or the Company if:
(a)
the Closing shall not have occurred on or before May 11, 2020 (the “Outside Date”); provided, however,
that if the Closing shall not have occurred by such date solely due to the failure of a Party to receive the FINRA Approval, the
Outside Date shall be automatically extended for up to one additional 30-day period to allow for the FINRA Approval to be obtained;
provided that the right to terminate this Agreement under this Section 9.2(a) shall not be available to any
Party whose breach of any representation, warranty, covenant or agreement contained in this Agreement has been the primary cause
of or resulted in the failure of the transactions contemplated by this Agreement to occur on or before such date; provided,
further, that if the Closing shall not have occurred on or before the Outside Date as a result of a Financing Failure,
then, notwithstanding the second proviso of this Section 9.2(a), Parent may terminate this Agreement pursuant to this Section
9.2(a) if Parent pays the Reverse Termination Fee required to be paid pursuant to Section 9.5(d) (it being agreed that
Parent shall be permitted to terminate this Agreement pursuant to this Section 9.2(a) following the occurrence of a Financing
Failure even if the Reverse Termination Fee is not be required to be paid because the Company Causation Exception applies pursuant
to Section 9.5(d));
(b)
if any Government Order permanently restrains, enjoins or prohibits or makes illegal the consummation of the Merger, and such
Government Order becomes effective (and final and nonappealable) or any Law becomes enacted, entered, promulgated or enforced
by any Government Authority that prohibits or makes illegal consummation of the Merger; provided that the terminating party
shall have complied in all material respects with its obligations under this Agreement, including Section 7.4 (Regulatory
Actions; Reasonable Best Efforts); or
(c)
if the Company Shareholder Approval is not obtained at the Company Shareholders Meeting (unless such Company Shareholders Meeting
has been postponed or adjourned, in which case at the final postponement or adjournment thereof).
Section
9.3 Termination by the Company. This Agreement may be terminated by the Company and the Merger may be abandoned:
(a)
at any time prior to the time the Company Shareholder Approval is obtained, if (i): the Company Board authorizes the Company,
subject to complying with the terms of this Agreement (including without limitation the provisions of Section 7.3(e)),
to enter into an Alternative Acquisition Agreement with respect to a Superior Proposal and the Company notifies Parent in writing
that it intends to enter into such an agreement, attaching the most current version of such agreement to such notice, (ii) Parent
does not make, within three business days of receipt of the Company’s written notification of its intention to enter into
a binding agreement for a Superior Proposal, an offer that the Company Board determines, in good faith after consultation with
its financial advisors and its legal counsel, is at least as favorable, from a financial point of view, to the shareholders of
the Company as the Superior Proposal and (iii) the Company pays to Parent any fees required to be paid pursuant to Section
9.5(c)(ii). The Company agrees (x) that it will not enter into the binding agreement referred to in clause (ii) above
until at least the fourth business day after it has provided the notice to Parent required thereby, (y) to notify Parent
promptly if its intention to enter into the written agreement referred to in its notification changes and (z) during such
three-day period, to negotiate in good faith with Parent with respect to any revisions to the terms of the transaction contemplated
by this Agreement proposed by Parent in response to a Superior Proposal, if any, so that Parent’s offer would, in the determination
of the Company Board, in good faith after consultation with its financial advisors and its legal counsel, be at least as favorable,
from a financial point of view, to the shareholders of the Company as the Superior Proposal; or
(b)
if there has been a breach of any representation, warranty, covenant or agreement made by Parent or Merger Sub in this Agreement,
or any such representation and warranty shall have become untrue after the date of this Agreement, such that Section 8.3(a)
or Section 8.3(b) would not be satisfied and such breach or condition is not curable or, if curable, is not cured within
30 days after written notice thereof is given by the Company to Parent.
Section
9.4 Termination by Parent. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective
Time by action of the board of directors of Parent if:
(a)
the Company Board shall have made a Qualifying Change of Recommendation pursuant to Section 7.3(b)(i)(A); or
(b)
there has been a breach of any representation, warranty, covenant or agreement made by the Company in this Agreement, or any such
representation and warranty shall have become untrue after the date of this Agreement, such that Section 8.2(a) or Section
8.2(b) would not be satisfied and such breach or condition is not curable or, if curable, is not cured within 30 days after
written notice thereof is given by Parent to the Company.
Section
9.5 Effect of Termination and Abandonment.
(a)
In the event the Company or Parent intends to terminate this Agreement and abandon the transactions contemplated by this Agreement
pursuant to Section 9.3, Section 9.3 or Section 9.4, respectively, the Company or Parent, as applicable,
shall give written notice to the other party specifying the provision or provisions of this Agreement pursuant to which such termination
and abandonment is intended to be effected.
(b)
Except to the extent provided in Section 9.5(c) and Section 9.5(d) in the event of termination of this Agreement
and abandonment of the transactions contemplated by this Agreement pursuant to this Article IX, this Agreement shall
become void and of no effect with no liability to any Person on the part of any Party (or any of its Affiliates or its or their
respective Representatives); provided, however, and notwithstanding anything to the contrary set forth in this Agreement,
(i) no such termination shall relieve any party of any liability or damages to any other party resulting from any fraud or
Willful Breach of any provision of this Agreement and (ii) the provisions set forth in this Section 9.5, Article X
and the Confidentiality Agreement shall survive any termination of this Agreement and any abandonment of the transactions
contemplated by this Agreement.
(c)
In the event this Agreement is terminated and the transactions contemplated by this Agreement abandoned pursuant to this Article IX:
(i)
by either the Company or Parent pursuant to Section 9.2(a) or Section 9.2(c), or by Parent pursuant to Section
9.4(b) (as a result of any Willful Breach) and, in each case, (A) a bona fide Acquisition Proposal shall have
been publicly disclosed and not publicly withdrawn at the time of such termination, and (B) within 12 months after such termination,
the Company or any of its Subsidiaries shall have entered into an agreement with respect to an Acquisition Proposal (substituting
“50%” for “15%” in the definition of “Acquisition Proposal” for purposes of this Section
9.5(c)(i)), then the Company shall pay or cause to be paid to Parent a termination fee of an amount equal to $19,000,000 (the
“Company Termination Fee”) plus the Parent Expense Reimbursement by wire transfer of immediately available
funds prior to or concurrently with entering into an agreement with respect to such Acquisition Proposal;
(ii)
by the Company pursuant to Section 9.3(a) or by Parent pursuant to Section 9.4(a), then the Company shall pay or
cause to be paid to Parent the Company Termination Fee plus the Parent Expense Reimbursement by wire transfer of immediately
available funds within five business days following the date of such termination and abandonment; or
(iii)
by either the Company or Parent pursuant to Section 9.2(c), then the Company shall pay or cause to be paid to Parent the
Parent Expense Reimbursement by wire transfer of immediately available funds within five business days following the date of such
termination and abandonment.
(d)
If this Agreement is terminated by Parent or the Company pursuant to Section 9.2(a) and at the time of any such termination
(i) each of the conditions set forth in Section 8.1 and Section 8.2 has been satisfied (other than those conditions
that by their nature are to be satisfied at the Closing) and (ii) there exists a Financing Failure, except in the case (A) where
the Company has materially breached its obligations under Section 7.16, such breach is not cured within 15 days after written
notice thereof by Parent to the Company specifying such breach in particularity and, but for such breach, there would be no Financing
Failure, or (B) of the occurrence of any event described in subsections (i) or (ii) of the definition of “Marketing Period”
and as a result of such events the Marketing Period has not been completed prior to the Outside Date and this Agreement has been
terminated pursuant to Section 9.2(a) (the foregoing clauses (ii)(A) and (ii)(B), a “Company Causation Exception”),
then, in any such case, Parent will pay to the Company a termination fee of an amount equal to $35,300,000 (the “Reverse
Termination Fee”) by wire transfer of immediately available funds prior to or simultaneous with such termination, or
as promptly as practicable, but in any event no later than two business days, after such termination.
(e)
The Parties acknowledge and agree that: (i) in no event shall the Company be required to pay the Company Termination Fee
or pay the Parent Expense Reimbursement on more than one occasion; (ii) the agreements set forth in this Section 9.5 are
an integral part of the transactions contemplated by this Agreement and that, without these agreements, the other parties would
not enter into this Agreement and accordingly, if the Company fails to promptly pay or cause to be paid the amount due pursuant
to this Section 9.5, and, in order to obtain such amount, Parent commences an Action that results in a final, binding and
non-appealable judgment against the Company for the Company Termination Fee (or any portion thereof) or the Parent Expense Reimbursement,
the Company shall pay or cause to be paid to Parent its reasonable and documented out-of-pocket costs and expenses (including
reasonable and documented attorneys’ fees) in connection with such Action; (iii) notwithstanding anything to the contrary
set forth in this Agreement, in the event that the Company Termination Fee or the Parent Expense Reimbursement becomes payable
by, and is paid or caused to be paid by, the Company, such fee shall be Parent’s sole and exclusive remedy for monetary
damages pursuant to this Agreement with respect to termination of this Agreement under the provisions of this Agreement giving
rise to the obligation to pay the Company Termination Fee; provided, however, that in the event the Company reimburses
Parent for the Parent Expense Reimbursement pursuant to Section 9.5(c)(iii), it shall retain all rights to further payment
under Section 9.5(c)(i) (subject to clause (iv) below); provided, further, that any such payment shall not
relieve the Company of any liability or damages incurred or suffered by Parent or Merger Sub to the extent such liability or damages
were the result of or arise out of any fraud or Willful Breach of any provision of this Agreement (including with respect to breaches
of this Agreement pursuant to which the Company Termination Fee shall have become or becomes payable pursuant to this Article
IX), in which case Parent and/or Merger Sub shall be entitled to all rights and remedies available in equity or at law, in
contract, in tort or otherwise; (iv) notwithstanding anything to the contrary set forth in this Agreement, the amount of the Parent
Expense Reimbursement paid by the Company shall be applied as a credit to any additional payment of the Company Termination Fee
required by Section 9.5; and (v) notwithstanding anything to the contrary set forth in this Agreement, the Company shall
have the right to recover damages (which shall be determined by reference to the total amount that would have been recoverable
by the Company’s shareholders if all such shareholders brought an action against Parent and were recognized as third-party
beneficiaries hereunder) from Parent in the event of any fraud or Willful Breach of any provision of this Agreement by Parent
or Merger Sub, which right is hereby acknowledged and agreed by Parent and Merger Sub.
(f)
The Parties acknowledge and agree that in no event shall Parent be required to pay the Reverse Termination Fee on more than one
occasion. Notwithstanding anything to the contrary in this Agreement:
(i)
if this Agreement is terminated and the Reverse Termination Fee is payable and is actually paid to the Company pursuant to Section
9.5(d), then, in such instances, the Company’s right to receive the Reverse Termination Fee shall be deemed to be liquidated
damages for any and all losses or damages suffered or incurred by the Company or any of its Affiliates in connection with this
Agreement, the Debt Financing and Debt Financing Commitment, and the transactions contemplated hereby and thereby; and
(ii)
if this Agreement is terminated and the Reverse Termination Fee is payable and is actually paid to the Company pursuant to Section
9.5(d) then, in such instances, the Reverse Termination Fee shall be the sole and exclusive remedy of the Company and its
Affiliates against the Parent and its Subsidiaries, the Debt Financing Sources and any of their respective former, current, or
future general or limited partners, stockholders, managers, members, directors, officers, Affiliates, employees, representatives
or agents (“Parent Related Parties”) for any loss suffered as a result of any breach of any representation,
warranty, covenant or agreement in this Agreement or the failure of the Merger to be consummated, and none of Parent, its Subsidiaries,
the Debt Financing Sources or any of the Parent Related Parties shall have any further liability or obligation relating to or
arising out of this Agreement or the transactions contemplated by this Agreement;
provided,
however, that in each case of the foregoing clauses (i) and (ii), under such circumstances, no Person shall be relieved
of any liability or damages incurred or suffered by the Company to the extent such liability or damages were the result of or
arise out of any fraud or Willful Breach of any provision of this Agreement by Parent or Merger Sub, in which case the Company
shall be entitled to all rights and remedies available in equity or at law, in contract, in tort or otherwise; provided,
further, that in the event of any Financing Failure, the Debt Financing Sources and their respective former, current, or
future general or limited partners, equityholders, managers, members, directors, officers, Affiliates, employees, attorneys, representatives
or agents will not have any liability of any nature (for any breach of this Agreement or of the Debt Commitment Letter) to the
Company or any of its Subsidiaries or to any shareholder or Affiliate of the Company or any of its Subsidiaries. Notwithstanding
anything to the contrary in this Agreement, the Reverse Termination Fee shall not be payable following the occurrence of a Financing
Failure if the Company Causation Exception applies pursuant to Section 9.5(d), and in such event, neither the Company nor any
other Person shall have any further recourse against Parent, Merger Sub or any of their respective Affiliates under this Agreement
except as otherwise provided in Section 9.5(b). The Parties agree that the Reverse Termination Fee and the agreements contained
in Section 9.5(d) are an integral part of the Merger, and that without these agreements, the other parties would not enter
into this Agreement.
Article
X
MISCELLANEOUS
Section
10.1 Non-survival of Representations and Warranties and Agreements. None of the representations, warranties, covenants
and agreements in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Time. This
Section 10.1 shall not limit Section 9.5 or any covenant or agreement of the parties which by its terms contemplates
performance after the Effective Time.
Section
10.2 Notices. All notices, requests, instructions, consents, claims, demands, waivers, approvals and other communications
to be given or made hereunder by one or more Parties to one or more of the other Parties shall, unless otherwise specified herein,
be in writing and shall be deemed to have been duly given or made on the date of receipt by the recipient thereof if received
prior to 5:00 p.m. in the place of receipt and such day is a business day (or otherwise on the next succeeding business day) if
(i) served by personal delivery or by a nationally recognized overnight courier service upon the Party or Parties for whom
it is intended, (ii) delivered by registered or certified mail, return receipt requested or (iii) sent by facsimile
or email; provided that the facsimile or email transmission is promptly confirmed by telephone or otherwise. Such communications
shall be sent to the respective Parties at the following street addresses, facsimile numbers or email addresses or at such other
street address, facsimile number or email address for a Party as shall be specified for such purpose in a notice given in accordance
with this Section 10.2:
(a)
If to the Company, to:
Ladenburg
Thalmann Financial Services Inc.
