424B3

424B3 1 nick_proxy_stmt_specail_.htm 424B3 424B3

Filed Pursuant to Rule 424(b)(3)

Registration No. 333-275704

NICHOLAS FINANCIAL, INC.

PROPOSED DOMESTICATION AND LOAN PORTFOLIO SALE– YOUR VOTE IS VERY IMPORTANT

March 19, 2024

Dear Shareholders:

We are furnishing this management proxy circular to shareholders of Nicholas Financial, Inc. in connection with the solicitation of proxies by our management for use at a Special Meeting of our shareholders to be held on April 15, 2024 at Noon (Central Time), at the offices of the company’s legal counsel, Kutak Rock LLP, located at The Omaha Building, 1650 Farnam Street, Omaha, Nebraska 68102-2186.

The purpose of the Special Meeting is to obtain shareholder approval to: (1) change our jurisdiction of incorporation by continuation from the provincial jurisdiction of British Columbia, Canada to the State of Delaware in the United States of America and (2) approve the sale of all or substantially all of our undertaking, consisting of automobile finance installment contracts, pursuant to a Master Asset Purchase Agreement with Westlake Services, LLC dba Westlake Financial, a California limited liability company. We refer to the first proposal as the “domestication” and to the second proposal as the “Loan Portfolio Sale” throughout this letter and the management proxy circular/prospectus that accompanies it.

We are pursuing the domestication for a number of reasons, the foremost being that we have no significant presence in Canada. Our corporate offices and operations are located in the United States and most of our shareholders reside there. The principal market for our common shares, the NASDAQ Global Select Market, is also in the United States. In addition, domiciling in the United States will eventually enable us to eliminate one level of holding company ownership and streamline our corporate structure. We believe this will reduce our overall professional fees and could lead to better acceptance in the capital markets and greater shareholder value.

We chose the State of Delaware to be our domicile principally because the Delaware General Corporation Law, or DGCL, expressly accommodates a continuation authorized by Section 308 of the British Columbia Business Corporations Act, or BCBCA. We also chose the State of Delaware because of the substantial body of case law that has evolved over the years interpreting various provisions of the DGCL. We believe the domestication will not only unambiguously establish us as a U.S. corporation, but it will help us achieve our strategic goals.

If we complete the domestication, we will continue our legal existence in Delaware as if we had originally been incorporated under Delaware law. In addition, each outstanding common share of Nicholas Financial, Inc. as a British Columbia, Canada corporation will then represent one share of common stock of Nicholas Financial, Inc. as a Delaware corporation. Our common shares are currently traded on the NASDAQ Global Select Market under the symbol “NICK”. Upon the completion of our domestication, our common stock will be listed on the NASDAQ Global Select Market under the symbol “NICK.” Further, our management will be comprised of the same directors and executive officers who served in such capacities immediately prior to the domestication.

The board of directors has determined that the domestication is in the best interests of the shareholders and recommends a vote “FOR” for the domestication because it believes that the domestication will reduce our overall professional fees, could lead to better acceptance in the capital markets and greater shareholder value, eliminate compliance with both Canadian and U.S. laws, including tax laws, and the substantial body of case law that has evolved over the years interpreting various provisions of the DGCL provides greater certainty.

If the Loan Portfolio Sale proposal is approved by the requisite vote of our shareholders and the Loan Portfolio Sale closes, we intend to pursue our restructuring plan. We intend to use net proceeds from the sale to either acquire or invest in businesses outside of the Corporation’s traditional business. The board of directors intend to explore acquisitions of businesses in industries with respect to which they have familiarity based on their other business and investment activities; however, the board does not intend to limit its acquisition and investment activities to those businesses and industries. The overall timeframe for potential acquisitions and investments remains uncertain. In exploring and considering potential acquisitions and investments, the Board intends to pursue opportunities that would have a reasonable likelihood of providing value to our shareholders over time in excess of the amount, if any, the shareholders would receive in a liquidation. The Board currently believes that the long-term interests of shareholders would be best served by the Corporation pursuing the Loan Portfolio Sale, the restructuring plan and other strategic initiatives that the Board may subsequently determine are in the best interests of shareholders.

