ZAIS Zais Grp. Holdings, Inc. (delisted)

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD [ ● ], 2018

Dear Stockholders:

On [●], 2018, ZAIS Group Holdings, Inc. (the “Company”) will hold its Annual Meeting of Stockholders at Oyster Point Hotel, 146 Bodman Place, Red Bank, NJ 07701. The meeting will begin at [●] a.m. Eastern Time.

The purpose of the meeting is:

and to act upon any other matter properly brought before the annual meeting or any adjournments or postponements of the annual meeting.

On February 15, 2017, the board of directors (the “Board”) formed a special committee of independent and disinterested directors (the “Special Committee”) to consider any proposals thereafter made by third parties or management for strategic transactions, as well as to consider all other strategic options for the Company. Accordingly, the Special Committee has evaluated the fairness of the merger contemplated by the Merger Agreement (the “Merger”) to the Company and its stockholders (other than Parent, the members of Parent (including Mr. Zugel and Daniel Curry, the Company’s President and Chief Executive Officer (“Mr. Curry”)), Mr. Zugel’s spouse, and certain trusts for members of Mr. Zugel’s family (collectively, the “Parent Group”), Ramguard LLC, a Delaware limited liability company (“Ramguard”); any holder of shares (“Exchange Shares”) acquired pursuant to an exercise of exchange rights with respect to Class A Units of ZAIS Group Parent, LLC, a Delaware limited liability company and the Company’s majority-owned subsidiary, by a person who is not a member of the Parent Group; stockholders (if any) who have agreed with Parent to retain certain of their shares of Class A Common Stock in connection with the Merger (“Rollover Shares”); and any affiliates of the foregoing, as to whom no view is expressed), including all of its unaffiliated stockholders, considered and negotiated the terms and conditions of the Merger, and made a recommendation to the Board. The Board (with Mr. Zugel and Mr. Curry recusing themselves), acting on the unanimous recommendation of the Special Committee, has approved the Merger Agreement and determined that the Merger Agreement and the transactions contemplated by it are advisable and in the best interests of and fair to the Company and its stockholders (other than the Parent Group, Ramguard, any holders of Rollover Shares or Exchange Shares, if any, and any affiliates of the foregoing). The Board (with Mr. Zugel and Mr. Curry recusing themselves) unanimously recommends that the stockholders of the Company vote “FOR” the proposal to approve the adoption of the Merger Agreement . In addition, the Board urges you to vote “FOR” proposal 3 above, and “FOR” each of the director nominees listed on the proxy statement to serve on the Board.

Your vote is very important, regardless of the number of shares of common stock of the Company (“Common Stock”) you own. Pursuant to the Merger Agreement, the affirmative vote of the holders of (i) a majority of the aggregate voting power of the outstanding shares of common stock (the “Statutory Stockholder Approval”) and (ii) a majority of the outstanding shares of Class A Common Stock (not owned by any member of the Parent Group, any director or executive officer of the Company, Ramguard, any holder of Rollover Shares or Exchange Shares (the Parent Group has informed the Company that it will not seek to enter into any agreements that would establish any Rollover Shares and that it does not expect there to be any Exchange Shares), or any affiliates of the foregoing person) (the “Majority of the Minority Stockholder Approval”) in favor of the Merger Agreement is required for approval of the adoption of the Merger Agreement. If you fail to vote on the proposal to adopt the Merger Agreement, the effect will be the same as a vote against adoption of the Merger Agreement.

The holders of record of the Company’s Common Stock at the close of business on April 2, 2018, are entitled to notice of and to vote at the annual meeting or at any adjournment of the meeting. All stockholders of record are cordially invited to attend the annual meeting in person. Even if you plan to attend the annual meeting in person, the Company requests that you complete, sign, date and return the enclosed proxy and thus ensure that your shares will be represented at the annual meeting if you are unable to attend. You also may vote your shares by proxy using the toll-free telephone number or the Internet as set forth in the instructions on the proxy card.

If you sign, date and return your proxy or voting instruction form(s) without indicating how you wish to vote, your proxy will be voted in favor of Proposals 1 and 3, and in favor of each of the director nominees listed in proposal 2 in the proxy statement. If you fail to attend the annual meeting or submit your proxy, it will have the same effect as a vote against the adoption of the Merger Agreement, but will not have any impact on the other proposals. You may revoke your proxy at any time before the vote at the annual meeting by following the procedures outlined in the enclosed proxy statement. If you are a stockholder of record, and you intend to attend the annual meeting and wish to vote in person, you may revoke your proxy and vote in person.

The Merger is described in the accompanying proxy statement, which the Company urges you to read carefully. A copy of the Merger Agreement is included as Annex A to the accompanying proxy statement.

The Proxy Statement, Annual Report on Form 10-K for the fiscal year ended December 31, 2017 and a form of proxy card are available at www.proxyvote.com

Red Bank, New Jersey
[●], 2018

Table of Contents

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Table of Contents

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SUMMARY TERM SHEET

This Summary Term Sheet discusses the material information contained in this proxy statement regarding the Merger and the annual meeting, but it does not contain all of the information in this proxy statement that is important to your voting decision with respect to the adoption of the Merger Agreement or the other matters being considered at the annual meeting. The Company encourages you to read carefully this entire proxy statement, its annexes and the documents referred to or incorporated by reference in this proxy statement, as this Summary Term Sheet may not contain all of the information that may be important to you. The items in this Summary Term Sheet include page references directing you to a more complete description of that topic in this proxy statement.

Except as otherwise specifically noted in this proxy statement, “ZAIS,” the “Company,” “we,” “our,” “us,” and similar words refer to ZAIS Group Holdings, Inc., a Delaware corporation, including, in certain cases, its subsidiaries. Throughout this proxy statement, ZGH Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of the Company, is referred to as “Sub,” Z Acquisition LLC, a Delaware limited liability company, is referred to as “Parent,” Christian Zugel, the Company’s Chairman and Chief Investment Officer, is referred to as “Mr. Zugel,” the Zugel Family Trust, a trust for the benefit of Mr. Zugel’s family, is referred to as “ ZFT,” Daniel Curry, the President and Chief Executive Officer of the Company and a member of Parent, is referred to as “Mr. Curry,” and the Agreement and Plan of Merger, dated as of January 11, 2018, by and among the Company, Sub, and Parent, as it may be amended from time to time, is referred to as the “Merger Agreement.”

In addition, throughout this proxy statement the persons identified below shall be referred to as follows:

This proxy statement also constitutes an information statement with respect to the purchase (the “Share Purchase”) by Parent of 6,500,000 shares of Class A Common Stock (the “Target Shares”) held by Ramguard pursuant to the Amended and Restated Share Purchase Agreement, dated as of January 11, 2018, by and among Parent, Ramguard, and Mr. Zugel (the “Share Purchase Agreement”). The Share Purchase may be deemed to constitute a step towards the consummation of one or more other transactions (including the Merger) that may constitute a “Rule 13e-3 transaction” under the rules and regulations of the Securities and Exchange Commission (“SEC”) pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Accordingly, the consummation of the Share Purchase is conditioned upon, among other things, the filing of a Rule 13e-3 Transaction Statement with the SEC and the provision to holders of shares of Class A Common Stock not less than 20 business days prior to the consummation of the Share Purchase of the disclosures required by Rule 13e-3 and Schedule 13E-3 under the Exchange Act. No approval of the board of directors of the Company (the “Board”) or vote of stockholders of the Company is necessary in connection with the execution, delivery or performance of the Share Purchase Agreement and the parties are obligated to consummate the Share Purchase whether or not the Merger is completed.

Parties to the Share Purchase Agreement

Ramguard

Ramguard is a Delaware limited liability company formed in June 2015 upon the conversion of d.Quant Special Opportunities Fund, L.P. from a Delaware limited partnership into a Delaware limited liability company. Ramguard is a private investment fund. Neil Ramsey, a citizen of the United States (“Mr. Ramsey”), is the manager of Ramguard. Ramguard is the beneficial owner of 9,207,056 shares of Class A Common Stock, representing approximately 63.26% of the Company’s outstanding Class A Common Stock. Mr. Ramsey is the beneficial owner of 9,585,287 shares of Class A Common Stock, or approximately 65.86% of the Company’s outstanding Class A Common Stock, consisting of (i) 9,207,056 shares held by Ramguard and (ii) 378,231 shares held by NAR Special Global, LLC (“NAR”), of which Mr. Ramsey is the managing member. At the closing of the Share Purchase, Ramguard will sell, transfer, and assign the Target Shares to Parent.

Parent

Z Acquisition LLC, a Delaware limited liability company, referred to herein as Parent, was formed for the primary purpose of entering into the Share Purchase Agreement and acquiring the Target Shares. As of the date of this proxy statement, Mr. Zugel, Mr. Zugel’s spouse, Mr. Curry, and ZFT, are the members of Parent, with Mr. Zugel as the sole managing member. Parent is owned 40% each by Mr. Curry and Mr. Zugel, and 10% each by Mr. Zugel’s spouse and ZFT. At the closing of the Share Purchase, Parent will acquire the 6,500,000 Target Shares, representing approximately 44.66% of the Company’s outstanding shares of Class A Common Stock. For more information, see “ Security Ownership of Certain Beneficial Owners and Management. ” Parent has not engaged in any business or operations except in furtherance of the Share Purchase and the Merger.

Mr. Zugel

Christian Zugel, a citizen of the Federal Republic of Germany, referred to herein as Mr. Zugel, is (i) the founder of ZAIS Group; (ii) the holder, in his capacity as voting trustee of the ZGH Class B Voting Trust, a trust the beneficiaries of which are members of Mr. Zugel’s family and his former spouse (the “Class B Voting Trust”), which trust holds 100% of the Company’s Class B Common Stock, par value $.000001 per share (the “Class B Common Stock”), and provides Mr. Zugel effective voting control over matters put to a vote of the Company’s stockholders, including the election of directors; (iii) the Chairman of the Board; (iv) the Company’s Chief Investment Officer; and (v) the sole managing member of Parent. Mr. Zugel is also the owner of 3,325,000 Class A Units (the “Class A Units”) of ZAIS Group Parent, LLC (“ZGP”), the Company’s majority owned subsidiary, which are exchangeable, under certain circumstances, for, at the Company’s option, cash, shares of Class A Common Stock (on a one-for-one basis), or a combination of the two, and family members and affiliates of Mr. Zugel own an additional 3,675,000 Class A Units of ZGP that are also so exchangeable under certain circumstances. As a result of the Share Purchase, Mr. Zugel and Parent will own in the aggregate 6,800,000 shares of Class A Common Stock, representing approximately 46.72% of the outstanding Class A Common Stock, not including shares of Class A Common Stock potentially issuable upon exchange of Class A Units.

Mr. Curry

Daniel A. Curry, a citizen of the United States of America, referred to herein as Mr. Curry, is the Company’s Chief Executive Officer, President and Director. Mr. Curry also serves as the President of ZAIS Group and is a member of ZAIS Group’s Management Advisory Committee. Mr. Curry is not a party to the Share Purchase Agreement, but owns 40% of Parent and, as a result of the Share Purchase, Parent will own in the aggregate 6,500,000 shares of Class A Common Stock, representing approximately 44.66% of the Company’s outstanding shares of Class A Common Stock.

The Share Purchase Agreement

On September 5, 2017, Parent and Mr. Zugel entered into a Share Purchase Agreement (the “Original Share Purchase Agreement”) with Ramguard to acquire the Target Shares for an aggregate purchase price of $26 million, or $4.00 per Target Share. On January 11, 2018, substantially concurrently with the execution of the Merger Agreement, the parties entered into an Amended and Restated Share Purchase Agreement, which we refer to as the Share Purchase Agreement. Under the terms of the Original Share Purchase Agreement, Ramguard was entitled to an adjustment to the consideration payable by Parent for the Target Shares if, among other things, Parent, Mr. Zugel or any of their respective controlled affiliates entered into a definitive merger agreement with the Company within one year from September 5, 2017 at a price per share of Class A Common Stock greater than $4.00. Pursuant to the Share Purchase Agreement, among other things, the price payable for the Target Shares was increased to $4.10 per share.

The purchase price for the Target Shares is payable as follows: at the closing of the Share Purchase, Parent will make a cash payment of $5,125,000, Parent or Mr. Zugel will make a cash payment of $5,125,000 and Parent will issue a promissory note and pledge agreement, which members of Parent will join as pledgors (the “Promissory Note”), in the principal amount of $13,325,000 with an interest rate of 8% per annum, payable quarterly in cash, and a maturity date of December 31, 2019, in each case, to Ramguard; and on or before the three month anniversary of the closing, Parent or Mr. Zugel will make a cash payment of $3,075,000 to Ramguard, together with interest in the amount of $125,000.

The Share Purchase Agreement also provides that if, within one year after September 5, 2017, Parent, Mr. Zugel, or any of their respective controlled affiliates enters into a definitive agreement with the Company or commences a tender offer recommended by the Board for a take private transaction at a price per share in excess of $4.10, each of the cash consideration amounts paid or payable to Ramguard and the initial principal amount of the Promissory Note will be adjusted on a pro rata basis, such that Ramguard shall have received (or be entitled to receive) such greater per share consideration amount. A similar adjustment in the price payable for the Target Shares will be made if, within one year after September 5, 2017, there is a change-in-control transaction or sale of a majority or more of the shares of Class A Common Stock at a price per share in excess of $4.10.

The source of funds for the cash portion of the purchase price of the Target Shares is expected to be personal funds of the members of Parent, which funds will be callable by Mr. Zugel in his capacity as sole managing member of Parent pursuant to the terms of that certain Second Amended and Restated Limited Liability Company Agreement of Parent, dated as of January 11, 2018 (the “2nd A&R LLC Agreement”) in order to fund the purchase of the Target Shares.

Conditions to the Closing of the Share Purchase

The completion of the Share Purchase is subject to customary closing conditions. In addition, the Share Purchase is conditioned on the applicable waiting periods under Rule 13e-3 of the Exchange Act and Schedule 13E-3 having expired. No approval of the Board or vote of stockholders of the Company is necessary in connection with the execution, delivery or performance of the Share Purchase Agreement and the parties are obligated to consummate the Share Purchase whether or not the Merger is completed.

Termination

Ramguard may terminate the Share Purchase Agreement if the closing of the transactions contemplated therein does not occur by May 31, 2018.

The Share Purchase Agreement is attached to this proxy statement as Annex D. For more information, see “ The Share Purchase Agreement ” beginning on page 70.

The Promissory Note and Pledge Agreement

At the closing of the transactions contemplated by the Share Purchase Agreement, Parent will issue the Promissory Note, which the members of Parent will join as pledgors, to Ramguard. Under the Promissory Note, Ramguard will be granted a security interest over (a) all of the equity securities of Parent, (b) all of the Class A Units of ZGP owned by Mr. Zugel and (c) all of the equity securities of the Company and its subsidiaries held directly or indirectly by Parent, Mr. Zugel or any entity wholly owned by Parent or Mr. Zugel (other than equity securities issued by the Company’s subsidiaries or equity tranches issued by structured vehicles (collateralized debt obligation vehicles and collateralized loan obligation vehicles, together referred to as “CLOs”), in each case, held by the Company or any direct or indirect subsidiary of the Company). If and to the extent required at any time in order to comply with the federal margin regulations, Mr. Zugel shall cause Parent either (x) to provide additional collateral for the outstanding balance of the Promissory Note or (y) prepay a portion of the outstanding balance under the Promissory Note.

The Promissory Note will also provide that upon a default, which includes, among other things, a payment default by Parent, the Company or any subsidiary in the payment of any judgment or the payment when due of any indebtedness for borrowed money in the amount of $1 million or more, which remains uncured beyond a 45-day grace period, or a breach of covenant by Parent or any pledgor under the Promissory Note which continues for 20 days (i) the interest rate on the Promissory Note shall increase to 12.5% and (ii) Ramguard will have the right (but not the obligation) to declare all amounts outstanding immediately due and payable and to exercise its security interest in the collateral securing the Promissory Note, and to recover collection costs (including reasonable legal fees).

Additionally, until such time that a take private transaction (which would include the Merger) is consummated by Mr. Zugel, Parent and their controlled affiliates and any third parties acting in concert with Mr. Zugel and Parent, if Mr. Zugel or Parent or any of their controlled affiliates receives any dividend or distribution from the Company or if Mr. Zugel receives any compensatory payments or distributions in excess of his base salary, an amount equal to the net, after-tax cash proceeds received by Mr. Zugel or Parent or any such controlled affiliate, as the case may be, will be used by Parent to repay outstanding principal under the Promissory Note. After consummation of a take private transaction, Parent will cause the Company and the Company’s subsidiaries not to consummate any sale of material assets for a price in excess of $2.5 million, and/or make any compensatory payments or distributions to Mr. Zugel in excess of his base salary; provided, however, that Ramguard’s prior written consent will not be required if an amount equal to the net, after-tax cash proceeds of any such sale of assets will be distributed by the Company and or its subsidiaries to their equity owners and an amount equal to the net, after-tax proceeds of any such sale of assets or compensatory payment or distribution received by Mr. Zugel or Parent or any of their controlled affiliates (other than the Company and its subsidiaries) will be used by Parent to repay outstanding principal under the Promissory Note. In addition, after consummation of a take private transaction, Parent will not (i) enter into any agreement that would cause a change in control transaction or sale of a majority or more of the shares of Class A Common Stock or (ii) make any distributions to its equity owners other than tax distributions until such time that the unpaid principal and any accrued and unpaid interest under the Promissory Note has been paid off.

In the event Mr. Zugel at any time is no longer an employee or officer of the Company, or is no longer the controlling stockholder of the Company and/or Parent, the unpaid principal and accrued and unpaid interest under the Promissory Note will become immediately due and payable.

All unpaid principal and accrued and unpaid interest under the Promissory Note may be paid in full or in part at the election of Mr. Zugel (x) on any quarterly interest payment date occurring on or after the date the purchase price payable by Mr. Zugel pursuant to the Share Purchase Agreement has been paid in full or (y) at any time in order to comply with the last sentence of the first paragraph under the heading “Promissory Note” above. For more information, see “ The Share Purchase Agreement—Promissory Note ” beginning on page 73.

The Parties to the Merger Agreement (Page 74)

The Company

ZAIS Group Holdings, Inc.
Two Bridge Avenue, Suite 322
Red Bank, NJ 07701

(732) 530-3610

The Company is a Delaware corporation and publicly traded holding company that conducts substantially all of its operations through its principal operating subsidiary ZAIS Group, LLC (“ZAIS Group”). ZAIS Group provides investment advisory and asset management services to private funds, separately managed accounts, CLOs and, until October 31, 2016, ZAIS Financial Corp. (“ZFC REIT”), a publicly traded mortgage real estate investment trust (collectively, the “ZAIS Managed Entities”). ZAIS Group also serves as the general partner to certain ZAIS Managed Entities, which are generally organized as pass-through entities for U.S. federal income tax purposes.

The Company’s Class A Common Stock is currently registered under the Exchange, and is listed on the NASDAQ Global Market under the symbol “ZAIS.”

Additional information about the Company is contained in its public filings, which are incorporated herein by reference. The Company’s Current Reports on Form 8-K, Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and proxy statements, and amendments to such, filed with the SEC are made available on the Company’s website at www.zaisgroupholdings.com . The Company’s code of ethics, corporate governance guidelines and key committee charters are also available on the Company’s website. See “Where You Can Find Additional Information” beginning on page 122 for additional information about where and how you can obtain copies of any materials the Company files with the SEC.

ZGH Merger Sub, Inc.

ZGH Merger Sub, Inc.
Two Bridge Avenue, Suite 322
Red Bank, NJ 07701

(732) 530-3610

ZGH Merger Sub, Inc., referred to herein as “Sub”, is a newly formed Delaware corporation and a wholly-owned subsidiary of the Company. As of the date of this proxy statement, Mr. Zugel and Nisha Motani, the Company’s Chief Financial Officer, are the directors of Sub. Sub has not engaged in any business other than in connection with the Merger and other related transactions.

Z Acquisition LLC

Z Acquisition LLC

Two Bridge Avenue, Suite 322
Red Bank, NJ 07701

(732) 530-3610

Information with respect to Z Acquisition LLC, referred to herein as “Parent”, is set forth above under “ Parties to the Share Purchase Agreement .”

The Merger Proposal

You are being asked to consider and vote upon the proposal to adopt the Merger Agreement. The Merger Agreement provides that Sub will be merged with and into the Company (the “Merger”), and each outstanding share of Class A Common Stock—other than shares beneficially owned or which are acquired by any member of the Parent Group, shares acquired pursuant to an exercise of exchange rights (“Exchange Shares”) with respect to Class A Units of ZGP (“Class A Units”) by a person who is not a member of the Parent Group, shares of Common Stock held by stockholders (if any) who have agreed with Parent to retain such shares in connection with the Merger (“Rollover Shares”), and stockholders of the Company who have properly and validly perfected, and not effectively waived, withdrawn or lost, their statutory appraisal rights under Delaware law (“Appraisal Shares”)—will be converted into the right to receive $4.10 in cash per share, without interest and less any required withholding taxes. The Parent Group has informed the Company that it will not seek to enter into any agreements that would establish any Rollover Shares and that it does not expect there to be any Exchange Shares. All outstanding restricted stock units (“RSUs”) are held by the Company’s independent directors and will be converted in the Merger into the right to receive $4.10 in cash for the number of shares of Class A Common Stock underlying such RSUs. The Merger will become effective at the time (the “Effective Time”) when the parties file a certificate of merger with the Secretary of State of the State of Delaware, to be executed, acknowledged and filed in accordance with the relevant provisions of Delaware law, or at such later date or time as may be agreed by the Company in writing and specified in the certificate of merger in accordance with Delaware law.

If the Merger is consummated, the Company will become a privately held company controlled by Mr. Zugel and his affiliates.

Conditions to the Merger (Page 86)

The obligations of the Company, on the one hand, and Parent, on the other hand, to consummate the Merger are subject to the satisfaction or mutual waiver by the Company and Parent (if permissible under applicable law; provided that the first conditions listed immediately below cannot be waived by any person in any circumstance), at or before the Effective Time, of the following conditions, in the manner described in “ The Merger Agreement—Conditions to the Merger ” beginning on page 86:

The obligation of the Company to effect the Merger is subject to the satisfaction or waiver by the Company, at or before the Effective Time, of the following conditions:

The obligation of Parent to complete the Merger is subject to the satisfaction or waiver by Parent, at or before the Effective Time, of the following conditions:

When the Merger Becomes Effective (Page 80 )

The Company anticipates completing the Merger in the second quarter of 2018, subject to receipt of the Requisite Stockholder Approval as specified in this proxy statement, and the satisfaction of the other closing conditions.

Reasons for the Merger; Recommendation of the Special Committee; Recommendation of the Board; Fairness of the Merger (Page   38 )

Based in part on the unanimous recommendation of the members of the Special Committee, the Board unanimously (with each of Mr. Zugel and Mr. Curry recusing himself) determined that the Merger Agreement and the transactions contemplated by it, including the Merger, are advisable and in the best interests of, and fair to, the Company and its stockholders (other than the Parent Group, Ramguard, any holders of Rollover Shares or Exchange Shares, and any affiliates of the foregoing, as to whom no view is expressed). The Board unanimously (with each of Mr. Zugel and Mr. Curry recusing himself) recommends that the stockholders of the Company vote “FOR” the proposal to adopt the Merger Agreement. For a description of the reasons considered by the Special Committee and the Board for their recommendations, see “ Special Factors—Reasons for the Merger; Recommendation of the Special Committee; Recommendation of the Board; Fairness of the Merger ” beginning on page 38. For descriptions of the fairness determinations made by the Special Committee, the Board and the Parent Group, see “ Special Factors—Reasons for the Merger; Recommendation of the Special Committee; Recommendation of the Board; Fairness of the Merger ” beginning on page 38 and “ Special Factors—Position of the Parent Group as to Fairness of the Merger ” beginning on page 50.

The purpose of the Merger is to enable the Company’s stockholders to realize the value of their investment in the Company through their receipt of $4.10 in cash per share (the “Merger Consideration” and, in the aggregate, the “Aggregate Merger Consideration”), without interest and less any applicable withholding tax. This represents a premium of approximately 138% over the trading price of $1.72 per share of Class A Common Stock on September 5, 2017, the last trading day prior to the date the initial proposal by Parent and Mr. Zugel was publicly disclosed.

The Parent Parties are undertaking the Share Purchase and the Merger at this time because Parent and Mr. Zugel initiated discussions with Ramguard with respect to the Share Purchase and made their proposal to the Special Committee for a take private transaction only after the culmination of the process undertaken by the Company, under the oversight of the Board and the Special Committee to explore financial and strategic alternatives for the Company to address the Company’s lack of scale and financial and operational challenges and enhance value for Company stockholders. In addition, the Parent Parties believe that the costs of remaining a public company have become more burdensome, and the challenges and risks of seeking to execute a turnaround in the Company’s performance while remaining a public company have become more acute, as a result of continued deterioration in the Company’s financial position and stock price performance.

Opinion of Financial Advisor to the Special Committee (See Page   43 and Annex B)

On January 11, 2018, Houlihan Lokey Capital, Inc. (“Houlihan Lokey”) rendered to the Special Committee an oral opinion (confirmed by delivery of Houlihan Lokey’s written opinion, dated January 11, 2018, to the Special Committee) as to the fairness, from a financial point of view and as of such date, of the Merger Consideration to be received by holders of Class A Common Stock (other than the Parent Group, Ramguard, any holders of Rollover Shares or Exchange Shares, and their respective affiliates) in the Merger pursuant to the Merger Agreement, which opinion was based on and subject to the various procedures followed, assumptions made, qualifications and limitations on the review undertaken and the other matters considered by Houlihan Lokey in connection with the preparation of its opinion .