4400
Biscayne Boulevard, 12th Floor
Miami,
Florida
Attention:
Brian L. Heller
Facsimile:
(305) 572-4141
Email:
bheller@ladenburg.com
With
a copy to (which shall not constitute a notice):
Sullivan &
Cromwell LLP
1888
Century Park East
Los
Angeles, California 90067-1725
Attention:
Alison S. Ressler
Facsimile:
(310) 407-2681
Email:
resslera@sullcrom.com
and
Sullivan &
Cromwell LLP
125
Broad Street
New
York, New York 10004
Attention:
Jared M. Fishman
Facsimile:
(212) 291-9280
Email:
fishmanj@sullcrom.com
(b)
If to Parent or Merger Sub, to:
Advisor
Group Holdings, Inc.
20
East Thomas Road, Suite 2000
Phoenix,
Arizona 85012
Attention:
Jamie Price, President and Chief Executive Officer
Email:
jamie.price@advisorgroup.com
With
a copy to (which shall not constitute a notice):
Advisor
Group Holdings, Inc.
20
East Thomas Road, Suite 2000
Phoenix,
Arizona 85012
Attention:
Nina McKenna, Chief Legal Counsel and General Counsel
Email:
nina.mckenna@advisorgroup.com
and
Eversheds
Sutherland (U.S.) LLP
999
Peachtree Street, NE, Suite 2300
Atlanta,
Georgia 30309-3996
Attention:
B. Scott Burton
Facsimile:
(404) 853-8806
Email:
scottburton@eversheds-sutherland.com
Section
10.3 Assignment. This Agreement shall not be assignable by operation of law or otherwise; provided, however,
that Parent may designate, by written notice to the Company, another wholly owned direct or indirect Subsidiary to be a
constituent corporation to the Merger in lieu of Merger Sub, in which event all references herein to Merger Sub shall be
deemed references to such other Subsidiary, except that all representations and warranties made herein with respect to Merger
Sub as of the date of this Agreement shall be deemed representations and warranties made with respect to such other
Subsidiary as of the date of such designation; provided that any such designation shall not materially impede or delay
the consummation of the transactions contemplated by this Agreement or otherwise materially impede the rights of the
shareholders of the Company under this Agreement. Any purported assignment in violation of this Agreement is void ab
initio.
Section
10.4 No Third-Party Beneficiaries. Except as provided in Section 7.11 or otherwise expressly provided herein, this
Agreement is for the sole benefit of the Parties and their permitted assigns, and nothing herein expressed or implied shall give
or be construed to give to any Person, other than the Parties and such assigns, any legal or equitable rights hereunder; provided
that each Debt Financing Source (and any of their respective Affiliates and representatives or any of their respective managers,
directors, officers, employees, partners, members, equityholders, attorneys, agents or representatives) is an express third party
beneficiary of Section 9.5(d), Section 10.7, Section 10.8, Section 10.9, Section 10.12, and
this proviso (and the defined terms used therein to the extent applicable thereto).
Section
10.5 Expenses. Except as expressly provided otherwise in this Agreement, including in Section 7.4, all costs
and expenses incurred by any party to this Agreement or on its behalf in connection with the preparation, negotiation, execution
and performance of this Agreement and the Merger shall be paid by the Party incurring such expense whether or not the Merger is
consummated.
Section
10.6 Entire Agreement. This Agreement (including the Company Disclosure Letter, the Preamble and any Recitals, Schedules
and Exhibits to this Agreement) and the Confidentiality Agreement constitute the entire agreement and supersede all other prior
agreements, understandings, representations and warranties both written and oral, among the parties, with respect to the subject
matter hereof. EACH PARTY AGREES THAT, EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS AGREEMENT, NEITHER PARENT
AND MERGER SUB NOR THE COMPANY MAKES OR RELIES ON ANY OTHER REPRESENTATIONS, WARRANTIES OR INDUCEMENTS, AND EACH HEREBY DISCLAIMS
ANY OTHER REPRESENTATIONS, WARRANTIES OR INDUCEMENTS, EXPRESS OR IMPLIED, AS TO THE ACCURACY OR COMPLETENESS OF ANY OTHER INFORMATION,
MADE BY, OR MADE AVAILABLE BY, ITSELF OR ANY OF ITS REPRESENTATIVES, WITH RESPECT TO, OR IN CONNECTION WITH, THE NEGOTIATION,
EXECUTION OR DELIVERY OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, NOTWITHSTANDING THE DELIVERY OR DISCLOSURE TO
THE OTHER OR THE OTHER’S REPRESENTATIVES OF ANY DOCUMENTATION OR OTHER INFORMATION WITH RESPECT TO ANY ONE OR MORE OF THE
FOREGOING. No party shall be bound by, or be liable for, any alleged representation, promise, inducement or statement of intention
not contained herein.
Section
10.7 Enforcement.
(a)
The parties agree that irreparable damage for which monetary damages, even if available, may not be an adequate remedy, would
occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that each party shall be entitled to an injunction, specific performance and
other equitable relief to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement
in any state or federal court sitting in New York County, New York, without proof of actual damages, and to waive any requirement
for the securing or posting of any bond in connection with such remedy, this being in addition to any other remedy to which they
are entitled at Law or in equity. Each of the Parties agrees that it will not oppose the granting of an injunction, specific performance
and other equitable relief as provided herein on the basis that (x) either party has an adequate remedy at law or (y) an
award of specific performance is not an appropriate remedy for any reason at law or equity. Any Party seeking an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement shall
not be required to provide any bond or other security in connection with any such order or injunction.
(b)
Notwithstanding the foregoing Section 10.7(a) or anything that may be expressed or implied in this Agreement to the contrary:
(i)
each Party covenants, agrees and acknowledges that, subject solely to the rights of Parent under the Debt Commitment Letter and
rights provided under the definitive agreements in respect of the Debt Financing, none of the parties to this Agreement (other
than Parent in respect of rights, claims or causes pursuant to the Debt Commitment Letter) nor any of their respective Affiliates
shall have any rights, claims or causes of action against any of the Debt Financing Sources or any of their respective former,
current, or future general or limited partners, equityholders, managers, members, directors, officers, Affiliates, employees,
attorneys, representatives or agents in connection with or arising out of the Debt Financing, this Agreement or the transactions
contemplated hereunder and thereunder, whether in law or equity, in contract, in tort or otherwise; and
(ii)
the Company shall not be entitled to specific performance under this Agreement if this Agreement is terminated pursuant to Section
9.2(a) following the occurrence of a Financing Failure and either (i) the Reverse Termination Fee is paid to the Company pursuant
to Section 9.5(d) or (ii) the Reverse Termination Fee is not required to be paid due to the occurrence of a Company Causation
Exception pursuant to Section 9.5(d).
Section
10.8 Governing Law; Consent to Jurisdiction; Venue.
(a)
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF FLORIDA, WITHOUT REGARD TO THE
CONFLICTS OF LAWS PRINCIPLES THEREOF THAT WOULD CAUSE THE LAWS OF ANOTHER JURISDICTION TO APPLY.
(b)
Each of the Parties irrevocably (i) submits to the exclusive jurisdiction of the Federal or State courts of the State of New York
for the purpose of any action arising out of or relating to this Agreement or the Confidentiality Agreement, and each of the Parties
irrevocably agrees that all claims in respect to such action may be heard and determined exclusively in any New York state or
federal court sitting in New York County, New York; (ii) agrees that it will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court and (iii) agrees that it will not bring any action
relating to this Agreement or any of the transactions contemplated by this Agreement in any court other than the courts of the
State of New York sitting in New York County, New York, as described above. Each of the Parties agrees that a final judgment in
any action shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided
by Law. Notwithstanding anything to the contrary contained in this Agreement, each of the parties hereto agrees that, except as
specifically set forth in the Debt Commitment Letter, all claims or causes of action (whether at law, in equity, in contract,
in tort or otherwise) against any of the Debt Financing Sources or any of their respective representatives, Affiliates or any
of their respective managers, directors, officers, employees, partners, members, equityholders, attorneys, advisors, representatives
or agents in any way relating to the Debt Financing or the performance thereof or the financings contemplated thereby, shall be
exclusively governed by, and construed in accordance with, the internal laws of the State of New York, without giving effect to
principles or rules or conflict of laws to the extent such principles or rules would require or permit the application of laws
of another jurisdiction.
(c)
Each of the Parties irrevocably consents to the service of any summons and complaint and any other process in any other action
relating to the Merger and the transactions contemplated hereby, on behalf of itself or its property, through the notice procedures
set forth in Section 10.2. Each of the Company, Parent and Merger Sub hereby agrees that service of any process, summons,
notice or document by U.S. registered mail to the respective addresses set forth in Section 10.2 shall be effective service
of process for any suit or proceeding in connection with this Agreement or the transactions contemplated hereby. Each Party hereby
irrevocably waives, and agrees not to assert, by way of motion, as a defense, counterclaim or otherwise, in any action or proceeding
with respect to this Agreement, any claim that it is not personally subject to the jurisdiction of the above-named courts for
any reason other than the failure to serve process in accordance with this Section 10.8, that it or its property is exempt
or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice,
attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise), and to the fullest
extent permitted by applicable Law, that the suit, action or proceeding in any such court is brought in an inconvenient forum,
that the venue of such suit, action or proceeding is improper, or that this Agreement, or the subject matter hereof or thereof,
may not be enforced in or by such courts and further irrevocably waives, to the fullest extent permitted by applicable Law, the
benefit of any defense that would hinder, fetter or delay the levy, execution or collection of any amount to which the Party is
entitled pursuant to the final judgment of any court having jurisdiction. Each Party expressly acknowledges that the foregoing
waiver is intended to be irrevocable under the Laws of the State of New York and of the United States of America; provided
that each such party’s consent to jurisdiction and service contained in this Section 10.8 is solely for the purpose
referred to in this Section 10.8 and shall not be deemed to be a general submission to said courts or in the State of New
York other than for such purpose.
(d)
Notwithstanding anything in this Section 10.8 to the contrary, each of the Parties agrees that (i) it will not bring or
support (and it will not support any of its Affiliates to bring or support) any suit (whether at law, in equity, in contract,
in tort or otherwise) against or involving any Debt Financing Source, any of their respective representatives and Affiliates or
any of the respective managers, officers, directors, employees, partners, members, equityholders, attorneys, advisors, agents
and representatives of the foregoing, and their respective successors and permitted assigns in any way relating to this Agreement
or any of the transactions contemplated by this Agreement (including any related Financing), including any dispute arising out
of or relating in any way to the Debt Commitment Letter, the Debt Financing or the performance thereof, in any forum other than
any New York State court or federal court sitting in the County of New York and the Borough of Manhattan (and appellate courts
thereof).
Section
10.9 Waiver of Trial by Jury. EACH OF PARENT, MERGER SUB AND THE COMPANY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY THAT
MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY
AND UNCONDITIONALLY WAIVES ANY AND ALL RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION (WHETHER BASED
ON CONTRACT, TORT OR OTHERWISE) DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
BY THIS AGREEMENT (INCLUDING IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THE DEBT FINANCING
OR THE PERFORMANCE THEREOF OR THE FINANCING CONTEMPLATED THEREBY). EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE,
AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS
WAIVER, (C) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT
BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.9.
Section
10.10 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to constitute
an original and all of which shall together constitute one and the same instrument. This Agreement shall become binding when any
number of counterparts, individually or taken together, shall bear the signatures of both Parties. This Agreement may be executed
and delivered by facsimile or any other electronic means, including “.pdf” or “.tiff” files, and any facsimile
or electronic signature shall constitute an original for all purposes.
Section
10.11 Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of
any provision shall not affect the validity or enforceability of the other provisions hereof. If any provision of this Agreement,
or the application thereof to any Person or any circumstance, is invalid or unenforceable, (a) a suitable and equitable provision
shall be substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid
or unenforceable provision and (b) the remainder of this Agreement and the application of such provision to other Persons or circumstances
shall not be affected by such invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity
or enforceability of such provision, or the application thereof, in any other jurisdiction.
Section
10.12 Amendments; Waiver. Any provision of this Agreement may be amended if, and only if, such amendment is in writing
and signed by and on behalf of each Party. Any provision of this Agreement may be waived if such waiver is in writing and signed
by and on behalf of the Party against whom such waiver is to be enforced; provided that Section 9.5(f), Section
10.4, Section 10.7, Section 10.8, Section 10.9 and this proviso (and the defined terms used therein to
the extent applicable thereto) may not be amended in a manner adverse to the interests of any Debt Financing Source (or any of
their respective representatives and Affiliates or any of their respective managers, officers, directors, employees, partners,
members, equityholders, attorneys, advisors or agents) without the written consent of such Debt Financing Source. No waiver of
any breach of this Agreement will be implied from any forbearance or failure of a Party to take action thereon.
[Signature
Page Follows]
In
witness whereof, the Parties have executed this
Agreement as of the date first written above.
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LADENBURG THALMANN FINANCIAL SERVICES INC.
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By:
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/s/
Richard Lampen
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Name:
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Richard
Lampen
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Title:
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Chairman,
President and CEO
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ADVISOR GROUP HOLDINGS, INC.
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By:
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Name:
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Title:
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HARVEST MERGER SUB, INC.
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By:
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Name:
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Title:
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[Signature
Page to the Agreement and Plan of Merger]
In
witness whereof, the Parties have executed this
Agreement as of the date first written above.
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LADENBURG THALMANN FINANCIAL SERVICES INC.
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By:
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Name:
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Title:
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ADVISOR GROUP HOLDINGS, INC.
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By:
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/s/
Jamie Price
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Name:
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Jamie
Price
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Title:
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CEO
Advisor Group
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HARVEST MERGER SUB, INC.