The board of directors has determined that the Loan Portfolio Sale is in the best interests of the shareholders and recommends a vote “FOR” for the Loan Portfolio Sale because it believes we will have a better chance to enhance shareholder value by using the net proceeds from the Loan Portfolio Sale to acquire or invest in other businesses rather than by continuing to operate its existing business or liquidating The board believes that if shareholders do not approve the Loan Portfolio Sale that: (i) the value of our contracts and the receivables will decrease over time; and (ii) the purchase price offered by another potential buyer, if any, will be lower than the purchase price offered in the Loan Portfolio Sale. If the loan portfolio is not sold we expect the costs to run off the business will be significant.

The record date for the determination of shareholders entitled to receive notice of, and to vote at the Special Meeting is March 11, 2024. At such date, 7,290,557 common shares were outstanding. The holders of at least three-fourths of our common shares present at the Special Meeting in person or by proxy (and assuming a quorum of our outstanding common shares are represented at the Special Meeting in person or by proxy) must vote to: (1) approve the domestication proposal and (2) approve the Loan Portfolio Sale proposal. Shareholders will have the right to dissent to the continuation and the Loan Portfolio Sale under Section 309 of the BCBCA. Dissenting shareholders have the right to be paid the fair value of their shares under Section 245 of the BCBCA. If approved by our shareholders, the domestication is expected to become effective as soon as practicable after the closing of the Loan Portfolio Sale. If the Loan Portfolio Sale is not approved by shareholders, we intend to proceed with the completion of the domestication as soon as practicable after the Special Meeting. If the Loan Portfolio Sale is approved by shareholders, but is terminated, we intend to proceed with the completion of the domestication as soon as practicable after the date the Loan Portfolio Sale is terminated. Our board of directors has reserved the right to terminate or abandon our domestication at any time prior to its effectiveness, notwithstanding shareholder approval, in its sole discretion.

Your existing certificates representing your Nicholas Financial, Inc. common shares will represent the same number of shares of Nicholas Financial, Inc. common stock after the domestication without any action on your part. You will not have to exchange any share certificates. We will issue new certificates to you representing shares of common stock of Nicholas Financial, Inc. as a Delaware corporation upon a transfer of the shares by you or at your request.

The accompanying management proxy circular provides a detailed description of our proposed domestication, the proposed Loan Portfolio Sale and other information to assist you in considering the proposals on which you are asked to vote. We urge you to review this information carefully and, if you require assistance, to consult with your financial, tax or other professional advisers.

Our board of directors recommends that you vote FOR approval of our domestication and FOR approval of the Loan Portfolio Sale.

Your vote is very important. Whether or not you plan to attend the Special Meeting, we ask that you indicate the manner in which you wish your shares to be voted and sign and return your proxy as promptly as possible in the enclosed envelope so that your vote may be recorded. If your shares are registered in your name, you may vote your shares in person if you attend the meeting, even if you send in your proxy.

We appreciate your continued interest in our company.

Very truly yours,

Michael Rost

Chief Executive Officer

These securities involve a high degree of risk. See “Risk Factors” beginning on page 14 of this proxy circular/prospectus for a discussion of specified matters that should be considered.

Neither the Securities and Exchange Commission nor any state securities commission or similar authority in Canada has approved or disapproved of these securities or determined if this proxy circular/prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

This proxy circular/prospectus is dated March 19, 2024 and is first being mailed to shareholders on or about March 19, 2024.

NICHOLAS FINANCIAL, INC.
26133 US Hwy 19 North, Suite 300

Clearwater, Florida 33763

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

To our Shareholders:

NOTICE IS HEREBY GIVEN that a special meeting of shareholders (the “Special Meeting”) of NICHOLAS FINANCIAL, INC. (the “Corporation”) will be held on April 15, 2024, at Noon (Central Time) at the offices of the company’s legal counsel, Kutak Rock LLP, located at The Omaha Building, 1650 Farnam Street, Omaha, Nebraska 68102-2186, to consider, and, if deemed advisable, approve the following special resolutions and to transact such other business as is proper at such meeting or any adjournment thereof:

1. RESOLVED AS A SPECIAL RESOLUTION, WITH OR WITHOUT AMENDMENT, THAT:

1. The Corporation is authorized to apply to the Registrar of Companies for British Columbia under Section 308 of the British Columbia Business Corporations Act (the “BCBCA”) for a continuation to the State of Delaware.