Houlihan Lokey’s opinion was furnished for the use of the Special Committee (in its capacity as such), only addressed the fairness, from a financial point of view and as of January 11, 2018, of the Merger Consideration to be received by holders of Class A Common Stock (other than the Parent Group, Ramguard, any holders of Rollover Shares or Exchange Shares, and their respective affiliates) in the Merger pursuant to the Merger Agreement and did not address any related transactions, any other term, aspect or implication of the Merger or any other agreement, arrangement or understanding. The summary of Houlihan Lokey’s opinion in this proxy statement is qualified in its entirety by reference to the full text of Houlihan Lokey’s written opinion, which is attached as Annex B to this proxy statement and describes the procedures followed, assumptions made, qualifications and limitations on the review undertaken and the other matters considered by Houlihan Lokey in connection with the preparation of its opinion. Neither Houlihan Lokey’s opinion nor the summary of its opinion and the related analysis set forth in this proxy statement are intended to be, and do not constitute, advice or a recommendation to the Special Committee, the Board, the Company, any security holder or any other party as to how to act or vote with respect to any matter relating to the Merger, any related transactions or otherwise.

Parent Parties’ Purposes and Reasons for the Share Purchase and the Merger (Page 49)

Parent and Mr. Zugel are undertaking the Share Purchase as a step towards the acquisition of all outstanding shares of Class A Common Stock (other than any Rollover Shares or any Exchange Shares). The Parent Parties believe that, due to the Company’s lack of scale, the costs associated with being a public company, the historic volatility of the Class A Common Stock, the Company’s financial performance and the challenges of effecting a turnaround in the performance of the Company while the Class A Common Stock continues to be publicly traded, it would be in the best interests of the Company and the holders of Class A Common Stock to effect a going private transaction.

The acquisition of the Target Shares may be deemed to constitute a step towards a potential going-private transaction, whereby the Company would cease to be registered under the Exchange Act and delist from NASDAQ. The Parent Parties believe this would allow the Company to realize significant cost savings by eliminating the compliance, insurance, regulatory, and other costs associated with being a public reporting company. Further, as a private company, the Company may have more latitude to focus on long-term strategic planning in a competitive business environment and more flexibility regarding its investment strategy without scrutiny or pressure from the public investment community to meet earnings expectations or short-term goals.

The proposed Merger affords an opportunity for the members of the Parent Group to acquire the remaining Class A Common Stock (other than any Rollover Shares or Exchange Shares). The Parent Parties’ purposes and reasons are more fully described below in “ Special Factors—Parent Parties’ Purposes and Reasons for the Share Purchase and the Merger ” beginning on page 49.

Position of the Parent Parties as to Fairness of the Share Purchase and the Merger (Page   50 )

Each of the Parent Parties believes that the proposed terms of the Share Purchase and the proposed terms of the Merger are substantively and procedurally fair to Ramguard, its affiliates, and the unaffiliated holders of Class A Common Stock.  Their belief is based on the factors described in “ Special Factors—Position of the Parent Parties as to Fairness of the Share Purchase and the Merger ” beginning on page 50.

Certain Effects of the Merger (Page 52)

If the conditions to the closing of the Merger are either satisfied or, to the extent permitted, waived, Sub will be merged with and into the Company and the separate corporate existence of Sub will cease and the Company will continue its corporate existence under Delaware law as the surviving corporation in the Merger, with all of its rights, privileges, immunities, powers and franchises continuing unaffected by the Merger. Upon completion of the Merger, the Class A Common Stock—other than shares beneficially owned by the Parent Group, Rollover Shares, Exchange Shares, shares held in the Company’s treasury, the Target Shares, and any Appraisal Shares—will be converted into the right to receive $4.10 per share, without interest and less any required withholding taxes. Following the completion of the Merger, the Class A Common Stock will no longer be publicly traded, stockholders (other than the Parent Group and holders of Rollover Shares or Exchange Shares) will cease to have any ownership interest in the Company and the registration of the Class A Common Stock and the Company’s reporting obligations with respect to the Class A Common Stock under the Exchange Act will be terminated upon application to the SEC.

Treatment of the Company Equity Awards in the Merger (Page 80)

At the Effective Time of the Merger, each restricted stock unit (“RSU”) granted under the ZAIS Group Holdings, Inc. 2015 Stock Incentive Plan (the “2015 Stock Plan”) that is outstanding immediately prior to the Effective Time shall be cancelled and converted into the right to receive (without regard to its vesting schedule) an amount in cash equal to (i) the number of shares of Class A Common Stock underlying such RSU immediately prior to the Effective Time multiplied by (ii) the Merger Consideration. All outstanding RSUs are held by the Company’s independent directors.

Interests of the Company’s Directors and Executive Officers in Share Purchase and the Merger (Page 59)

Other than Mr. Zugel and Mr. Curry, none of the directors and executive officers of the Company has any interest in the Share Purchase.

In considering the recommendations of the Special Committee and of the Board with respect to the Merger Agreement, you should be aware that, aside from their interests as stockholders of the Company, the Company’s directors and executive officers have interests in the Merger that may be different from, or in addition to, those of other stockholders of the Company generally. This is particularly true of (i) Mr. Zugel who, as the sole trustee of the Class B Voting Trust (as defined below) and sole managing member of the Parent, will indirectly control the Company following the Merger and (ii) Mr. Curry who, as a member of Parent, will indirectly own a significant stake in the Company following the Merger. Interests of executive officers and directors that may be different from or in addition to the interests of the Company’s stockholders include:

These interests are discussed in more detail in the section entitled “ Special Factors—Interests of the Company’s Directors and Executive Officers in the Share Purchase and the Merger ” beginning on page 59. The Special Committee and the Board were aware of the different or additional interests described in this proxy statement and considered those interests along with other matters in recommending and/or approving, as applicable, the Merger Agreement and the transactions contemplated by it.

Regulatory Approvals (Page 63)

No material federal or state regulatory approvals, filings or notices are required in connection with the Share Purchase or the Merger other than (1) the filing of a certificate of merger with the Secretary of State of the State of Delaware by the Company and Sub following the Closing and (ii) the approval of the Financial Conduct Authority, a regulatory body in the United Kingdom.

Termination (Page 87)

The Company (pursuant to a resolution adopted by the Special Committee) and Parent may terminate the Merger Agreement by mutual written consent at any time before the Effective Time, whether prior to or after receipt of the Requisite Stockholder Approval. In addition, either the Company or Parent (as applicable) may terminate the Merger Agreement if:

In addition, the Company (pursuant to a resolution adopted by the Special Committee) or Parent may terminate the Merger Agreement if prior to the Effective Time, the Special Committee or the Board (acting on the recommendation of the Special Committee) shall have made a change in its recommendation to the Company’s stockholders in favor of approving the Merger Agreement (an “Adverse Company Recommendation”, as discussed in more detail in the section entitled “ The Merger Agreement—Other Covenants and Agreements ” beginning on page 85).

Fees and Expenses (Page 88)

The Company is required to reimburse Parent and the other members of the Parent Group for all documented fees and expenses incurred by them (including reasonable attorneys’ fees) in connection with the Merger Agreement and the transactions contemplated thereby, up to a maximum of $1,500,000 in the aggregate, if the Company or the Parent terminates the Merger Agreement because of an Adverse Company Recommendation.

Specific Performance (Page 88)

Under certain circumstances, each of the Company and Parent are each entitled to specific performance of the terms of the Merger Agreement, in addition to any other remedy at law or equity.

Financing (Page 58)

The Company intends to partially fund the payment of the Aggregate Merger Consideration from cash on hand. To increase the amount of cash held by the Company, immediately before the Merger, Parent will contribute $12,649,676.70 in cash to ZGP in exchange for 3,085,287 Class A Units, which cash will then be paid to the Company by ZGP for the redemption of an equivalent number of Class A Units held by the Company. This contribution will be effected pursuant to the ZGP Investment Agreement (as discussed in more detail in the section entitled “ Agreements With Parent Group Members—Investment Agreement ” beginning on page 119) among ZGP, Parent, and, for limited purposes, Mr. Zugel. The Merger is not subject to a financing condition. However, if the Company does not receive the cash pursuant to the ZGP Investment Agreement, it is unlikely the Company will be able to fund the Aggregate Merger Consideration and consummate the Merger. There can be no assurance that Parent will have sufficient funds to consummate the purchase of Class A Units pursuant to the ZGP Investment Agreement, and if Parent fails to perform its obligations pursuant to the ZGP Investment Agreement, as a result of Parent’s limited assets, the Company will, in such event, have limited recourse other than the ability to exercise its rights against the Covered Stockholders (as defined below) under the Voting Agreements, to the extent such Covered Stockholders have breached their related obligations under the applicable Voting Agreement (as discussed in more detail in the section entitled “ Agreements With Parent Group Members—Voting Agreement ” beginning on page 119).

Voting Agreements (Page 119)

In connection with the Merger Agreement, Parent, Mr. Zugel, Mr. Zugel’s spouse, and certain trusts for members of Mr. Zugel’s family (the “Covered Stockholders”) and the Company entered into a Voting Agreement (the “Parent Group Voting Agreement”). Pursuant to the terms and conditions set forth in the Parent Group Voting Agreement, each Covered Stockholder has agreed (i) to vote, or cause to be voted, all shares of Common Stock owned by the Covered Stockholder (representing an aggregate of approximately 93.44% of the Company’s total outstanding voting power as of January 11, 2018) for the adoption of the Merger Agreement, (ii) not to transfer or engage in certain transactions with respect to shares of Common Stock owned by the Covered Stockholder (subject to certain exceptions), (iii) to use reasonable best efforts to consummate the transactions contemplated by the Share Purchase Agreement and the ZGP Investment Agreement (as described below), (iv) to refrain from seeking to remove any member of the Special Committee or taking any action that would limit the independence or authority of the Special Committee, and (v) to take, or refrain from taking, certain other actions in furtherance of the consummation of the Merger.

Similarly, in connection with the Merger Agreement, Ramguard, NAR Special Global, LLC (a Delaware limited liability company and an affiliate of Ramguard) (the “Ramguard Parties”), Mr. Ramsey, for limited purposes, and the Company entered into a separate Voting Agreement (the “Ramguard Voting Agreement”). In accordance with the terms and conditions set forth in the Ramguard Voting Agreement, the Ramguard Parties have agreed (i) to vote, or cause to be voted, all shares of Common Stock owned by the Ramguard Parties, other than the Target Shares which will be voted by Parent pursuant to the terms of the Share Purchase Agreement (representing an aggregate of approximately 4.47% of the Company’s total outstanding voting power as of January 11, 2018), for the adoption of the Merger Agreement, (ii) not to transfer or engage in certain transactions with respect to shares of Common Stock owned by the Ramguard Parties (subject to certain exceptions, including the transactions contemplated by the Share Purchase Agreement), (iii) not to make any material amendment or grant any material waiver under the Share Purchase Agreement without the prior written consent of the Company, (iv) to use their reasonable best efforts to consummate the transactions contemplated by the Share Purchase Agreement, and (v) to take, or refrain from taking, certain other actions in furtherance of the consummation of the Merger.

In connection with the Merger Agreement, Mr. Curry entered into a letter agreement with the Company of even date with the Merger Agreement (the “Curry Support Agreement”). Pursuant to the terms and conditions set forth in the Curry Support Agreement, Mr. Curry agreed (i) not to acquire or engage in certain transactions with respect to Common Stock of the Company during the period from the date of the Merger Agreement until the closing of the Merger, (ii) to use his reasonable best efforts to consummate the transactions contemplated by the Share Purchase Agreement and the ZGP Investment Agreement (as described below), including making capital contributions to Parent as and when called in furtherance of such transactions, (iii) to cooperate with the Company as the Company prepares certain SEC filings in connection with the Merger, (iv) to refrain from seeking to remove any member of the Special Committee or taking any action that would limit the independence or authority of the Special Committee, and (v) to take, or refrain from taking, certain other actions in furtherance of the consummation of the Merger.

ZGP Investment Agreement (Page 119)

In connection with the Merger Agreement, ZGP, Parent, and Mr. Zugel (solely with regard to consenting to the issuance of Class A Units in his capacity as the founder member representative of ZGP) entered into an Investment Agreement of even date with the Merger Agreement (the “ZGP Investment Agreement”), in the form attached as Exhibit B to the Merger Agreement. Subject to the terms and conditions set forth in the ZGP Investment Agreement, the parties to the ZGP Investment Agreement, other than Mr. Zugel, agreed that, immediately prior to the Merger, ZGP will issue 3,085,287 Class A Units in exchange for a contribution from Parent to ZGP of $12,649,676.70 in cash.

ZGP intends to use the proceeds from the contribution by Parent, together with cash obtained from its operating subsidiary ZAIS Group, to redeem for cash a number of Class A Units held by the Company corresponding to the number of outstanding shares of Class A Common Stock that are to be converted into the right to receive the Merger Consideration (the “Unit Redemption”) for an amount equal to the Aggregate Merger Consideration. Following the Unit Redemption, the Company intends to use the cash paid to it by ZGP to fund a portion of the Aggregate Merger Consideration.

Material U.S. Federal Income Tax Consequences of the Merger (Page 61)

If you are a U.S. Holder (as defined below), the receipt of cash in exchange for Class A Common Stock pursuant to the Merger generally will be a taxable transaction for U.S. federal income tax purposes. You should consult your own tax advisors regarding the particular tax consequences to you of the exchange of Class A Common Stock for cash pursuant to the Merger in light of your particular circumstances (including the application and effect of any state, local or foreign income and other tax laws).

Rights of Appraisal (Page 64 and Annex C)

The Share Purchase is not subject to the approval of holders of Class A Shares and does not give rise to dissenters’ rights of appraisal.

Company stockholders who do not vote in favor of adoption of the Merger Agreement and who are entitled to demand, and properly demand, appraisal of their shares of Class A Common Stock and otherwise comply with all the requirements of Section 262 of the General Corporation Law of the State of Delaware (the “DGCL”) will be entitled to seek appraisal for, and obtain payment in cash for the judicially determined fair value of, their shares of Class A Common Stock in lieu of receiving the Merger Consideration if the Merger is completed. In addition to not voting in favor of the adoption of the Merger Agreement, the dissenting stockholder must deliver to the Company a written demand for appraisal of such stockholder’s shares prior to the vote on the adoption of the Merger Agreement and continue to hold such shares until the consummation of the Merger.

The Annual Meeting (Page 75)

The annual meeting will be held at the Oyster Point Hotel, 146 Bodman Place, Red Bank, NJ 07701, on [●], 2018, beginning at [●] a.m. Eastern Time.

This proxy statement, which you should read carefully, contains important information about the Merger, the Merger Agreement, the annual meeting and the other matters to be voted on at the annual meeting. In addition to the proposal to adopt the Merger Agreement, you are also being asked to consider and vote on a number of other important matters, including the election of directors, and, potentially, the adjournment of the meeting to solicit additional proxies and any other matter properly brought before the annual meeting or any adjournments or postponements of it.

Your vote is very important. The enclosed materials allow you to submit a proxy to vote your shares of Common Stock without attending the annual meeting and to ensure that your shares of Common Stock are represented and voted at the annual meeting. Even if you plan to attend the annual meeting, you are encouraged to submit a proxy as soon as possible.

Record Date and Quorum (Page 75)

The holders of record of the Common Stock as of the close of business on April 2, 2018, the record date, are entitled to receive notice of and to vote at the annual meeting. As of the record date, 14,555,113 shares of Class A Common Stock were outstanding and 20,000,000 shares of Class B Common Stock were outstanding. The shares of Common Stock in treasury on that date, if any, will not be voted. On all matters to be voted on at the annual meeting, each holder of record of Class A Common Stock on the record date will be entitled to one vote for each share and each holder of record of Class B Common Stock on the record date will be entitled to ten votes for each share.

The presence at the annual meeting, in person or by proxy, of the holders of a majority of the aggregate voting power of the Common Stock outstanding on the record date and entitled to vote will constitute a quorum, permitting the Company to conduct its business at the annual meeting. The members of the Parent Group who are party to the Parent Group Voting Agreement (as described in “ Agreements With Parent Group Members—Voting Agreement ”) are required pursuant thereto to cause their respective shares of Common Stock to be present at the meeting for purposes of establishing a quorum. Therefore, a quorum is contractually assured.

Required Votes (Page 75)

For the Company to complete the Merger, under Delaware law, it must obtain the Statutory Stockholder Approval. The receipt of the Statutory Stockholder Approval is contractually assured because the members of the Parent Group and the Ramguard Parties, who hold shares representing a majority of the voting power of the Company, have agreed to vote their shares in favor of the Merger Agreement pursuant to the Parent Group Voting Agreement (as described in “ Agreements With Parent Group Members—Voting Agreement ”) and the Ramguard Parties Voting Agreement, respectively, in the form attached as Exhibits A-1 and A-2 to the Merger Agreement. In addition, it is a condition to the consummation of the Merger that the Majority of the Minority Stockholder Approval is obtained, and this is not assured of occurring. Based on the Company’s outstanding Common Stock as of the record date, the Majority of the Minority Stockholder Approval will require the affirmative vote on the Merger proposal of stockholders (other than the members of the Parent Group, any director or executive officer of the Company, Ramguard, any holder of Rollover Shares or Exchange Shares, or any affiliates of the foregoing persons) holding at least 2,137,548 shares of Class A Common Stock. A failure to vote your shares of Common Stock or an abstention from voting will have the same effect as a vote against adoption of the Merger Agreement.

For purposes of Proposal 2 (election of directors), the election of each director nominee must be approved by a plurality of the votes cast by stockholders represented at the meeting in person or by proxy. A “plurality” means that the individuals who receive the largest number of votes “FOR” are elected as directors up to the maximum number of directors to be elected at the annual meeting. Proposal 3 (adjournment proposal) requires the affirmative vote of a majority of the shares present in person or represented by proxy at the annual meeting and entitled to vote on the proposal.

The completion of the Merger is not contingent upon the approval of Proposals 2 or 3.

Recommendation of the Board

Based in part on the unanimous recommendation of the Special Committee, the Board (other than Mr. Zugel and Mr. Curry, each of whom has recused himself) recommends that the stockholders vote:

The Board also recommends that you vote:

You should read “Special Factors—Reasons for the Merger; Recommendation of the Special Committee; Recommendation of the Board; Fairness of the Merger” beginning on page 38 for a discussion of the factors that the Special Committee and the Board considered in deciding to recommend and/or approve, as applicable, the Merger Agreement. See also “Special Factors—Interests of the Company’s Directors and Executive Officers in the Share Purchase and the Merger” beginning on page 59.

Voting; Proxies; Revocation (Page 77)

If you hold your shares in “street name” through a broker, bank or other nominee, you should follow the directions provided by it regarding how to instruct it to vote your shares. If you are a stockholder of record, you can ensure that your shares are voted at the annual meeting by submitting your proxy via:

Holding in “Street Name”

Most of the Company’s stockholders hold their shares through a broker, bank or other nominee (that is, in “street name”) rather than directly in their own name. If you hold your shares in street name, the proxy materials were made available to you by the organization holding your account. As a holder in street name, you have the right to instruct that organization on how to vote the shares held in your account. If you requested printed copies of the proxy materials by mail, you will receive a voting instruction form from your broker, bank or other nominee.

All of the proposals, including the proposal for adoption of the Merger Agreement, are not routine matters and your broker, bank or other nominee will only vote your shares on these proposals if you provide specific instructions on how to vote. You should follow the directions provided by your broker, bank or other nominee regarding how to instruct your broker, bank or other nominee to vote your shares. Without instructions, your shares will not be voted for adoption of the Merger Agreement and will effectively be votes against adoption of the Merger Agreement. A failure to give voting instructions will have no effect on the other non-routine proposals.

Stockholders of Record

If your shares are registered directly in your name with the Company’s transfer agent, Broadridge Corporate Issuer Solutions, you are considered the stockholder of record with respect to those shares, and the proxy materials were made available directly to you by the Company.

Abstentions

If you vote “ABSTAIN” by proxy or in person at the annual meeting, it will have the same effect as a vote “against” the proposal to adopt the Merger Agreement and will have no effect on Proposal 2 (election of directors). For Proposal 3 (adjournment proposal), the Company will treat abstentions as shares present or represented and entitled to vote on this proposal. Accordingly, such a vote on Proposal 3 will have the same effect as a vote “against” this proposal.

Changing Your Vote

If you are a stockholder of record, you can change your vote at any time before your proxy is voted at the annual meeting by properly delivering a later-dated proxy either by mail, the Internet or telephone or attending the annual meeting in person and voting (but simply attending the annual meeting will not cause your proxy to be revoked). You also may revoke your proxy by delivering a notice of revocation to the Company’s corporate secretary prior to the vote at the annual meeting. If your shares of Common Stock are held in street name, you must contact your broker, bank or other nominee to revoke your proxy.

Householding (Page 122)

In accordance with a notice sent to certain street name holders of Common Stock who share a single address, stockholders at a single address will receive only one copy of this proxy statement and the Company’s annual report on Form 10-K for the year ended December 31, 2017, unless the Company has previously received contrary instructions. This practice, known as “householding,” is designed to reduce the Company’s printing and postage costs. The Company does not currently “household” for stockholders of record. If your household received a single set of proxy materials, but you would prefer to receive a separate copy of this proxy statement or the Company’s annual reports on Form 10-K for the years ended December 31, 2016 and 2017, contact the Company at ZAIS Group Holdings, Inc., Two Bridge Avenue, Suite 322, Red Bank, New Jersey 07701-1106, Attn: Secretary, and you will be provided those documents promptly after the Company has received your request. You may also change your householding preferences through the Broadridge Householding Election system at 1-866-540-7095.

You may request or discontinue householding in the future by contacting the broker, bank or other nominee through which you hold your shares.

Exchanging Shares for Merger Consideration

If stockholders vote to adopt the Merger Agreement, after the Merger is completed, you will be sent a letter of transmittal with detailed written instructions for exchanging your shares of Common Stock for the Merger Consideration. If your shares of Common Stock are held in “street name” by your broker, bank or other nominee, you may receive instructions from your broker, bank or other nominee as to what action, if any, you need to take to effect the surrender of your “street name” shares in exchange for the per share Merger Consideration. Do not send in your certificates now.

If you transfer your shares of Common Stock, you will have transferred your right to receive the Merger Consideration in the Merger. In order to receive the Merger Consideration, you must hold your shares of Common Stock through completion of the Merger. The record date for stockholders entitled to vote at the annual meeting is earlier than the date on which the Merger will be consummated. As such, if you transfer your shares of Common Stock after the record date but before the annual meeting, you will have transferred your right to receive the Merger Consideration, but retained the right to vote at the annual meeting.

Questions

If you have questions about the Merger, or require assistance in submitting your proxy or voting your shares or need additional copies of the proxy statement or the enclosed proxy, please contact MacKenzie Partners, Inc., which is acting as the proxy solicitation agent and information agent in connection with the Merger.

MacKenzie Partners, Inc.

105 Madison Avenue

New York, New York 10016

Telephone: (212) 929-5500

Toll-Free (800) 322-2885

Email: proxy@mackenziepartners.com

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

SPECIAL FACTORS

Background

The Company (originally known as HF2 Financial Management Inc.) was formed for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization, or other similar business combination with one or more businesses or entities, with a focus on companies operating in the financial services industry. In fulfillment of that objective, on March 17, 2015, pursuant to an Investment Agreement, dated as of September 16, 2014 (as amended on October 31, 2014 and March 4, 2015, the “Investment Agreement”), the Company consummated a transaction (the “Business Combination”) whereby it acquired a 66.5% interest in ZGP. Pursuant to the Investment Agreement, the Company contributed $78.2 million in cash to ZGP in exchange for newly-issued Class A Units of ZGP. In addition, in connection with the transaction, all of the Company’s outstanding shares of Class B Common Stock were transferred to the members of ZGP (the “ZGP Founders”) on a pro rata basis, and then immediately contributed to the ZGH Class B Voting Trust (the “Class B Voting Trust”), of which Mr. Zugel is the sole trustee.

Also on March 17, 2015, in connection with the closing of the Business Combination, the ZGP Founders, including Mr. Zugel, and the Company entered into a voting trust agreement for the Class B Voting Trust (the “Voting Trust Agreement”). Pursuant to the Voting Trust Agreement and in his capacity as sole trustee of the Class B Voting Trust, Mr. Zugel has voting power over the shares of Class B Common Stock held in the Class B Voting Trust. Shares of Class B Common Stock hold no economic interest in the Company, but shares of Class B Common Stock may, as a single class, be voted with the shares of Class A Common Stock of the Company and carry 10 votes per share, thus enabling Mr. Zugel, as the sole trustee of the Class B Voting Trust, to control the vote of all common shares. Class B Common Stock is not registered under the Exchange Act or listed on any securities exchange. There are currently 20 million shares of Class B Common Stock outstanding, all of which are held by the Class B Voting Trust.

In connection with the closing of the Business Combination, the Company, ZGP, the ZGP Founders, and Mr. Zugel, as trustee of the Class B Voting Trust, entered into an Exchange Agreement (as amended on July 21, 2015, the “Exchange Agreement”). The Exchange Agreement entitles each ZGP Founder, including Mr. Zugel, to exchange such ZGP Founder’s respective Class A Units, on a quarterly basis commencing after March 17, 2017, for (at the Company’s option, as determined by the Company’s Audit Committee): (i) a number of shares of Class A Common Stock equal to the exchange rate (currently one-to-one), (ii) cash in an amount equal to the fair market value of the Class A Common Stock subject to exchange, or (iii) a combination of Class A Common Stock and cash. Generally, the number of Class A Units that may be exchanged by any ZGP Founder for any quarter may not exceed 25% of the aggregate number of Class A Units held by such ZGP Founder as of the first day of the 12-month period, commencing on or following the second anniversary of the date of the Exchange Agreement, in which the applicable quarterly exchange occurs. The Exchange Agreement also provides that immediately prior to the occurrence of any change of control (as defined in the Exchange Agreement), each unit-holder may surrender all or a portion of its Class A Units in exchange for Class A Common Stock. As of [●], 2018, Mr. Zugel held 3,325,000 Class A Units, all of which are, under certain circumstances, exchangeable for shares of Class A Common Stock in accordance with the terms of the Exchange Agreement, as described above, subject to the limitations set forth in the Exchange Agreement.

The ZGP Founders also have certain rights under a Tax Receivable Agreement, dated March 17, 2015 (as amended on July 21, 2015, the “Tax Receivable Agreement”), in connection with exchanges under the Exchange Agreement and in the event of a change of control (as defined in the Exchange Agreement).