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By:
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/s/
Jamie Price
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Name:
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Jamie
Price
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Title:
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CEO
Advisor Group
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[Signature
Page to the Agreement and Plan of Merger]
Schedule
A
Definitions
and Terms
“Acquisition
Proposal” means (i) any proposal or offer with respect to a merger, joint venture, partnership, consolidation,
dissolution, liquidation, tender offer, recapitalization, reorganization, share exchange, business combination or similar transaction
involving the Company or any of its Significant Subsidiaries and (ii) any acquisition by any Person resulting in, or proposal
or offer, in each case, which if consummated would result in, any Person becoming the beneficial owner of, directly or indirectly,
in one or a series of related transactions, 15% or more of the total voting power of any class of equity securities of the Company
(or of the surviving entity in a merger involving the Company, as applicable) or 15% or more of the consolidated net revenues,
net income or total assets (it being understood that total assets include equity securities of its Subsidiaries and shall
be determined by the Company Board, acting reasonably, on both a book-value and fair-market-value basis) of the Company, in each
case other than the transactions contemplated by this Agreement.
“Action”
means any civil, criminal or administrative action, suit, demand, claim, charge, audit, case, litigation, arbitration, mediation,
opposition, objection, cancellation, inquiry, hearing, dispute, investigation or other proceeding.
“Advisory
Contracts” means any investment advisory, sub-advisory, investment management, trust or similar Contract to which the
Company or any Subsidiary thereof is a party or is bound.
“Advisory
Entity” means each Subsidiary of the Company that is registered, licensed or qualified or required to be registered,
licensed or qualified as an investment adviser with the SEC or other applicable Government Authority, including Ladenburg Thalmann
Asset Management, Inc., Investacorp Advisory Services, Inc., KMS Financial Services, Inc., Triad Advisors, LLC, Triad Hybrid Solutions,
LLC, Securities America Advisors, Inc., Arbor Point Advisors, LLC, and SSN Advisory, Inc.
“Affiliate”
means, with respect to any specified Person, any other Person directly or indirectly Controlling, Controlled by or under common
Control with such specified Person.
“Agreement”
has the meaning set forth in the Preamble.
“Alternative
Financing” has the meaning set forth in Section 7.15(c).
“Applicable
Date” has the meaning set forth in Section 5.3.
“Articles
of Merger” has the meaning set forth in Section 2.3.
“Bankruptcy
and Equity Exception” has the meaning set forth in Section 5.1(c)(i).
“Benefit
Plan” means any (i) “employee benefit plan” as defined in Section 3(3) of ERISA; (ii) compensation,
employment, consulting, severance, termination protection, change in control, transaction bonus, retention or similar plan, agreement,
arrangement, program or policy; or (iii) other plan, agreement, arrangement, program or policy providing for compensation, bonuses,
profit-sharing, equity or equity-based compensation or other forms of incentive or deferred compensation, vacation benefits, insurance
(including any self-insured arrangement), medical, dental, vision, prescription or fringe benefits, life insurance, relocation
or expatriate benefits, perquisites, disability or sick leave benefits, employee assistance program, workers’ compensation,
supplemental unemployment benefits or post-employment or retirement benefits (including compensation, pension, health, medical
or insurance benefits), in each case whether or not written: (x) that is sponsored, maintained, administered, contributed to or
entered into by any of the Company, its Subsidiaries or any of their respective ERISA Affiliates for the current or future benefit
of any current or former employee of the Company and its Subsidiaries; or (y) for which any of the Company or its Subsidiaries
has any direct or indirect liability.
“Book-Entry
Share” has the meaning set forth in Section 4.1(a).
“Broker-Dealer”
means a “broker” and/or “dealer” (as defined in Sections 3(a)(4) and 3(a)(5) of the Exchange Act).
“Broker-Dealer
Subsidiaries” means each Subsidiary of the Company that is registered, licensed or qualified or required to be registered,
licensed or qualified as a broker or dealer (as defined in Sections 3(a)(4) and 3(a)(5), respectively, of the Exchange Act) with
the SEC or other applicable Government Authority, including Ladenburg Thalmann & Co. Inc., Investacorp, Inc., KMS Financial
Services, Inc., Triad Advisors, LLC, Securities America, Inc., and Securities Service Network, LLC.
“business
day” means any day ending at 11:59 p.m., (Eastern Time), other than a Saturday or Sunday or a day
on which banks located in New York, New York are authorized or required by Law to be closed.
“Certificate”
has the meaning set forth in Section 4.1(a).
“Change
of Recommendation” has the meaning set forth in Section 7.3(b)(i).
“Client”
means any Person to whom the Company or any Subsidiary thereof provides Investment Management Services.
“Closing”
has the meaning set forth in Section 2.2.
“Closing
Date” has the meaning set forth in Section 2.2.
“Code”
means the Internal Revenue Code of 1986.
“Commitment
Letters” has the meaning set forth in Section 6.3.
“Company”
has the meaning set forth in the Preamble.
“Company
401(k) Plans” has the meaning set forth in Section 7.9(c).
“Company
Board” has the meaning set forth in the Recitals.
“Company
Board Recommendation” has the meaning set forth in Section 5.1(c)(ii).
“Company
Causation Exception” has the meaning set forth in Section 9.5(d).
“Company
Disclosure Letter” has the meaning set forth in Article V.
“Company
Equity Awards” has the meaning set forth in Section 4.5(d).
“Company
Equity Payments” has the meaning set forth in Section 4.5(d).
“Company
Fundamental Representations” means Section 5.1(a) (Organization), Section 5.1(b) (Corporate
Authorization), Section 5.1(c) (Binding Effect; Approval); Section 5.2(a) (Capital Structure);
and Section 5.20 (Finder’s Fees).
“Company
Indemnified Parties” has the meaning set forth in Section 7.11(a).
“Company
Intellectual Property” has the meaning set forth in Section 5.13(c).
“Company
Material Adverse Effect” means any event, change, development, circumstance, fact or effect that, individually or in
the aggregate, (i) has had or is reasonably expected to have a material and adverse effect on the business, financial condition
or the results of operations of the Company or its Subsidiaries, taken as a whole, or (ii) that would reasonably be expected to
prevent or materially impair the ability of the Company or any of its Subsidiaries to perform their respective obligations under
this Agreement or to consummate the transactions contemplated hereby in a timely manner; provided that, in the case of
clause (i) only, none of the following (or the results thereof), either alone or in combination with any other events, changes,
developments, circumstances, facts or effects, shall constitute or contribute to a Company Material Adverse Effect: (a) any change
in applicable accounting principles or any adoption, proposal, implementation or change in Law (including any Law in respect of
Taxes or any fiduciary or similar duties of investment advisors, broker dealers or registered representatives), or any interpretation
thereof by any Government Authority, or change in GAAP or authoritative interpretations thereof; (b) any change in global, national
or regional political conditions (including protests, strikes, riots, acts of terrorism or war) or in general global, national
or regional economic, business, regulatory, political or market conditions or in national or global financial or capital markets
(including any changes in debt or equity trading market volume, volatility or performance or interest rates); (c) any change generally
affecting the industries or market sectors in which one or more of the Company and its Subsidiaries operate; (d) any change resulting
from or arising out of hurricanes, earthquakes, floods or other natural disasters; (e) the negotiation, execution, announcement
or performance of this Agreement or consummation of the transactions contemplated hereby (including any loss of, or adverse change
in, the relationship of the Company with its customers, employees, registered representatives, investment adviser representatives
or marketing sponsors resulting from the pendency or the announcement of the transactions contemplated by this Agreement or the
identity of, or any facts or circumstances related to, Parent) or any litigation relating to this Agreement or the transactions
contemplated hereby; (f) the failure of one or more of the Company and its Subsidiaries to meet any internal or public projections,
forecasts or estimates of performance, revenues or earnings (it being understood that the underlying factors or occurrences
giving rise or contributing to such failure shall, unless otherwise excluded, be taken into account in determining whether there
has been a Company Material Adverse Effect); (g) any actions (or the effects of any action) taken (or omitted to be taken) upon
the written request or instruction of, or with the written consent of, Parent, consistent with the terms hereof; or (h) any action
(or the effects of any action) taken (or omitted to be taken) by the Company or any of its Subsidiaries as required pursuant to
this Agreement, except in the case of clauses (a), (b) or (c), to the extent the Company and the Company Subsidiaries, taken as
a whole, are disproportionately affected thereby as compared with other similarly situated participants in the applicable industry
or industries in which the Company and the Company Subsidiaries operate.
“Company
Option” has the meaning set forth in Section 4.5(a).
“Company
Registered Intellectual Property” has the meaning set forth in Section 5.13.
“Company
Reports” has the meaning set forth in Section 5.3(a).
“Company
Restricted Share” has the meaning set forth in Section 4.5(b).
“Company
Shareholder Approval” has the meaning set forth in Section 5.1(b).
“Company
Shareholders” has the meaning set forth in Section 7.2(a).
“Company
Shareholders Meeting” has the meaning set forth in Section 7.2(a).
“Company
Termination Fee” has the meaning set forth in Section 9.5(c)(i).
“Compliant”
means, with respect to the Required Information, that (a) such Required Information does not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make such Required Information, in light of the circumstances
under which the statements contained in the Required Information are made, not misleading, (b) such Required Information is compliant
in all material respects with all applicable requirements of Regulation S-X and Regulation S-K under U.S. Securities Laws and
(c) the independent registered public accountants of the Company have consented to or otherwise authorized the use of their audit
opinions related to any audited financial statements included in such Required Information.
“Confidentiality
Agreement” means the letter agreement, dated as of September 13, 2019, by and between the Company and Parent.
“Constituent
Documents” means, with respect to any corporation, its charter and by-laws; with respect to any partnership, its certificate
of partnership and partnership agreement; with respect to any limited liability company, its certificate of formation and limited
liability company or operating agreement; with respect to each other Person, its comparable constitutional instruments or documents
(and, in each case, such similar instruments or documents as applicable under a relevant jurisdiction).
“Continuing
Employees” means the employees of the Company and its Subsidiaries who are employed as of immediately prior to the Effective
Time.
“Contract”
means any written contract, agreement, undertaking, indenture or lease that is binding on any Person or its property, but shall
exclude any Benefit Plan.
“Control”
means, with respect to any specified Person, the power to direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise. The terms “Controlling” and “Controlled”
have meanings correlative to the foregoing.
“Debt
Commitment Letter” has the meaning set forth in Section 6.3.
“Debt
Financing” has the meaning set forth in Section 6.3.
“Debt
Financing Sources” has the meaning set forth in Section 6.3.
“Dissenting
Shares” has the meaning set forth in Section 4.4.
“DTC”
has the meaning set forth in Section 4.2(b)(ii).
“Effective
Time” has the meaning set forth in Section 2.3.
“Encumbrance”
means any mortgage, deed of trust, easement, pledge, hypothecation, assignment, security interest, option, equity interest, preference,
participation interest, conditional sales contract, lien or encumbrance; provided, however, that no Encumbrance
shall be deemed to be created by this Agreement.
“Environmental
Laws” means any Laws enacted or in effect on or prior to the Closing Date relating to the protection of the environment
or exposure to, disposal, release, discharge, reclamation or cleanup of Hazardous Substances.
“Environmental
Permits” means all permits, licenses, certificates, consents, approvals and other similar authorizations of Government
Authorities required by Environmental Laws and affecting, or relating to, the business of the Company or any Subsidiary as currently
conducted.
“Equity
Financing” has the meaning set forth in Section 6.3.
“Equity
Interest” means, with respect to any Person, any share of capital stock of, or any general, limited or other partnership
interest, membership interest or similar ownership interest in, such Person, or any securities or obligations convertible or exchangeable
into or exercisable for, or giving any Person a right to subscribe for or acquire, any such share or interest.
“Equity
Letter” has the meaning set forth in Section 6.3.
“ERISA”
means the Employee Retirement Income Security Act of 1974.
“ERISA
Affiliate” means, with respect to an entity, any other entity that, together with such first entity, would be treated
as a single employer under Section 414 of the Code.
“ESPP”
has the meaning set forth in Section 4.5(c).
“ESPP
Termination Date” has the meaning set forth in Section 4.5(c).
“Exchange
Act” means the Securities Exchange Act of 1934.
“Exchange
Fund” has the meaning set forth in Section 4.2(a)(i).
“Excluded
Share” and “Excluded Shares” have the meanings set forth in Section 4.1(a).
“Expenses”
has the meaning set forth in Section 10.5.
“FBCA”
has the meaning set forth in the Recitals.
“FCPA”
means the U.S. Foreign Corrupt Practices Act of 1977.
“Final
Offering” has the meaning set forth in Section 4.5(c).
“Financial
Advisor” means (i) an investment adviser representative of the Company or any of its Subsidiaries that is registered
as an investment adviser under the Investment Advisers Act; and/or (ii) a registered representative of the Company or any of its
Subsidiaries that is registered as a Broker-Dealer.
“Financing”
has the meaning set forth in Section 6.3.
“Financing
Covenants” means the covenants and obligations of Parent in Section 7.15 and all other covenants and obligations
of Parent in this Agreement that relate specifically to any Debt Financing.
“Financing
Failure” means, the occurrence of each of the following: (i) Parent and its Affiliates have complied in all material
respects with the Financing Covenants (including the requirements therein to seek Alternative Financing), the Debt Commitment
Letter and any definitive financing documents related to the Debt Financing, including by providing any all information about
the Parent and its Affiliates required by any of the foregoing and (ii) there occurs and remains a refusal on the part of the
Debt Financing Sources representing in the aggregate more than 10% of the aggregate amount of the Debt Financing to fund their
respective portions of the Debt Financing pursuant to the Debt Commitment Letter.
“FINRA”
means the Financial Industry Regulatory Authority (including any predecessor entity, including the National Association of Securities
Dealers, Inc.).
“FINRA
Approval” means FINRA approval of each Broker-Dealer Subsidiary’s Continuing Membership Application pursuant to
FINRA (NASD) Rule 1017 with respect to the transactions contemplated hereby.
“Form
ADV” has the meaning set forth in Section 5.16(c).
“Form
BD” has the meaning set forth in Section 5.17(b).
“GAAP”
means U.S. generally accepted accounting principles.
“Government
Authority” means any foreign or domestic, federal, state, county, city or local legislative, administrative or regulatory
authority, agency court, or other governmental or quasi-governmental entity with competent jurisdiction, including any supranational
body and any Self-Regulatory Organization.
