jmpllc20211014_defm14a.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934

 

Filed by the Registrant  ☒

 

Filed by a Party other than the Registrant  ☐

 

Check the appropriate box:

 

Preliminary Proxy Statement

 

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

 

Definitive Proxy Statement

 

Definitive Additional Materials

 

Soliciting Material under §240.14a-12

 

JMP Group LLC

(Name of Registrant as Specified In Its Charter)

 
 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

 

No fee required.

 

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

Fee paid previously with preliminary materials.

 

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

 

 

(1)

Amount Previously Paid:

 

 

(2)

Form, Schedule or Registration Statement No.:

 

 

(3)

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(4)

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600 Montgomery Street, Suite 1100

San Francisco, CA 94111

 

 

October 15, 2021

 

Dear Shareholder of JMP Group LLC:

 

You are cordially invited to attend a Special Meeting of Shareholders of JMP Group LLC (which we refer to as the Special Meeting) to be held on November 12, 2021, at 9:00 a.m., Pacific time at our headquarters at 600 Montgomery Street, Suite 1100, San Francisco, CA 94111. JMP Group LLC (which we refer to as JMP) has entered into a merger agreement with Citizens Financial Group, Inc. (which we refer to as Citizens). If the merger and the other transactions contemplated by the merger agreement are approved and consummated, JMP will become a wholly-owned subsidiary of Citizens and the common shares will no longer be a publicly held. The JMP board of directors, acting upon the unanimous recommendation of the special transaction committee of the board of directors of JMP (which we refer to as the Special Transaction Committee), has unanimously determined that the merger and the merger agreement are advisable, and are fair to, and in the best interests of, JMP and its shareholders and has approved the merger agreement and the merger. The merger requires the approval of holders of a majority of the outstanding common shares of JMP, par value $0.001 per share, and we are asking you to vote to adopt the merger agreement and thereby to approve the transactions contemplated by the merger agreement, including the merger, at the Special Meeting.

 

Holders of JMP common shares as of the close of business on October 11, 2021 will be entitled to vote at the Special Meeting. Each common share of JMP is entitled to one vote for each matter to be voted on at the Special Meeting. The holders of shares entitled to cast a majority of the total votes of the outstanding common shares of JMP on October 11, 2021, present in person or represented by proxy at the Special Meeting and entitled to vote, will constitute a quorum at the Special Meeting.

 

On October 11, 2021, there were 19,958,495 common shares of JMP outstanding and entitled to vote at the Special Meeting held by approximately 31 shareholders of record. JMP does not have cumulative voting.

 

Upon completion of the merger, each common share of JMP will be converted into the right to receive cash consideration of $7.50 per common share.

 

At the Special Meeting, the JMP shareholders will be asked to vote on the following proposals:

 

 

1.

To consider and vote on a proposal to adopt the Agreement and Plan of Merger, dated as of September 8, 2021 (as it may be amended from time to time, the “merger agreement”), among Citizens, Jolt Acquisition LLC (which we refer to as Merger Sub), a Delaware limited liability company and a wholly-owned subsidiary of Citizens and JMP (the “merger”), and thereby to approve the transactions contemplated by the merger agreement, including the merger of Merger Sub with and into JMP;

 

 

2.

To approve, by non-binding advisory vote, certain compensation arrangements for JMP’s named executive officers in connection with the merger; and

 

 

3.

To approve the adjournment of the Special Meeting, if necessary, for any purpose, including to solicit additional proxies if there are not sufficient votes to adopt the merger agreement and thereby to approve the transactions contemplated by the merger agreement, including the merger, at the time of the Special Meeting.

 

The JMP board of directors, acting upon the unanimous recommendation of its Special Transaction Committee, recommends that you vote FOR the proposal to adopt the merger agreement and thereby to approve the transactions contemplated by the merger agreement, including the merger, and recommends that you vote FOR the proposal to approve, by non-binding advisory vote, certain compensation arrangements for JMPs named executive officers in connection with the merger, and recommends that you vote FOR the adjournment of the Special Meeting, if necessary, for any purpose, including to solicit additional proxies in favor of the adoption of the merger agreement and thereby the approval of the transactions contemplated by the merger agreement, including the merger.

 

Your vote is very important. Regardless of the number of shares you own or whether or not you plan to attend the Special Meeting, it is important that your shares be represented and voted. Voting instructions are inside.

 

 

 

 

The obligations of Citizens and JMP to complete the merger are subject to several conditions set forth in the merger agreement and summarized in this proxy statement. Important information about Citizens, JMP, the Special Meeting, the merger agreement, and the merger is contained in or incorporated by reference into this proxy statement. I urge you to read the entire document, including any documents incorporated by reference into this proxy statement and its annexes, carefully and in their entirety.

 

JMP shareholders will have the right to demand appraisal of their common shares of JMP and obtain payment in cash for the fair value of their shares, but only if they perfect their appraisal rights and comply with the applicable provisions of Delaware law. A copy of the Delaware statutory provisions related to appraisal rights is attached as Annex C to this proxy statement, and a summary of these provisions can be found under “Proposal One: The Merger—Appraisal Rights” beginning on page 33.

 

I look forward to seeing you at the Special Meeting.

 

   

Sincerely,

 
   
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Joseph A. Jolson

 
   

Chairman and Chief Executive Officer          

 

 

 

YOUR VOTE IS IMPORTANT.

PLEASE PROMPTLY SUBMIT YOUR PROXY BY TELEPHONE, INTERNET OR MAIL.

This proxy statement is first being distributed to the shareholders of JMP on or about October 18, 2021.

 

 

 

 

Important Information

 

Whether or not you plan to attend the Special Meeting in person, we encourage you to submit your proxy as promptly as possible (1) over the internet; (2) by telephone; or (3) by signing and dating the enclosed proxy card and returning it in the accompanying prepaid reply envelope.  You may revoke your proxy or change your vote at any time before it is voted at the Special Meeting.

 

If you hold your shares in “street name,” you should instruct your bank, broker or other nominee how to vote your shares in accordance with the voting instruction form that you will receive from your bank, broker or other nominee.  Your bank, broker or other nominee cannot vote on any of the proposals, including the proposal to adopt the merger agreement, without your instructions.

 

If you are a shareholder of record, voting in person by ballot at the Special Meeting will revoke any proxy that you previously submitted.  If you hold your shares through a bank, broker or other nominee, you must obtain a “legal proxy” from the bank, broker or other nominee that holds your shares in order to vote in person at the Special Meeting.

 

We encourage you to read the accompanying proxy statement and its annexes, including all documents incorporated by reference into the accompanying proxy statement, carefully and in their entirety.  If you have any questions concerning the merger, the Special Meeting or the accompanying proxy statement, would like additional copies of the accompanying proxy statement, or need help voting your common shares, please contact Andrew Palmer, Director of Investor Relations, at 415-835-8978 or apalmer@jmpg.com.

 

For a more detailed description of the information incorporated by reference into this proxy statement and how you may obtain it, see “Where You Can Find More Information” on page 55 of this proxy statement.

 

 

 

 

JMP Group LLC

600 Montgomery Street, Suite 1100

San Francisco, CA 94111

 


 

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

 


 

Date:

November 12, 2021

     

Time:

9:00 a.m., Pacific time.

     

Location:

600 Montgomery Street, Suite 1100, San Francisco, CA 94111

     

Purposes:

1.

To consider and vote on a proposal to adopt the Agreement and Plan of Merger, dated as of September 8, 2021 (as it may be amended from time to time, the merger agreement), among Citizens, Merger Sub and JMP, a copy of which is attached as Annex A to the proxy statement accompanying this notice, and thereby to approve the transactions contemplated by the merger agreement, including the merger of Merger Sub with and into JMP;

     
 

2.

To consider and vote on a proposal to approve, by a non-binding, advisory vote, certain compensation arrangements for JMP’s named executive officers in connection with the merger; and

     
 

3.

To approve the adjournment of the Special Meeting, if necessary, for any purpose, including to solicit additional proxies if there are not sufficient votes to adopt the merger agreement and thereby to approve the transactions contemplated by the merger agreement, including the merger, at the time of the Special Meeting.

     

Adjournments and Postponements:

The proposal to adopt the merger agreement and thereby to approve the transactions contemplated by the merger agreement, including the merger, may be considered at the Special Meeting at the time and on the date specified above or at any time and date to which the Special Meeting may be properly adjourned or postponed.

     

Who Can Vote:

JMP shareholders at the close of business on October 11, 2021.

     

Who May Attend:

You are entitled to attend the Special Meeting only if you were a JMP shareholder as of the close of business on October 11, 2021 or hold a valid proxy for the Special Meeting. You should be prepared to present photo identification (a driver’s license or passport is preferred) for admittance.

     
 

In addition, if you are a shareholder of record, your name is subject to verification against the list of shareholders of record on the record date prior to being admitted to the meeting.

     
 

If you are not a shareholder of record but hold shares through a broker or nominee (i.e., in “street name”), you should be prepared to provide proof of beneficial ownership on the record date, such as your most recent account statement or similar evidence of ownership. If you do not provide photo identification or comply with the other procedures outlined above upon request, you will not be admitted to the Special Meeting.

     
 

The Special Meeting will begin promptly at 9:00 a.m., Pacific time. Check-in will begin at 8:30 a.m., Pacific time, and you should allow ample time for check-in procedures.

     

How You Can Vote:

Your vote is very important. Whether or not you plan to attend the Special Meeting, we encourage you to read this proxy statement and submit your proxy or voting instructions for the Special Meeting as soon as possible.

     
 

You may submit your proxy or voting instructions for the Special Meeting by completing, signing, dating and returning the proxy card or voting instruction card in the pre-addressed envelope provided, or, in most cases, by using the telephone or the Internet. For specific instructions on how to vote your shares, please refer to the section entitled “The Special Meeting” beginning on page 14 of this proxy statement and the instructions on the proxy card or voting instruction card.

 

 

 

 

Inspection of List of Shareholders of Record:

A list of the shareholders of record as of October 11, 2021 will be available for inspection during ordinary business hours at the office of JMP’s Corporate Secretary, 600 Montgomery Street, Suite 1100, San Francisco, CA 94111, from November 2, 2021 to November 11, 2021, as well as at the Special Meeting, for any purpose germane to the Special Meeting.

   

Additional Information:

Important information about Citizens, JMP, the Special Meeting, the merger and the other proposal for consideration at the Special Meeting is contained in this proxy statement. I urge you to read the entire document, including any documents incorporated by reference into this proxy statement and its annexes, carefully and in their entirety.

 

 

 

   

By Order of the Board of Directors,

 
   
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Walter Conroy

 
   

Chief Legal Officer and Corporate Secretary

 
   

October 15, 2021

 

 

 

 

 

TABLE OF CONTENTS

 

QUESTIONS AND ANSWERS ABOUT THE MERGER AND SPECIAL MEETING

1

SUMMARY

7

The Companies

7

The Merger

8

Effects of the Merger; Merger Consideration

8

Treatment of JMP Equity-Based Awards

8

The Special Meeting; JMP Shareholders Entitled to Vote; Required Vote

8

JMP Employee Benefits Matters

9

Recommendation of the JMP Board of Directors and JMP’s Reasons for the Merger

9

Opinion of the Special Transaction Committee’s Financial Advisor

9

No Citizens Shareholder Approval

9

Interests of Certain Persons in the Merger

10

Security Ownership by Directors and Executive Officers of JMP

10

Delisting and Deregistration of JMP Common Shares

10

Litigation Related to the Merger

10

Regulatory Approvals

10

Appraisal Rights

10

Conditions to Complete the Merger

10

Expected Timing of the Merger

11

Termination of the Merger Agreement

11

Termination Fees

12

Material United States Federal Income Tax Consequences of the Merger

12

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

13

THE SPECIAL MEETING

14

Date, Time and Place; Attending the Special Meeting

14

Matters to be Considered

14

Record Date; Stock Entitled to Vote

14

Quorum

14

Vote Required

14

Abstentions

15

Voting of Proxies by Holders of Record

15

Shares Held in Street Name

15

Revocability of Proxies

16

Independent Election Inspector

16

Solicitation of Proxies

16

PROPOSAL ONE:  THE MERGER

17

Structure of the Merger

17

Background of the Merger

17

JMP’s Reasons for the Merger

20

Recommendation of the JMP Board of Directors

22

Opinion of the Special Transaction Committee’s Financial Advisor

22

Certain JMP Unaudited Prospective Financial Information

28

Interests of Certain Persons in the Merger

29

Merger-Related Compensation for JMP’s Named Executive Officers

31

No Citizens Shareholder Approval

32

Manner and Procedure for Exchanging Shares of JMP Stock

32

Litigation Related to the Merger

32

Regulatory Approvals

33

Merger Expenses, Fees and Costs

33

Appraisal Rights

33

Delisting and Deregistration of JMP Common Shares

35

THE MERGER AGREEMENT

36

The Merger

36

Closing

36

Effective Time

36

Merger Consideration

36

Treatment of JMP Equity-Based Awards

36

Conversion of Shares; Exchange of Certificates

37

Representations and Warranties

37

Conduct of Business Prior to Closing

39

Agreement to Use Reasonable Best Efforts

41

Agreement Not to Solicit Other Offers

41

 

i

 

 

JMP Employee Benefits Matters

42

Other Covenants and Agreements

43

Conditions to Complete the Merger

44

Termination of the Merger Agreement

45

Effect of Termination

45

Expenses and Fees

45

Certificate of Formation and LLC Agreement of the Surviving Company

46

Managers and Officers of the Surviving Company

46

Governing Law

46

Specific Performance

46

Amendment, Waiver and Extension of the Merger Agreement

46

OTHER AGREEMENTS RELATED TO THE MERGER

47

The Voting Agreements

47

MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER

48

PROPOSAL TWO:  ADVISORY VOTE ON MERGER-RELATED COMPENSATION FOR JMP’S NAMED EXECUTIVE OFFICERS

50

PROPOSAL THREE:  THE ADJOURNMENT

51

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

52

OTHER MATTERS

54

Other Business

54

Important Notice Regarding Availability of Proxy Materials for the Special Meeting of Shareholders to be Held on November 12, 2021

54

Householding

54

Communicating with the Board of Directors

54

FUTURE SHAREHOLDER PROPOSALS

54

WHERE YOU CAN FIND MORE INFORMATION

55

 

 

 

 

ANNEX A         Agreement and Plan of Merger

ANNEX B         Opinion of Keefe, Bruyette & Woods, Inc.

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

 

ii

 

 

 

QUESTIONS AND ANSWERS ABOUT THE MERGER AND SPECIAL MEETING

 

The following are some questions that you, as a JMP shareholder, may have regarding the merger and the other matters being considered at JMPs Special Meeting of Shareholders, which is referred to as the Special Meeting, and the answers to those questions. You are urged to carefully read this proxy statement and the other documents referred to in this proxy statement in their entirety because the information in this section does not provide all of the information that might be important to you with respect to the merger and the other matters being considered at the Special Meeting. Additional important information is contained in the annexes to this proxy statement. In this proxy statement, unless stated to the contrary or the context requires otherwise, the terms the Company, we, our, ours, and us refer to JMP and its subsidiaries.

 

Q:

Why am I receiving this proxy statement?

 

A:

Citizens and JMP have agreed to a merger. Under the terms of the merger agreement that is described in this proxy statement, JMP will become a wholly-owned subsidiary of Citizens through the merger (described below) and its common shares will no longer be a publicly held. See “Proposal One: The Merger” and “The Merger Agreement.” A copy of the merger agreement is attached to this proxy statement as Annex A. This proxy statement contains important information about Citizens, JMP, the Special Meeting, the merger agreement, and the merger. It is the proxy statement by which the JMP board of directors is soliciting proxies from you to vote on a proposal to adopt the merger agreement and thereby to approve the transactions contemplated by the merger agreement, including the merger, and the any other matters to be voted on at the Special Meeting or at any adjournment or postponement of the Special Meeting.

 

You are receiving this proxy statement because you have been identified as a shareholder of JMP and may be entitled to vote at the upcoming Special Meeting. To complete the merger, the holders of a majority of the outstanding common shares of JMP must vote to adopt the merger agreement and thereby to approve the transactions contemplated by the merger agreement, including the merger, and all other conditions to the merger must be satisfied or waived. You should read this proxy statement carefully.

 

Q:

What will happen in the proposed merger?

 

A:

In the merger, Merger Sub, a wholly-owned subsidiary of Citizens, will merge with and into JMP. As a result, JMP will become a wholly-owned subsidiary of Citizens and JMP common shares will no longer be publicly held. See “Proposal One: The Merger—Structure of the Merger.”

 

Q:

What will I be entitled to receive in the merger?

 

A:

If the merger is completed, for each common share of JMP other than shares owned by JMP as treasury stock, common shares of JMP owned by Citizens, shares for which appraisal rights have been properly exercised and perfected under the General Corporation Law of the State of Delaware (the “DGCL”) and the Amended and Restated Limited Liability Company Agreement (the “JMP LLC Agreement”), and certain common shares of JMP subject to continuing option and RSU awards (each as defined below) that you own, you will have the right to receive cash consideration of $7.50.

 

Q:

How will the merger affect JMP equity awards?

 

A:

The equity awards will be affected as follows:

 

Treatment of JMP Options. At the effective time of the merger, each outstanding option to purchase JMP common shares, whether vested or unvested, will be converted into an option to purchase a number of shares of common stock of Citizens, par value $0.01 per share equal to the product (rounded down to the nearest whole number) of the total number of common shares subject to the option immediately prior to the effective time of the merger multiplied by the per share merger consideration of $7.50 divided by the volume weighted average of the closing sale prices per share of Citizens common stock on the New York Stock Exchange (the “NYSE”) for the five full consecutive trading days ending on and including the third business day prior to the closing date, what we refer to as the “Equity Award Exchange Ratio,” at an exercise price per share (rounded up to the nearest whole cent) equal to the exercise price per share of the common shares subject to the option immediately prior to the effective time of the merger divided by the Equity Award Exchange Ratio. Except as otherwise provided, each such option to purchase JMP common shares converted to an option to purchase Citizens shares will continue to be governed by the same terms and conditions (including vesting and exercisability terms) as were applicable to the JMP option immediately prior to the effective time of the merger.

 

Treatment of JMP RSU Awards. At the effective time of the merger, each outstanding JMP restricted stock unit, which we refer to as a JMP RSU, whether vested or unvested, will be converted into a restricted stock unit award representing the right to receive the number of denominated shares of Citizens common stock. The number of shares of Citizens common stock subject to such JMP RSU converted to Citizens RSU will be equal to the product (rounded down to the nearest whole number) of the total number of common shares subject to such JMP RSU award immediately prior to the effective time of the merger multiplied by the Equity Award Exchange Ratio. Except as otherwise provided, each JMP RSU converted to Citizens RSU shall continue to be governed by the same terms and conditions (including vesting and settlement terms) as were applicable to such JMP RSU immediately prior to the effective time of the merger.

 

Under the terms of the JMP Amended and Restated Equity Incentive Plan and Sections 4.3(a) and (b) of the merger agreement, converted option and RSU awards are subject to accelerated vesting on a termination of the holder’s employment without cause within the 12 months following closing (See “Proposal One: The Merger—Merger-Related Compensation for JMP’s Named Executive Officers” on page 31).

 

1

 

 

Q:

When do you expect the merger to be completed?

 

A:

Citizens and JMP are working toward completing the merger as quickly as possible. The merger is expected to close during the fourth quarter of 2021, subject to receipt of JMP shareholder approval, governmental and regulatory approvals, and other usual and customary closing conditions. However, no assurance can be given as to when, or if, the merger will occur.

 

Q:

Are there conditions to completing the merger?

 

A:

Yes. Citizens and JMP’s respective obligations to complete the merger are subject to the satisfaction or waiver of certain specified closing conditions. See “The Merger Agreement—Conditions to Complete the Merger.”

 

Q:

What happens if the merger is not completed?

 

A:

If the merger agreement is not adopted and the transactions contemplated thereby, including the merger, are not approved by JMP shareholders or if the merger is not completed for any other reason, you will not receive any payment for your common shares of JMP in connection with the merger. Instead, JMP will remain an independent public company and its common shares will continue to be listed and traded on the NYSE. If the merger agreement is terminated under specified circumstances, JMP may be required to pay Citizens a termination fee of 4% of the aggregate merger consideration, as described under “The Merger Agreement—Expenses and Fees—Termination Fees Payable by JMP” beginning on page 46.

 

Q:

Am I entitled to appraisal rights?

 

A:

JMP shareholders will have the right to demand appraisal of their common shares of JMP and obtain payment in cash for the fair value of their shares, but only if they perfect their appraisal rights and comply with the applicable provisions of Delaware law and the JMP LLC Agreement. A copy of the Delaware statutory provisions related to appraisal rights is attached as Annex C to this proxy statement, and a summary of these provisions can be found under “Proposal One: The Merger—Appraisal Rights” beginning on page 33. Due to the complexity of the procedures for exercising the right to seek appraisal, JMP shareholders who are considering exercising such rights are encouraged to seek the advice of legal counsel. Failure to strictly comply with the applicable provisions of the Delaware General Corporate Law and the JMP LLC Agreement will result in the loss of the right of appraisal.

 

Q:

What are the tax consequences of the merger to me?

 

A:

If you are a U.S. holder (as defined in the section entitled “Material United States Federal Income Tax Consequences of the Merger” beginning on page 48), the receipt of cash in exchange for common shares pursuant to the merger will generally result in the recognition of gain or loss in an amount measured by the difference, if any, between the amount of cash that such U.S. Holder receives in the merger and such U.S. Holder’s adjusted tax basis in the common shares surrendered in the merger.

 

A Non-U.S. Holder (as defined in the section entitled “Material United States Federal Income Tax Consequences of the Merger” beginning on page 48) generally will not be subject to U.S. federal income tax with respect to the exchange of common shares for cash in the merger unless such Non-U.S. Holder has certain connections to the United States, but may be subject to backup withholding tax unless the Non-U.S. Holder complies with certain certification procedures or otherwise establishes a valid exemption from backup withholding tax.

 

Because particular circumstances may differ, we recommend that you consult your own tax advisor to determine the U.S. federal income tax consequences relating to the merger in light of your own particular circumstances and any consequences arising under U.S. federal non-income tax laws or the laws of any state, local or foreign taxing jurisdiction. This discussion is provided for general information only and does not constitute legal advice to any holder. A more complete description of material U.S. federal income tax consequences of the merger is provided in the section of this proxy statement entitled “Material United States Federal Income Tax Consequences of the Merger.” beginning on page 48.

 

Q:

What shareholder approvals are required for the merger?

 

A:

To adopt the merger agreement and thereby to approve the transactions contemplated by the merger agreement, including the merger, the holders of a majority of the outstanding common shares of JMP must vote “FOR” the adoption of the merger agreement and thereby the approval of the transactions contemplated by the merger agreement, including the merger. Only holders of record of JMP common shares at the close of business on October 11, 2021, referred to in this proxy statement as the record date, are entitled to notice of and to vote at the Special Meeting. As of the record date, there were 19,958,495 common shares of JMP outstanding and entitled to vote at the Special Meeting. Failure to vote your shares, abstentions, and broker non-votes will have the same effect as voting “AGAINST” the proposal to adopt the merger agreement and thereby to approve the transactions contemplated by the merger agreement, including the merger. See “The Special Meeting—Quorum; Vote Required; Abstentions; Voting of Proxies by Holders of Record; Shares Held in Street Name” beginning on page 14.

 

Q:

What shareholder approvals are required for the proposal to approve, by non-binding advisory vote, certain compensation arrangements?

 

A:

The affirmative vote of holders of a majority of the common shares of JMP represented (in person or by proxy) at the Special Meeting and entitled to vote on the proposal is required for such proposal to pass. For the proposal to approve, by non-binding advisory vote, certain compensation arrangements for JMP’s named executive officers in connection with the merger, any common share of JMP represented in person or by proxy at the Special Meeting but abstaining from voting will have the same effect as a vote cast “AGAINST” this proposal. Common shares of JMP not represented in person or by proxy at the Special Meeting and broker non-votes will have no effect on the vote count for this proposal.

 

2

 

 

Q:

What shareholder approvals are required for the adjournment of the Special Meeting, if necessary, for any purpose, including to solicit additional proxies in favor of the adoption of the merger agreement and thereby the approval of the transactions contemplated by the merger agreement, including the merger?

 

A:

Whether or not a quorum will be present at the meeting, the affirmative vote of a majority of the common shares of JMP represented (in person or by proxy) at the Special Meeting and entitled to vote on the proposal is required for such proposal to pass. For the proposal to adjourn the Special Meeting, any common share of JMP represented in person or by proxy at the Special Meeting, but abstaining from voting will have the same effect as a vote cast “AGAINST” this proposal. Common shares of JMP not represented in person or by proxy at the Special Meeting and broker non-votes will have no effect on the proposal to adjourn the Special Meeting. See “The Special Meeting—Quorum; Vote Required; Abstentions” beginning on page 14.

 

Q:

Why am I being asked to consider and vote on a proposal to approve, by non-binding advisory vote, certain compensation arrangements for JMPs named executive officers in connection with the merger?

 

A:

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (which we refer to as the Dodd-Frank Act) and the Securities Exchange Act of 1934, as amended (which we refer to as the Exchange Act) rules require us to seek a non-binding, advisory vote with respect to the compensation that may be paid or become payable to our named executive officers that is based on or otherwise relates to the merger, which is referred to as “golden parachute” compensation.

 

Q:

What will happen if JMPs shareholders do not approve the golden parachute compensation?

 

A:

Approval of the compensation that may be paid or become payable to JMP’s named executive officers that is based on or otherwise relates to the merger is not a condition to completion of the merger. The vote is an advisory vote and will not be binding on JMP or the surviving corporation. Therefore, if the merger agreement is adopted by JMP’s shareholders and the merger is completed, this compensation, including amounts that JMP is contractually obligated to pay, could still be payable regardless of the outcome of the advisory vote.

 

Q:

What do I need to do now?

 

A:

Please carefully review this proxy statement and vote the proxy card or voting instruction card you receive as soon as possible. Your proxy card or voting instruction card must be received, or you must vote using the telephone or the Internet if available, no later than 11:59 p.m., Pacific time, on November 11, 2021 in order for your shares to be voted at the Special Meeting, unless you attend and vote at the Special Meeting.

 

Q:

How does the JMP board of directors recommend I vote on the merger, golden parachute and adjournment proposals?

 

A:

After careful consideration, the JMP board of directors, acting upon the unanimous recommendation of its committee of independent directors, has unanimously determined that the merger and the merger agreement are advisable, and are fair to, and in the best interests of, JMP and its shareholders and approved the merger agreement and the merger. Accordingly, the JMP board of directors recommends that you vote FOR the proposal to adopt the merger agreement and thereby to approve the transactions contemplated by the merger agreement, including the merger, FOR the proposal to approve, by non-binding advisory vote, certain compensation arrangements for JMP’s named executive officers in connection with the merger, and FOR the adjournment of the Special Meeting, if necessary, for any purpose, including to solicit additional proxies in favor of the adoption of the merger agreement and thereby the approval of the transactions contemplated by the merger agreement, including the merger. See “Proposal One: The Merger—JMP’s Reasons for the Merger; Recommendation of the JMP Board of Directors” beginning on page 20.

 

Q:

Why is it important for me to vote?

 

A:

JMP and Citizens cannot complete the merger without the approval of holders of a majority of the outstanding common shares of JMP. Therefore, any shares that are not voted will have the same effect as a vote “AGAINST” the merger.

 

Q:

Do I need to send in my JMP share certificates now?

 

A:

No. If the merger is consummated, instructions will be sent to holders of physical JMP share certificates regarding the exchange of your JMP share certificates for the merger consideration payable to you in the merger.

 

Q:

When and where will the Special Meeting be held?

 

A:

The Special Meeting will take place on November 12, 2021, at 600 Montgomery Street, Suite 1100, San Francisco, CA 94111 commencing at 9:00 a.m., Pacific time.

 

3

 

 

Q:

What matters will be voted on at the Special Meeting?

 

A:

You will be asked to vote on the following proposals:

 

 

1.

To consider and vote on a proposal to adopt the Agreement and Plan of Merger, dated as of September 8, 2021 (as it may be amended from time to time), among Citizens, Merger Sub and JMP, and thereby to approve the transactions contemplated by the merger agreement, including the merger of Merger Sub with and into JMP;

 

 

2.

To approve, by non-binding advisory vote, certain compensation arrangements for JMP’s named executive officers in connection with the merger; and

 

 

3.

To approve the adjournment of the Special Meeting, if necessary, for any purpose, including to solicit additional proxies if there are not sufficient votes to adopt the merger agreement and thereby to approve the transactions contemplated by the merger agreement, including the merger, at the time of the Special Meeting.

 

Q:

What vote is needed for each proposal?

 

A:

The following are the vote requirements for the various proposals:

 

 

Adoption of the Merger Agreement and Thereby the Approval of the Transactions Contemplated by the Merger Agreement, Including the Merger: You may vote “FOR,” “AGAINST” or “ABSTAIN” with respect to the adoption of the merger agreement and thereby the approval of the transactions contemplated by the merger agreement, including the merger. To adopt the merger agreement and thereby to approve the transactions contemplated by the merger agreement, including the merger, the holders of a majority of the outstanding common shares of JMP must vote “FOR” the adoption of the merger agreement and thereby the approval of the transactions contemplated by the merger agreement, including the merger. Failure to vote your shares, broker non-votes, and abstentions will have the same effect as voting “AGAINST” the adoption of the merger agreement and thereby the approval of the transactions contemplated by the merger agreement, including the merger.

 

 

Approval, by a Non-Binding Advisory Vote, of Certain Compensation Arrangements. You may vote “FOR,” “AGAINST” or “ABSTAIN” with respect to the compensation proposal at the Special Meeting. The affirmative vote of a majority of the common shares of JMP represented (in person or by proxy) at the Special Meeting and entitled to vote on the proposal is required for such proposal to pass. For the proposal to approve, by non-binding advisory vote, certain compensation arrangements for JMP’s named executive officers in connection with the merger any common share of JMP represented in person or by proxy at the Special Meeting but abstaining from voting will have the same effect as a vote cast “AGAINST” this proposal. Common shares of JMP not represented in person or by proxy at the Special Meeting and broker non-votes will have no effect on the vote count for the JMP proposal to approve, by non-binding advisory vote, certain compensation arrangements for JMP’s named executive officers in connection with the merger.

 

 

Approval of the Adjournment of the Special Meeting. You may vote “FOR,” “AGAINST” or “ABSTAIN” with respect to the adjournment proposal at the Special Meeting. The affirmative vote of a majority of the common shares of JMP represented (in person or by proxy) at the Special Meeting and entitled to vote on the proposal is required for such proposal to pass. For the proposal to adjourn the Special Meeting, any common share of JMP represented in person or by proxy at the Special Meeting but abstaining from voting will have the same effect as a vote cast “AGAINST” this proposal. Common shares of JMP not represented in person or by proxy at the Special Meeting and broker non-votes will have no effect on the proposal to adjourn the Special Meeting.

 

Q:

Who can vote at the Special Meeting?

 

A:

JMP shareholders of record at the close of business on the record date are entitled to vote at the Special Meeting.

 

Q:

What is the record date for the Special Meeting?

 

A:

The record date for the Special Meeting is October 11, 2021.

 

Q:

What constitutes a quorum for purposes of the Special Meeting?

 

A:

The holders of shares entitled to cast a majority of the total votes of the outstanding common shares of JMP on October 11, 2021, the record date, present in person or represented by proxy at the Special Meeting and entitled to vote, will constitute a quorum for the transaction of business at the Special Meeting. Abstentions are counted for purposes of determining the presence or absence of a quorum for the transaction of business.

 

Q:

How can I vote?

 

A:

If you are a shareholder of record, you may submit a proxy for the Special Meeting by: (1) completing, signing, dating, and returning the proxy card in the pre-addressed envelope provided; (2) using the telephone; or (3) using the Internet. For specific instructions on how to use the telephone or the Internet to submit a proxy for the Special Meeting, please refer to the instructions on your proxy card.

 

If you hold your common shares of JMP in a stock brokerage account or if your shares are held by a bank or nominee (i.e., in “street name”), you must provide the shareholder of record of your shares with instructions on how to vote your shares. Please check the voting instruction card used by your broker or nominee to see if you may use the telephone or the Internet to provide instructions on how to vote your shares.

 

4

 

 

If you are a shareholder of record, you may also vote in person at the Special Meeting. If you hold shares in a stock brokerage account or if your shares are held by a bank or nominee (i.e., in “street name”), you may not vote in person at the Special Meeting unless you obtain a signed proxy from the shareholder of record giving you the right to vote the shares (i.e., a “legal proxy”). You will also need to present photo identification and comply with the other procedures described in “The Special Meeting—Date, Time and Place; Attending the Special Meeting” on page 14. Giving a proxy will not affect your right to vote your JMP shares if you attend the Special Meeting and want to vote in person.

 

Q:

What is the difference between holding shares as a shareholder of record and as a beneficial owner?

 

A:

Many JMP shareholders hold their shares through a broker, bank or other nominee rather than directly in their own name. There are some important distinctions between shares held of record and shares beneficially owned.

 

Shareholder of Record: If your shares are registered directly in your name with JMP’s transfer agent, American Stock Transfer & Trust Company, LLC, you are considered the shareholder of record with respect to those shares and this proxy statement is being sent directly to you by JMP. As a shareholder of record, you have the right to grant your proxy directly to JMP or to vote in person at the Special Meeting. JMP has enclosed a proxy card for your use.

 

Beneficial Owner: If your shares are held in a brokerage account, bank account, or by another nominee, you are considered the beneficial owner of shares held in “street name,” and this proxy statement is being forwarded to you by your broker, bank, or nominee together with a voting instruction card. As the beneficial owner, you have the right to direct your broker, bank, or other nominee how to vote and are also invited to attend the Special Meeting. However, since you are not the shareholder of record, you may not vote your shares in person at the Special Meeting unless you obtain a legal proxy from the broker, bank, or nominee that holds your shares, giving you the right to vote the shares instead of the broker, bank, or nominee holding your shares. Your broker, bank or nominee has enclosed voting instructions for your use in directing your broker, bank, or nominee how to vote your shares.

 

Q:

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

 

A:

If you hold shares directly as a shareholder of record and also in “street name,” or otherwise through a nominee, you may receive more than one proxy statement and/or set of voting instructions relating to the meeting. These should each be voted and/or returned separately in order to ensure that all of your shares are voted.

 

Q:

What happens if I dont indicate how to vote on my proxy card?

 

A:

If you sign and send in your proxy card and do not indicate how you want to vote, your proxy will be counted voted as the JMP board of directors recommends, which is:

 

 

FOR the adoption of the merger agreement and thereby the approval of the transactions contemplated by the merger agreement, including the merger;

 

 

FOR the approval, by non-binding advisory vote, of certain compensation arrangements for JMP’s named executive officers in connection with the merger; and

 

 

FOR the approval of the adjournment of the Special Meeting, if necessary, for any purpose, including to solicit additional proxies if there are not sufficient votes to adopt the merger agreement and thereby to approve the transactions contemplated by the merger agreement, including the merger.

 

Q:

What happens if I do not vote?

 

A:

If you do not sign and send in your proxy card, vote using the telephone or the Internet or vote at the Special Meeting, or submit voting instructions, as applicable, it will have the effect of a vote “AGAINST” the adoption of the merger agreement and thereby the approval of the transactions contemplated by the merger agreement, including the merger. Common shares of JMP not represented in person or by proxy at the Special Meeting will have no effect on the vote count for the JMP proposal to adjourn the Special Meeting. See “The Special Meeting—Quorum; Vote Required; Abstentions; Voting of Proxies by Holders of Record; Shares Held in Street Name” beginning on page 14.

 

Q:

What happens if I abstain?

 

A:

Abstentions are counted as present and entitled to vote for purposes of determining a quorum. For each of the proposals to be considered at the meeting, including the proposal to adopt the merger agreement and thereby to approve the transactions contemplated by the merger agreement, including the merger, the proposal to approve, by non-binding advisory vote, certain compensation arrangements for JMP’s named executive officers in connection with the merger and the adjournment proposal, abstentions have the same effect as a vote “AGAINST” such proposals.

 

Q:

If my shares are held in street name by my broker, will my broker automatically vote my shares for me?

 

A:

No. If your shares are held in an account at a broker, you must instruct the broker on how to vote your shares. If you do not provide voting instructions to your broker, your shares will not be voted on any proposal on which your broker does not have discretionary authority to vote. This is called a broker non-vote. Under the current rules of the NYSE, brokers do not have discretionary authority to vote on the proposal to adopt the merger agreement and thereby to approve the transactions contemplated by the merger agreement, including the merger, or to vote on the proposal to approve, by non-binding advisory vote, certain compensation arrangements for JMP’s named executive officers in connection with the merger, or the adjournment proposal. Accordingly, a broker non-vote will have the same effect as a vote “AGAINST” adoption of the merger agreement and thereby the approval of the transactions contemplated by the merger agreement, including the merger. Broker non-votes will have no effect on the proposal to approve, by non-binding advisory vote, certain compensation arrangements or the proposal to adjourn the Special Meeting.

 

5

 

 

Q:

Can I change my vote after I have voted?

 

A:

Yes. JMP shareholders of record may revoke their proxies at any time prior to the time their proxies are voted at the Special Meeting. Proxies may be revoked by written notice to the corporate secretary of JMP, by a later-dated proxy signed and returned by mail, or by attending the Special Meeting and voting in person. However, attending the Special Meeting without voting will not revoke your previously submitted proxy. JMP shareholders of record may also revoke proxies by a later-dated proxy using the telephone or the Internet voting procedures described on their proxy cards.

 

JMP shareholders whose shares are held in the name of a broker, bank, or nominee may change their votes by submitting new voting instructions to their brokers, banks, or nominees. Those JMP shareholders may not vote their shares in person at the Special Meeting unless they obtain a signed legal proxy from the shareholder of record giving them the right to vote their shares.

 

Q:

Who will count the votes?

 

A:

JMP has retained Broadridge Financial Solutions to receive and tabulate the votes in connection with the Special Meeting. Our corporate secretary will utilize such tabulations and serve as our election inspector who will certify the results and perform any other acts required by the JMP LLC Agreement, the Delaware Limited Liability Company Act (the “DLLCA”) and the DGCL.

 

Q:

What do I do if I have questions?

 

A:

If you have any questions about the Special Meeting or if you need additional copies of this proxy statement, you should contact:

 

Andrew Palmer, Director of Investor Relations, at 415-835-8978 or apalmer@jmpg.com.

 

If your broker, bank or other nominee holds your shares, you may call your broker, bank, or other nominee for additional information.

 

The merger has not been approved or disapproved by the U.S. Securities and Exchange Commission (referred to as the SEC) or any state securities commission. Neither the SEC nor any state securities commission has passed upon the merits or fairness of the merger or upon the adequacy or accuracy of the information contained in this proxy statement. Any representation to the contrary is a criminal offense.

 

6

 

 

 

SUMMARY

 

This summary highlights selected information from this proxy statement and may not contain all of the information that is important to you. You are encouraged to read carefully this entire proxy statement and the other documents referred to in this proxy statement because the information in this section does not provide all of the information that might be important to you with respect to the merger agreement, the merger and the other matters being considered at the Special Meeting. See Where You Can Find More Information on page 55. The merger agreement is attached as Annex A to this proxy statement and is incorporated herein by reference. You are encouraged to read it, as it is the most important legal document that governs the merger. Page references are included in parentheses to direct you to a more complete description contained elsewhere in this proxy statement of the topics presented in this summary. In addition, JMP encourages you to read the information incorporated by reference into this proxy statement, which includes important information about Citizens and JMP that has been filed with the U.S. Securities and Exchange Commission, which is referred to as the SEC in this proxy statement. You may obtain the information incorporated by reference into this proxy statement without charge by following the instructions in the section titled Where You Can Find More Information beginning on page 55 of this proxy statement.