2. The Corporation is authorized to file with the Secretary of State of the State of Delaware the certificate of corporate domestication and a certificate of incorporation pursuant to, and in accordance with the Delaware General Corporation Law (the “DGCL”) as if it has been incorporated thereunder (the “domestication”).

3. Effective on the date of the domestication, the Corporation shall file a certificate of corporate domestication and certificate of incorporation and bylaws in the forms as set out in Exhibits B, C, and D to the management proxy circular dated as of March 19, 2024 (the “Circular”) each of which is hereby approved in all respects.

4. Notwithstanding that this special resolution shall have been duly passed by the shareholders of the Corporation, the directors of the Corporation are authorized, in their sole discretion, to abandon the application for a certificate of corporate domestication and a certificate of incorporation under the DGCL at any time prior to the filing or issue thereof without further approval of the shareholders of the Corporation.

5. Any director or officer of the Corporation is authorized and directed to execute and deliver or cause to be executed and delivered all such documents and instruments and to take or cause to be taken all such other actions as such director or officer may determine to be necessary or desirable to carry out the intent of the foregoing special resolution, such determination to be conclusively evidenced by the execution and delivery of such documents and instruments and the taking of such actions.

2. RESOLVED AS A SPECIAL RESOLUTION, WITH OR WITHOUT AMENDMENT, THAT:

1. The sale of all or substantially all of our undertaking, consisting of motor vehicle retail installment sale contracts and other portions of our undertaking specified in, and pursuant to, a Master Asset Purchase Agreement with Westlake Services, LLC dba Westlake Financial, a California limited liability company (the “Loan Portfolio Sale”), be approved;

2. Notwithstanding that this special resolution shall have been duly passed by the shareholders of the Corporation, the directors of the Corporation are authorized, in their sole discretion, to abandon the Loan Portfolio Sale at any time prior to the completion thereof without further approval of the shareholders of the Corporation; and

3. Any director or officer of the Corporation is authorized and directed to execute and deliver or cause to be executed and delivered all such documents and instruments and to take or cause to be taken all such other actions as such director or officer may determine to be necessary or desirable to carry out the intent of the foregoing special resolution, such determination to be conclusively evidenced by the execution and delivery of such documents and instruments and the taking of such actions.

A shareholder wishing to be represented by proxy at the Special Meeting or any postponement or adjournment thereof must deposit his or her duly executed form of proxy with the Corporation’s transfer agent and registrar, Computershare Investor Services Inc., 8th Floor, 100 University Avenue, Toronto, Ontario, M5J 2Y1, Attention: Proxy Department, or by facsimile to (416) 263-9524 or 1-866-249-7775 or with the Corporation at the Corporate Headquarters of the Company at 26133 US Hwy 19 North, Suite 300 Clearwater, Florida 33763 not later than 1:00 p.m. (Eastern Time) on April 11, 2024 or, if the Special Meeting is adjourned, not less than 48 hours (excluding Saturdays, Sundays and holidays) before any postponement or adjournment of the Special Meeting. The time limit for the deposit of proxies may be waived by the chair of the Special Meeting at his discretion, without notice. A shareholder may also vote by telephone or via the Internet by following the instructions on the form of proxy. If a shareholder votes by telephone or via the Internet, completion or return of the proxy form is not needed.

The directors of the Corporation have fixed the close of business on March 11, 2024 as the record date for the determination of the shareholders of the Corporation entitled to receive notice of the Special Meeting and to vote at the Special Meeting. At such date, 7,290,557 common shares were outstanding. The holders of at least three-fourths of our common shares present at the Special Meeting in person or by proxy (and assuming a quorum of our outstanding common shares are represented at the Special Meeting in person or by proxy) must vote to approve the domestication proposal. No cumulative voting rights are authorized. A proxy circular/prospectus and form of proxy accompany this Notice.