“Government
Order” has the meaning set forth in Section 8.1(c).
“Hazardous
Substance” means any pollutant, contaminant, waste, chemical material, substance, compound or constituent in any form
subject to regulation by Environmental Laws to the extent such substances have been released into the environment in quantities,
at concentrations, or at locations for which remedial action is required under any Environmental Law. Hazardous Substances shall
not include naturally occurring substances that are present in the environment as a result of natural processes.
“HSR
Act” means the Hart-Scott-Rodino Antitrust Improvement Act of 1976.
“Indebtedness”
means, as to any Person, (a) all obligations of such Person for borrowed money (including, reimbursement and all other obligations
with respect to surety bonds, letters of credit and bankers’ acceptances or similar credit transactions, whether or not
matured), (b) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts
payable, accrued commercial or trade liabilities arising in the ordinary course of business (including repurchase agreements,
fails to receive and pending trades, open derivative contracts and other payables to clearing organizations, brokers, dealers
and customers), accrued compensation and other accrued liabilities (including Taxes, legal reserves, asset retirement obligations
and property provisions), (c) all capitalized lease obligations of such Person, (d) all guarantees and arrangements having the
economic effect of a guarantee of such Person of any Indebtedness of any other Person, (e) all obligations of such Person pursuant
to securitization or factoring programs or arrangements, (f) all obligations or undertakings of such Person to maintain or cause
to be maintained the financial position or covenants of others or to purchase the obligations or property of others, (g) net cash
payment obligations of such Person under swaps, options, derivatives and other hedging agreements or arrangements that will be
payable upon termination thereof (assuming they were terminated on the date of determination) or upon a change of control event,
(h) all outstanding reimbursement obligations of such Person or any Subsidiary thereof in respect of any amounts actually drawn
under any letter of credit and bankers’ acceptance or similar credit transaction, (i) all obligations under conditional
sale or other title retention agreements relating to property or assets purchased by the Company or its Subsidiaries, and (j)
all obligations secured by any Encumbrance on the assets of the Company or any of its Subsidiaries; provided that Indebtedness
shall not include Trading Indebtedness.
“Insurance
Policies” means all material fire and casualty, earthquake, flood, general liability, business interruption, product
liability, cyber-security, and other insurance policies maintained by the Company or any of its Subsidiaries.
“Insurance
Services Subsidiary” has the meaning set forth in Section 5.10(b).
“Intellectual
Property” means, in any and all jurisdictions throughout the world, any (i) trademarks, service marks, Internet
domain names, trade dress and trade names, registrations and applications for registration of the foregoing, and the goodwill
associated therewith and symbolized thereby, (ii) patents and patent applications, (iii) trade secrets and (iv) copyrights
(including copyrights in computer software and Internet websites) and registrations and applications for registration of the foregoing.
“Investment
Advisers Act” means the Investment Advisers Act of 1940.
“Investment
Company Act” means the Investment Company Act of 1940.
“Investment
Management Services” means services that involve (i) the management of an investment account or fund (or portions thereof
or a group of investment accounts or funds), (ii) the giving of advice with respect to the investment and/or reinvestment
of assets or funds (or any group of assets or funds) or (iii) otherwise acting as an “investment adviser” within the
meaning of the Investment Advisers Act, and performing activities related or incidental thereto.
“Investor”
has the meaning set forth in the Equity Letter.
“IRS”
means the U.S. Internal Revenue Service.
“IT
Assets” means computers, other hardware, networks, computer software, firmware, middleware, servers, workstations, routers,
hubs, switches, data, data communication lines and other information technology equipment, and associated documentation.
“Knowledge”
means, (i) with respect to the Company, the actual knowledge of any of the officers listed in Section 1.1 of the Company
Disclosure Letter after inquiry reasonable under the circumstances and (ii) with respect to Parent, the actual knowledge
of any of the executive officers of Parent after inquiry reasonable under the circumstances.
“Law”
means any law, statute, ordinance, rule, regulation, order, judgment, injunction, decree, ruling or other requirement or rule
of law enacted, issued, promulgated, enforced or entered by a Government Authority.
“Leases”
has the meaning set forth in Section 5.12(a).
“Liabilities”
means any debt, liability or obligation, whether asserted or unasserted, determined or determinable, absolute or contingent, accrued
or unaccrued and whether due or to become due.
“Losses”
has the meaning set forth in Section 7.11(a).
“Marketing
Period” means the first period of 10 consecutive business days after January 13, 2020 through which (a) the conditions
set forth in Article VIII (other than those conditions that by their nature can only be satisfied at the Closing or on
the Closing Date) have been satisfied, (b) Parent has received the Required Information, and (c) the Required Information is and
remains Compliant; it being understood and agreed that when the Company in good faith reasonably believes that it has delivered
the Required Information in accordance with the terms of this Agreement, then the Company may deliver to Parent a written notice
to that effect (stating when it believes it completed such delivery), in which case the Marketing Period shall be deemed to have
commenced on the date such notice is delivered to Parent (which date shall not be earlier than the date of such notice), unless
Parent in good faith reasonably believes that the Company has not completed delivery of the Required Information and, within two
business days after receipt of such notice from the Company, Parent delivers a written notice to the Company to that effect stating
with specificity which Required Information the Company has not delivered; provided that the Marketing Period shall end
on any earlier date that is the date on which the Debt Financing otherwise is obtained by Parent or a Successful Syndication (as
defined in the Debt Commitment Letter, as in effect on the date hereof, by reference) is achieved. Notwithstanding the foregoing,
the Marketing Period shall not commence and shall be deemed not to have commenced if, prior to the completion of the Marketing
Period (i) the applicable auditors shall have withdrawn any audit opinion with respect to audited financial statements contained
in the Required Information, in which case the Marketing Period shall not be deemed to commence unless and until a new unqualified
audit opinion is issued with respect thereto by the applicable auditors or another nationally recognized independent public accounting
firm or other independent public accounting firm reasonably acceptable to Parent, (ii) financial statements included in the Required
Information that are available to Parent on the first day of the Marketing Period would be deemed stale or otherwise be unusable
under customary practices for offerings and private placements of high-yield debt securities under Rule 144A promulgated under
the Securities Act or are insufficient to permit the Company’s independent public accountants to issue a customary “comfort”
letter to the Debt Financing Sources, including as to negative assurances and change period, in order to consummate any offering
of debt securities, in each case, at any time during the Marketing Period, or (iii) the Company or any of its Affiliates determines
in writing or issues a statement indicating its intent to, or that it is required to, restate any historical financial statements
of the Company included in the Required Information or that any such restatement is under consideration or may be a possibility,
in which case the Marketing Period shall not be deemed to commence unless and until such restatement has been completed and the
relevant financial statements have been amended or the Company has announced that it has concluded that no restatement shall be
required in accordance with GAAP. For the avoidance of doubt, once the Marketing Period has been completed, the Marketing Period
shall not thereafter restart or be deemed not to have previously occurred under any circumstances.
“Material
Contract” has the meaning set forth in Section 5.14(a).
“Maximum
Amount” has the meaning set forth in Section 7.11(b).
“Merger”
has the meaning set forth in the Recitals.
“Merger
Sub” has the meaning set forth in the Preamble.
“MSRB”
means the Municipal Securities Rulemaking Board.
“Notifying
Party” has the meaning set forth in Section 7.5.
“NYSE”
has the meaning set forth in Section 5.3(b).
“Other
Anti-Bribery Laws” means, other than the FCPA, all applicable anti-bribery, anti-corruption, anti-money-laundering and
similar Laws in jurisdictions in which the Company or any of its Subsidiaries do business or have done business since the Applicable
Date.
“Outside
Date” has the meaning set forth in Section 9.2(a).
“Parent”
has the meaning set forth in the Preamble.
“Parent
401(k) Plan” has the meaning set forth in Section 7.9(c)(i).
“Parent
Expense Reimbursement” means an amount equal to Parent’s documented out of pocket costs and expenses paid or payable
to third parties (including legal, accounting, tax, regulatory, operations, advisory, management, human resources (including pension),
consulting, insurance, audit, search, asset appraisal, title, surveys, financing, filing, compensation, travel and other similar
fees, costs and expenses) and incurred or accrued by or on behalf of Parent or its Affiliates in connection with this Agreement
and the transactions contemplated hereby, including costs and expenses incurred in connection with Parent’s or its Affiliates’
due diligence investigation of the Company and its Subsidiaries and the preparation, negotiation, execution and delivery of definitive
agreements in connection with the transactions contemplated by this Agreement, any costs of public relations or proxy solicitation firms
incurred by Parent or its Affiliates incurred in connection with the transactions contemplated by this Agreement, and any financing
costs of Parent or its Affiliate incurred in connection with the transactions contemplated by this Agreement, (including any accrued
interest paid by Parent in connection therewith); provided, that aggregate amount of the Parent Expense Reimbursement shall in
no event exceed $10,000,000.
“Parent
Fundamental Representations” means Section 6.1(a) (Organization), Section 6.1(b) (Corporate
Authorization), Section 6.1(c) (Binding Effect; Approval); and Section 6.7 (Finder’s Fees).
“Parent
Material Adverse Effect” means any event, change, development, circumstance, fact or effect that prevents or materially
impairs the ability of Parent or any of its Subsidiaries to perform their respective obligations under this Agreement or to consummate
the transactions contemplated hereby in a timely manner.
“Parent
Related Parties” has the meaning set forth in Section 9.5(f).
“Party”
and “Parties” have the meaning set forth in the Preamble.
“Paying
Agent” has the meaning set forth in Section 4.2(a)(i).
“Paying
Agent Agreement” has the meaning set forth in Section 4.2(a)(ii).
“Per
Share Merger Consideration” has the meaning set forth in Section 4.1(a).
“Permits”
means licenses, permits, certificates, registrations and other authorizations and approvals that are issued by or obtained from
any Government Authority.
“Permitted
Encumbrances” means (i) Encumbrances for Taxes, assessments or governmental charges or levies not yet due and payable,
or are being contested in good faith by appropriate proceedings, (ii) Encumbrances resulting from a precautionary filing
by a lessor with respect to a lease, (iii) Encumbrances imposed by Law, such as carriers’, warehousemen’s and
mechanics’ liens and other similar liens arising in the ordinary course which secure payment of obligations not more than
60 days past due or which are being contested in good faith by appropriate proceedings, (iv) purchase money security interests
for the purchase or leasing of office equipment, computers, vehicles and other items of tangible personal property, (v) licenses
or similar rights under Intellectual Property granted in the ordinary course, and (vi) any other Encumbrances which do not impede
the ownership, operation or value of the Company and its Subsidiaries, taken as a whole, in any material respect.
“Person”
means any individual, bank, corporation, general or limited partnership, association, limited liability company, business trust,
unincorporated organization or similar organization, whether domestic or foreign, or any Government Authority.
“Pre-Closing
Period” means each taxable period that ends as of or before the Closing and, in the case of a taxable period beginning
on or before and ending after the Closing, the portion of such period through the end of the Closing Date.
“Preferred
Share” and “Preferred Shares” have the meanings set forth in Section 4.1(c).
“Pro
Rata Percentage” has the meaning set forth in the Equity Letter.
“Proxy
Statement” has the meaning set forth in Section 7.2(a).
“PTO
Plans” has the meaning set forth in Section 7.9(c)(ii).
“Public
Fund” means any pooled investment vehicle (including each portfolio or series thereof, if any) for which the Company
or any Subsidiary thereof acts as investment adviser, investment sub-adviser, sponsor or manager, and which is registered as an
investment company under the Investment Company Act.
“Public
Fund Board” means the board of directors or trustees (or Persons performing similar functions) of a Public Fund.
“Registered
Debt Securities” means the (a) the 6.5% Senior Notes due 2027, (b) the 7.0% Senior Notes due 2028, (c) the 7.25% Senior
Notes due 2028, and (d) the 7.75% Senior Notes due 2029, in each case, issued by the Company.
“Registered
Intellectual Property” means Intellectual Property that is issued by, registered or filed with, renewed by or the subject
of a pending application before any Government Authority or Internet domain name registrar.
“Representatives”
has the meaning set forth in Section 7.3(a)(i).
“Required
Amount” shall have the meaning set forth in Section 6.3.
“Required
Governmental Approvals” means (i) the approvals, filings or notices as set forth in Section 5.4 of the Company
Disclosure Letter; (ii) FINRA Approval and (iii) the expiration or termination of the waiting period applicable to the consummation
of the Merger under the HSR Act.
“Required
Information” means (a) the audited consolidated balance sheets and consolidated statements of income and cash flows
of the Company and of and for the fiscal years ended December 31, 2016, December 31, 2017, and December 31, 2018, and if the Closing
Date occurs after February 11, 2020 and the Marketing Period has not been completed prior to such date, the audited consolidated
balance sheet and consolidated statements of income and cash flows of the Company for the fiscal year ended, December 31, 2019,
and (b) unaudited consolidated balance sheets and statements of income, stockholders’ equity and cash flows of the Company
as of and for each of the fiscal quarters that is not a fiscal year-end after the date of the most recent financial statements
delivered pursuant to the foregoing clause (a) and ended at least 45 days before the Closing Date. which unaudited quarterly financial
statements have been reviewed by the Company’s independent auditors as provided in the procedures specified by AICPA AU-C
Section 930.
“Reverse
Termination Fee” has the meaning set forth in Section 9.5(d).
“Sanctioned
Person” means any Person (i) designated on any Sanctions-related list of blocked or restricted persons, including without
limitation the list of Specially Designated Nationals and Blocked Persons, (ii) resident in or organized under the Laws of a country
or territory that is the subject of country- or territory-wide Sanctions (including without limitation Cuba, Iran, North Korea,
Syria, or the Crimea region) or government thereof, or (iii) owned or controlled by (including by virtue of such Person being
a director or owning voting shares or interests), or acting, directly or indirectly, for or on behalf of, any of the foregoing.
“Sanctions”
means economic sanctions and trade embargoes, including without limitation the sanctions laws, executive orders, and implementing
regulations promulgated or enforced by the Office of Foreign Assets Control of the U.S. Department of the Treasury, the UN Security
Council, the EU, or Her Majesty’s Treasury of the United Kingdom.