 

The Companies

 

Citizens

One Citizens Plaza

Providence, RI 02903

(203) 900-6715

 

Citizens (NYSE: CFG) is a bank holding company incorporated under Delaware state law in 1984 and whose primary federal regulator is the Board of Governors of the Federal Reserve System. Citizens Bank, N.A., is Citizens’ banking subsidiary, whose primary federal regulator is the Office of the Comptroller of the Currency.

 

Citizens is one of the nation’s oldest and largest financial institutions. Headquartered in Providence, Rhode Island, Citizens offers a broad range of retail and commercial banking products and services to individuals, small businesses, middle-market companies, large corporations and institutions. In consumer banking, Citizens provides an integrated experience that includes mobile and online banking, a 24/7 customer contact center as well as the convenience of approximately 3,000 ATMs and 1,000 branches in 11 states in the New England, Mid-Atlantic, and Midwest regions. Consumer banking products and services include a full range of banking, lending, savings, wealth management and small business offerings. In commercial banking, Citizens offers corporate, institutional and not-for-profit clients a full range of wholesale banking products and services including lending and deposits, capital markets, treasury services, foreign exchange and interest rate products, and asset finance. At June 30, 2021, Citizens had total assets of $185.1 billion, total deposits of $150.6 billion and total stockholders’ equity of $23.2 billion.

 

JMP Group LLC

600 Montgomery Street

Suite 1100

San Francisco, CA 94111

(415) 835-8900

 

JMP Group LLC (NYSE: JMP), together with its subsidiaries, is a diversified capital markets firm. JMP provides investment banking, sales and trading, and equity research services to corporate and institutional clients as well as alternative asset management products and services to institutional investors and high-net-worth individuals.

 

JMP currently operates from its headquarters in San Francisco and from additional offices in New York, Boston, Chicago and the Minneapolis area. JMP focuses on four target industries—technology, healthcare, financial services and real estate—and on four revenue-producing business lines—investment banking, sales and trading, equity research and asset management. JMP provides its corporate clients with a wide variety of services, including strategic financial advice and capital raising solutions, sales and trading support, and equity research coverage. JMP provides institutional investors with capital markets intelligence and investment recommendations about individual equities that are not widely followed. JMP believes that its concentration on small and middle-market companies, as well as its broad range of product offerings, positions JMP as a leader in what has traditionally been an underserved, though high-growth, market.

 

JMP conducts its investment banking and institutional brokerage business through JMP Securities LLC (“JMP Securities”); its asset management business through Harvest Capital Strategies LLC and JMP Asset Management LLC; and certain principal investments through JMP Investment Holdings LLC, JMP Capital LLC and other subsidiaries.

 

Additional information about JMP and its subsidiaries is included in documents incorporated by reference into this proxy statement. See “Where You Can Find More Information” beginning on page 55.

 

7

 

 

Jolt Acquisition LLC

 

Jolt Acquisition LLC, a Delaware limited liability company, sometimes referred to in this proxy statement as Merger Sub, is a newly-formed and wholly-owned subsidiary of Citizens. If Citizens and JMP complete the merger, Merger Sub will be merged with and into JMP, with JMP becoming a wholly-owned subsidiary of Citizens. Merger Sub was organized solely for use in the merger. Merger Sub has not carried on any activities to date, except for activities incidental to its formation and activities undertaken in connection with the transactions contemplated by the merger agreement.

 

The Merger

(See page 36)

 

Citizens and JMP agreed to the acquisition of JMP by Citizens under the terms of the merger agreement that is described in this proxy statement. Pursuant to the merger agreement, Merger Sub will merge with and into JMP, with JMP continuing as a wholly-owned subsidiary of Citizens.
 
We have attached the merger agreement as Annex A to this proxy statement. We encourage you to read carefully the merger agreement in its entirety because it is the legal document that governs the merger.

 

Effects of the Merger; Merger Consideration

(See page 36)

 

In the merger, each issued and outstanding common share of JMP (other than (i) shares owned by JMP or any direct or indirect wholly-owned subsidiary of JMP, (ii) shares owned by Citizens or any direct or indirect wholly-owned subsidiary of Citizens, in each case, excluding shares held on behalf of third parties, and, (iii) shares for which appraisal rights have been properly exercised and perfected under the General Corporation Law of the State of Delaware and the JMP LLC Agreement (we refer to the shares described in the foregoing clauses (i), (ii) and (iii) as the excluded shares)) will be automatically converted into the right to receive cash consideration of $7.50, referred to as the “merger consideration”.

 

For a full description of the merger consideration, see “The Merger Agreement—Merger Consideration” beginning on page 36 of this proxy statement.

 

Treatment of JMP Equity-Based Awards

(See page 36)

 

Treatment of JMP Options. At the effective time of the merger, each outstanding option to purchase JMP common shares, whether vested or unvested, will be converted into an option to purchase a number of shares of common stock of Citizens, par value $0.01 per share equal to the product (rounded down to the nearest whole number) of the total number of common shares subject to the option immediately prior to the effective time of the merger multiplied by the per share merger consideration of $7.50 divided by the volume weighted average of the closing sale prices per share of Citizens common stock on the NYSE for the five full consecutive trading days ending on and including the third business day prior to the closing date, what we refer to as the “Equity Award Exchange Ratio,” at an exercise price per share (rounded up to the nearest whole cent) equal to the exercise price per share of the common shares subject to the option immediately prior to the effective time of the merger divided by the Equity Award Exchange Ratio. Except as otherwise provided, each such option to purchase JMP common shares converted to an option to purchase Citizens shares will continue to be governed by the same terms and conditions (including vesting and exercisability terms) as were applicable to the JMP option immediately prior to the effective time of the merger.

 

Treatment of JMP RSU Awards. At the effective time of the merger, each outstanding restricted stock unit award (referred to as an JMP RSU), whether vested or unvested, will be converted into a restricted stock unit award representing the right to receive the number of denominated shares of Citizens common stock (referred to as a Citizens RSU). The number of shares of Citizens common stock subject to such JMP RSU converted to Citizens RSU will be equal to the product (rounded down to the nearest whole number) of the total number of common shares subject to such JMP RSU award immediately prior to the effective time of the merger multiplied by the Equity Award Exchange Ratio. Except as otherwise provided, each JMP RSU converted to a Citizens RSU will continue to be governed by the same terms and conditions (including vesting and settlement terms) as were applicable to such JMP RSU immediately prior to the effective time of the merger.

 

Under the terms of JMP’s Amended and Restated Equity Incentive Plan and Sections 4.3(a) and (b) of the merger agreement, converted option and RSU awards are subject to accelerated vesting on a termination of the holder’s employment without cause in the 12 months following closing (see, “Proposal One: The Merger—Merger-Related Compensation for JMP’s Named Executive Officers” on page 31).

 

The Special Meeting; JMP Shareholders Entitled to Vote; Required Vote

(See page 14)

 

The Special Meeting of JMP shareholders will be held on November 12, 2021 at 9:00 a.m., Pacific Time, at 600 Montgomery Street, Suite 1100, San Francisco, CA 94111. At the Special Meeting, JMP shareholders will be asked to:

 

 

1.

consider and vote on a proposal to adopt the merger agreement and thereby to approve the transactions contemplated by the merger agreement, including the merger;

 

 

2.

approve, by non-binding advisory vote, certain compensation arrangements for JMP’s named executive officers in connection with the merger; and

 

 

3.

approve the adjournment of the Special Meeting, if necessary, for any purpose, including to solicit additional proxies if there are not sufficient votes to adopt the merger agreement and thereby to approve the transactions contemplated by the merger agreement, at the time of the Special Meeting.

 

8

 

 

The close of business on October 11, 2021 was the record date for the Special Meeting. Only JMP shareholders on the record date are entitled to notice of and to vote at the Special Meeting. Each common share of JMP will be entitled to one vote on each matter to be acted upon at the Special Meeting. On the record date, there were 19,958,495 common shares of JMP outstanding and entitled to vote at the Special Meeting.
 
The approval of holders of a majority of the outstanding common shares of JMP is required to adopt the merger agreement and thereby to approve the transactions contemplated by the merger agreement, including the merger. The approval of the affirmative vote of a majority of the common shares of JMP represented (in person or by proxy) at the Special Meeting and entitled to vote on such proposal is required to adopt the proposal to approve, by non-binding advisory vote, certain compensation arrangements for JMP’s named executive officers in connection with the merger and, whether or not a quorum will be present at the meeting, for the adjournment proposal.

 

JMP Employee Benefits Matters

(See page 42)

 

Please refer to “The Merger Agreement—JMP Employee Benefits Matters” on page 42 for a discussion of the employee benefits to be provided to JMP employees, including any executive officers, who remain at Citizens or any of its subsidiaries following the merger.

 

All of the named executive officers are eligible to participate in our employee benefit plans, including medical, dental, life insurance and 401(k) plans. These plans are available to all salaried employees and do not discriminate in favor of executive officers. It is generally our policy not to extend significant perquisites to our executives that are not available to our employees generally. We have no current plans to make changes to levels of such benefits and perquisites provided to executives.

 

Recommendation of the JMP Board of Directors and JMPs Reasons for the Merger

(See page 20)

 

Acting upon the unanimous recommendation of its committee of independent directors, and after careful consideration of the numerous factors described in the section entitled “Proposal One: The Merger—JMP’s Reasons for the Merger; Recommendation of the JMP Board of Directors” beginning on page 20 of this proxy statement, the JMP board of directors has unanimously determined that the merger and the merger agreement are advisable, and are fair to, and in the best interests of, JMP and its shareholders. Accordingly, the JMP board of directors recommends that you vote FOR the proposal to adopt the merger agreement and thereby to approve the transactions contemplated by the merger agreement, including the merger.
 
In addition, the JMP board of directors recommends that you vote FOR the proposal to approve, by non-binding advisory vote, certain compensation arrangements for JMP’s named executive officers in connection with the merger.
 
Finally, the JMP board of directors recommends that you vote FOR the adjournment of the Special Meeting, if necessary, for any purpose, including to solicit additional proxies in favor of the adoption of the merger agreement and thereby the approval of the transactions contemplated by the merger agreement, including the merger.

 

Opinion of the Special Transaction Committees Financial Advisor

(See page 22)

 

In connection with the transaction, Keefe, Bruyette & Woods, Inc. (which we refer to as KBW), delivered a written opinion, dated September 7, 2021, to a committee of the JMP board of directors comprised of three independent directors (which we refer to as the Special Transaction Committee) and, at the request of the Special Transaction Committee, to JMP’s board of directors as to the fairness, from a financial point of view and as of the date of the opinion, of the $7.50 per share merger consideration to be received by the holders of JMP common shares in the merger. The full text of KBW’s written opinion, dated September 7, 2021, which describes the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by KBW in preparing the opinion, is attached to this proxy statement as Annex B. The opinion was for the information of, and was directed to, the Special Transaction Committee (in its capacity as such) and, as requested by the Special Transaction Committee, JMPs board of directors in connection with their respective consideration of the financial terms of the merger. KBWs opinion did not address the underlying business decision to engage in the merger or enter into the merger agreement or constitute a recommendation to the Special Transaction Committee or the JMP board of directors in connection with the merger, and it does not constitute a recommendation to any holder of JMP common shares as to how to vote in connection with the merger or any other matter, nor does it constitute a recommendation regarding whether or not any such shareholder should enter into a voting, shareholders, or affiliates or similar agreement with respect to the merger or exercise any dissenters or appraisal rights that may be available to such shareholder.

 

No Citizens Stockholder Approval

(See page 32)

 

Citizens’ stockholders are not required to adopt the merger agreement or approve the merger or the payment of the merger consideration.

 

9

 

 

Interests of Certain Persons in the Merger

(See page 29)

 

When considering the recommendation by the JMP board of directors to vote FOR the proposal to adopt the merger agreement and thereby to approve the transactions contemplated by the merger agreement, including the merger, you should be aware that directors and executive officers of JMP have interests in the merger, including financial interests, that may be different from, or in addition to, your interests. JMP directors and officers will also receive indemnification from Citizens, and Citizens has agreed to provide and pay for liability insurance benefits for members of the JMP board of directors and JMP officers. The Special Transaction Committee of independent directors of the JMP board of directors was aware of these interests and considered them in its recommendation to approve the merger agreement and the merger. The JMP board of directors was aware of these interests and considered them in approving the merger agreement and the merger.

 

Security Ownership by Directors and Executive Officers of JMP

(See page 52)

 

As of the record date for the Special Meeting, the directors and executive officers of JMP and their affiliates, as a group, beneficially owned and were entitled to vote approximately 58.8% of the outstanding common shares of JMP entitled to vote at the Special Meeting. The approval of the holders of a majority of the outstanding common shares of JMP is required to adopt the merger agreement and thereby to approve the transactions contemplated by the merger agreement, including the merger.

 

Delisting and Deregistration of JMP Common Shares

(See page 35)

 

If the merger is completed, JMP common shares will no longer be listed on the NYSE and will be deregistered under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), and JMP will no longer file periodic and current reports with the SEC related to the common shares.

 

Litigation Related to the Merger

(See page 32)

 

Following the filing of JMP’s preliminary proxy statement associated with the Merger with the SEC on October 5, 2021, two complaints have been filed against JMP and certain officers and directors thereof in connection with the Merger. The complaints allege that the preliminary proxy statement omits material information with respect to the Merger that renders the preliminary proxy statement false and misleading. The complaints seek, among other things, injunctive relief preventing the consummation of the Merger, rescission of the Merger if consummated or an award of rescissory damages, dissemination of a proxy statement that does not contain any untrue statements of material fact, declaration that the defendants violated Sections 14(a) and/or 20(a) of the Exchange Act as well as Rule 14a-9 promulgated under the Exchange Act, an award of compensatory damages, and an award of plaintiffs’ expenses and attorneys’ fees. JMP believes that the claims asserted in the complaints are without merit and no supplemental disclosure is required under applicable law, but cannot predict with certainty the results of the litigation.

 

Regulatory Approvals

(See page 33)

 

Citizens and JMP have both agreed to use their reasonable best efforts to apply for and obtain all regulatory approvals necessary or advisable in connection with the transactions contemplated by the merger agreement. On September 30, 2021, JMP made an application for regulatory approval from the Financial Industry Regulatory Authority (“FINRA”). We refer to this approval as the FINRA approval.
 
The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, or the HSR Act, prohibits Citizens and JMP from completing the merger until Citizens and JMP have furnished certain information and materials to the Antitrust Division of the Department of Justice and the Federal Trade Commission and the required waiting period has expired or been terminated. Citizens and JMP each filed the required notification and report forms on September 29, 2021.

 

Appraisal Rights

(See page 33)

 

JMP shareholders will have the right to demand appraisal of their common shares of JMP and obtain payment in cash for the fair value of their shares, but only if they perfect their appraisal rights and comply with the applicable provisions of Delaware law and the JMP LLC Agreement. A copy of the Delaware statutory provisions related to appraisal rights is attached as Annex C to this proxy statement, and a summary of these provisions can be found under “Proposal One: The Merger—Appraisal Rights” beginning on page 33. Due to the complexity of the procedures for exercising the right to seek appraisal, JMP shareholders who are considering exercising such rights are encouraged to seek the advice of legal counsel. Failure to strictly comply with the applicable provisions of the DGCL and the JMP LLC Agreement will result in the loss of the right of appraisal.

 

Conditions to Complete the Merger

(See page 44)

 

Each of Citizens’, Merger Sub’s and JMP’s obligation to effect the merger is subject to the satisfaction (or, to the extent permissible, waiver) of a number of conditions, including:
 
 

adoption of the merger agreement and thereby the approval of the transactions contemplated by the merger agreement, including the merger, by JMP’s shareholders in accordance with applicable law and JMP’s LLC Agreement;

 

 

the absence of any applicable law that prohibits the merger, makes the merger illegal or enjoins the consummation of the merger;

 

 

the requisite approvals under the HSR Act and the FINRA approval as well as any other authorizations, consents, orders, declarations or approvals of, or filings with various governmental authorities to the extent required by applicable law or the merger agreement having been obtained and remaining in full force and effect and all statutory waiting periods in respect thereof having expired ;

 

10

 

 

the accuracy of the representations and warranties of JMP or Citizens, as applicable, contained in the merger agreement, as of the date of the merger agreement and as of the closing date (except to the extent such representations and warranties speak as of an earlier date, in which case as of such earlier date), subject to the materiality standards provided in the merger agreement (and the receipt by each party of a certificate signed on behalf of the other party by an executive officer, dated as of the closing date, to such effect); 

 

 

the performance by the other party in all material respects of all obligations required to be performed by it under the merger agreement at or prior to the date on which the merger is completed (and the receipt by each party of an officers’ certificate from the other party to such effect); and

 

 

there not be any applicable law in effect that restrains, enjoins or otherwise prohibits consummation of the merger or other transactions contemplated by the merger agreement.

 

Citizens’ and Merger Sub’s obligation to effect the merger is also subject to the satisfaction (or, to the extent permissible, waiver) of the following conditions:

 

 

subsequent to the date of the merger agreement, no event having occurred or circumstance arisen that, individually or taken together with all other facts, circumstances or events, has had or would reasonably be expected to have a material adverse effect on JMP; and

 

 

there not be pending any proceeding, claim or action by any governmental authority, with a reasonable likelihood of success, that seeks to restrain, enjoin or otherwise prohibit consummation of the merger.

 

Expected Timing of the Merger

(See page 36)

 

Citizens and JMP are working toward completing the merger as quickly as possible. The merger is expected to close during the fourth quarter of 2021, subject to receipt of JMP shareholder approval, governmental and regulatory approvals and the satisfaction of other usual and customary closing conditions. However, no assurance can be given as to when, or if, the merger will occur.

 

Termination of the Merger Agreement

(See page 45)

 

Citizens and JMP may mutually agree to terminate the merger agreement before completing the merger, even after JMP shareholder approval. In addition, either of Citizens or JMP may terminate the merger agreement if:

 

 

the merger has not been completed by March 8, 2022 if the HSR and FINRA approvals have not been obtained and each other condition to consummate the merger has been satisfied, waived or remains capable of being satisfied (except that this right is not available to any party whose breach of the merger agreement resulted in failure of the merger to be consummated);

 

 

the approval of any governmental authority required for consummation of the merger or the other transactions contemplated by the merger agreement has been denied by final and nonappealable action of such governmental authority or an application has been permanently withdrawn by mutual agreement of Citizens and JMP at the request or suggestion of a governmental authority; or

 

 

at the JMP shareholder meeting (including any adjournment or postponement thereof), adoption of the merger agreement and thereby the approval of the transactions contemplated by the merger agreement, including the merger, by the JMP shareholders is not obtained.

 

Citizens may also terminate the merger agreement under the following circumstances:

 

 

at any time prior to the JMP shareholder approval, (i) JMP has breached in any material respect its obligation relating to non-solicitation of acquisition proposals, (ii) the board of directors of JMP fails to reaffirm its recommendation to approve the merger agreement as promptly as practicable, and in any event within five business days after receipt of any written request to do so by Citizens, or (iii) a tender offer or exchange offer for the outstanding common shares of JMP has been publicly disclosed and JMP’s board recommends that shareholders tender their shares in such tender or exchange offer or within ten business days after the commencement of such tender or exchange offer JMP’s board fails to recommend unequivocally against the acceptance of such offer; or

 

 

JMP breaches its representations, warranties, covenants or agreements under the merger agreement such that, if continued on the closing date, an applicable closing condition will not have been 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 Citizens or such shorter period remaining prior to the end date) so long as Citizens is not then in material breach of any representation or warranty, covenant or agreement.

 

JMP may terminate the merger agreement if:

 

 

at any time prior to the JMP shareholder approval, the board of directors of JMP changes its recommendation with respect to the merger agreement in order for JMP to accept a superior proposal, as defined in the merger agreement, and JMP, subject to complying with the terms of the merger agreement, concurrently enters into a binding written agreement providing for the consummation of such superior proposal, but only if JMP pays any amounts due as described under “Proposal One: The Merger—Expenses and Fees—Termination Fees Payable by JMP” immediately before or simultaneous with, and as a condition to any such termination; or

 

 

Citizens or Merger Sub breaches any of its representations, warranties, covenants or agreements under the merger agreement such that, if continued on the closing date, an applicable closing condition will not have been 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 JMP or such shorter period remaining prior to the end date), so long as JMP is not then in material breach of any representation, warranty, covenant or agreement.

 

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Termination Fees

(See page 46)

 

Under the terms of the merger agreement, JMP would be obligated to pay Citizens a termination fee equal to 4.0% of the aggregate merger consideration if the merger agreement is terminated in any of the following circumstances:
 
 

at any time prior to shareholder approval of the merger agreement, by action of the board of directors of JMP, if the JMP board of directors has made a change of recommendation in order to accept a superior proposal and JMP concurrently enters into a binding written definitive acquisition agreement providing for the consummation of a transaction for the superior proposal;

 

 

at any time prior to shareholder approval of the merger agreement, by action of Citizens, in the event (i) JMP has breached in any material respect its obligation relating to non-solicitation of acquisition proposals; (ii) the board of directors of JMP has made a change of recommendation; (iii) at any time after the end of ten business days following receipt of an acquisition proposal, JMP’s board shall have failed to reaffirm its recommendation for shareholders to approve the merger agreement as promptly as practicable (but in any event within five business days) after receipt of any written request to do so by Citizens; or (iv) a tender offer or exchange offer for outstanding shares shall have been publicly disclosed (other than by Citizens or an affiliate of Citizens) and JMP’s board recommends that the shareholders tender their shares in such tender or exchange offer or, within ten business days after the commencement of such tender or exchange offer, JMP’s board fails to recommend unequivocally against acceptance of such offer; or

 

 

in the event that either (1) a bona fide acquisition proposal has been made to JMP or its shareholders or any person has publicly announced a bona fide acquisition proposal (and has not withdrawn it at least two business days prior to the Special Meeting), (2) the merger agreement is terminated by either Citizens or JMP for failure of the merger to be consummated by the end date and shareholder approval has not be obtained or as the result of a willful and material breach, and (3) within 12 months of the termination of the merger agreement JMP enters into a definitive agreement with respect to or consummates an acquisition proposal, provided that the references to “25%” in the definition of “acquisition proposal” shall instead refer to “50%”.

 

Any termination fee required must be paid promptly, but in no event later than two business days after the date of a relevant termination, provided that with respect to terminations related to bona fide acquisition proposals or the failure to obtain shareholder approval noted above, the termination fee must be paid concurrently with JMP entering into the definitive agreement with respect to or consummation of an acquisition proposal and with respect to a change in recommendation by the board of directors of JMP to accept a superior proposal, the termination fee must be paid simultaneously with such termination.

 

Material United States Federal Income Tax Consequences of the Merger

(See page 48)

 

For U.S. federal income tax purposes, if you are a U.S. holder (as defined in the section entitled “Material United States Federal Income Tax Consequences of the Merger” beginning on page 48), the receipt of cash in exchange for common shares pursuant to the merger will generally result in the recognition of gain or loss in an amount measured by the difference, if any, between the amount of cash that such U.S. Holder receives in the merger and such U.S. Holder’s adjusted tax basis in the common shares surrendered in the merger.

 

A Non-U.S. Holder (as defined in the section entitled “Material United States Federal Income Tax Consequences of the Merger” beginning on page 48) generally will not be subject to U.S. federal income tax with respect to the exchange of common shares for cash in the merger unless such Non-U.S. Holder has certain connections to the United States, but may be subject to backup withholding tax unless the Non-U.S. Holder complies with certain certification procedures or otherwise establishes a valid exemption from backup withholding tax.

 

For more information, you are encouraged to read the section entitled “Material United States Federal Income Tax Consequences of the Merger” beginning on page 48 for a more detailed discussion of the U.S. federal income tax consequences of the merger.

 

You are encouraged to consult your tax advisor as to the tax consequences to you of the exchange of common shares for cash pursuant to of the merger in light of your particular circumstances, including the applicability and effect of the alternative minimum tax and any state, local or foreign and other tax laws and of changes in those laws.

 

The U.S. federal income tax consequences described above may not apply to all holders of JMP common shares. Your tax consequences will depend on your individual situation. Accordingly, you are urged to consult your tax advisor for a full understanding of the particular tax consequences of the merger to you.

 

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CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING STATEMENTS

 

This proxy statement contains certain “forward-looking” statements as that term is defined by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. Forward-looking statements may be typically identified by such words as “may,” “will,” “should,” “expect,” “anticipate,” “plan,” “likely,” “believe,” “estimate,” “project,” “intend” and other similar expressions. These forward-looking statements are subject to known and unknown risks and uncertainties that could cause our actual results to differ materially from the expectations expressed in the forward-looking statements. Although we believe that the expectations reflected in our forward-looking statements are reasonable, any or all of our forward-looking statements may prove to be incorrect. Consequently, no forward-looking statements may be guaranteed, and there can be no assurance that the actual results or developments anticipated by such forward-looking statements will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, JMP or its business or operations. Factors that could cause our actual results to differ from those projected or contemplated in any such forward-looking statements include, but are not limited to, the following:

 

 

the risk that the conditions to the closing of the merger are not satisfied (including a failure of the JMP shareholders to approve, on a timely basis or otherwise, the merger agreement, the merger and the principal terms thereof and the risk that regulatory approvals required for the merger are not obtained, on a timely basis or otherwise, or are obtained subject to conditions that are not anticipated);

 

the risk that the merger agreement may be terminated in circumstances that require us to pay Citizens a termination fee of 4.0% of the aggregate merger consideration in connection therewith;

 

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

 

uncertainties as to the timing of the consummation of the merger and the ability of each of JMP and Citizens to consummate the merger;

 

risks that the proposed transaction diverts management’s attention from our ongoing business operations and disrupts the current plans and operations of JMP;

 

risks that the merger affects JMP’s ability to retain or recruit employees;

 

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

 

limitations placed on JMP’s ability to operate the business by the merger agreement;

 

unexpected costs, charges or expenses that JMP incurs related to the merger;

 

the effect of the announcement or pendency of the merger on our business relationships, operating results and business generally, including risks related to the diversion of the attention of JMP management or employees during the pendency of the merger;

 

potential adverse reactions or changes to business relationships resulting from the announcement or consummation of the merger; and

 

legislative, regulatory and economic developments.

 

The foregoing factors that could cause actual events to differ from expectations should not be construed as exhaustive and should be read in conjunction with statements that are included herein and elsewhere, including the risk factors included in JMP’s most recent Annual Report on Form 10-K for the year ended December 31, 2020, JMP’s most recent Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, and our other reports filed with the SEC. All subsequent written and oral forward-looking statements concerning the proposed transaction or other matters attributable to JMP or any other person acting on its behalf are expressly qualified in their entirety by the cautionary statements referenced above. You should not rely upon forward-looking statements as predictions of future events. The forward-looking statements speak only as of the date of the communication in which they are contained. JMP can give no assurance that the conditions to the merger will be satisfied. Except as required by applicable law, JMP undertakes no obligation to revise or update any forward-looking statement, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.

 

All information contained in this proxy statement exclusively concerning Citizens and Merger Sub and their affiliates has been supplied by Citizens and Merger Sub and has not been independently verified by us.

 

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THE SPECIAL MEETING

 

Date, Time and Place; Attending the Special Meeting

 

The Special Meeting will take place on November 12, 2021, at 600 Montgomery Street, Suite 1100, San Francisco, CA 94111, commencing at 9:00 a.m., Pacific time. Check in will begin at 8:30 a.m., Pacific time, and you should allow ample time for check-in procedures.

 

You are entitled to attend the Special Meeting only if you were a JMP shareholder as of the close of business on October 11, 2021 or hold a valid proxy for the Special Meeting. You should be prepared to present photo identification (a driver’s license or passport is preferred) for admittance. In addition, if you are a shareholder of record, your name is subject to verification against the list of shareholders of record on the record date prior to being admitted to the meeting. If you are not a shareholder of record but hold shares through a broker or nominee (i.e., in “street name”), you should be prepared to provide proof of beneficial ownership on the record date, such as your most recent account statement or similar evidence of ownership. If you do not provide photo identification or comply with the other procedures outlined above upon request, you will not be admitted to the Special Meeting.

 

Matters to be Considered

 

At the Special Meeting, JMP shareholders will be asked to vote on the following proposals:

 

 

1.

To consider and vote on a proposal to adopt the Agreement and Plan of Merger, dated as of September 8, 2021 (as it may be amended from time to time), among Citizens, Merger Sub and JMP, and thereby to approve the transactions contemplated by the merger agreement, including the merger;

 

 

2.

To approve, by non-binding advisory vote, certain compensation arrangements for JMP’s named executive officers in connection with the merger; and

 

 

3.

To approve the adjournment of the Special Meeting, if necessary, for any purpose, including to solicit additional proxies if there are not sufficient votes to adopt the merger agreement and thereby to approve the transactions contemplated by the merger agreement, including the merger, at the time of the Special Meeting.

 

A copy of the merger agreement is attached to this proxy statement as Annex A. You are encouraged to read the merger agreement and the other information contained in this proxy statement (including the documents incorporated by reference into this proxy statement) carefully before deciding how to vote.

 

Record Date; Stock Entitled to Vote

 

Holders of record are entitled to vote only if you were a JMP shareholder as of the close of business on October 11, 2021, the record date, provided that such shares remain outstanding on the date of the meeting.

 

Each common share of JMP is entitled to one vote for each matter to be voted on.

 

On October 11, 2021, there were 19,958,495 common shares of JMP outstanding and entitled to vote at the Special Meeting held by approximately 31 shareholders of record.

 

Quorum

 

The holders of shares entitled to cast a majority of the total votes of the outstanding common shares of JMP on October 11, 2021, the record date, present in person or represented by proxy at the Special Meeting and entitled to vote, will constitute a quorum for the transaction of business at the Special Meeting. Abstentions are counted for purposes of determining the presence or absence of a quorum.

 

Vote Required

 

The following are the vote requirements for the various proposals:

 

 

Adoption of the Merger Agreement and Thereby the Approval of the Transactions Contemplated by the Merger Agreement, Including the Merger: You may vote “FOR,” “AGAINST” or “ABSTAIN” with respect to the adoption of the merger agreement and thereby the approval of the transactions contemplated by the merger agreement, including the merger. To adopt the merger agreement and thereby to approve the transactions contemplated by the merger agreement, including the merger, the holders of a majority of the outstanding common shares of JMP must vote “FOR” the adoption of the merger agreement thereby the approval of the transactions contemplated by the merger agreement, including the merger. Because approval is based on the affirmative vote of a majority of the shares outstanding, your failure to vote, a broker non-vote or an abstention will have the same effect as a vote AGAINST” the adoption of the merger agreement and thereby AGAINST” the approval of the transactions contemplated by the merger agreement, including the merger.

 

 

Approval, by a Non-Binding Advisory Vote, of Certain Compensation Arrangements. You may vote “FOR,” “AGAINST” or “ABSTAIN” with respect to the compensation proposal at the Special Meeting. The affirmative vote of a majority of the common shares of JMP represented (in person or by proxy) at the Special Meeting and entitled to vote on the proposal is required for such proposal to pass. For the proposal to approve, by non-binding advisory vote, certain compensation arrangements for JMP’s named executive officers in connection with the merger, any common share of JMP represented in person or by proxy at the Special Meeting but abstaining from voting will have the same effect as a vote cast “AGAINST” this proposal. Common shares of JMP not represented in person or by proxy at the Special Meeting will have no effect on the vote count for the JMP proposal to approve, by non-binding advisory vote, certain compensation arrangements for JMP’s named executive officers in connection with the merger.

 

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Approval of the Adjournment of the Special Meeting. You may vote “FOR,” “AGAINST” or “ABSTAIN” with respect to the adjournment proposal at the Special Meeting. Whether or not a quorum will be present at the meeting, the affirmative vote of a majority of the common shares of JMP represented (in person or by proxy) at the Special Meeting and entitled to vote on the proposal is required for such proposal to pass. For the proposal to adjourn the Special Meeting, any common share of JMP represented in person or by proxy at the Special Meeting but abstaining from voting will have the same effect as a vote cast “AGAINST” this proposal. Common shares of JMP not represented in person or by proxy at the Special Meeting and broker non-votes will have no effect on the proposal to adjourn the Special Meeting.

 

Abstentions

 

Abstentions are counted as present and entitled to vote for purposes of determining a quorum. For each of the proposals to be considered at the Special Meeting, including the proposal to adopt the merger agreement and thereby to approve the transactions contemplated by the merger agreement, including the merger, the proposal to approve, by non-binding advisory vote, certain compensation arrangements for JMP’s named executive officers in connection with the merger and the adjournment proposal, abstentions have the same effect as a vote “AGAINST” such proposals.

 

Voting of Proxies by Holders of Record

 

If your shares are registered directly in your name with JMP’s transfer agent, American Stock Transfer & Trust Company, LLC, you are considered the shareholder of record with respect to those shares and this proxy statement is being sent directly to you by JMP. As a shareholder of record, you have the right to grant your proxy directly to JMP or to vote in person at the Special Meeting. JMP has enclosed a proxy card for your use. As a shareholder of record, you may submit a proxy for your shares by using the toll-free number or the Internet website by following the instructions on your proxy card for using these quick, cost–effective and easy methods for submitting proxies. You also may submit a proxy in writing by simply filling out, signing and dating your proxy card and mailing it in the prepaid envelope included with this proxy statement. If you submit a proxy by telephone or the Internet website, please do not return your proxy card by mail. You will need to follow the instructions when you submit a proxy using any of these methods to make sure your shares will be voted at the meeting.

 

If you hold shares through a broker or other nominee, you may instruct your broker or other nominee to vote your shares by following the instructions that the broker or nominee provides to you with these materials. See “—Shares Held in Street Name” below.

 

You also may vote by submitting a ballot in person if you attend the Special Meeting. However, we encourage you to submit a proxy by mail by completing your proxy card, by telephone, or via the Internet even if you plan to attend the Special Meeting. If you attend the Special Meeting, you will also need to present photo identification and comply with the other procedures described above in “The Special Meeting—Date, Time and Place; Attending the Special Meeting” on page 14. Giving a proxy will not affect your right to vote your JMP shares if you attend the Special Meeting and want to vote in person.

 

Your vote is important. Accordingly, please submit your proxy by telephone, through the Internet, or by mail, whether or not you plan to attend the Special Meeting in person. Proxies must be received by 11:59 p.m., Pacific time, on November 11, 2021.

 

Shares Held in Street Name

 

If your shares are held in a brokerage account, bank account or by another nominee, you are considered the beneficial owner of shares held in “street name,” and this proxy statement is being forwarded to you by your broker, bank or nominee together with a voting instruction card. As the beneficial owner, you have the right to direct your broker, bank or other nominee how to vote and are also invited to attend the Special Meeting. However, since you are not the shareholder of record, you may not vote your shares in person at the Special Meeting unless you obtain a legal proxy from the broker, bank or nominee that holds your shares, giving you the right to vote the shares instead of the broker, bank or nominee holding your shares. Your broker, bank or nominee has enclosed voting instructions for your use in directing your broker, bank or nominee how to vote your shares.

 

If you do not provide voting instructions to your broker, your shares will not be voted on any proposal on which your broker does not have discretionary authority to vote. This is called a broker non–vote.  Under the current rules of the NYSE, brokers do not have discretionary authority to vote on the proposal to adopt the merger agreement and thereby to approve the transactions contemplated by the merger agreement, including the merger, or to vote on the proposal to approve, by non-binding advisory vote, certain compensation arrangements for JMP’s named executive officers in connection with the merger, or the adjournment proposal. Accordingly, a broker non–vote will have the same effect as a vote “AGAINST” adoption of the merger agreement and thereby the approval of the transactions contemplated by the merger agreement, including the merger. Broker non-votes will have no effect on the proposal to approve, by non-binding advisory vote, certain compensation arrangements or the adjournment proposal.

 

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Revocability of Proxies

 

A proxy submitted through the Internet or by telephone may be revoked by (i) executing a later-dated proxy card that is received prior to 11:59 p.m., Pacific time, on November 11, 2021, (ii) subsequently submitting a new proxy through the Internet or by telephone prior to 11:59 p.m., Pacific time, on November 11, 2021 (iii) attending the Special Meeting and voting in person, or (iv) giving written notice to our Corporate Secretary at 600 Montgomery Street, Suite 1100, San Francisco, CA 94111. A proxy submitted by proxy card may be revoked before the vote is cast by the designated proxy by (i) giving written notice to our Corporate Secretary at 600 Montgomery Street, Suite 1100, San Francisco, CA 94111, (ii) subsequently submitting another proxy bearing a later date or (iii) attending the Special Meeting and voting in person. Attending the Special Meeting without voting will not revoke your previously submitted proxy.

 

JMP shareholders whose shares are held in the name of a broker, bank or nominee may change their votes by submitting new voting instructions to their brokers, banks or nominees. Those JMP shareholders may not vote their shares in person at the Special Meeting unless they obtain a signed proxy from the shareholder of record giving them the right to vote their shares.

 

Independent Election Inspector

 

JMP has retained Broadridge Financial Solutions, Inc. to receive and tabulate the votes in connection with the Special Meeting. Our corporate secretary will utilize such tabulations and serve as our election inspector who will certify the results and perform any other acts required by the JMP LLC Agreement, the DLLCA and the DGCL.

 

Solicitation of Proxies

 

This proxy statement is furnished in connection with the solicitation of proxies by the JMP board of directors to be voted at the Special Meeting.

 

JMP is paying for costs associated with the preparation of the proxy statement and related materials for the Special Meeting. Although there are no formal agreements to do so, JMP will reimburse banks, brokerage firms and other custodians, nominees and fiduciaries for their reasonable expenses incurred in sending proxy materials to JMP’s shareholders and beneficial owners of JMP common shares in accordance with applicable rules. In addition to solicitation by mail, JMP’s directors, officers and employees may solicit proxies in person, by telephone, or by electronic or other means of communication, but they will not receive special compensation for such activities.

 

16

 

 

PROPOSAL ONE: THE MERGER

 

The following is a discussion of the proposed merger and the merger agreement. This is a summary only and may not contain all of the information that is important to you. A copy of the merger agreement is attached to this proxy statement as Annex A and is incorporated by reference herein. You are urged to read this entire proxy statement, including the merger agreement and the documents incorporated by reference into this proxy statement, for a more complete understanding of the merger.

 

Structure of the Merger

 

Transaction Structure

 

Subject to the terms and conditions of the merger agreement and in accordance with Delaware law, Merger Sub will be merged with and into JMP, with JMP surviving the merger and becoming a wholly-owned subsidiary of Citizens.

 

Merger Consideration

 

In the merger, each issued and outstanding common share of JMP (other than the excluded shares) will be automatically converted into the right to receive cash consideration of $7.50, as described below.