DATED at Clearwater, Florida this 19th day of March, 2024.

    Irina Nashtatik,

   

    Chief Financial Officer & Corporate Secretary

   

MANAGEMENT PROXY CIRCULAR

TABLE OF CONTENTS


SUMMARY	1
Nicholas Financial, Inc.	1
Questions and Answers About the Meeting and Proposals	1
The Domestication Proposal	4
Regulatory and Other Approvals	5
Tax Consequences of the Domestication	5
Dissent Rights of Shareholders	6
Comparison of Shareholder Rights	7
The Loan Portfolio Sale Proposal	7
Tax Consequences of the Loan Portfolio Sale	8
Dissent Rights of the Shareholders	9
INFORMATION CONCERNING THE COMPANY	10
Narrative Description of Our Business	10
Legal Proceedings	10
Market for Our Common Equity and Related Stockholder Matters	11
Management’s Discussion and Analysis of Financial Condition and Results of Operation	12
Quantitative and Qualitative Disclosures About Market Risk	12
Financial Statements and Supplementary Data	12
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	12
Directors, Executive Officers and Corporate Governance	12
RISK FACTORS	14
Risks Relating to the Domestication	14
Risks Relating to the Loan Portfolio Sale	15
General Risk Factors	17
FORWARD-LOOKING STATEMENTS	18
THE SPECIAL MEETING	19
Solicitation of Proxies	19
Our Common Shares	19
Appointment and Revocation of Proxies	19
THE DOMESTICATION	20
General	20
Principal Reasons for the Domestication	20
Effects of the Domestication	20
Treatment of Outstanding Capital Stock and Options	21
Shareholder Approval	21
Regulatory and Other Approvals	21
Comparison of Shareholder Rights	21
Proposed Certificate of Incorporation and Bylaws of Nicholas Financial, Inc	31
Dissent Rights of Shareholders	32
United States and Canadian Income Tax Considerations	33
THE LOAN PORTFOLIO SALE	40
General	40
Background	40
The Asset Purchase Agreement	41
Reasons for the Loan Portfolio Sale Proposal	44
Shareholder Approval	47
Dissent Rights of Shareholders	47
United States and Canadian Income Tax Considerations	49
Non-Resident Dissenting Shareholders	51
DESCRIPTION OF CAPITAL STOCK	51
Common Stock	51
Preferred Stock	52
Potential Anti-takeover Effect of Delaware Law, Our Certificate of Incorporation and Bylaws	52
Listing	52
Transfer Agent and Registrar	52
INTEREST OF MANAGEMENT IN THE DOMESTICATION	53
LEGAL MATTERS	53
EXPERTS	53
WHERE YOU CAN FIND MORE INFORMATION	54
Obtaining Documents Incorporated by Reference	55
GENERAL	55
DIRECTORS’ APPROVAL	55

    Exhibits:

   

    Exhibit A-1 – Special Resolution Related to Continuation and Domestication

   

    Exhibit A-2 – Special Resolution Related to Loan Portfolio Sale

   

    Exhibit B – Form of Certificate of Corporate Domestication

   

    Exhibit C – Form of Certificate of Incorporation of Nicholas Financial, Inc.

   

    Exhibit D – Form of Bylaws of Nicholas Financial, Inc.

   

    Exhibit E – Sections 237 - 247 of the British Columbia Business Corporations Act. (BCBCA)

   

    Exhibit F – Asset Purchase Agreement

   

    Exhibit G – Form of Proxy Card

   

NICHOLAS FINANCIAL, INC.

PROXY CIRCULAR/PROSPECTUS

(All dollar amounts expressed herein are U.S. dollars)

SUMMARY

This summary highlights selected information appearing elsewhere in this proxy circular/prospectus (the “Circular”) and does not contain all the information that you should consider in making a decision with respect to the proposals described herein. You should read this summary, together with the more detailed information, including our financial statements and the related notes appearing elsewhere in this Circular, and the exhibits attached hereto. You should carefully consider, among other things, the matters discussed in “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which are included in this Circular or incorporated by reference into this Circular. You should read this Circular in its entirety.

Nicholas Financial, Inc.