“Sarbanes-Oxley
Act” means the Sarbanes-Oxley Act of 2002.
“SEC”
means the U.S. Securities and Exchange Commission.
“Securities
Act” means the Securities Act of 1933.
“Self-Regulatory
Organization” means (i) any “self regulatory organization” as defined in Section 3(a)(26) of the Exchange
Act and (ii) any other United States or foreign securities exchange, futures exchange, commodities exchange or contract market.
“Share”
and “Shares” have the meanings set forth in Section 4.1(a).
“Significant
Subsidiary” is as defined in Rule 1.02(w) of Regulation S-X promulgated pursuant to the Exchange Act.
“Solvent”
means, with respect to any Person, that, as of any date of determination, (a) the amount of the “fair saleable value”
of the assets of such Person will, as of such date, exceed (i) the value of all “liabilities of such person, including
contingent and other liabilities,” as of such date, as such quoted terms are generally determined in accordance with applicable
Laws governing determinations of the insolvency of debtors, and (ii) the amount that will be required to pay the probable Liabilities
of such Person as such debts become absolute and mature, (b) such Person will not have, as of such date, an unreasonably
small amount of capital for the operation of the businesses in which it is engaged or proposed to be engaged following such date,
and (c) such Person will be able to pay its Liabilities as they mature.
“Sponsors”
has the meaning set forth in the Equity Letter.
“Stock
Plans” has the meaning set forth in Section 5.2.
“Subsidiary”
means, with respect to any Person, any other Person of which at least a majority of the securities or ownership interests having
by their terms ordinary voting power to elect a majority of the board of directors or other persons performing similar functions
is directly or indirectly owned or controlled by such Person and/or by one or more of its Subsidiaries.
“Superior
Proposal” means any bona fide written Acquisition Proposal (with the percentages set forth in the definition
of such term changed from 15% to 50%) that would result in a Person or group, other than Parent or any of its Subsidiaries or
controlled Affiliates, becoming the beneficial owner of, directly or indirectly, more than 50% of the total voting power of the
equity securities of the Company (or of the surviving entity in a merger involving the Company, as applicable) or more than 50%
of the consolidated net revenues, net income or total assets (it being understood that total assets include equity securities
of its Subsidiaries and shall be determined by the Company Board, acting reasonably, on both a book-value and fair-market-value
basis) of the Company that the Company Board has determined in good faith, after consultation with outside legal counsel and its
financial advisor that (a) if consummated, would result in a transaction more favorable to the Company’s shareholders from
a financial point of view than the Merger, and (b) is reasonably likely to be consummated on the terms proposed, taking into
account any legal, financial, regulatory and shareholder approval requirements, the sources, availability and terms of any financing,
financing market conditions, the likelihood of termination, the timing of closing and the identity of the Person or Persons making
the proposal and any other aspects considered, in good faith, relevant by the Company Board. Notwithstanding anything to the contrary
in this Agreement, no Acquisition Proposal will be deemed to constitute a Superior Proposal for any purpose under this Agreement
(including for purposes of Section 7.3 or Article IX of this Agreement) if the Acquisition Proposal resulted
or arose, directly or indirectly, from a breach of Section 7.3.
“Surviving
Corporation” has the meaning set forth in Section 2.3.
“Tax”
and “Taxes” means all means all income, excise, gross receipts, premium, ad valorem, sales, use, employment,
franchise, profits, gains, property, transfer, payroll, stamp taxes or other taxes (whether payable directly or by withholding)
imposed by any United States (or any of its political subdivisions) Government Authority and any material tax imposed by any other
Government Authority, together with any interest and any penalties thereon or additional amounts with respect thereto.
“Tax
Returns” means all returns and reports (including elections, declarations, disclosures, schedules, estimates and information
returns) required to be supplied to a Government Authority relating to Taxes.
“Trading
Indebtedness” means, with respect to any Person any margin facility or other margin-related indebtedness of such Person
for borrowed money or any other such indebtedness incurred exclusively to finance the securities, derivatives, commodities or
futures trading positions and related assets and liabilities of such Person and its Subsidiaries, including collateralized loan,
any obligations under any securities lending and/or borrowing facility and any day loans and overnight loans with settlement banks
and prime brokers to finance securities, derivatives, commodities or futures trading positions and margin loans, including any
unsecured guarantee by such Person or any of its Subsidiaries (excluding a Broker-Dealer Subsidiary guarantee of such indebtedness
of a non-Broker-Dealer Subsidiary (other than any of its Subsidiaries that are consolidated with it for regulatory capital purposes)).
“Transaction
Notice” has the meaning set forth in Section 7.14(b)(i).
“Transition
Period” has the meaning set forth in Section 7.9(c)(ii).
“U.S.
Securities Laws” means the Securities Act, the 1934 Exchange Act and all other state and federal securities Laws.
“Virtual
Data Room” means the virtual data room containing documents and information relating to, among other things, the Company
and its Subsidiaries, made available by the Company in electronic form to Parent and its Representatives.
“Willful
Breach” means a material breach of, or failure to perform any of the covenants or other agreements contained in, this
Agreement, that is a consequence of an act or failure to act by the breaching or non-performing party with actual knowledge, or
knowledge that a person acting reasonably under the circumstances should have, that such party’s act or failure to act would,
or would reasonably be expected to, result in or constitute a breach of or failure of performance under this Agreement.
Annex
B to the Proxy Statement
EXECUTION
VERSION
VOTING
AGREEMENT
This
VOTING AGREEMENT (this “Agreement”) dated November 11, 2019, among Advisor Group Holdings,
Inc., a Delaware corporation (“Parent”), Harvest Merger Sub, Inc., a Florida corporation and a wholly
owned subsidiary of Parent (“Merger Sub”), and the undersigned shareholder
(“Shareholder” and, together with Parent and Merger Sub, the “Parties” and each, a
“Party”) of Ladenburg Thalmann Financial Services Inc., a Florida corporation
(the “Company”).
WHEREAS,
concurrently with or following the execution of this Agreement, Parent, Merger Sub and the Company have entered, or will enter,
into an Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which Merger Sub will be merged
with and into the Company (the “Merger”);
WHEREAS,
in furtherance of the Merger, on the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub will agree
to merge with the Company in a transaction pursuant to which Parent will become the sole common shareholder of the Company in
exchange for cash with respect to all of the issued and outstanding shares of common stock, par value $0.0001 per share, of the
Company (the “Company Common Stock”), including all of the outstanding Shares Beneficially Owned by Shareholder;
and
WHEREAS,
as a condition and material inducement to expending time and resources with respect to the transactions contemplated by the Merger
Agreement, Parent and Merger Sub have required that Shareholder agrees, and Shareholder has agreed, to enter into this Agreement.
NOW,
THEREFORE, in consideration of the premises and of the representations, warranties, covenants and agreements contained herein,
and intending to be legally bound hereby, the Parties agree as follows:
1.
Definitions. Capitalized terms used but not defined in this Agreement shall have the meanings given in the Merger Agreement.
For purposes of this Agreement:
(a)
“Beneficially Own” or “Beneficial Ownership” with respect to any securities means having
“beneficial ownership” of such securities (as determined pursuant to Rule 13d-3 under the Exchange Act).
(b)
“Existing Shares” means the outstanding shares of Company Common Stock Beneficially Owned by Shareholder as
set forth on Schedule I hereto.
(c)
“Shares” means, collectively, the Existing Shares and any outstanding shares of Company Common Stock of which
Shareholder acquires Beneficial Ownership after the date hereof and prior to the termination of this Agreement, whether upon the
exercise of options, warrants or rights, the conversion or exchange of convertible or exchangeable securities, or by means of
purchase, dividend, distribution or otherwise; provided, however, that nothing in this Agreement shall require Shareholder
to exercise any option or other right to purchase shares of Company Common Stock.
2.
Provisions Concerning Company Common Stock.
(a)
Except as otherwise agreed to in writing by Parent in advance, from the period commencing with the execution and delivery of this
Agreement and continuing until the Expiration Time (as defined in Section 6 hereof), Shareholder irrevocably and unconditionally
agrees to vote (or cause to be voted) the Shares at any meeting of the holders of Company Common Stock, and at every adjournment
or postponement thereof, however called, or in connection with any written consent of the holders of Company Common Stock: (i)
in favor of (A) the Company Shareholder Approval and any actions required in furtherance thereof and hereof and (B) any proposal
to adjourn or postpone such meeting of shareholders of the Company to a later date if there are not sufficient votes to obtain
the Company Shareholder Approval; and (ii) against the following actions, agreements or transactions (other than the Merger, and
the transactions contemplated by the Merger Agreement): (A) any Acquisition Proposal, and (B) any action which is intended or
would reasonably be expected to prevent, materially delay or materially interfere with or impair the consummation of the Merger
or the other transactions contemplated by the Merger Agreement. Shareholder shall not enter into any contract or agreement with
any Person, the effect of which would be inconsistent with the provisions and agreements contained in this Section 2 or
that would otherwise violate this Agreement. Each Shareholder shall retain at all times the right to vote the Shares in such Shareholder’s
sole discretion, and without any other limitation, on any matters other than those set forth in this Section 2(a) that
are at any time or from time to time presented for consideration to the Company’s shareholders generally.
(b)
By entering into this Agreement, solely to the extent of a failure of Shareholder to act in accordance with its obligations under
Section 2(a) hereof, Shareholder hereby appoints Parent and any designee of Parent, and each of them individually, its proxies
and attorneys-in-fact, with full power of substitution and re-substitution, to vote during the term of this Agreement with respect
to the Shares in accordance with Section 2(a) hereof. Shareholder shall take such further action or execute such other instruments
as may be reasonably necessary to effectuate the intent of this proxy and power of attorney. This proxy and power of attorney
granted by Shareholder: (i) is given to secure the performance of the duties of Shareholder under this Agreement; (ii) shall be
irrevocable from the period commencing with the execution and delivery of this Agreement and continuing until the Expiration Time;
(iii) shall be deemed to be coupled with an interest sufficient in law to support an irrevocable proxy; (iv) shall revoke any
and all prior proxies granted by Shareholder with respect to the Shares; (v) is a durable power of attorney and shall survive
the bankruptcy, death, or incapacity of Shareholder to the extent not revoked and terminated in accordance with this Section
2(b); (vi) shall not be exercised to vote, consent or act on any matter except as contemplated by Section 2(a) above;
and (vii) shall be revoked, terminated and of no further force or effect, automatically and without further action, immediately
upon the Expiration Time.
(c)
Shareholder is entering into this Agreement solely in Shareholder’s capacity as the record holder or Beneficial Owner of
Shares, and nothing herein shall limit or affect any actions taken (or any failures to act) by Shareholder in his or her capacity
as a director or officer of the Company. The taking of any actions (or any failures to act) by Shareholder (including voting on
matters, which may include the consideration of Acquisition Proposals to the extent in accordance with the terms of the Merger
Agreement, put to such board or any committee thereof, influencing officers, employees, agents, management or the other directors
of the Company and taking any action or making any statement at any meeting of such board or any committee thereof) in Shareholder’s
capacity as a director or officer of the Company shall not constitute a breach of this Agreement, regardless of the circumstances
related thereto.
3.
Shareholder Representations and Warranties. As of the date of this Agreement, Shareholder hereby represents, warrants,
covenants and agrees as follows:
(a)
Ownership of Shares. Shareholder is the Beneficial Owner of the number of Shares set forth on Schedule I hereto.
On the date hereof, the Existing Shares set forth on Schedule I hereto constitute all of the outstanding shares of Company
Common Stock owned of record or Beneficially Owned by Shareholder. Shareholder has good, valid and marketable title to the Existing
Shares and, immediately prior to the Merger will have good, valid and marketable title to the Shares, in each case, free and clear
of all Encumbrances (other than restrictions on transfer under applicable securities Laws). Without limiting the foregoing, Shareholder
has sole voting power and sole power to issue instructions with respect to the matters set forth in Section 2 hereof,
sole power of disposition, sole power of conversion, sole power to demand appraisal rights and sole power to enter into and perform
all of Shareholder’s obligations under this Agreement, in each case, with respect to all of the Existing Shares set forth
on Schedule I hereto, with no limitations, qualifications or restrictions on such rights, except for the impact, if any,
of any applicable community property rights or applicable Law.
(b)
Power; Binding Agreement. Shareholder has the full legal capacity, power and authority to enter into and perform all of
Shareholder’s obligations under this Agreement. The execution, delivery and performance of this Agreement by Shareholder
will not violate any other agreement to which Shareholder is a party including any voting agreement, shareholders agreement or
voting trust. This Agreement has been duly and validly executed and delivered by Shareholder and constitutes a valid and binding
agreement of Shareholder, enforceable against Shareholder in accordance with its terms, except that such enforceability (i) may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other similar Laws affecting or relating to creditors’
rights generally, and (ii) is subject to general principles of equity. There is no beneficiary or holder of a voting trust
certificate or other interest of any trust of which Shareholder is trustee whose consent is required for the execution and delivery
of this Agreement or the consummation by Shareholder of the transactions contemplated hereby; provided, however,
that if Shareholder is married and Shareholder’s Shares constitute community property, this Agreement has been duly authorized,
executed and delivered by, and constitutes a valid and binding agreement of, Shareholder’s spouse, enforceable against such
Person in accordance with its terms.
(c)
No Conflicts. No filing with, and no permit, authorization, consent or approval of, any Governmental Authority is
necessary for the execution of this Agreement by Shareholder and the consummation by Shareholder of the transactions contemplated
hereby and none of the execution and delivery of this Agreement by Shareholder, the consummation by Shareholder of the transactions
contemplated hereby or compliance by Shareholder with any of the provisions hereof shall (i) result in a violation or breach of,
or constitute (with or without notice or lapse of time or both) a default (or give rise to any third party right of termination,
cancellation, material modification or acceleration) under any of the terms, conditions or provisions of any agreement, contract
or other instrument or obligation of any kind to which Shareholder is a party or by which Shareholder or any of Shareholder’s
properties or assets may be bound, or (ii) violate any Law or order applicable to Shareholder or any of Shareholder’s properties
or assets.