 

Background of the Merger

 

The JMP board of directors, together with senior management of JMP regularly reviews JMP’s business strategies, opportunities and challenges as part of its consideration and evaluation of JMP’s prospects and ways to increase shareholder value, taking into account, the state of the financial industry, participants therein, the regulatory environment and the broader economy as a whole. As part of these reviews, the board and management, together with external advisors, from time to time, have considered, among other strategies, internal organic growth strategies, potential divestitures, commercial collaborations with third parties, potential strategic partnerships, as well as the possibility of a business combination transaction and potential acquisitions by or of JMP, considering the possibility of both financial and strategic counterparties. In addition, in an effort to enhance preparedness in the event of potential strategic opportunities or activity, members of JMP’s senior management and the board of directors have from time to time met with representatives of investment banks and financial advisory firms to discuss the possible engagement of such firms for various banking and financial advisory services, including mergers and acquisition advisory services.

 

Consistent with the foregoing, between January 14, 2021 and March 8, 2021, JMP management met with or had calls with representatives of Keefe, Bruyette & Woods, Inc. (“KBW”) regarding KBW’s financial advisory services, including to discuss potential mergers and acquisition advisory services. In March 2021, the JMP board discussed with KBW representatives the advisability of preliminarily considering a strategic transaction and, in particular, a business combination or sale transaction at such time. As part of these discussions, KBW noted possible business combination counterparties on a preliminary basis that might have an interest in a possible transaction. The board requested that KBW contact potential counterparties, instructing KBW that the board had not yet made any determination to sell the company, but did want to understand the range of possible transactions.

 

On March 15, 2021, a senior representative of a financial firm, which we refer to as Company A in this proxy statement, was introduced to a senior member of JMP’s management by a mutually-known third party, other than KBW. On March 17, 2021, JMP management held an initial call with Company A, during which Company A expressed its unsolicited potential interest in exploring an acquisition of JMP.

 

Given the board’s ongoing consideration of possible strategic transactions, and the unsolicited communication of interest by Company A, on March 19, 2021, the board, by unanimous written consent, approved JMP engaging KBW to act as financial advisor to JMP in connection with the consideration of a possible sale of JMP.

 

In connection with the engagement of KBW, the board authorized and directed KBW to contact approved potential business combination counterparties (including Citizens) on behalf of JMP, and KBW proceeded to do so. On March 25, 2021, at a regularly scheduled meeting of the board of directors, Mr. Jolson provided the board with an update on the potential sale process, including the parties that KBW was contacting and the meeting held with representatives from Company A. Representatives of Mintz Levin, Cohn, Ferris, Glovsky and Popeo, P.C., legal counsel to the Company (“Mintz”), reviewed a presentation on the fiduciary duties of directors under Delaware law in connection with a sale of control of JMP.

 

Between April 9, 2021 and April 22, 2021, JMP entered into a non-disclosure agreement with four companies, including Company A, Citizens and another company referred to as Company B, and conducted initial management presentations to several of the companies.

 

On April 22, 2021, at a regularly scheduled meeting of the board, Mr. Jolson provided the board with an update on the sale process including the parties that KBW was contacting and the status of meetings management had held with representatives of interested parties.

 

On April 23, 2021, JMP management conducted a presentation to Citizens.

 

Between April 26, 2021 and May 6, 2021, JMP entered into a non-disclosure agreement with another financial firm and JMP management conducted management presentations to several of the interested companies, including a follow-up management presentation to Citizens. Also on May 6, 2021, at a regularly scheduled meeting of the board, Messrs. Jolson and Lehmann provided the board with an update on the sale process including the parties that KBW was contacting and the status of meetings management had held with representatives of interested parties.

 

17

 

 

On May 10, 2021, JMP conducted an in-person management meeting and dinner in New York with Company B.

 

On May 20, 2021, JMP entered into a non-disclosure agreement with a financial firm, dated April 20, 2021.

 

On May 25, 2021, Citizens and Company B submitted nonbinding indications of interest for the acquisition of JMP. Company B’s indication of interest was an all-cash offer equal to the 10 day average of JMP’s stock (equal to $5.40/share as of Friday May 21, 2021). Company B also offered to permit JMP to make a pre-close special dividend equal to the excess of common equity at June 30, 2021 over common equity at March 31, 2021, which equaled approximately $1.45 per share. The Citizens indication of interest proposed an all cash offer with a price range of $6.75 to $7.00 per share.

 

On May 27, 2021, at a special meeting of the board of directors, KBW reviewed the two preliminary indications of interest (from Citizens and Company B) received to date. Representatives of Mintz discussed the fiduciary duties of the board and advised the board to form a special transaction committee. Board members proposed Messrs. Karmin, Lunenburg and Tongue as potential members of the special transaction committee.

 

On June 1, 2021, the board, by unanimous written consent, formed the special transaction committee, referred to herein as the Special Transaction Committee, comprised of Messrs. Karmin, Lunenburg and Tongue. Upon formation of the Special Transaction Committee, at the request of the Special Transaction Committee and agreement of the board, KBW reported to and became subject to the sole direction of the Special Transaction Committee as the Special Transaction Committee’s financial advisor. Also on June 1, 2021, the Special Transaction Committee engaged Whiteford, Taylor & Preston L.L.P. (“WTP”), as legal counsel to the Special Transaction Committee.

 

On June 8, 2021, at a meeting of the Special Transaction Committee at which representatives of WTP were present, the Special Transaction Committee reviewed a memorandum prepared by WTP as counsel to the Special Transaction Committee regarding the duties of the Special Transaction Committee under Delaware law when considering an acquisition offer. The members of the Special Transaction Committee discussed the two preliminary indications of interest received from Company B and Citizens. The members of the Special Transaction Committee agreed it was advisable and in the best interests of JMP to explore transactions where JMP is acquired with specific limitations on management’s involvement in negotiations unless directed by the Special Transaction Committee.

 

On June 16, 2021, the Special Transaction Committee delivered a memorandum to the board setting forth the purpose of the Special Transaction Committee as protecting shareholder interests, and the respective roles of the Special Transaction Committee and the board in negotiating any acquisition transaction, stating that all negotiations would be conducted by, in close cooperation with, and under the supervision of, the Special Transaction Committee with KBW, acting as financial advisor at the direction of the Special Transaction Committee.

 

On June 24, 2021, members of JMP management and Citizens had a call to discuss personnel, culture and the current compensation framework at JMP.

 

On June 30, 2021, members of JMP management and Citizens held a call to provide a financial update on JMP’s business and discuss potential opportunities to cross-sell between the two organizations.

 

On July 1, 2021, KBW received a second indication of interest from Citizens dated July 1, 2021 containing a proposed purchase of $7.25 per share for JMP’s common shares. The indication of interest requested a sixty-day exclusivity period.

 

On the morning of July 14, 2021, at a meeting of the Special Transaction Committee at which representatives of WTP, representatives of KBW, Mark Lehmann and Walter Conroy were present, the Special Transaction Committee and Mark Lehmann (who had been invited by the Special Transaction Committee) discussed the size of an expected retention pool for certain key JMP employees and the sixty day exclusivity period proposed by Citizens in its indication of interest. The Special Transaction Committee also reviewed the roll-forward balance sheet prepared by JMP and delivered to Citizens. The Special Transaction Committee also reviewed the assumptions upon which Citizens’ bid of $7.25 per share was based. Representatives of KBW informed the Special Transaction Committee that Citizens indicated that it was amenable to a special dividend if JMP were to realize a targeted valuation with respect to certain marketable securities owned by JMP. The Special Transaction Committee also reviewed the comments to the Citizens’ indication of interest that had been proposed by legal counsel and management.

 

On the afternoon of July 14, 2021, at a meeting of the Special Transaction Committee at which representatives of WTP and Walter Conroy were present, the Special Transaction Committee approved a motion to recommend to the board that upon a request from Citizens, JMP should agree to the exclusivity period proposed by Citizens and JMP should move forward with further due diligence and negotiation of the proposed transaction as outlined in the Citizens indication of interest.

 

Later that afternoon, at a special meeting of the board, Mr. Karmin, as chair of the Special Transaction Committee, provided the board with an update on matters discussed at the Special Transaction Committee meetings earlier that day, in particular the second indication of interest provided by Citizens and the sixty-day exclusivity period. Representatives of KBW reviewed the indication of interests provided by Citizens and Company B and the reason communicated by Company B for not providing a second indication of interest. Representatives of KBW observed that over the course of discussions, Citizens had increased its bid from a range of $6.75-$7.00 per share to $7.25 per share. Mr. Karmin discussed the retention pool, the need for employee retention, and the likely requirement that key employees would need to sign agreements in connection with signing the merger agreement. Mr. Karmin discussed potential purchase price adjustments to provide additional value to shareholders. Following a recommendation from the Special Transaction Committee, the Board unanimously approved JMP entering into exclusivity with Citizens for 45 days.

 

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On July 15, 2021, members of senior management at JMP met with a representative of Citizens in New York.

 

On July 16, 2021, JMP countersigned the second indication of interest from Citizens with a proposed purchase price of $7.25 per share thereby entering into an exclusivity agreement with Citizens for 45 days from July 16, 2021 to allow Citizens to conduct due diligence.

 

On August 5, 2021, at a regularly scheduled meeting of the board, a representative of KBW provided the board with an update on the sale process, including the status of due diligence and the expectation that Citizens would deliver a draft of the merger agreement the following week. Mr. Karmin, as chair of the Special Transaction Committee, reported to the board on the currently proposed price per share of $7.25 and the Special Transaction Committee’s efforts to increase the price per share and/or agree on a purchase price adjustment to provide shareholders with additional value.

 

On August 9, 2021, counsel to the Special Transaction Committee and JMP received an initial draft of a merger agreement from Sullivan & Cromwell LLP (“Sullivan & Cromwell”), counsel to Citizens.

 

Over the next two weeks, members of the Special Transaction Committee and members of management, as well as representatives from WTP and Mintz, held calls to discuss the principal terms and issues in the draft merger agreement, and representatives of WTP, Mintz and Sullivan & Cromwell, counsel to Citizens, negotiated the terms of the merger agreement. Members of JMP management and representatives from Citizens held telephonic meetings to discuss certain diligence items on the current business outlook of JMP and other diligence matters.

 

On August 30, 2021, Citizens delivered a revised indication of interest dated August 30, 2021 with a price per share of $7.50 and a provision for a pre-close special dividend up to $5.0 million, but only if JMP were to realize a targeted valuation with respect to certain marketable securities owned by JMP.

 

On September 1, 2021, at a special meeting of the board, Mr. Karmin, as chair of the Special Transaction Committee, reported on the current status of discussions with Citizens and the revised letter of intent received from Citizens. Representatives of Mintz discussed open issues in the merger agreement and deal issues. Representatives of KBW provided the Board with an update on process, Citizen’s due diligence, negotiations, and price increases to date. Mr. Karmin, as chair of the Special Transaction Committee, recommended that JMP enter into the third letter of intent with Citizens extending exclusivity to September 19, 2021. The Board approved JMP entering into the third letter of intent with Citizens.

 

On September 2, 2021, at a meeting of the Special Transaction Committee, representatives of KBW provided an update on recent discussions on the draft indication of interest from Citizens. The Special Transaction Committee directed that the terms to permit a special dividend contingent upon realizing a targeted valuation with respect to certain marketable securities owned by JMP would be set forth in the definitive merger agreement. At this meeting, KBW also reviewed its process for rendering an opinion regarding the merger consideration to the Special Transaction Committee and, as requested by the Special Transaction Committee, the JMP board of directors in connection with their respective consideration of the financial terms of the merger.

 

On September 2, 2021, members of JMP management and Citizens held a call to discuss the transaction announcement and integration planning.

 

On September 3, 2021, JMP countersigned the revised second indication of interest from Citizens with a proposed purchase price of $7.50 per share and a provision for a special dividend up to $5.0 million, contingent upon JMP realizing a targeted valuation with respect to certain marketable securities owned by JMP. By countersigning the indication of interest, JMP entered into an exclusivity agreement with Citizens up to and including September 19, 2021.

 

On the afternoon of September 7, 2021 at a meeting of the Special Transaction Committee, the Special Transaction Committee received an update on recent discussions regarding the edits to the draft merger agreement WTP and Mintz received from Sullivan and Cromwell earlier that day and considered some of the final open points. Representatives of WTP and Mintz provided the Special Transaction Committee with a summary of the terms of the draft merger agreement and the voting agreements ancillary thereto. The members of the Special Transaction Committee determined to adjourn the meeting in order for legal counsel to incorporate clarifying edits and agreed-upon concepts in the draft merger agreement.

 

Later on the afternoon of September 7, 2021, at a meeting of the Special Transaction Committee, representatives of WTP and Mintz reported on recent discussions regarding the edits to the merger agreement. At this meeting, KBW reviewed the financial aspects of the proposed merger and rendered to the Special Transaction Committee an opinion to the effect that, as of such date and subject to the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by KBW as set forth in its opinion, the $7.50 per share merger consideration to be received by the holders of JMP common shares in the merger was fair, from a financial point of view, to such holders. The members of the Special Transaction Committee determined to adjourn the meeting in order for legal counsel to incorporate clarifying edits and agreed-upon concepts in the merger agreement.

 

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Later on the afternoon of September 7, 2021, at a special meeting of the Board, Mr. Karmin, as chair of the Special Transaction Committee, reported on the Special Transaction Committee meeting that preceded the board meeting and provided an update on the current status of remaining issues on the merger agreement. Mr. Karmin indicated that the Special Transaction Committee was waiting for final agreement on the language on certain points of the merger agreement before providing its recommendation to the board. At the request of the Special Transaction Committee, KBW again reviewed the financial aspects of the proposed merger and rendered to the JMP board of directors an opinion to the effect that, as of such date and subject to the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by KBW as set forth in its opinion, the $7.50 per share merger consideration to be received by the holders of JMP common shares in the merger was fair, from a financial point of view, to such holders. Representatives of Mintz provided the board with a summary of the terms of the merger agreement and voting agreements, including those relating to termination rights, the board’s ability to change its recommendation, and the termination fee. Representatives of Mintz also discussed the board’s fiduciary duties.

 

Later that evening, at a meeting of the Special Transaction Committee, the members discussed the matters previously discussed at the prior meetings, including counsel’s summary of the merger agreement. Representatives of Mintz summarized the material updates and revisions to the merger agreement. After discussion, the Special Transaction Committee resolved to declare that the merger agreement and the merger, and all transactions contemplated thereby are advisable, and fair to and in the best interests of JMP and the shareholders. The Special Transaction Committee further resolved to recommend to the board that the board declare that the merger agreement, the merger and all transactions contemplated thereby, advisable, and fair to and in the best interests of JMP and the shareholders, and that the board recommend to the shareholders that they should vote in favor of the resolution approving the merger agreement, the merger and the transactions contemplated thereby.

 

On September 8, 2021 at 12:15 a.m. Pacific Time, at a special meeting of the board, Mr. Karmin, as chair of the Special Transaction Committee, reported on the Special Transaction Committee meeting that preceded the board meeting and provided an update on the resolution of issues in the merger agreement and related documents. Following the update, Mr. Karmin stated that at the meeting preceding the board meeting, the Special Transaction Committee had resolved to recommend the approval of the merger agreement and voting agreements and all related instruments, to the full board. Representatives from Mintz discussed the very limited remaining open items in the merger agreement and related disclosure schedules and discussed the resolution of the remaining issues that had been agreed between parties and their counsel. Representatives from Mintz reviewed the material merger agreement terms, including the deal protection package and reminded the board of the prior discussion earlier in the evening on those and other related topics, including the relevant fiduciary duties of the board and earlier discussions thereof. The board members unanimously adopted the resolutions approving the merger and the definitive transaction documents.

 

On September 8, 2021, Messrs. Lehmann, Wright, Dever and Slader delivered retention agreements to Citizens.

 

On September 8, 2021, the merger agreement and voting agreements were executed and delivered and the merger was announced before the market opened.

 

JMPs Reasons for the Merger

 

The JMP board of directors, at the meeting described above on September 8, 2021 and upon the unanimous recommendation by the Special Transaction Committee, has unanimously (i) determined that the merger agreement and the transactions contemplated thereby, including the merger, are fair to and in the best interests of JMP and its shareholders, (ii) approved the merger agreement and the transactions contemplated thereby, including the merger, and declared it advisable that JMP enter into the merger agreement and (iii) resolved to recommend that the JMP shareholders adopt the merger agreement and thereby approve the transactions contemplated therein, including the merger, and directed that such matter be submitted for consideration of the JMP shareholders at a special meeting.

 

In evaluating the merger agreement, the merger, and the other transactions contemplated by the merger agreement, the JMP board of directors consulted with JMP’s senior management team, as well as JMP’s internal and outside legal advisors and KBW acting as the Special Transaction Committee’s financial advisor and, in reaching its decision to approve and declare advisable the merger agreement, the merger, and the other transactions contemplated by the merger agreement and to recommend that the JMP shareholders adopt the merger agreement and approve the transactions contemplated thereby, the JMP board considered the recommendation of the Special Transaction Committee and a number of other factors. The material factors considered by the JMP board were the same factors considered by Special Transaction Committee in arriving at its decision to recommend the merger to the JMP board and included the following:

 

 

JMP’s and Citizens’ financial performance and condition, results of operations, management, business quality, prospects, competitive position and businesses as separate entities;

 

 

current financial market conditions and historical market prices, volatility and trading information with respect to JMP common shares and Citizens common shares;

 

 

the intrinsic value and historical market prices of JMP common shares and the fact that the implied value of the merger consideration as of September 8, 2021 of $7.50 for each common share of JMP (with the aggregate merger consideration calculated on a fully-diluted basis) represented a multiple of JMP’s stated tangible book value as of June 30, 2021 and, if such implied value and JMP’s tangible book value as of June 30, 2021 are adjusted for JMP’s excess capital at the closing of the merger as estimated by the parties;

 

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the financial and other terms of the merger agreement, including the cash consideration, deal protection and termination fee provisions;

 

 

Citizens made a compelling offer of a full and fair price, as it values the accretive nature of JMP’s business;

 

 

the JMP board’s knowledge of the current and prospective environment in which JMP operates, including national, local and international economic conditions, the competitive environment, the trend toward consolidation in the financial services industry and the likely effect of these factors on JMP’s potential growth, development, productivity, profitability and strategic options;

 

 

the extensive review undertaken by the JMP board, the Special Transaction Committee, and management with respect to the strategic alternatives available to JMP;

 

 

the inquiries that had been made both by and to JMP regarding a possible strategic transaction, which resulted in no competing proposals, including by other parties that had expressed interest in a transaction with JMP, and the absence of any ongoing discussions that could lead to any such competing proposal;

 

 

the ability of other parties to make a proposal to acquire JMP following announcement of a merger with Citizens, and the limited nature and scope of any provisions of the merger agreement limiting any such proposals or JMP’s flexibility in responding to any potentially superior proposal so received;

 

 

the opinion, dated September 7, 2021, of KBW to the Special Transaction Committee and to the JMP board of directors as to the fairness, from a financial point of view and as of the date of the opinion, of the $7.50 per share merger consideration to be received by the holders of JMP common shares in the merger, as more fully described in the section entitled “Proposal One: The Merger—Opinion of the Special Transaction Committee’s Financial Advisor” beginning on page 22;

 

 

the nature and amount of payments and other benefits to be received by JMP management in connection with the merger pursuant to the merger agreement, existing JMP plans and compensation arrangements and arrangements entered into in connection with the merger agreement;

 

 

the fact that retention arrangements were offered to, and accepted by a group of four key employees, which should reduce the execution risks regarding the merger;

 

 

the potential that JMP may be permitted to declare a special dividend to its shareholders prior to closing in an amount up to $5,000,000 in the aggregate, but only if JMP realizes a targeted valuation with respect to certain marketable securities owned by JMP;

 

 

the limited regulatory approvals and other closing conditions that would be required for the consummation of a merger with Citizens;

 

 

the potential for diversion of management and employee attention during the period prior to the completion of the merger and the potential effect on JMP’s business and relations with customers, service providers and other stakeholders, whether or not the merger is completed;

 

 

the possibility that the merger might not receive timely regulatory clearances from the appropriate government agencies or self-regulatory organizations;

 

 

the requirement that JMP conduct its business in the ordinary course and the other restrictions on the conduct of JMP’s business prior to completion of the merger, which may delay or prevent JMP from undertaking business opportunities that may arise pending completion of the merger;

 

 

that the consummation of the merger will preclude JMP shareholders from participating in any future growth of JMP were it to remain an independent public company; and

 

 

the current trading prices of JMP common shares may not be a good indicator of the near-term value of JMP, given, among other factors, the challenges of the small scale of JMP, the cyclical nature of the financial services industry with JMP being at or close to an apogee, and the recent lower trading prices of JMP common shares over a sustained period.

 

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The foregoing discussion of the factors considered by the JMP board of directors and the Special Transaction Committee is not intended to be exhaustive, but rather includes the material factors considered by the JMP board and the Special Transaction Committee. In reaching its decision to approve and declare advisable the merger agreement, the merger and the other transactions contemplated by the merger agreement and to unanimously recommend that the JMP shareholders adopt the merger agreement and approve the transactions contemplated thereby, including the merger, the JMP board of directors, and in its recommendation of such decision, the Special Transaction Committee, did not view any single factor as determinative, and did not find it necessary or practicable to assign any relative or specific weights to the various factors considered. Furthermore, individual directors may have given differing weights to the various factors.

 

Recommendation of the JMP Board of Directors

 

Acting upon the unanimous recommendation of its Special Transaction Committee, the JMP board of directors believes that the merger and the merger agreement are advisable, and are fair to, and in the best interests of, JMP and its shareholders and recommends that JMP shareholders vote FOR the proposal to adopt the merger agreement and thereby to approve the transactions contemplated by the merger agreement, including the merger.

 

Opinion of the Special Transaction Committees Financial Advisor

 

JMP engaged KBW to render financial advisory and investment banking services to JMP until such time as the Special Transaction Committee was formed, and after such time, solely to the Special Transaction Committee, including an opinion to the Special Transaction Committee and, as requested by the Special Transaction Committee, to the JMP board of directors as to the fairness, from a financial point of view, to the holders of JMP common shares of the merger consideration to be received by such holders in the merger. JMP selected KBW because KBW is a nationally recognized investment banking firm with substantial experience in transactions similar to the merger. As part of its investment banking business, KBW is continually engaged in the valuation of financial services businesses and their securities in connection with mergers and acquisitions.

 

As part of its engagement, representatives of KBW attended the meetings of the Special Transaction Committee and the JMP board of directors held on September 7, 2021, at which the Special Transaction Committee and JMP board evaluated the proposed merger. At these meetings, KBW reviewed the financial aspects of the proposed merger and rendered to the Special Transaction Committee and the JMP board of directors an opinion to the effect that, as of such date and subject to the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by KBW as set forth in its opinion, the $7.50 per share merger consideration to be received by the holders of JMP common shares in the merger was fair, from a financial point of view, to such holders. The Special Transaction Committee recommended and the JMP board approved the merger agreement at these meetings.

 

The description of the opinion set forth herein is qualified in its entirety by reference to the full text of the opinion, which is attached as Annex B to this document and is incorporated herein by reference, and describes the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by KBW in preparing the opinion.

 

KBWs opinion speaks only as of the date of the opinion. The opinion was for the information of, and was directed to, the Special Transaction Committee (in its capacity as such) and, as requested by the Special Transaction Committee, the JMP board of directors (in its capacity as such) in connection with their respective consideration of the financial terms of the merger. The opinion addressed only the fairness, from a financial point of view, to the holders of JMP common shares of the $7.50 per share merger consideration to be received by such holders in the merger. It did not address the underlying business decision to engage in the merger or enter into the merger agreement or constitute a recommendation to the Special Transaction Committee or the JMP board in connection with the merger, and it does not constitute a recommendation to any holder of JMP common shares as to how to vote in connection with the merger or any other matter, nor does it constitute a recommendation regarding whether or not any such shareholder should enter into a voting, shareholders, or affiliates or similar agreement with respect to the merger or exercise any dissenters or appraisal rights that may be available to such shareholder.

 

KBW’s opinion was reviewed and approved by KBW’s Fairness Opinion Committee in conformity with its policies and procedures established under the requirements of Rule 5150 of the Financial Industry Regulatory Authority.

 

In connection with the opinion, KBW reviewed, analyzed and relied upon material bearing upon the financial and operating condition of JMP and bearing upon the merger, including among other things:

 

 

a draft of the merger agreement dated September 6, 2021 (the most recent draft made available to KBW);

 

 

the audited financial statements and Annual Reports on Form 10-K for the three fiscal years ended December 31, 2020 of JMP;

 

 

the unaudited quarterly financial statements and Quarterly Reports on Form 10-Q for the quarters ended March 31, 2021 and June 30, 2021 of JMP;

 

 

certain other interim reports and other communications of JMP to its shareholders; and

 

 

other financial information concerning the business and operations of JMP furnished to KBW by JMP or which KBW was otherwise directed to use for purposes of KBW’s analyses.

 

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KBW’s consideration of financial information and other factors that it deemed appropriate under the circumstances or relevant to its analyses included, among others, the following:

 

 

the historical and current financial position and results of operations of JMP;

 

 

the assets and liabilities of JMP;

 

 

the nature and terms of certain other merger transactions and business combinations in the broker dealer industry;

 

 

a comparison of certain financial and stock market information for JMP with similar information for certain other companies the securities of which were publicly traded; and

 

 

financial and operating forecasts and projections of JMP that were prepared by JMP management, provided to and discussed with KBW by such management and used and relied upon by KBW at the direction of such management and with the consent of the Special Transaction Committee; and

 

 

information regarding the securities position held by JMP in Workspace Property Trust (and the one-time event related thereto occurring in July 2021) that was contained in JMP’s public filings or provided to KBW by JMP management and used and relied upon by KBW at the direction of such management and with the consent of the Special Transaction Committee.

 

KBW also performed such other studies and analyses as it considered appropriate and took into account its assessment of general economic, market and financial conditions and its experience in other transactions, as well as its experience in securities valuation and knowledge of the broker dealer industry generally. KBW also participated in discussions that were held with the management of JMP regarding the past and current business operations, regulatory relations, financial condition and future prospects of JMP and such other matters as KBW deemed relevant to its inquiry. In addition, KBW considered the results of the efforts undertaken by JMP, with KBW’s assistance, to solicit indications of interest from third parties regarding a potential transaction with JMP.

 

In conducting its review and arriving at its opinion, KBW relied upon and assumed the accuracy and completeness of all of the financial and other information that was provided to or discussed with it or that was publicly available and did not independently verify the accuracy or completeness of any such information or assume any responsibility or liability for such verification, accuracy or completeness. KBW relied, with the consent of the Special Transaction Committee, upon the management of JMP as to the reasonableness and achievability of the financial and operating forecasts and projections of JMP referred to above (and the assumptions and bases therefor), and KBW assumed that such forecasts and projections were reasonably prepared and represented the best currently available estimates and judgments of such management.

 

It is understood that the forecasts and projections of JMP provided to KBW and used and relied upon by it were not prepared with the expectation of public disclosure and that such information was based on numerous variables and assumptions that are inherently uncertain (including, without limitation, factors related to general economic and competitive conditions and, in particular, assumptions regarding the ongoing COVID-19 pandemic) and, accordingly, actual results could vary significantly from those set forth in such forecasts and projections. KBW assumed, based on discussions with JMP management and with the consent of the Special Transaction Committee, that the forecasts and projections of JMP and other information that were provided to KBW by JMP management provided a reasonable basis upon which KBW could form its opinion and KBW expressed no view as to any such information or the assumptions or bases therefor. Among other things, such information assumed that the ongoing COVID-19 pandemic could have an adverse impact, which was assumed to be limited, on JMP. KBW relied on all such information without independent verification or analysis and did not in any respect assume any responsibility or liability for the accuracy or completeness thereof.

 

KBW also assumed that there were no material changes in the assets, liabilities, financial condition, results of operations, business or prospects of JMP since the date of the last financial statements that were made available to KBW. In rendering its opinion, KBW did not make or obtain any evaluations or appraisals or physical inspection of the property, assets or liabilities (contingent or otherwise) of JMP, nor did KBW evaluate the solvency, financial capability or fair value of JMP or Citizens under any state or federal laws, including those relating to bankruptcy, insolvency or other matters. Estimates of values of companies and assets do not purport to be appraisals or necessarily reflect the prices at which companies or assets may actually be sold. Such estimates are inherently subject to uncertainty and should not be taken as KBW’s view of the actual value of any companies or assets. 

 

KBW assumed that, in all respects material to its analyses:

 

 

the merger and any related transactions would be completed substantially in accordance with the terms set forth in the merger agreement (the final terms of which KBW assumed would not differ in any respect material to KBW’s analyses from the draft of the merger agreement reviewed by KBW and referred to above) with no adjustments to the merger consideration and with no other payments in respect of JMP common shares;

 

 

the representations and warranties of each party in the merger agreement and in all related documents and instruments referred to in the merger agreement were true and correct;

 

 

each party to the merger agreement and all related documents would perform all of the covenants and agreements required to be performed by such party under such documents;

 

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there were no factors that would delay or subject to any adverse conditions, any necessary regulatory or governmental approval for the merger or any related transactions and that all conditions to the completion of the merger and any related transactions would be satisfied without any waivers or modifications to the merger agreement or any of the related documents; and

 

 

in the course of obtaining the necessary regulatory, contractual, or other consents or approvals for the merger and any related transactions, no restrictions, including any divestiture requirements, termination or other payments or amendments or modifications, would be imposed that would have a material adverse effect on the merger or the future results of operations or financial condition of JMP.

 

KBW assumed that the merger would be consummated in a manner that complies with all applicable provisions of the Exchange Act and all other applicable federal and state statutes, rules and regulations. KBW was further advised by JMP that JMP relied upon advice from its advisors (other than KBW) or other appropriate sources as to all legal, financial reporting, tax, accounting and regulatory matters with respect to JMP, Citizens, Merger Sub, the merger and any related transaction, and the merger agreement. KBW did not provide advice with respect to any such matters.

 

KBW’s opinion addressed only the fairness, from a financial point of view, as of the date of such opinion, to the holders of JMP common shares of the merger consideration to be received by such holders in the merger without regard to individual circumstances of specific holders with respect to control, voting or other rights or aspects which may distinguish such holders. KBW expressed no view or opinion as to any other terms or aspects of the merger or any term or aspect of any related transaction (including the contingent dividend that may be paid by JMP under certain circumstances before the closing of the merger (the “Contingent Dividend”)), including without limitation, the form or structure of the merger or any such related transaction, the treatment in the merger of outstanding options to purchase JMP common shares and outstanding JMP restricted stock units the likelihood or amount of the Contingent Dividend, any consequences of the merger or any such related transaction to JMP, its shareholders, creditors or otherwise, or any terms, aspects, merits or implications of any employment, consulting, voting, support, shareholder or other agreements, arrangements or understandings contemplated or entered into in connection with the merger, any such related transaction, or otherwise. KBW’s opinion was necessarily based upon conditions as they existed and could be evaluated on the date of such opinion and the information made available to KBW through such date. There has been widespread disruption, extraordinary uncertainty and unusual volatility arising from the effects of the COVID-19 pandemic, including the effect of evolving governmental interventions and non-interventions. Developments subsequent to the date of KBW’s opinion may have affected, and may affect, the conclusion reached in KBW’s opinion and KBW did not and does not have an obligation to update, revise or reaffirm its opinion. KBW’s opinion did not address, and KBW expressed no view or opinion with respect to:

 

 

the underlying business decision of JMP to engage in the merger or enter into the merger agreement;

 

 

the relative merits of the merger as compared to any strategic alternatives that are, have been or may be available to or contemplated by JMP, the Special Transaction Committee or the JMP board;

 

 

the fairness of the amount or nature of the compensation to any of JMP’s officers, directors or employees, or any class of such persons, relative to the compensation to the holders of JMP common shares;

 

 

the effect of the merger or any related transaction on, or the fairness of any consideration to be received by, holders of any class of securities of JMP (other than the holders of JMP common shares solely with respect to the merger consideration, as described in KBW’s opinion and not relative to any consideration to be received by holders of any other class of securities) or any other party to any transaction contemplated by the merger agreement;

 

 

whether Citizens has sufficient cash, available lines of credit or other sources of funds to enable the aggregate merger consideration to be paid to the holders of JMP common shares at the closing of the merger;

 

 

any advice or opinions provided by any other advisor to any of the parties to the merger or any other transaction contemplated by the merger agreement; or

 

 

any legal, regulatory, accounting, tax or similar matters relating to JMP or its shareholders, or relating to or arising out of or as a consequence of the merger or any related transaction.

 

In performing its analyses, KBW made numerous assumptions with respect to industry performance, general business, economic, market and financial conditions and other matters, which are beyond the control of KBW and JMP. Any estimates contained in the analyses performed by KBW are not necessarily indicative of actual values or future results, which may be significantly more or less favorable than suggested by these analyses. Additionally, estimates of the value of businesses or securities do not purport to be appraisals or to reflect the prices at which such businesses or securities might actually be sold. Accordingly, these analyses and estimates are inherently subject to substantial uncertainty. In addition, the KBW opinion was among several factors taken into consideration by the Special Transaction Committee and the JMP board in making its determination to approve the merger agreement and the merger. Consequently, the analyses described below should not be viewed as determinative of the decision of the Special Transaction Committee or the JMP board with respect to the fairness of the merger consideration. The type and amount of consideration payable in the merger were determined through negotiation between JMP and Citizens, and the decision of JMP to enter into the merger agreement was solely that of the Special Transaction Committee and the JMP board.

 

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The following is a summary of the material financial analyses presented by KBW to the Special Transaction Committee and the JMP board in connection with its opinion. The summary is not a complete description of the financial analyses underlying the opinion or the presentation made by KBW to the Special Transaction Committee and the JMP board, but summarizes the material analyses performed and presented in connection with such opinion. The financial analyses summarized below include information presented in tabular format. The tables alone do not constitute a complete description of the financial analyses. The preparation of a fairness opinion is a complex analytic process involving various determinations as to appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. Therefore, a fairness opinion is not readily susceptible to partial analysis or summary description. In arriving at its opinion, KBW did not attribute any particular weight to any analysis or factor that it considered, but rather made qualitative judgments as to the significance and relevance of each analysis and factor. Accordingly, KBW believes that its analyses and the summary of its analyses must be considered as a whole and that selecting portions of its analyses and factors or focusing on the information presented below in tabular format, without considering all analyses and factors or the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of the process underlying its analyses and opinion.

 

Selected Companies Analysis. Using publicly available information, KBW compared the market performance of JMP to five selected publicly-traded small-cap and mid-cap full service broker dealers. Companies specialized in or solely focused on M&A advisory or wealth and asset management were excluded from the selected companies.

 

The selected companies were as follows:

 

Piper Sandler Companies

B. Riley Financial, Inc.

Cowen Inc.

Oppenheimer Holdings Inc.

Cohen & Company Inc.

 

To perform this analysis, KBW used market price information as of September 3, 2021 and revenue, earnings per share (“EPS”), book value, and tangible book value of JMP and the selected companies for the latest 12 months (“LTM”) available or as of the end of such period. KBW also used calendar years 2021 and 2022 revenue and EPS estimates for JMP and the selected companies taken from the publicly available analyst’s estimate of Barrington Research in the case of JMP and from consensus “street estimates” of the selected companies to the extent publicly available.

 

KBW’s analysis showed, to the extent publicly available, the following concerning the market performance of JMP and the selected companies (excluding the impact of the tangible book value multiple for one of the selected companies, which multiple was considered to be not meaningful):

 

 

Selected Companies

 

JMP

25th 

Percentile

Average

Median

75th

Percentile

Market Cap / LTM Revenue

0.8x

0.4x

0.8x

0.5x

1.2x

Market Cap / CY 2021E Revenue

0.9x

0.8x

1.0x

1.0x

1.3x

Market Cap / CY 2022E Revenue

0.9x

0.9x

1.1x

1.1x

1.4x

Price / LTM EPS

14.0x

3.2x

5.1x

3.6x

3.9x

Price / CY 2021E EPS

8.7x

5.1x

6.2x

6.2x

7.2x

Price / CY 2022E EPS

10.4x

6.9x

8.1x

8.1x

9.3x

Price / Book Value

2.0x

0.8x

1.6x

1.1x

2.7x

Price / Tangible Book Value

2.1x

0.9x

1.6x

1.2x

1.9x

 

Note: Multiples in above table were rounded.

 

25

 

 

KBW then applied: (i) a range of price-to-LTM revenue multiples of 0.42x to 1.20x derived from the 25th and 75th percentile multiples of the selected companies to the revenues of JMP for the 12-month period ended June 30, 2021; (ii) ranges of price-to-LTM earnings multiples of 3.20x to 3.95x, price-to-2021 estimated earnings multiples of 5.12x to 7.21x, and price-to-2022 estimated earnings multiples of 6.95x to 9.29x, which ranges were derived from the 25th and 75th percentile multiples of the selected companies, to the earnings of JMP for the 12-month period ended June 30, 2021, calendar year 2021 estimated operating net income of JMP (taken from financial and operating forecasts and projections of JMP provided by JMP management) and calendar year 2022 estimated operating net income of JMP (taken from financial and operating forecasts and projections of JMP provided by JMP management), respectively; and (iii) a range of price-to-tangible book value multiples of 0.87x to 1.85x derived from the 25th and 75th percentile multiples of the selected companies to each of the June 30, 2021 GAAP tangible book value of JMP, June 30, 2021 reported non-GAAP tangible book value of JMP and June 30, 2021 pro forma tangible book value of JMP (adjusted, at the direction of JMP management and based on information contained in JMP’s public filings or provided by JMP management, pro forma for the one-time event related to JMP’s securities position in Workspace occurring in July 2021 as if such event had occurred on June 30, 2021). This analysis indicated the following ranges of the implied value per share of JMP common stock, as compared to the $7.50 per share consideration in the merger and also a $7.73 illustrative per share consideration shown for informational purposes based on the potential that JMP may be permitted to declare a special dividend to its shareholders prior to closing in an amount up to $5,000,000 in the aggregate:

 

 

Implied Value

Per Share Ranges

of JMP Common Stock

Based on LTM Revenue for the period ended June 30, 2021

$3.21 to $9.24

Based on LTM Earnings for the period ended June 30, 2021

$1.57 to $1.94

Based on CY 2021 Estimated Operating Net Income

$3.72 to $5.23

Based on CY 2022 Estimated Operating Net Income

$4.48 to $5.99

Based on June 30, 2021 GAAP Tangible Book Value

$2.84 to $6.03

Based on June 30, 2021 Adjusted Reported Non-GAAP Tangible Book Value

$3.54 to $7.53

Based on June 30, 2021 Pro Forma Tangible Book Value (adjusted for Workspace)

$4.35 to $9.24

 

No company used as a comparison in the above selected companies analysis is identical to JMP. Accordingly, an analysis of these results is not mathematical. Rather, it involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies involved.

 

Selected Transactions Analysis. KBW reviewed publicly available information related to 10 selected acquisitions of small-cap and mid-cap broker dealer companies. Transactions involving acquired companies specialized in or solely focused on M&A advisory or wealth and asset management were excluded from the selected transactions.

 

The selected transactions were as follows:

 

Acquirer

Acquired Company

B. Riley Financial, Inc.

National Holdings Corporation

Piper Jaffray Companies

Sandler O’Neill + Partners, L.P.

Stifel Financial Corp.

GMP Capital Inc.

SVB Financial Group

Leerink Holdings LLC

B. Riley Financial, Inc.

Wunderlich Securities

B. Riley Financial, Inc.

FBR & Co.

Stifel Financial Corp.

Sterne, Agee & Leach, Inc.

Leucadia National Corporation

Jefferies Group, Inc.

Stifel Financial Corp.

KBW, Inc.