Nicholas Financial, Inc. is a Canadian holding company incorporated under the laws of British Columbia in 1986 (“Nicholas Financial-Canada” or the “Corporation”). The business activities of Nicholas Financial-Canada are currently conducted exclusively through its wholly owned indirect subsidiary, Nicholas Financial, Inc., a Florida corporation (“Nicholas Financial-Florida”). Nicholas Financial-Florida is a specialized consumer finance company engaged primarily in acquiring and servicing automobile finance installment contracts for purchases of used and new automobiles and light trucks. Additionally, Nicholas Financial-Florida sells consumer-finance related products and, prior to the end of the third fiscal quarter of the fiscal year ended March 31, 2023, Nicholas Financial-Florida originated direct consumer loans. The Corporation disclosed in its Form 10-Q for the quarterly period ended September 30, 2023 that in connection with the Asset Purchase Agreement (as defined below), the Corporation does not intend to continue any significant contract purchases and origination activities, except on a much smaller scale, than it has historically Nicholas Data Services, Inc. (“NDS”), is a second Florida subsidiary of Nicholas Financial-Canada and it serves as the intermediate holding company for Nicholas Financial-Florida. NF Funding I, LLC (“NF Funding I”), was a wholly owned, special purpose financing subsidiary of Nicholas Financial-Florida, but that subsidiary no longer served any purpose and, as a result, it was dissolved prior to the end of the fiscal year ended March 31, 2023.

Our principal executive office is located at 26133 US Hwy 19 North, Suite 300 Clearwater, Florida 33763, and our telephone number at that address is (727) 726-0763. Our registered office in Canada is located at 3200 – 650 West Georgia Street, Vancouver, British Columbia, V6B 4P7.

Significant additional information about the Corporation is set forth in the section of this Circular entitled “Information Concerning the Corporation,” beginning at page 10.

Set forth below in a question and answer format is general information regarding the Special Meeting of Shareholders (the “Special Meeting”) to which this Circular relates. This general information regarding the Special Meeting is followed by a more detailed summary of the process relating to, reasons for and effects of our proposed change in jurisdiction of incorporation from British Columbia, Canada to Delaware in the United States (Proposal 1 in the Notice of Special Meeting), which we refer to in this Circular as the domestication and for the sale of all or substantially all of our undertaking (Proposal 2 in the Notice of Special Meeting), which we refer to in this Circular as the Loan Portfolio Sale.

Questions and Answers About the Meeting and Proposals

Q. What is the purpose of the Special Meeting?

A. The purpose of the Special Meeting is to vote on a proposal to approve a special resolution authorizing us to make an application to change the jurisdiction of incorporation of Nicholas Financial-Canada from British Columbia, Canada to the State of Delaware, United States of America and adopt a certificate of incorporation of Nicholas Financial, Inc. under Delaware law to be effective as of the date of our domestication, to vote on a second proposal to approve a special resolution approving the sale of all or substantially all of the Corporation’s undertaking pursuant to the Master Asset Purchase Agreement dated November 13, 2023, by and between Westlake Services, LLC dba Westlake Financial, a California limited liability company, the Corporation and Nicholas Financial- Florida, a wholly-owned indirect subsidiary of the Corporation), substantially in the form attached to this Circular as Exhibit F (such agreement, the “Asset Purchase Agreement,” and such proposal the “Loan Portfolio Sale”) and to transact such other business as is proper at the Special Meeting.

Q. What will happen if the shareholders do not approve the domestication?

A. Our jurisdiction will remain in British Columbia, Canada and the potential benefits to the Corporation and the shareholders of the domestication described in this Circular will not be realized. See “THE DOMESTICATION- Principal Reasons for the Domestication.”

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Q. What will happen if the shareholders approve the Loan Portfolio Sale?