(d)
No Encumbrances. Except as applicable in connection with the transactions contemplated by this Agreement, Shareholder’s
Shares and any certificates representing such Shares are now, and at all times during the term of this Agreement will be, held
by Shareholder, or by a nominee or custodian for the benefit of Shareholder, free and clear of all Encumbrances, proxies, voting
trusts or agreements, understandings or arrangements, except for restrictions on transfer under applicable securities Laws and
any such Encumbrances, proxies, voting trusts or agreements, understandings or arrangements arising hereunder.
(e)
No Litigation. As of the date hereof, there is no action, suit, investigation, or proceeding (whether judicial, arbitral,
administrative, or other) pending against, or, to the knowledge of Shareholder, threatened against or affecting, Shareholder that
would reasonably be expected to materially impair or materially adversely affect the ability of Shareholder to perform Shareholder’s
obligations hereunder or to consummate the transactions contemplated by this Agreement on a timely basis.
(f)
No Finder’s Fees. No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee
or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf
of Shareholder.
(g)
Waiver of Certain Other Actions. Shareholder hereby agrees not to commence or participate in, and to take all actions necessary
to opt out of any class in any class action with respect to, any claim, complaint, action, litigation or other proceeding, derivative
or otherwise, against the Parent, the Company, or any of their respective Affiliates or successors: (a) challenging the validity
of, or seeking to enjoin or delay the operation of, any provision of this Agreement or the Merger Agreement (including any claim
seeking to enjoin or delay the closing of the Merger); or (b) to the fullest extent permitted under applicable Law, alleging a
breach of any duty of the Board of Directors of the Company or Parent in connection with the Merger Agreement, this Agreement,
or the transactions contemplated thereby or hereby.
(h)
Reliance on Agreement. Shareholder understands and acknowledges that Parent is entering into, and causing Merger Sub to
enter into, the Merger Agreement in reliance upon Shareholder’s execution and delivery of this Agreement, and Shareholder
acknowledges the consideration and other benefits to be received by it under the Merger Agreement.
4.
Parent and Merger Sub Representations and Warranties. As of the date of this Agreement, Parent and Merger Sub each hereby
represent and warrant as follows:
(a)
Authority; Binding Agreement. Parent and Merger Sub each has the full legal capacity, power and authority to enter into
and perform all of Parent’s and Merger Sub’s respective obligations under this Agreement. The execution, delivery
and performance of this Agreement by Parent and Merger Sub will not violate any other agreement to which Parent or Merger Sub
is a party. This Agreement has been duly and validly executed and delivered by each of Parent and Merger Sub and constitutes a
valid and binding agreement of Parent and Merger Sub, enforceable in accordance with its terms, except that such enforceability
(i) may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting or relating
to creditors’ rights generally, and (ii) is subject to general principles of equity.
(b)
No Conflicts. No filing with, and no permit, authorization, consent or approval of, any Government Authority is necessary
for the execution of this Agreement by Parent and Merger Sub and the consummation by Parent or Merger Sub of the transactions
contemplated hereby and none of the execution and delivery of this Agreement by Parent and Merger Sub, the consummation by Parent
and Merger Sub of the transactions contemplated hereby or compliance by Parent and Merger Sub with any of the provisions hereof
shall (A) conflict with or result in a breach of the certificate of incorporation or bylaws of Parent or Merger Sub, if any,
(B) result in a violation or breach of, or constitute (with or without notice or lapse of time or both) a default (or give rise
to any third party right of termination, cancellation, material modification or acceleration) under any of the terms, conditions
or provisions of any contract or other instrument or obligation of any kind to which Parent or Merger Sub is a party or by which
Parent or Merger Sub or any of their respective material properties or assets may be bound, or (C) violate any Law or order applicable
to Parent or Merger Sub or any of Parent’s or Merger Sub’s respective material properties or assets.
5.
Additional Shares. While this Agreement is in effect, Shareholder will notify Parent promptly (and in any event within
two business days (as defined in the Merger Agreement) after the acquisition thereof) if Shareholder acquires Beneficial Ownership
of any Shares after the date of this Agreement. Any such Shares shall be subject to the terms of this Agreement as though owned
by Shareholder on the date of this Agreement. In the event of a stock dividend or distribution, or any change in the Company Common
Stock by reason of any stock dividend, split-up, recapitalization, combination, exchange of shares or the like, the term “Shares”
shall be deemed to refer to and include the Shares as well as all such stock dividends and distributions and any shares into which
or for which any or all of the Shares may be changed or exchanged.
6.
Termination. This Agreement shall automatically terminate without further action upon the earliest to occur (the “Expiration
Time”) of: (a) the Effective Time; (b) the termination of the Merger Agreement in accordance with its terms; (c) any
amendment, modification, waiver or other change to any provision of the Merger Agreement, as in effect on the date hereof, that
reduces the amount or changes the form of consideration payable to any shareholder of the Company; and (d) the written agreement
of Shareholder and Parent to terminate this Agreement; provided, however, that (i) nothing herein shall relieve
any Party from liability for any material breach of this Agreement, and (ii) Section 3(g) hereof, this Section 6
and Section 7 hereof shall survive any termination of this Agreement.
7.
Miscellaneous.
(a)
Entire Agreement and Modification. This Agreement supersedes all prior communications, understandings and agreements among
the Parties with respect to its subject matter and constitutes a complete and exclusive statement of the terms of the agreement
among the Parties with respect to its subject matter. This Agreement may not be amended except by a written agreement executed
by all the Parties. In the event of any inconsistency between the statements in the body of this Agreement and the Merger Agreement,
the statements in the Merger Agreement will control.
(b)
Restrictions on Transfer. Except as applicable in connection with the transactions contemplated by Section 2 hereof,
during the term of this Agreement, Shareholder shall not, directly or indirectly: (i) offer for sale, sell, transfer, tender,
pledge, encumber, assign or otherwise dispose of, or enter into any contract or other arrangement or understanding with respect
to, or consent to the offer for sale, sale, transfer, trade, pledge, encumbrance, assignment or other disposition of, any or all
of the Shares or any interest therein, or enter into any negotiations in connection therewith; (ii) grant any proxies or powers
of attorney, deposit any Shares into a voting trust or enter into a voting agreement with respect to any Shares; (iii) take any
action that would make any representation or warranty of Shareholder contained herein untrue or incorrect or have the effect of
preventing or disabling Shareholder from performing Shareholder’s obligations under this Agreement; (iv) commit or agree
to take any of the foregoing actions; or (v) request that the Company register the transfer (book-entry or otherwise) of any certificate
or uncertificated interest representing any of Shareholder’s Shares if such transfer would violate the provisions of this
Section 7(b).
(c)
Waiver of Appraisal Rights. Shareholder hereby waives any rights of appraisal or rights to dissent from the Merger that
Shareholder may have, including pursuant to any section of the Florida Business Corporation Act.
(d)
Certain Events. Shareholder agrees that this Agreement and the obligations hereunder shall attach to Shareholder’s
Shares and shall be binding upon any Person to which legal or Beneficial Ownership of such Shares shall pass, whether by operation
of Law or otherwise, including Shareholder’s heirs, guardians, administrators or successors. Notwithstanding any transfer
of Shares, the transferor shall remain liable for the performance of all obligations of the transferor under this Agreement.
(e)
Assignment. This Agreement shall not be assigned by any of the Parties, by operation of Law or otherwise, without the prior
written consent of all of the other Parties, provided that (i) the death of Shareholder shall itself not be a sale, transfer
or disposition of any Shares prohibited by Section 7(b) hereof or this Section 7(e) hereof as long as Shareholder’s
estate continues to own the Shares and agrees to perform Shareholder’s obligations hereunder and (ii) Parent is expressly
permitted to assign this Agreement to any of its Affiliates. Any purported assignment in violation of this Agreement is void ab
initio.
(f)
Further Assurances. From time to time, at any Party’s request and without further consideration, each party hereto
shall execute and deliver such additional documents and take all such further lawful action as may be necessary or desirable to
consummate and make effective, in the most expeditious manner practicable, the transactions contemplated by this Agreement.
(g)
Notices. All notices, requests, instructions, consents, claims, demands, waivers, approvals and other communications to
be given or made hereunder by one or more Parties to one or more of the other Parties shall, unless otherwise specified herein,
be in writing and shall be deemed to have been duly given or made on the date of receipt by the recipient thereof if received
prior to 5:00 p.m. in the place of receipt and such day is a business day (or otherwise on the next succeeding business day) if
(i) served by personal delivery or by a nationally recognized overnight courier service upon the Party or Parties for whom
it is intended, (ii) delivered by registered or certified mail, return receipt requested or (iii) sent by facsimile
or email; provided that the facsimile or email transmission is promptly confirmed by telephone or otherwise. Such communications
shall be sent to the respective Parties at the following street addresses, facsimile numbers or email addresses or at such other
street address, facsimile number or email address for a Party as shall be specified for such purpose in a notice given in accordance
with this Section 7(g).
If
to Shareholder, to the address or email set forth for such Shareholder on Schedule I hereto.
|
If
to Parent or Merger Sub:
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Advisor
Group Holdings, Inc.
20 East Thomas Road, Suite 2000
Phoenix, AZ 85012
Attention: Jamie Price, President and CEO
E-mail: jamie.price@advisorgroup.com
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copy
(which shall not constitute notice) to:
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Advisor
Group Holdings, Inc.
20 East Thomas Road, Suite 2000
Phoenix, AZ 85012
Attention: Nina McKenna, Chief
Legal Counsel and General Counsel
E-mail: nina.mckenna@advisorgroup.com
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(h)
Severability. If any provision of this Agreement, or the application of any provision hereof to any Party or circumstance,
is held to be illegal, invalid or unenforceable, such provision or the application of such provision, as the case may be, shall
be fully severable, and the application of the remainder of such provision to such Party or circumstance, the application of such
provision to other Parties or circumstances, and the remainder of this Agreement shall remain in full force and effect and shall
not be affected by the illegal, invalid or unenforceable provision or application of such provision, as the case may be, or by
its severance from this Agreement. Furthermore, in lieu of such illegal, invalid or unenforceable provision or application of
such provision, there shall be added automatically as a part of this Agreement a provision as similar in its terms to such illegal,
invalid or unenforceable provision as may be possible and be legal, valid and enforceable.
(i)
Specific Performance. Shareholder agrees that irreparable damage would occur and that Parent and Merger Sub would not have
any adequate remedy at Law in the event that any of the provisions of this Agreement were not performed in accordance with the
terms hereof or were otherwise breached. It is accordingly agreed that Parent and Merger Sub shall be entitled to seek an injunction
or injunctions to prevent breaches by Shareholder of this Agreement and to enforce specifically the terms and provisions of this
Agreement in addition to any other remedy at Law or equity and Shareholder will not oppose the seeking of such relief on the basis
that the other Party has an adequate remedy at law. Shareholder agrees that she or he will not seek, and agrees to waive any requirement
for, the securing or posting of a bond in connection with the other Party’s seeking or obtaining such equitable relief.
(j)
Waiver. The rights and remedies of the Parties are cumulative and not alternative. Neither the failure nor any delay by
any Party in exercising any right, power, or privilege under this Agreement or the documents referred to in this Agreement will
operate as a waiver of such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege
will preclude any other or further exercise of such right, power, or privilege or the exercise of any other right, power, or privilege.
No claim or right arising out of this Agreement or the documents referred to in this Agreement can be discharged or waived, in
whole or in part, by a waiver or renunciation of the claim or right unless in writing signed by the Party waiving such obligation
or right.
(k)
No Third Party Beneficiaries. This Agreement is for the sole benefit of the parties hereto and their respective successors
and permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or
equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.
(l)
Governing Law; Jurisdiction. THIS AGREEMENT SHALL BE GOVERNED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF FLORIDA, WITHOUT REGARD TO ANY CONFLICTS OF LAWS PRINCIPLES THAT COULD REQUIRE APPLICATION OF THE LAWS OF ANY OTHER STATE.
(m)
Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY
TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY AND
ALL RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) DIRECTLY
OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES
AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) EACH SUCH PARTY UNDERSTANDS
AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) EACH SUCH
PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS IN THIS SECTION
7(m).
(n)
Headings. The descriptive headings contained in this Agreement are included for convenience of reference only and shall
not affect in any way the meaning or interpretation of this Agreement.
(o)
Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original
copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement. Delivery
of a copy of this Agreement bearing an original signature by facsimile transmission or by electronic mail in “portable document
format” form shall have the same effect as physical delivery of the paper document bearing the original signature.
[Remainder
of Page Intentionally Left Blank]
IN
WITNESS WHEREOF, Parent, Merger Sub, and Shareholder have caused this Agreement to be duly executed as of the day and year first
above written.
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ADVISOR
GROUP HOLDINGS, INC.
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By:
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Name:
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Title:
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HARVEST
MERGER SUB, INC.
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By:
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Name:
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Title:
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Signature
Page to
Voting Agreement
IN
WITNESS WHEREOF, Parent, Merger Sub and Shareholder have caused this Agreement to be duly executed as of the day and year first
above written.
Signature
Page to
Voting Agreement
SCHEDULE
I
Shares
of Company Common Stock: ______________________________
Contact
information for notice under Section 7(g):
Annex
C to the Proxy Statement
Execution
Version
VOTING
AGREEMENT
This
VOTING AGREEMENT (this “Agreement”) dated November 11, 2019, among Advisor Group Holdings,
Inc., a Delaware corporation (“Parent”), Harvest Merger Sub, Inc., a Florida corporation and a
wholly owned subsidiary of Parent (“Merger Sub”), and Vector Group,
Ltd. (“Shareholder” and, together with Parent and Merger Sub, the “Parties”
and each, a “Party”).
WHEREAS,
concurrently with or following the execution of this Agreement, Parent, Merger Sub and Ladenburg Thalmann Financial Services Inc.,
a Florida corporation (the “Company”) have entered, or will enter, into an Agreement and Plan of Merger (the
“Merger Agreement”), pursuant to which Merger Sub will be merged with and into the Company (the “Merger”);
WHEREAS,
in furtherance of the Merger, on the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub will agree
to merge with the Company in a transaction pursuant to which Parent will become the sole common shareholder of the Company in
exchange for cash with respect to all of the issued and outstanding shares of common stock, par value $0.0001 per share, of the
Company (the “Company Common Stock”), including all of the outstanding Shares Beneficially Owned by Shareholder;
and
WHEREAS,
as a condition and material inducement to expending time and resources with respect to the transactions contemplated by the Merger
Agreement, Parent and Merger Sub have required that Shareholder agrees, and Shareholder has agreed, to enter into this Agreement.