Stifel Financial Corp.

Thomas Weisel Partners

 

For each selected transaction to the extent the relevant information was publicly available, KBW derived the following implied transaction statistics, in each case based on the announced transaction value for the acquired company and using financial data based on the acquired company’s then latest publicly available financial statements prior to the announcement of the respective transaction and, to the extent publicly available, one year forward consensus “street estimates” prior to the announcement of the respective transaction or, in the case of the Stifel Financial Corp. / KBW, Inc. transaction, prospective financial information disclosed in the S-4 registration statement for the transaction:

 

 

Transaction value at announcement to LTM revenue of the acquired company;

 

Transaction value at announcement to forward earnings of the acquired company in the seven selected transactions in which forward earnings for the acquired company was available at announcement; and

 

Transaction value at announcement to book value of the acquired company in the eight selected transactions in which book value for the acquired company was available at announcement,

 

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KBW’s analysis showed the following concerning the selected transactions (excluding the impact of the forward earnings multiple of one of the selected transactions, which multiple was considered to be not meaningful because it was negative):

 

 

 

Selected Transactions

 

25th 

Percentile

Average

Median

75th 

Percentile

Transaction value at announcement / LTM Revenue

0.5x

1.0x

1.1x

1.3x

Transaction value at announcement / Forward Earnings

9.5x

14.2x

13.6x

19.6x

Transaction value at announcement / Book Value

1.4x

2.3x

1.7x

3.1x

 

Note: Multiples in above table were rounded.

 

KBW then applied: (i) a range of transaction value at announcement-to-LTM revenue multiples of 0.50x to 1.29x derived from the 25th and 75th percentile multiples of the selected transactions to the revenues of JMP for the 12-month period ended June 30, 2021; (ii) a range of transaction value at announcement-to-forward earnings multiples of 9.50x to 19.63x derived from the 25th and 75th percentile multiples of the selected transactions to the 2021 calendar year estimated operating net income of JMP (taken from financial and operating forecasts and projections of JMP provided by JMP management); and (iii) a range of transaction value at announcement-to-book value multiples of 1.36x to 3.06x derived from the 25th and 75th percentile multiples of the selected transactions to each of the June 30, 2021 GAAP book value of JMP, June 30, 2021 adjusted reported non-GAAP book value of JMP and June 30, 2021 pro forma book value of JMP (adjusted, at the direction of JMP management and based on information contained in JMP’s public filings or provided by JMP management, pro forma for the one-time event related to JMP’s securities position in Workspace occurring in July 2021 as if such event had occurred on June 30, 2021). This analysis indicated the following ranges of the implied value per share of JMP common stock, as compared to the $7.50 per share consideration in the merger and also a $7.73 illustrative per share consideration shown for informational purposes based on the potential that JMP may be permitted to declare a special dividend to its shareholders prior to closing in an amount up to $5,000,000 in the aggregate:

 

 

Implied Value Per Share Range

of JMP Common Stock

Based on LTM Revenue for the period ended June 30, 2021

$3.85 to $9.94

Based on CY 2021 Estimated Operating Net Income

$6.89 to $14.25

Based on June 30, 2021 GAAP Book Value

$4.44 to $9.95

Based on June 30, 2021 Adjusted Reported Non-GAAP Book Value

$5.54 to $12.43

Based on June 30, 2021 Pro Forma Book Value (adjusted for Workspace)

$6.80 to $15.26

 

No company or transaction used as a comparison in the above selected transaction analysis is identical to JMP or the proposed transaction. Accordingly, an analysis of these results is not mathematical. Rather, it involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies involved.

 

Discounted Cash Flow Analysis. KBW performed a discounted cash flow analysis to estimate ranges for the implied equity value of JMP. In this analysis, KBW used financial and operating forecasts and projections of JMP provided by JMP management, and assumed discount rates ranging from 11.0% to 15.0%. Range of values were determined by adding (i) the present value of the estimated excess cash flows that JMP could generate over the 5.5-year period from June 30, 2021 to December 31, 2026 as a standalone company and (ii) the present value of implied terminal values of JMP at the end of such period. In calculating implied terminal values for JMP, KBW applied a range of 6.9x to 9.3x to JMP’s estimated fiscal year ending December 31, 2026 operating net income. This discounted cash flow analysis resulted in a range of implied values per share of JMP common stock of approximately $4.90 to $6.55.

 

KBW also reviewed how the discounted cash flow analysis would be affected by applying sensitivities that varied JMP’s annual revenue growth over the 5.5-year period from 0.0% to 3.0% and varied JMP’s annual pre-tax margin from 9.0% to 11.0%. Assuming a discount rate of 12.8%, these sensitivities to the discounted cash flow analysis resulted in a range of implied values per share of JMP common stock of approximately $4.42 to $6.92.

 

The discounted cash flow analysis is a widely used valuation methodology, but the results of such methodology are highly dependent on the assumptions, including terminal values and discount rates. The discounted cash flow analysis did not purport to be indicative of the actual values or expected values of JMP.

 

Miscellaneous. KBW acted as financial advisor to the Special Transaction Committee and not as an advisor to or agent of any other person. As part of KBW’s investment banking business, KBW is continually engaged in the valuation of securities of financial services companies in connection with acquisitions, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements and valuations for various other purposes. As specialists in the securities of financial services companies, KBW has experience in, and knowledge of, the valuation of securities broker-dealers and investment banking enterprises. In the ordinary course of its and their broker-dealer businesses, KBW and its affiliates may from time to time purchase securities from, and sell securities to, JMP and Citizens. In addition, as market makers in securities, KBW and its affiliates may from time to time have a long or short position in, and buy or sell, securities of JMP and Citizens. KBW employees may also from time to time maintain individual positions in JMP and Citizens.

 

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Pursuant to the KBW engagement agreement, JMP agreed to pay KBW a total cash fee equal to 1.5% of the aggregate merger consideration, $250,000 of which became payable to KBW with the rendering of KBW’s opinion and the balance of which is contingent upon the closing of the merger. JMP also agreed to reimburse KBW for reasonable out-of-pocket expenses and disbursements incurred in connection with its engagement and to indemnify KBW against certain liabilities relating to or arising out of KBW’s engagement or KBW’s role in connection therewith. In addition to the present engagement, during the two years preceding the date of its opinion, KBW provided investment banking and financial advisory services to Harvest Capital Credit Corporation (“HCC”), which was a publicly-traded business development company that, among other things, received investment advisory services from an affiliate of JMP, and KBW received compensation for its services. KBW acted as financial advisor to HCC in connection with its acquisition by Portman Ridge Finance Corporation which closed in June 2021. During the two years preceding the date of its opinion, KBW did not provide investment banking or financial advisory services to Citizens. An investment banking affiliate of KBW currently maintains a business relationship with an affiliate of Citizens to jointly market certain services to real estate investment trusts and pays such Citizens affiliate a portion of the compensation received by such KBW affiliate for its services to such real estate investment trusts. KBW may in the future provide investment banking and financial advisory services to JMP or Citizens and receive compensation for such services.

 

Certain JMP Unaudited Prospective Financial Information

 

JMP does not as a matter of course make public projections as to future revenues, earnings or other financial results due to, among other reasons, the uncertainty of the underlying assumptions and estimates. However, JMP is including this unaudited prospective financial information that was made available to the JMP board of directors and KBW in connection with the merger. This unaudited prospective financial information is referred to as the financial and operating forecasts and projections of JMP that were prepared by JMP management in the section “Proposal One: The Merger—Opinion of the Special Transaction Committee’s Financial Advisor” beginning on page 22 of this proxy statement. The inclusion of this information should not be regarded as an indication that JMP or any of its representatives or any other recipient of this information considered, or now considers, it to be necessarily predictive of actual future results.

 

JMP’s management prepared, or approved the use of, the following unaudited prospective financial information. This information was prepared solely for internal use and is subjective in many respects. While presented with numeric specificity, the unaudited prospective financial information reflects numerous estimates and assumptions made with respect to business, economic, market and financial conditions and matters specific to JMP’s business, all of which are difficult to predict and many of which are beyond JMP’s control. JMP can give no assurance that the unaudited prospective financial information and the underlying estimates and assumptions will be realized. Actual results may differ, and may differ materially, from those set forth below, and important factors that may affect actual results and cause the unaudited prospective financial information to be inaccurate include, but are not limited to, risks and uncertainties relating to JMP’s business, industry performance, and general business and economic conditions. For other factors that could cause actual results to differ please see the section entitled “Cautionary Statement Concerning Forward-Looking Statements” beginning on page 13 of this proxy statement. The information should also be read in conjunction with statements that are included herein and elsewhere, including the risk factors included in JMP’s most recent Annual Report on Form 10-K for the year ended December 31, 2020, JMP’s most recent Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, and our other reports filed with the SEC.

 

The unaudited prospective financial information was not prepared with a view toward public disclosure, nor was it prepared with a view toward compliance with GAAP, published guidelines of the SEC regarding projections and the use of non-GAAP financial measures, or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. In addition, the unaudited prospective financial information requires significant estimates and assumptions that make it inherently less comparable to the similarly titled GAAP measures in JMP’s historical GAAP financial statements. The presentation of the unaudited prospective financial information that are non-GAAP financial measures is not meant to be considered in isolation or as a substitute for results prepared in accordance with GAAP. JMP’s management uses non-GAAP measures internally to evaluate its ongoing operational performance, and believes these non-GAAP measures are useful to investors as they provide a basis for evaluating JMP’s underlying operating results. These non-GAAP measures may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles and the non-GAAP measures have limitations in that they do not reflect all of the amounts associated with its results of operations as determined in accordance with GAAP. Neither JMP’s independent registered public accounting firm, nor any other independent accountants, have compiled, examined or performed any procedures with respect to the unaudited prospective financial information contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability.

 

28

 

Furthermore, the unaudited prospective financial information does not take into account any circumstances or events occurring after the date it was prepared. JMP can give no assurance that, had the unaudited prospective financial information been prepared as of the date of this proxy statement, similar estimates and assumptions would be used. JMP does not intend to make publicly available any update or other revision to the unaudited prospective financial information. None of JMP or its affiliates, officers, directors, advisors or other representatives has made, makes or is authorized in the future to make any representation to any shareholder of JMP, stockholder of Citizens or other person regarding JMP’s ultimate performance compared to the information contained in the unaudited prospective financial information or that the projected results will be achieved. The summary of the unaudited prospective financial information included below is not being included to influence your decision whether to vote for the merger and the transactions contemplated in connection with the merger, but is being provided solely because it was considered in connection with the merger.

 

In light of the foregoing, and considering that the Special Meeting will be held several months after the unaudited prospective financial information was prepared, as well as the uncertainties inherent in any forecasted information, JMP shareholders are cautioned not to place unwarranted reliance on such information, and JMP urges all shareholders to review JMP’s most recent SEC filings for a description of JMP’s reported financial results. See “Where You Can Find More Information” on page 55 of this proxy statement.

 

The following table presents selected JMP unaudited prospective financial data for the year ending December 31, 2021:

 

 

Fiscal year ending

December 31, 2021

($ in millions)

Total net revenues

$168.3

Operating net income (non-GAAP)

$15.7

 

For purposes of the discounted cash flow analysis of JMP performed in connection with KBW’s opinion, JMP senior management provided KBW with an estimated long-term annual growth rate of 2.0% for JMP’s revenue from 2022 through 2026, an estimated pre-tax margin of 11%, an estimate of no change to net working capital, and annual depreciation of $1.053 million.

 

Interests of Certain Persons in the Merger

 

In considering the recommendations of JMP’s board of directors with respect to the merger, you should be aware that executive officers and members of the board of directors of JMP have agreements or arrangements that provide them with interests in the merger, including financial interests, that may be different from, or in addition to, the interests of the other shareholders of JMP. JMP’s board of directors was aware of these interests during its deliberations of the merits of the merger and in determining to recommend to JMP shareholders that they vote for the proposal to adopt the merger agreement and thereby approve the transactions contemplated by the merger agreement, including the merger. The amounts set forth in the discussions below regarding director and executive officer compensation are based on compensation levels as of the date of this proxy statement unless otherwise specified.

 

Treatment of Restricted Stock Units

 

Certain executive officers and directors hold JMP restricted stock units granted under the JMP Amended and Restated Equity Incentive Plan. At the effective time of the merger, each outstanding restricted stock unit, whether vested or unvested, will be converted into a restricted stock unit award representing the right to receive the number of denominated shares of Citizens common stock. The number of shares of Citizens common stock subject to such JMP RSU converted to Citizens RSU will be equal to the product (rounded down to the nearest whole number) of the total number of common shares subject to such JMP RSU award immediately prior to the effective time of the merger multiplied by the Equity Award Exchange Ratio. Except as otherwise provided, each such JMP RSU converted to Citizens RSU will continue to be governed by the same terms and conditions (including vesting and settlement terms) as were applicable to the applicable JMP RSU immediately prior to the effective time of the merger. JMP RSUs under the JMP Group LLC Amended and Restated Equity Incentive Plan are subject to accelerated vesting on a termination without cause in the 12 months following closing.

 

The following table sets forth the number of JMP RSUs held by each executive officer of JMP and non-employee director as of October 2, 2021. The estimated value of the JMP RSUs is based on (i) the per share merger consideration of $7.50, multiplied by (ii) the total number of shares subject to each JMP RSU award, without subtraction of applicable withholding taxes. As of the date of the merger agreement, none of the executive officers or non-employee directors held options to purchase JMP common shares.

 

Name

 

RSUs
(1) (#)

   

Value of
RSUs
(2) ($)

 

Executive Officers:

               

Joseph A. Jolson

    125,129     $ 938,468  

Thomas R. Wright

    5,862     $ 43,965  

Craig R. Johnson

    13,097     $ 98,228  

Non-Employee Directors:

               

Kenneth M. Karmin

    3,683     $ 27,623  

H. Mark Lunenburg

    2,864     $ 21,480  

Jonathan M. Orszag

    2,457     $ 18,428  

Staci Slaughter

    2,048     $ 15,360  

Glenn H. Tongue

    3,274     $ 24,555  

 

 

(1)

Each RSU will be converted into a restricted stock unit to receive a number of shares of Citizens common stock equal to the number of JMP common shares that were subject to such RSU prior to the effective time of the merger, multiplied by the Equity Award Exchange Ratio.

 

 

(2)

For purposes of this table, the value of the RSUs at the closing of the merger is estimated to be equal to (i) the number of JMP common shares stock subject to the RSUs multiplied by (ii) $7.50.

 

29

 

 

Employment Arrangements with Citizens and Executive Officers

 

Mark L. Lehmann and Citizens entered into an Executive Employment Agreement effective as of the closing, for Mr. Lehmann’s continued employment with JMP, a subsidiary of Citizens, immediately following the closing of the transaction contemplated by the merger agreement, as Managing Director, Chief Executive Officer, JMP Securities. Citizens will pay Mr. Lehmann a base salary at the annualized rate of $300,000. Effective January 3, 2022, his base salary shall increase to $400,000, with a commensurate decrease in incentive compensation opportunity. Mr. Lehmann shall be eligible to participate in Citizens’ discretionary award program. 

 

Incentive compensation for the 2021 performance year will be subject to the same deferral schedule as was in effect for JMP executives for performance year 2020, except that any deferred portion will be awarded in the form of deferred cash without money market investment with a vesting schedule consistent with 2020 awards (vesting in two equal installments on December 1, 2022 and December 1, 2023). Awards for years thereafter will be consistent with terms for awards granted to similarly situated Citizens colleagues.

 

Mr. Lehmann is eligible to receive an aggregate retention award in the amount of $2,500,000 payable in three installments: $625,000 on the first anniversary of the closing; $625,000 on the second anniversary of the closing, and $1,250,000 on the third anniversary of the closing. In the event Citizens terminates Mr. Lehmann’s employment for any other reason other than with cause (including as a result of his death or disability) or Mr. Lehmann resigns his employment with good reason (each as defined in the agreement), he shall continue to receive the retention award payments on their fixed payment dates. If Citizens incurs a change in control (as defined under Citizens Financial Group, Inc. Deferred Cash Award Agreement), any unpaid portion of the retention award will be treated as an award issued in the Citizens Financial Group, Inc. Deferred Cash Award Agreement. The remaining payments of the retention award is forfeited if Citizens terminates Mr. Lehmann’s employment with cause or he resigns without good reason. The terms and conditions of any JMP Equity Incentive Plan between Mr. Lehmann and JMP shall remain in full force and control, and any outstanding JMP equity will be converted to Citizens equity in accordance with the terms of the merger agreement.

 

Mr. Lehmann shall be credited with the number of years of service relating to his employment with JMP and any predecessors or affiliates thereof, for purposes of eligibility, vesting, and benefit accrual (except for benefit accrual under defined benefit pension plans, for purposes of qualifying for subsidized early retirement benefits or retiree medical benefits or to the extent it would result in a duplication of benefits) in Citizens’ employee benefits and other plans, programs and policies. Mr. Lehmann’s service credit at JMP shall be credited for purposes of calculating vacation or paid time off under Citizens’ policy and with respect to reaching retirement eligibility under any deferred compensation plan or agreement.

 

In the event Citizens terminates Mr. Lehmann’s employment without cause, or Mr. Lehmann terminates his employment with good reason, Citizens will pay Mr. Lehmann a lump sum severance payment equal to 2 weeks’ base salary for each full year of service to Citizens and/or JMP and one month of COBRA premiums. Mr. Lehmann’s agreement provides for a one year nonsolicitation of employees following termination of employment and a three year nonsolicitation of clients and prospects following the closing.

 

Thomas Wright, and Citizens entered into an Executive Employment Agreement effective as of the closing, for Mr. Wright’s continued employment with JMP, a subsidiary of Citizens, immediately following the closing of the transaction contemplated by the merger agreement, as Managing Director, Chief Operating Officer, Head of Equities, JMP Securities. Citizens will pay Mr. Wright a base salary at the annualized rate of $300,000. Effective January 3, 2022, his base salary shall increase to $400,000, with a commensurate decrease in incentive compensation opportunity. Mr. Wright shall be eligible to participate in Citizens discretionary award program. 

 

Incentive compensation for the 2021 performance year will be subject to the same deferral schedule as was in effect for JMP executives for performance year 2020, except that any deferred portion will be awarded in the form of deferred cash without money market investment with a vesting schedule consistent with 2020 awards (vesting in two equal installments on December 1, 2022 and December 1, 2023). Awards for years thereafter will be consistent with terms for awards granted to similarly situated Citizens colleagues.

 

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Mr. Wright is eligible to receive an aggregate retention award in the amount of $1,750,000 payable in three installments: $437,500 on the first anniversary of the closing; $437,500 on the second anniversary of the closing, and $875,000 on the third anniversary of the closing. In the event Citizens terminates Mr. Wright’s employment for any other reason other than with cause (including as a result of his death or disability) or Mr. Wright resigns his employment with good reason (each as defined in the agreement), he shall continue to receive the retention award payments on their fixed payment dates. If Citizens incurs a change in control (as defined under Citizens Financial Group, Inc. Deferred Cash Award Agreement), any unpaid portion of the retention award will be treated as an award issued in the Citizens Financial Group, Inc. Deferred Cash Award Agreement. The remaining payments of the retention award is forfeited if Citizens terminates Mr. Wright’s employment with cause or he resigns without good reason. The terms and conditions of any JMP Equity Incentive Plan between Mr. Wright and JMP shall remain in full force and control, and any outstanding JMP equity will be converted to Citizens equity in accordance with the terms of the merger agreement.

 

Mr. Wright shall be credited with the number of years of service relating to his employment with JMP Group and any predecessors or affiliates thereof, for purposes of eligibility, vesting, and benefit accrual (except for benefit accrual under defined benefit pension plans, for purposes of qualifying for subsidized early retirement benefits or retiree medical benefits or to the extent it would result in a duplication of benefits) in Citizens’ employee benefits and other plans, programs and policies. Mr. Wright’s service credit at JMP Group shall be credited for purposes of calculating vacation or paid time off under Citizens’ policy and with respect to reaching retirement eligibility under any deferred compensation plan or agreement.

 

In the event Citizens terminates Mr. Wright’s employment without cause, or Mr. Wright terminates his employment with good reason, Citizens will pay Mr. Wright a lump sum severance payment equal to 2 weeks’ base salary for each full year of service to Citizens and/or JMP Group and one month of COBRA premiums. Mr. Wright’s agreement provides for a one year nonsolicitation of employees following termination of employment and a one year nonsolicitation of clients and prospects following termination of employment.

 

Employee Benefits Matters

 

For a discussion of the merger agreements’ employee benefits matters, see the section entitled “The Merger Agreement—JMP Employee Benefits Matters” beginning on page 42, which is incorporated herein by reference.

 

Directors and Officers Indemnification; Directors and Officers Insurance

 

Under the merger agreement, each present and former director and officer of JMP or any of its subsidiaries is entitled to continued indemnification and insurance coverage through the combined company for acts or omissions occurring at or prior to the effective time of the merger. The obligation to indemnify includes the obligation to advance expenses incurred in connection with the defense of any actions. For additional information, see “The Merger Agreement—Other Covenants and Agreements—Indemnification and Insurance” beginning on page 44.

 

Merger-Related Compensation for JMPs Named Executive Officers

 

This section sets forth the information required by Item 402(t) of Regulation S-K regarding the compensation for each of JMP’s named executive officers that is based on or otherwise relates to the merger. This compensation is referred to as “golden parachute” compensation by the applicable SEC disclosure rules. The table does not include the value of benefits that the named executive officers are vested in without regard to the occurrence of a change in control. The “golden parachute” compensation payable to these individuals is subject to a non-binding advisory vote of holders of JMP common shares, as described in the section entitled “Questions and Answers About the Merger and the Special Meeting” beginning on page 1.

 

Pursuant to JMP Group LLC Amended and Restated Equity Incentive Plan and the standard forms of equity award agreements under that plan, unvested restricted stock units held by employees, including certain of JMP’s named executive officers, in the event of a corporate transaction that is not a “hostile” transfer of control of the Company where awards are assumed or replaced, remain unvested until the original vesting date, but will become fully vested if the employee is terminated by the successor company or JMP without “cause” within 12 months of the corporate transaction. Set forth in the table below are the values of restricted share unit awards under the JMP Group LLC Amended and Restated Equity Incentive Plan as of October 2, 2021 that, in each case, would vest in the event of the named executive officer’s termination of service without cause within 12 months of the merger (i.e., “double-trigger” acceleration). The estimated value of the JMP RSUs is based on (i) the per share merger consideration of $7.50, multiplied by (ii) the total number of shares subject to each JMP RSU award, without subtraction of applicable withholding taxes. The RSUs in the table below were awarded pursuant to JMP’s deferred compensation program, under which a portion of each participant’s total earned salary and cash bonus compensation is subject to a deferred payout over two years. Program participants may elect to receive a portion of their earned salary and cash bonus compensation in a particular year in either cash (which is invested in a money market fund) or restricted share units. Mr. Jolson elected to receive RSUs for the 2020 fiscal year, and Mr. Wright elected to receive RSUs for the 2019 fiscal year. The deferred compensation amounts (either cash or RSUs) vest over two fiscal years, with 50% vesting on December 1st of each year after the RSU award is granted. Mark Lehmann does not hold any restricted stock units and, as of October 2, 2021, none of the named executive officers of JMP held options to purchase JMP common shares.

 

Named Executive

Officer

Number of

RSUs

Grant Date

Vesting Date

Per RSU

Value

Total Value

Joseph Jolson

62,564

2/4/2021

12/1/2021

$7.50

$469,230

Joseph Jolson

62,565

2/4/2021

12/1/2022

$7.50

$469,238

Thomas R. Wright

5,862

2/5/2020

12/1/2021

$7.50

$ 43,965

 

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In the event that Mr. Jolson resigns as an officer and director of JMP and its subsidiaries in connection with the closing of the merger, Mr. Jolson will remain eligible to participate in JMP’s annual bonus pool, and will be eligible to be awarded a pro-rated bonus determined by JMP’s compensation committee and calculated according to JMP’s historical performance metrics, but taking into account JMP’s investment returns and operating performance for fiscal year 2021. As of the date of this proxy statement, the amount of such pro-rated bonus has not been determined.

 

For a discussion of the agreements governing the terms of Messrs. Wright’s and Lehmann’s employment with and service to Citizens following the closing, and the amounts payable pursuant to such agreements, see the section entitled “Proposal One: The Merger—Interests of Certain Persons in the Merger—Employment Arrangements with Citizens and Executive Officers” beginning on page 30, incorporated herein by reference.

 

No Citizens Stockholder Approval

 

Citizens stockholders are not required to adopt the merger agreement and thereby approve the transactions contemplated by the merger agreement, including the merger or the payment of the merger consideration.

 

Manner and Procedure for Exchanging Shares of JMP Stock

 

The conversion of JMP common shares into the right to receive the merger consideration will occur automatically at the effective time of the merger.

 

Prior to the completion of the merger, Citizens and Merger Sub will select a commercial bank or trust company reasonably acceptable to JMP to serve as the Paying Agent (the “Paying Agent”) to make payments of the merger consideration to JMP’s shareholders. At or prior to the closing of the merger, Citizens or Merger Sub will deposit (or cause to be deposited) with the payment agent cash that is sufficient in the aggregate to pay the aggregate per share price to our shareholders in accordance with the merger agreement.

 

Promptly (and in any event within three business days) following the effective time of the merger, the surviving company will cause the Paying Agent to mail to each holder of record (as of immediately prior to the effective time of the merger) of a certificate that immediately prior to the effective time of the merger represented outstanding common shares of JMP (other than excluded shares), a letter of transmittal and instructions advising shareholders how to surrender share certificates in exchange for merger consideration. Upon receipt of (1) surrendered certificates for cancellation (or an appropriate affidavit for lost, stolen or destroyed certificates, together with any required bond); and (2) a duly completed and signed letter of transmittal and such other documents as may be reasonably requested by the Paying Agent, the holder of such certificate will be entitled to receive an amount in cash equal to the product of (a) the aggregate number of common shares of JMP represented by such certificate and (b) the per share price of $7.50. The amount of any per share price paid to our shareholders will not include interest and may be reduced by any applicable withholding taxes.

 

Notwithstanding the foregoing, any holder of our common shares held in book-entry form (which we refer to as “uncertificated shares”) will not be required to deliver a certificate or an executed letter of transmittal (as both are described above) to the Paying Agent to receive the consideration payable in respect thereof. Each holder of record (as of immediately prior to the effective time of the merger) of uncertificated shares that immediately prior to the effective time of the merger represented an outstanding common shares of JMP (other than excluded shares) will, upon receipt of an “agent’s message” in customary form at the effective time of the merger, and any documents as may reasonably be requested by the Paying Agent, be entitled to receive, and the Paying Agent will pay and deliver as promptly as practicable, an amount in cash equal to the product of (1) the aggregate number of common shares of JMP represented by such holder’s transferred uncertificated shares; and (2) the per share price of $7.50. The amount of consideration paid to such JMP shareholders will not include interest and may be reduced by any applicable withholding taxes.

 

If any cash deposited with the Paying Agent is not claimed within one year following the effective time of the merger, such cash may be returned to the surviving company upon the surviving company’s request, and any of our shareholders as of immediately prior to the merger who have not complied with the exchange procedures in the merger agreement will thereafter look only to the surviving company for satisfaction of payment of the merger consideration (subject to abandoned property law, escheat law or similar laws). None of the Paying Agent, Citizens, the surviving company or any other party will be liable to any of our shareholders with respect to any cash amounts properly paid to a public official pursuant to any applicable abandoned property law, escheat law or similar laws.

 

The letter of transmittal will include instructions if a shareholder has lost a share certificate or if such certificate has been stolen or destroyed. In the event that any share certificates have been lost, stolen or destroyed, then the Paying Agent will issue the per share price to such holder upon the making by such holder of an affidavit for such lost, stolen or destroyed certificate. Citizens or the Paying Agent may, in its discretion and as a condition precedent to the payment of the per share price, require such shareholder to deliver a bond in such amount as Citizens or the payment agent may direct as indemnity against any claim that may be made against Citizens, the surviving company or the Paying Agent with respect to such certificate.

 

Litigation Related to the Merger

 

Following the filing of JMP’s preliminary proxy statement associated with the Merger with the SEC on October 5, 2021, two complaints have been filed against JMP and certain officers and directors thereof in connection with the Merger. The first, Shiva Stein v. JMP Group LLC, Joseph A. Jolson, Craig R. Johnson, Carter D. Mack, Mark L. Lehman, Kenneth M. Karmin, Glenn H. Tongue, H. Mark Lunenberg, Jonathan M. Orszag and Staci Slaughter, Case No. 3:21-cv-07877, was filed on October 7, 2021, in the United States District Court for the Northern District of California. The second, Claude Carrick v. JMP Group, LLC, Joseph A. Jolson, Craig R. Johnson, Mark L. Lehmann, Kenneth M. Karmin, H. Mark Lunenberg, Carter D. Mack, Jonathan M. Orszag, Staci Slaughter and Glenn H. Tongue, Case No. 1:21-cv-08415, was filed on October 12, 2021, in the United States District Court for the Southern District of New York. The complaints allege that the preliminary proxy statement omits material information with respect to the Merger that renders the preliminary proxy statement false and misleading. The complaints seek, among other things, injunctive relief preventing the consummation of the Merger, rescission of the Merger if consummated or an award of rescissory damages, dissemination of a proxy statement that does not contain any untrue statements of material fact, declaration that the defendants violated Sections 14(a) and/or 20(a) of the Exchange Act as well as Rule 14a-9 promulgated under the Exchange Act, an award of compensatory damages, and an award of plaintiffs’ expenses and attorneys’ fees.

 

JMP believes that the claims asserted in the complaints are without merit and no supplemental disclosure is required under applicable law. Additional lawsuits arising out of the merger may be filed in the future. There can be no assurance that any of the defendants will be successful in the outcome of any pending or any potential future lawsuits. JMP intends to defend vigorously against the pending lawsuits described above and any other future lawsuits filed against it challenging the merger.

 

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Regulatory Approvals

 

Under the merger agreement, JMP and Citizens have both agreed to use their reasonable best efforts to apply for and obtain all regulatory approvals necessary or advisable in connection with the transactions contemplated by the merger agreement, including the merger.

 

Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended

 

The HSR Act prohibits Citizens and JMP from completing the merger until Citizens and JMP have furnished certain information and materials to the Antitrust Division of the Department of Justice and the Federal Trade Commission and the required waiting period has expired or been terminated. Citizens and JMP each filed the required notification and report forms on September 29, 2021.

 

Additional Regulatory Approvals

 

Financial Industry Regulatory Authority

 

As a member of the FINRA, a subsidiary of JMP is required to file an application for the FINRA approval. This subsidiary filed such application with FINRA on September 30, 2021.

 

Notifications and applications requesting approval may be submitted to various other foreign, federal and state regulatory authorities and self-regulatory organizations.

 

Merger Expenses, Fees and Costs

 

Except with respect to certain filing fees under antitrust laws, all of which will be paid by Citizens, each of Citizens and JMP will be responsible for all expenses incurred by it in connection with the negotiation and completion of the transactions contemplated by the merger agreement.

 

Appraisal Rights

 

The JMP LLC Agreement provides that shareholders shall have appraisal rights as if JMP were a corporation, and that such appraisal rights shall, to the fullest extent permitted by law, be identical to the rights that a shareholder of a Delaware corporation would have under Section 262 of the Delaware General Corporation Law (referred to herein as the DGCL) if JMP were a corporation. Under Delaware law, you are entitled to dissenters’ rights of appraisal in connection with the merger, provided that you meet all of the conditions set forth in Section 262 of the Delaware General Corporation Law and the JMP LLC Agreement. In particular, under Delaware law, appraisal rights are only available if, among other things, shareholders are required to accept cash for their shares (other than cash in lieu of fractional shares). Pursuant to Section 262 of the General Corporation Law of the State of Delaware, or Section 262, JMP shareholders who do not vote in favor of the merger and who comply with the applicable requirements of Section 262 will have the right to seek appraisal of the fair value of such shares as determined by the Delaware Chancery Court if the merger is completed. It is possible that the fair value as determined by the Court may be more or less than, or the same as, the merger consideration. Shareholders should note that investment banking opinions as to the fairness from a financial point of view of the consideration payable in a sale transaction, such as the merger, are not opinions as to, and do not in any manner address, fair value under the DGCL.

 

JMP shareholders electing to exercise appraisal rights must comply with the strict procedures set forth in Section 262 in order to demand and perfect their rights. ANY SHAREHOLDER WISHING TO PRESERVE THEIR RIGHTS TO APPRAISAL MUST MAKE A DEMAND FOR APPRAISAL NOW AS DESCRIBED BELOW.

 

The following is intended as a brief summary of the material provisions of Section 262 required to be followed by dissenting JMP shareholders wishing to demand and perfect their appraisal rights. This summary, however, is not a complete statement of all applicable requirements and is subject to and qualified in its entirety by reference to Section 262, the full text of which appears in Annex C to this proxy statement.

 

Under Section 262, JMP is required to notify shareholders not less than 20 days before the Special Meeting to vote on the merger that appraisal rights will be available. A copy of Section 262 must be included with that notice.

 

THIS PROXY STATEMENT CONSTITUTES JMP’S NOTICE TO ITS SHAREHOLDERS OF THE AVAILABILITY OF APPRAISAL RIGHTS IN CONNECTION WITH THE MERGER UNDER SECTION 262 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE.

 

If you wish to consider exercising your appraisal rights, you should carefully review the text of Section 262 set forth in Annex C to this proxy statement and consult your legal advisor. If you fail to timely and properly comply with the requirements of Section 262, your appraisal rights may be lost. To exercise appraisal rights with respect to your common shares of JMP, you must:

 

 

NOT deliver an executed copy of the enclosed proxy card;

 

 

deliver to JMP a written demand for appraisal of your shares before the date of the Special Meeting, as described further below under “—Written Demand and Notice”;

 

 

continuously hold your common shares of JMP through the date the merger is consummated; and

 

 

otherwise comply with the procedures set forth in Section 262.

 

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Only a holder of record of common shares of JMP, or a person duly authorized and explicitly purporting to act on that shareholder’s behalf, is entitled to assert appraisal rights for the shares of common shares registered in that shareholder’s name. A demand for appraisal must be executed by or on behalf of the shareholder of record, fully and correctly, as such shareholder’s name appears on their stock certificates, and must state that such person intends thereby to demand appraisal of his or her common shares of JMP in connection with the proposed merger. Beneficial owners who do not also hold the shares of record may not directly make appraisal demands to JMP. The beneficial owner must, in such cases, have the registered shareholder submit the required demand in respect of those shares.

 

If the common shares of JMP are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, execution of the demand must be made in that capacity, and if the common shares of JMP are owned of record by more than one person, as in a joint tenancy and tenancy in common, the demand must be executed by or on behalf of all joint owners. An authorized agent, including an agent for two or more joint owners, may execute a demand for appraisal on behalf of a holder of record; however, the agent must identify the record owner or owners and expressly disclose the fact that, in executing the demand, the agent is acting as agent for such owner or owners. Shareholders who hold their common shares of JMP in brokerage accounts or other nominee forms and who wish to exercise appraisal rights are urged to consult with their brokers to determine the appropriate procedures for the making of a demand for appraisal by such a nominee.

 

Failure to strictly follow the procedures set forth in Section 262 may result in the loss, termination or waiver of appraisal rights. Shareholders who vote in favor of the adoption and approval of the merger agreement, the merger and the other transactions contemplated by the merger agreement will not have a right to have the fair market value of their common shares of JMP determined. However, failure to vote in favor of the merger agreement, the merger and the other transactions contemplated by the merger agreement is not sufficient to perfect appraisal rights. If you desire to exercise your appraisal rights, you must also submit to JMP a written demand for payment of the fair value of the JMP common shares held by you.

 

Written Demand and Notice

 

A written demand for appraisal should be filed with JMP before the Special Meeting. The demand notice shall be sufficient if it reasonably informs JMP of your identity and that you wish to seek appraisal with respect to your common shares of JMP. All demands should be delivered to: JMP Group LLC, 600 Montgomery Street, Suite 1100, San Francisco, CA 94111, Attention: Corporate Secretary.

 

Citizens, within ten (10) days after the effective date of the merger, will notify each shareholder who has complied with Section 262 and who has not voted in favor of the merger, that the merger has become effective.

 

Judicial Appraisal

 

Within 120 days after the effective time, Citizens or any shareholder who is entitled to appraisal rights and has otherwise complied with Section 262 may file a petition with the Delaware Court of Chancery demanding a determination of the value of the common shares of JMP held by all such shareholders. At the hearing on such petition, the court shall determine which shareholders are entitled to an appraisal of their shares and may require the shareholders who have demanded appraisal to submit their certificates to the Register in Chancery so an appropriate legend can be placed on them. Failure to comply with this requirement may result in the dismissal of the appraisal proceedings with respect to you.

 

After the Delaware Court of Chancery determines the holders of common shares entitled to appraisal, the appraisal proceeding shall be conducted in accordance with the rules of the Delaware Court of Chancery, including any rules specifically governing appraisal proceedings. Through this proceeding, the Delaware Court of Chancery shall determine the fair value of the shares, exclusive of any element of value arising from the accomplishment or expectation of the merger, together with interest, to be paid, if any, upon the amount determined to be “fair value” in an appraisal proceeding. In determining the fair value of the shares the Delaware Court of Chancery will take into account all relevant factors. In Weinberger v. UOP, Inc., the Delaware Supreme Court discussed the factors that could be considered in determining fair value in an appraisal proceeding, stating that “proof of value by any techniques or methods that are generally considered acceptable in the financial community and otherwise admissible in court” should be considered, and that “fair price obviously requires consideration of all relevant factors involving the value of a company.” The Delaware Supreme Court stated that, in making this determination of fair value, the court must consider market value, asset value, dividends, earnings prospects, the nature of the enterprise and any other facts that could be ascertained as of the date of the merger that throw any light on future prospects of the corporation. Section 262 provides that fair value is to be “exclusive of any element of value arising from the accomplishment or expectation of the merger.” In Cede & Co. v. Technicolor, Inc., the Delaware Supreme Court stated that such exclusion is a “narrow exclusion that does not encompass known elements of value,” but which rather applies only to the speculative elements of value arising from such accomplishment or expectation. In Weinberger, the Delaware Supreme Court also stated that “elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the merger and not the product of speculation, may be considered.” Unless the Delaware Court of Chancery in its discretion determines otherwise for good cause shown, interest from the effective time through the date of payment of the judgment shall be compounded quarterly and shall accrue at 5% over the Federal Reserve discount rate (including any surcharges) as established from time to time during the period between the effective time and the date of payment of the judgment.

 

Shareholders who consider seeking appraisal should consider that the fair value of their shares under Section 262 could be more than, the same as, or less than, the value of the consideration provided for in the merger agreement without the exercise of appraisal rights. No representation is made as to the outcome of the appraisal of fair value as determined by the Delaware Court of Chancery. Delaware courts have decided that the statutory appraisal remedy, depending on factual circumstances, may or may not be a dissenter’s exclusive remedy. The Court of Chancery may determine the cost of the appraisal proceeding and assess it against the parties as the Court deems equitable. Upon application of a dissenting shareholder, the Court may order that all or a portion of the expenses incurred by any dissenting shareholder in connection with the appraisal proceeding, including, without limitation, reasonable attorneys’ fees and the fees and expenses of experts, be charged pro rata against the value of all common shares of JMP entitled to appraisal. In the absence of a court determination or assessment, each party will bear its own expenses.