The Business Combination resulted in the Company becoming a publicly traded holding company conducting substantially all of its operations through ZAIS Group. ZAIS Group’s business consists of providing investment advisory and asset management services to private funds, separately managed accounts, and structured vehicles (including CLOs). After giving effect to the Business Combination, the Company had cash and cash equivalents of approximately $73.5 million. The Company then sought to deploy this capital through acquisitions and other transactions and investments in an effort to enhance stockholder value.

The Board and management regularly reviewed the Company’s strategic direction, operational and financial performance, industry conditions, regulatory developments, and potential opportunities with the goal of creating and enhancing stockholder value. As part of these efforts, the Board and management reviewed and considered a wide range of strategic alternatives that could be expected to contribute to the growth of the Company. These strategic alternatives included potential business combinations involving acquisitions or sales of all or a portion of the Company. The Board and Company management actively engaged in this process for approximately two years, leading to the establishment, on February 15, 2017, by the Board of the Special Committee of independent and disinterested directors to consider proposals for strategic transactions, as well as to consider all other strategic options for the Company.

From August 2015 through September 2017, the Company’s financial advisors, PL Advisors and Berkshire Capital Securities LLC (“Berkshire Capital”), as noted below, reached out to approximately 49 potential counterparties, including financial sponsors, potential strategic buyers, potential strategic sellers, and private investors. The Company engaged with 33 of these potential counterparties, with 29 of these potential counterparties executing non-disclosure agreements and 28 receiving non-public evaluation materials.

On April 16, 2015, the Company engaged an investment advisory firm, PL Advisors, as its financial advisor. PL Advisors’ engagement initially focused on a specific potential strategic transaction. On August 1, 2015, the Company expanded PL Advisors’ engagement to include serving as a non-exclusive financial advisor in connection with a variety of potential strategic transactions, including potential business combinations involving acquisitions or sales of all or a portion of the Company. Over the next two years, the Company, with the assistance of its advisors, evaluated numerous potential strategic transactions, with an initial focus on transactions in which the Company would acquire the candidate or otherwise retain control.

Throughout the periods described below, the Company’s management led the day-to-day strategic review process, regularly updating the Board and submitting to the Board formal proposals when such proposals were received. As the Company’s Chief Investment Officer and controlling stockholder, Mr. Zugel was actively involved in discussions with potential counterparties (including terminating such discussions).

On August 6, 2015, the Company reported its financial results for the quarter ended June 30, 2015, the first full fiscal quarter following the closing of the Business Combination. The Company reported Adjusted EBITDA (which is a non-GAAP financial measure that the Company views as a key performance metric and which is discussed in more detail in the Company’s SEC filings) of negative $(4.8) million compared to positive Adjusted EBITDA of $15.5 million for the same period in the prior year. The Company also reported having $4.359 billion in assets under management (“AUM”) as of June 30, 2015. On August 6, 2015, the closing price of the Class A Common Stock was $10.49 per share. Between August 6, 2015 and early September 2015, the closing price of the Class A Common Stock declined from $10.49 per share to less than $6 per share.

On September 15, 2015, a party, which we refer to as Party A, executed a non-disclosure agreement with the Company. On September 22, 2015, a second party, which we refer to as Party B, entered into a non-disclosure agreement with the Company.

Company management provided the Board with an update on the Company’s strategic review process on November 2, 2015. By that date, the trading price of the Class A Common Stock had recovered and the stock was trading above $10.50 per share.

On November 6, 2015, the Company reported its financial results for the quarter ended September 30, 2015. The Company reported negative Adjusted EBITDA for the quarter of $(1.1) million, compared to negative Adjusted EBITDA of $(2.2) million for the same quarter in the prior year, and negative Adjusted EBITDA for the nine months ended September 30, 2015 of $(11) million, relative to positive Adjusted EBITDA of $26.4 million for the same period in the prior year. The Company also reported having $4.201 billion AUM as of September 30, 2015, down by more than $150 million since June 30, 2015. On November 6, 2015, the closing price of the Class A Common Stock was $10.54 per share. Between November 6, 2015 and early February 2016, the closing price of the Class A Common Stock declined from $10.54 per share to less than $4 per share.

On November 25, 2015, the Company delivered a proposal to Party A to acquire 100% of Party A for a combination of 14 million shares of Class A Common Stock, $5 million in cash, and an earn-out. Based upon the trading price of the Class A Common Stock at that time, the proposal implied an offer value of more than $145 million for Party A. Discussions between Party A and the Company continued thereafter.

On December 9, 2015, Company management provided the Board with an update on the Company’s strategic review process. On December 14, 2015, Mr. Zugel had a follow up meeting with Party A representatives to discuss the potential business combination between the Company and Party A.

On December 17, 2015, another entity, which we refer to as Party C, executed a non-disclosure agreement with the Company.

On January 12, 2016, Company management provided the Board with an overview of discussions with Party A. The Board directed Company management to continue to engage in discussions with Party A towards reaching agreement on terms for a transaction that Company management could recommend to the Board and ultimately to the Company’s stockholders.

On January 14, 2016, Mr. Ramsey sent an email to Mr. Zugel, expressing, among other things, concerns regarding the Company’s strategic direction and cost structure. On several occasions after January 14, 2016, Mr. Ramsey expressed to Mr. Zugel concerns about the Company’s financial performance, business plans, strategy, lines of business and cost structure.

On January 17, 2016, Party A sent a written counterproposal to the Company. This proposal contemplated the issuance to Party A of Class A Units in ZGP rather than Class A Common Stock, which would have resulted in substantial dilution of the Company’s interest in ZGP and given Party A effective control of the Company through ownership of a majority of ZGP and certain other governance rights. Company management determined the proposal was not in the best interests of the Company and its stockholders.

On February 17, 2016, Mr. Zugel had separate meetings with representatives of Party C, another entity, which we refer to as Party D, and another entity, which we refer to as Party E. Party E’s primary interest was in a potential acquisition of the Company’s CLO management contracts and related business platform.

On February 23, 2016, the Company entered into a non-disclosure agreement with Party D, covering only Party D’s information. Also on February 23, 2016, Company management provided the Board with an update on the Company’s strategic review process and reported that the Company was in preliminary discussions with Berkshire Capital, which had acted as a financial advisor to the Company before the Business Combination, to potentially engage it as a financial advisor to assist the Company in identifying potential strategic transactions to enhance the value of the Company for the benefit of its stockholders.

On February 24, 2016, Mr. Zugel met with a representative of another entity, which we refer to as Party F, to discuss a potential business combination. On March 9, 2016, Party F executed a non-disclosure agreement with the Company.

On March 10, 2016, the Company reported its financial results for the quarter and year ended December 31, 2015 and filed its 2015 annual report with the SEC. The Company reported negative Adjusted EBITDA of $(3.4) million for the quarter, compared with positive Adjusted EBITDA of $14.8 million for the same period in the prior year. Adjusted EBITDA for the year ended December 31, 2015 was negative $(14.3) million, compared with Adjusted EBITDA of $41.1 million for the same period in 2014. The Company also reported $4.157 billion AUM as of December 31, 2015. The Company also announced that it was conducting a strategic review of its business and fund activities with a view towards improving profitability through organic growth, reduction in expenses, acquisitions, dispositions of assets or the sale or termination of product lines. The Company also announced an exit from residential whole loan activities and the commencement of a reduction in its labor force. On March 10, 2016, the closing price of the Class A Common Stock was $6.64 per share.

On April 21, 2016, Company management provided the Board with an update on the Company’s strategic review process and discussed with the Board the proposed engagement of Berkshire Capital as the Company’s financial advisor. On April 22, 2016, the Company engaged Berkshire Capital as a financial advisor. On May 6, 2016, the Company and PL Advisors agreed to terminate their engagement effective as of August 1, 2016.

Following its engagement, Berkshire Capital aggregated potential transaction counterparties from several industry sources that it then filtered by size and potential interest, with the input of Company management, to approximately 30 potential strategic partners that were screened by cultural fit, existing business capabilities, ability to participate in such a transaction, perceived interest, and other salient factors.

On May 10, 2016, the Company reported its financial results for the quarter ended March 31, 2016. The Company reported negative Adjusted EBITDA for the quarter of $(6.1) million, compared to negative Adjusted EBITDA of $(5.9) million for the same quarter in the prior year. The Company also reported $3.991 billion AUM as of March 31, 2016, down more than $160 million since December 31, 2015. The Company also announced the planned termination of its management agreement with ZAIS Financial Corp., a publicly traded mortgage real estate investment trust. On May 10, 2016, the closing price of the Class A Common Stock was $2.99 per share, down from $6.64 at the time of the Company’s 2015 annual report.

On May 17, 2016, Party C submitted a proposal (supplemented by further background information on May 23, 2016) to acquire certain assets of ZGP. The Company’s management determined that this proposal was not in the best interests of the Company’s stockholders and declined to pursue it.

On May 19, 2016, the Company entered into a second non-disclosure agreement with Party D, covering the Company’s information. The next day, Mr. Zugel met with Party D representatives to discuss a potential business combination.

On June 2, 2016, another entity, which we refer to as Party G, entered into a non-disclosure agreement with the Company.

On June 8, 2016, Company management provided the Board with an update on the Company’s strategic review process.

On June 30, 2016, the Company submitted to Party D a proposal to acquire all of the outstanding capital stock of Party D for $10.50 per share in cash, or approximately $250 million, subject to various conditions, including obtaining financing.

On July 11, 2016, the Company received notice that Party D had decided to reject the Company’s proposal in favor of a transaction with a different party. Thereafter, Company management instructed Berkshire Capital to identify additional potential counterparties interested in acquiring the Company.

On August 2, 2016, at a meeting of the Board, Company management provided the Board with an update on the Company’s strategic review process, noting that Berkshire Capital had identified 31 potential transaction counterparties, each of which had been discussed by Company management with Berkshire Capital. Company management reported that they had authorized Berkshire Capital to make preliminary inquiries with respect to several of these potential counterparties that Company management determined could match with the Company’s business objectives.

On August 3, 2016, Mr. Zugel met with a representative of another potential counterparty, which we refer to as Party H, to discuss a potential business combination between the Company and Party H. Also on August 3, 2016, Mr. Zugel met with a representative of Party G to discuss a potential business combination. The next day, a Party G representative emailed Mr. Zugel indicating Party G’s potential interest in a transaction, if a transaction could be structured that would be accretive to Party G.

On August 9, 2016, the Company reported its financial results for the quarter ended June 30, 2016. The Company reported negative Adjusted EBITDA for the quarter of $(4.5) million, compared to negative Adjusted EBITDA of $(4.1) million for the same quarter in the prior year. The Company also reported $3.949 billion AUM as of June 30, 2016. On August 9, 2016, the closing price of the Class A Common Stock was $2.79 per share.

On August 10, 2016, Mr. Zugel and a Party H representative again met to discuss a potential business combination.

On August 30, 2016, Party G executed a second non-disclosure agreement with the Company. On September 15, 2016, another potential counterparty, which we refer to as Party I, entered into a non-disclosure agreement with the Company.

Also on September 15, 2016, at a meeting of the Board, Howard Steinberg, then General Counsel of the Company, discussed with the Board its responsibilities and fiduciary duties relating to the strategic review process. During this meeting, Company management recommended that the Company begin a formal process to solicit third-party indications of interest in respect of strategic transactions, including the potential acquisition of the Company by a third party, and proposed to commence sending information to potential counterparties, coordinated through Berkshire Capital. The Board authorized Company management to proceed with this process.

On September 16, 2016, while discussions between the Company and several potential counterparties were ongoing, Berkshire Capital disseminated a process letter to other potential counterparties that Berkshire Capital had previously contacted and that Berkshire Capital believed might have interest in a business combination transaction. This process letter requested that interested counterparties respond with a preliminary, nonbinding indication of interest by October 7, 2016.

On September 20, 2016, Party H entered into a non-disclosure agreement with the Company. On September 22, 2016, another potential counterparty, which we refer to as Party J, entered into a non-disclosure agreement with the Company.

On October 7, 2016, Party G submitted a proposal to acquire certain Company assets (including investment management contracts and investments in managed CLOs and funds). Party G’s proposal contemplated that the Company would distribute its cash and other remaining assets, in addition to cash consideration to be paid by Party G for the acquired assets, to the Company’s stockholders and holders of the Class A Units. This would have resulted in the liquidation of the Company. Party G’s proposal was subject to several conditions, including completion of diligence and a requirement that $16.7 million of the Company’s net operating losses would be preserved in the transaction for use by Party G. According to Party G, the net proceeds (including Company cash and other assets not acquired by Party G) to the Company’s stockholders and the holders of Class A Units would have equaled between $88 million and $95 million or between $4.00 and $4.31 per share. This proposal did not take into account shut-down and other costs of executing this transaction that Company management believed would be substantial. The Company’s management and the Board concluded that the proposed transaction would result in per share cash to the stockholders well below the $4.00 to $4.31 projected by Party G, and, accordingly, would not be in the best interests of the Company’s stockholders.

Also on October 7, 2016, Party F submitted a proposal that contemplated a per-share consideration of $3.50 (excluding shares owned by entities affiliated with Mr. Zugel and Ramguard), conditioned upon the occurrence of a “going private” transaction involving Mr. Zugel and Ramguard. This per-share price was calculated on the assumption that the Company would have at least $40 million in cash and investments in Company-sponsored products at closing, and that any non-cash assets (such as any CLO risk-retention amounts) would be freely saleable or financeable on commercially reasonable terms. Discussions between the parties terminated in spring 2017, when Party F informed the Company that it preferred to engage with the Company only if and after the Company had been taken private.

On October 10, 2016, Party I submitted an indication of interest to acquire the Company’s CLO management contracts for a cash payment of between $10 million and $15 million, subject to completion of due diligence. Party I also expressed its potential willingness to purchase certain of the Company’s other CLO assets for an additional $20 million to $22.5 million. In view of the Board’s interest in a transaction involving its entire business, Company management suspended discussions with Party I.

On October 13, 2016, Party C executed a second non-disclosure agreement, and the parties re-engaged in discussions.

Also on October 13, 2016, Party J submitted a proposal for an acquisition of the Company at a price of $2.00 per share, payable in a combination of cash, Party J equity securities, and vendor loan notes, plus an unspecified earn-out amount. The Company’s management rejected this proposal, after discussing the proposal with Berkshire Capital and concluding that Party J’s proposal was inadequate relative to other indications of interest and Company management’s views on valuation, and suspended discussions with Party J.

Also on October 13, 2016, Party H submitted an indication of interest, which included proposed consideration in the form of “a percentage of equity in the go-forward, pro-forma private entity.” After discussions with Berkshire Capital, Company management concluded that the proposal implied a value of approximately $2.95 per share, subject to adjustments based on valuations of multiple balance-sheet line items and costs. Management did not act on this proposal due to the implied valuation and uncertainty regarding the feasibility of the proposed structure.

On October 14, 2016, Berkshire Capital reviewed with the Board the indications of interest received from Parties C, F, G, H, I, and J. After discussions among the Board, Company management and Berkshire Capital, and in light of the fact that the Board believed that the valuations implied by the proposals from Party C, Party H, Party I and Party J did not exceed the Company’s then-estimated liquidation value, the Board concurred with Company management’s recommendation to have Berkshire Capital engage in further discussions on behalf of the Company with Party F and Party G to attempt to elicit improved proposals in respect of transaction structure and price and to reject the other proposals.

Also on October 14, 2016, another entity, which we refer to as Party K, entered into a non-disclosure agreement with the Company.

On November 1, 2016, Berkshire Capital updated the Board on the strategic review process. Company management reported to the Board that they were in the process of evaluating the outstanding bids from Party F and Party G, among others. Members of management expressed concern that these bids might be below the likely liquidation value of the Company. Company management also noted to the Board that the bids received by the Company as of the meeting were lower than the likely liquidation value of the Company and lower than the Company’s majority stockholder was likely to accept. Management indicated it would provide the Board with a recommendation, including as to a potential stand-alone business strategy, over subsequent weeks.

On November 4, 2016, the Company reported its financial results for the quarter ended September 30, 2016. The Company reported Adjusted EBITDA of $1.1 million, compared with negative Adjusted EBITDA of $(1.1) million for the three months ended September 30, 2015. The Company also reported $3.844 billion AUM as of September 30, 2016, down approximately $100 million since June 30, 2016. On November 4, 2016, the closing price of the Class A Common Stock was $1.59 per share.

On November 9, 2016 and December 5, 2016, Party C submitted further proposals regarding a potential acquisition of the Company. Company management found these proposals to be incomplete and lacking sufficient detail to be analyzed and presented to the Board for evaluation. On December 7, 2016, representatives of the Company met with representatives of Party C, together with Mr. Ramsey, to discuss Party C’s most recent proposals. Despite efforts by Company management to clarify Party C’s proposals, none of Party C’s proposals included a definitive per-share consideration, and Company management was unable to conduct a meaningful analysis of the proposals. Accordingly, discussions with Party C were terminated by Company management.

Also on December 7, 2016, Mr. Zugel met with a Party B representative to discuss the Company’s strategic review process. The next day, Party B and the Company agreed to extend the term of their September 22, 2015 non-disclosure agreement through December 31, 2017.

On December 15, 2016, while the Company was engaged in evaluating various proposals from potential counterparties, Mr. Ramsey delivered to Mr. Zugel a draft letter addressed to the Board. Mr. Ramsey requested Mr. Zugel’s advice with respect to the draft letter, and inquired whether Mr. Zugel would support the proposal outlined in the draft letter. The draft letter outlined a proposal for a transaction that would lead to a buyout of the Company on the following terms: (i) RQSI, an affiliate of Mr. Ramsey, would make a $5.00 per share cash bid for all 13.1 million publicly-held shares of Class A Common Stock; (ii) Mr. Ramsey and related stockholders would agree to delayed cash settlement in respect of their Class A Common Stock until the Company restructured its CLO risk-retention holdings; (iii) Mr. Zugel and Company employees would receive cash only for Class A Common Stock purchased in the market at the time the Company went public; (iv) no consideration would be paid for Class B Units of ZGP (“Class B Units”), RSUs, or unvested shares; (v) the Company would deregister as a public entity and be owned by Mr. Zugel and his affiliates; and (vi) the Company would set aside 15% of its operating profits over the next five years’ for the benefit of stockholders being cashed out in the transaction, as an ongoing participation (or potential recovery of a portion of such stockholders’ losses). Mr. Zugel did not provide comments to the draft letter and no such letter was sent by Mr. Ramsey to the Board.

On December 28, 2016, Mr. Ramsey presented a potential transaction framework in writing to Mr. Zugel. Pursuant to the potential terms, (i) the Company would redeem Class A Common Stock held by outside stockholders at $4.60 per share in cash; (ii) the Company would redeem a portion of the Class A Common Stock held by Mr. Ramsey and his affiliated entities, up to four million shares, at the same price; and (iii) the remaining Class A Common Stock held by Mr. Ramsey and his affiliated entities would be exchanged for a $30 million senior note bearing interest at 10% and secured by the Company’s CLO equity holdings to finance a going private transaction. This potential transaction framework was never submitted to the Board by Mr. Ramsey and Mr. Zugel provided no follow up to Mr. Ramsey on this potential transaction framework.

On January 6, 2017, Mr. Zugel delivered a counterproposal to Mr. Ramsey outlining a transaction whereby: (i) Mr. Zugel would take the Company private through the purchase of Class A Common Stock held by minority stockholders, together with all “restricted stock” and RSUs held by the Company’s employees and outside directors; (ii) the transaction would be in the form of a tender offer at a per-share price in the range of $3.75 to $4.25, resulting in the purchase of up to 5,300,000 shares of Class A Common Stock; and (iii) to ensure maximum stockholder participation, allowing the Company to deregister as a public company with no reporting obligations, persons related to and affiliated with Mr. Zugel and RQSI would agree not to participate in the tender offer. Mr. Zugel later shared this proposal with other members of the Company’s management and, by January 9, 2017, each member of the Board.

On January 11, 2017, Mr. Ramsey, together with Ramguard (then known as d.Quant Special Opportunities Fund, LP), filed an amendment to their Schedule 13D to disclose Mr. Ramsey’s interest in pursuing potential strategic alternatives involving the Company, including alternatives that might involve the acquisition by the Company or its affiliates of the Company’s outstanding Class A Common Stock (other than those held by management), including those held by Mr. Ramsey and Ramguard.

On January 12, 2017, representatives of the Company met with representatives of Ramguard to discuss Mr. Zugel’s January 6, 2017 counterproposal. At this meeting, pursuant to a pre-existing non-disclosure agreement, the Company presented certain pro forma financial information (including certain financial projections). No agreements were reached at this meeting.

At a meeting of the Board held on January 27, 2017, the Board discussed the status of the strategic review process, among other matters, with a representative of Berkshire Capital present. At this meeting, the representative of Berkshire Capital provided a summary of the strategic review process, including feedback received from potential counterparties. In particular, the representative of Berkshire Capital noted the reluctance expressed by many counterparties to pursue a transaction with a publicly-held entity. At this meeting, the Board also discussed the two proposals from Mr. Ramsey and Mr. Zugel, among other transactions and potential alternatives, and next steps in evaluating all proposals, including the need to obtain the advice of the Company’s regular legal counsel, McDermott Will & Emery LLP (“McDermott”), regarding the Board’s evaluation of these proposals.

On February 2, 2017, Mr. Zugel filed a Schedule 13D disclosing, among other things, the potential for a going private transaction and/or a tender offer for the Company’s Class A Common Stock.

Also on February 2, 2017, the Board again met to discuss the status of the strategic review process. At this meeting, Company management noted their engagement in a review of a proposal for the Company to buy out all minority stockholders of the Company, other than Mr. Zugel, Mr. Ramsey, and their affiliates. The Board discussed forming a special committee, comprised exclusively of independent directors, in light of potential conflicts arising from the proposals made by Mr. Zugel.

On February 3, 2017, another potential counterparty, which we refer to as Party L, entered into a non-disclosure agreement with the Company. On February 13, 2017, Company management met with Party L representatives to discuss a potential transaction, after which Party L expressed an interest solely in joint product development or the financing of the Company’s investments. In view of the Company’s interest in a business combination or other similar transaction involving the entire company, discussions with Party L were suspended.

At a meeting on February 15, 2017, McDermott presented an overview of the Board’s fiduciary duties. Following this presentation, the Board resolved to establish a special committee, comprised of the Board’s three independent and disinterested directors, John Burke, Paul Guenther and James Zinn, to consider any proposals for strategic transactions thereafter made, as well as to consider all other strategic options for the Company. The Board appointed Paul Guenther as the chair of the Special Committee. The Board further resolved that it would not approve a potential transaction or strategic alternative without the prior favorable recommendation of the Special Committee. The Board also discussed the Company’s strategic review process, including proposals involving Messrs. Zugel and Ramsey. Company management reported that, according to Mr. Ramsey’s counsel, Mr. Ramsey did not intend to provide a written commitment not to participate in the tender offer contemplated by Mr. Zugel’s January 6, 2017 proposal.

Subsequently, the Special Committee’s review of potential strategic alternatives included capital raising, asset sales, strategic partnerships, a sale of the entire Company, a sale of component parts of the Company, acquisitions and other options, including continuing operating as a public company. From its inception through January 11, 2018, the Special Committee met approximately 26 times.

The Special Committee held its first meeting immediately following the February 15, 2017 meeting of the Board, during which Alston & Bird LLP (“Alston”) was engaged to act as legal counsel for the Special Committee. Alston reviewed the Special Committee’s duties in reviewing potential strategic transactions, the role of a financial advisor to the Special Committee, potential candidates to serve as the Special Committee’s independent financial advisor and the current status of proposals received by the Company. The Special Committee agreed to authorize Mr. Zugel and his representatives, including any members of Company management whose assistance Mr. Zugel required, to continue to discuss with Mr. Ramsey his willingness to participate in a transaction in which he and his affiliates would remain stockholders of the Company, and to obtain from Mr. Ramsey a satisfactory commitment that would enable the Company or Mr. Zugel to present to the Special Committee a specific proposal. After this meeting, the Special Committee commenced interviewing potential financial advisors.

On February 22, 2017, the Company presented to Mr. Ramsey a draft letter agreement based on the proposal Mr. Zugel sent to Mr. Ramsey on January 6, 2017, outlining a proposed transaction whereby shares held by the Company’s public stockholders would be repurchased using the Company’s available cash, with Mr. Zugel, Mr. Ramsey, Ramguard, and their respective affiliates retaining their respective equity interests in the Company. This proposal was expressly subject to approval by the Special Committee and the Board. The letter agreement required that Mr. Ramsey, on behalf of Ramguard, agree that Ramguard would not tender its Class A Common Stock nor seek to have its shares purchased in such a transaction, if a proposal were made and recommended by the Board to the Company’s stockholders after recommendation from the Special Committee. Mr. Ramsey informed Company management that he would not execute the letter agreement, citing litigation concerns, and as a result, Mr. Zugel abandoned his January 6, 2017 counterproposal and informed the Board accordingly.

On February 23, 2017, the Special Committee met with Alston to discuss the qualifications of the financial advisors that the Special Committee had interviewed since its first meeting. The Special Committee determined to defer engaging a financial advisor until it had received final proposals from all potential financial advisors it had interviewed and until it had obtained greater clarity on whether a proposal regarding a potential transaction would be forthcoming from any third party or affiliate of the Company.

For the next several months, the Company again focused on engaging with third parties on a potential business combination transaction to enhance stockholder value.

In February 2017, after meeting with the Company’s management, Party K expressed an interest solely in acquiring the Company’s CLO management contracts, and formally withdrew its interest in acquiring the Company as a whole, at which time discussions terminated.

On February 28, 2017, Party H’s advisor contacted Berkshire Capital, expressing an interest in exploring a business combination with the Company, which interest Berkshire Capital shared with the Company. On March 7, 2017, at the Company’s request, Berkshire Capital presented to management a financial analysis of the transaction proposed by Party H, which included consideration consisting of cash, stock of Party H, and an earn-out. Berkshire Capital estimated that the consideration equated to approximately $3.00 per share of Class A Common Stock. Company management determined not to pursue this transaction.