A. If the Loan Portfolio Sale proposal is approved by our shareholders and the Loan Portfolio Sale closes, among other things we intend to pursue our restructuring plan. We intend to use net proceeds from the sale to either acquire or invest in businesses outside of the Corporation’s traditional business. The board of directors intend to explore acquisitions of businesses in industries with respect to which they have familiarity based on their other business and investment activities; however, the board does not intend to limit its acquisition and investment activities to those businesses and industries. The overall timeframe for potential acquisitions and investments remains uncertain. In exploring and considering potential acquisitions and investments, the Board intends to pursue opportunities that would have a reasonable likelihood of providing value to our shareholders over time in excess of the amount, if any, the shareholders would receive in a liquidation. The Board currently believes that the long-term interests of shareholders would be best served by the Corporation pursuing the Loan Portfolio Sale, the restructuring plan and other strategic initiatives that the Board may subsequently determine are in the best interests of shareholders. There can be no assurance that any of these alternatives will result in greater stockholder value than the liquidation and dissolution of the Corporation. See “THE LOAN PORTFOLIO SALE- -Reasons for the Loan Portfolio Sale Proposal” and “-Our Business and Operations Following Approval of the Loan Portfolio Sale Proposal” and “RISK FACTORS- Risks Relating to the Loan Portfolio Sale.

Q. What will happen if the shareholders do not approve the Loan Portfolio Sale?

A. The Loan Portfolio Sale will not be consummated and the potential benefits to the Corporation and the shareholders of the restructuring plan described in this Circular may not be realized at all or delayed. If our shareholders do not approve the Loan Portfolio Sale proposal, we believe it would be very difficult for us to continue our current business operations. See “THE LOAN PORTFOLIO SALE-Reasons for the Loan Portfolio Sale Proposal.” If our stockholders do not approve the Loan Portfolio Sale proposal, the Board will continue to explore what, if any, alternatives are available in light of our future business prospects. See “THE LOAN PORTFOLIO SALE- Our Business and Operations Following Approval of the Loan Portfolio Sale Proposal.”

Q. Where will the Special Meeting be held?

A. The Special Meeting will be held at the offices of the company’s legal counsel, Kutak Rock LLP, located at The Omaha Building, 1650 Farnam Street, Omaha, Nebraska 68102-2186, on April 15, 2024, at Noon (Central Time).

Q. Who is soliciting my vote?

A. Our management is soliciting your proxy to vote at the Special Meeting. This Circular and form of proxy were first mailed to our shareholders on or about March 19, 2024. Your vote is important. We encourage you to vote as soon as possible after carefully reviewing this Circular.

Q. Who is entitled to vote?

A. The record date for the determination of shareholders entitled to receive notice of the Special Meeting is March 11, 2024. In accordance with the provisions of the BCBCA, we will prepare a list of our registered holders of common shares (the “common shareholders”) as of the record date. If you were a common shareholder as of the record date, you will be entitled to vote to approve the special resolution authorizing the change of jurisdiction and approval of the Delaware certificate of incorporation of Nicholas Financial, Inc. to be effective as of the date of our domestication (Proposal 1 in the Notice of Special Meeting) and any other matter that is properly submitted for shareholder vote at the Special Meeting.

Q. What am I voting on?

A. The common shareholders are entitled to vote on: (1) a special resolution authorizing us to make an application under Section 308 of the BCBCA to change our jurisdiction of incorporation from the provincial jurisdiction of British Columbia, Canada to the State of Delaware, United States of America, by way of a continuation under Section 308 of the BCBCA and a domestication under Section 388 of the Delaware General Corporation Law (“DGCL”), and to approve the Delaware certificate of incorporation of Nicholas Financial, Inc. authorized in the special resolution to be effective as of the date of our domestication (2) a special resolution authorizing us to approve the sale of all or substantially all of the undertaking of the Corporation (the “Loan Portfolio Sale”) pursuant to the Master Asset Purchase Agreement dated November 13, 2023, by and between Westlake Services, LLC dba Westlake Financial, a California limited liability company, the Corporation and Nicholas Financial- Florida corporation and wholly-owned indirect subsidiary of the Corporation), substantially in the form attached to this Circular as Exhibit F (such agreement, the “Asset Purchase Agreement,” and such proposal the “Loan Portfolio Sale”).