NOW,
THEREFORE, in consideration of the premises and of the representations, warranties, covenants and agreements contained herein,
and intending to be legally bound hereby, the Parties agree as follows:
1.Definitions.
Capitalized terms used but not defined in this Agreement shall have the meanings given in the Merger Agreement. For purposes of
this Agreement:
(a)“Beneficially
Own” or “Beneficial Ownership” with respect to any securities means having “beneficial ownership”
of such securities (as determined pursuant to Rule 13d-3 under the Exchange Act).
(b)“Existing
Shares” means the outstanding shares of Company Common Stock Beneficially Owned by Shareholder as set forth on Schedule I hereto.
(c)“Shares”
means, collectively, the Existing Shares and any outstanding shares of Company Common Stock of which Shareholder acquires Beneficial
Ownership after the date hereof and prior to the termination of this Agreement, whether upon the exercise of options, warrants
or rights, the conversion or exchange of convertible or exchangeable securities, or by means of purchase, dividend, distribution
or otherwise; provided, however, that nothing in this Agreement shall require Shareholder to exercise any option
or other right to purchase shares of Company Common Stock.
2.Provisions
Concerning Company Common Stock.
(a)Except
as otherwise agreed to in writing by Parent in advance, from the period commencing with the execution and delivery of this Agreement
and continuing until the Expiration Time
(as
defined in Section 6 hereof), Shareholder irrevocably and unconditionally agrees to vote (or cause to be voted) the
Shares at any meeting of the holders of Company Common Stock, and at every adjournment or postponement thereof, however called,
or in connection with any written consent of the holders of Company Common Stock: (i) in favor of (A) the Company Shareholder
Approval and any actions required in furtherance thereof and hereof and (B) any proposal to adjourn or postpone such meeting of
shareholders of the Company to a later date if there are not sufficient votes to obtain the Company Shareholder Approval; and
(ii) against the following actions, agreements or transactions (other than the Merger, and the transactions contemplated by the
Merger Agreement): (A) any Acquisition Proposal, and (B) any action which is intended or would reasonably be expected to prevent,
materially delay or materially interfere with or materially impair the consummation of the Merger or the other transactions contemplated
by the Merger Agreement. Shareholder shall not enter into any contract or agreement with any Person, the effect of which would
be inconsistent with the provisions and agreements contained in this Section 2 or that would otherwise violate this
Agreement. Each Shareholder shall retain at all times the right to vote the Shares in such Shareholder’s sole discretion,
and without any other limitation, on any matters other than those set forth in this Section 2(a) that are at any time
or from time to time presented for consideration to the Company’s shareholders generally.
(b)By
entering into this Agreement, solely to the extent of a failure of Shareholder to act in accordance with its obligations under
Section 2(a) hereof, Shareholder hereby appoints Parent and any designee of Parent, and each of them individually,
its proxies and attorneys-in-fact, with full power of substitution and re-substitution, to vote during the term of this Agreement
with respect to the Shares in accordance with Section 2(a) hereof. Shareholder shall take such further action or execute
such other instruments as may be reasonably necessary to effectuate the intent of this proxy and power of attorney. This proxy
and power of attorney granted by Shareholder: (i) is given to secure the performance of the duties of Shareholder under this Agreement;
(ii) shall be irrevocable from the period commencing with the execution and delivery of this Agreement and continuing until the
Expiration Time; (iii) shall be deemed to be coupled with an interest sufficient in law to support an irrevocable proxy; (iv)
shall revoke any and all prior proxies granted by Shareholder with respect to the Shares; (v) is a durable power of attorney and
shall survive the bankruptcy, death, or incapacity of Shareholder to the extent not revoked and terminated in accordance with
this Section 2(b); (vi) shall not be exercised to vote, consent or act on any matter except as contemplated by Section
2(a) above; and (vii) shall be revoked, terminated and of no further force or effect, automatically and without further
action, immediately upon the Expiration Time.
(c)Shareholder
is entering into this Agreement solely in Shareholder’s capacity as the record holder or Beneficial Owner of Shares. This
Agreement shall not in any way limit or affect any actions taken (or any failures to act) by any director, officer or employee
of Shareholder in his or her capacity as a director, officer or employee of the Company. The taking of any actions (or any failures
to act) by any director, officer or employee of Shareholder (including voting on matters, which may include the consideration
of Acquisition Proposals to the extent in accordance with the terms of the Merger Agreement, put to such board or any committee
thereof, influencing officers, employees, agents, management or the other directors of the Company and taking any action or making
any statement at any meeting of such board or any committee thereof) in Shareholder’s capacity as a director, officer or
employee of the Company shall not constitute a breach of this Agreement, regardless of the circumstances related thereto.
3.Shareholder
Representations and Warranties. As of the date of this Agreement, Shareholder hereby represents, warrants, covenants and agrees
as follows:
(a)Ownership
of Shares. Shareholder is the [record and] Beneficial Owner of the number of Shares set forth on Schedule I hereto.
On the date hereof, the Existing Shares set forth on Schedule I hereto constitute all of the outstanding shares of
Company Common Stock owned of record or Beneficially Owned by Shareholder. Shareholder has good, valid and marketable title to
the Existing Shares and, immediately prior to the Merger will have good, valid and marketable title to the Shares, in each case,
free
and
clear of all Encumbrances (other than restrictions on transfer under applicable securities Laws). Without limiting the foregoing,
Shareholder has sole voting power and sole power to issue instructions with respect to the matters set forth in Section 2 hereof,
sole power of disposition, sole power of conversion, sole power to demand appraisal rights and sole power to enter into and perform
all of Shareholder’s obligations under this Agreement, in each case, with respect to all of the Existing Shares set forth
on Schedule I hereto, with no limitations, qualifications or restrictions on such rights, except for the impact, if
any, of any applicable community property rights or applicable Law.
(b)Power;
Binding Agreement. Shareholder has the full legal capacity, power and authority to enter into and perform all of Shareholder’s
obligations under this Agreement. The execution, delivery and performance of this Agreement by Shareholder will not violate any
other agreement to which Shareholder is a party including any voting agreement, shareholders agreement or voting trust. This Agreement
has been duly and validly executed and delivered by Shareholder and constitutes a valid and binding agreement of Shareholder,
enforceable against Shareholder in accordance with its terms, except that such enforceability (i) may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other similar Laws affecting or relating to creditors’ rights generally,
and (ii) is subject to general principles of equity.
(c)No
Conflicts. No filing with, and no permit, authorization, consent or approval of, any Governmental Authority is necessary
for the execution of this Agreement by Shareholder and the consummation by Shareholder of the transactions contemplated hereby
and none of the execution and delivery of this Agreement by Shareholder, the consummation by Shareholder of the transactions contemplated
hereby or compliance by Shareholder with any of the provisions hereof shall (i) result in a violation or breach of, or constitute
(with or without notice or lapse of time or both) a default (or give rise to any third party right of termination, cancellation,
material modification or acceleration) under any of the terms, conditions or provisions of any agreement, contract or other instrument
or obligation of any kind to which Shareholder is a party or by which Shareholder or any of Shareholder’s properties or
assets may be bound, or (ii) violate any Law or order applicable to Shareholder or any of Shareholder’s properties or assets.
(d)No
Encumbrances. Except as applicable in connection with the transactions contemplated by this Agreement, Shareholder’s
Shares and any certificates representing such Shares are now, and at all times during the term of this Agreement will be, held
by Shareholder, or by a nominee or custodian for the benefit of Shareholder, free and clear of all Encumbrances, proxies, voting
trusts or agreements, understandings or arrangements, except for restrictions on transfer under applicable securities Laws and
any such Encumbrances, proxies, voting trusts or agreements, understandings or arrangements arising hereunder.
(e)No
Litigation. As of the date hereof, there is no action, suit, investigation, or proceeding (whether judicial,
arbitral, administrative, or other) pending against, or, to the knowledge of Shareholder, threatened against or affecting, Shareholder
that would reasonably be expected to materially impair or materially adversely affect the ability of Shareholder to perform Shareholder’s
obligations hereunder or to consummate the transactions contemplated by this Agreement on a timely basis.
(f)No
Finder’s Fees. No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission
in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Shareholder.
(g)Reliance
on Agreement. Shareholder understands and acknowledges that Parent is entering into, and causing Merger Sub to enter into,
the Merger Agreement in reliance upon Shareholder’s execution and delivery of this Agreement, and Shareholder acknowledges
the consideration and other benefits to be received by it under the Merger Agreement.
4.Parent
and Merger Sub Representations and Warranties. As of the date of this Agreement, Parent and Merger Sub each hereby represent
and warrant as follows:
(a)Authority;
Binding Agreement. Parent and Merger Sub each has the full legal capacity, power and authority to enter into and perform all
of Parent’s and Merger Sub’s respective obligations under this Agreement. The execution, delivery and performance
of this Agreement by Parent and Merger Sub will not violate any other agreement to which Parent or Merger Sub is a party. This
Agreement has been duly and validly executed and delivered by each of Parent and Merger Sub and constitutes a valid and binding
agreement of Parent and Merger Sub, enforceable in accordance with its terms, except that such enforceability (i) may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting or relating to creditors’
rights generally, and (ii) is subject to general principles of equity.
(b)No
Conflicts. No filing with, and no permit, authorization, consent or approval of, any Government Authority is necessary for
the execution of this Agreement by Parent and Merger Sub and the consummation by Parent or Merger Sub of the transactions contemplated
hereby and none of the execution and delivery of this Agreement by Parent and Merger Sub, the consummation by Parent and Merger
Sub of the transactions contemplated hereby or compliance by Parent and Merger Sub with any of the provisions hereof shall (A) conflict
with or result in a breach of the certificate of incorporation or bylaws of Parent or Merger Sub, if any, (B) result in a violation
or breach of, or constitute (with or without notice or lapse of time or both) a default (or give rise to any third party right
of termination, cancellation, material modification or acceleration) under any of the terms, conditions or provisions of any contract
or other instrument or obligation of any kind to which Parent or Merger Sub is a party or by which Parent or Merger Sub or any
of their respective material properties or assets may be bound, or (C) violate any Law or order applicable to Parent or Merger
Sub or any of Parent’s or Merger Sub’s respective material properties or assets.
5.Additional
Shares. While this Agreement is in effect, Shareholder will notify Parent promptly (and in any event within two business days
(as defined in the Merger Agreement) after the acquisition thereof) if Shareholder acquires Beneficial Ownership of any Shares
after the date of this Agreement. Any such Shares shall be subject to the terms of this Agreement as though owned by Shareholder
on the date of this Agreement. In the event of a stock dividend or distribution, or any change in the Company Common Stock by
reason of any stock dividend, split-up, recapitalization, combination, exchange of shares or the like, the term “Shares”
shall be deemed to refer to and include the Shares as well as all such stock dividends and distributions and any shares into which
or for which any or all of the Shares may be changed or exchanged.
6.Termination.
This Agreement shall automatically terminate without further action upon the earliest to occur (the “Expiration Time”)
of: (a) the Effective Time; (b) the termination of the Merger Agreement in accordance with its terms; (c) any amendment, modification,
waiver or other change to any provision of the Merger Agreement, as in effect on the date hereof, that reduces the amount or changes
the form of consideration payable to any shareholder of the Company; and (d) the written agreement of Shareholder and Parent to
terminate this Agreement; provided, however, that (i) nothing herein shall relieve any Party from liability
for any material breach of this Agreement, and (ii) this Section 6 and Section 7 hereof shall survive any
termination of this Agreement.
7.Miscellaneous.
(a)Entire
Agreement and Modification. This Agreement supersedes all prior communications, understandings and agreements among the Parties
with respect to its subject matter and constitutes a complete and exclusive statement of the terms of the agreement among the
Parties with respect to its subject matter. This Agreement may not be amended except by a written agreement executed by all the
Parties. In the event of any inconsistency between the statements in the body of this Agreement and the Merger Agreement, the
statements in the Merger Agreement will control.
(b)Restrictions
on Transfer; No Solicitation. Except as applicable in connection with the transactions contemplated by Section 2 hereof,
during the term of this Agreement, Shareholder shall not, directly or indirectly: (i) offer for sale, sell, transfer, tender,
pledge, encumber, assign or otherwise dispose
of,
or enter into any contract or other arrangement or understanding with respect to, or consent to the offer for sale, sale, transfer,
trade, pledge, encumbrance, assignment or other disposition of, any or all of the Shares or any interest therein, or enter into
any negotiations in connection therewith; (ii) grant any proxies or powers of attorney, deposit any Shares into a voting trust
or enter into a voting agreement with respect to any Shares; (iii) take any action that would make any representation or warranty
of Shareholder contained herein untrue or incorrect or have the effect of preventing or disabling Shareholder from performing
Shareholder’s obligations under this Agreement; (iv) commit or agree to take any of the foregoing actions; or (v) request
that the Company register the transfer (book-entry or otherwise) of any certificate or uncertificated interest representing any
of Shareholder’s Shares if such transfer would violate the provisions of this Section 7(b). Shareholder further agrees,
solely in its capacity as a shareholder of the Company, to not directly or indirectly, through any Affiliate, officer, director,
agent or employee of, or any investment banker, financial advisor, attorney, accountant or other representative (i) solicit, initiate,
seek or encourage (including by way of furnishing information or assistance) or take other action to facilitate any inquiries
or the submission of any proposal that constitutes or may reasonably be expected to lead to, an Acquisition Proposal, or (ii)
engage in any discussions or negotiations relating thereto or in furtherance thereof or accept any Acquisition Proposal.
(c)Waiver
of Appraisal Rights. Shareholder hereby waives any rights of appraisal or rights to dissent from the Merger that Shareholder
may have, including pursuant to any section of the Florida Business Corporation Act.