On March 2, 2017, Mr. Zugel met with representatives of Party D, which had previously been a potential acquisition target of the Company. At the meeting, Mr. Zugel endeavored to determine whether Party D might have an interest in pursuing a transaction with the Company. After reviewing confidential materials on the Company, Party D formally withdrew its expression of interest without submitting a proposal.

At a meeting on March 8, 2017, the Board discussed Mr. Ramsey’s rejection of the proposed letter agreement and Company management provided an update on the strategic alternatives under consideration by the Company and the Special Committee. The Board also discussed other possible options, including a liquidation or take-private transaction. The Board took no action with respect to any of these alternatives.

On March 21, 2017, another potential counterparty, which we refer to as Party M, executed a non-disclosure agreement with the Company.

On March 22, 2017, both Party C and Party F advised the Company that they were interested in engaging in a potential strategic transaction only after the Company was no longer publicly held, and the parties suspended discussions.

On March 24, 2017, Berkshire Capital circulated a second process letter to parties having potential interest in a business combination transaction. This process letter requested that interested parties respond with a preliminary, nonbinding indication of interest by April 13, 2017.

Also on March 24, 2017, Party B delivered a proposal to the Company regarding a potential transaction.

In addition, on March 24, 2017, the Company reported its financial results for the quarter ended December 31, 2016 and filed its 2016 annual report with the SEC. The Company reported positive Adjusted EBITDA of $7.5 million for the quarter, compared with negative Adjusted EBITDA of $(3.4) million for the same period in the prior year. Adjusted EBITDA for the year ended December 31, 2016 was negative ($1.9) million, compared with negative Adjusted EBITDA of $(14.3) million for the same period in 2015. The Company also reported $3.444 billion AUM as of December 31, 2016, down more than $700 million since December 31, 2015. In its earnings release, which is included as Exhibit 99.1 to its Current Report on Form 8-K filed with the SEC on that date, which is incorporated herein by reference, the Company also disclosed the Board’s strategic review and its engagement of a financial advisor, and stated that various alternatives had been and were being considered, including a possible sale, combination or other similar transaction or going private transaction which would result in the termination of the registration of the Class A Common Stock. On March 24, 2017, the closing price of the Class A Common Stock was $2.92 per share.

On April 13, 2017, Party B submitted an updated indication of interest proposing the acquisition of Party B by the Company, on terms that would result in the Company remaining a public company. Under this proposal, existing equity holders of the Company and ZGP would own approximately 26% of the combined entity, which Party B asserted would have an indicative value of $4.10 per share of Class A Common Stock. Party B’s proposal was conditioned on Mr. Zugel’s entry into an employment agreement, without specifying the proposed terms of such employment agreement. Party B subsequently indicated a willingness to discuss a transaction whereby the existing equity holders would retain ownership of approximately 30% of the combined entity.

On April 21, 2017, the Company received an indication of interest from Party M that contemplated payment of approximately $3.35 per share in cash to the public stockholders, and a mix of Party M stock and an earn-out to Mr. Zugel and other “private” equity holders having an indicative value (according to Party M) of approximately $4.29 per Class A Unit.

On April 27, 2017, Berkshire Capital reviewed with the Board and Alston activity since the fall of 2016 and outlined the recent proposals from Party B and Party M, which had previously been disseminated to the Board for consideration. Berkshire Capital communicated to the Board that it had suggested to Party M that it submit a revised, all cash offer providing equal treatment for all of the Company’s stockholders, but that Party M expressed an unwillingness to submit such a proposal. It also communicated to the Board that Party B was seeking a 45-day exclusive negotiation period. The Board also discussed a previously circulated presentation from Berkshire Capital which analyzed these two proposals from a financial standpoint, noting the key terms and differences in each, and also outlined the recent financial performance of certain publicly-held competitors of the Company. The Board determined that Company management should await advice from the Special Committee before engaging in any further discussions with Party B or Party M.

On April 28, 2017, the Special Committee, along with Alston, met to discuss the Party B and Party M proposals, and resolved to request revised bids from each of Party B and Party M. The Special Committee also discussed potential alternative strategic transactions, and discussed whether the Company should continue to operate as a standalone entity and the potential for a proposal from Mr. Zugel. The Special Committee also discussed the retention of an independent financial advisor and determined to solicit updated proposals from two financial advisors, including Houlihan Lokey, that the Special Committee had previously interviewed.

On May 4, 2017, the Special Committee met with Alston to discuss the updated proposals that it had received from potential financial advisors, and resolved to pursue an engagement with Houlihan Lokey. The Special Committee also discussed a list of questions that Alston proposed to submit to Party B regarding its most recent proposal, which, with the Special Committee’s comments incorporated, was then provided to Party B for its response.

On May 5, 2017, the Company received a revised indication of interest from Party M, proposing consideration with an aggregate net indicative value to holders of Class A Common Stock and Class A Units of $78.7 million, consisting of a mix of cash, common stock of Party M, and an earn-out, with the potential for public stockholders to elect whether to receive cash or Party M shares. According to Party M, this proposal implied a value of approximately $3.65 per share of Class A Common Stock.

On May 9, 2017, at a meeting attended by representatives of Berkshire Capital, the Board discussed Party B’s and Party M’s most recent proposals, Party B’s request for exclusivity and the status of discussions with each of Party B and Party M. Later that day, the Special Committee, along with Alston, discussed with both Berkshire Capital and Houlihan Lokey (which was invited to attend the meeting having executed a non-disclosure agreement pending finalization of the terms of its engagement) the most recent proposals from Party B and Party M. In light of this discussion, the Special Committee determined that it was premature to grant exclusivity to Party B, but permitted Party B to proceed with its due diligence review of the Company.

On May 11, 2017, the Company reported its financial results for the quarter ended March 31, 2017. The Company reported negative Adjusted EBITDA for the quarter of $(5.0) million, compared to negative Adjusted EBITDA of $(6.1) million for the same quarter in the prior year. The Company also reported $3.360 billion AUM as of March 31, 2017. On May 11, 2017, the closing price of the Class A Common Stock was $2.24 per share, down from $2.92 at the time of the Company’s 2016 annual report.

On May 16, 2017, the Special Committee, along with Alston, again met with Berkshire Capital and Houlihan Lokey to discuss Party B’s diligence process and discussions with Party B. Berkshire Capital and Houlihan Lokey discussed Party B’s proposals regarding a potential combined entity and Party B’s perceived uncertainty regarding its interest, after such combination, in the Company remaining a publicly-held company. The Special Committee determined to grant Party B a 20-day exclusivity period (subject to potential extension for an additional 25 days), and Company management provided a draft exclusivity agreement to Party B that afternoon, which Party B returned with comments on May 17, 2017.

Also on May 17, 2017, Party M submitted a revised indication of interest for a transaction in which the consideration would consist of a combination of cash, Party M stock and a note, having an aggregate indicative value (according to Party M) of approximately $3.32 per share.

On May 18, 2017, the Special Committee again met with Alston, Berkshire Capital and Houlihan Lokey. At this meeting, the Special Committee discussed the most recent revised proposal from Party M, in particular the basis for the valuation included in this proposal, and determined that the value of the proposal was significantly below that of the most recent proposal from Party B. The Special Committee determined that the full Board should meet before the Company proceeded with any exclusivity arrangement with Party B.

At a meeting the next day, the Board discussed the status of the proposals from Party B and Party M. In view of Party B’s interest in the Company and the input from the Special Committee, the Board then deferred to the Special Committee the decision on exclusivity with Party B. Immediately afterwards, the Special Committee met, along with Alston and Berkshire Capital. Following discussion regarding Party B’s exclusivity request and the proposals from both potential counterparties, the Special Committee authorized the execution of an exclusivity agreement with Party B, and instructed Berkshire Capital to inform Party M of this decision. The Special Committee also resolved to engage Houlihan Lokey as its financial advisor in connection with a potential transaction with Party B.

Later that day, the Company and ZGP entered into an exclusivity agreement with Party B which prohibited each party from, directly or indirectly, (i) soliciting, initiating, or encouraging any proposal or alternative transaction; (ii) continuing, entering into, or engaging in any discussions regarding any inquiries or the making of any proposal or alternative transaction; or (iii) furnishing any non-public information to any other person, in each case with the intent to induce the making, submission or announcement of, or to encourage, facilitate or assist any proposal, alternative transaction or any inquiries, indications of interest, offers or proposals that were intended to lead to any proposal or alternative transaction.

On May 23, 2017, Company management met with representatives of Party B, along with representatives of Berkshire Capital and Party B’s financial advisor. The parties agreed to negotiate a term sheet to be executed by June 8, 2017, when exclusivity would expire unless the parties agreed to extend the exclusivity period, with definitive agreements targeted to be executed in July 2017. Thereafter, Party B commenced a detailed review and analysis of the Company.

On June 2, 2017, the Company, after consultation with the Special Committee and Alston, submitted to Party B a draft term sheet setting forth key terms of a transaction, including the retention by holders of Class A Common Stock and Class A Units of a 30% interest in the resulting entity. The next day, Berkshire Capital reported to members of the Company’s management that Party B intended to respond to the draft term sheet by the June 8, 2017 deadline to extend exclusivity by execution of a letter of intent.

On June 5, 2017, Mr. Zugel received an email from Party E requesting to re-engage in discussions regarding funding of CLO equity commitments, acquiring CLO management contracts, or a possible business combination between the Company and Party E. Mr. Zugel did not respond due to the Company’s exclusivity agreement with Party B.

On June 7, 2017, the Board, at a meeting, agreed that, if Party B did not respond to the Company’s term sheet by close of business on June 8, 2017, the Company would provide notice to Party B of the Company’s decision not to extend the exclusivity period. On June 8, 2017, after the deadline passed without any proposal from Party B, Mr. Zugel sent Party B notice that the Company would not extend the exclusivity agreement. Later that day, Mr. Zugel spoke with representatives of Party B regarding Party B’s delay and orally committed to extend Party B’s exclusivity until June 12, 2017, in exchange for Party B’s commitment to deliver a draft term sheet by June 9, 2017. Company management then informed the Special Committee of this oral agreement.

On June 9, 2017, Party B submitted to the Company a revised draft term sheet. The revised term sheet reflected significant changes from the draft term sheet provided by the Company, and introduced substantially greater uncertainty than the draft term sheet provided by the Company, including the addition of new terms relating to minimum Company cash, net working capital, and balance sheet investment amounts, and resulting purchase price adjustments in the event the requirement minimums were not achieved, as well as provisions requiring the Company to reimburse Party B for certain expenses if the proposed transaction was not consummated for specified reasons.

On June 13 and June 14, 2017, representatives of the Company and Berkshire Capital met with representatives of Party B to discuss Party B’s revisions to the draft term sheet and potential compromises to which the parties might agree. The Company agreed to further extend Party B’s exclusivity until June 16, 2017.

On June 15, 2017, Party B delivered to the Company a further revised draft term sheet. This term sheet included some concessions by Party B as well as certain other revised terms that were less favorable to the Company than the prior Party B draft. On June 16, 2017, representatives of the Company and Berkshire Capital again met with representatives of Party B, but the parties were unable to reach agreement. The exclusivity agreement with Party B expired on June 16, 2017, although the parties continued to engage in discussions and negotiations.

On June 23, 2017, the Company entered into a non-disclosure agreement with another potential counterparty, which we refer to as Party N.

Also on June 23, 2017, Party B submitted a further revised draft term sheet to the Company. The revised draft contemplated a liquidation of the Company and distribution to the Company’s public stockholders (excluding Neil Ramsey and affiliates and members of management) of net cash proceeds that Party B calculated to be approximately $4.00 per share, with all other stockholders exchanging their Class A Common Stock for Class A Units and continuing their investment in the combined company. Company management, after consultation with Berkshire Capital, concluded that it was unlikely that the transaction would result in the Company’s stockholders receiving $4.00 per share, and shared this conclusion with the Special Committee on June 28, 2017.

On June 29, 2017, Party N expressed to the Company its interest in bidding solely for the Company’s CLO management contracts, the CLO platform, and the Company’s risk retention vehicle. In light of the Company’s interest in a business combination transaction involving the entire company, discussions with Party N were suspended on June 30, 2017.

Also on June 30, 2017, the Board, along with Berkshire Capital and Alston, met to discuss the status of the Company’s strategic review. The Board discussed the most recent proposal from Party B, which Company management reported did not include many of the structural terms that had been previously agreed with Party B. Management presented the Board with a detailed written analysis of Party B’s proposal, which was supplemented by financial analysis that illustrated that the proposal included a lower per-share price than had been agreed between the parties in prior discussions. The Board discussed management’s view that negotiations with Party B should be suspended in light of Party B’s most recent proposal, which management determined was not in the best interests of the Company’s stockholders. Management and Berkshire Capital then presented an update on other potential counterparties and the indications of interest received from them.

Immediately following the Board meeting, the Special Committee met with Alston and Berkshire Capital to review and discuss the most recent revised proposal from Party B, including the disparate treatment of stockholders and the risk that Mr. Ramsey would not agree to continue his investment as an equity holder in the resulting entity. Further, the Special Committee discussed Party B’s noted reluctance to become a public company. Berkshire Capital advised the Special Committee that Party B’s revised proposal seemed to ignore prior guidance that had been provided with respect to the Special Committee’s desires and expectations for a successful bid. Following this discussion, the Special Committee decided to reject Party B’s most recent proposal and determined that submitting a counteroffer to Party B would not be productive. The Special Committee then discussed next steps, including potentially re-engaging with prior potential counterparties that had expressed an interest in a transaction with the Company.

Also on June 30, 2017, Mr. Zugel received a revised term sheet from Party A proposing that the Company acquire certain businesses of Party A for $8 million in cash and a promissory note in the amount of $20 million, both subject to adjustment, together with warrants convertible into Class A Common Stock. Given the Company’s interest in pursuing a sale transaction, among other reasons, Company management determined not to re-engage in discussions with Party A.

On July 8, 2017, Party E entered into a non-disclosure agreement with the Company.

On July 27, 2017, representatives of the Company met with Mr. Ramsey and his counsel to discuss the Company’s strategic review process. Mr. Ramsey expressed the view that the Company should be taken private through a transaction led by Mr. Zugel, and reported that he would be willing to sell his Class A Common Stock for $4.00 per share, with 50% of the consideration being paid with a note to facilitate the proposed transaction.

Later on July 27, 2017, the Board, along with Berkshire Capital and Alston, met to discuss the status of the Company’s strategic review process and to receive a report on the meeting with Mr. Ramsey. Immediately following the Board meeting, the Special Committee met with Alston to discuss the strategic review process and the lack of progress in finding a suitable buyer for the Company. The Special Committee discussed potential options for the Company going forward, including (i) locating a potential buyer and completing a transaction, preferably on an expedited basis; (ii) pursuing a going-private transaction; or (iii) continuing to operate as a standalone publicly-held company, with a plan for reducing expenses and potentially resizing operations.

On July 28, 2017, the Company entered into a non-disclosure agreement with another potential counterparty, which we refer to as Party O.

After submitting a series of proposals on April 21, 2017, May 5, 2017, May 17, 2017, June 30, 2017, and July 11, 2017 (some of which were received during the Company’s exclusive negotiations with Party B, and were therefore not responded to), on August 3, 2017, Party M submitted a further proposal to the Company. This proposal included a mix of consideration which Party M valued at $3.66 per share (which value was dependent, in part, on Party M’s stated value for its own stock). Party M orally indicated a willingness to make an all-cash bid for the Company comprised of a cash investment by Party M and cash on the Company’s balance sheet, requiring a financing condition, but declined to submit an updated proposal on these terms. Party M subsequently formally withdrew its expression of interest.

On August 4, 2017 and August 8, 2017, Party E submitted a proposal to the Company regarding a potential business combination. Party E’s proposal contemplated consideration of $4.00 per share for the Class A Common Stock (excluding all Class A Units), subject to potential downward adjustment.

On August 9, 2017, Party O submitted a proposal for an acquisition transaction that included cash consideration in the range of $2.68 to $3.01 per share (on a fully-diluted basis), and requested exclusivity.

Also on August 9, 2017, the Board, along with Berkshire Capital and Alston, met to discuss the status of the Company’s strategic review process and discussions with interested counterparties. Mr. Zugel disclosed to the Board that he was again considering a potential going-private transaction, but that he preferred the Company execute an acceptable transaction with a third party.

Immediately following the Board meeting, the Special Committee met with Alston to discuss recommendations from Company management for moving forward with the strategic review process, including the advantages and disadvantages to the Company and its stockholders of a potential going-private transaction. The Special Committee determined that (i) the negotiations with current potential counterparties should be completed by September 4, 2017; (ii) the strategic review process would be suspended immediately with respect to actively soliciting any new potential counterparties; and (iii) if there was no acceptable transaction by September 4, 2017, the Special Committee would inquire as to whether Mr. Zugel would be interested in making a going-private proposal.

On August 14, 2017, the Company reported its financial results for the quarter ended June 30, 2017. The Company reported negative Adjusted EBITDA for the quarter of $(0.8) million, compared to negative Adjusted EBITDA of $(4.5) million for the same quarter in the prior year. The Company also reported $3.752 billion AUM as of June 30, 2017. On August 14, 2017, the closing price of the Class A Common Stock was $2.16 per share.

On August 19, 2017, Mr. Zugel reached out to Mr. Ramsey to express his interest in moving forward with discussions concerning a potential acquisition of Class A Common Stock held by Ramguard. Mr. Ramsey confirmed his interest in engaging in these discussions.

On August 22, 2017, the Board met with Berkshire Capital and Alston to discuss the most recent proposal received from Party B. The Board concluded that the proposal contained significant deficiencies and uncertainties. The Board instructed Company management to negotiate with Party B to determine whether Party B would be willing and able to improve its proposal and remove the identified deficiencies and uncertainties. The Board also engaged in a discussion of other strategic alternatives, during which Mr. Zugel reported that he was considering making a proposal that would be beneficial to the Company’s stockholders and which would result in the Company going private.

Subsequently, Party B delivered two successive revised proposals to the Company, which proposals were evaluated by Company management and Berkshire Capital, with input from the Special Committee.

On August 25, 2017, the Special Committee determined that Party O’s August 9, 2017 proposal would not be in the best interests of the Company’s stockholders and then terminated discussions with Party O.

On the same day, Mr. Zugel again contacted Mr. Ramsey. Mr. Ramsey confirmed his interest in further discussions but indicated that he had concerns regarding the risks of taking a portion of the consideration in the form of a note. Mr. Zugel noted the possibility of securing a portion of the note.

On August 29, 2017, Company management met with representatives of Party E. Party E reported that it could proceed with a bid for 100% of the Company’s Class A Common Stock only with exclusive negotiation rights. However, Party E was unwilling to provide assurances as to its financing sources or financing commitments before being granted exclusivity. Consequently, Company management informed Party E that the Company would not proceed on an exclusive basis, given the uncertainty of the financing commitment and the significant doubts the Company had concerning Party E’s financial wherewithal, and the parties’ discussions were suspended.

On August 31, 2017, Mr. Zugel sent a draft term sheet to Ramguard, containing a proposal for the purchase of 6,500,000 shares of Class A Common Stock at $4.00 per share, payable in a combination of cash and a note, by Parent, a Delaware limited liability company formed by Mr. Zugel for purposes of the proposed transaction with Ramguard.

Also in August 2017, Mr. Zugel contacted a representative of Party N to discuss whether Party N, as the majority equity-holder of several of the Company’s CLO vehicles, would consent to a change of control of the Company. The representative of Party N did not commit to such consent and no further discussions regarding such consent have taken place.

On September 1, 2017, Party B delivered a proposal offering consideration consisting of $3.65 per share of Class A Common Stock, subject to adjustment up or down, and consideration consisting of equity in Party B to the holders of Class A Units in exchange for their contribution of Class A Units to Party B. This proposal was contingent on Party B receiving a capital investment sufficient to fund the transaction, and included a $2 million fee as liquidated damages if Party B were unable to close because of its failure to obtain financing. Company management recommended to the Special Committee, which concurred, that Party B’s proposal was not in the best interests of the Company’s stockholders, and negotiations with Party B were terminated with the consent of the Special Committee.

On September 2, 2017, representatives of Ramguard spoke with representatives of Mr. Zugel and Parent regarding the draft term sheet and provided comments on the draft term sheet. Discussions and negotiations continued until September 5, 2017, and the parties worked on drafts of a definitive agreement for the transaction.

On September 5, 2017, Parent, Ramguard, and Mr. Zugel entered into a Share Purchase Agreement (the “Original Share Purchase Agreement”) pursuant to which Parent agreed to acquire 6,500,000 shares of Class A Common Stock held by Ramguard (the “Target Shares”) at $4.00 per share—the price proposed by Mr. Ramsey at the July 27, 2017 meeting between Mr. Ramsey and Company management. The closing price of the Class A Common Stock on September 5, 2017 was $1.72 per share.

Also on September 5, 2017, following the execution and delivery of the Original Share Purchase Agreement, Mr. Zugel sent a letter to the Special Committee expressing his interest in discussing a possible negotiated acquisition of the remaining issued and outstanding Class A Common Stock by way of a merger at a price of $4.00 per share of Class A Common Stock in cash (the “Take Private Transaction”). Mr. Zugel’s and Parent’s proposal for the Take Private Transaction was irrevocably conditioned upon the approval of the Take Private Transaction by the Special Committee and by a majority of the issued and outstanding shares of Class A Common Stock not held by Mr. Zugel, Parent, their affiliates and the executive officers and other affiliates of the Company. In connection with the execution and delivery of the Original Share Purchase Agreement and Mr. Zugel’s proposal, on the same day, Mr. Zugel filed with the SEC an amended Schedule 13D and Ramguard and Mr. Ramsey also filed an amended Schedule 13D. The next day, the Company filed a Current Report on Form 8-K disclosing the Special Committee’s receipt of Mr. Zugel’s proposal.

On September 7, 2017, the Special Committee met with a representative from Alston to discuss the Original Share Purchase Agreement and the letter from Mr. Zugel that proposed a going-private transaction in which the public stockholders would receive $4.00 per share in cash. The Special Committee determined that it would need to engage a financial advisor before responding to Mr. Zugel’s proposal and directed Alston to obtain a proposal from Houlihan Lokey.

On September 12, 2017, the Special Committee met with a representative from Alston to discuss the proposal from Houlihan Lokey and instructed Alston to continue negotiations with Houlihan Lokey regarding the terms of its engagement. The Special Committee also discussed the proposal from Mr. Zugel and reviewed and discussed his current ownership and ownership following the contemplated transaction with Ramguard. The Special Committee determined that it would need additional information regarding the proposed terms of the transaction from Mr. Zugel, including the required vote for approval of the transaction, and instructed Alston to obtain more information from Fried, Frank, Harris, Shriver & Jacobson (“Fried Frank”), Mr. Zugel and Parent’s legal counsel.

Following the filings by Mr. Zugel, Ramguard and Mr. Ramsey, several previously-evaluated potential counterparties again had contact with Company management to discuss potential transactions.

On September 13, 2017, Party L contacted Mr. Zugel to offer financing assistance in a proposed buyout transaction. On September 26, 2017, Party B’s senior management contacted Mr. Zugel to propose the continuation of discussions regarding a transaction between Party B and the Company in the future, referencing Party B’s discussion with its financial advisor to develop a framework for a potential transaction with the Company, but no specific proposal was received or discussed. Later, on January 24, 2018, Mr. Zugel met with a member of Party B’s senior management, during which meeting the member of Party B’s senior management reiterated Party B’s interest in pursuing a transaction between Party B and the Company in the future. No specific proposal was received or discussed, and Mr. Zugel communicated to the member of Party B’s senior management that the Company would not engage in any such discussions until after consummation of the merger, if then.

On September 20, 2017, Fried Frank discussed with Alston additional details regarding Mr. Zugel’s proposal, including the proposed transaction structure and closing conditions and that the Company was to be the sole source of funds for payments to stockholders.

On September 21, 2017, the Special Committee met with a representative from Alston to discuss the potential engagement of Houlihan Lokey and to receive an update from Alston regarding its discussion with Fried Frank. The Special Committee discussed issues raised by Mr. Zugel’s proposal, including additional potential issues that might surface in negotiation of a definitive merger agreement. The Special Committee directed Alston to request from Fried Frank either a draft agreement and plan of merger (or merger agreement) or a detailed term sheet outlining all material terms and conditions of Mr. Zugel’s proposal.

On September 27, 2017, the Special Committee engaged Houlihan Lokey as its financial advisor in connection with the Special Committee’s evaluation and negotiation of the financial aspects of Mr. Zugel’s proposal.

On September 29, 2017, the Special Committee met with representatives from Alston and Houlihan Lokey to discuss the issues raised in Alston’s September 20, 2017 conversation with Fried Frank, including Mr. Zugel’s intention that the Company would be the exclusive source of the funds to be used to pay public stockholders the proposed merger consideration, which would necessitate certain dispositions of Company assets. The Special Committee discussed the Company’s ability to pay the aggregate merger consideration and other transaction expenses and the potential need for additional funding. The Special Committee also received an update from Houlihan Lokey regarding its preliminary review of certain financial information relating to the Company provided by Company management. The Special Committee deferred engaging in discussions with Mr. Zugel regarding the consideration payable in the merger until Houlihan Lokey reviewed with the Special Committee certain financial matters in respect of the proposed merger consideration, but agreed that progress could be made in the interim on other material terms of the proposed transaction.

On October 2, 2017, Party N communicated an interest in providing financing to the Company’s CLO business and, alternatively, reiterated its interest in acquiring the Company’s CLO management contracts, both of which Company management determined were undesirable transactions in view of the proposal from Mr. Zugel.

On October 3, 2017, several months after Party F had sent Mr. Zugel an update on Party F, a representative of Party F contacted Mr. Zugel for an update on the Company and to recommend that the Company and Party F remain in touch regarding a potential relationship, but no proposal was received or discussed.