 

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Any shareholder who has demanded appraisal in compliance with Section 262 will not, after the effective time, be entitled to vote such stock for any purpose or receive payment of dividends or other distributions, if any, on the JMP common shares, except for dividends or distributions, if any, payable to shareholders of record at a date before the merger.

 

Request for Appraisal Data

 

If you submit a written demand for appraisal of your common shares of JMP and otherwise properly perfect your appraisal rights, you may, upon written request mailed to Citizens within 120 days after the effective time, receive a written statement identifying (1) the aggregate number of common shares of JMP which were not voted in favor of the adoption and approval of the merger agreement, the merger and the other transactions contemplated by the merger agreement and with respect to which JMP has received written demands for appraisal; and (2) the aggregate number of holders of such shares. Citizens will mail this statement to you within ten (10) days after receiving your written request. If no petition is filed by either Citizens or any dissenting shareholder within the 120-day period, the rights of all dissenting shareholders to appraisal will cease. Shareholders seeking to exercise appraisal rights should not assume that Citizens will file a petition with respect to the appraisal of the fair value of their shares or that Citizens will initiate any negotiations with respect to the fair value of those shares. Citizens will be under no obligation to take any action in this regard and has no present intention to do so. Accordingly, it is the obligation of shareholders who wish to seek appraisal of their common shares of JMP to initiate all necessary action with respect to the perfection of their appraisal rights within the time periods and in the manner prescribed in Section 262. Failure to file the petition on a timely basis will cause the shareholder’s right to an appraisal to cease.

 

Withdrawal

 

Even if you submit a written demand for appraisal of your common shares of JMP and otherwise properly perfect your appraisal rights, you may withdraw your demand at any time after the effective time, except that any such attempt to withdraw made more than 60 days after the effective time will require the written approval of Citizens and, once a petition for appraisal is filed, the appraisal proceeding may not be dismissed as to any holder absent court approval. The foregoing, however, will not affect the right of any shareholder who has not commenced an appraisal proceeding or joined that proceeding as a named party to withdraw such shareholder’s demand for appraisal and to accept the terms offered under the merger agreement within 60 days after the effective time. If you withdraw your demand, you will be deemed to have accepted the terms of the merger agreement, which are summarized in this proxy statement and which is attached as Annex A.

 

Tax Considerations

 

If you elect to exercise your appraisal rights, the payment in cash of the fair value of your common shares of JMP will be a taxable transaction to you and the amount of any such cash you receive will be included in the determination of whether the transactions contemplated by the merger agreement constitute a reorganization under Section 368(a) of the Code as more fully described in the section of this proxy statement entitled “Material United States Federal Income Tax Consequences of the Merger.” Holders of JMP common shares should be aware that the actual number of common shares of JMP (if any) for which appraisal rights are exercised cannot be determined until after the vote at the Special Meeting.

 

Shareholders considering exercising appraisal rights should consult with their own tax advisors with regard to the tax consequences of such actions.

 

The foregoing summary is not intended to be a complete statement of the procedures for exercising appraisal rights under Section 262 and is qualified in its entirety by reference to the full text of Section 262, a copy of which is attached as Annex C to this proxy statement. JMP urges any shareholder wishing to exercise appraisal rights, if any, to read this summary and Section 262 carefully, and to consult legal counsel before attempting to exercise appraisal rights. Failure to comply strictly with all of the procedures set forth in Section 262 may result in the loss of your statutory appraisal rights, if any.

 

Delisting and Deregistration of JMP Common Shares

 

JMP common shares are listed on the NYSE under the symbol “JMP.” If the merger is completed, JMP common shares will no longer be or listed on the NYSE and will be deregistered under the Exchange Act.

 

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THE MERGER AGREEMENT

 

The following summary describes material provisions of the merger agreement. This summary does not purport to be complete and may not contain all of the information about the merger agreement that is important to you. This summary is subject to, and qualified in its entirety by reference to, the merger agreement, which is attached to this proxy statement as Annex A and is incorporated by reference into this proxy statement. You are urged to read the merger agreement carefully and in its entirety, as it is the legal document governing the merger. The merger agreement summary below is included in this proxy statement only to provide you with information regarding the terms and conditions of the merger agreement, and not to provide any other factual information regarding JMP, Citizens or their respective businesses. Accordingly, 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 on page 55.

 

The representations, warranties and covenants contained in the merger agreement and described in this proxy statement were subject to important limitations agreed to by the parties in connection with negotiating the terms of the merger agreement. In particular, in your review of the representations and warranties contained in the merger agreement described in this summary, it is important to bear in mind that these representations and warranties were negotiated for the principal purposes of establishing circumstances in which a party to the merger agreement may have the right to not close the merger if the representations and warranties of the other party prove to be untrue due to a change in circumstance or otherwise, and allocating risk between parties to the merger agreement, rather than establishing matters as facts. The representations and warranties may also be subject to a contractual standard of materiality in a way that is different from what may be viewed as material by you or by other investors, and in some cases, these representations and warranties were qualified by confidential disclosures.

 

The Merger

 

Each of the JMP board of directors and the Citizens board of directors has approved the merger agreement, which provides for the merger of Merger Sub with and into JMP upon the terms, and subject to the conditions, of the merger agreement. JMP will be the surviving company in the merger and, following the merger, will be a wholly-owned subsidiary of Citizens and will no longer be a publicly held company. 

 

Closing

 

Under the terms of the merger agreement, the closing of the merger will occur, unless otherwise mutually agreed between the JMP and Citizens, at 9:00 a.m. (New York time) (a) no later than three business days following the date on which each of the conditions to closing (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) have been satisfied or, to the extent permissible, waived by the party or parties entitled to the benefit of such conditions, if such date occurs on or prior to the fifteenth day of a calendar month; or (b) if the date on which each of the conditions to closing are satisfied occurs after the fifteenth day of a calendar month, on the first business day of the next month, subject to certain exceptions, including that if the closing would otherwise occur at any time during the month of December (other than December 1), then the closing will occur on the first business day of January that is at least three business days after the closing conditions are satisfied.

 

Effective Time

 

At the closing of the merger, JMP and Citizens will cause to be filed a certificate of merger with the Secretary of State of Delaware. The merger will become effective when the certificate of merger is filed with the Secretary of State of the State of Delaware or at a later time as agreed to by Citizens and JMP and set forth in the certificate of merger.

 

Merger Consideration

 

In the merger, each issued and outstanding common share of JMP (other than excluded shares) will be automatically converted into the right to receive cash consideration of $7.50.

 

Treatment of JMP Equity-Based Awards

 

Upon completion of the merger, the equity-based awards will be treated as follows:

 

Treatment of JMP Options. At the effective time of the merger, each outstanding option to purchase JMP common shares, whether vested or unvested, will be converted into an option to purchase a number of shares of common stock of Citizens, par value $0.01 per share equal to the product (rounded down to the nearest whole number) of the total number of common shares subject to the option immediately prior to the effective time of the merger multiplied by the per share merger consideration of $7.50 divided by the volume weighted average of the closing sale prices per share of Citizens common stock on the NYSE for the five full consecutive trading days ending on and including the third business day prior to the closing date, what we refer to as the “Equity Award Exchange Ratio,” at an exercise price per share (rounded up to the nearest whole cent) equal to the exercise price per share of the common shares subject to the option immediately prior to the effective time of the merger divided by the Equity Award Exchange Ratio. Except as otherwise provided, each such option to purchase JMP common shares converted to an option to purchase Citizens shares will continue to be governed by the same terms and conditions (including vesting and exercisability terms) as were applicable to the JMP option immediately prior to the effective time of the merger.

 

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Treatment of JMP RSU Awards. At the effective time of the merger, each outstanding JMP RSU, whether vested or unvested, will be converted into a restricted stock unit award representing the right to receive the number of denominated shares of Citizens common stock. The number of shares of Citizens common stock subject to such JMP RSU converted to Citizens RSU will be equal to the product (rounded down to the nearest whole number) of the total number of common shares subject to such JMP RSU award immediately prior to the effective time of the merger multiplied by the Equity Award Exchange Ratio. Except as otherwise provided, each such JMP RSU converted to Citizens RSU shall continue to be governed by the same terms and conditions (including vesting and settlement terms) as were applicable to the applicable JMP RSU immediately prior to the effective time of the merger. JMP RSUs under the JMP Group LLC Amended and Restated Equity Incentive Plan are subject to accelerated vesting on a termination without cause in the 12 months following closing (See “Proposal One: The Merger—Merger-Related Compensation for JMP’s Named Executive Officers” on page 31).

 

Conversion of Shares; Exchange of Certificates

 

The conversion of JMP common shares into the right to receive the merger consideration will occur automatically at the effective time of the merger.

 

Prior to the completion of the merger, Citizens and Merger Sub will select a commercial bank or trust company reasonably acceptable to JMP to serve as the Paying Agent to make payments of the merger consideration to JMP’s shareholders. At or prior to the closing of the merger, Citizens or Merger Sub will deposit (or cause to be deposited) with the payment agent cash that is sufficient in the aggregate to pay the aggregate per share price to our shareholders in accordance with the merger agreement.

 

Promptly (and in any event within three business days) following the effective time of the merger, the surviving company will cause the Paying Agent to mail to each holder of record (as of immediately prior to the effective time of the merger) of a certificate that immediately prior to the effective time of the merger represented outstanding common shares of JMP (other than excluded shares), a letter of transmittal and instructions advising shareholders how to surrender share certificates in exchange for merger consideration. Upon receipt of (1) surrendered certificates for cancellation (or an appropriate affidavit for lost, stolen or destroyed certificates, together with any required bond); and (2) a duly completed and signed letter of transmittal and such other documents as may be reasonably requested by the Paying Agent, the holder of such certificate will be entitled to receive an amount in cash equal to the product of (a) the aggregate number of common shares of JMP represented by such certificate and (b) the per share price of $7.50. The amount of any per share price paid to our shareholders will not include interest and may be reduced by any applicable withholding taxes.

 

Notwithstanding the foregoing, any holder of shares of uncertificated shares will not be required to deliver a certificate or an executed letter of transmittal (as both are described above) to the Paying Agent to receive the consideration payable in respect thereof. Each holder of record (as of immediately prior to the effective time of the merger) of uncertificated shares that immediately prior to the effective time of the merger represented outstanding common shares of JMP (other than excluded shares) will, upon receipt of an “agent’s message” in customary form at the effective time of the merger, and any documents as may reasonably be requested by the Paying Agent, be entitled to receive, and the Paying Agent will pay and deliver as promptly as practicable, an amount in cash equal to the product of (1) the aggregate number of common shares of JMP represented by such holder’s transferred uncertificated shares; and (2) the per share price of $7.50. The amount of consideration paid to such JMP shareholders will not include interest and may be reduced by any applicable withholding taxes.

 

If any cash deposited with the Paying Agent is not claimed within one year following the effective time of the merger, such cash may be returned to the surviving company upon the surviving company’s request, and any of our shareholders as of immediately prior to the merger who have not complied with the exchange procedures in the merger agreement will thereafter look only to the surviving company for satisfaction of payment of the merger consideration (subject to abandoned property law, escheat law or similar laws). None of the Paying Agent, Citizens, the surviving company or any other party will be liable to any of our shareholders with respect to any cash amounts properly paid to a public official pursuant to any applicable abandoned property law, escheat law or similar laws.

 

The letter of transmittal will include instructions if a shareholder has lost a share certificate or if such certificate has been stolen or destroyed. In the event that any share certificates have been lost, stolen or destroyed, then the Paying Agent will issue the per share price to such holder upon the making by such holder of an affidavit for such lost, stolen or destroyed certificate. Citizens or the Paying Agent may, in its discretion and as a condition precedent to the payment of the per share price, require such shareholder to deliver a bond in such amount as Citizens or the payment agent may direct as indemnity against any claim that may be made against Citizens, the surviving company or the Paying Agent with respect to such certificate.

 

You should not submit your JMP share certificates until you receive the transmittal instructions and a form of letter of transmittal from the Paying Agent.

 

Representations and Warranties

 

The merger agreement contains representations and warranties of JMP, Citizens and Merger Sub.

 

Some of the representations and warranties in the merger agreement made by JMP are qualified as to “materiality” or “Material Adverse Effect.” For purposes of the merger agreement, “Material Adverse Effect” means, with respect to JMP, any effect, circumstance, occurrence or change that, either individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect on the business, assets or liabilities, properties, operations, results of operations or condition (financial or otherwise) of JMP and its subsidiaries, taken as a whole, except that, the impact of the following shall not be included:

 

 

changes, after the date hereof, in laws or in United States generally accepted accounting principles or interpretations thereof; changes in global, national or regional political conditions (including the outbreak of war or acts of terrorism);

 

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changes resulting from hurricanes, earthquakes, tornados, floods or other natural disasters or from any outbreak of any disease or other public health event, including any “contagion event” (and the related “contagion event measures”), each as defined in the merger agreement;

 

 

any government shutdown, any declaration of martial law or similar directive, guidance, policy or guidance or other action by any governmental authority;

 

 

changes in market price or trading volume of the common shares (without excepting the facts or circumstances giving rise or contributing to such change);

 

 

any action taken by JMP with Citizen’s express written consent or any action taken by JMP that JMP was expressly required to take pursuant to the terms of the merger agreement;

 

 

any failure, in and of itself, by JMP to meet internal or other estimates, predictions, projections or forecasts of revenue, net income or any other measure of financial performance (without excepting the facts or circumstances giving rise or contributing to failure to meet estimates or projections);

 

 

changes, events, conditions or trends after the date hereof in economic, business, credit or financial conditions affecting other companies in the industries in which JMP and its subsidiaries operate generally, and changes in the capital or credit markets, including any downgrades in the credit markets, or adverse credit events resulting in deterioration in the credit markets generally (including any such change resulting from or arising out of a contagion event); or

 

 

any changes demonstrably resulting from the public announcement of the identity of Citizens as a party to the merger agreement.

 

In the merger agreement, JMP has made customary representations and warranties to Citizens and Merger Sub that are subject, in some cases, to specified exceptions and qualifications contained in the merger agreement. These representations and warranties relate to, among other things:

 

 

due organization, valid existence, good standing and authority and qualification to conduct business of JMP and its subsidiaries;

 

 

the capital structure of JMP;

 

 

indebtedness of JMP and its subsidiaries;

 

 

JMP’s and its subsidiaries corporate power and authority to enter into and perform the merger agreement, the due execution and enforceability of the merger agreement;

 

 

the approval and recommendation of JMP’s board of directors;

 

 

the receipt of the opinion of Keefe, Bruyette & Woods, Inc. by the JMP board;

 

 

required consents, approvals and regulatory filings in connection with the merger agreement and performance thereof;

 

 

no breach of organizational documents, law or other agreements as a result of the merger;

 

 

the absence of any undisclosed preemptive or similar rights, options, warrants, conversion rights, stock appreciation rights, redemption rights, repurchase rights, agreements, arrangements, securities, calls, commitments or rights of any kind that obligate JMP to issue or sell any shares of capital stock or other equity or voting interest in, or other securities of, JMP 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 JMP;

 

 

the required filings and accuracy of JMP’s SEC filings and financial statements;

 

 

JMP’s compliance with the applicable listing and corporate governance rules and regulations of the NYSE;

 

 

JMP’s disclosure controls and procedures;

 

 

that JMP has identified and disclosed to JMP’s auditors and audit committee any significant deficiencies or material weaknesses in the design or operation of its internal controls over financial reporting and any fraud that involves management or other employees who have a significant role in JMP’s internal control over financial reporting;

 

 

the absence of any commitment on behalf of JMP or any of its subsidiaries to become a party to any joint venture, partnership of any similar contract;

 

 

the compliance by JMP and its subsidiaries with the terms of the $3,798,000 City National Bank note entered into by JMP’s broker dealer subsidiary pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act and, that such subsidiary has used the proceeds in accordance with the terms of the loan and with applicable legal requirements and that such loan was duly forgiven in whole;

 

 

the absence of legal proceedings and orders;

 

 

employee benefit plans;

 

 

real property owned or leased by JMP and its subsidiaries;

 

 

environmental matters;

 

 

labor and employment matters;

 

 

tax matters;

 

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the existence and enforceability of specified categories of JMP’s material contracts and the lack of any breaches or defaults thereunder and of any notices with respect to termination or intent not to renew those material contracts therefrom;

 

 

JMP’s and its subsidiaries largest customers;

 

 

required permits, certifications, approvals, registrations, consents and similar orders;

 

 

compliance with laws;

 

 

JMP’s investment securities and commodities;

 

 

inapplicability of anti-takeover statutes;

 

 

insurance matters;

 

 

intellectual property matters;

 

 

payment of fees to brokers in connection with the merger agreement;

 

 

absence of any transactions, relations or understandings between JMP or any of its subsidiaries and any affiliate or related person;

 

 

certain matters related to JMP’s investment adviser and broker-dealer subsidiaries; and

 

 

certain matters related to the prohibitions on proprietary trading and certain interests in and relationships with “covered funds” pursuant to Section 13 of the BHC Act and the Federal Reserve Board’s regulations promulgated thereunder, which we refer to as the “Volcker Rule.”

 

In the merger agreement, Citizens and Merger Sub have made customary representations and warranties to JMP that are subject, in some cases, to specified exceptions and qualifications contained in the merger agreement.  These representations and warranties relate to, among other things:

 

 

due organization, valid existence, good standing and authority and qualification to conduct business;

 

 

corporate power and authority;

 

 

the absence of any conflict with, violation of or default under any organizational documents, existing contracts, or applicable laws due to the performance of the merger agreement;

 

 

required consents and regulatory filings in connection with the merger agreement;

 

 

no breach of organizational documents, law or other agreements as a result of the merger;

 

 

the absence of legal proceedings and orders;

 

 

no prior activities of Merger Sub;

 

 

ownership of capital stock of JMP;

 

 

payment of fees to brokers in connection with the merger agreement; and

 

 

matters with respect to Citizens’ sufficiency of funds.

 

The representations and warranties contained in the merger agreement will not survive the consummation of the merger.

 

Conduct of Business Prior to Closing

 

JMP has agreed in the merger agreement that, until the earlier of the effective time of the merger or the termination of the merger agreement, JMP will and will cause each of its subsidiaries to conduct their business in the ordinary course consistent with past practice and use its reasonable best efforts to maintain and preserve intact the material aspects of their business organizations, to maintain their business relationships and goodwill with suppliers, contractors, distributors, customers, partners, employees, licensors, licensees and others having material business relationships with it, to retain the services of JMP’s and its subsidiaries’ employees and business associates and agents, to comply in all material respects with all applicable laws and the requirements of all material contracts and take no action that would reasonably be expected to adversely affect or delay the ability to obtain the required approvals for the transactions contemplated by the merger agreement or to perform JMP’s covenants and agreements under the merger agreement or to consummate the transactions contemplated on a timely basis.

 

Except as set forth in the disclosure schedules to the merger agreement or with Citizens’ prior written consent, which is not to be unreasonably withheld, conditioned or delayed, or necessary and commercially reasonable in response to a contagion event or contagion event measure, JMP will not and will not permit any of its subsidiaries to:

 

 

amend its organizational documents;

 

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merge or consolidate JMP or any of its subsidiaries;

 

 

enter into any new line of business or change in any material respect the businesses and policies of JMP and its subsidiaries, except as required by applicable laws or reasonably necessary to address applicable laws of findings of any governmental authority;

 

 

acquire (including by merger, consolidation, or acquisition of stock or assets) any interest in any corporation, partnership, other business organization or any division thereof outside the ordinary course of business or any material amount of assets from any other person;

 

 

merge or consolidate with any other person;

 

 

adopt a plan of complete or partial liquidation, dissolution, recapitalization or restructuring;

 

 

engage in any other transaction reasonably likely to cause the Closing to be prevented or delayed;

 

 

sell, lease, license, mortgage, or otherwise encumber or allow to lapse or expire or create or incur any lien (other than as permitted in the merger agreement) on, any of JMP’s or its Subsidiaries’ material assets (including material intellectual property rights), securities, properties, rights, interests or businesses but excluding any sale, disposition, lease, mortgage, pledge, encumbrance or license of inventory or product in the ordinary course of business consistent with past practice;

 

 

except for common shares issuable upon the exercise or conversion of JMP options, RSUs outstanding on the date of the merger agreement or RSUs issued to new employees in the ordinary course of business consistent with past practice, or with respect to Citizens’ and Merger Sub’s participation in the merger, issue, sell, grant, dispose of, pledge or otherwise encumber or authorize, propose or agree to the issuance, sale, grant, disposition, pledge, delivery, transfer or encumbrance by JMP or any of its subsidiaries of, any shares of JMP’s capital securities;

 

 

make any loans, advances or capital contributions to, or investments in, any person (other than JMP or any of its wholly-owned subsidiaries), other than in the ordinary course of business consistent with past practice, engage in any reclassification, recapitalization or equity split (including a reverse split) that changes any outstanding shares of its capital securities or combine, exchange or readjust, or engage in any similar transaction with respect to, shares of its capital securities;

 

 

declare, set aside or pay any dividend or make any other distribution (whether in cash, securities, property or any combination thereof) in respect of any shares of its capital securities or other securities (other than dividends or distributions by any of its wholly-owned subsidiaries to JMP or another wholly owned subsidiary of JMP);

 

 

redeem, repurchase, cancel or otherwise acquire or offer to redeem, repurchase, or otherwise acquire, any of its securities or any securities of any of its subsidiaries;

 

 

create, incur, assume, suffer to exist or otherwise be liable with respect to any indebtedness (other than intercompany indebtedness and indebtedness incurred in the ordinary course of JMP’s and its subsidiaries’ business consistent with past practice in connection with margin for securities purchases and drawdowns under credit agreements in effect as of the date of the merger agreement);

 

 

engage in “proprietary trading” (as defined in the Volcker Rule), acquire or hold any ownership interest in or sponsor any “covered fund” (as defined in the Volcker Rule) except to the extent permitted under the Volcker Rule, as JMP reasonably determines, based on applicable law and in consultation with JMP’s and Citizens’ external counsel, or enter into any new, or amend any existing, agreement to act as investment adviser, investment sub-adviser, sponsor or manager for any private fund client or other pooled vehicle, or registered investment company or business development company, except for any such amendments which would have no adverse impact on the business of JMP or the transactions contemplated by the merger agreement;

 

 

restructure or materially change its investment securities or derivatives portfolio or its interest rate exposure, through purchases, sales or otherwise, so as to alter the manner in which the portfolio is classified or reported, except as may be required by U.S. GAAP or by applicable laws or as would not be reasonably expected to materially and adversely affect JMP;

 

 

enter into capital commitments for new investment partnerships;

 

 

terminate, renew, suspend, abrogate, amend or modify in any material respect any JMP permit, other than in the ordinary course of business consistent with past practice or for purposes of effecting the transactions contemplated hereby;

 

 

(1) enter into any contract that would have been a material contract, as defined in the merger agreement, were JMP or any of its subsidiaries a party or subject thereto on the date of the merger agreement, in each case, except in the ordinary course consistent with past practice and which contract is terminable at will or with thirty calendar days or less notice without payment of any amount other than for products delivered or services performed through the date of termination (2) enter into any contract providing for payments to any person to be made by JMP or any of its subsidiaries upon a change in control thereof or terminate or amend in any material respect any contract referred to in clause (1) or any material contract, as defined in the merger agreement, or waive any material right thereunder or make any change in any instrument or agreement governing the terms of any of its securities, except if there is a commercially reasonable basis to do so in the ordinary course of business consistent with past practice and such action would not reasonably be expected to have an adverse impact on the business of JMP or its subsidiaries or on the transactions contemplated by the merger agreement;

 

 

incur, or commit to incur, any capital expenditures or any obligations or liabilities in respect thereof, in excess of $150,000 individually or $500,000 in the aggregate;

 

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enter into any agreement, arrangement or commitment that materially limits or otherwise restricts JMP or its subsidiaries from engaging or competing in any line of business or in any geographic area or otherwise enter into any agreements, arrangements or commitments imposing material changes or restrictions on its assets, operations or business, except in the ordinary course of business consistent with past practice;

 

 

materially change JMP’s methods of accounting, except as required by concurrent changes in U.S. GAAP or in Regulation S-X promulgated under the Exchange Act;

 

 

settle, or offer or propose to settle any litigation, investigation, arbitration, proceeding or other claim involving or against JMP or any of its subsidiaries involving a payment by JMP or its subsidiaries in excess of $250,000 individually or $1,000,000 in the aggregate, or that would impose any material restriction on the business of JMP or its subsidiaries or the surviving company, affect the merger (including, without limitation, the timing of the closing) and the other transactions contemplated, or create adverse precedent for claims that would reasonably be expected to be material taken as a whole;

 

 

except as may be required by applicable law, make a new tax election or change any tax election, change any entity classification of any subsidiary, create a permanent establishment in any country other than the country in which JMP or any of its subsidiaries is organized, file any amended income tax return or other amended tax return, adopt or change any annual tax accounting period or accounting method for taxes, settle or compromise any material tax claim, surrender any claim for a material refund of taxes, enter into any closing agreement relating to taxes or file any income tax return or other tax return that is inconsistent with past practice;

 

 

announce, implement or effect any material reduction in labor force, lay-off, early retirement program, severance program or other program or effort concerning the termination of employment of employees of JMP, other than routine employee terminations in the ordinary course of business consistent with past practice;

 

 

except as required by applicable law, terminate, adopt, establish, enter into, amend in any material respect or renew any benefit plan (or communicate any intention to take such action), increase in any manner the compensation, benefits, severance or termination pay of any of the current or former directors, officers, employees or consultants who are natural persons of JMP its subsidiaries, except for certain circumstances as described in the merger agreement, accelerate the vesting of or lapsing of restrictions, or amend the vesting requirements of any equity-based compensation, deferred cash compensation or other long-term incentive compensation under any benefit plan, grant any new awards or amend or modify the terms of any outstanding awards, take any action to accelerate the payment, or to fund or secure the payment, of any amounts under any benefit plan, hire any employee or consultant who is a natural person with a target total annual cash compensation opportunity in excess of $300,000, become a party to, establish, adopt, amend, commence participation in or terminate any collective bargaining agreement or other agreement with a labor union, works council or similar organization or terminate without cause the employment of any director;

 

 

fail to use reasonable efforts to maintain existing material insurance policies or comparable replacement policies; or

 

 

agree, resolve or commit to do any of the foregoing.

 

Agreement to Use Reasonable Best Efforts

 

Subject to the terms and conditions of the merger agreement, each of Citizens, Merger Sub and JMP has agreed to use reasonable best efforts to consummate and make effective the transactions contemplated by the merger agreement and the voting agreement as promptly as reasonably practicable; file any and all required notification and report forms under the HSR Act with respect to the merger and the other transactions contemplated by the merger agreement, and use reasonable best efforts to cause the expiration or termination of any applicable waiting periods; for JMP to submit or cause to be submitted an application for JMP’s broker-dealer subsidiary for the FINRA approval; each prepare and file any applications, notices and filings required in order to obtain required approvals and secure any approvals required under the rules and regulations of the governmental authorities; and defend any lawsuits or other proceedings, whether judicial or administrative, challenging the merger agreement or the consummation of the transactions contemplated.

 

Agreement Not to Solicit Other Offers

 

The JMP board of directors adopted a resolution recommending that the JMP shareholders adopt the merger agreement. JMP has agreed that it will not, it will cause its subsidiaries and its and their officers, directors, employees and affiliates not to, and it will direct, and use its reasonable best efforts to cause, its financial advisors, attorneys and accountants not to, directly or indirectly:

 

 

initiate, solicit, encourage or otherwise facilitate any inquiries or the making of any proposal or offer with respect to an acquisition proposal (as defined below);

 

 

engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to an acquisition proposal;

 

 

otherwise facilitate any effort or attempt to make or implement an acquisition proposal;

 

 

withdraw, qualify or modify (or publicly propose or resolve to withdraw, qualify or modify), in a manner adverse to Citizens the recommendation from the board of directors of JMP to proceed with the merger (any of these actions being referred to as an “change of recommendation”); or

 

 

enter into any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement or other agreement (other than a confidentiality agreement) relating to an acquisition proposal.

 

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However, prior to the adoption of the merger agreement by JMP’s shareholders, the board of directors of JMP may, directly or indirectly through advisors, agents or other intermediaries, subject to compliance with the merger agreement:

 

 

engage in negotiations or discussions with any third party that has made after the date of the merger agreement a superior proposal (as defined below) or an unsolicited bona fide acquisition proposal that the board of directors of JMP reasonably believes (after consultation with its financial advisors and outside legal counsel) is reasonably likely to lead to a superior proposal (as defined below);

 

 

thereafter furnish to such third party nonpublic information relating to JMP or any of its subsidiaries pursuant to a confidentiality agreement with terms no less favorable to JMP than those contained in the confidentiality agreements between JMP and Citizens (subject to certain exceptions); and

 

 

make a change of recommendation either in connection with approving, recommending or otherwise declaring advisable any superior proposal made to JMP after the date of the merger agreement or upon the occurrence of an intervening event (as defined below),

 

but in each case referred to in the foregoing bullet points, only if the board of directors of JMP determines in good faith after considering advice from outside legal counsel to JMP, that failure to take such action would more likely than not be inconsistent with its fiduciary duties under applicable law and the LLC agreement.

 

The board of directors of JMP may not make a change of recommendation unless JMP has delivered to Citizens a prior written notice advising Citizens that it intends to take such action. JMP must notify Citizens promptly (but in no event later than the next succeeding business day) after receipt by JMP of any acquisition proposal, any indication that a third party is considering making an acquisition proposal or of any request for information relating to JMP by any third party that may be considering making, or has made, an acquisition proposal, which notice must identify the third party making, and the material terms and conditions of, any such acquisition proposal, indication or request. JMP must keep Citizens informed, on a current basis, of the status and terms of any such acquisition proposal.

 

As used in the merger agreement, an “acquisition proposal” means any proposal, offer or inquiry with respect to a merger, joint venture, partnership, consolidation, dissolution, liquidation, tender offer, recapitalization, reorganization, share exchange, business combination or similar transaction involving JMP or any of its subsidiaries that if consummated, would result in any person (or the stockholders of any person) owning 25% or more of the total voting power of JMP or the surviving entity in a merger involving such party or the resulting parent company of such surviving entity and any proposal or offer to acquire in any manner, directly or indirectly, 25% or more of the total voting power of any class of voting interest of JMP or those of any of its subsidiaries or 25% or more of JMP’s consolidated total assets (including voting interest of its subsidiaries), in each case other than the transactions contemplated by the merger agreement.

 

As used in the merger agreement, “superior proposal” means any bona fide, unsolicited written acquisition proposal (except that all references to “25%” in the definition of acquisition proposal will be deemed to be references to “50%”) that the JMP board of directors (in consultation with its financial advisors and outside counsel) has determined in its good faith judgment is reasonably likely to be consummated in accordance with its terms, taking into account all legal, financial and regulatory aspects of the proposal and the person making the proposal, and if consummated, would result in a transaction more favorable to the shareholders from a financial point of view than the transaction contemplated by the merger agreement (after taking into account any revisions to the terms and the time likely to be required to consummate such acquisition proposal).

 

As used in the merger agreement, “intervening event” means a development or a change in circumstances that occurs or arises after the date of the merger agreement that is material to JMP and its subsidiaries, taken as a whole, and was not known to, or reasonably foreseeable by, JMP’s board of directors; providedhowever, that the following events will not constitute an intervening event: (i) the receipt, existence or terms of an acquisition proposal, (ii) any changes, in and of themselves, in the market price or trading volume of the shares, capital stock or other securities of Citizens or the major stock indexes in the U.S. market (it being understood that the underlying factors that may have contributed to changes in the market price or trading volume of the shares, that are not otherwise excluded from the definition of intervening event, may be taken into account in determining whether such an intervening event has occurred), (iii) any changes in JMP’s credit ratings, (iv) JMP or Citizens meeting, failing to meet or exceeding published or unpublished revenue or market consensus earnings projections, in each case, in and of itself, (v) changes in U.S. GAAP, other applicable accounting rules or applicable law or (vi) any development or change in circumstances generally affecting the economy, securities or financial markets or political conditions in the United States, except if such development or change in circumstances disproportionately adversely affects JMP and its subsidiaries compared to other companies of similar size operating in the industries in which JMP and its subsidiaries operate.

 

JMP Employee Benefits Matters

 

From the effective time through the first (1st) anniversary thereof, Citizens will provide, or cause to be provided, to each of the employees of JMP and its subsidiaries who continue employment with Citizens or any of its subsidiaries following the effective time (such employees, the “continuing employees”) with (i) base salary or base wage and target annual cash bonus opportunity that are no less favorable in the aggregate than the base salary or base wage and target annual cash bonus opportunity provided by JMP and its subsidiaries to each such continuing employee immediately prior to the effective time, and (ii) employee benefits (including, severance benefits, but excluding equity-based and long-term incentive compensation and money market deferred cash opportunities) that are substantially comparable in the aggregate either to those provided to the continuing employees immediately prior to the effective time or to similarly situated employees of Citizens.

 

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With respect to any employee benefit plans of Citizens or Citizens subsidiaries in which any continuing employees become eligible to participate on or after the effective time (“new plans”), Citizens will use commercially reasonable efforts to (i) cause any pre-existing conditions or limitations and eligibility waiting periods under any group health plans of Citizens 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, co-payments or coinsurance 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 JMP and its subsidiaries for all purposes under each applicable new plan, as if such service had been performed with Citizens, except for benefit accrual under defined benefit pension plans, for purposes of qualifying for subsidized early retirement benefits or to the extent it would result in a duplication of benefits.

 

If requested by Citizens in writing not less than twenty business days before the closing date, JMP will terminate the 401(k) plan (the “JMP 401(k) plan”), effective as of the day prior to the closing date, which termination may be contingent upon the occurrence of the effective time. If Citizens requests that the JMP 401(k) plan be terminated, (i) JMP will provide Citizens with evidence that such plan has been terminated (the form and substance of which will be subject to reasonable review and comment by Citizens) not later than two days immediately preceding the closing date, and (ii) the continuing employees will be eligible to participate, effective as of the effective time, in a 401(k) plan sponsored or maintained by Citizens or one of its subsidiaries (the “Citizens 401(k) plan”), it being agreed that there will be no gap in participation in a tax-qualified defined contribution plan for continuing employees. Citizens and JMP will take, or cause to be taken, any and all actions as may be required to permit current or former employees of JMP and its subsidiaries to make rollover contributions to the Citizens 401(k) plan of “eligible rollover distributions” (within the meaning of Section 401(a)(31) of the Code) from the JMP 401(k) plan in the form of cash, notes (in the case of loans), Citizens common stock or a combination thereof.

 

Other Covenants and Agreements

 

The merger agreement contains certain other covenants and agreements relating to, among other things:

 

JMP Shareholders Meeting

 

JMP has agreed to cause a meeting of shareholders of JMP to be called and held as soon as reasonably practicable for the purpose of voting on the adoption of the merger agreement and thereby the approval of the transactions contemplated by the merger agreement, including the merger. The JMP board of directors has agreed to recommend adoption of the merger agreement and thereby the approval of the transactions contemplated by the merger agreement, including the merger, by JMP shareholders and, except as otherwise permitted in the merger agreement, not to withdraw, modify or qualify (or publicly propose to withdraw, modify or qualify) in any manner adverse to Citizens such recommendation or approve, adopt or recommend any acquisition proposal except as otherwise set forth above under “The Merger Agreement—Agreement Not to Solicit Other Offers”. JMP has agreed to use its reasonable best efforts to obtain shareholder adoption of the merger agreement and thereby the approval of the transactions contemplated by the merger agreement, including the merger.

 

Access to Information/Employees

 

During the period prior to the effective time of merger and subject to applicable law, JMP and Citizens have agreed to:

 

 

give to the other party, its officers, employees, counsel, accountants and other authorized representatives reasonable access to its books, records (including tax returns and work papers of independent auditors), contracts, information technology systems, properties and personnel and to such other information as such other party may reasonably request during normal business hours; and

 

 

furnish to the other party promptly all information concerning its business, properties and personnel as the other party may reasonably request.

 

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Indemnification and Insurance

 

From and after the effective time of the merger, Citizens will indemnify and hold harmless the present and former officers and directors of JMP in respect of acts or omissions occurring at or prior to the effective time of the merger to the fullest extent permitted by Delaware law or any other applicable law or provided under JMP’s LLC Agreement in effect on the date of the merger agreement.

 

For six years after the effective time of the merger, Citizens will provide officers’ and directors’ liability insurance in respect of acts or omissions occurring prior to the effective time of the merger on terms with respect to coverage and amount no less favorable than those of such policy in effect on the date of the merger agreement, or will purchase a non-cancelable “tail” coverage insurance policy under JMP’s current officers’ and directors’ liability insurance policies, in each case subject to a cap of, on an annualized basis, 300% of JMP’s current annual premium.

 

Conditions to Complete the Merger

 

Each of Citizens’, Merger Sub’s and JMP’s obligation to effect the merger is subject to the satisfaction (or, to the extent permissible, waiver) of the following conditions:

 

 

adoption of the merger agreement by JMP’s shareholders in accordance with Delaware law and the LLC agreement;

 

 

the absence of any applicable law that prohibits the merger, makes the merger illegal or enjoins the consummation of the merger;

 

 

the requisite approvals under the HSR Act and the FINRA approval as well as any other authorizations, consents, orders, declarations or approvals of, or filings with various governmental authorities to the extent required by applicable law or the merger agreement having been obtained and remaining in full force and effect and all statutory waiting periods in respect thereof having expired; and 

 

 

the absence of any proceeding, claim or action by any governmental authority, with a reasonable likelihood of success, that seeks to restrain, enjoin or otherwise prohibit the consummation of the merger.

 

Citizens’ and Merger Sub’s obligation to effect the merger is subject to the satisfaction (or, to the extent permissible, waiver) of a number of conditions, including:

 

 

JMP having performed in all material respects all obligations required to be performed by it under the merger agreement at or prior to the time of the merger;

 

 

the accuracy of the representations and warranties of JMP contained in the merger agreement, as of the date of the merger agreement and as of the closing date (except to the extent such representations and warranties speak as of an earlier date, in which case as of such earlier date), subject to the materiality standards provided in the merger agreement;

 

 

the receipt of a certificate signed by the chief executive officer or chief financial officer of JMP to the effect of the previous two paragraphs;

 

 

subsequent to the date of the merger agreement, no event having occurred or circumstance arisen that, individually or taken together with all other facts, circumstances or events, has had or would reasonably be expected to have a material adverse effect on JMP; and

 

 

there not being any pending proceeding, claim or action by any governmental authority of competent jurisdiction, with a reasonable likelihood of success, which seeks to restrain, enjoin or otherwise prohibit consummation of the merger.

 

JMP’s obligation to effect the merger is subject to the satisfaction (or, to the extent permissible, waiver) of a number of conditions, including:

 

 

each of Citizens and Merger Sub having performed in all material respects all of its obligations under the merger agreement required to be performed by it at or prior to the date on which the merger is completed;

 

 

the accuracy of the representations and warranties of Citizens and Merger Sub contained in the merger agreement, as of the date of the merger agreement and as of the closing date (except to the extent such representations and warranties speak as of an earlier date, in which case as of such earlier date), subject to the materiality standards provided in the merger agreement; and

 

 

the receipt of a certificate signed by the chief executive officer or chief financial officer of Citizens to the effect of the previous two paragraphs.