Q. What is the voting recommendation of the Board of Directors?

A. The board of directors recommends a vote: (1) FOR the special resolution authorizing us to make an application under Section 308 of the BCBCA to change our jurisdiction of incorporation from the provincial jurisdiction of British Columbia, Canada to the State of Delaware, United States of America, by way of a continuation, and to approve the Delaware certificate of incorporation of Nicholas Financial, Inc. authorized in the special resolution to be effective as of the date of our domestication and (2) FOR the special resolution authorizing the Loan Portfolio Sale.

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Q. Will any other matters be voted on?

A. The board of directors does not intend to present any other matters at the Special Meeting. The board of directors does not know of any other matters that will be brought before our shareholders for a vote at the Special Meeting. If any other matter is properly brought before the Special Meeting, your signed proxy card gives authority to Jeffrey Royal and Mark Hutchins, and each or either of them as proxies, with full power of substitution, to vote on such matters at their discretion.

Q. How many votes do I have?

A. Common shareholders are entitled to one vote for each common share held as of the close of business on the record date.

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

A. Many shareholders hold their shares through a stock broker or bank (“Intermediaries”) rather than directly in their own names. As summarized below, there are some distinctions between shares held of record and those owned beneficially.

Shareholder of Record – If your shares are registered directly in your name with our transfer agent, you are considered, with respect to those shares, the “shareholder of record,” and these Circular materials are being sent directly to you by us. You may vote the shares registered directly in your name by completing and mailing the proxy card, . by telephone or via the Internet by following the instructions on the form of proxy or by voting in person at the Special Meeting.

Beneficial Owner – Non-registered holders who have not objected to their Intermediary disclosing certain ownership information about themselves to the Corporation are referred to as “NOBOs”. Those non-registered holders who have objected to their Intermediary disclosing ownership information about themselves to the Corporation are referred to as “OBOs”. The Corporation has elected to send the Notice, this Circular and the form of proxy (collectively, the “meeting materials”) directly to the NOBOs, to the extent possible, and indirectly through Intermediaries to the OBOs. The Intermediaries (or their service companies) are responsible for forwarding the meeting materials to each OBO, unless the OBO has waived the right to receive them. Intermediaries will frequently use service companies to forward the meeting materials to non-registered holders.

Q. How do I vote?

A. If you are a shareholder of record, there are four ways to vote: By completing and mailing your proxy card; by telephone or via the Internet by following the instructions on the form of proxy or by voting in person at the Special Meeting. If you return your proxy card but you do not indicate your voting preferences, the proxies will vote your shares FOR Proposal 1, FOR Proposal 2 and on any other matter that is properly submitted for shareholder vote at the Special Meeting.

Generally, a non-registered holder who has not waived the right to receive meeting materials will either:

(i) be given a voting instruction form (“VIF”) which is not signed by the Intermediary, and which, when properly completed and signed by the non-registered holder and returned to the Intermediary or its service company, will constitute voting instructions which the Intermediary must follow; or

(ii) less frequently, be given a form of proxy which has already been signed by the Intermediary (typically by a facsimile, stamped signature), which is restricted as to the number of common shares beneficially owned by the non-registered holder and must be completed, but not signed, by the non-registered holder and deposited with the Corporation’s transfer agent, Computershare Investor Services Inc.

These meeting materials are being sent to both registered shareholders and non-registered holders. If you are a non-registered holder, and the Corporation or its agent has sent these meeting materials to you, your name and address and information about your holdings of securities have been obtained in accordance with applicable securities regulatory requirements from the Intermediary holding securities on your behalf. By choosing to send these meeting materials to you directly, the Corporation (and not the Intermediary holding securities on your behalf) has assumed responsibility for delivering these materials to you and executing your proper voting instructions. Please return your voting instructions as specified in the request for voting instruction.

VIFs, whether provided by the Corporation or by an Intermediary, should be completed and returned in accordance with the specific instructions noted on the VIF, including those regarding where and by when the VIF is to be delivered. The purpose of this procedure is to permit non-registered holders to direct the voting of the common shares that they beneficially own.

Should a non-registered holder who receives a VIF wish to attend the Special Meeting or have someone else attend on his or her behalf, the non-registered holder should follow the instructions set forth in the VIF.