(d)Certain
Events. Shareholder agrees that this Agreement and the obligations hereunder shall attach to Shareholder’s Shares and
shall be binding upon any Person to which legal or Beneficial Ownership of such Shares shall pass, whether by operation of Law
or otherwise, including Shareholder’s heirs, guardians, administrators or successors. Notwithstanding any transfer of Shares,
the transferor shall remain liable for the performance of all obligations of the transferor under this Agreement.
(e)Assignment.
This Agreement shall not be assigned by any of the Parties, by operation of Law or otherwise, without the prior written consent
of all of the other Parties, provided that (i) the death of Shareholder shall itself not be a sale, transfer or disposition
of any Shares prohibited by Section 7(b) hereof or this Section 7(e) hereof as long as Shareholder’s
estate continues to own the Shares and agrees to perform Shareholder’s obligations hereunder and (ii) Parent is expressly
permitted to assign this Agreement to any of its Affiliates. Any purported assignment in violation of this Agreement is void ab
initio.
(f)Further
Assurances. From time to time, at any Party’s request and without further consideration, each party hereto shall execute
and deliver such additional documents and take all such further lawful action as may be necessary or desirable to consummate and
make effective, in the most expeditious manner practicable, the transactions contemplated by this Agreement.
(g)Notices.
All notices, requests, instructions, consents, claims, demands, waivers, approvals and other communications to be given or made
hereunder by one or more Parties to one or more of the other Parties shall, unless otherwise specified herein, be in writing and
shall be deemed to have been duly given or made on the date of receipt by the recipient thereof if received prior to 5:00 p.m.
in the place of receipt and such day is a business day (or otherwise on the next succeeding business day) if (i) served by
personal delivery or by a nationally recognized overnight courier service upon the Party or Parties for whom it is intended, (ii) delivered
by registered or certified mail, return receipt requested or (iii) sent by facsimile or email; provided that the
facsimile or email transmission is promptly confirmed by telephone or otherwise. Such communications shall be sent to the respective
Parties at the following street addresses, facsimile numbers or email addresses or at such other street address, facsimile number
or email address for a Party as shall be specified for such purpose in a notice given in accordance with this Section 7(g).
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If
to Shareholder:
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Vector
Group Ltd.
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4400
Biscayne Boulevard, 10th Floor
Miami,
FL 33137
Attention:
Marc Bell
E-mail: mbell@vectorgroupltd.com
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copy
(which shall not constitute notice) to:
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O’Melveny
and Myers LLP
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400
South Hope Street, 18th Floor
Los
Angeles, CA 90071-2899
Attention:
John-Paul Motley
E-mail:
jpmotley@omm.com
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If
to Parent or Merger Sub:
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Advisor
Group Holdings, Inc.
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20
East Thomas Road, Suite 2000
Phoenix,
Arizona 85012
Attention:
Jamie Price, President and CEO
E-mail:
jamie.price@advisorgroup.com
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copy
(which shall not constitute notice) to:
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Advisor
Group Holdings, Inc.
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20
East Thomas Road, Suite 2000
Phoenix,
Arizona 85012
Attention:
Nina McKenna, Chief Legal Counsel and General Counsel
E-mail:
nina.mckenna@advisorgroup.com
(h)Severability.
If any provision of this Agreement, or the application of any provision hereof to any Party or circumstance, is held to be illegal,
invalid or unenforceable, such provision or the application of such provision, as the case may be, shall be fully severable, and
the application of the remainder of such provision to such Party or circumstance, the application of such provision to other Parties
or circumstances, and the remainder of this Agreement shall remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or application of such provision, as the case may be, or by its severance from this Agreement.
Furthermore, in lieu of such illegal, invalid or unenforceable provision or application of such provision, there shall be added
automatically as a part of this Agreement a provision as similar in its terms to such illegal, invalid or unenforceable provision
as may be possible and be legal, valid and enforceable.
(i)Specific
Performance. Shareholder agrees that irreparable damage would occur and that Parent and Merger Sub would not have any adequate
remedy at Law in the event that any of the provisions of this Agreement were not performed in accordance with the terms hereof
or were otherwise breached. It is accordingly agreed that Parent and Merger Sub shall be entitled to seek an injunction or injunctions
to prevent breaches by Shareholder of this Agreement and to enforce specifically the terms and provisions of this Agreement in
addition to any other remedy at Law or equity and Shareholder will not oppose the seeking of such relief on the basis that the
other Party has an adequate remedy at law. Shareholder agrees that she or he will not seek, and agrees to waive any requirement
for, the securing or posting of a bond in connection with the other Party’s seeking or obtaining such equitable relief.
(j)Waiver.
The rights and remedies of the Parties are cumulative and not alternative. Neither the failure nor any delay by any Party in exercising
any right, power, or privilege under this Agreement or the documents referred to in this Agreement will operate as a waiver of
such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege will preclude any other
or further
exercise
of such right, power, or privilege or the exercise of any other right, power, or privilege. No claim or right arising out of this
Agreement or the documents referred to in this Agreement can be discharged or waived, in whole or in part, by a waiver or renunciation
of the claim or right unless in writing signed by the Party waiving such obligation or right.
(k)No
Third Party Beneficiaries. This Agreement is for the sole benefit of the parties hereto and their respective successors and
permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable
right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.
(l)Governing
Law; Jurisdiction. THIS AGREEMENT SHALL BE GOVERNED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA,
WITHOUT REGARD TO ANY CONFLICTS OF LAWS PRINCIPLES THAT COULD REQUIRE APPLICATION OF THE LAWS OF ANY OTHER STATE.
(m)Waiver
of Jury Trial. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO
INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY AND
ALL RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) DIRECTLY
OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES
AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) EACH SUCH PARTY UNDERSTANDS
AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) EACH SUCH
PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS IN THIS SECTION
7(m).
(n)Headings.
The descriptive headings contained in this Agreement are included for convenience of reference only and shall not affect in any
way the meaning or interpretation of this Agreement.
(o)Counterparts.
This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement
and all of which, when taken together, will be deemed to constitute one and the same agreement. Delivery of a copy of this Agreement
bearing an original signature by facsimile transmission or by electronic mail in “portable document format” form shall
have the same effect as physical delivery of the paper document bearing the original signature.
IN
WITNESS WHEREOF, Parent, Merger Sub, and Shareholder have caused this Agreement to be duly executed as of the day and year first
above written.
ADVISOR
GROUP HOLDINGS, INC.
By: /s/
Jamie Price
Name: Jamie
Price
HARVEST
MERGER SUB, INC.
By: /s/
Jamie Price
Name: Jamie
Price
Signature
Page to
Voting
Agreement
IN
WITNESS WHEREOF, Parent, Merger Sub and Shareholder have caused this Agreement to be duly executed as of the day and year first
above written.
VECTOR
GROUP, LTD.
By: /s/
Marc N. Bell
Name: Marc
N. Bell
Title:
Senior Vice President and General Counsel
Signature
Page to
Voting
Agreement
SCHEDULE
I
Shares
of Company Common Stock
15,191,205
As
noted in the Shareholder’s Schedule 13D file with the Securities and Exchange Commission, the Shareholder disclaims beneficial
ownership of the shares of the Company’s securities held by any of the Shareholder’s directors and executive officers.
Annex
D to the Proxy Statement
OPINION
OF JEFFERIES LLC
Jefferies
LLC
520
Madison Avenue
New
York, NY 10022
www.jefferies.com
November
11, 2019
The
Board of Directors
Ladenburg
Thalmann Financial Services Inc.
4400
Biscayne Boulevard, 12th Floor
Miami,
Florida 33137
Directors
of the Board:
We
understand that Ladenburg Thalmann Financial Services Inc. (the “Company”), Advisor Group Holdings, Inc. (“Parent”),
and Harvest Merger Sub, Inc., a Florida corporation and wholly owned subsidiary of Parent (“Merger Sub”), propose
to enter into an Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which Merger Sub will merge
with and into the Company in accordance with the Florida Business Corporation Act, with the Company continuing as the surviving
corporation (the “Merger”), and each outstanding share of Company common stock (the “Shares”)
other than Excluded Shares, will be converted into the right to receive $3.50 per Share (the “Per Share Merger Consideration”).
The terms and conditions of the Merger are more fully set forth in the Merger Agreement and capitalized terms used herein, but
not defined herein, shall have the meanings ascribed to them in the Merger Agreement.
You
have asked for our opinion as to whether the Per Share Merger Consideration to be received in the Merger by the holders of Shares
pursuant to the Merger Agreement is fair, from a financial point of view, to such holders.
In
arriving at our opinion, we have, among other things:
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(i)
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reviewed
a draft dated November 10, 2019 of the Merger Agreement;
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(ii)
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reviewed
certain publicly available financial and other information about the Company;
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(iii)
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reviewed
certain information furnished to us by the Company’s management, including financial
forecasts and analyses under various business assumptions, relating to the business,
operations and prospects of the Company;
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(iv)
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held
discussions with members of senior management of the Company concerning the matters described
in clauses (ii) and (iii) above;
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(v)
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reviewed
the share trading price history and valuation multiples for the Shares and compared them
with those of certain publicly traded companies that we deemed relevant;
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(vi)
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reviewed
the proposed financial terms of the Merger and compared them with the publicly available
financial terms of certain other transactions that we deemed relevant; and
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(vii)
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conducted
such other financial studies, analyses and investigations as we deemed appropriate.
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In
our review and analysis and in rendering this opinion, we have assumed and relied upon, but have not assumed any responsibility
to independently investigate or verify, the accuracy and completeness of all financial and other information that was supplied
or otherwise made available by the Company or that was publicly available to us (including, without limitation, the information
described above), or that was otherwise reviewed by us. We have relied on assurances of the management of the Company that it
is not aware of any facts or circumstances that would make such information inaccurate or misleading. In our review, we did not
obtain any independent evaluation or appraisal of any of the assets or liabilities of, nor did we conduct a physical inspection
of any of the properties or facilities of, the Company, nor have we been furnished with any such evaluations or appraisals of
such physical inspections, nor do we assume any responsibility to obtain any such evaluations or appraisals.
With
respect to the financial forecasts provided to and examined by us, we note that projecting future results of any company is inherently
subject to uncertainty. The Company has informed us, however, and we have assumed, that such financial forecasts were reasonably
prepared on bases reflecting the best currently available estimates and good faith judgments of the management of the Company
as to the future financial performance of the Company under various business assumptions. We express no opinion as to the Company’s
financial forecasts or the assumptions on which they are made.
Our
opinion is based on economic, monetary, regulatory, market and other conditions existing and which can be evaluated as of the
date hereof. We expressly disclaim any undertaking or obligation to advise any person of any change in any fact or matter affecting
our opinion of which we become aware after the date hereof.
We
have made no independent investigation of any legal or accounting matters affecting the Company, and we have assumed the correctness
in all respects material to our analysis of all legal and accounting advice given to the Company and its Board of Directors, including,
without limitation, advice as to the legal, accounting and tax consequences of the terms of, and transactions contemplated by,
the Merger Agreement to the Company and its shareholders. In addition, in preparing this opinion, we have not taken into account
any tax consequences of the Merger to any holder of Shares. We have assumed that the final form of the Merger Agreement will be
substantially similar to the last draft reviewed by us in all respects material to our opinion. We have assumed that the Merger
will be consummated in accordance with the terms of the Merger Agreement without waiver, modification or amendment of any term,
condition or agreement and in compliance with applicable laws, documents and other requirements. We have also assumed that in
the course of obtaining the necessary regulatory or third party approvals, consents and releases for the Merger, no delay, limitation,
restriction or condition will be imposed that would have an adverse effect on the Company or the contemplated benefits of the
Merger in any respect material to our opinion.
It
is understood that our opinion is for the use and benefit of the Board of Directors of the Company (in its capacity as such) in
its consideration of the Merger, and our opinion does not address the relative merits of the transactions contemplated by the
Merger Agreement as compared to any alternative transaction or opportunity that might be available to the Company, nor does it
address the underlying business decision by the Company to engage in the Merger or the terms of the Merger Agreement or the documents
referred to therein. Our opinion does not constitute a recommendation to any holder of Shares as to how any such holder should
vote in the Merger or how any such holder should act with respect to the Merger or any matter related thereto. In addition, you
have not asked us to address, and this opinion does not address, the fairness to, or any other consideration of, the holders of
any class of securities, creditors or other constituencies of the Company, other than the holders of Shares. We express no opinion
as to the price at which Shares will trade at any time. Furthermore, we do not express any view or opinion as to the fairness,
financial or otherwise, of the amount or nature of any compensation payable or to be received by any of the Company’s officers,
directors or employees, or any class of such persons, in connection with the Merger relative to the Per Share Merger Consideration
to be received by holders of Shares or otherwise. Our opinion has been authorized by the Fairness Committee of Jefferies LLC.
We
have been engaged by the Company to act as financial advisor to the Board in connection with the Merger and will receive a fee
for our services, a portion of which is payable upon delivery of this opinion and a portion of which is contingent upon consummation
of the Merger. We will also be reimbursed for all expenses reasonably incurred in connection with our engagement, and the Company
has agreed to indemnify us against liabilities arising out of or in connection with the services rendered and to be rendered by
us under such engagement.
We
have not, in the past two years, provided financial advisory services or financing services to the Company, Parent or Parent’s
controlling shareholder. We maintain a market in the securities of the Company, and in the ordinary course of our business, we
and our affiliates may trade or hold securities of the Company, Parent and/or their respective affiliates for our own account
and for the accounts of our customers and, accordingly, may at any time hold long or short positions in those securities. In addition,
we may seek to, in the future, provide financial advisory and financing services to Parent or entities that are affiliated with
Parent, for which we would expect to receive compensation.
Except
as otherwise expressly provided in our engagement letter with the Company, our opinion may not be used or referred to by the Company,
or quoted or disclosed to any person in any manner, without our prior written consent.
Based
upon and subject to the foregoing, we are of the opinion that, as of the date hereof, the Per Share Merger Consideration to be
received in the Merger by the holders of Shares pursuant to the Merger Agreement is fair, from a financial point of view, to such
holders.
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Very
truly yours,
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JEFFERIES
LLC
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By
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/s/
Alexander Yavorsky
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Name:
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Alexander
Yavorsky
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Title:
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Managing
Director
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