 

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Termination of the Merger Agreement

 

Citizens and JMP may mutually agree to terminate the merger agreement before completing the merger, even after JMP shareholder approval. In addition, either of Citizens or JMP may terminate the merger agreement if:

 

 

the merger has not been consummated by March 8, 2022, which may be extended by written notice to the other party to May 7, 2022 if the HSR and FINRA approvals have not been obtained and each other condition to consummate the merger has been satisfied, waived or remains capable of being satisfied (except that this right is not available to any party whose breach of the merger agreement resulted in failure of the merger to be consummated);

 

 

the approval of any governmental authority required for consummation of the merger or the other transactions contemplated by the merger agreement has been denied by final and nonappealable action of such governmental authority or an application has been permanently withdrawn by mutual agreement of Citizens and JMP at the request or suggestion of a governmental authority; or

 

 

at the JMP shareholder meeting (including any adjournment or postponement thereof), adoption of the merger agreement and thereby the approval of the transactions contemplated by the merger agreement, including the merger, by the JMP shareholders is not obtained.

 

Citizens may also terminate the merger agreement under the following circumstances:

 

 

at any time prior to the JMP shareholder approval, (i) JMP has breached in any material respect its obligation relating to non-solicitation of acquisition proposals, (ii) the board of directors of JMP fails to reaffirm its recommendation to approve the merger agreement as promptly as practicable, and in any event within five business days after receipt of any written request to do so by Citizens, (iii) or a tender offer or exchange offer for the outstanding common shares of JMP has been publicly disclosed and JMP’s board recommends that shareholders tender their shares in such tender or exchange offer or within ten business days after the commencement of such tender or exchange offer JMP’s board fails to recommend unequivocally against the acceptance of such offer; or

 

 

JMP breaches any of its representations, warranties, covenants or agreements under the merger agreement such that, if continued on the closing date, an applicable closing condition will not have been 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 Citizens (or such shorter period remaining prior to the end date)) so long as Citizens is not then in material breach of any representation, warranty, covenant or agreement.

 

JMP may terminate the merger agreement if:

 

 

at any time prior to the JMP shareholder approval, the board of directors of JMP changes its recommendation with respect to the merger agreement in order for JMP to accept a superior proposal and JMP, subject to complying with the terms of the merger agreement, concurrently enters into a binding written definitive acquisition agreement for the consummation of such superior proposal, but only if JMP pays any amounts due as described below under “Expenses and Fees—Termination Fees Payable by JMP” immediately before or simultaneous with, and as a condition to any such termination; or

 

 

Citizens or Merger Sub breaches any of its representations, warranties, covenants or agreements under the merger agreement such that, if continued on the closing date, an applicable closing condition will not have been 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 JMP (or such shorter period remaining prior to the end date)) provided JMP is not then in material breach of any representation, warranty, covenant or agreement.

 

Effect of Termination

 

If the merger agreement is terminated, it will become void and of no effect, and there will be no liability on the part of Citizens, Merger Sub or JMP to any other party or its directors, officers, employees, agents, legal and financial advisors or other representatives (except as to any expenses or fees owed, as described below under “Expenses and Fees”), except if such termination resulted from willful and material breach by any party of any of the covenants or other agreements contained in the merger agreement, that is a consequence of an act or failure to act by the breaching or non-performing party with actual knowledge that such party’s act or failure to act would, or would reasonably be expected to, result in or constitute such breach or such failure of performance.

 

Expenses and Fees

 

Except with respect to certain filing fees under antitrust laws, which will be paid by Citizens, each of Citizens and JMP will be responsible for all expenses incurred by it in connection with the negotiation and completion of the transactions contemplated by the merger agreement.

 

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Termination Fees Payable by JMP

 

Under the terms of the merger agreement, JMP would be obligated to pay Citizens a 4.0% of the aggregate merger consideration if the merger agreement is terminated in any of the following circumstances:

 

 

at any time prior to shareholder approval of the merger agreement, by action of the board of directors of JMP, if the JMP board of directors has made a change of recommendation in order to accept a superior proposal and JMP concurrently enters into a binding written definitive acquisition agreement providing for the consummation of a transaction for the superior proposal;

 

 

at any time prior to shareholder approval of the merger agreement, by action of Citizens, in the event (i) JMP has breached in any material respect its obligation relating to non-solicitation of acquisition proposals; (ii) the board of directors of JMP has made a change of recommendation; (iii) at any time after the end of ten business days following receipt of an acquisition proposal, JMP’s board shall have failed to reaffirm its recommendation for shareholders to approve the merger agreement as promptly as practicable (but in any event within five business days) after receipt of any written request to do so by Citizens; or (iv) a tender offer or exchange offer for outstanding shares shall have been publicly disclosed (other than by Citizens or an affiliate of Citizens) and JMP’s board recommends that the shareholders tender their shares in such tender or exchange offer or, within ten business days after the commencement of such tender or exchange offer, JMP’s board fails to recommend unequivocally against acceptance of such offer; or

 

 

in the event that either (1) a bona fide acquisition proposal has been made to JMP or its shareholders or any person has publicly announced a bona fide acquisition proposal (and has not withdrawn it at least two business days prior to the Special Meeting), (2) the merger agreement is terminated by either Citizens or JMP for failure of the merger to be consummated by the end date and shareholder approval has not be obtained or as the result of a willful and material breach, and (3) within 12 months of the termination of the merger agreement JMP enters into a definitive agreement with respect to or consummates an acquisition proposal, provided that the references to “25%” in the definition of “acquisition proposal” shall instead refer to “50%”.

 

Any termination fee required must be paid promptly, but in no event later than two business days after the date of a relevant termination, provided that with respect to terminations related to bona fide acquisition proposals or the failure to obtain shareholder approval noted above, the termination fee must be paid concurrently with the board of directors of JMP entering into the definitive agreement with respect to or consummation of an acquisition proposal and with respect to a change in recommendation by the board of directors of JMP to accept a superior proposal, the termination fee must be paid simultaneously with such termination.

 

Certificate of Formation and LLC Agreement of the Surviving Company

 

At the effective time of the merger, the certificate of formation of JMP will be, by virtue of the merger, amended to read in its entirety as the certificate of formation of Merger Sub in effect immediately prior to the effective time, and as so amended will be the certificate of formation of the surviving company until thereafter amended in accordance with applicable law. The merger agreement further provides that, at the effective time of the merger, the LLC Agreement of JMP will be amended and restated to read in its entirety as the LLC Agreement attached as Exhibit B to the merger agreement and as so amended will be the LLC Agreement of the surviving company until thereafter amended, restated or amended and restated as provided therein or in accordance with applicable law.

 

Managers and Officers of the Surviving Company

 

From and after the effective time of the merger, until successors are duly elected or appointed and qualified in accordance with applicable law, JMP, Citizens and Merger Sub will take all actions necessary so that (i) the individuals designated in writing by Citizens prior to the effective time will be the managers of JMP and (ii) the individuals designated in writing by Citizens prior to the effective time will be the officers of JMP.

 

Governing Law

 

The merger agreement is governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflicts of law rules of such state, and provides that any action or proceeding arising out of or in connection with the merger agreement will be maintained in the Court of Chancery of the State of Delaware and any state appellate court therefrom within the State of Delaware or, if the Court of Chancery of the State of Delaware declines to accept jurisdiction over a particular matter, any federal or state court of competent jurisdiction located in the State of Delaware.

 

Specific Performance

 

Each party is entitled to seek an injunction or injunctions to prevent a breach of the merger agreement and to enforce specifically the terms and provisions of the merger agreement in the Court of Chancery of the State of Delaware and any state appellate court therefrom within the State of Delaware or, if the Court of Chancery of the State of Delaware declines to accept jurisdiction over a particular matter, any federal or state court of competent jurisdiction located in the State of Delaware.

 

Amendment, Waiver and Extension of the Merger Agreement

 

Any provision of the merger agreement may be amended or waived prior to the effective time of the merger if, but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by each party to the merger agreement or, in the case of a waiver, by each party against whom the waiver is to be effective. However, after JMP shareholder approval is obtained, there may be no amendment or waiver that, pursuant to Delaware law, requires further shareholder approval unless such approval is obtained.

 

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OTHER AGREEMENTS RELATED TO THE MERGER

 

The Voting Agreements

 

The following summary describes material provisions of the voting agreements that have been entered into by Citizens with certain shareholders of JMP. 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. This summary is subject to, and qualified in its entirety by reference to, the form of voting agreement, which is attached to this proxy statement as Exhibit A to Annex A and is incorporated by reference into this proxy statement. You are urged to read the form of voting agreement carefully and in its entirety.

 

As a condition to its entering into the merger agreement, Citizens required certain shareholders of JMP to each enter into a voting agreement with Citizens, in each case with respect to all of the common shares of JMP beneficially owned by such shareholders. As of the record date, the outstanding shares subject to the voting agreements with Citizens, which we refer to as the voting agreement shares, represent approximately 30.5% of the votes eligible to be cast at the Special Meeting.

 

The shareholders party to the voting agreements have agreed, solely with respect to the voting agreement shares, to do the following, among others:

 

 

vote in favor of any proposal for shareholders to adopt the merger agreement;

 

 

vote in favor of any proposal to adjourn a meeting at which there is a proposal for shareholders to adopt the merger agreement to a later date if there are not sufficient votes to adopt the merger agreement or if there are not sufficient shares present in person or represented by proxy at such meeting to constitute a quorum;

 

 

vote in favor of any proposal for which a vote of shareholders is required by applicable law to facilitate the consummation of the transactions contemplated by the voting agreement or the merger agreement, including the merger;

 

 

vote against any proposal providing for an acquisition proposal or the adoption of an alternative acquisition agreement; and

 

 

vote against any proposal for any amendment or modification of the JMP LLC Agreement (other than pursuant to the merger agreement) or other action, transaction or agreement that is intended to or would, or would reasonably be expected to (i) result in any of the conditions to the consummation of the merger under the merger agreement not being fulfilled on a timely basis, (ii) prevent, delay or impair consummation of the merger or dilute, in any material respect, the benefit of the merger to Citizens or (iii) facilitate an acquisition proposal or alternative acquisition agreement.

 

The shareholders party to the voting agreement have also agreed not to sell, directly or indirectly, transfer or otherwise dispose of any voting agreement shares unless the person to whom the voting agreement shares are transferred agrees in writing to be bound by the terms of the voting agreement. The voting agreements remain in full force and effect until the earlier of the effective time of the merger, the termination of the merger agreement or the voting agreement, or any amendment or modification of, or waiver under, the merger agreement, in each case, without the prior written consent of the shareholders party to the voting agreements in a manner that, among other exceptions, reduces or imposes any restriction on the right of the shareholders party to the voting agreements to receive the merger consideration, reduces the amount or changes the form of the merger consideration.

 

47

 

 

MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER

 

The following discussion is a summary of material U.S. federal income tax consequences of the merger that may be relevant to U.S. Holders and Non-U.S. Holders (each as defined below) of common shares whose shares are converted into the right to receive cash pursuant to the merger. This discussion is based upon the Internal Revenue Code of 1986 (which we refer to as the Code) Treasury Regulations promulgated under the Code, court decisions, published positions of the Internal Revenue Service (which we refer to as the IRS) and other applicable authorities, all as in effect on the date of this proxy statement and all of which are subject to change or differing interpretations, possibly with retroactive effect. This discussion is limited to holders who hold their common shares as “capital assets” within the meaning of Section 1221 of the Code (generally. property held for investment purposes).

 

This discussion is for general information only and does not address all of the tax consequences that may be relevant to holders in light of their particular circumstances. For example, this discussion does not address:

 

 

tax consequences that may be relevant to holders who may be subject to special treatment under U.S. federal income tax laws, such as financial institutions; tax-exempt organizations; S corporations, partnerships and any other entity or arrangement treated as a partnership or pass-through entity for U.S. federal income tax purposes; insurance companies; mutual funds; dealers in stocks and securities; traders in securities that elect to use the mark-to-market method of accounting for their securities; regulated investment companies; real estate investment trusts; entities subject to the U.S. anti-inversion rules; holders who hold their common shares as “qualified small business stock” for purposes of Sections 1045 and 1202 of the Code; Non-U.S. Holders that own (directly or by attribution) more than five percent of our common shares; or certain former citizens or long-term residents of the United States;

 

tax consequences to holders holding the shares as part of a hedging, constructive sale or conversion, straddle or other risk reduction transaction;

 

tax consequences to holders who received their common shares in a compensatory transaction or pursuant to the exercise of options or warrants;

 

tax consequences to U.S. Holders whose “functional currency” is not the U.S. dollar;

 

tax consequences to holders who hold their common shares through a bank, financial institution or other entity, or a branch thereof, located, organized or resident outside the United States;

 

tax consequences arising from the Medicare tax on net investment income;

 

tax consequences to holders subject to special tax accounting rules as a result of any item of gross income with respect to the common shares being taken into account in an “applicable financial statement” (as defined in the Code );

 

the U.S. federal estate, gift or alternative minimum tax consequences, if any;

 

any state. local or non-U.S. tax consequences; or

 

tax consequences to holders that do not vote in favor of the merger and who properly demand appraisal of their shares under Section 262 of the DGCL.

 

If a partnership (including an entity or arrangement, domestic or foreign, treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of our common shares, then the tax treatment of a partner in such partnership will generally depend upon the status of the partner and the activities of the partner and the partnership. Partnerships holding our common shares and partners therein should consult their tax advisors regarding the consequences of the merger.

 

No ruling has been or will be obtained from the IRS regarding the U.S. federal income tax consequences of the merger described below. If the IRS contests a conclusion set forth herein, no assurance can be given that a holder would ultimately prevail in a final determination by a court.

 

THIS DISCUSSION IS PROVIDED FOR GENERAL INFORMATION ONLY AND DOES NOT CONSTITUTE LEGAL ADVICE TO ANY HOLDER. A HOLDER SHOULD CONSULT ITS OWN TAX ADVISORS CONCERNING THE U.S. FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE MERGER IN LIGHT OF ITS PARTICULAR CIRCUMSTANCES AND ANY CONSEQUENCES ARISING UNDER FEDERAL NON-INCOME TAX LAWS OR THE LAWS OF ANY STATE. LOCAL OR NON-U.S. TAXING JURISDICTION.

 

U.S. Holders

 

For purposes of this discussion a “U.S. Holder” is a beneficial owner of shares of our common shares 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 state thereof or the District of Columbia;

 

an estate, the income of which is subject to US. federal income taxation regardless of its source; or

 

a trust that (1) is subject to the primary supervision of a court within the United States and the control of one of more United States persons as defined in section 7701(a)(30) of the Code; or (2) has a valid election in effect under applicable Treasury regulations to be treated as a United States person.

 

48

 

 

The receipt of cash by a U.S. Holder in exchange for common shares pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes. In general, such U.S. Holder’s gain or loss will be equal to the difference, if any, between the amount of cash received and the U.S. Holder’s adjusted tax basis in the shares surrendered pursuant to the merger. A U.S. Holder’s adjusted tax basis generally will equal the amount that such U.S. Holder paid for the shares. Such gain or loss will be capital gain or loss and will be long-term capital gain or loss if such U.S. Holder’s holding period in such shares is more than one year at the time of the completion of the merger. A reduced tax rate on capital gain generally will apply to long-term capital gain of a non-corporate U.S. Holder (including individuals). The deductibility of capital losses is subject to limitations. If a U.S. Holder acquired different blocks of our common shares at different times and different prices, such holder must determine its adjusted tax basis and holding period separately with respect to each block of our common shares.

 

Non-U.S. Holders

 

For purposes of this discussion, the term “Non-U.S. Holder” means a beneficial owner of our common shares that is neither a U.S. Holder nor a partnership for U.S. federal income tax purposes.

 

Any gain realized by a Non-U.S. Holder pursuant to the merger generally will not be subject to U.S. federal income tax unless:

 

 

the gain is effectively connected with a trade or business of such Non-U.S. Holder in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment maintained by such Non-U.S. Holder in the United States), in which case such gain generally will be subject to U.S. federal income tax at rates generally applicable to U.S. persons, and, if the Non-U.S. Holder is a corporation, such gain may also be subject to the branch profits tax at a rate of 30 percent (or a lower rate under an applicable income tax treaty);

 

such Non-U.S. Holder is an individual who is present in the United States for 183 days or more in the taxable year of the completion of the merger, and certain other specified conditions are met, in which case such gain will be subject to U.S. federal income tax at a rate of 30 percent (or a lower rate under an applicable income tax treaty); or

 

JMP is or has been a “United States real property holding corporation” as such term is defined in Section 897(c) of the Code (which we refer to as USRPHC), at any time within the shorter of the five-year period preceding the Merger or such Non-U.S. Holder’s holding period with respect to the applicable common shares (which we refer to as the “relevant period”) and, if our common shares are regularly traded on an established securities market (within the meaning of Section 897(c)(3) of the Code), such Non-U.S. Holder owns (directly, indirectly or constructively) more than five percent of our common shares at any time during the relevant period, in which case such gain will be subject to U.S. federal income tax at rates generally applicable to U.S. persons (as described in the first bullet point above), except that the branch profits tax will not apply. Generally, a corporation is a USRPHC if the fair market value of its U.S. real property interests (as defined in the Code) equals or exceeds 50 percent of the sum of the fair market value of its worldwide real property interests plus its other assets used or held for use in a trade or business. For this purpose, U.S. real property interests generally include land, improvements and associated personal property. Although there can be no assurances in this regard, we believe that we are not, and have not been, a USRPHC at any time during the five-year period preceding the merger. Non-U.S. Holders are encouraged to consult their own tax advisors regarding the possible consequences to them if we are a USRPHC.

 

Information Reporting and Backup Withholding

 

Information reporting and backup withholding (at a current rate of 24 percent) may apply to the proceeds received by a holder pursuant to the merger. Backup withholding generally will not apply to (1) a U.S. Holder that furnishes a correct taxpayer identification number and certifies that such U.S. Holder is not subject to backup withholding on IRS Form W-9 (or a substitute or successor form); or (2) a Non-U.S. Holder that (a) provides a certification of such Non-U.S. Holder’s non-U.S. status on the appropriate series of IRS Form W-8 (or a substitute or successor form); or (b) otherwise establishes an exemption from backup withholding. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against the holder’s U.S. federal income tax liability, if the required information is timely furnished to the IRS.

 

Withholding on Foreign Entities

 

Sections 1471 through 1474 of the Code, and the Treasury regulations and administrative guidance issued thereunder (which we refer to as FATCA), impose a U.S. federal withholding tax of 30 percent on certain payments made to a “foreign financial institution” (as specially defined under these rules) unless such institution enters into an agreement with the U.S. government to withhold on certain payments and to collect and provide to the U.S. tax authorities substantial information regarding certain U.S. account holders of such institution (which includes certain equity and debt holders of such institution, as well as certain account holders that are foreign entities with U.S. owners) or an exemption applies. FATCA also generally will impose a U.S. federal withholding tax of 30 percent on certain payments made to a non-financial foreign entity unless such entity provides the withholding agent a certification identifying certain direct and indirect U.S. owners of the entity or an exemption applies. An intergovernmental agreement between the United States and an applicable foreign country may modify these requirements. Under certain circumstances, a Non-U.S. Holder might be eligible for refunds or credits of such taxes. The Treasury Department recently released proposed regulations which, if finalized in their present form, would eliminate the federal withholding tax of 30 percent applicable to the gross proceeds of a sale or other disposition of our common shares. In its preamble to such proposed regulations, the U.S. Treasury Department stated that taxpayers may generally rely on the proposed regulations until final regulations are issued.

 

Holders of our common shares are encouraged to consult with their own tax advisors regarding the possible implications of FATCA on the disposition of our common shares pursuant to the merger.

 

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PROPOSAL TWO: ADVISORY VOTE ON MERGER-RELATED COMPENSATION FOR

JMPS NAMED EXECUTIVE OFFICERS

 

Vote Required

 

Section 951 of the Dodd-Frank Act and Rule 14a-21(c) under the Exchange Act requires that JMP seek a non-binding advisory vote from its shareholders to approve certain “golden parachute” compensation that its “named executive officers” will receive from JMP in connection with the merger. The proposal gives JMP’s shareholders the opportunity to express their views on the merger-related compensation of JMP’s named executive officers. Approval requires the affirmative vote of the majority of shares present in person or represented by proxy and entitled to vote on the proposal. Accordingly, JMP is asking its shareholders to approve the following resolution on a non-binding, advisory basis:

 

“RESOLVED, that the compensation that may be paid or become payable to JMP’s named executive officers in connection with the merger pursuant to agreements or understandings with JMP, and the agreements and understandings with JMP pursuant to which such compensation may be paid or become payable, as disclosed in the table in this proposal and as further described under the heading “Proposal One: The Merger—Merger-Related Compensation for JMP’s Named Executive Officers” beginning on page 31, are hereby APPROVED.”

 

Approval of this proposal is not a condition to completion of the merger, and the vote with respect to this proposal is advisory only and will not be binding on JMP or Citizens. If the merger is completed, the “golden parachute” compensation may be paid to JMP’s named executive officers even if JMP shareholders fail to approve the “golden parachute” compensation.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The JMP board unanimously recommends that you vote FOR this proposal.

 

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PROPOSAL THREE: THE ADJOURNMENT

 

In the event that there are not sufficient votes to constitute a quorum or approve the adoption of the merger agreement at the time of the Special Meeting, the merger agreement may not be adopted unless the Special Meeting is adjourned to a later date or dates in order to permit further solicitation of proxies. In order to allow proxies that have been received by JMP at the time of the Special Meeting to be voted for an adjournment, if necessary, JMP has submitted the proposal on adjournment to its shareholders as a separate matter for their consideration.

 

The board of directors of JMP unanimously recommends that shareholders vote “FOR” the adjournment proposal, if necessary to solicit additional proxies if there are not sufficient votes to constitute a quorum or approve the adoption of the merger agreement at the Special Meeting. If it is necessary to adjourn the Special Meeting, no notice of the adjourned Special Meeting is required to be given to shareholders (unless the adjournment is for more than 30 days or if a new record date is fixed), other than an announcement at the Special Meeting of the hour, date and place to which the Special Meeting is adjourned.

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table sets forth, as of October 11, 2021 (unless otherwise indicated), certain information regarding the beneficial ownership of JMP’s common shares. We had 19,958,495 common shares outstanding as of October 11, 2021. In accordance with the rules of the SEC, “beneficial ownership” includes voting or investment power with respect to equity securities. In computing the number of common shares beneficially owned by a person and the percentage ownership of that person, we deemed as outstanding common shares subject to options or restricted stock units held by that person that are currently exercisable or that vest or become exercisable within 60 days of October 11, 2021. We did not deem these shares outstanding, however, for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated, the address for each person listed below is: c/o JMP Group LLC, 600 Montgomery Street, Suite 1100, San Francisco, California 94111. To our knowledge, except as indicated in the footnotes to this table and pursuant to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all common shares beneficially owned by them.

 

Name

 

Number of Common Shares
Owned and Nature of
Beneficial Ownership(1)

   

Percent of Class

 

5% Shareholders

               

Wedbush Securities Inc.

   

2,250,000

(2) 

   

11.3

%

Joseph A. Jolson 1996 Trust dated 3/7/96

   

1,328,210

     

6.7

%

Joseph A. Jolson 1991 Trust dated 6/4/91

   

5,325,926

     

26.7

%

Directors and Executive Officers

               

Joseph A. Jolson

   

6,828,100

(3) 

   

34.1

%

Carter D. Mack

   

1,368,798

(4) 

   

6.9

%

Craig R. Johnson

   

1,373,768

(5) 

   

6.9

%

Mark L. Lehmann

   

737,238

(6) 

   

3.7

%

Thomas R. Wright

   

434,920

(7)

   

2.2

%

Kenneth M. Karmin

   

263,958

(8) 

   

1.3

%

Glenn H. Tongue

   

265,084

(9) 

   

1.3

%

H. Mark Lunenburg

   

215,206

     

1.1

%

Jonathan M. Orszag

   

183,325

     

*

 

Raymond S. Jackson

   

99,887

     

*

 

Staci Slaughter

   

9,257

     

*

 

All directors and executive officers as a group (11 persons)

   

11,779,541

     

58.8

%

 

*

Indicates less than 1% of class.

 

(1) 

For purposes of this table, “beneficial ownership” is determined in accordance with Rule 13d-3 under the Exchange Act, pursuant to which a person or group of persons is deemed to have “beneficial ownership” of any common shares that such person has the right to acquire within 60 days of the date of determination.

 

(2) 

Based on a Form 4 filed by Wedbush Securities on September 9, 2021. The address for Wedbush Securities, Inc. is 10000 Wilshire Boulevard, Suite 900, Los Angeles, CA 90017.

 

(3) 

Includes (a) 1,328,210 shares owned by the Joseph A. Jolson 1996 Trust, of which Mr. Jolson is a trustee, (b) 5,325,926 shares owned by the Joseph A. Jolson 1991 Trust, of which Mr. Jolson is the trustee,(c) 36,400 shares owned by Mr. Jolson directly and (d) 62,564 shares to be delivered upon the vesting on December 1, 2021 of 50% of RSUs granted on February 4, 2021. Also included in the number reported is 75,000 shares owned by The Jolson Family Foundation although Mr. Jolson disclaims beneficial ownership of these shares.

 

(4) 

Includes (a) 1,368,631 shares owned by the Mack Trust dated February 14, 2002, of which Mr. Mack is the trustee and (b) 167 shares owned by Mr. Mack’s spouse.

 

(5) 

Includes (a) 996,782 shares held by the Johnson Revocable Trust, UAD 7/2/97, of which Mr. Johnson is the trustee, (b) 370,438 shares owned by Mr. Johnson directly and (c) 6,548 shares to be delivered upon the vesting on December 1, 2021 of 50% of RSUs granted on February 4, 2021.

 

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(6) 

Includes (a) 720,826 shares owned by the Mark L. and Kerri C. Lehmann Trust U/A dated 3/4/2009, of which Mr. Lehmann is the co-trustee and (b) 16,412 shares owned by Mr. Lehmann directly.

 

(7) 

Includes (a) 429,058 shares held by Mr. Wright directly and (b) 5,862 shares to be delivered upon the vesting on December 1, 2021 of 50% of RSUs granted on February 5, 2020.

 

(8) 

Includes (a) 258,276 shares held by the Beth & Ken Karmin Family Trust Dated November 5, 2009, of which Mr. Karmin is the co-trustee and (b) 5,682 shares held by Mr. Karmin directly.

(9) 

Includes (a) 230,198 shares held by Mr. Tongue directly and (b) 34,886 shares held indirectly through the Deer Haven Fund, of which Mr. Tongue is the general partner.

 

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OTHER MATTERS

 

Other Business

 

The JMP board of directors does not currently intend to bring any other business before the Special Meeting and, to the knowledge of the JMP board of directors, no other matters other than those indicated above are to be brought before the Special Meeting. If, however, any other matter properly comes before the Special Meeting, the proxy holders will, in their discretion, vote on it in accordance with their own best judgment.

 

Important Notice Regarding Availability of Proxy Materials for the Special Meeting of Shareholders to be Held on November 12, 2021

 

This proxy statement is available at www.proxyvote.com.

 

Householding

 

The SEC has adopted rules that permit companies and intermediaries (such as banks and brokers and other nominee record holders) to satisfy the delivery requirements for proxy statements and annual reports with respect to two or more shareholders sharing the same address by delivering a single copy of such materials addressed to those shareholders. This practice, known as “householding,” is designed to reduce the volume of duplicate information and reduce printing and postage costs.

 

If you and others who share your mailing address own our common shares in street name, meaning through bank or brokerage accounts, you may have received a notice that your household will receive only one proxy statement from each company whose shares is held in such accounts. Unless you responded that you did not want to participate in householding, you were deemed to have consented to it and a single copy of this proxy statement has been sent to your address.

 

We will promptly deliver separate copies of this proxy statement upon the oral or written request of any shareholder who is in a household that participates in the householding of our proxy materials. You may send your request by mail to our Corporate Secretary, Walter Conroy, at JMP Group LLC, 600 Montgomery Street, Suite 1100, San Francisco, CA 94111 or by telephone at (415) 835-8900. Shareholders who share an address and receive multiple copies of this proxy statement may also request to receive a single copy by contacting your bank, broker or other nominee record holder, or you may contact us following the same instructions above.

 

Communicating with the Board of Directors

 

Shareholders or other interested parties may communicate with the Board of Directors, any committee or individual member of the Board of Directors, the Lead Director or the non-management members of the Board of Directors, by writing to: Board of Directors, JMP Group LLC, 600 Montgomery Street, Suite 1100, San Francisco, CA 94111, Attn: Secretary. All such communications are reviewed by our Secretary and then presented to our Board of Directors, a committee or an individual member of the Board of Directors, the Lead Director or the non-management members of the Board of Directors, as applicable, at the subsequent regularly scheduled meeting of the Board of Directors.

 

FUTURE SHAREHOLDER PROPOSALS

 

If the merger is consummated, JMP will not have public shareholders and there will be no public participation in any future shareholder meetings. If the merger is not consummated, however, shareholders will continue to be entitled to attend and participate in meetings of shareholders. If the merger is not consummated and the 2022 annual meeting is held, shareholder proposals will be eligible for consideration for inclusion in the proxy statement and form of proxy for our 2022 annual meeting of shareholders in accordance with Rule 14a-8 under the Exchange Act and our bylaws, as amended, as described below.

 

54

 

 

Shareholders who, in accordance with Rule 14a-8 under the Exchange Act, wish to present proposals for inclusion in the proxy materials to be distributed by JMP in connection with its 2022 annual meeting of shareholders must submit their proposals to JMP’s Corporate Secretary on or before January 3, 2022, which is 120 days before the first anniversary of the date of release of the 2021 Proxy Statement, provided that the date of JMP’s 2022 annual meeting of shareholders is not more than thirty days before or after the one-year anniversary of the date of the 2021 annual meeting. SEC rules provide that submitting a proposal does not guarantee its inclusion in such proxy materials.

 

In accordance with Section 7.10 of the JMP LLC Agreement, for a matter not included in our proxy materials to be properly brought before the 2022 annual meeting of shareholders, a shareholder’s notice of the matter the shareholder wishes to present must be delivered to JMP’s Corporate Secretary at JMP Group LLC, 600 Montgomery Street, Suite 1100, San Francisco, California 94111 as follows:

 

 

1.

If the 2022 annual meeting of shareholders is scheduled to take place within 30 days before or after the first anniversary date of the 2021 annual meeting, such notice shall be delivered not less than 90 days nor more than 120 days prior to the first anniversary of the date on which JMP first mailed its proxy materials for the 2021 annual meeting; or

 

 

2.

If the date of the 2022 annual meeting of shareholders is changed more than 30 days from the first anniversary date of the 2021 annual meeting, such notice shall be delivered not later than the close of business on the later of (i) the 90th day prior to the 2022 annual meeting or (ii) the 10th day following the day on which public announcement of the date of the 2022 annual meeting is first made.

 

Accordingly, because the first anniversary of the date on which we first mailed our proxy materials for the 2021 annual meeting is May 3, 2022, any such notice given by or on behalf of a shareholder pursuant to Section 7.10 of JMP’s LLC Agreement (and not pursuant to SEC Rule 14a-8) must be received no earlier than January 3, 2022 and no later than February 2, 2022 to be timely given unless the date of the annual meeting of our shareholders to be held in 2022 is changed by more than 30 days from the first anniversary date of the 2021 annual meeting. A shareholder’s notice to the Company must set forth, as to each matter the shareholder proposes to bring before an annual meeting, the information required by our LLC Agreement. Nothing in Section 7.10 of the JMP LLC Agreement shall affect the right of a shareholder to request inclusion of a proposal in the proxy statement to the extent that such right is provided by applicable law.

 

WHERE YOU CAN FIND MORE INFORMATION

 

JMP files annual, quarterly and current reports, proxy statements and other documents with the SEC under the Exchange Act. These reports, proxy statements and other documents contain additional information about JMP and will be made available for inspection and copying at our executive offices during regular business hours by any shareholder or a representative of a shareholder as so designated in writing.

 

The SEC allows us to “incorporate by reference” information into this proxy statement, which means that we can disclose important information to you by referring you to other documents filed separately with the SEC. The information incorporated by reference is deemed to be part of this proxy statement, except for any information superseded by information contained in this proxy statement or incorporated by reference subsequent to the date of this proxy statement. This proxy statement incorporates by reference the documents set forth below that we have previously filed with the SEC. These documents contain important information about us and our financial condition and are incorporated by reference into this proxy statement.

 

We incorporate by reference each document we file under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of the initial filing of this proxy statement and before the Special Meeting or the termination of the merger agreement (other than current reports on Form 8-K furnished pursuant to Item 2.02 or Item 7.01 of Form 8-K, including any exhibits included with such information, unless otherwise indicated therein). We also incorporate by reference in this proxy statement the following documents filed by us with the SEC under the Exchange Act:

 

 

our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the SEC on March 29, 2021;

 

 

our Quarterly Reports on Form 10-Q for the quarter ended March 31, 2021, filed with the SEC on May 11, 2021, and for the quarter ended June 30, 2021, filed with the SEC on August 11, 2021;

 

 

our 2021 Annual Proxy Statement filed with the SEC on April 28, 2021; and

 

 

our Current Reports on Form 8-K filed with the SEC on June 10, 2021, June 21, 2021, August 11, 2021 and September 10, 2021.

 

JMP is also incorporating by reference additional documents that JMP files with the SEC between the date of this proxy statement and the date of the Special Meeting or the termination of the merger agreement. These documents include annual, quarterly and current reports, proxy statements and other information. These SEC filings are also available to the public from commercial document retrieval services and at www.sec.gov.

 

55

 

 

All information contained in this proxy statement exclusively concerning Citizens and Merger Sub and their affiliates has been supplied by Citizens and Merger Sub and has not been independently verified by us.

 

You may obtain any of the documents that we file with the SEC, without charge, by requesting them in writing from us at the following address:

 

JMP Group LLC

600 Montgomery Street

Suite 1100

San Francisco, California 94111

Attention: Investor Relations

 

If you would like to request documents from us, please do so as soon as possible to receive them before the Special Meeting. If you request any documents from us, we will mail them to you by first class mail, or another equally prompt method. Please note that all of our documents that we file with the SEC are also promptly available through the “Investor Relations” section of our website, https://investor.jmpg.com/. The information included on our website is not incorporated by reference into this proxy statement. The website addresses, and the website addresses included in any documents incorporated by reference in this proxy statement, are not intended to function as hyperlinks, and the information contained on such websites and on the SEC’s website is not incorporated by reference in this proxy statement and you should not consider it a part of this proxy statement.

 

To receive timely delivery of documents in advance of the Special Meeting, please make your request no later than October 29, 2021.

 

Shareholders should not rely on information other than that contained or incorporated by reference in this proxy statement. We have not authorized anyone to provide information that is different from that contained in this proxy statement. This proxy statement is dated October 15, 2021. No assumption should be made 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 will not create any implication to the contrary. Notwithstanding the foregoing, if there is any material change in any of the information previously disclosed, we will, where relevant and to the extent required by applicable law, update such information through a supplement to this proxy statement.

 

56

 

 

Annex A

 

 

 

 

AGREEMENT AND PLAN OF MERGER

 

by and among

 

CITIZENS FINANCIAL GROUP, INC,

 

JOLT ACQUISITION LLC

 

and

 

JMP GROUP LLC

 

Dated as of September 8, 2021

 

 

 

 

 

 

TABLE OF CONTENTS

Page

     
 

ARTICLE I

 
     
 

The Merger; Closing; Effective Time

 
     

1.1.

The Merger

2

1.2.

Closing

2

1.3.

Effective Time

3

     
 

ARTICLE II

 
     
 

Certificate of Formation and LLC Agreement of the Surviving Company

 
     

2.1.

Certificate of Formation

3

2.2.

LLC Agreement of the Surviving Company

3

     
 

ARTICLE III

 
     
 

Managers and Officers of the Surviving Company

 
     

3.1.

Managers of the Surviving Company

3

3.2.

Officers of the Surviving Company

4

     
 

ARTICLE IV

 
     
 

Effect of the Merger on Equity Interest;
Exchange of Share Certificates

 
     

4.1.

Effect on Equity Interest

4

4.2.

Exchange of Share Certificates; Surrender of Book Entry Shares

5

4.3.

Treatment of Stock-Based Awards 

8

     
 

ARTICLE V

 
     
 

Representations and Warranties

 
     

5.1.

Representations and Warranties of the Company 

9

5.2.

Representations and Warranties of Parent and Merger Sub

44

5.3.

Disclosure Schedule

46

     
 

ARTICLE VI

 
     
 

Covenants

 
     

6.1.

Conduct of Business of the Company Prior to the Effective Time 

47

6.2.

Acquisition Proposals; Change of Recommendation

51

 

i

 

 

6.3.

Proxy Statement Filing; Information Supplied

54

6.4.

Company Meeting 

55

6.5.

Cooperation; Regulatory Matters; Status 

56

6.6.

Private Fund Consents

58

6.7.

PPP Loan

59

6.8. 

Information; Access and Reports; Notifications

59

6.9. 

Stock Exchange Delisting 

61

6.10.

Publicity

61

6.11.

Employee Benefits

62

6.12.

Expenses

63

6.13.

Indemnification; Directors’ and Officers’ Insurance 

63

6.14.

Resignations

65

6.15. 

Shareholder Litigation  

65

6.16.

Other Actions by the Company

65

6.17.

Treatment of Company Indebtedness

66

6.18. 

Volcker Rule; BHC Act

66

     
 

ARTICLE VII

 
     
 

Conditions

 
     

7.1. 

Conditions to Each Party’s Obligation to Effect the Merger

67

7.2. 

Conditions to Obligations of Parent and Merger Sub 

67

7.3. 

Conditions to Obligation of the Company

68

     
 

ARTICLE VIII

 
     
 

Termination

 
     

8.1.

Termination

69

8.2.

Effect of Termination and Abandonment

70

     
 

ARTICLE IX

 
     
 

Miscellaneous and General

 
     

9.1.

Survival

72

9.2. 

Waiver; Amendment 

72

9.3.

Counterparts

72

9.4.

Governing Law and Venue

72

9.5.

Waiver of Jury Trial

73

9.6.

Notices 

73

9.7.

Entire Understanding; No Third Party Beneficiaries 

74

9.8.

Effect 

75

9.9.

Specific Performance

75

 

ii

 

 

9.10.

Severability 

75

9.11.

Successors and Assigns 

75

9.12.

Obligations of Parent and of the Company

75

9.13.

Definitions 

76

9.14.

Interpretation; Construction

76

 

Annex A

Defined Terms

A-1

Annex B

Stockholder Parties to the Voting Agreement

B-1

Annex C 

Key Employees

C-1

     
     

Exhibit A

Voting Agreement

 

Exhibit B

Form of Limited Liability Company Agreement of the Surviving Corporation

 

 

iii

 

 

 

AGREEMENT AND PLAN OF MERGER

 

This AGREEMENT AND PLAN OF MERGER (this “Agreement”), dated as of September 8, 2021, is by and among Citizens Financial Group, Inc., a Delaware corporation (“Parent”), Jolt Acquisition LLC, a Delaware limited liability company and a wholly-owned Subsidiary of Parent (“Merger Sub”), and JMP Group LLC, a Delaware limited liability company (the “Company,” with the Company, Parent and Merger Sub sometimes being hereinafter referred to individually as a “Party” and collectively as the “Parties”).