On October 5, 2017, Fried Frank provided Alston and McDermott with a draft agreement and plan of merger with respect to the Take Private Transaction (as subsequently revised, the “Draft Merger Agreement”). The Draft Merger Agreement contemplated that the Company would pay the merger consideration using its existing cash and other assets and did not contemplate any infusion of funds from Mr. Zugel or Parent. The Draft Merger Agreement also contained various closing conditions, including: (i) the receipt of the Statutory Stockholder Approval and the Majority of the Minority Stockholder Approval, (ii) there being no more than 236,650 Appraisal Shares, (iii) the Company’s transaction expenses not exceeding $4,500,000, and (iv) there being no pending or threatened legal proceeding.

On October 18, 2017, the Special Committee met with representatives from Alston and Houlihan Lokey to discuss the Draft Merger Agreement. The Special Committee discussed numerous issues, including the proposed financing for the transaction, whether Mr. Zugel should be required to provide additional capital or a financial backstop for the transaction to ensure the Company’s ability to pay the merger consideration and transaction expenses without risking insolvency, and various proposed closing conditions (including those relating to maximum appraisal shares, pending and threatened proceedings, and transaction expenses). The Special Committee also discussed the Original Share Purchase Agreement and the need to ensure that Parent’s purchase of the 6,500,000 shares held by Ramguard was consummated prior to the closing of the proposed merger. After discussion, the Special Committee agreed that Alston should prepare a revised draft of the merger agreement, but should reserve further negotiations regarding price.

On October 26, 2017, Alston delivered to Fried Frank comments on the Draft Merger Agreement. Alston noted to Fried Frank that the Special Committee reserved its position regarding the price of $4.00 per share of Class A Common Stock being proposed by Mr. Zugel and Parent. In addition, among other terms, Alston proposed in the revised Draft Merger Agreement that (i) Parent, Zugel, and Ramguard would amend the Share Purchase Agreement to limit the rights of any party thereto to terminate the Share Purchase Agreement before the outside date set forth in the Draft Merger Agreement, (ii) each member of the Parent Group, and potentially Ramguard, would enter into customary voting and support agreements relating to the merger, and (iii) Parent and Mr. Zugel would be required to make certain representations and be subject to certain covenants relating to the Company’s solvency following the merger.

On November 3, 2017, the Special Committee met with representatives from Alston and Houlihan Lokey to discuss the proposed timing for the transaction, including the expected timing for consummation of the transactions contemplated by the Original Share Purchase Agreement. At this meeting, the Special Committee reviewed and discussed management’s projections (the “October Projections”), including the underlying assumptions, and determined that Houlihan Lokey should meet with management to obtain further clarity regarding the October Projections.

On November 7, 2017, immediately following a regular meeting of the Board of Directors, the Special Committee met with representatives from Alston and Houlihan Lokey, as well as certain members of management of the Company, to review the October Projections and management’s liquidation analysis previously provided to Houlihan Lokey. The various assumptions underlying the October Projections, including the rationale for such assumptions, and management’s liquidation analysis were then discussed. Management was then excused from the meeting and the Special Committee continued to discuss various assumptions underlying the October Projections, including those related to projected compensation expenses. Following discussion, the Special Committee instructed Houlihan Lokey to utilize management’s October Projections in the preparation of its preliminary financial analysis.

On November 13, 2017, the Company reported its financial results for the quarter ended September 30, 2017. The Company reported Adjusted EBITDA for the quarter of $0.8 million, compared to Adjusted EBITDA of $1.1 million for the same quarter in the prior year. The Company also reported $4.144 billion AUM as of September 30, 2017. On November 13, 2017, the closing price of the Class A Common Stock was $3.75 per share.

On November 15, 2017, the Special Committee met with a representative from Alston and representatives from Houlihan Lokey to discuss management’s liquidation analysis, which, as revised and approved by Company management, indicated an estimated liquidation value of the Company as of September 30, 2017 (assuming an orderly liquidation) of approximately $2.33 per share, and Houlihan Lokey’s preliminary financial analysis based on management’s October Projections, which indicated an overall approximate implied per share equity value reference range for the Company of $3.94 to $4.36. The Special Committee then discussed Mr. Zugel’s $4.00 per share proposal relative to the foregoing and discussed how to respond to Mr. Zugel regarding price. After discussion, the Special Committee directed Alston to communicate to Fried Frank that the Special Committee had determined that the price of $4.00 per share proposed by Mr. Zugel and Z Acquisition was inadequate and that the Special Committee was making a counterproposal of $4.30 per share.

On November 16, 2017, Alston advised Fried Frank of the Special Committee’s determination and counterproposal.

On November 20, 2017, Fried Frank conveyed to Alston the response of Parent and Mr. Zugel to the Special Committee’s November 16, 2017 counterproposal. Fried Frank reported that, among other terms, Parent and Mr. Zugel were prepared to increase their proposal to $4.10 per share of Class A Common Stock, that Mr. Zugel was not willing to commit to make an additional capital contribution to the Company to the extent necessary to fund the transaction, and that that price represented Mr. Zugel and Parent’s final offer. Fried Frank also indicated that Parent and Mr. Zugel had limited flexibility on the Special Committee’s requests regarding various other terms in the Draft Merger Agreement, including (i) expense reimbursement for Parent and Mr. Zugel, in certain instances relating to an adverse recommendation of the Company, of $1,500,000, and (ii) as conditions to closing of the merger (A) a cap on the number of shares of Class A Common Stock as to which a properly executed notice of appraisal has been received by the Company and not withdrawn immediately before the Effective Time, (B) a cap on the amount of transaction expenses incurred by the Company, and (C) the absence of certain legal proceedings relating to the merger and the Merger Agreement.

On November 21, 2017, Parent and Mr. Zugel filed with the SEC a Schedule 13E-3, which related to the Original Share Purchase Agreement and the transactions contemplated therein, in addition to disclosing the material terms of the merger as contained in the counterproposal of Parent and Mr. Zugel communicated to Alston on November 20, 2017. Later that day, Fried Frank delivered to Alston, McDermott, the Company, and the Special Committee a revised draft of the Merger Agreement, consistent with the counterproposal delivered by phone the previous day. In this communication, Fried Frank noted that, among other terms, Mr. Zugel would be willing to enter into an agreement that would require Mr. Zugel to vote his shares of Common Stock in favor of the merger, subject to customary exceptions.

On November 22, 2017, the Special Committee met with representatives from Alston and Houlihan Lokey to discuss Parent and Mr. Zugel’s response to the Special Committee’s counterproposal and the revised draft of the merger agreement provided by Fried Frank, including implications of Mr. Zugel not committing to contribute additional capital to the Company to fund any portion of the merger consideration or ensure the Company’s solvency post-closing. The Special Committee discussed the Company’s ability to pay the merger consideration without additional capital and requested that Houlihan Lokey obtain from management updated cash flow projections through the anticipated closing date for a proposed transaction, including projections of transaction expenses.

On November 28, 2017, the Special Committee met with representatives from Alston and Houlihan Lokey to discuss the cash flow projections prepared by management, as well as the material open issues in the merger agreement. The Special Committee focused on certain terms in the revised draft that could cause the merger to fail to close, including the closing conditions related to the exercise of appraisal rights and pending or threatened litigation. The Special Committee also discussed the recent Schedule 13E-3 filing by Parent and Mr. Zugel, including the characterization of $4.10 per share of Class A Common Stock as a “final offer.” The Special Committee determined that it would be best to meet in person with Mr. Zugel and Fried Frank in order to negotiate the terms of the deal as an entire package, and instructed Alston to reach out to Fried Frank to schedule a meeting.

On November 30, 2017, Alston spoke with Fried Frank. In response to a request for an increased purchase price, Fried Frank advised that Parent and Mr. Zugel were firm about their proposal of $4.10 per share, and that the Special Committee should not expect any increase in price. Fried Frank also acknowledged the request for an in-person meeting, but indicated that Mr. Zugel hesitated to commit to attending such meeting absent confirmation that $4.10 per share of Class A Common Stock was an acceptable price to the Special Committee.

On December 1, 2017, the Special Committee met with representatives from Alston and Houlihan Lokey to discuss the conversations with Fried Frank. The Special Committee discussed the proposed $4.10 per share price further, including in the context of the matters discussed at the November 15, 2017 meeting of the Special Committee, the outcome of the Company’s prior strategic review process and bids received in such process, and the relative importance of changes in the merger consideration as compared to enhanced certainty regarding closing of the merger. The Special Committee concluded that it was important to have an in-person meeting with Mr. Zugel and Fried Frank to negotiate the full terms, including price and terms that could provide additional certainty of closing.

On December 2, 2017, after review and discussion among Alston, McDermott, the Company, and the Special Committee, Alston delivered to Fried Frank a list of issues relating to the most recent draft of the Merger Agreement provided on November 21, 2017, which list set forth the Special Committee’s position with respect to each issue, noting that the majority of the issues of concern to the Special Committee related to certainty of closing.

On December 4, 2017, Mr. Zugel, Fried Frank, Messrs. Guenther, Burke, and Steinberg, and a representative from Alston met in person, with Mr. Zinn participating by conference telephone, to discuss the remaining issues in the merger agreement. Mr. Zugel noted at the outset that the updated cash flow projections from management had led him to conclude that the proposed transaction was not financially viable absent additional funding. After extended discussion of potential alternatives, Mr. Zugel suggested that he explore obtaining an additional financial investment that would provide funding for the purchase of all shares held by Ramguard and its affiliates, leaving to the Company only the requirement to fund the merger consideration payable to other stockholders of the Company. Mr. Zugel and Fried Frank left the meeting to have telephonic conversations with Mr. Ramsey and Mr. Curry regarding the revised proposal. Upon returning to the meeting, Mr. Zugel reported that those discussions were sufficiently promising to justify continuing efforts to negotiate an acceptable transaction. The parties then discussed the issues list previously circulated by Alston. The parties resolved several issues (notably with respect to the closing condition regarding certain proceedings), and agreed to continue discussing the remaining open issues.

On December 6 and 8, 2017, Alston and Fried Frank continued discussions about certain open items in the issues list previously circulated by Alston.

On December 11, 2017, Alston delivered to Fried Frank a revised draft of the Merger Agreement, based on the parties’ recent discussions and input from McDermott and the Company. This revised draft of the Merger Agreement included, among other changes, (i) the addition of an investment agreement (the “ZGP Investment Agreement” (as discussed below)) whereby Mr. Zugel or Parent would acquire Class A Units in exchange for a cash payment to ZGP, which cash would be used to fund a portion of the Aggregate Merger Consideration, (ii) a provision that would prevent Parent from relying on the failure of certain closing conditions or assert any rights relating to such failure if such failure resulted from actions taken or not taken by any member of the Parent Group, and (iii) a proposal regarding the scope of transaction-related fees incurred by the Company that would count toward a proposed cap. At the same time, Alston delivered an initial draft of a Stockholder Voting Agreement and Support Agreement (the “Draft Voting Agreement”) that the Special Committee proposed would be entered into by Mr. Zugel, other members of the Parent Group, and Ramguard.

On December 13, 2017, Fried Frank delivered to Alston, the Special Committee, McDermott, and the Company revised drafts of both the Draft Merger Agreement and the Draft Voting Agreement, and noted that the revised Draft Voting Agreement and an amended Original Share Purchase Agreement would also be shared with Ramguard and its counsel for review. Among other changes, the Draft Merger Agreement provided by Fried Frank included (i) a cap of 400,000 shares seeking appraisal rights as a closing condition, and (ii) a broader definition of transaction-related expenses of the Company that would count toward the proposed $4,500,000 cap. This draft also indicated that Parent, rather than Mr. Zugel, would be making the additional investment in ZGP to fund a portion of the Unit Redemption, but the amount of such investment was still undetermined.

On December 14, 2017, Mr. Zugel’s spouse, ZFT and Mr. Curry were admitted as members of Parent. The limited liability company agreement of Parent was amended and restated in its entirety by an Amended and Restated LLC Agreement (the “A&R Parent LLC Agreement”) to reflect, among other things, such admissions and appointment.

On December 15, 2017, Alston, at the direction of the Special Committee, provided Wyatt, Tarrant & Combs LLP (“Wyatt”), counsel to Ramguard, with the Draft Voting Agreement.

On December 18, 2017, the Special Committee met with representatives from Alston and Houlihan Lokey to discuss various open issues in the revised draft of the Merger Agreement, including the closing conditions related to the Company’s transaction expenses, number of shares seeking appraisal rights and pending litigation, as well as certain other changes to representations, warranties and covenants.

Also on December 18, 2017, Parent, Mr. Zugel, Mr. Zugel’s spouse, and ZFT filed with the SEC an amended Schedule 13D, which disclosed, among other things, that (i) Parent was owned, as of December 14, 2017, by Mr. Zugel, Mr. Zugel’s spouse, ZFT, and Mr. Curry, (ii) Parent had agreed in principle to contribute approximately $11,100,000 to ZGP in order to provide a portion of the funds required to consummate the Take Private Transaction, and (iii) Parent and its members had entered into the A&R Parent LLC Agreement, which, among other terms, would permit Mr. Zugel as sole managing member of Parent to make capital calls from the members that would fund the Share Purchase, with any member of Parent who fails to timely contribute its pro rata portion of a capital call forfeiting its pre-emptive rights under the A&R Parent LLC Agreement.

On December 21, 2017, following discussion with McDermott and the Special Committee, Alston provided to Fried Frank revised drafts of the Merger Agreement and Draft Voting Agreement, now relating solely to members of the Parent Group. The revised Draft Merger Agreement set a cap on Appraisal Shares of 600,000 shares, and limited the items to be included in the calculation of the Company’s transaction-related expenses, and included various additional revisions.

Also on December 21, 2017, Alston provided to Wyatt the revised draft of the Merger Agreement and a separate Voting Agreement (the “Draft Ramguard Voting Agreement”) that would be entered into between the Company and Ramguard and its affiliates.

On December 22, 2017, Fried Frank responded to the revised drafts from Alston with counterproposals on various open issues, including (i) a cap on appraisal shares of 500,000 shares of Class A Common Stock, (ii) the ZGP Investment Agreement would cover the cost to purchase all of the shares (other than the Target Shares) held by Ramguard affiliates, not just Ramguard, which would result in an investment in ZGP of $12,649,676.70, and (iii) all members of the Parent Group would sign the stockholder voting and support agreement, but this group would not include Mr. Zugel’s former spouse, since she had not been approached about the transaction.

On December 26, 2017, Wyatt provided a revised draft of the Ramguard Voting Agreement to Alston.

On January 3, 2018, the Special Committee met with representatives from Alston and Houlihan Lokey to discuss the latest developments resulting from conversations with Fried Frank, including (i) the proposed cap on appraisal shares of 500,000 shares of Class A Common Stock, (ii) the agreement to have the ZGP Investment Agreement cover the cost to purchase all of the shares (other than the Target Shares) held by Ramguard affiliates, not just those shares held by Ramguard, and (iii) the fact that Mr. Zugel’s former spouse would not be a member of the Parent Group or sign a Voting Agreement at the time of signing, since she had not been approached about the transaction. With respect to Mr. Zugel’s former spouse, the Special Committee discussed the need for any shares that she may acquire by exercising her “exchange rights” with respect to Class A Units to remain outstanding (i.e., not be converted into the right to receive the Merger Consideration), given that any such shares would increase the Aggregate Merger Consideration. The Special Committee also discussed the potential for her to exercise appraisal rights and the need to carve any such shares out of the appraisal share cap. Finally, the Special Committee discussed the proposed cap on the Company’s transaction expenses.

Also on January 3, 2018, Alston delivered to Fried Frank a draft of the ZGP Investment Agreement, whereby ZGP would, immediately prior to the Merger, issue to Parent a number of Class A Units in exchange for the capital contribution in cash by Parent to ZGP, the proceeds from which would be used to fund a portion of the Unit Redemption. The Company would use the cash it receives in the transaction to fund a portion of the Merger Consideration.

On January 4, 2018, Fried Frank provided to Alston, McDermott, and the Company revised drafts of the Merger Agreement, the ZGP Investment Agreement, and the Parent Group Voting Agreement. Alston then, later that day, separately provided a draft of the Company’s disclosure schedule to the Merger Agreement to Fried Frank.

Also on January 4, 2018, Michael Szymanski, the President and Chief Executive Officer and member of the Board of the Company and President of ZAIS Group, resigned all of his positions with the Company and ZAIS Group effective as of January 5, 2018. Additionally, on January 4, 2018, the Company entered into a Consulting Agreement with Mr. Szymanski (the “Szymanski Consulting Agreement”) wherein, effective on January 6, 2018, Mr. Szymanski would commence providing consulting services to the Company and ZAIS Group through February 28, 2018 for a monthly consulting fee equal to $50,000 payable in advance and the reimbursement of all reasonable expenses. Additionally, the Company entered into a Release Agreement with Mr. Szymanski wherein he agreed to a full release of claims against, and covenant not to sue, ZAIS Group and its affiliates, in exchange for the Company’s agreement to (i) pay the last $500,000 installment of Mr. Szymanski’s $1.5 million retention award which he would have otherwise forfeited and (ii) waive the six-month covenant not to compete and modify the 12-month covenant not to solicit otherwise applicable to Mr. Szymanski.

On January 5, 2018, the Company announced the appointment, effective on January 8, 2018, of Mr. Curry, a member of Parent, as President of ZAIS Group and President and Chief Executive Officer of the Company. Mr. Curry was also elected to the Board. Later that day, the Company filed a Current Report on Form 8-K that disclosed the appointment of Mr. Curry and the resignation of Mr. Szymanski.

Also on January 5, 2018, Alston provided to Wyatt a revised draft of the voting and support agreement for Ramguard and its affiliates.

On January 8, 2018, Alston provided revised drafts of the Merger Agreement, ZGP Investment Agreement, and Parent Group Voting Agreement to Fried Frank. Also on January 8, 2018, Wyatt sent to Alston a revised draft of the voting and support agreement for Ramguard and its affiliates.

Also on January 8, 2018, management informed Houlihan Lokey and the Special Committee that there were certain updates to management’s October Projections. On January 9, 2018, management provided to Houlihan Lokey and the Special Committee management’s updated projections (the “January Projections”), which reflected ordinary course updates from the October Projections for (i) the Company’s actual performance and actual capital raises, (ii) Company management’s reassessment of the assumptions related to one of the Company’s investment funds (known as the ZAIS Zephyr 7 Fund (“Zephyr 7”)) and (iii) the impact of the U.S. tax reform enacted in December 2017. Management’s reassessment related to Zephyr 7 had the effect of substantially reducing the Company’s projected revenues during the years covered by the January Projections. For additional information regarding the changes from the October Projections to the January Projections, please see “ Special Factors—Projections. ”

On January 9, 2018, Fried Frank provided comments on the revised drafts of the Merger Agreement, ZGP Investment Agreement, and Parent Group Voting Agreement to Alston.

On January 10, 2018, the Special Committee met with representatives from Alston and Houlihan Lokey to discuss the changes to Company management’s projections, including the impact of Company management’s reassessment of projected revenues from Zephyr 7, the projected impact of the U.S. tax reform enacted in December 2017, and other matters. The Special Committee also discussed the remaining open items in the Merger Agreement. Following the meeting, in accordance with the directives of the Special Committee, Houlihan Lokey and Mr. Burke and Mr. Zinn, on behalf of the Special Committee, engaged in discussions with representatives of management (including Mr. Zugel) to understand the changes to management’s projections, including the basis for management’s reassessment of projected revenues from Zephyr 7.

Also on January 10, 2018, representatives of Alston engaged in negotiations with Fried Frank to finalize the Merger Agreement. Following these negotiations, Alston provided a draft of the Curry Support Agreement, which would bind Mr. Curry to the same obligations under the Parent Group Voting Agreement (other than those obligations relating solely to stockholders such as voting shares in favor of the proposed transaction) to Mr. Curry for review. Also on January 10, 2018, Alston distributed proposed final versions of the Merger Agreement, ZGP Investment Agreement, Voting Agreements, and the Company’s disclosure schedule to the Merger Agreement to Fried Frank, and distributed to Wyatt a proposed final version of the Ramguard Voting Agreement.

On January 11, 2018, the Special Committee and the Board were provided copies of the final form of the Merger Agreement, the Voting Agreements, and the ZGP Investment Agreement for their review. For a detailed summary of the Merger Agreement, please see “ The Merger Agreement ” on page 79 and for a detailed summary of the Voting Agreements, Curry Support Agreement, and ZGP Investment Agreement, please see “ Agreements with Parent Group Members ” on page 119.

Also on January 11, 2018, the Special Committee, together with Alston, Houlihan Lokey and the Company’s general counsel, Mr. Russo, and Mr. Steinberg and representatives from McDermott who were attending at the invitation of the Special Committee, met at McDermott’s offices in New York City and telephonically and discussed, among other things, the proposed transaction with Parent. To begin the meeting, the Special Committee discussed the changes to Company management’s projections, including the expressed basis for Company management’s reassessment of projected revenues from Zephyr 7. Alston discussed with the Special Committee their legal duties in connection with the proposed transaction and reviewed the key terms of the various transaction documents, including discussion of the closing condition requiring that the Merger Agreement be approved by the holders of the majority of the shares not held by members of the Parent Group, directors and executive officers of the Company, Ramguard, and each of their respective affiliates. Throughout this discussion, the Special Committee and representatives from Alston discussed various aspects of Parent and Mr. Zugel’s proposal and various provisions of the Merger Agreement and related documents. Mr. Russo, Mr. Steinberg and representatives from McDermott were then excused from the meeting. At the request of the Special Committee, Houlihan Lokey reviewed its financial analysis of the Merger Consideration and rendered to the Special Committee an oral opinion (confirmed by delivery of Houlihan Lokey’s written opinion, dated January 11, 2018, to the Special Committee) to the effect that, as of such date and based on and subject to various procedures followed, assumptions made, qualifications and limitations on the review undertaken and the other matters considered by Houlihan Lokey in connection with the preparation of its opinion, the Merger Consideration to be received by holders of Class A Common Stock (other than the Parent Group, Ramguard, any holders of Rollover Shares or Exchange Shares, and their respective affiliates) in the Merger pursuant to the Merger Agreement was fair to such holders from a financial point of view. The representatives from Houlihan Lokey were then excused from the meeting, and the Special Committee reviewed the resolutions to approve the proposed transaction. Upon a motion duly made and seconded, the Special Committee (i) expressed its unanimous view that the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Merger, were advisable, in the best interests of and fair to the Company and the Company’s stockholders (other than members of the Parent Group, Ramguard, any holder of Rollover Shares or Exchange Shares, and their respective affiliates, as to whom no view was expressed), (ii) unanimously approved the Merger Agreement and the transactions contemplated by the Merger Agreement, and (iii) unanimously recommended that the Board of Directors approve and adopt the Merger Agreement and other ancillary agreements and that the stockholders of the Company adopt the Merger Agreement and approve the transactions contemplated thereby. For the basis of the Special Committee’s determination in this regard, please see “ Special Factors—Reasons for the Merger; Recommendation of the Special Committee; Recommendation of the Board; Fairness of the Merger—Special Committee ” on page 38.

Immediately following the Special Committee’s meeting, on January 11, 2018, the Board (with the Special Committee members attending and Messrs. Zugel and Curry not present and recusing themselves) met at McDermott’s offices in New York City and telephonically, along with representatives of Alston, Houlihan Lokey, and McDermott. The Board received and discussed the Special Committee’s recommendation concerning the Merger Agreement and the Merger. At this meeting, representatives from McDermott reiterated the matters discussed with the Special Committee, as well as resolutions to be considered by the Board. The Board considered the Special Committee’s recommendation to the Board that it approve the Merger Agreement, the transactions contemplated by the Merger Agreement and related matters. Following the Board’s own discussions and deliberations, the Board approved the Merger Agreement and determined that the Merger Agreement and the transactions contemplated by the Merger Agreement were advisable, in the best interest of and fair to the Company’s stockholders (other than members of the Parent Group, Ramguard, any holder of Rollover Shares or Exchange Shares, and their respective affiliates, as to whom no view was expressed) and resolved to recommend to the Company’s stockholders that they approve the adoption of the Merger Agreement, among other transaction-related resolutions. For the basis of the Board’s determination in this regard, please see “ Special Factors—Reasons for the Merger; Recommendation of the Special Committee; Recommendation of the Board; Fairness of the Merger —Recommendation of the Board ” beginning on page 38.

Later that day, (i) the Merger Agreement was executed by the Company, Sub, and Parent, (ii) the Voting Agreements were executed by the Company, on the one hand, and the members of Parent Group (other than Mr. Curry) and the Ramguard Parties and, for limited purposes, Mr. Ramsey, on the other hand, respectively, (iii) the ZGP Investment Agreement was executed by the Company, Parent, and, for limited purposes, Mr. Zugel, and (iv) the Curry Support Agreement was executed by Mr. Curry.

Also on January 11, 2018, Parent, Mr. Zugel, and Ramguard entered into the Share Purchase Agreement, which, among other changes, increased the price per share of Class A Common Stock to $4.10 and extended the outside date upon which Ramguard could terminate the Share Purchase Agreement to May 31, 2018.

In addition, the members of the Parent Group, on January 11, 2018, entered into a Second Amended and Restated Limited Liability Company Agreement of Parent (the “2 ^nd A&R Parent LLC Agreement”), which, among other changes, requires the members to fund their pro rata share of the capital contribution requirements of members of Parent with respect to the ZGP Investment Agreement.

On January 12, 2018, prior to the open of trading on the U.S. public stock markets, the Company issued a press release announcing the execution of the Merger Agreement, and filed the press release, the Merger Agreement, the Voting Agreements, the Curry Support Agreement, and the ZGP Investment Agreement as exhibits to its Current Report on Form 8-K.

Subsequent to execution of the Merger Agreement, the Parent Group informed the Company and Special Committee that it will not seek to enter into any agreements that would establish any Rollover Shares.

Reasons for the Merger; Recommendation of the Special Committee; Recommendation of the Board; Fairness of the Merger

Both the Special Committee and the Board believe, based on their consideration of the factors described below, that the Merger Agreement and the transactions contemplated by it, including the Merger, are substantively and procedurally fair to the Company’s unaffiliated stockholders (the term “unaffiliated stockholders,” as used herein, does not include any of the Company’s directors and officers, any member of the Parent Group, Ramguard, any holders of Rollover Shares or Exchange Shares, and their respective affiliates, as to whom no view is expressed).

The Special Committee

The Special Committee, with the advice and assistance of its independent legal and financial advisors, evaluated the Merger, the terms and conditions of the Merger Agreement and the transactions contemplated thereby. The Special Committee, by unanimous vote at a meeting held on January 11, 2018, determined that the Merger, the Merger Agreement and the transactions contemplated thereby are fair to, and in the best interests of, the holders of the Class A Common Stock (other than the Parent Group, Ramguard, any holders of Rollover Shares, any holders of Exchange Shares, and any of their respective affiliates, as to whom no view is expressed), and recommended that the Board approve and adopt the Merger Agreement and recommend that the Company’s stockholders vote to adopt the Merger Agreement.

In the course of reaching the determinations and making the recommendations described above, the Special Committee considered a number of factors, certain of which were viewed as generally positive or favorable and others of which were viewed as generally negative or unfavorable, as summarized below (not necessarily in order of relative importance).

The Special Committee viewed the following factors as being generally positive or favorable in coming to its determinations and recommendations:

In addition to the foregoing factors which the Special Committee considered as being generally positive or favorable in making its determination and recommendations in favor of the Merger, the Special Committee also considered that its determination and recommendations were supported by its belief that there were limited strategic alternatives for enhancing value for the Company’s stockholders based on the results of the Company’s lengthy strategic review process.

In the course of reaching the determinations and making the recommendations described above, the Special Committee considered the following factors to be generally negative or unfavorable in making its determinations and recommendations:

In the course of reaching the determinations and decisions, and making the recommendations, described above, the Special Committee considered the following factors relating to the procedural safeguards that the Special Committee believes were present to ensure the fairness of the Merger and to permit the Special Committee to represent the interests of the Company’s unaffiliated stockholders, each of which factors the Special Committee believes supports its decision and provides assurance of the fairness of the Merger to the Company and its unaffiliated stockholders:

The Special Committee did not consider the Company's net book value, which is defined as total assets minus total liabilities, as a factor. The Special Committee believes that net book value, as an accounting concept based on historical costs, is not a material indicator of the value of the Company as a going concern because it does not take into account the future prospects of the Company, market conditions, trends in the industry in which the Company conducts its business or the business risks inherent in competing with other companies in the same industry. Therefore, the Special Committee does not believe that net book value reflects, or has any meaningful impact on, the market price of Class A Common Stock or the fair market value of its assets or business.

The foregoing discussion of the information and factors considered by the Special Committee addresses the material factors considered by the Special Committee in its consideration of the Merger Agreement. In view of the variety of factors considered in connection with its evaluation of the Merger Agreement and the Merger, the Special Committee did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determination and recommendation. In addition, individual Special Committee members may have given different weights to factors. The Special Committee unanimously approved the Merger Agreement and the Merger and recommended adoption of the Merger Agreement based upon the totality of the information presented to and considered by it. The Special Committee unanimously determined that it is in the best interests of the Company and its stockholders (other than the Parent Group, Ramguard, holders of Exchange Shares and Rollover Shares, and their respective affiliates) to undertake the Merger at this time for the reasons described above.

Recommendation of the Board

The Board consists of five directors. On January 11, 2018, based on the unanimous recommendation of the Special Committee, as well as on the basis of the factors described above, the Board unanimously (with each of Mr. Zugel and Mr. Curry not present and recusing himself) on behalf of the Company:

The Board believes, based on its considerations of the factors described above, that the Merger Agreement and the transactions contemplated by it, including the Merger, are substantively and procedurally fair to the Company’s unaffiliated stockholders. In adopting the Special Committee’s recommendations and concluding that the Merger Agreement and the transactions contemplated by it, including the Merger, are in the best interests of the Company and its stockholders ( other than the Parent Group, Ramguard, any holders of Rollover Shares or Exchange Shares, and their respective affiliates, as to whom no view is expressed ), the Board consulted with outside legal advisors, considered and relied upon the same factors and considerations that the Special Committee relied upon, as described above, and adopted as its own analysis as well as the Special Committee’s analyses and conclusions in their entirety. The Board is not aware of any firm offer made by any unaffiliated person, other than as described in this Proxy Statement or in relation to the Business Combination, during the two years prior to the date of Merger Agreement for (i) the merger or consolidation of the Company with another company, or vice versa, (ii) the sale or transfer of all or any substantial part of the Company’s assets, or (iii) a purchase of the Company’s securities that would enable such person to exercise control of the Company.

Opinion of Financial Advisor to the Special Committee

At a meeting of the Special Committee held to evaluate the Merger and related transactions on January 11, 2018, Houlihan Lokey rendered to the Special Committee an oral opinion (confirmed by delivery of Houlihan Lokey’s written opinion, dated January 11, 2018, to the Special Committee) as to the fairness, from a financial point of view and as of such date, of the Merger Consideration to be received by holders of Class A Common Stock (other than the Parent Group, Ramguard, any holders of Rollover Shares or Exchange Shares, and their respective affiliates) in the Merger pursuant to the Merger Agreement, which opinion was based on and subject to the various procedures followed, assumptions made, qualifications and limitations on the review undertaken and the other matters considered by Houlihan Lokey in connection with the preparation of its opinion.

Houlihan Lokey’s opinion was furnished for the use of the Special Committee (in its capacity as such), only addressed the fairness, from a financial point of view and as of January 11, 2018, of the Merger Consideration to be received by holders of Class A Common Stock (other than the Parent Group, Ramguard, any holders of Rollover Shares or Exchange Shares, and their respective affiliates) in the Merger pursuant to the Merger Agreement and did not address any related transactions, any other term, aspect or implication of the Merger or any other agreement, arrangement or understanding. The summary of Houlihan Lokey’s opinion in this proxy statement is qualified in its entirety by reference to the full text of Houlihan Lokey’s written opinion, which is attached as Annex B to this proxy statement and describes the procedures followed, assumptions made, qualifications and limitations on the review undertaken and the other matters considered by Houlihan Lokey in connection with the preparation of its opinion. Neither Houlihan Lokey’s opinion nor the summary of its opinion and the related analysis set forth in this proxy statement are intended to be, and do not constitute, advice or a recommendation to the Special Committee, the Board, the Company, any security holder or any other party as to how to act or vote with respect to any matter relating to the Merger, any related transactions or otherwise.

In connection with its opinion, Houlihan Lokey made such reviews, analyses and inquiries as it deemed necessary and appropriate under the circumstances. Among other things, Houlihan Lokey:

Houlihan Lokey relied upon and assumed, without independent verification, the accuracy and completeness of all data, material and other information furnished, or otherwise made available, to Houlihan Lokey, discussed with or reviewed by Houlihan Lokey, or publicly available, and did not assume any responsibility with respect to such data, material and other information. The management of the Company advised Houlihan Lokey, and Houlihan Lokey assumed, at the direction of the Special Committee, that the financial projections and other estimates utilized in Houlihan Lokey’s analyses (including as to potential tax attributes and investments of the Company) were reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of such management as to the future financial results and condition of the Company. Houlihan Lokey expressed no opinion with respect to any such projections or estimates or the data or assumptions on which they are based. Houlihan Lokey relied upon and assumed, without independent verification, that estimates of the management of the Company as to the value of investments of the Company as of December 31, 2017 are reflective of the fair value of such investments as of such date, that there had been no change in the businesses, assets, liabilities, financial condition, results of operations, cash flows or prospects of the Company since the respective dates of the most recent financial statements and other information, financial or otherwise, provided to Houlihan Lokey that would have been meaningful in any respect to Houlihan Lokey’s analyses or opinion, and that there was no information or any facts that would make any of the information reviewed by Houlihan Lokey incomplete or misleading. Houlihan Lokey also relied upon, without independent verification, the assessments of the management of the Company as to, among other things, (i) the related transactions, including with respect to the timing thereof and financial and other terms involved, (ii) certain tax receivable and related exchange arrangements, including with respect to the obligations of the Company and other terms involved and the expectation of Company management that there would be no exchanges or related tax benefits thereunder during the fiscal years ending December 31, 2017 through December 31, 2022, (iii) the potential impact on the Company, its subsidiaries and managed entities of market, competitive, cyclical and other trends and developments in and prospects for, and governmental, regulatory and legislative matters relating to or otherwise affecting, the financial services industry and the investment and asset management sectors thereof and related credit and financial markets, including with respect to interest rates, and (iv) existing and future contracts and relationships, agreements and arrangements with, and the ability to attract, retain and/or replace, key customers, employees and other commercial relationships of the Company and its subsidiaries. Houlihan Lokey assumed, with the consent of the Special Committee, that there would be no developments with respect to any such matters that would be meaningful in any respect to Houlihan Lokey’s analyses or opinion.

Houlihan Lokey further relied upon and assumed, without independent verification, that (a) the representations and warranties of all parties to the Merger Agreement and all other related documents and instruments that are referred to therein were true and correct, (b) each party to the Merger Agreement and such other related documents and instruments would fully and timely perform all of the covenants and agreements required to be performed by such party, (c) all conditions to the consummation of the Merger and related transactions would be satisfied without waiver thereof, and (d) the Merger and related transactions would be consummated in a timely manner in accordance with their respective terms, without any amendments or modifications thereto. Houlihan Lokey relied upon and assumed, without independent verification, that (i) the Merger and related transactions would be consummated in a manner that complies in all respects with all applicable foreign, federal and state statutes, rules and regulations and relevant documents and other requirements and (ii) all governmental, regulatory, and other consents and approvals necessary for the consummation of the Merger and related transactions would be obtained and that no delay, limitations, restrictions or conditions would be imposed or occur or amendments, modifications or waivers made that would be meaningful in any respect to Houlihan Lokey’s analyses or opinion. In addition, Houlihan Lokey relied upon and assumed, without independent verification, that the final Merger Agreement when executed would not differ in any material respect from the draft of the Merger Agreement identified above.

Furthermore, in connection with its opinion, Houlihan Lokey was not requested to, and did not, make any physical inspection or independent appraisal or evaluation of any of the assets, properties or liabilities (fixed, contingent, derivative, off-balance sheet or otherwise) of the Company or any other party or entity nor was Houlihan Lokey provided with any such appraisal or evaluation. Houlihan Lokey did not estimate, and expressed no opinion regarding, the liquidation value of the Company or any other entity or business. Houlihan Lokey did not undertake an independent analysis or evaluation of any potential or actual litigation, regulatory action, possible unasserted claims or other contingent liabilities, or of any governmental investigation of any such claims or other liabilities, to which the Company or any other entity was or may be a party or was or may be subject. Houlihan Lokey is not an appraiser or expert in the evaluation of, nor did Houlihan Lokey express any view or opinion as to, specialized or other credit instruments.

Houlihan Lokey was not requested to, and did not, (a) initiate any discussions with, or solicit any indications of interest from, third parties with respect to the Merger or related transactions, the securities, assets, businesses or operations of the Company or any other party or entity, or any alternatives to the Merger or related transactions, (b) identify or introduce to the Special Committee or the Company, or screen for creditworthiness, any prospective investors, lenders or other participants in the Merger, related transactions or alternatives thereto, or (c) advise the Special Committee, the Company, or any other party or entity with respect to alternatives to the Merger or related transactions. Houlihan Lokey’s opinion was necessarily based on financial, economic, market, regulatory and other conditions as in effect on, and the information made available to Houlihan Lokey as of, the date of Houlihan Lokey’s opinion. Houlihan Lokey did not undertake, and is under no obligation, to update, revise, reaffirm or withdraw its opinion, or otherwise comment on or consider events occurring or coming to Houlihan Lokey’s attention after the date of its opinion. Houlihan Lokey did not express any opinion as to the price or range of prices at which shares of Class A Common Stock would trade, or any shares of Class A Common Stock or other securities of the Company or any other entity may be transferable, at any time.

Houlihan Lokey’s opinion was furnished for the use of the Special Committee (in its capacity as such) in connection with its evaluation of the Merger and may not be used for any other purpose without Houlihan Lokey’s prior written consent. Houlihan Lokey’s opinion is not intended to be, and does not constitute, a recommendation to the Special Committee, the Board, the Company, any security holder or any other party as to how to act or vote with respect to any matter relating to the Merger, any related transactions or otherwise.

Houlihan Lokey’s opinion related to the fairness, from a financial point of view and as of its date, of the Merger Consideration to be received in the Merger pursuant to the Merger Agreement by holders of Class A Common Stock (other than the Parent Group, Ramguard, any holders of Rollover Shares or Exchange Shares, and their respective affiliates) without regard to individual circumstances of specific holders that may distinguish such holders, and Houlihan Lokey’s analyses and opinion did not address, take into consideration or give effect to, any rights, preferences, restrictions or limitations (whether by virtue of control, voting, liquidity or otherwise) that may be attributable to, shares of Class A Common Stock or other securities of the Company. Houlihan Lokey was not requested to opine as to, and its opinion did not express an opinion as to or otherwise address, among other things: (i) the underlying business decision of the Special Committee, the Board, the Company, its security holders or any other party to proceed with or effect the Merger or any related transactions, (ii) any related transactions, the terms of any arrangements, understandings, agreements or documents related to, or the form, structure or any other portion, aspect or implication of, the Merger (other than the Merger Consideration to the extent expressly specified in Houlihan Lokey’s opinion) or otherwise, including, without limitation, any terms, aspects or implications of any roll-over arrangements or any stockholder voting and support, share purchase, investment, or other agreement or arrangement to be entered into in connection with or contemplated by the Merger, any related transactions or otherwise, (iii) the fairness of any portion or aspect of the Merger or any related transactions to the holders of any class of securities, creditors or other constituencies of the Company, or to any other party, except if and only to the extent expressly set forth in the last sentence of Houlihan Lokey’s opinion, (iv) the relative merits of the Merger or any related transactions as compared to any alternative business strategies or transactions that might be available to the Company or any other party or whether any alternative transaction might produce consideration for the holders of Class A Common Stock in an amount in excess of that contemplated in the Merger, (v) the fairness of any portion or aspect of the Merger or related transactions to any one class or group of the Company’s or any other party’s security holders or other constituents vis-à-vis any other class or group of the Company’s or such other party’s security holders or other constituents (including, without limitation, the allocation of any consideration amongst or within such classes or groups of security holders or other constituents), (vi) whether or not the Company, Parent, their respective security holders or any other party is receiving or paying reasonably equivalent value in the Merger or any related transactions, (vii) the solvency, creditworthiness or fair value of the Company or any other participant in the Merger or any related transactions, or any of their respective assets or securities, under any applicable laws relating to bankruptcy, insolvency, fraudulent conveyance or similar matters, or (viii) the fairness, financial or otherwise, of the amount, nature or any other aspect of any compensation to or consideration payable to or received by any officers, directors or employees of any party to the Merger or any related transactions, any class of such persons or any other party, relative to the Merger Consideration or otherwise. Furthermore, no opinion, counsel or interpretation was intended in matters that required legal, regulatory, accounting, insurance, tax or other similar professional advice, including, without limitation, any advice (and Houlihan Lokey expressed no view or opinion) with respect to changes in, or the impact of, tax laws, regulations and governmental and legislative policies on the Company or any other participant in the Merger or any related transactions, the Merger or any related transactions. Houlihan Lokey assumed that such opinions, counsel or interpretations had been or would be obtained from appropriate professional sources and Houlihan Lokey relied, with the consent of the Special Committee, on the assessments by the Special Committee, the Company and their respective advisors and other representatives as to all such matters. The issuance of Houlihan Lokey’s opinion was approved by a committee authorized to approve opinions of this nature.

In performing its analysis, Houlihan Lokey considered general business, economic, industry and market conditions, financial and otherwise, and other matters as they existed on, and could be evaluated as of, the date of its opinion. The estimates contained in the financial projections prepared by the management of the Company and the implied reference ranges indicated by Houlihan Lokey’s analysis are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by such estimates and the analysis. In addition, any analysis relating to the value of assets, businesses or securities does not purport to be an appraisal or to reflect the prices at which assets, businesses or securities actually may be sold, which may depend on a variety of factors, many of which are beyond the control of the Company. Much of the information used in, and accordingly the results of, Houlihan Lokey’s analysis are inherently subject to substantial uncertainty.

Houlihan Lokey’s opinion was only one of many factors considered by the Special Committee in evaluating the Merger and related transactions. Neither Houlihan Lokey’s opinion nor its analysis was determinative of the consideration payable in the Merger or of the views of the Special Committee, management or any other party with respect to the Merger, related transactions or the Merger Consideration. Under the terms of Houlihan Lokey’s engagement as financial advisor to the Special Committee, the Special Committee and the Company agreed that Houlihan Lokey was acting as an independent contractor and that Houlihan Lokey was not acting as an agent or fiduciary of the Special Committee, the Company, security holders, creditors or other constituencies of the Company or any other person or entity. Houlihan Lokey was not requested to, and it did not, recommend the specific consideration payable in the Merger and related transactions or that any given consideration constituted the only appropriate consideration for the Merger and related transactions. The type and amount of consideration payable in the Merger and related transactions were determined through negotiation between the Special Committee and Mr. Zugel, and the decision for the Company to enter into the Merger Agreement was solely that of the Special Committee and the Board.

Financial Analysis

In preparing its opinion to the Special Committee, Houlihan Lokey performed the financial analysis described below under the heading “— January 11, 2018 Financial Presentation .” The summary of Houlihan Lokey’s analysis is not a complete description of the analysis underlying Houlihan Lokey’s opinion. The preparation of such an opinion is a complex process involving various quantitative and qualitative judgments and determinations with respect to the financial, comparative and other analytical methods employed and the adaptation and application of these methods to the unique facts and circumstances presented. As a consequence, neither Houlihan Lokey’s opinion nor its underlying analysis is readily susceptible to summary description. Houlihan Lokey arrived at its opinion based on the results of the analysis undertaken by it and assessed as a whole and did not draw, in isolation, conclusions from or with regard to any individual component of such analysis or any particular methodology or factor. While the results of the analysis were taken into account in reaching Houlihan Lokey’s overall conclusion with respect to fairness, Houlihan Lokey did not make separate or quantifiable judgments regarding individual components of such analysis. Accordingly, Houlihan Lokey believes that its analysis and the following summary must be considered as a whole and that selecting portions of its analysis, methodologies and factors, without considering such analysis, methodologies and factors in their entirety, could create a misleading or incomplete view of the processes underlying Houlihan Lokey’s analysis and opinion.

The following is a summary of the material financial analysis performed by Houlihan Lokey in connection with the preparation of its opinion and reviewed with the Special Committee on January 11, 2018. The analysis summarized below includes information presented in tabular format. The table alone does not constitute a complete description of the analysis. Considering the data in the table below without considering the full narrative description of the analysis, as well as the methodologies underlying, and the assumptions, qualifications and limitations affecting, such analysis, could create a misleading or incomplete view of Houlihan Lokey’s analysis.

Introduction

In evaluating the Company from a financial perspective, Houlihan Lokey performed the financial analysis more fully described below.  Estimates of the future financial and operating performance of the Company relied upon by Houlihan Lokey for purposes of the financial analysis described below were based on financial projections and other estimates relating to the Company prepared by or discussed with the management of the Company and approved by the Special Committee (the “Company Projections”).

January 11, 2018 Financial Presentation

Sum-of-the-Parts Analysis . Houlihan Lokey performed a “sum-of-the-parts” analysis of the Company by (a) performing a discounted cash flow analysis of the Company’s asset management platform based on the Company Projections and (b) taking into account (i) the Company’s estimated equity interests in CLOs and net cash and cash equivalents as of December 31, 2017 based on the Company Projections and (ii) the estimated present value (as of December 31, 2017 and utilizing a discount rate of 15.3% derived from a cost of equity calculation) of the tax attributes of the Company expected by the management of the Company to be utilized, in the case of net operating loss carryforwards of the Company, during the fiscal years ending December 31, 2018 through December 31, 2023 and, in the case of amortization-related tax benefits, during the fiscal years ending December 31, 2018 through December 31, 2029, based on the Company Projections, the Company’s public filings and discussions with Company management.

In its discounted cash flow analysis of the Company’s asset management platform, Houlihan Lokey calculated the estimated present value of the unlevered, after-tax free cash flows that the Company’s asset management platform was projected to generate during the fiscal years ending December 31, 2018 through December 31, 2022 based on the Company Projections without reflecting cash outflows for projected CLO investments. The implied terminal value of the Company’s asset management platform was derived by applying to the terminal year unlevered, after-tax free cash flows (assuming working capital remained constant in perpetuity) of the Company’s asset management platform a range of perpetuity growth rates of 0% to 2% selected based on Houlihan Lokey’s professional judgment and taking into account, among other things, the Company Projections and trends in the industry and sectors in which the Company operates. Present values (as of December 31, 2017) of cash flows and terminal values were calculated using a discount rate range of 13.0% to 15.0% derived from a weighted average cost of capital calculation. For purposes of this discounted cash flow analysis, stock-based compensation was treated as a cash expense.

This sum-of-the-parts analysis indicated the following overall approximate implied per share equity value reference range for the Company, as compared to the per share Merger Consideration:

Certain Informational Factors

Houlihan Lokey observed certain additional information that was not considered part of its financial analysis for its opinion but was noted for informational purposes, including the results of an illustrative analysis prepared by Company management regarding the estimated liquidation value of the Company as of September 30, 2017 assuming an orderly liquidation, which indicated an estimated liquidation value of the Company of approximately $2.33 per share.

Preliminary Discussion Materials

In addition to the January 11, 2018 financial presentation provided to the Special Committee in connection with Houlihan Lokey’s opinion, dated January 11, 2018, to the Special Committee as summarized above (a substantially similar copy of which was provided to the Special Committee for its review on January 10, 2018), Houlihan Lokey also provided, for informational purposes, certain preliminary discussion materials to the Special Committee as summarized below.

The preliminary financial considerations and other information in the preliminary discussion materials reflected market data as of dates proximate to such materials and were based on financial, economic, monetary, market and other conditions and circumstances as in effect on, and information, including tax information relating to the Company, made available to Houlihan Lokey as of, the date of such materials. Accordingly, to the extent preliminary financial analyses or information were included in such preliminary discussion materials, such preliminary financial analyses or information may have differed from the January 11, 2018 financial presentation as a result of, among other things, changes in the Company’s internal financial projections and forecasts, estimates and assumptions, such financial, economic, monetary, market and other conditions and circumstances and other information. Houlihan Lokey also continued to refine various aspects of such preliminary financial considerations and other information. The January 11, 2018 financial presentation superseded the preliminary discussion materials. None of the preliminary discussion materials constituted an opinion of, or recommendation by, Houlihan Lokey with respect to a possible transaction or otherwise.

Miscellaneous

Houlihan Lokey was engaged as the Special Committee’s financial advisor in connection with the Merger based on, among other things, Houlihan Lokey’s experience and reputation. Houlihan Lokey is regularly engaged to provide financial advisory services in connection with mergers and acquisitions, financings, and financial restructurings. Pursuant to its engagement, Houlihan Lokey is entitled to an aggregate fee of $800,000 for its services, of which $250,000 was paid to Houlihan Lokey upon its engagement, and $350,000 was paid to Houlihan Lokey upon delivery of its opinion. An additional $200,000 payment is contingent upon consummation of the Merger. In addition, the Company has agreed to reimburse Houlihan Lokey for certain expenses and to indemnify Houlihan Lokey, its affiliates and certain related parties against certain liabilities and expenses, including certain liabilities under the federal securities laws, arising out of or related to Houlihan Lokey’s engagement.

In the ordinary course of business, certain of Houlihan Lokey’s employees and affiliates, as well as investment funds in which they may have financial interests or with which they may co-invest, may acquire, hold or sell, long or short positions, or trade, in debt, equity, and other securities and financial instruments (including loans and other obligations) of, or investments in, the Company, members of the Parent Group, Ramguard or any other party that may be involved in the Merger or related transactions and their respective affiliates or any currency or commodity that may be involved in the Merger or related transactions.

Houlihan Lokey and/or certain of its affiliates in the past have provided investment banking, financial advisory and/or other financial or consulting services to an entity that was externally managed and advised by an affiliate of the Company, for which Houlihan Lokey and/or such affiliates have received compensation, including, during the two-year period prior to the date of Houlihan Lokey’s opinion, having acted as financial advisor to such entity in connection with a business combination, for which Houlihan Lokey received during such two-year period an aggregate fee of approximately $2.5 million. Houlihan Lokey and certain of its affiliates may provide investment banking, financial advisory and/or other financial or consulting services to the Company, members of the Parent Group, Ramguard, other participants in the Merger or related transactions or certain of their respective affiliates or security holders in the future, for which Houlihan Lokey and its affiliates may receive compensation. In addition, Houlihan Lokey and certain of its affiliates and certain of Houlihan Lokey’s and their respective employees may have committed to invest in private equity or other investment funds managed or advised by the Company, members of the Parent Group, Ramguard, other participants in the Merger or related transactions or certain of their respective affiliates or security holders, and in portfolio companies of such funds, and may have co-invested with the Company, members of the Parent Group, Ramguard, other participants in the Merger or related transactions or certain of their respective affiliates or security holders, and may do so in the future. Furthermore, in connection with bankruptcies, restructurings, distressed situations and similar matters, Houlihan Lokey and certain of its affiliates may have in the past acted, may currently be acting and may in the future act as financial advisor to debtors, creditors, equity holders, trustees, agents and other interested parties (including, without limitation, formal and informal committees or groups of creditors) that may have included or represented and may include or represent, directly or indirectly, or may be or have been adverse to, the Company, members of the Parent Group, Ramguard, other participants in the Merger or related transactions or certain of their respective affiliates or security holders, for which advice and services Houlihan Lokey and its affiliates have received and may receive compensation.