 

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 and in accordance with the provisions of the Limited Liability Company Act of the State of Delaware (the “DLLCA”);

 

WHEREAS, the board of directors of Parent has unanimously approved the Merger upon the terms and subject to the conditions set forth herein, and has adopted this Agreement;

 

WHEREAS, Parent, as the sole member of Merger Sub, has approved the Merger upon the terms and subject to the conditions set forth herein, and have adopted this Agreement;

 

WHEREAS, the board of directors of the Company (the “Company Board”) upon recommendation of the special transaction committee of the Company Board established on June 1, 2021, as constituted from time to time (the “Special Transaction Committee”), and after due consideration, has determined that this Agreement and the transactions contemplated hereby are fair to and in the best interests of the Company and its Shareholders and have approved and declared advisable this Agreement and the transactions contemplated hereby, including the Merger, all upon the terms and subject to the conditions set forth herein;

 

WHEREAS, concurrently with the execution and delivery of this Agreement, as a condition and inducement to Parent’s and Merger Sub’s willingness to enter into this Agreement, each of the Shareholders listed on Annex B hereto, as a beneficial owner of Shares, is entering into a voting agreement of even date herewith in favor of Parent (the “Voting Agreement”), in the form attached hereto as Exhibit A, pursuant to which, among other things, such Persons have agreed to vote Shares beneficially owned by each of them in favor of the adoption of this Agreement subject to the terms of and as more particularly set forth therein;

 

WHEREAS, the Company Board has taken all action so that, assuming the representations set forth in Section 5.2(h) are true, Parent will not be an “interested stockholder” or prohibited from entering into or consummating a “business combination” with the Company (in each case as such term is used in Section 203 of the Delaware General Corporation Law (the “DGCL”)) as a result of the execution of this Agreement or the Voting Agreement or the consummation of the transactions contemplated hereby or thereby, including the Merger, in the manner contemplated hereby or thereby;

 

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WHEREAS, Parent, Merger Sub and the Company desire to make certain representations, warranties, covenants and agreements in connection with this Agreement and to set forth certain conditions to the Merger; and

 

WHEREAS, concurrently with the execution and delivery of this Agreement, as a condition and inducement to Parent’s and Merger Sub’s willingness to enter into this Agreement, each of the individuals listed on Annex C hereto (the “Key Employees”) is entering into a new employment agreement with Parent.

 

NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements set forth in this Agreement, the parties, intending to be legally bound, agree as follows:

 

ARTICLE I

The Merger; Closing; Effective Time

 

1.1.    The Merger. Upon the terms and subject to the conditions set forth in this Agreement, at the Effective Time, Merger Sub shall be merged with and into the Company and the separate existence of Merger Sub shall thereupon cease. The Company shall be the surviving company in the Merger (sometimes hereinafter referred to as the “Surviving Company”) and, following the Merger, shall be a wholly-owned Subsidiary of Parent, and the separate existence of the Company, with all of its rights, privileges, immunities, powers and franchises, shall continue unaffected by the Merger, except as set forth in this Agreement. The Merger shall have the effects specified in this Agreement and in the DLLCA. For the purposes of this Agreement, “Subsidiary” means, as to any Person, a corporation, limited liability company, partnership or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, limited liability company, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person.

 

1.2.    Closing. Unless otherwise mutually agreed between the Company and Parent, the closing of the Merger (the “Closing”) shall take place remotely by mutual electronic exchange of the documents and signatures (or their electronic counterparts) at 9:00 a.m. (New York time) (a) if the date on which each of the conditions set forth in Article VII hereof (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) have been satisfied or, to the extent permissible, waived by the party or parties entitled to the benefit of such conditions (the “Closing Conditions Satisfaction Date”) occurs on or prior to the fifteenth day of a calendar month, on the date that is three (3) Business Days after the Closing Conditions Satisfaction Date; or (b) if the Closing Conditions Satisfaction Date occurs after the fifteenth day of a calendar month, on the first Business Day of the month following the month in which the Closing Conditions Satisfaction Date occurs; provided, that, notwithstanding the foregoing, if the Closing Conditions Satisfaction Date occurs within the last three (3) Business Days of any month, the Closing Date will be the date that is three (3) Business Days after the Closing Conditions Satisfaction Date; and provided, further, that if the Closing would otherwise occur at any time during the month of December (other than December 1), then the Closing Date will occur on the first Business Day of January that is at least three (3) Business Days after the Closing Conditions Satisfaction Date. The date on which the Closing occurs is referred to in this Agreement as the “Closing Date.” For purposes of this Agreement, “Business Day” means any day ending at 11:59 p.m. (New York time) (other than a Saturday or Sunday) on which the Department of State of the State of Delaware and banks in the County of New York, New York are open for general business.

 

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1.3.    Effective Time. As soon as practicable following, and on the date of, the Closing, the Company and Parent will cause a Certificate of Merger (the “Certificate of Merger”) to be executed, acknowledged and filed with the Secretary of State of the State of Delaware as provided in Section 18-209 of the DLLCA and the Company and Merger Sub shall make all other filings or recordings required by the DLLCA in connection with the Merger. The Merger shall become effective at the time when the Certificate of Merger has been duly filed with the Secretary of State of the State of Delaware or at such later time as may be agreed by the parties in writing and specified in the Certificate of Merger (the “Effective Time”).

 

ARTICLE II

Certificate of Formation and LLC Agreement of the Surviving Company

 

2.1.    Certificate of Formation. At the Effective Time, the certificate of formation of the Company (the “Company Certificate of Formation”) as in effect immediately prior to the Merger shall be the certificate of formation of the Surviving Company.

 

2.2.    LLC Agreement of the Surviving Company. At the Effective Time, the Company LLC Agreement will be amended and restated in connection with the Merger to read in its entirety as set forth on Exhibit B hereto, which shall be the limited liability company agreement of the Surviving Company (the “Surviving Company LLC Agreement”) and thereafter may be amended, restated or amended and restated as provided therein or as provided by applicable Law.

 

ARTICLE III
 

Managers and Officers of the Surviving Company

 

3.1.    Managers of the Surviving Company. The parties hereto shall take all actions necessary so that the individuals designated in writing by Parent prior to the Effective Time shall, from and after the Effective Time, be the managers of the Surviving Company until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Surviving Company LLC Agreement and applicable Law.

 

-3-

 

 

3.2.    Officers of the Surviving Company. The parties hereto shall take all actions necessary so that the individuals designated in writing by Parent prior to the Effective Time shall, from and after the Effective Time, be the officers of the Surviving Company until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Surviving Company LLC Agreement and applicable Law.

 

ARTICLE IV
 

Effect of the Merger on Equity Interest;
Exchange of Share Certificates

 

4.1.    Effect on Equity Interest. At the Effective Time, as a result of the Merger and without any action on the part of the holder of any equity interest of the Company:

 

(a)    Merger Consideration. Each common share representing limited liability company interests in the Company (each, a “Share” and the holders of Shares, the “Shareholders”), having the rights and obligations specified in the Amended and Restated Limited Liability Company Agreement of the Company, effective as of January 1, 2015 (the “Company LLC Agreement”), 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 or any direct or indirect wholly-owned Subsidiary of the Company, and in each case not held on behalf of third parties and (ii) Shares that are owned by Shareholders who have perfected and not withdrawn a demand for appraisal rights pursuant to Section 262 of DGCL and the Company LLC Agreement (the Shares referred to in this clause (ii), “Dissenting Shares”, the holders of such Shares, “Dissenting Shareholders,” and the Dissenting Shares together with the Shares referred to in clause (i), “Excluded Shares”)) shall be converted into the right to receive $7.50 per Share in cash, without interest (the “Per Share Merger Consideration”). At the Effective Time, each Share converted into the right to receive the Per Share Merger Consideration pursuant to this Section 4.1(a) shall cease to be outstanding, shall be cancelled and shall cease to exist as of the Effective Time, and each certificate formerly representing any of the Shares (other than Excluded Shares) (each, a “Share 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 in respect of each Share represented thereby, without interest.

 

(b)    Cancellation of Excluded Shares. Each Excluded Share shall, as a result of the Merger and without any action on the part of the holder of such Excluded Share, cease to be outstanding, be cancelled without payment of any consideration therefor and shall cease to exist, subject to any rights any Dissenting Shareholder may have pursuant to Section 4.2(g) with respect to any Excluded Shares that are Dissenting Shares.

 

-4-

 

 

(c)    Merger Sub. Each common share of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into one common share representing one membership interest of the Surviving Company.

 

4.2.    Exchange of Share Certificates; Surrender of Book Entry Shares.

 

(a)    Appointment of Paying Agent. Prior to the Effective Time, Parent and Merger Sub shall appoint a bank or trust company reasonably acceptable to the Company to serve as the paying agent (the “Paying Agent”) and shall enter into an agreement (the “Paying Agent Agreement”) reasonably acceptable to the Company relating to the Paying Agent’s responsibilities with respect to this Agreement.

 

(b)    Deposit of Merger Consideration. At or prior to the Effective Time, Parent or Merger Sub shall deposit, or cause to be deposited, with the Paying Agent, cash in U.S. Dollars in immediately available funds sufficient in the aggregate to provide all funds necessary for the Paying Agent to make payments in respect of Shares (other than Excluded Shares) pursuant to Section 4.1(a) (such cash being hereinafter referred to as the “Payment Fund”). The Payment Fund shall not be used for any purpose other than a purpose expressly provided for in this Agreement. Pending its disbursement in accordance with this Section 4.2, the Payment Fund shall be invested by the Paying Agent, if and as directed by Parent. Any such investment, if made, must be made in (i) short-term direct obligations of the United States of America, (ii) short-term obligations for which the full faith and credit of the United States of America is pledged to provide for the payment of principal and interest, (iii) short-term commercial paper rated the highest quality by either Moody’s Investors Service, Inc. or Standard and Poor’s Ratings Services or (iv) certificates of deposit, bank repurchase agreements or banker’s acceptances of commercial banks with capital exceeding $1 billion. Parent shall or shall cause the Surviving Company to promptly replace or restore the cash in the Payment Fund so as to ensure that the Payment Fund is at all times maintained at a level sufficient for the Paying Agent to make all payments of the aggregate Per Share Merger Consideration as contemplated by Section 4.1(a). No investment losses resulting from investment of the funds deposited with the Paying Agent shall diminish the rights of any holder of Shares to receive the Per Share Merger Consideration in respect of each Share (other than any Excluded Share) as provided herein. The Company shall notify Parent in writing prior to the Effective Time of the number of Shares and Excluded Shares outstanding immediately prior to the Effective Time, and shall cause the Company’s transfer agent to deliver to the Paying Agent on or prior to the Closing Date a list of the holders of Shares in a format that is reasonably acceptable to the Paying Agent and otherwise reasonably cooperate with the Paying Agent.

 

(c)    Procedures for Surrender.

 

(i)    Promptly after the Effective Time (and in any event within three Business Days thereafter), the Surviving Company shall cause the Paying Agent to mail to each holder of record of Shares (other than Excluded Shares) (A) a notice advising such holders of the effectiveness of the Merger, (B) a letter of transmittal in customary form specifying that delivery shall be effected, and risk of loss and title shall pass, only upon delivery of the Share Certificates (or affidavits of loss in lieu of the Share Certificates as provided in Section 4.2(f)) or transfer of the Book Entry Shares to the Paying Agent (including customary provisions with respect to delivery of an “agent’s message” with respect to Book Entry Shares) to the Paying Agent (the “Letter of Transmittal”), and (C) instructions for effecting the surrender of the Share Certificates (or affidavits of loss in lieu of the Share Certificates as provided in Section 4.2(f)) or the Book Entry Shares to the Paying Agent in exchange for payment of the amount (after giving effect to any required Tax withholdings as provided in Section 4.2(h)) of cash that such holder has the right to receive pursuant to Section 4.1(a).

 

-5-

 

 

(ii)    Upon surrender to the Paying Agent of Share Certificates (or affidavits of loss in lieu of the Share Certificates as provided in Section 4.2(f)) or Book Entry Shares, together with, in the case of Share Certificates, the Letter of Transmittal, duly completed and validly executed in accordance with the instructions thereto, or, in the case of Book Entry Shares held through the Depositary Trust Company, receipt of an “agent’s message” by the Paying Agent, and such other documents as may be reasonably required by the Paying Agent, the holder of such Share Certificates or Book Entry Shares shall be entitled to receive in exchange therefor, and the Paying Agent shall be required to deliver to each such holder, a check in the amount (after giving effect to any required Tax withholdings as provided in Section 4.2(h)) of cash that such holder has the right to receive pursuant to Section 4.1(a).

 

(iii)    No interest will be paid or accrued on any amount payable upon surrender of any Shares.

 

(iv)    In the event of a transfer of ownership of Shares (other than Excluded Shares) represented by a Share Certificate or Share Certificates that is not registered in the transfer books and records of the Company or if the consideration payable is to be paid in a name other than that in which the Share Certificate or Share Certificates surrendered or transferred in exchange therefor registered in the transfer books and records of the Company, a check for any cash to be paid upon due surrender of the Share Certificate or Share Certificates may be issued to such transferee if the Share Certificate or Share Certificates formerly representing such Shares are duly endorsed and otherwise in proper form for surrender and presented to the Paying Agent, accompanied by all documents reasonably required to evidence and effect such transfer and to evidence that any applicable stock transfer Taxes have been paid or are not applicable, in each case, in form and substance reasonably satisfactory to the Paying Agent. Payment of the Per Share Merger Consideration in respect of Book Entry Shares shall only be made to the Person in whose name such Book Entry Shares are registered in the transfer books and records of the Company.

 

(d)    Transfers. From and after the Effective Time, there shall be no transfers on the transfer books and records of the Company of the Shares that were outstanding immediately prior to the Effective Time.

 

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(e)    Termination of Payment Fund. Any portion of the Payment Fund that remains unclaimed by, or otherwise undistributed to, the holders of Share Certificates and Book Entry Shares by the one-year anniversary of the Effective Time shall be delivered to the Surviving Company. Any holder of Shares (other than Excluded Shares) who has not theretofore complied with this Article IV shall thereafter look only to the Surviving Company for payment of the Per Share Merger Consideration (after giving effect to any required Tax withholdings as provided in Section 4.2(h)) in respect thereof upon delivery of the Share Certificates (or affidavits of loss in lieu of the Share Certificates as provided in Section 4.2(f)) or surrender of Book Entry Shares, without any interest thereon. Notwithstanding the foregoing, none of the Surviving Company, Parent, the Paying Agent or any other Person shall be liable to any former holder of Shares for any amount properly delivered to a public official pursuant to applicable abandoned property, escheat or similar Laws. To the fullest extent permitted by Law, immediately prior to the date any Per Share Merger Consideration would otherwise escheat to or become the property of any Governmental Authority, such Per Share Merger Consideration shall become the property of the Surviving Company, free and clear of all claims or interest of any Person previously entitled thereto. For the purposes of this Agreement, “Person” means any individual, corporation (including not‑for‑profit), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, Governmental Authority or other entity of any kind or nature.

 

(f)    Lost, Stolen or Destroyed Share Certificates. In the event any Share Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Share 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 such reasonable and customary amount as Parent may direct, sufficient to indemnify Parent and the Surviving Company against any claim that may be made against Parent or the Surviving Company with respect to such Share Certificate, the Paying Agent will issue in exchange for such lost, stolen or destroyed Share Certificate a check in the amount (after giving effect to any required Tax withholdings as provided in Section 4.2(h)) equal to the number of Shares (other than Excluded Shares) represented by such lost, stolen or destroyed Share Certificate multiplied by the Per Share Merger Consideration.

 

(g)    Appraisal Rights. No Dissenting Shareholder shall be entitled to receive the Per Share Merger Consideration with respect to any Dissenting Share owned by such Dissenting Shareholder. Each Dissenting Shareholder shall be entitled to receive only the payment provided by Section 262 of the DGCL and the Company LLC Agreement with respect to the Dissenting Shares owned by such Dissenting Shareholder and such Dissenting Shareholder shall cease to have any other rights with respect to such Dissenting Shares. The Company shall give Parent (i) prompt notice and copies of any written demands for appraisal of Shares, actual, attempted or purported withdrawals of such demands and any other instruments served pursuant to (or purportedly pursuant to) applicable Law and the Company LLC Agreement that are received by the Company relating to the Shareholders’ demands of appraisal after receipt thereof by the Company, and (ii) shall give Parent the opportunity to direct and participate in all negotiations and proceedings with respect to such demands. The Company shall not, except with the prior written consent of Parent, schedule any meeting or make any voluntary payment with respect to any such demands for appraisal or offer to settle or settle any such demands.

 

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(h)    Adjustments. Without limiting the other provisions of this Agreement, if at any time during the period between the date of this Agreement and the Effective Time, the outstanding Shares shall have been, in compliance with Section 6.1, changed into a different number or a different class, solely by reason of any reclassification, recapitalization, equity split (including a reverse split), or combination, exchange, readjustment of Shares, or similar transaction, or any dividend or distribution paid in Shares, the Per Share Merger Consideration shall be appropriately adjusted to reflect such change in order to give the Shareholders the same economic effect as contemplated by the terms of this Agreement prior to such change.

 

(i)    Withholding Rights. Each of Parent, the Company, Merger Sub, the Surviving Company and the Paying Agent, as applicable (each a “Withholding Agent”), shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement such amounts as it is required to deduct and withhold with respect to the making of such payment under the Internal Revenue Code of 1986, as amended (the “Code”), or any other applicable federal, state, local or foreign Tax Law. To the extent that amounts are so withheld by a Withholding Agent, such withheld amounts (i) shall be timely remitted by such Withholding Agent to the applicable Governmental Authority and (ii) shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made to the extent such withheld amounts are remitted to the appropriate Governmental Authority, and no Withholding Agent shall be required to pay any additional amounts with respect to such deducted or withheld amounts.

 

4.3.    Treatment of Stock-Based Awards.

 

(a)    Treatment of Company Options. At the Effective Time, each outstanding option to purchase Shares under the Company’s Stock Plan (a “Company Option”), whether vested or unvested, shall cease to represent an option to purchase Shares and shall be converted into an option (a “Parent Option”) to purchase a number of shares of common stock of Parent, par value $0.01 per share (“Parent Common Stock”) equal to the product (rounded down to the nearest whole number) of (i) the total number of Shares subject to such Company Option immediately prior to the Effective Time multiplied by (ii) the Equity Award Exchange Ratio, at an exercise price per share (rounded up to the nearest whole cent) equal to (i) the exercise price per share of the Shares subject to such Company Option immediately prior to the Effective Time divided by (ii) the Equity Award Exchange Ratio; provided, however, that the exercise price and the number of shares of Parent Common Stock purchasable pursuant to the Parent Options shall be determined in a manner consistent with the requirements of Section 409A of the Code; provided, further, that in the case of any Company Option to which Section 422 of the Code applies, the exercise price and the number of shares of Parent Common Stock purchasable pursuant to such Company Option converted to Parent Option shall be determined in accordance with the foregoing, subject to such adjustments as are necessary in order to satisfy the requirements of Section 424(a) of the Code. Except as specifically provided above and as set forth in Section 4.3(a) of the Company Disclosure Schedule, following the Effective Time, each Company Option converted to Parent Option shall continue to be governed by the same terms and conditions (including vesting and exercisability terms) as were applicable to the corresponding Company Option immediately prior to the Effective Time. For the purposes of this Agreement, “Equity Award Exchange Ratio” means the Per Share Merger Consideration divided by the volume weighted average of the closing sale prices per share of Parent Common Stock on the NYSE, as reported in the New York City edition of The Wall Street Journal (or, if not reported thereby, as reported in another authoritative source) on each of the five full consecutive trading days ending on and including the third Business Day prior to the Closing Date.

 

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(b)    Treatment of Company RSUs. At the Effective Time, each outstanding restricted stock unit under the Company’s Stock Plan (a “Company RSU”), whether vested or unvested, shall, automatically and without any action on the part of the holder thereof cease to represent a restricted stock unit award denominated in Shares and shall be converted into a restricted stock unit award representing the right to receive the number of denominated shares of Parent Common Stock (a “Parent RSU”). The number of shares of Parent Common Stock subject to such Company RSU converted to Parent RSU shall be equal to the product (rounded down to the nearest whole number) of (i) the total number of Shares subject to such Company RSU award immediately prior to the Effective Time multiplied by (ii) the Equity Award Exchange Ratio. Except as specifically provided above and as set forth in Section 4.3(b) of the Company Disclosure Schedule, following the Effective Time, each such Company RSU converted to Parent RSU shall continue to be governed by the same terms and conditions (including vesting and settlement terms) as were applicable to the applicable Company RSU immediately prior to the Effective Time.

 

(c)    Company 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 that are necessary to effectuate the treatment of the Company Options and the Company RSUs, in each case, pursuant to Section 4.3(a) and Section 4.3(b) and in accordance with applicable Law. The Company shall take all actions necessary to ensure that, from and after the Effective Time, neither Parent nor the Surviving Company will be required to deliver Shares or other equity interest of the Company to any Person pursuant to or in settlement of Company Options or Company RSUs.

 

(d)    Form S-8. Promptly following the Effective Time, Parent shall file a registration statement on Form S-8 or otherwise appropriate registration statement with respect to Shares subject to the applicable adjusted Company Options and Company RSUs, as required.

 

ARTICLE V

Representations and Warranties

 

5.1.    Representations and Warranties of the Company. Except as (i) set forth in the Company Disclosure Schedule, subject to Section 5.3, or (ii) disclosed in any report, schedule, form, statement or other document filed with or furnished to the SEC (including the exhibits and other information incorporated therein) by the Company since January 1, 2020 but prior to the date of this Agreement (excluding any disclosures set forth under the heading “Risk Factors” or disclosures of risks set forth in any “forward-looking statements” disclaimer), the Company hereby represents and warrants to Parent and Merger Sub:

 

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(a)    Organization, Good Standing; Authority.

 

(i)    The Company is a limited liability company duly organized, validly existing and in good standing under the Laws of the State of Delaware. The Company is licensed or qualified to do business and is in good standing as a foreign entity in each jurisdiction where the ownership or operation of its assets or properties or conduct of its business requires such qualification, except where the failure to be so licensed or qualified would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Company has made available to Parent a complete and correct copy of the Company’s certificate of formation and the Company LLC Agreement and the organizational documents of its Subsidiaries, each as amended prior to the date of this Agreement. The Company’s certificate of formation and Company LLC Agreement and such organizational documents made available to Parent are in full force and effect.

 

(ii)    For the purposes of this Agreement,

 

(A) “Contagion Event” means the outbreak or continued presence of contagious disease, epidemic or pandemic (including SARS-CoV-2 or COVID-19, or any evolutions or mutations thereof, or any other viruses (including influenza), and the governmental responses thereto).

 

(B) “Contagion Event Measures” means any quarantine, “shelter in place,” “stay at home,” workforce reduction, social distancing, shut down, closure, sequester or other directives, guidelines or recommendations promulgated by any Governmental Authority, including the Centers for Disease Control and Prevention and the World Health Organization, in each case, in connection with or in response to a Contagion Event.

 

(C) “Governmental Authority” means any transnational, domestic or foreign federal, state or local governmental, regulatory or administrative authority, department, court, agency, commission, official, body or other governmental entity or instrumentality, including any political subdivision thereof and any non-governmental self-regulatory agency, commission or authority, including NYSE and FINRA.

 

(D) “Government Shutdown” means any shutdown or material limiting of certain U.S. or foreign federal, state or local government services.

 

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(E) “Material Adverse Effect” means, with respect to the Company, any effect, circumstance, occurrence or change that, either individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect on (1) the business, assets or liabilities, properties, operations, results of operations or condition (financial or otherwise) of the Company and its Subsidiaries, taken as a whole (provided, however, with respect to clause (1), Material Adverse Effect shall not include the impact of: (s) changes, after the date hereof, in Law (including any Law in respect of Taxes, and Laws newly enacted for, relating to or arising out of efforts to implement Contagion Event Measures and address the spread of any Contagion Event) or in United States generally accepted accounting principles (“U.S. GAAP”) or interpretations thereof; (t) changes, after the date hereof, in global, national or regional political conditions (including the outbreak of war or acts of terrorism); (u) changes, after the date hereof, resulting from hurricanes, earthquakes, tornados, floods or other natural disasters or from any outbreak of any disease or other public health event, including any Contagion Event (and the related Contagion Event Measures), any Government Shutdown, any declaration of martial law or similar directive, guidance, policy or guidance or other action by any Governmental Authority; (v) changes, after the date hereof, in market price or trading volume of the Shares (without excepting the facts or circumstances giving rise or contributing to such change); (w) any action taken by the Company with Parent’s express written consent or any action taken by the Company that the Company was expressly required to take pursuant to the terms of this Agreement; (x) any failure, in and of itself, by the Company to meet internal or other estimates, predictions, projections or forecasts of revenue, net income or any other measure of financial performance (without excepting the facts or circumstances giving rise or contributing to failure to meet estimates or projections); (y) changes, events, conditions or trends after the date hereof in economic, business, credit or financial conditions affecting other companies in the industries in which the Company and its Subsidiaries operate generally, and changes, after the date hereof, in the capital or credit markets, including any downgrades in the credit markets, or adverse credit events resulting in deterioration in the credit markets generally (including any such change resulting from or arising out of a Contagion Event); or (z) any changes demonstrably resulting from the public announcement of the identity of Parent as a party to this Agreement, except, with respect to clauses (s), (t), (u) and (y), such effect, circumstance, occurrence or change that disproportionately adversely affects the Company and its Subsidiaries compared to similar companies operating in the industries in which the Company and its Subsidiaries conduct their business, in which case only the disproportionate effect will be taken into account), or (2) the ability of the Company and its Subsidiaries to timely consummate the transactions contemplated hereby.

 

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(b)    Capital Structure.

 

(i)    The authorized equity interest of the Company consists of 100,000,000 Shares and 10,000,000 preferred shares representing limited liability company interests in the Company (the “Preferred Shares”). As of the close of business on September 3, 2021, 19,894,177 Shares were issued and outstanding (excluding 2,902,915 Shares held in treasury) and no Preferred Shares were issued and outstanding on such date. All of the outstanding Shares have been duly authorized and validly issued and are fully paid and nonassessable. Other than Shares reserved for issuance under the Company’s Equity Incentive Plan (the “Stock Plan”), the Company has no Shares or Preferred Shares reserved for issuance. As of the close of business on September 3, 2021, 1,500,000 Shares were underlying outstanding Company Options and 555,474 Shares were underlying outstanding Company RSUs granted under the Stock Plan. Except as set forth in this Section 5.1(b)(i) and except for securities issued after the date of this Agreement in compliance with Section 6.1(b), there are no other outstanding shares of equity or voting interest in the Company, and there are no preemptive or similar rights, options, warrants, conversion rights, stock appreciation rights, redemption rights, repurchase rights, agreements, arrangements, securities, calls, commitments or rights of any kind that obligate the Company to issue or sell to any Person any shares of capital stock or other equity or voting interest in, or other securities of, the Company or any securities or obligations convertible or exchangeable into or exercisable for, or giving any Person (other than the Company or one or more of its wholly-owned Subsidiaries) a right to subscribe for or acquire, any securities of the Company. Upon any issuance of any Shares in accordance with the terms of the Stock Plan, such Shares will be duly authorized, validly issued, fully paid and nonassessable and free and clear of any Lien, other than transfer restrictions imposed by applicable securities Laws. Since the close of business on September 7, 2021 and except for securities issued after the date of this Agreement in compliance with Section 6.1(b), (A) no Shares have been issued, except pursuant to the exercise of Company Options and the settlement of Company RSUs outstanding prior to the close of business on September 7, 2021 in accordance with the terms of the Stock Plan and (B) no grants or awards of Company Options, Company RSUs or other awards under the Stock Plan have been made. 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 the Shareholders on any matter. Other than the Voting Agreement, the Company is not a party to any shareholders’ agreement, voting trust agreement, registration rights agreement or other similar agreement or understanding relating to any voting or equity interests in the Company or any other agreement relating to the disposition, voting or dividends with respect to any equity or voting interests in the Company.

 

(ii)    Section 5.1(b)(ii) of the Company Disclosure Schedule contains a correct and complete list, as of the close of business on September 7, 2021, of all outstanding Company Options and Company RSUs granted under the Stock Plan by holder, including the date of grant, term, number of vested and unvested Shares subject thereto, vesting, exercisability or settlement schedules (as applicable), and exercise price, in each case, where applicable. The Company has made available to Parent complete and accurate copies of (A) the Stock Plan; (B) forms of agreements evidencing Company Options; and (C) forms of agreements evidencing Company RSUs. Each Company Option and Company RSU (1) was granted in material compliance with all applicable Laws and all of the terms and conditions of the Stock Plan, (2) if applicable, has an exercise price per Share equal to or greater than the fair market value of a Share on the date of such grant, (3) qualifies for the Tax and accounting treatment afforded to such Company Option or Company RSU, as applicable, in the Company’s Tax Returns and the Company Reports, respectively, and (4) does not trigger any liability for the holder thereof under Section 409A of the Code.

 

(iii)    As of July 31, 2021, the amount of all outstanding Indebtedness of the Company and its Subsidiaries (excluding (A) intercompany Indebtedness and (B) Indebtedness incurred in the ordinary course of the Company’s and its Subsidiaries’ securities brokerage business, including margin for securities purchases made in the ordinary course) does not exceed $58,153,922.

 

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(iv)    For the purposes of this Agreement,

 

(A) “Indebtedness” means, without duplication, (1) all indebtedness for borrowed money or for the deferred purchase price of property or services (other than current trade liabilities incurred in the ordinary course of business), whether or not evidenced by a writing, (2) any other indebtedness that is evidenced by a note, bond, debenture, draft or similar instrument, (3) all obligations under leases accounted for as financing or capital leases under U.S. GAAP, (4) all obligations in respect of acceptances issued or created, (5) notes payable and drafts accepted representing extensions of credit, (6) all liabilities secured by any Lien on any property other than Liens relating to equipment leased by the Company not constituting a capital lease, (7) letters of credit and any other agreements relating to the borrowing of money or extension of credit and (8) any guarantee (including by way of a “keep well” or other similar undertaking) of any of the foregoing obligations.

 

(c)    Subsidiaries.

 

(i)    Section 5.1(c)(i) of the Company Disclosure Schedule sets forth 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. The outstanding shares of capital stock or other equity or voting securities of each Subsidiary of the Company have been duly authorized and are validly issued, fully paid and nonassessable, and are not subject to preemptive rights (and were not issued in violation of any preemptive rights). There are no shares of capital stock or other equity or voting securities of any Subsidiary of the Company authorized and reserved for issuance. Except as set forth in this Section 5.1(c)(i) and except for securities issued after the date of this Agreement in compliance with Section 6.1(b), there are no other outstanding shares of equity or voting interest in any of the Company’s Subsidiaries, and there are no preemptive or similar rights, options, warrants, conversion rights, stock appreciation rights, redemption rights, repurchase rights, agreements, arrangements, securities, calls, commitments or rights of any kind that obligate such Subsidiary to issue or sell to any Person any shares of capital stock or other equity or voting interest in, or other securities of, such Subsidiary or any securities or obligations convertible or exchangeable into or exercisable for, or giving any Person (other than the Company or one or more of its wholly-owned Subsidiaries) a right to subscribe for or acquire, any securities of any of the Company’s Subsidiaries.

 

(ii)    Except as would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, each Company Subsidiary (i) is duly organized and validly existing under the laws of its jurisdiction of organization, (ii) is duly licensed or qualified to do business and, where such concept is recognized under applicable Law, in good standing in all jurisdictions (whether federal, state, local or foreign) where its ownership, leasing or operation of property or the conduct of its business requires it to be so licensed or qualified or in good standing, and (iii) has all requisite corporate, limited liability company or similar power and authority to own, lease or operate its properties and assets and to carry on its business as now conducted. There is no Person whose results of operations, cash flows, changes in shareholders’ equity or financial position are consolidated in the financial statements of the Company other than the Company Subsidiaries.

 

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(iii)    The Company does not own, directly or indirectly, any voting interest in any Person that requires an additional filing by Parent under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), and any applicable antitrust, competition or merger control Laws promulgated by any non-U.S. Governmental Authority (together with the HSR Act, “Antitrust Laws”) in connection with the transactions contemplated by this Agreement.

 

(d)    Company Power. The Company, assuming the representations set forth in Section 5.2(h) are true, and each of its Subsidiaries have all requisite power and authority (limited liability company and other) to carry on their respective businesses as they are now being conducted and own all their respective properties and assets, in each case in all material respects; and the Company has all requisite limited liability company power and authority and, other than receiving the affirmative vote (in person or by proxy) at a special meeting of the Shareholders duly called and held for such purpose (the “Company Meeting”), or any adjournment or postponement thereof, of the holders of a majority of the outstanding Shares entitled to vote thereon in favor of the adoption of this Agreement (the “Company Shareholder Approval”), has taken all company action necessary in order to execute, deliver and perform each of its obligations under this Agreement and the Voting Agreement, and the transactions contemplated hereby and thereby, including the Merger.

 

(e)    Company Authority. As of the date of this Agreement, the Company Board has, by resolutions duly adopted at a meeting duly called and held, (i) unanimously determined that upon recommendation of the Special Transaction Committee, and after due consideration, this Agreement, the Voting Agreement, and the transactions contemplated hereby and thereby, including the Merger, are fair to and in the best interests of the Company and the Shareholders, (ii) unanimously approved and declared advisable this Agreement, the Voting Agreement, and the transactions contemplated hereby and thereby, including the Merger and (iii) unanimously resolved and directed that such matters be submitted for consideration by the Shareholders at the Company Meeting and that such matter be recommended for approval at the Company Meeting (the “Company Recommendation”). Assuming the representations set forth in Section 5.2(h) are true, the Company has duly authorized, executed and delivered this Agreement and the Voting Agreement, and each of this Agreement and the Voting Agreement (assuming due authorization, execution and delivery by Parent) is a valid and legally binding obligation of the Company, enforceable against it in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar Laws of general applicability relating to or affecting creditors’ rights or to general equity principles (the “Bankruptcy and Equity Exception”). Prior to the execution of this Agreement, the Company Board has received an opinion (which, if initially rendered verbally, has been or will be confirmed by a written opinion, dated the same date) of Keefe, Bruyette & Woods Inc., to the effect that, as of the date of such opinion, and based upon and subject to the factors, assumptions, and limitations set forth therein, the Per Share Merger Consideration is fair from a financial point of view to the Shareholders. Assuming the representations set forth in Section 5.2(h) are true, the Company Board has also taken all action so that Parent will not be an “interested stockholder” or prohibited from entering into or consummating a “business combination” with the Company (in each case as such term is used in Section 203 of the DGCL) as a result of the execution of this Agreement or the Voting Agreement or the consummation of the transactions contemplated hereby or thereby in the manner contemplated hereby or thereby.

 

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(f)    Consents and Approvals; No Violations

 

(i)    The execution, delivery and performance by the Company of this Agreement and the Voting Agreement and the consummation by the Company of the transactions contemplated hereby and thereby, including the Merger, require no authorization or other action by or in respect of, or filing with, any Governmental Authority other than (A) the filing of any required applications, filings and notices, as applicable, with the New York Stock Exchange (“NYSE”) (B) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware as provided in Section 18-209 of the DLLCA, (C) the filing of applications or notices, and approvals or expiration of applicable waiting periods, required under the HSR Act, (D) compliance with applicable requirements of FINRA (including the submission by the Company and FINRA approval of the FINRA Application (the “FINRA Approval”)), (E) the filing of amendments to the Uniform Application for Investment Advisor Registration on Form ADV of Harvest Capital Strategies LLC, JMP Asset Management LLC and HCAP Advisors LLC (the “Company Investment Advisor Subsidiaries”) and amendments to the Uniform Application for Broker-Dealer Registration on Form BD of the Company Broker-Dealer Subsidiary following the consummation of the Merger, (F) compliance with the applicable requirements of the Exchange Act, including (1) the filing of an information statement of the type contemplated by Rule 14a-101 under the Exchange Act containing the information specified in Schedule 14A under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), related to the Merger, this Agreement and the Voting Agreement (the “Proxy Statement”) and (2) confirmation from SEC staff (x) that it has no further comments on the Proxy Statement or (y) that the Company may commence mailing the Proxy Statement and (G) the filings or notices required by, and any approvals required under the rules and regulations of the Governmental Authorities set forth on Section 5.1(f)(i)(G) of the Company Disclosure Schedule (the consents, approvals, orders, authorizations, registrations, declarations and filings required under or in connection with any of the foregoing clauses (A) through (G) above, the “Required Approvals”) and (H) any authorization, action or filing, the absence of which would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. As of the date hereof, other than with respect to ordinary filing times required to obtain FINRA Approval, the Company is not aware of any reason why the Required Approvals will not be received in order to permit consummation of the Merger on a timely basis.

 

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(ii)    Assuming the representations set forth in Section 5.2(h) are true, the execution, delivery and performance by the Company of this Agreement and the Voting Agreement and the consummation by the Company of the transactions contemplated hereby and thereby, including the Merger, do not and will not (A) conflict with or result in any violation or breach of any provision of the Company Certificate of Formation or the Company LLC Agreement or the similar organizational documents of any Subsidiary of the Company, (B) assuming compliance with the matters referred to in Section 5.1(f)(i) conflict with or result in a violation or breach of any applicable Law, (C) assuming compliance with the matters referred to in Section 5.1(f)(i), require any consent by any Person under, constitute a material default, or an event that, with or without notice or lapse of time or both, would constitute a material default, under, or cause or permit the termination, modification, cancellation or acceleration of any right or obligation or the loss of any benefit to which the Company or any of its Subsidiaries are entitled, under (1) any agreement, lease, license, contract, note, mortgage, indenture, arrangement or other obligation (each a “Contract”), which is a Material Contract, binding upon the Company or any of its Subsidiaries or to which any of their respective properties, rights or other assets are subject or (2) any Company Permit governing the operation of the business of the Company or any of its Subsidiaries, or (D) result in the creation or imposition of any mortgage, lien, license, covenant not to sue, pledge, charge, security interest, deed of trust, right of first refusal, easement, or similar encumbrance in respect of such property or asset (each a “Lien”) on any property or asset of the Company or any of its Subsidiaries, except in the case of clauses (B), (C) and (D) above, any such violation, breach, conflict, default, right, termination, modification, acceleration, cancellation, loss or Lien that would not reasonably be expected to have a Material Adverse Effect.

 

(iii)    For the purposes of this Agreement:

 

(A) “FINRA” means the Financial Industry Regulatory Authority, including any predecessor entity, including without limitation, the National Association of Securities Dealers, Inc.

 

(g)    Company Reports; Financial Statements; Liabilities.

 

(i)    The Company has filed or furnished, as applicable, on a timely basis all forms, statements, certifications, reports and documents required to be filed or furnished by it with the Securities and Exchange Commission (the “SEC”) under the Exchange Act or the Securities Act of 1933, as amended (the “Securities Act”) since January 1, 2018 (the “Applicable Date”) (the forms, statements, 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 of 2002 (the “Sarbanes-Oxley Act”), and any rules and regulations promulgated thereunder applicable to the Company Reports, except where the failure to file (or furnish, as applicable) such forms, statements, certifications, reports and documents, either individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. 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 of the Company Reports filed or furnished with 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.

 

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(ii)    The Company’s consolidated financial statements (including, in each case, any notes thereto) contained in the Company Reports were or will be prepared in accordance with U.S. GAAP applied on a consistent basis throughout the periods indicated ((A) including, for the avoidance of doubt, rules relating to consolidation and (B) except as may be indicated in the notes thereto or, in the case of interim consolidated financial statements, where information and footnotes contained in such financial statements are not required to be in compliance with U.S. GAAP), were or will be prepared from and in accordance with, the books and records of the Company and its Subsidiaries in all material respects, and in each case such consolidated financial statements fairly presented, in all material respects and in accordance with U.S. GAAP, the consolidated financial position, results of operations and cash flows of the Company and the consolidated Subsidiaries of the Company as of the respective dates thereof and for the respective periods covered thereby (subject, in the case of unaudited statements, to normal year-end adjustments).

 

(iii)    The Company is in compliance with the applicable listing and corporate governance rules and regulations of the NYSE.

 

(iv)    The Company maintains disclosure controls and procedures required by Rule 13a-15 or 15d-15 under the Exchange Act. Such disclosure controls and procedures are effective to provide reasonable assurances that the information required to be disclosed by the Company is recorded and reported on a timely basis to the individuals responsible for the preparation of the Company’s filings with the SEC and other public disclosure documents. 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 adequate to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP and includes policies and procedures that (A) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company, (B) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. 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 (C) 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.

 

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(v)    The Company has identified and 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 or material weaknesses in the design or operation of its internal controls over financial reporting that would reasonably be expected to adversely affect the Company’s ability to record, process, summarize and report financial information and (B) to the Knowledge of the Company, 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 (1) a summary of any such disclosure made by management to the Company’s auditors and audit committee since the Applicable Date and (2) any material communication since the Applicable Date made by management or the Company’s auditors to the audit committee required or contemplated by the listing standards of NYSE, the audit committee’s charter or professional standards of the Public Company Accounting Oversight Board. Since the Applicable Date, no material complaints from any source regarding accounting, internal accounting controls or auditing matters, and no concerns from the Company’s employees regarding questionable accounting or auditing matters, have been received by the Company to its Knowledge. The Company has made available to Parent a summary of all material complaints or concerns relating to other matters made since the Applicable Date through the Company’s whistleblower hot-line or equivalent system for receipt of employee concerns regarding possible violations of Law. No attorney representing the Company or any of its Subsidiaries, whether or not employed by the Company or any such Subsidiary, has reported evidence of a violation of securities Laws, breach of fiduciary duty or similar violation by the Company or any of its officers, directors, employees or agents to the Company’s chief legal officer, audit committee (or other committee designated for the purpose) or the Company Board pursuant to the rules adopted pursuant to Section 307 of the Sarbanes-Oxley Act or any such policy contemplating such reporting, including in instances not required by those rules. For the purposes of this Agreement, “significant deficiency” and “material weakness” have the meanings assigned to such terms in Auditing Standard No. 5 of the Public Company Accounting Oversight Board, as in effect on the date of this Agreement.

 

(vi)    None of the Company or any of its Subsidiaries is a party to, nor does the Company or any of its Subsidiaries have any commitment to become a party to, any joint venture, partnership agreement or any similar Contract (including any Contract relating to any transaction, arrangement or relationship between or among the Company or any of its Subsidiaries, on the one hand, and any unconsolidated Affiliate, on the other hand, including any structured finance, special purpose or limited purpose entity or Person, on the other hand (such as any arrangement described in Section 303(a)(4) of Regulation S-K) where the intended result, purpose or effect of such arrangement is to avoid disclosure of any material transaction involving, or material liabilities of, the Company or any of its Subsidiaries in the Company’s consolidated financial statements included in the Company Reports).

 

(vii)    Except as would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect, neither the Company nor any of its Subsidiaries has any liability of any nature whatsoever (whether absolute, accrued, contingent or otherwise and whether due or to become due) required by U.S. GAAP to be included on a consolidated balance sheet of the Company, except for those liabilities that are reflected or reserved against on the consolidated balance sheet of the Company included in its Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2021 (including any notes thereto) and for liabilities incurred in the ordinary course of business consistent with past practice since June 30, 2021, or in connection with this Agreement and the transactions contemplated hereby.

 

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(viii)    The Company and its Subsidiaries have complied with the terms of the $3,798,000 note with City National Bank entered into by the Company Broker-Dealer Subsidiary pursuant to the Paycheck Protection Program (the “PPP Loan”) under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and have used the proceeds therefrom in accordance with the terms of the PPP Loan and otherwise in compliance with all applicable legal requirements and guidance issued in respect of the Paycheck Protection Program and the CARES Act. On the application date for the PPP Loan, the Company and its Subsidiaries met all eligibility requirements for receipt of the PPP Loan as established by or pursuant to the CARES Act. All representations and warranties made by the Company and its Subsidiaries to City National Bank or the Small Business Administration in connection with the PPP Loan were true and correct in all material respects when made. Prior to the date of this Agreement, the PPP Loan was duly forgiven in whole and as of the date of this Agreement and the Closing Date, neither the Company nor any of its Subsidiaries has any liability with respect to the PPP Loan.

 

(ix)    For the purposes of this Agreement,

 

(A) “Knowledge” means, when used with respect to the Company, the actual knowledge, after reasonable inquiry, of any of the Chief Executive Officer, the Chief Executive Officer of the Company Broker-Dealer Subsidiary, the Chief Financial Officer, the Chief Operating Officer, the Chief Legal Officer, the Chief Compliance Officer and President of Harvest Capital Strategies LLC.

 

(h)    Absence of Changes.

 

(i)    Since January 1, 2021, except for changes resulting from or related to the Contagion Event or the Contagion Event Measures, there has not been any effect, change, event, circumstance, condition, occurrence or development that has had or would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.

 

(ii)    Since January 1, 2021 through the date of this Agreement, except with respect to the transactions contemplated hereby or changes resulting from or related to the Contagion Event or the Contagion Event Measures, the Company and its Subsidiaries have carried on their respective businesses in all material respects in the ordinary course.

 

(iii)    Since January 1, 2021, there has not been (A) any material damage, destruction or other casualty loss with respect to any material asset or property owned, leased or otherwise used by the Company or any Subsidiary of the Company, whether or not covered by insurance, (B) any declaration, setting aside or payment of any dividend or other distribution in cash, stock or property in respect of the capital stock of the Company other than as set forth in the Company Reports, or (C) any change by the Company in accounting principles, practices or methods, other than those pursuant to a change in accounting standards.

 

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(i)    Litigation.

 

(i)    Except as would not reasonably be expected to, either individually or in the aggregate, have a Material Adverse Effect, neither the Company nor any of its Subsidiaries is a party to any, and there are no outstanding or pending or, to the Knowledge of the Company, threatened in writing, legal, administrative, arbitral or other proceedings, claims, actions or governmental or regulatory investigations of any nature (each an “Action”) against (A) the Company or any of its Subsidiaries or any of their current or former directors or executive officers, or (B) challenging the validity or propriety of the transactions contemplated by this Agreement.

 

(ii)    Except as would not reasonably be expected to, either individually or in the aggregate, have a Material Adverse Effect, there is no injunction, order, judgment, decree, or regulatory restriction (each, an “Order”) imposed upon the Company, any of its Subsidiaries or the assets of the Company or any of its Subsidiaries (or that, upon consummation of the Merger, would apply to the Surviving Company or any of its affiliates).

 

(j)    Employee Benefits.

 

(i)    Section 5.1(j)(i) of the Company Disclosure Schedule sets forth an accurate and complete list of all material Company Benefit Plans. For the purposes of this Agreement, “Benefit Plan” means any benefit or compensation plan, program, policy, practice, agreement, contract, arrangement or other obligation, whether or not in writing and whether or not funded, in each case, which is sponsored or maintained by, or required to be contributed to, or with respect to which any potential liability is borne by the Company or any of its Subsidiaries. Benefit Plans include, but are not limited to, “employee benefit plans” within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), employment, consulting, retirement, severance, termination or change in control agreements, deferred compensation, equity-based, incentive, bonus, supplemental retirement, profit sharing, insurance, medical, welfare, fringe or salary continuation. With respect to each material Benefit Plan, the Company has made available to Parent, to the extent applicable, accurate and complete copies of (A) the Benefit Plan document, including any amendments thereto, and all related trust documents, insurance contracts or other funding vehicles, (B) a written description of such Benefit Plan if such plan is not set forth in a written document, (C) the most recently prepared annual report (Form 5500) filed with the Internal Revenue Services (“IRS”) and most recently prepared actuarial report, (D) the most recently received determination or opinion letter for applicable qualified retirement plan(s), and (E) all material correspondence to or from any Governmental Authority received in the last three years with respect to any Benefit Plan.

 

(ii)    Each Company Benefit Plan (A) has been established, operated and administered in all material respects in compliance with its terms and applicable Laws, including, without limitation, ERISA and the Code, (B) has had all contributions or other amounts payable by the Company or any Subsidiary with respect to each Benefit Plan in respect of current or prior plan years paid or accrued in accordance with generally accepted accounting principles, and (C) has no actions, suits or claims pending or, to the Company’s Knowledge, threatened in writing (other than routine claims for benefits) with respect to any Benefit Plan which could reasonably be expected to result in a material liability to the Company or any of its Subsidiaries.

 

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(iii)    Each Company Benefit Plan that is intended to be qualified under Section 401(a) of the Code and the related trust has been determined by the IRS to be qualified under Section 401(a) of the Code and, to the Company’s Knowledge, nothing has occurred that would reasonably be expected to adversely affect the qualification or tax exemption of any such Company Benefit Plan or the related trust.

 

(iv)    Neither the Company nor any ERISA Affiliate has in the last six (6) years preceding the date of this Agreement (A) contributed (or had any obligation to contribute) to a plan that is subject to Section 412 of the Code, or Section 302 or Title IV of ERISA, or (B) contributed to, or is or has been obligated to contribute to, or has otherwise incurred any obligation or liability under, any “multiemployer plan” within the meaning of Section 3(37) of ERISA. For the purposes of this Agreement, “ERISA Affiliate” means any entity which is considered a single employer with the Company under Section 414 of the Code.

 

(v)    None of the Company Benefit Plans provide for retiree or post-employment health, medical, disability, life insurance or other welfare benefits to any Person, other than coverage mandated by applicable Law including Section 4980B of the Code, and none of the Company or any of its Subsidiaries has any obligation to provide such benefits. To the extent that the Company or any of its Subsidiaries sponsors such plans, the Company or the applicable Subsidiary has reserved the right to amend, terminate or modify at any time each Company Benefit Plan that provides retiree or post-employment disability, life insurance or other welfare benefits to any Person.

 

(vi)    Each Company Benefit Plan that is a “nonqualified deferred compensation plan” (within the meaning of Section 409A of the Code) is in documentary compliance with, and has been operated and administered in all material respects in compliance with, Section 409A of the Code and the guidance issued by the IRS provided thereunder.

 

(vii)    Neither the execution and delivery of this Agreement, the Voting Agreement, Shareholder or other approval of this Agreement nor the consummation of the transactions contemplated hereby or by the Voting Agreement could, either alone or in combination with another event (A) entitle any current or former employee, director, officer or independent contractor of the Company or any of its Subsidiaries to severance pay or any material increase in severance pay, (B) accelerate the time of payment or vesting or materially increase the amount of compensation due to any such employee, director, officer or independent contractor, (C) directly or indirectly cause the Company to transfer or set aside any assets to fund any material benefits under any Company Benefit Plan, (D) otherwise give rise to any material liability under any Company Benefit Plan, (E) limit or restrict the right of the Company or, after the consummation of the transactions contemplated hereby, Parent and its Subsidiaries to merge, amend, terminate or transfer the assets of any Company Benefit Plan or (F) result in the payment of any amount that could, individually or in combination with any other such payment, constitute an “excess parachute payment” as defined in Section 280G(b)(1) of the Code.

 

-21-

 

 

(viii)    Neither the Company nor any Subsidiary has any obligation to provide, and no Company Benefit Plan or other agreement provides any individual with the right to, a gross-up, indemnification, reimbursement or other payment for any excise or additional Taxes, interest or penalties incurred pursuant to Section 409A or Section 4999 of the Code or due to the failure of any payment to be deductible under Section 280G of the Code.

 

(ix)    To the Company’s Knowledge, except as set forth on Section 5.1(j)(ix) of the Company Disclosure Schedule, as of the date hereof, no employee, director, officer or independent contractor with total annual compensation during the calendar year 2020 of $150,000 or greater, has delivered notice to the Company Board or the Company that such person has a current intention to resign or terminate his or her employment or services with the Company prior to or in connection with the Closing (for the avoidance of doubt, this shall not include persons whose resignation was requested by or on behalf of Parent). Schedule 5.1(j)(ix) of the Company Disclosure Schedule sets forth, to the extent known, the amount and payment timing of any payment, increase in payment, or acceleration of payments due to any such employee, director, officer or independent contractor upon such a resignation or other termination of employment, and all such amounts are properly accrued on the Company’s financial statements, if so required as of the date hereof.

 

(k)    Compliance with Laws; Company Permits.

 

(i)    Compliance with Laws. Except as has not had, and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, (A) since January 1, 2018, the businesses of each of the Company and its Subsidiaries have been, and are being, conducted in compliance with all applicable laws, statutes, codes, treaties and ordinances, common law, and any rules, regulations, standards, Orders and agency requirements of any Governmental Authority (collectively, “Laws”) and (B) since January 1, 2019, none of the Company or any of its Subsidiaries has received any written notice or written communication of any noncompliance with any Laws.

 

(ii)    Without limitation, the Company and its Subsidiaries are, and have been since January 1, 2018, in compliance with and are not in violation of any anti-money laundering or anti-bribery laws applicable thereto, including the Anti-Money Laundering Act and the USA PATRIOT Act of 2001 or the regulations implementing such statutes, all other anti-money laundering Laws applicable to the Company or its Subsidiaries, and all Laws with respect to economic or trade sanctions issued by the Office of Foreign Assets Control of the U.S. Department of the Treasury (“OFAC”), except for violations that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. Without limiting the generality of the foregoing, the Company has not been advised of any governmental or regulatory potential findings of weakness or deficiency regarding its compliance with, anti-money laundering Laws, anti-bribery Laws, any Order issued with respect to economic or trade sanctions by OFAC and any other state or federal anti-money-laundering Laws, including those provisions of federal regulations requiring (A) the filing of reports, such as Currency Transaction Reports and Suspicious Activity Reports, (B) the maintenance of records and (C) the exercise of diligence in identifying customers. The Company has adopted such procedures, policies and internal controls as are reasonably designed to comply with the USA PATRIOT Act of 2001, and any other applicable anti-money laundering Laws (including any Laws or Orders with respect to economic or trade sanctions).

 

-22-

 

 

(iii)    Without limitation, none of the Company or any of its Subsidiaries, or to the Knowledge of the Company, any director, officer, employee, agent or other person acting on behalf of the Company or any of its Subsidiaries has, directly or indirectly, (A) used any funds of the Company or any of its Subsidiaries for unlawful contributions, unlawful gifts, unlawful entertainment or other unlawful expenses relating to political activity, (B) made any unlawful payment to foreign or domestic governmental officials or employees or to foreign or domestic political parties or campaigns from funds of the Company or any of its Subsidiaries, (C) violated any provision that would result in the violation of the Foreign Corrupt Practices Act of 1977, as amended, or any similar law, (D) established or maintained any unlawful fund of monies or other assets of the Company or any of its Subsidiaries, (E) made any fraudulent entry on the books or records of the Company or any of its Subsidiaries, or (F) made any unlawful bribe, unlawful rebate, unlawful payoff, unlawful influence payment, unlawful kickback or other unlawful payment to any person, private or public, regardless of form, whether in money, property or services, to obtain favorable treatment in securing business, to obtain special concessions for the Company or any of its Subsidiaries, to pay for favorable treatment for business secured or to pay for special concessions already obtained for the Company or any of its Subsidiaries, except, in each case, as would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company. No United States economic or trade sanction administered by OFAC prohibits United States persons from transacting with, or require United States persons to block property or property interests of, the Company, any of its Subsidiaries or, to the Knowledge of the Company, any director, officer, employee, agent or other person acting on behalf of the Company or any of its Subsidiaries.

 

(iv)    Permits. Except as has not had, and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, (A) the Company and its Subsidiaries hold all permits, certifications, approvals, registrations, consents, authorizations, franchises, variances, exemptions and orders (including all product certifications) issued or granted by any Governmental Authority or other Person responsible for issuing such permit, certification, approval, registration, consent, authorization, franchise, variance, exemption or order (the “Company Permits”) necessary for the Company and its Subsidiaries to own, lease and operate their properties or other assets and to conduct their businesses in the manner in which they conduct them, (B) all such Company Permits of the Company and its Subsidiaries are valid and in full force and effect, (C) all documents submitted by the Company or any of its Subsidiaries to a Governmental Authority in order to obtain, maintain or defend any Company Permit were compiled, prepared and submitted in accordance with all applicable Laws, (D) the Company and its Subsidiaries are in compliance with such Company Permits and (E) there is not pending or, to the Company’s Knowledge, threatened (in writing) any administrative or judicial proceeding that would reasonably be expected to result in any suspension, modification, revocation or cancellation of any of the Company Permits of the Company or any of its Subsidiaries.

 

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(l)    Material Contracts.

 

(i)    Section 5.1(l)(i) of the Company Disclosure Schedule lists each of the following Contracts, whether written or oral, to which the Company or any of its Subsidiaries is a party or by which it is bound as of the date of this Agreement (each such Contract listed or required to be so listed, a “Material Contract”):

 

(A)    any Contract or series of related Contracts for the purchase, receipt, lease or use of materials, supplies, goods, services, equipment or other assets involving payments by or to the Company or any of its Subsidiaries reasonably expected to total more than $150,000 on an annual basis or $300,000 in the aggregate (other than Contracts involving payments to the Company entered into in the ordinary course of business, including investment banking contracts);

 

(B)    any Contract or series of related Contracts that (1) requires consent of or notice to a third party in the event of or with respect to the Merger in order to avoid a breach or termination of, a loss of benefit under, or triggering a price adjustment, right of renegotiation or other remedy under, any such agreement, and (2) (x) involves payments by or to the Company or any of its Subsidiaries reasonably expected to total more than $150,000 on an annual basis or $300,000 in the aggregate or (y) is material to the business of the Company or any of its Subsidiaries;

 

(C)    Indebtedness, whether as borrower, lender or guarantor, in amounts greater than $10,000,000 individually;

 

(D)    any Contract (1) involving commitments to others to make capital expenditures or capital asset purchases or capital asset sales in excess of $3,000,000; or (2) involving any expenditures or commitments to purchase relating to information technology in amounts greater than $250,000;

 

(E)    any Contract restricting the payment of dividends or the repurchase of stock or other equity;

 

(F)    any collective bargaining agreements;

 

(G)    any joint venture, profit sharing, partnership agreements or other similar agreements;

 

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(H)    all leases or subleases for (1) real property with annual payments in excess of $100,000 or (2) personal property with annual payments in excess of $150,000 and not cancelable by the Company (without premium or penalty) within 12 months;

 

(I)    any Contract that (1) limits the freedom of the Company or any of its Subsidiaries to engage or compete in any line of business or with any Person or in any area or which would so limit the freedom of Parent, the Company or any of their respective Affiliates after the Effective Time or (2) contains any exclusivity, “most favored nation”, rights of first refusal, rights of first negotiation or similar obligations or restrictions that are binding on the Company or any of its Subsidiaries or that would be binding on Parent or its Affiliates after the Effective Time;

 

(J)    that may not be cancelled by Parent, the Company or any of their respective Subsidiaries without payment of a penalty or termination fee equal to or greater than $3,000,000 (assuming such Contract was terminated on the Closing Date);

 

(K)    agreements by the Company or any of its Subsidiaries not to acquire assets or securities of a third party (including standstill agreements) or agreements by a third party not to acquire assets or securities of the Company or any of its Subsidiaries (including standstill agreements);

 

(L)    any Contract pursuant to which the Company or any of its Subsidiaries grants or receives a license or other right with respect to any Intellectual Property Rights that are material to the business of the Company or any of its Subsidiaries, other than non-exclusive licenses granted to, or by, the Company or its Subsidiaries for off-the-shelf or similar commercial Software on standardized terms that are generally commercially available and that are not modified by or on behalf of the Company or any of its Subsidiaries, other than modifications made in the ordinary course of business that are typical and customary to the industry in which the Company operates;

 

(M)    each Contract governing the collection, use, disclosure, storage, transfer, disposal or other processing of Personal Information by or on behalf of the Company or any of its Subsidiaries, other than those Contracts that are (1) consistent in all material respects with form agreements made available to Parent or (2) otherwise entered into in the ordinary course of business and typical and customary to the industry in which the Company operates;

 

(N)    any Contract providing for the indemnification by the Company or any of its Subsidiaries of any Person or under which the Company or any of its Subsidiaries has guaranteed any liabilities or obligations of any other Person, in each case entered into outside the ordinary course of business;

 

(O)    any Contract that contains a put, call, right of first refusal, right of first offer or similar right pursuant to which the Company or any of its Subsidiaries could be required to purchase or sell, as applicable, any equity interests of any Person or assets;

 

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(P)    any Contract relating to the acquisition or disposition of any business or operations (whether by merger, sale of stock, sale of assets or otherwise) entered into since January 1, 2019 or that contains any continuing material earnout or similar contingent payment obligation that has not been satisfied in full;

 

(Q)    any Contract that the Company would reasonably foresee would prevent, materially delay or materially impede the Company’s ability to consummate the Merger or the other transactions contemplated hereby;

 

(R)    other than any employment Contract or other Contract providing for the provision of services to the Company (or a Subsidiary thereof), any Benefit Plan made in connection with a service provider’s provision of services to the Company (or a Subsidiary thereof), or any standard Contract providing for the assignment and/or confidentiality of proprietary information in connection with provision of services to the Company (or any Subsidiary thereof), any Contracts with any (1) officer or director of the Company or any of its Subsidiaries (or any other employee who is one of the twenty most highly compensated employees of the Company and its Subsidiaries); (2) record or beneficial owner of five percent or more of the voting securities of Company; or (3) affiliate (as such term is defined in Rule 12b-2 promulgated under the Exchange Act) or “associates” (or members of any of their “immediate family”) (as such terms are respectively defined in Rule 12b-2 and Rule 16a-1 of the Exchange Act) of any such officer, director or beneficial owner; and

 

(S)    that is a “material contract” (as such term is defined in Item 601(b)(10) of Regulation S-K of the Exchange Act).

 

(ii)    The Company has made available to Parent prior to the date of this Agreement, accurate and complete copies of all written Material Contracts, including all amendments thereto.

 

(iii)    Each Material Contract is a valid and binding agreement of the Company and/or any of its Subsidiaries party thereto, enforceable against the Company and/or any of its Subsidiaries, as applicable, and, to the Knowledge of the Company, each other party thereto, and is in full force and effect (except for such failures to be binding, enforceable or in full force and effect that have not had and would not reasonably be expected to have a Material Adverse Effect or prevent or materially adversely affect or delay the ability of the Company to carry out its obligations under this Agreement and to consummate the transactions contemplated hereby). Neither the Company nor any of its Subsidiaries has received written notice of any default, violation or breach in any material respect under the terms of any such Material Contract (except as have not had and would not reasonably be expected to have a Material Adverse Effect or prevent or materially adversely affect or delay the ability of the Company to carry out its obligations under this Agreement and to consummate the transactions contemplated hereby). The execution, delivery and performance of this Agreement by the Company and the consummation of the transactions contemplated hereby and the compliance by the Company with the provisions of this Agreement will not result in a breach or violation of, or default under, in any material respect, any Material Contract, except for such breaches, violations or defaults that would not reasonably be expected to, individually or in the aggregate, (A) prevent or materially impair or delay the ability of the Company to carry out its obligations under this Agreement, and to consummate the transactions contemplated hereby; or (B) otherwise have a Material Adverse Effect.

 

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(iv)    Other than pursuant to the Company Benefit Plans set forth on Schedule 5.1(j)(vii), none of the Company or any of its Subsidiaries is a party to, or is bound by, any Contract, whether written or oral, providing for payments to any Person to be made by the Company or any of its Subsidiaries upon a change in control thereof.

 

(v)    For the purposes of this agreement,

 

(A) “Affiliate” means a Person that directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with a second Person.

 

(m)    Customers. Section 5.1(m) of the Company Disclosure Schedule sets forth a list of the top fifty largest customers, with respect to the fiscal year ended December 31, 2020, of the Company and its Subsidiaries during such period based on revenues received by the Company and its Subsidiaries in such period. Since December 31, 2020, none of the Company or any of its Subsidiaries has had any outstanding material dispute with any of the twenty-five largest customers of the Company and its Subsidiaries based on revenues received by the Company and its Subsidiaries with respect to the fiscal year ended December 31, 2020 (each, a “Significant Customer”). Since December 31, 2020, none of the Company or any of its Subsidiaries has received any written notice from any Significant Customer that such customer shall not continue, or does not expect to continue, as a customer of the Company or any of its Subsidiaries, as applicable, or that such customer intends to materially reduce the scale of the business conducted with the Company or any of its Subsidiaries.

 

(n)    Real Property.

 

(i)    Title to Real Property; Liens.

 

(A)     Leased Real Property. Set forth in Section 5.1(n)(i)(A) of the Company Disclosure Schedule is an accurate and complete list of all Leased Real Property and all Real Property Leases relating to such Leased Real Property. Each of the Real Property Leases relating to the Leased Real Property is valid, binding and enforceable in accordance with its terms and is in full force and effect, except where the failure to be binding, enforceable or in full force and effect has not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. To the Company’s Knowledge, there are no Liens on the estate or interest created by any such Real Property Lease, except Permitted Liens.

 

(B)     Owned Real Property. The Company does not own any real property.

 

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(C)     For the purposes of this Agreement:

 

 

1.

“Leased Real Property” shall mean the leasehold or subleasehold interests and any other rights to use or occupy any land, buildings, structures, improvements, fixtures or other interests in real property held by the Company or any of its Subsidiaries under the Real Property Leases.

 

 

2.

“Permitted Liens” shall mean: (s) Liens arising under workers’ compensation, unemployment insurance, social security, retirement and similar legislation; (t) Liens for current Taxes that are not yet due or delinquent or are being contested in good faith by appropriate proceedings and for which adequate reserves have been taken on the financial statements contained in the Company Reports; (u) statutory liens or landlords’, carriers’, warehousemen’s, mechanics’, suppliers’, workmen’s, materialmen’s or repairmen’s liens or other like Liens arising in the ordinary course of business with respect to amounts that not yet overdue or are being contested in good faith by appropriate proceedings and for which adequate reserves have been taken on the financial statements contained in the Company Reports; (v) with respect to the Leased Real Property, zoning restrictions and any entitlement, building, and other land use regulations, minor title defects or irregularities, covenants, conditions, restrictions, easements, and other similar non-monetary matters of record that, in the case of zoning restrictions or any entitlement, building, or other land use regulations, are not violated by, and in each case do not, individually or in the aggregate, materially impair the use, occupancy or value of, such Leased Real Property, the consummation of the transactions contemplated by this Agreement or the ordinary course operations or business of the Company and its Subsidiaries; (w) as to any Leased Real Property, any Lien affecting solely the interest of the landlord thereunder and not the interest of the tenant thereunder, which does not materially impair the use, occupancy or value of such Leased Real Property; (x) non-exclusive licenses of Intellectual Property Rights granted in the ordinary course of business; (y) Liens to the extent disclosed or reflected on the consolidated balance sheet of the Company for the annual period ended December 31, 2020; and (z) any other Liens that, in the aggregate, do not materially impair the value of the continued use and operation of the assets or properties to which they relate.

 

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3.

“Real Property Leases” shall mean the leases, subleases, ground leases, licenses or other agreements, including all amendments, extensions, renewals, guaranties or other agreements with respect thereto, pursuant to which the Company or any of its Subsidiaries leases any real property.

 

(D)     Neither the Company nor any applicable Subsidiary has received written notice of or has, to the Company’s Knowledge, an expropriation or condemnation proceeding pending or threatened in writing against any material Leased Real Property.

 

(E)     To the Company’s Knowledge, the Company has not received any written notice that its present use of the Leased Real Property is not in conformity in any material respect with all applicable Laws, rules, regulations and ordinances, including all applicable zoning Laws, ordinances and regulations and with all registered deeds, restrictions of record or other agreements affecting such Leased Real Property. To the Company’s Knowledge, no damage or destruction has occurred with respect to any of the Leased Real Property that would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

(o)    Investment Securities. Each of the Company and its Subsidiaries has good title in all material respects to all securities and commodities held as investments, owned by it (except those sold under repurchase agreements) which are material to the Company’s business on a consolidated basis, free and clear of any Lien, except to the extent such securities or commodities are pledged or lent in the ordinary course of business to secure obligations of the Company or its Subsidiaries. Such securities and commodities are valued on the books of the Company in accordance with U.S. GAAP in all material respects.

 

(p)    Takeover Statutes. Other than Section 203 of the DGCL, which is applicable pursuant to the Company LLC Agreement, no “fair price,” “moratorium,” “business combination” or other similar anti-takeover statute or regulation (each, a “Takeover Statute”) or any anti-takeover provision in the Company LLC Agreement is applicable to the Company, Parent, Merger Sub, the Shares, this Agreement, the Voting Agreement or the transactions contemplated hereby and thereby, including the Merger. There is no shareholder rights plan, “poison pill,” antitakeover plan or similar device in effect to which the Company or any of its Subsidiaries is subject, party to or otherwise bound. Prior to the date of this Agreement, the Company Board has taken all action necessary so that, assuming the representations set forth in Section 5.2(h) are true, the restrictions set forth in Section 203 of the DGCL, as applicable pursuant to the Company LLC Agreement, applicable to “business combinations” (as such term is defined in Section 203 of the DGCL) are and will be inapplicable to the execution and delivery of and performance under this Agreement and the Voting Agreement and the consummation of the transactions contemplated hereby and thereby, including the Merger.

 

(q)    Environmental Matters.

 

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(i)    Except as has not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect:

 

(A)    Each of the Company and its Subsidiaries is and has at all times been in compliance with all applicable Environmental Laws which compliance includes obtaining, maintaining and complying with all permits, notices, approvals and authorizations, if any, required under Environmental Laws in connection with the operation of the Company’s and its Subsidiaries’ business, as applicable.

 

(B)    Neither the Company nor any of its Subsidiaries has stored, released, used or disposed of any Hazardous Substances in a manner that would reasonably be expected to give rise to any liability under any Environmental Laws.

 

(C)    Neither the Company nor any of its Subsidiaries is the subject of any pending claims, notices, demand letters, investigations, proceedings or information requests indicating or alleging any potential liability relating to any Environmental Law and, to the Knowledge of the Company, none are threatened.

 

(ii)    The Company has made available to Parent copies of all environmental reports, assessments and studies prepared in the last five years in its possession concerning its or its Subsidiaries’ operations or any properties currently or formerly owned or operated by the Company or any of its Subsidiaries.

 

For the purposes of this Agreement, (A) “Environmental Law” means any applicable federal, state or local law or other legal requirement pertaining to pollution, the protection, restoration or remediation of or prevention of harm to the environment or natural resources, or the protection of human health and safety, including any law or legal requirement relating to Hazardous Substances and (B) “Hazardous Substance” means any pollutant, contaminant, hazardous substance, hazardous waste, petroleum products, mold, PFAS compounds and any other chemical waste, substance or material listed in or regulated or identified in any Environmental Law.

 

(r)    Taxes.

 

(i)    The Company and each of its Subsidiaries  have duly and timely filed (taking into account any valid extension of time within which to file) all material Tax Returns required to be filed by any of them and all such filed Tax Returns are true, correct and complete in all material respects;  have paid all material Taxes that are required to be paid (whether or not shown to be due on any such Tax Returns) or, if payment is not yet due, made adequate provisions for such Taxes in the financial statements in accordance with U.S. GAAP; (C) have materially complied with all applicable Laws relating to the withholding of Taxes and information reporting and have duly and timely withheld and paid over to the appropriate Tax authority all material amounts required to be so withheld and paid over under all applicable Laws with respect to any employee, creditor or third party, except, in each case, for Taxes that are being contested in good faith in appropriate proceedings and for which adequate reserves have been established in accordance with U.S. GAAP in the financial statements included in the Company Reports filed prior to the date of this Agreement; and (D) other than as a result of extending the due date for filing a Tax Return, have not waived any statute of limitations with respect to any income Tax Return or any other material Tax Return or agreed to any extension of time with respect to a Tax assessment or deficiency and there has been no request by a Governmental Authority to execute such a waiver or extension.

 

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(ii)    All deficiencies for Taxes asserted or assessed in writing against the Company or any of its Subsidiaries have been fully or timely paid, settled or properly reflected in the financial statements included in the most recent Company Reports.

 

(iii)    There are no Tax Liens upon any property or assets of the Company or any of its Subsidiaries except Liens for current Taxes not yet due and payable that may thereafter be paid without interest or penalty, and Liens for material Taxes that are being contested in good faith by appropriate proceedings and for which adequate reserves have been established in accordance with U.S. GAAP. No deficiency for any material amount of Taxes has been proposed or asserted in writing or assessed by any Governmental Authority against the Company or any of its Subsidiaries that remains unpaid or unresolved. As of the date of this Agreement, there are not pending or threatened (in writing) any audits, suits, claims, examinations, investigations, proceedings or other administrative or judicial proceedings in respect of Taxes or Tax matters. No written claim has been received by the Company or any of its Subsidiaries from a Governmental Authority in a jurisdiction where the Company or any of its Subsidiaries does not file Tax Returns (A) indicating that the Company or any of its Subsidiaries are or may be subject to taxation by, or required to file any Tax Return in, that jurisdiction, (B) indicating an intent to open an audit or other review or (C) requesting information related to Tax matters.

 

(iv)    Neither the Company nor any of its Subsidiaries (A) is or will be required to include any material adjustment in taxable income for any Tax period ending after the Closing Date or in any Tax Return not yet filed pursuant to Section 481 or 263A of the Code or any comparable provision under state or foreign Tax Laws as a result of transactions or events occurring, or accounting methods employed, prior to the date of this Agreement; (B) has entered into a material transaction that is being accounted for under the installment method of Section 453 of the Code or similar provision of U.S. state, U.S. local or foreign Tax Law; or (C) will be required to recognize a material amount of taxable income or take into account any other measure of Tax that will be reportable in taxable periods beginning on or after the Closing Date that is attributable to a transaction or event that occurred prior to the Closing. No power of attorney that currently is in effect has been granted by the Company or any of its Subsidiaries with respect to any Tax matter to any non-employee third party.

 

(v)    None of the Company or any of its Subsidiaries has executed or entered into a closing agreement pursuant to Section 7121 of the Code or any predecessor provision thereof or any similar provision of state, local or foreign Law relating to any taxable period ending after the Closing Date.

 

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(vi)    None of the Company or any of its Subsidiaries (A) has been a member of an affiliated group (within the meaning of Section 1504(a) of the Code) filing a United States consolidated federal income Tax Return (other than the affiliated group of which the Company is the common parent); (B) has any liability for the Taxes of any other Person (other than the Company or any of its Subsidiaries) under Treasury Regulations Section 1.1502-6 or any similar provision of state, local or foreign Tax Law, as a transferee or successor, by contract, or otherwise; or (C) is a party to any Tax sharing agreement (other than with respect to any such agreement or arrangement solely among the Company and its Affiliates, or any gross-up and indemnification provisions in credit agreements, derivatives, leases, supply agreements or other commercial agreements, each of which legal arrangements being entered into in the ordinary course of business and the primary purposes of which being unrelated to Taxes), pursuant to which it will have any obligation to make any payments in respect of Taxes after the Closing Date. In the last five years, neither the Company nor any of its Subsidiaries has been either a “distributing corporation” or a “controlled corporation” in a transaction intended to qualify under Section 355 of the Code.

 

(vii)    Neither the Company nor any of its Subsidiaries has been a United States real property holding company within the meaning of Section 897(c) of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.

 

(viii)    For the purposes of this Agreement,

 

(A)    the term “Tax” (including, with correlative meaning, the term “Taxes”) includes, whether disputed or not (1) any and all federal, state, local and foreign income, windfall or other profits, franchise, gross receipts, environmental, customs duty, capital stock, severances, stamp, transfer, payroll, sales, employment, unemployment, disability, use, property, withholding, excise, production, value added, escheat, unclaimed property, occupancy and other taxes, duties or assessments of any nature whatsoever, together with all interest, penalties and additions imposed with respect to such amounts and any interest in respect of such penalties and additions, and

 

(B)    the term “Tax Return” includes all returns and reports (including elections, declarations, disclosures, schedules, estimates and information returns) or any other document required to be supplied to a Tax authority relating to Taxes.

 

(s)    Labor Matters.

 

(i)    As of the date hereof, neither the Company nor any of its Subsidiaries is a party to, nor is it currently negotiating in connection with entering into, any collective bargaining agreement or other agreement with a labor union, works council or similar organization, and, to the Company’s Knowledge, there are no union organizing activities involving any employees of the Company or any of its Subsidiaries, nor to the Company’s Knowledge have there been any such activities within the past three years.

 

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(ii)    As of the date hereof, there is no strike, lockout, slowdown, work stoppage, unfair labor practice or material labor dispute, arbitration or grievance pending or, to the Company’s Knowledge, threatened in writing, nor have there been any such actions within the past three years. To the Company’s Knowledge, each of the Company and its Subsidiaries is in compliance in all material respects with all applicable Laws respecting labor, employment and employment practices, terms and conditions of employment, wages and hours, sexual harassment and occupational safety and health. Neither the Company nor any of its Subsidiaries is a party to, or is otherwise bound by, any consent decree with any Governmental Authority relating to employees or employment practices. No material Action brought by or on behalf of any employee, prospective employee, former employee, retiree, labor organization or other representative of any employees of the Company is pending or, to the Company’s Knowledge, threatened in writing. Neither the Company nor any of its Subsidiaries has incurred any liability or obligation under the Worker Adjustment and Retraining Notification Act and the regulations promulgated thereunder (the “WARN Act”) or any similar state or local Law that remains unsatisfied.

 

(iii)    The Company and its Subsidiaries are in compliance in all material respects with, and since January 1, 2018, have complied in all material respects with, all laws regarding pre-employment, employment, employment staffing and employment practices, terms and conditions of employment, wages and hours, plant closing notification, classification of employees and independent contractors, equitable pay practices, employee privacy rights, labor relations, employment discrimination, sexual harassment or discrimination, workers’ compensation or long-term disability policies, retaliation, immigration, family and medical leave, occupational safety and health and other laws in respect of any reduction in force (including notice, information and consultation requirements).

 

(iv)    Since January 1, 2018, neither the Company nor any of its Subsidiaries entered into any settlement agreement related to allegations of sexual harassment or sexual misconduct by, and to the Knowledge of the Company, no allegations of sexual harassment or sexual misconduct have been made to the Company against, any individual in his or her capacity as (A) a member of the Company Board, or (B) an employee of the Company or any of its Subsidiaries at a level of director or above. There are no proceedings currently pending or, to the Knowledge of the Company, threatened in writing related to any allegations of sexual harassment or sexual misconduct by any of the individuals identified in clauses (A)-(B) above.

 

(t)    Intellectual Property; Information Technology; Privacy.

 

(i)    Section 5.1(t)(i) of the Company Disclosure Schedule sets forth an accurate and complete list, as of the date of this Agreement, of all Owned Intellectual Property that is Registered (collectively, the “Registered Intellectual Property”), indicating for each item of Registered Intellectual Property, the record owner, registration or application number, and the jurisdictions in which each such item of Registered Intellectual Property has been issued or registered or in which any application