Parent Parties’ Purposes and Reasons for the Share Purchase and the Merger

Parent and Mr. Zugel are undertaking the Share Purchase as a step towards the acquisition of all outstanding shares of Class A Common Stock (other than any Rollover Shares or any Exchange Shares). The Parent Parties believe that, due to the Company’s lack of scale, the costs associated with being a public company, the historic volatility of the Class A Common Stock, the Company’s financial performance and the challenges of effecting a turnaround in the performance of the Company while the Class A Common Stock continues to be publicly traded, it would be in the best interests of the Company and the holders of Class A Common Stock to effect a going private transaction. The acquisition of the Target Shares may be deemed to constitute a step towards a potential going-private transaction, whereby the Company would cease to be registered under the Exchange Act and delist from NASDAQ.

The proposed Merger affords an opportunity for the members of the Parent Group to acquire the remaining Class A Common Stock, while offering holders of Class A Common Stock a substantial premium over trading prices for the Class A Common Stock prior to September 5, 2017, the date on which Mr. Zugel and Parent initially entered into the Share Purchase Agreement and delivered to the Company the proposal by Mr. Zugel and Parent for a merger.

If the Merger is consummated, the Company would cease to be registered under the Exchange Act and the Class A Common Stock would cease to trade on NASDAQ, and members of the Parent Group, Mr. Zugel’s former spouse, and their affiliates would be the sole direct or indirect owners of the Company. The Parent Parties believe this would allow the Company to realize significant cost savings by eliminating the compliance, insurance, regulatory, and other costs associated with being a public reporting company. The Parent Parties estimate that these costs savings could be approximately $2 million per year. Further, as a private company, the Company may have more latitude to focus on long-term strategic planning in a competitive business environment and more flexibility regarding its investment strategy without scrutiny or pressure from the public investment community to meet earnings expectations or short-term goals.

The Parent Parties are undertaking the Share Purchase and the Merger at this time because Parent and Mr. Zugel initiated discussions with Ramguard with respect to the Share Purchase and made their proposal to the Special Committee for a take private transaction only after the culmination of the process undertaken by the Company, with the oversight of the Board and the Special Committee, to explore financial and strategic alternatives for the Company to address the Company’s lack of scale and financial and operational challenges and enhance value for Company stockholders. In addition, the Parent Parties believe that the costs of remaining a public company have become more burdensome, and the challenges and risks of seeking to execute a turnaround in the Company’s performance while remaining a public company have become more acute, as a result of continued deterioration in the Company’s financial position and stock price performance.

Position of the Parent Parties as to Fairness of the Share Purchase and the Merger

Under SEC rules governing going private transactions, each of the Parent Parties is required to express his, her or its belief as to the fairness of the Share Purchase and the Merger to Ramguard and the unaffiliated stockholders of the Company. Each of the Parent Parties is making the statements included in this section solely for the purpose of complying with the requirements of Rule 13e-3 and related rules under the Exchange Act.

The Parent Parties believe that the Share Purchase is substantively and procedurally fair to Ramguard and the unaffiliated stockholders of the Company based on their consideration of the following factors, which are not listed in any relative order of importance:

The Share Purchase

An affiliate of Ramguard and Mr. Ramsey, NAR, has been an investor in the Company since its inception, and the Parent Group believes that Ramguard and Mr. Ramsey are sophisticated investors who are knowledgeable about the businesses in which the Company is engaged and the benefits and risks of an investment in the Class A Common Stock.

In that regard, the Parent Parties believe that Ramguard and Mr. Ramsey were familiar with the efforts undertaken by the Company since the business combination with ZGP, with the assistance of experienced legal and financial advisors, to enhance the value of the Company, and that Ramguard and Mr. Ramsey were aware that those efforts did not lead to a definitive agreement for a transaction.

The price initially contemplated by the Original Share Purchase Agreement of $4.00 per share of Class A Common Stock represented a premium of approximately 132% to the trading price of the Class A Common Stock on September 5, 2017, the last trading day prior to execution of the Original Share Purchase Agreement. The price contemplated by the Share Purchase Agreement of $4.10 per share represents a premium of approximately 138% over the closing trading price of $1.72 per share of Class A Common Stock on September 5, 2017, the last trading day prior to the day that the initial proposal by Parent and Mr. Zugel for the Take Private Transaction was publicly disclosed. Under the terms of the Original Share Purchase Agreement, Ramguard was entitled to receive this increased consideration for the Target Shares by reason of the execution of the Merger Agreement.

No approval of the Board or vote of stockholders of the Company is necessary in connection with the execution, delivery or performance of the Share Purchase Agreement and Parent and Ramguard are obligated to consummate the Share Purchase whether or not the Merger is completed. The Share Purchase will have no effect on the rights of any unaffiliated stockholders of the Company. The Target Shares and any other shares of Class A Common Stock held by Ramguard and its affiliates will not be counted for purposes of determining whether the Majority of the Minority Approval is obtained.

The Merger

The Parent Parties believe that all of the factors described below, relating to the fairness of the Merger to the unaffiliated holders of Class A Common Stock, also support the Parent Parties’ belief that the terms of the Share Purchase are fair to Ramguard and the unaffiliated stockholders of the Company. Notwithstanding the foregoing, Parent and Mr. Zugel’s proposal for a Take Private Transaction was irrevocably conditioned upon the approval of the Take Private Transaction by the Special Committee and by a majority of the issued and outstanding shares of Class A Common Stock not held by Mr. Zugel, Parent, their affiliates and the executive officers and other affiliates of the Company.

The Parent Group has interests in the Merger that are different from those of the other stockholders of the Company by virtue of its continuing interests in the surviving corporation after the completion of the Merger. The Parent and Mr. Zugel attempted to negotiate with the Special Committee the terms of a transaction that would be most favorable to the Parent Group, and not necessarily to the Company’s unaffiliated stockholders, and, accordingly, did not negotiate the Merger Agreement with a goal of obtaining terms that were fair to such unaffiliated stockholders. The Special Committee consists of three directors of the Company who are not affiliated with the members of the Parent Group, are not employees of the Company or any of its affiliates and have no financial interest in the Merger different from, or in addition to the interests of the Company’s unaffiliated stockholders other than their interests described under “ Special Factors—Interests of the Company’s Directors and Executive Officers in the Share Purchase and the Merger ” beginning on page 59. Accordingly, the Parent Parties believe that the members of the Special Committee are independent and disinterested directors of the Company.

Based on its knowledge and analysis of available information regarding the Company, as well as the factors considered by, and the analyses and resulting conclusions of, the Special Committee and the Board discussed under “ Special Factors—Reasons for the Merger; Recommendation of the Special Committee; Recommendation of the Board; Fairness of the Merger ” beginning on page 38, each of the Parent Parties believes that the Merger is substantively and procedurally fair to the unaffiliated stockholders based on its consideration of the following factors, which are not listed in any relative order of importance:  

The price of $4.10 per share of Class A Common Stock payable pursuant to the Merger Agreement exceeds the price of $4.00 per share of Class A Common Stock previously negotiated with Ramguard and Neil Ramsey, who are collectively the largest holder of Class A Common Stock and who the Parent Parties believed to be informed and sophisticated investors.

The price of $4.10 per share of Class A Common Stock represents a premium of approximately 138% to the trading price of the Class A Common Stock on September 5, 2017, the last trading day prior to execution of the Share Purchase Agreement and the submission by Mr. Zugel and Parent of the proposal for the Take Private Transaction.

The consideration being paid in the Merger is all cash, rather than cash and notes as is the structure for the Share Purchase.

The Parent Group irrevocably conditioned the proposed Merger upon the approval of the Take Private Transaction by the Special Committee and the Majority of the Minority Stockholder Approval.

Since the business combination with ZGP, the Company has been engaged, with the assistance of experienced legal and financial advisors, in efforts to enhance the value of the Company. Those efforts, which commenced in August 2015, did not lead to a definitive agreement for a transaction, and none of the members of the Parent Group is aware of any credible, alternative proposal that would deliver superior value to the unaffiliated holders of Class A Common Stock.

The Special Committee was advised by independent legal counsel and an independent financial advisor, each of which was selected by the Special Committee.

The terms of the Merger Agreement permit the Company to provide information to, and engage in negotiations with, any person who submits a proposal that would reasonably be expected to lead to a proposal that is superior to the proposed Merger, and to terminate the Merger Agreement to enter into a superior proposal or for certain favorable intervening events, subject only to paying the costs and expenses of the Parent Group related to the proposed Merger up to a maximum amount of $1,500,000.

While consummation of the Share Purchase and the Merger would mean that Ramguard and other unaffiliated holders of Class A Common Stock would not participate in any potential future appreciation in value of the equity interests in the Company, these holders would not bear the risks of the future financial performance of the Company, which could result in continued losses or diminution in value. The Company has a history of operating losses since the business combination with ZGP, and there can be no assurance as to the future financial performance of the Company.

None of the members of the Parent Group has received any report, opinion or appraisal from an outside party that is materially related to the Share Purchase or the proposed Merger.

Plans for the Company after the Merger

In accordance with the Merger Agreement, if the Merger is consummated, the Class A Common Stock will be delisted from NASDAQ and deregistered under the Exchange Act. The deregistration of the Class A Common Stock under the Exchange Act would suspend the Company’s obligation to file reports under Section 15(d) of the Exchange Act. If the Merger is not consummated for any reason, the Company’s stockholders will not receive any payment for their shares of Common Stock. Instead, the Company will remain a public company and the Company’s Class A Common Stock will continue to be listed and traded on NASDAQ. If the Merger is not consummated, the Parent Parties may seek to acquire additional shares of Class A Common Stock in the future in market or privately negotiated transactions or may pursue other alternatives with a view to terminating the registration of the Class A Common Stock under the Exchange Act and/or the listing of the Class A Common Stock on NASDAQ.

As of the date of this proxy statement, except as set forth herein, the Parent Parties have no current plans or proposals or negotiations which would relate to or result in an extraordinary transaction involving the Company’s business or management, such as a merger, reorganization, liquidation, relocation of any operations (other than the Company’s plan to relocate its present Red Bank, New Jersey operations to Holmdel, New Jersey), or sale or transfer of a material amount of assets, or the incurrence of any indebtedness. Following the Merger, the Parent Parties will continuously evaluate and review the Company’s business and operations and may propose or develop new plans and proposals which they consider to be in the best interests of the Parent Group, including engaging in acquisitions of new businesses or assets, dispositions of existing businesses or assets, the alteration of the mix of assets held by the Company, or any of the types of extraordinary transactions described above. As described under “ Special Factors—Background ,” Mr. Zugel and the Company have engaged in discussions, from time to time, regarding potential acquisitions or dispositions of assets or lines of business or joint ventures. The Parent Parties may engage in such discussions in the future and may enter into one or more such transactions in the future.

Certain Effects of the Merger

If the Merger Agreement is adopted by the Requisite Stockholder Approval and the other conditions to the closing of the Merger are either satisfied or, to the extent permitted, waived, Sub will be merged with and into the Company with the Company surviving the Merger as a subsidiary of Parent. The separate corporate existence of Sub will cease and the Company will continue its corporate existence under Delaware law as the surviving corporation in the Merger, with all of its rights, privileges, immunities, powers, and franchises continuing unaffected by the Merger.

Upon consummation of the Merger, each share of Class A Common Stock issued and outstanding immediately before the Effective Time of the Merger (other than shares beneficially owned by the Parent Group, any Rollover Shares, shares held in the Company’s treasury, shares subject to the Share Purchase Agreement, or shares owned by holders of Appraisal Shares) will immediately be converted into the right to receive the Merger Consideration, without interest and less applicable withholding taxes. Further, upon consummation of the Merger, each RSU that is outstanding immediately prior to the Effective Time (without regard to vesting schedule) shall terminate and be cancelled and converted into the right to receive an amount in cash equal to the Merger Consideration with respect to each share of Class A Common Stock underlying such RSU, subject to applicable tax withholding requirements (if any). All outstanding RSUs are held by the Company’s independent directors and will be converted in the Merger into the right to receive the Merger Consideration.

Following the Merger, the entire equity of the surviving corporation will be owned by the Parent Group and holders of Rollover Shares or Exchange Shares (if any). If the Merger is completed, the members of the Parent Group and holders of Rollover Shares or Exchange Shares, if any, will be the sole beneficiaries of the Company’s future earnings and growth, if any, and will be entitled to vote on corporate matters affecting the Company following the Merger. Likewise, the Parent Group and holders of Rollover Shares or Exchange Shares, if any, will also bear the risks of ongoing operations, including the risks of any decrease in the Company’s value after the Merger.

If the Share Purchase and Merger are completed, the Company’s unaffiliated stockholders (other than Mr. Zugel’s former spouse, indirectly by virtue of her ownership of Class A Units) will have no interest in the Company’s net book value or net earnings. The table below sets forth the direct and indirect interests in the Company’s net book value and net earnings of the members of the Parent Group prior to and immediately after the Merger, based on the net book value at December 31, 2017 and net earnings for the year ended December 31, 2017. Ownership percentages assume that the Share Purchase has been completed prior to and after the Merger.

A primary potential benefit of the Merger to the Company’s stockholders (other than members of the Parent Group and any holders of Rollover Shares or Exchange Shares) will be the right of such stockholders to receive the Merger Consideration as described above, representing a premium of approximately 138% over the closing trading price of $1.72 per share of the Company’s Class A Common Stock on September 5, 2017, the last trading day prior to the date the merger proposal by Parent and Mr. Zugel was publicly disclosed. Additionally, such stockholders will avoid the risk of any possible decrease in the Company’s future earnings, growth or value.

The primary potential detriments of the Merger to such stockholders include the lack of continuing financial interest of such stockholders in the Company’s potential future earnings, growth or value. Additionally, the receipt of cash in exchange for shares of Common Stock pursuant to the Merger will generally be a taxable transaction for U.S. federal income tax purposes to the stockholders who surrender shares of the Common Stock in the Merger, as described further under the section entitled “ Special Factors—Material U.S. Federal Income Tax Consequences of the Merger ”.

In connection with the Merger, the members of the Parent Group and any holders of Rollover Shares or Exchange Shares will receive benefits and be subject to obligations that are different from, or in addition to, the benefits received by the Company’s stockholders generally. The primary potential benefits of the Merger to the members of the Parent Group, based on their ownership of all the equity interests in Parent, and to any holders of Rollover Shares or Exchange Shares, if any, include their interest in the Company’s potential future earnings and growth which, if they successfully execute their business strategies, could be substantial. Additionally, following the Merger, the Company will be a private company, and as such will be relieved of the burdens imposed on companies with publicly traded equity, including certain costs associated with being a public company, including certain legal and auditing expenses, and the requirements and restrictions on trading that the Company’s directors, officers and beneficial owners of more than 10% of the outstanding shares of Common Stock face as a result of the provisions of Section 16 of the Exchange Act. Additionally, following the Merger, Messrs. Zugel, Curry, and Burke will be directors of the surviving corporation.

The primary potential detriments of the Merger to the members of the Parent Group and any holders of Rollover Shares or Exchange Shares include the fact that all of the risk of any possible decrease in the Company’s earnings, growth or value following the Merger will be borne by members of the Parent Group and any holders of Rollover Shares or Exchange Shares. Additionally, the investment by the Parent Group in Parent and the investments by the Parent Group and holders of Rollover Shares or Exchange Shares, if any, in the Company will not be liquid, with no public trading market for such securities.

In connection with the Merger, certain members of the Company’s management will receive benefits and be subject to obligations that may be different from, or in addition to, the benefits and obligations of the Company’s stockholders generally, as described in more detail under “ Special Factors—Interests of the Company’s Directors and Executive Officers in the Share Purchase and the Merger ” beginning on page 59. Those receiving incremental benefits are expected to include, among others, certain executive officers of the Company who will continue as executive officers of the surviving corporation.

The shares of Class A Common Stock are currently registered under the Exchange Act and are quoted on NASDAQ under the symbol “ZAIS.” As a result of the Merger, the Company will be a privately held corporation and there will be no public market for its shares. After the Merger, the shares of Class A Common Stock will cease to be listed on NASDAQ and price quotations with respect to sales of shares of Class A Common Stock in the public market will no longer be available. In addition, registration of the Class A Common Stock under the Exchange Act will be terminated and the Company will cease to have reporting obligations under the Exchange Act.

At the Effective Time of the Merger, the certificate of incorporation and bylaws of the Company will be amended and restated to read as set forth in Exhibits C and D, respectively, to the Merger Agreement, and, as so amended and restated, will be the certificate of incorporation and by-laws of the Company following the Merger until thereafter amended in accordance with their respective terms and the DGCL.

Projections

The Company does not, as a matter of course, make public projections as to future performance or earnings beyond the current fiscal year given the unpredictability of underlying assumptions and estimates. However, financial projections prepared by or on behalf of the Company were from time to time made available to the Parent Group and other potential acquiring persons in connection with the Company’s strategic review process described above in “ —Background ,” beginning on page 16, as well as to the Board and the Board’s financial advisors in connection with the Merger, including Berkshire Capital (in its role as the Company’s financial advisor, assisting the Company in identifying potential strategic transactions to enhance the value of the Company for the benefit of its stockholders). The October Projections and January Projections were provided to the Special Committee and the Special Committee’s financial advisor, Houlihan Lokey. The January Projections provided to Houlihan Lokey were approved by the Special Committee for Houlihan Lokey’s use and reliance in connection with its financial analysis and opinion.

These financial projections are not being included in this proxy statement to influence your decision to vote for or against the proposal to adopt the Merger Agreement. The inclusion of this information should not be regarded or construed as an indication that the Company, the Board, Berkshire Capital, the Special Committee, Houlihan Lokey, Parent, any member of the Parent Group, other potential acquiring counterparties, or any other recipient of this information considered, or may now consider, such financial projections necessarily to be predictive of actual future results. No person has made or makes any representation to any stockholder regarding the information included in these financial projections.

In developing the financial projections, Company management made numerous judgments, estimates and assumptions with respect to industry performance, general business, economic, regulatory, market and financial conditions and other future events, as well as matters specific to the Company’s business, at a given point in time, all of which are difficult to predict and many of which are beyond the Company’s control. The financial projections are subjective in many respects and are susceptible to multiple interpretations and periodic revisions based on actual experience and business developments. As such, the financial projections constitute forward-looking information and are subject to risks and uncertainties that could cause actual results to differ materially from the results projected, including the various risks set forth in the Company’s periodic reports filed with the SEC. This prospective financial information was not prepared with a view toward compliance with published guidelines of the Securities and Exchange Commission or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. There can be no assurance that the projected results will be realized or that actual results will not be significantly higher or lower than projected. The financial projections cannot be considered necessarily predictive of actual results and they should not be relied upon as such. The financial projections cover multiple years and such information by its nature becomes less predictive with each successive year. In addition, the financial projections assume that the Company will remain a publicly-traded company.

The financial projections do not take into account any circumstances or events occurring after the date prepared, including the announcement of the Merger. The financial projections do not take into account the effect of any failure of the Merger to occur and should not be viewed as continuing in that context.

The October Projections reflected ordinary course updates from the August 2017 projections below (the “August Projections”) for (i) the Company’s actual performance and actual capital raises, and (ii) projections related to the Company’s CLO business. The updates to the projections for the Company’s CLO business were related to Company management’s reassessment of the underlying assumptions as well as refinement of certain calculations. As a result of this reassessment, Company management projected in the October Projections (1) an increase in the estimated number of CLO offerings to close in the future, (2) an increase in the estimated size of the CLO offerings, and (3) accelerated estimated timing of the closings of such CLO offerings. Together these updates resulted in increased projected revenue relating to management fees for the Company’s CLO business during the years covered by the October Projections. 

The October Projections were also updated to reflect the October 2017 restructuring of the Company’s risk retention fund (known as Zephyr A-6).  Zephyr A-6 invests in certain CLOs managed by ZAIS Group, in consideration for which ZAIS Group earns management fees. Prior to the restructuring, ZAIS Group’s ownership percentage in Zephyr A-6 was 51% and ZAIS Group earned 15 basis points of senior management fees from the Company-managed CLOs in which Zephyr A-6 was invested. Any such fees above the 15 basis points of senior management fees together with certain other subordinate and incentive management fees (collectively, the “Rebated Fees”) paid to ZAIS Group by such CLOs were to be paid to Zephyr A-6. By virtue of ZAIS Group’s investment in Zephyr A-6, ZAIS Group earned 51% of the Rebated Fees paid to Zephyr A-6. This investment income is included in “Other Revenues” in the tables below. As a result of the restructuring of Zephyr A-6, (i) ZAIS Group’s ownership percentage in Zephyr A-6 was reduced from 51% to 13.33% and (ii) the senior management fees paid to ZAIS Group by CLOs invested in by Zephyr A-6 increased to 20 basis points from 15 basis points. This restructuring reduced the amount of Rebated Fees projected to be paid to Zephyr A-6 and increased projected management fee revenue earned by ZAIS Group. The reduced ownership percentage for ZAIS Group’s investment in Zephyr A-6 combined with the projected lower Rebated Fees resulted in lower projected investment income from Zephyr A-6 for ZAIS Group (which income is included in “Other Revenues”).

The January Projections reflected ordinary course updates from the October Projections for (i) the Company’s actual performance and actual capital raises, and (ii) the assumptions related to the size of estimated future capital commitments and timing of future capital calls for Zephyr 7. Company management’s reassessment of the assumptions related to Zephyr 7 had the effect of substantially reducing the Company’s projected future revenues during the years covered by the January Projections. While the portion of the January Projections that relates to the Company’s CLO business remained unchanged from the October Projections, the presentation in the January Projections was revised to reflect (1) projected management fee revenue, comprised of 20 basis points of fees plus the estimated amount of the Rebated Fees to be paid to Zephyr A-6, and (2) a rebate fee expense representing the estimated amount of Rebated Fees to be paid to Zephyr A-6. In contrast, the October Projections reflected only the projected management fee revenue based on 20 basis points of senior management fees. In connection with preparing the January Projections, Company management estimated that the combined federal and state tax rate for the Company would be 28.1% based on the U.S. tax reform enacted in December 2017.

The inclusion of the financial projections herein is not deemed an admission or representation by the Company that the financial projections are viewed as material information of the Company or the surviving corporation. The financial projections are not included in this proxy statement in order to induce any holder of Common Stock to approve the proposal to approve the Merger Agreement. THE COMPANY DOES NOT INTEND TO UPDATE OR OTHERWISE REVISE THE FINANCIAL PROJECTIONS TO REFLECT CIRCUMSTANCES EXISTING SINCE THEIR RESPECTIVE PREPARATION OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS, EVEN IN THE EVENT THAT ANY OR ALL OF THE UNDERLYING ASSUMPTIONS ARE SHOWN TO BE INACCURATE, OR TO REFLECT CHANGES IN GENERAL ECONOMIC OR INDUSTRY CONDITIONS, UNLESS REQUIRED BY LAW.

The prospective financial information included in this proxy statement has been prepared by, and is the responsibility of, the Company's management. Neither PricewaterhouseCoopers LLP nor any independent accountant has audited, reviewed, examined, compiled nor applied agreed-upon procedures with respect to the accompanying prospective financial information and, accordingly, neither PricewaterhouseCoopers LLP nor any independent accountant expresses an opinion or any other form of assurance with respect thereto. The PricewaterhouseCoopers LLP report included in the Company’s Form 10-K which is incorporated by reference in this proxy statement relates to the Company's historical financial information. It does not extend to the prospective financial information and should not be read to do so.

August 2017 Projections
($ in thousands)

October 2017 Projections
($ in thousands)

January 2018 Projections
($ in thousands)

Use of Non-GAAP Measures

Definition of Adjusted EBITDA

This proxy statement includes certain financial information that is not in conformity with generally accepted accounting principles (“GAAP”), including Adjusted EBITDA (and per share measures).  Adjusted EBITDA is a non-GAAP financial measure that the Company defines as GAAP net income (loss) excluding consolidating effects of certain of the ZAIS Managed Entities which are consolidated in the Company’s financial statements, compensation expense related to a portion of net operating income of ZAIS Group payable to certain employees of ZAIS Group, compensation expense related to incentive income in the form of percentage interests being recorded before related incentive income is recognized, equity-based compensation, severance, taxes, interest expense, depreciation and amortization expenses, goodwill impairment, foreign currency and certain other non-cash and non-operating items.

The Company believes that providing investors with this non-GAAP financial information, in addition to GAAP measures, gives investors greater transparency to the information used by management in its financial and operational decision-making. However, because Adjusted EBITDA is an incomplete measure of the Company’s financial performance and involves differences from net income (loss) computed in accordance with GAAP, it should be considered along with, but not as an alternative to, the Company’s net income (loss) computed in accordance with GAAP as a measure of the Company’s financial performance. In addition, because not all companies use identical calculations, the Company’s presentation of Adjusted EBITDA may not be comparable to other similarly-titled measures of other companies.

Financing

The Company and the Parent Parties estimate that the total amount of funds required to complete the Merger and related transactions (including the Share Purchase) and pay related fees and expenses will be approximately $65,000,000. The parties intend to fund this amount from cash on hand, which is expected to include, with respect to the Merger, cash held by the Company and cash received as a result of the transactions contemplated by the ZGP Investment Agreement. Accordingly, the Merger will be funded in part by the Unit Redemption. The Unit Redemption will itself be funded, in part, by the contribution by Parent to ZGP pursuant to the ZGP Investment Agreement, whereby Parent will acquire Class A Units of ZGP in exchange for $12,649,676.70 in cash.

As of the date of the signing of the Merger Agreement, Parent did not have funding sufficient to complete the Merger and related transactions, including the transactions contemplated by the Share Purchase Agreement and the ZGP Investment Agreement. However, the Merger Agreement contains a representation and warranty of Parent to the effect that, pursuant to the Second Amended and Restated Limited Liability Company Agreement of Parent, Mr. Zugel, as sole managing member of Parent, has the right to require the members of Parent to make capital contributions to Parent sufficient to fund (i) the cash portion of the purchase price to be paid to Ramguard pursuant to the Share Purchase Agreement and (ii) the consideration payable pursuant to the ZGP Investment Agreement. Pursuant to the Parent Group Voting Agreement, Parent is required, and Mr. Zugel is required to cause Parent to, make the necessary capital call(s) from the members of Parent, including Mr. Curry, to provide such funding. Additionally, pursuant to the Parent Group Voting Agreement, Ramguard Voting Agreement and Curry Support Agreement, the members of Parent have agreed to satisfy their obligations to make such capital contributions. However, if Mr. Zugel or Parent breach their obligations under the Parent Group Voting Agreement, and this right to make capital calls is not exercised, or the members of Parent breach their obligations under the Voting Agreement or Curry Support Agreement (as applicable) and do not comply with their obligations to make the capital contributions demanded by Parent, then Parent may not obtain the requisite funding to complete the transactions contemplated by the Share Purchase Agreement and ZGP Investment Agreement, the Merger may not be consummated and the Merger Consideration would not be paid to the holders of Class A Common Stock. As of the date of the signing of the Merger Agreement, Parent had $1,000,000 in invested capital.

Interests of the Company’s Directors and Executive Officers in the Share Purchase and the Merger

Other than Mr. Zugel and Mr. Curry, none of the directors and executive officers of the Company has any interest in the Share Purchase.

In considering the recommendation of the Board that you vote to adopt the Merger Agreement, you should be aware that aside from their interests as stockholders of the Company, the Company’s directors and executive officers have interests in the Merger that may be different from, or in addition to, those of other stockholders of the Company generally. The members of the Special Committee were aware of and considered these interests, among other matters, in evaluating and negotiating the Merger Agreement and the Merger, and in making its recommendations to the Board, which was also aware of and took into account these interests, among other matters, when making its recommendation to the stockholders of the Company that the Merger Agreement be adopted. See “ Special Factors—Background ” beginning on page 16 and “ Special Factors—Reasons for the Merger; Recommendation of the Special Committee; Recommendation of the Board; Fairness of the Merger ” beginning on page 38.

Effective upon the consummation of the Merger, the Company will be wholly owned by members of the Parent Group, and Mr. Zugel, Chairman of the Board and the Chief Investment Officer, will control the Company. Mr. Curry, as a member of Parent, will retain an indirect ownership interest in the Company following the Merger. The Parent Group has informed the Company that it will not seek to enter into any agreements that would establish any Rollover Shares and that it does not expect there to be any Exchange Shares.

The Company’s stockholders should take these interests into account in deciding whether to vote “FOR” the adoption of the Merger Agreement. These interests are described in more detail below, and certain of them are quantified in the narrative and the table below.

Treatment of the Company Equity Awards in the Merger

Restricted Stock Units

If the Merger is consummated, each RSU that is outstanding immediately prior to the Effective Time (without regard to vesting schedule) shall terminate and be cancelled and converted into the right to receive an amount in cash equal to the Merger Consideration with respect to each share of Class A Common Stock underlying such RSU, subject to applicable tax withholding requirements. All outstanding RSUs are held by the Company’s independent directors and will be converted in the Merger into the right to the Merger Consideration.

The Company estimates the aggregate amount that would be payable to the Company’s directors as a result of the full vesting of outstanding company RSU awards held by such directors is approximately $425,100.

For additional information about beneficial ownership of Common Stock by directors and officers, see “ Important Additional Information Regarding the Company—Security Ownership of Management and Certain Beneficial Owners ” beginning on page 114.

Under the Merger Agreement, each RSU outstanding at the Effective Time shall be cancelled and converted into the right to receive cash equal to the Merger Consideration. The following table sets forth the Company’s directors’ holdings of RSUs granted under the 2015 Stock Plan as of [●], and also sets forth the aggregate amount that each director would receive upon conversion of the RSUs into the right to receive an amount in cash equal to the Merger Consideration.

Szymanski Retention Agreement

On April 5, 2017, pursuant to an Award Letter, ZAIS Group provided Mr. Szymanski, the former Chief Executive Officer and President of the Company, a retention bonus award equal to $1.5 million in total (the “Retention Bonus”), with the last installment of $500,000 payable if Mr. Szymanski remained with the Company through the closing of a strategic transaction involving the Company, including the closing of any going-private transaction. On November 7, 2017, the Company amended the Award Letter to provide that the final installment of the Retention Bonus would be paid on February 28, 2018, provided Mr. Szymanski was still employed by ZAIS Group on that date. In connection with his resignation from the Company effective January 5, 2018, Mr. Szymanski entered into a Release Agreement with ZAIS Group wherein he agreed to a full release of claims against, and covenant not to sue, ZAIS Group and its affiliates, in exchange for the Company’s agreement to (i) pay the last installment of Mr. Szymanski’s Retention Bonus which he would have otherwise forfeited and (ii) waive the six-month covenant not to compete and modify the 12-month covenant not to solicit otherwise applicable to Mr. Szymanski. Additionally, on January 4, 2018, the Company entered into the Szymanski Consulting Agreement with Mr. Szymanski pursuant to which, effective January 6, 2018, Mr. Szymanski commenced providing consulting services to the Company and ZAIS Group for a monthly consulting fee equal to $50,000 payable in advance and the reimbursement of all reasonable expenses, which consulting services are scheduled to terminate February 28, 2018.

Indemnification/Insurance

The Company’s bylaws provide for mandatory indemnification of directors and executive officers against certain liabilities that may arise by reason of their status or service as directors or officers. In addition, pursuant to the Merger Agreement, the Company’s directors and executive officers will be entitled to certain ongoing indemnification from the surviving corporation and coverage under directors’ and officers’ liability insurance policies that the Parent or the surviving corporation will be required (and the Parent will be required to cause the surviving corporation to) to maintain with respect to matters occurring before the Effective Time. The indemnification and insurance provisions in the Merger Agreement are further described in the section entitled “ The Merger Agreement—Other Covenants and Agreements ” on page 85.

Compensation of the Special Committee

The Special Committee consists of the three independent members of the Board: John Burke, James Zinn and Paul B. Guenther. The Board appointed Mr. Guenther as the chairman of the Special Committee. In consideration of the time and effort required of the members of the Special Committee in connection with evaluating the potential transaction or any related transaction, the Board approved the following compensation structure for each member of the Special Committee:

These fees are not dependent on the closing of the Merger or on the Special Committee’s or the Board’s approval of, or recommendations with respect to, the Merger or any other transaction. For further information on compensation earned by the Company’s directors, see “ Board and Committee Matters—Director Compensation ” on page 95.

Material U.S. Federal Income Tax Consequences of the Merger

The following is a general discussion summarizing the material U.S. federal income tax consequences of the Merger to U.S. Holders (as defined below) of the Company’s Class A Common Stock whose shares are converted into the right to receive cash pursuant to the Merger in accordance with the terms set forth in the Merger Agreement. This discussion does not address U.S. federal income tax consequences of the Merger to any other U.S. Holders or to non-U.S. Holders. This discussion is based on the Internal Revenue Code of 1986, as amended (the “Code”), Treasury regulations promulgated thereunder and judicial and administrative authorities, pronouncements, rulings and decisions, in each case in effect as of the date hereof. These authorities are subject to change and may be subject to differing interpretations. Any such change or differing interpretation may be applied retroactively in a manner that could affect the accuracy of this discussion. No ruling has been or will be obtained from the Internal Revenue Service (“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 not a complete description of all of the tax consequences of the Merger and, in particular, does not address any tax consequences arising under the unearned income Medicare contribution tax, nor does it address any tax consequences arising under the laws of any state, local or non-U.S. jurisdiction, or under any U.S. federal laws other than those pertaining to the income tax.

This discussion is limited to U.S. Holders who hold Class A Common Stock as a “capital asset” within the meaning of Section 1221 of the Code (generally, property held for investment). It does not address all U.S. federal income tax consequences relevant to such a holder’s particular circumstances and does not address consequences relevant to holders subject to special rules, including, without limitation:

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

For purposes of this discussion, the term “U.S. Holder” means a beneficial owner of Class A Common Stock (other than any holder subject to special rules as discussed above) that is:

If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds Class A Common Stock, the tax treatment of a partner in that partnership generally will depend on the status of the partner and the activities of the partnership. Any entity treated as a partnership for U.S. federal income tax purposes that holds Class A Common Stock and any partners in such partnership should consult their own tax advisors regarding the tax consequences of the Merger to them.

All holders of Class A Common Stock should consult their own tax advisors as to the particular tax consequences to them of the Merger, including the applicability and effect of any U.S. federal, state, and local, non-U.S,. and other tax laws.

Tax Consequences of the Merger

The receipt of the Merger Consideration by a U.S. Holder in exchange for Class A Common Stock pursuant to the Merger will be a taxable transaction for U.S. federal income tax purposes. In general, a U.S. Holder that receives cash in exchange for shares of Class A Common Stock pursuant to the Merger will recognize gain or loss in an amount equal to the difference, if any, between (1) the amount of cash received and (2) the U.S. Holder’s adjusted tax basis in those shares.

If a U.S. Holder’s holding period in a share of Class A Common Stock surrendered in the Merger is greater than one year as of the Effective Time of the Merger, the gain or loss recognized by the U.S. Holder with respect thereto will be long-term capital gain or loss. Long-term capital gains of certain non-corporate U.S. Holders, including individuals, are generally subject to U.S. federal income tax at preferential rates. The deductibility of a capital loss realized on the exchange is subject to limitations. If a U.S. Holder acquired different blocks of Class A Common Stock at different times and difference prices, that holder must determine the tax consequences of the exchange separately with respect to each block of Class A Common Stock.

Information Reporting and Backup Withholding

Cash payments received by a U.S. Holder in exchange for Class A Common Stock pursuant to the Merger will be subject to information reporting and, under certain circumstances, may be subject to backup withholding if the U.S. Holder is not exempt from backup withholding and fails to provide its taxpayer identification number in the manner required. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be refunded or credited against a U.S. Holder’s U.S. federal income tax liability, if any, if that holder furnishes the required information to the Internal Revenue Service in a timely manner.

The U.S. federal income tax consequences set forth immediately above are included for general information purposes. This discussion is not a substitute for careful tax planning and advice. Because individual circumstances may be different, each U.S. Holder is urged to consult its own tax advisor as to its own specific tax consequences.

Regulatory Approvals

No material federal or state regulatory approvals, filings or notices are required in connection with the Share Purchase or the Merger other than (i) the filing of a certificate of merger with the Secretary of State of the State of Delaware by the Company and Sub following the Closing and (ii) the approval of the Financial Conduct Authority, a regulatory body in the United Kingdom.

Delisting and Deregistration of Common Stock

If the Merger is completed, the Company’s shares of Class A Common Stock will be delisted from NASDAQ and deregistered under the Exchange Act. As a result, the Company would no longer file periodic reports with the SEC on account of the shares of Class A Common Stock.

Fees and Expenses

All fees and expenses incurred in connection with the Share Purchase, the Share Purchase Agreement, and any other transactions contemplated thereby will be paid by the party incurring such fees and expenses.

Except as described under “ The Merger Agreement—Fees and Expenses ,” if the Merger is not completed, all fees and expenses incurred in connection with the Merger will be paid by the party incurring those fees and expenses, except that the Company will pay the costs of proxy solicitation and printing and mailing this proxy statement and the Schedule 13E-3 and all SEC filing fees with respect to the transaction. Total fees and expenses incurred or to be incurred by the Company in connection with the Merger are estimated at this time to be as follows:

Anticipated Accounting Treatment of the Share Purchase and the Merger

The Share Purchase has no effect on the financial statements of the Company.

The Merger will be accounted for in accordance with U.S. generally accepted accounting principles. The Company is determining whether the purchase method of accounting or historical book values will be used to account for the transaction.

Rights of Appraisal

This section summarizes certain material provisions of Delaware law pertaining to appraisal rights. This summary, however, is not a complete statement of all applicable requirements, and it is qualified in its entirety by reference to Section 262 of the DGCL (“Section 262”), the full text of which appears in Annex C to this proxy statement. The following summary does not constitute any legal or other advice, nor does it constitute a recommendation that stockholders exercise their appraisal rights under Section 262.

Stockholders should carefully review the full text of Section 262, particularly the procedural steps required to perfect appraisal rights, as well as the information discussed below. Failure to fully and precisely follow the steps required by Section 262 for the perfection of appraisal rights will result in the loss of those rights.

The Share Purchase is not subject to the approval of holders of Common Stock and does not give rise to dissenters’ rights of appraisal.

Under Section 262, if the Merger is completed, holders of shares of the Company’s Common Stock immediately prior to the Effective Time of the Merger and who (i) have neither voted in favor of, nor consented in writing to, the approval of the adoption of the Merger Agreement, (ii) timely demand appraisal and otherwise follow the procedures set forth in Section 262, and (iii) do not thereafter withdraw their demand for appraisal of such shares or otherwise waive, lose, or fail to perfect their appraisal rights, in each case in accordance with Section 262, will be entitled to have such shares appraised by the Delaware Court of Chancery (“Court of Chancery”) and to receive payment in cash of an amount equal to the “fair value” of such shares as determined by the Court of Chancery, exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with interest, if any, as determined by such court. The “fair value” as determined by the Court of Chancery could be greater than, less than or the same as the Merger Consideration.

Pursuant to the Parent Group Voting Agreement and Ramguard Voting Agreement, respectively, each member of the Parent Group and each Ramguard Party waived, and agreed not to assert, any appraisal rights in connection with the Merger with respect to any and all shares of Common Stock held by such persons of record or beneficially owned.

Under Section 262, where a merger agreement is to be submitted for adoption at a meeting of stockholders, the corporation must, not less than twenty (20) days before such meeting, notify each stockholder who was a stockholder on the record date set by the board of directors for notice of such meeting (or if no such record date is set, on the close of business on the day next preceding the day on which notice is given), with respect to such shares for which appraisal, and shall include in such notice a copy of Section 262. THIS PROXY STATEMENT CONSTITUTES THE FORMAL NOTICE OF APPRAISAL RIGHTS UNDER SECTION 262 AND A COPY OF SECTION 262 IS ATTACHED HERETO AS ANNEX C AND INCORPORATED HEREIN BY REFERENCE. The Board has fixed April 2, 2018 as the record date for the purposes of determining the stockholders entitled to receive this notice of appraisal. Any holder of shares of the Company’s Common Stock who wishes to exercise such appraisal rights or who wishes to preserve his, her or its right to do so, should review the following discussion and Annex C carefully because failure to timely and properly comply with the procedures specified in Section 262 will result in the loss of appraisal rights under Section 262.

Any stockholder wishing to exercise appraisal rights is urged to consult legal counsel.

If a stockholder elects to exercise appraisal rights under Section 262 with respect to any shares of the Company’s Common Stock, such stockholder must do all of the following:

Written Demand by the Record Holder

All written demands for appraisal should be addressed to the Company’s Secretary at Two Bridge Avenue, Suite 322, Red Bank, New Jersey 07701. If the shares 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 shares are owned of record by more than one person, such as in a joint tenancy or tenancy in common, the demand must be executed by or for all joint owners. An authorized agent, including one of two or more joint owners, may execute the demand for appraisal for a holder of record. However, the agent must identify the record owner(s) and expressly disclose the fact that, in executing the demand, the agent is acting as agent for the record owner(s).

A beneficial owner of shares held in “street name” who wishes to exercise appraisal rights should take such actions as may be necessary to ensure that a timely and proper demand for appraisal is made by the record holder of the shares. If shares are held through a brokerage firm, bank or other nominee who in turn holds the shares through a central securities depository nominee, such as Cede & Co., a demand for appraisal of such shares must be made by or on behalf of the depository nominee, and must identify the depository nominee as the record holder. Any beneficial owner who wishes to exercise appraisal rights and holds shares through a nominee holder is responsible for ensuring that the demand for appraisal is timely made by the record holder. The beneficial holder of the shares should instruct the nominee holder that the demand for appraisal should be made by the record holder of the shares, which may be a central securities depository nominee if the shares have been so deposited.

A record holder, such as a broker, bank, fiduciary, depository or other nominee, who holds shares as a nominee for several beneficial owners may exercise appraisal rights with respect to the shares held for one or more beneficial owners while not exercising such rights with respect to the shares held for other beneficial owners. In such case, the written demand must set forth the number of shares covered by the demand. Where the number of shares is not expressly stated, the demand will be presumed to cover all shares held in the name of the record owner.

Filing a Petition for Appraisal

Within 10 days after the Effective Time of the Merger, the surviving corporation in the Merger must give notice of the date that the Merger has become effective to each of the Company’s stockholders who did not vote in favor of or consent to the adoption of the Merger Agreement and otherwise complied with Section 262. At any time within 60 days after the Effective Time, any stockholder who has not commenced an appraisal proceeding or joined a proceeding as a named party shall have the right to withdraw such stockholder’s demand for appraisal and accept the Merger Consideration for that stockholder’s shares of Common Stock by delivering to the surviving corporation a written withdrawal of the demand for appraisal. However, any such attempt to withdraw the demand made more than 60 days after the Effective Time will require written approval of the surviving corporation. Unless the demand is properly withdrawn by the stockholder within 60 days after the Effective Time, no appraisal proceeding in the Court of Chancery will be dismissed as to any stockholder without the approval of the Court of Chancery, and such approval may be conditioned upon such terms as such Court deems just. If the surviving corporation does not approve a request to withdraw a demand for appraisal when that approval is required, or if the Court of Chancery does not approve the dismissal of an appraisal proceeding, the stockholder will be entitled to receive only the appraised value determined in any such appraisal proceeding, which value could be less than, equal to or more than the Merger Consideration.

Within 120 days after the Effective Time of the Merger, but not thereafter, the surviving corporation, or any holder of shares who has complied with Section 262 and is otherwise entitled to appraisal rights under Section 262, may commence an appraisal proceeding by filing a petition in the Court of Chancery demanding a determination of the fair value of the shares held by all holders who properly demanded appraisal of such shares. If no such petition is filed within that 120-day period, appraisal rights will be lost for all holders of shares of the Company’s Common Stock who had previously demanded appraisal of their shares. The Company is under no obligation to and has no present intention to file a petition and holders should not assume that the Company, as the surviving corporation, will file a petition, or that it will initiate any negotiations with respect to the fair value of the shares. Accordingly, it is the obligation of the holders of shares of the Company’s Common Stock to initiate all necessary action to perfect their appraisal rights in respect of the shares within the period prescribed in Section 262.

Within 120 days after the Effective Time of the Merger, any holder of shares who has complied with the requirements for the exercise of appraisal rights will be entitled, upon written request, to receive from the surviving corporation a statement setting forth the aggregate number of shares not voted in favor of the Merger and with respect to which demands for appraisal have been received and the aggregate number of holders of such shares. Such statement must be mailed within 10 days after a written request therefor has been received by the surviving corporation or within 10 days after the expiration of the period for delivering of demands for appraisal, whichever is later. Notwithstanding the requirement that a demand for appraisal be made by or on behalf of the record owner of the shares, a person who is the beneficial owner of shares held either in a voting trust or by a nominee on behalf of such person, and as to which demand has been properly made and not effectively withdrawn, may, in such person’s own name, file a petition for appraisal or request from the surviving corporation the statement described in this paragraph.

Upon the filing of such petition by any such holder of shares, service of a copy thereof must be made upon the surviving corporation, which will then be obligated within 20 days to file with the Delaware Register in Chancery a duly verified list (the “verified list”) containing the names and addresses of all stockholders who have demanded payment for their shares and with whom agreements as to the value of their shares have not been reached. Upon the filing of any such petition, the Court of Chancery may order that notice of the time and place fixed for the hearing on the petition be mailed to the surviving corporation and all of the stockholders shown on the verified list. Such notice will also be published at least one week before the day of the hearing in a newspaper of general circulation published in the City of Wilmington, Delaware, or in such other publication as the Court of Chancery deems advisable. The costs of these notices and publications are borne by the surviving corporation.

After notice to the stockholders as required by the Court of Chancery, the Court of Chancery is empowered to conduct a hearing on the petition to determine those stockholders who have complied with Section 262 and who have become entitled to appraisal rights thereunder. The Court of Chancery may require the stockholders who demanded payment for their shares to submit stock certificates held by them, if any, to the Delaware Register in Chancery for notation thereon of the pendency of the appraisal proceeding, and if any stockholder fails to comply with the direction, the Court of Chancery may dismiss the proceedings as to that stockholder. In addition, the Court of Chancery will dismiss the proceedings as to all holders of shares of the Company’s Common Stock who are otherwise entitled to appraisal rights unless (i) the total number of shares entitled to appraisal exceeds 1% of the outstanding shares of Common Stock of the Company, or (ii) the value of the consideration provided in the Merger for such total number of shares exceeds $1 million.

Determination of Fair Value

After the Court of Chancery determines the stockholders entitled to an appraisal, the appraisal proceeding will be conducted in accordance with the rules of the Court of Chancery, including any rules specifically governing appraisal proceedings. Through the appraisal proceeding, the 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, if any, to be paid upon the amount determined to be the fair value. Unless the Court of Chancery in its discretion determines otherwise for good cause shown, interest from the Effective Time of the Merger through the date of payment of the judgment will be compounded quarterly and will accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the Effective Time of the Merger and the date of payment of the judgment. Notwithstanding the foregoing, at any time before the entry of judgment in the proceedings, the surviving corporation may pay to each stockholder entitled to appraisal an amount in cash, in which case interest shall accrue thereafter as provided herein only upon the sum of (i) the difference, if any, between the amount so paid and the fair value of the shares as determined by the Court of Chancery, and (ii) interest theretofore accrued, unless paid at that time.

In determining fair value, the Court of Chancery will take into account all relevant factors. In Weinberger v. UOP, Inc. , the Supreme Court of Delaware 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.” In Tri-Continental Corporation v. Battye , the Delaware Supreme Court stated that, in making this determination of fair value, the Court of Chancery 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 merged corporation. In Weinberger , the Supreme Court of Delaware 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.” 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 addition, the Delaware courts have decided that the statutory appraisal remedy, depending on the factual circumstances, may or may not be a dissenter’s exclusive remedy.

Stockholders considering appraisal should be aware that the fair value of their shares as so determined could be more than, the same as or less than the Merger Consideration and that an investment banking opinion as to the fairness, from a financial point of view, of the consideration payable in a sale transaction, such as the Merger, is not an opinion as to, and does not otherwise address, “fair value” under Section 262. Although the Company believes that the Merger Consideration is fair, no representation is made as to the outcome of the appraisal of fair value as determined by the Court of Chancery. Neither the Parent Group nor the Company anticipates offering more than the Merger Consideration to any stockholder exercising appraisal rights, and each of the Parent Group and the Company reserve the right to assert, in any appraisal proceeding, that for purposes of Section 262, the fair value of a share is less than the Merger Consideration.

Upon application by the surviving corporation or by any holder of shares entitled to participate in the appraisal proceeding, the Court of Chancery may, in its discretion, proceed to trial upon the appraisal prior to the final determination of the stockholders entitled to an appraisal. Any holder of shares whose name appears on the verified list and who has submitted such stockholder’s stock certificates, if any, to the Delaware Register in Chancery, if such is required, may participate fully in all proceedings until it is finally determined that such stockholder is not entitled to appraisal rights. The Court of Chancery will direct the payment of the fair value of the shares, together with interest, if any, by the surviving corporation to the stockholders entitled thereto. Payment will be so made to each such stockholder, in the case of holders of uncertificated stock forthwith, and in the case of holders of shares of the Company’s Common Stock represented by certificates upon the surrender to the surviving corporation of such stockholder’s certificates. The Court of Chancery’s decree may be enforced as other decrees in such Court may be enforced.

If a petition for appraisal is not timely filed, then the right to an appraisal will cease. The costs of the action (which do not include attorneys’ fees or the fees and expenses of experts) may be determined by the Court of Chancery and taxed upon the parties as the Court of Chancery deems equitable in the circumstances. Upon application of a stockholder, the Court of Chancery may order all or a portion of the expenses incurred by a stockholder in connection with an appraisal proceeding, including, without limitation, reasonable attorneys’ fees and the fees and expenses of experts utilized in the appraisal proceeding, to be charged pro rata against the value of all the shares entitled to appraisal. In the absence of such an order, each party bears its own expenses.

Any stockholder who has duly demanded and perfected appraisal rights for shares in compliance with Section 262 will not, after the Effective Time of the Merger, be entitled to vote his, her or its shares for any purpose or be entitled to the payment of dividends or other distributions thereon, except dividends or other distributions payable to holders of record of shares as of a date prior to the Effective Time of the Merger.

If any stockholder who demands appraisal of shares under Section 262 fails to perfect, successfully withdraws, or loses such holder’s right to appraisal with respect to such shares, such shares will be deemed to have been converted at the Effective Time of the Merger into the right to receive the Merger Consideration. If no petition for appraisal is filed with the Delaware Court of Chancery within 120 days after the Effective Time of the Merger, stockholders’ rights to appraisal shall cease, and all holders of shares of the Company’s Class A Common Stock (other than the Parent Group and holders of Rollover Shares or Exchange Shares, if any,) will be entitled to receive the Merger Consideration. Inasmuch as the Company has no obligation to file such a petition and has no present intention to do so, any holder of shares who desires such a petition to be filed is advised to file it on a timely basis. In addition, a stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party may withdraw his, her or its demand for appraisal and accept the Merger Consideration by delivering to the Company a written withdrawal of such stockholder’s demand for appraisal and acceptance of the terms of the Merger either within 60 days after the Effective Time of the Merger or thereafter with the written approval of the Company. Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery will be dismissed as to any stockholder without the approval of the Court of Chancery, and such approval may be conditioned upon such terms as the Court of Chancery deems just; provided, however, that the limitation set forth in this sentence will not affect the right of any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party to withdraw such stockholder’s demand for appraisal and to accept the Merger Consideration within 60 days after the Effective Time of the Merger.

If you wish to exercise your appraisal rights with respect to any shares, you must strictly comply with the procedures set forth in Section 262. If you fail to take any required step in connection with the exercise of appraisal rights, it will result in the loss of your appraisal rights and your shares will be deemed to have been converted at the Effective Time of the Merger into the right to receive the Merger Consideration.

The foregoing summary of the rights of the Company’s stockholders to seek appraisal rights under Section 262 does not purport to be a complete statement of the procedures to be followed by the stockholders of the Company desiring to exercise any appraisal rights available thereunder and is qualified in its entirety by reference to Section 262. The proper exercise of appraisal rights requires strict adherence to the applicable provisions of Section 262, a copy of which is attached hereto as Annex C and incorporated herein by reference.