Q. Can I change my vote or revoke my proxy?

A. A shareholder may revoke the proxy at any time prior to the voting thereof. In addition to revocation in any other manner permitted by law, a proxy may be revoked by an instrument in writing executed by the shareholder or his attorney authorized in writing, or if the shareholder is a corporation, by a duly authorized officer or attorney thereof (such instrument, a “Notice of Revocation”), and deposited either at the registered office of the Corporation at any time up to and including the last business day preceding the day of the

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Special Meeting, or any adjournment thereof, or, as to any matter in respect of which a vote shall not already have been cast pursuant to such proxy, with the Chairman of the Meeting on the day of the Meeting, or any adjournment thereof, and upon either of such deposits the proxy is revoked. If you file a Notice of Revocation, you may then vote (or abstain from voting) your shares in person at the Special Meeting; however, if you are a beneficial owner, you must first obtain a proxy from the record holder to do so.

Q. How are votes counted?

A. We will appoint a scrutineer at the Special Meeting, who will collect all proxies and ballots and tabulate the results. The scrutineer is typically a representative of our transfer agent.

Q. Who pays for soliciting proxies?

A. We will bear the cost of soliciting proxies from the shareholders. It is planned that the solicitation will be initially by mail, but proxies may also be solicited by our employees by email. These persons will receive no additional compensation for such services but will be reimbursed for reasonable out-of-pocket expenses. Arrangements will also be made with brokerage houses and other custodians, nominees and fiduciaries for the forwarding of solicitation materials to the beneficial owners of shares held of record by these persons, and we may reimburse them for their reasonable out-of-pocket expenses. The cost of such solicitation, estimated to be approximately $25,000, will be borne by us.

Q. What is the quorum requirement of the Special Meeting?

A. A quorum for the consideration of Proposal 1 and Proposal 2 shall be common shareholders present in person or by proxy representing not less than one-third of the total outstanding common shares.

Q. What are broker non-votes?

A. Broker non-votes occur when holders of record, such as banks and brokers holding shares on behalf of beneficial owners, do not receive voting instructions from the beneficial holders at least ten days before the Special Meeting. Broker non-votes will not affect the outcome of the matters being voted on at the Special Meeting, assuming that a quorum is obtained.

Q. What is the vote required to approve the domestication?

A. Our change of jurisdiction from British Columbia, Canada to Delaware requires the affirmative vote, in person or by proxy, of three-fourths of the votes cast by the common shareholders at the Special Meeting if a quorum, or one-third of the total outstanding common shares, is present.

Q. What is the vote required to approve the Loan Portfolio Sale?

A. The Loan Portfolio sale requires the affirmative vote, in person or by proxy, of three-fourths of the votes cast by the common shareholders at the Special Meeting if a quorum, or one-third of the total outstanding common shares, is present.

Q. Multiple shareholders live in my household, and together we received only one copy of this Circular. How can I obtain my own separate copy of this document for the Special Meeting?

A. You may pick up copies in person at the Special Meeting. If you want copies mailed to you and are a beneficial owner, you must request them from your broker, bank or other nominee. If you want copies mailed to you and are a shareholder of record, we will mail them promptly if you request them from our corporate office by phone at (727) 726-0763 or by mail to 26133 US Hwy 19 North, Suite 300 Clearwater, Florida 33763, Attention: Chief Financial Officer. We cannot guarantee you will receive mailed copies before the Special Meeting.

Q. Who can help answer my questions?

A. If you have questions about the Special Meeting you should contact Irina Nashtatik at (727) 726-0763. You may also obtain additional information about us from documents filed with the SEC by following the instructions in the section entitled “Where You Can Find More Information.”

The Domestication Proposal

Our board of directors is proposing to change our jurisdiction of incorporation from the provincial jurisdiction of British Columbia, Canada to the State of Delaware, United States of America through a transaction called a “continuation” under Section 308 of the BCBCA and a “domestication” under Section 388 of the DGCL. Under the DGCL, a corporation becomes domesticated in Delaware by filing a certificate of corporate domestication and a certificate of incorporation with the Secretary of State of the State of Delaware. The domesticated corporation, which will be called Nicholas Financial, Inc., will become subject to the DGCL on the date of its domestication, but will be deemed for the purposes of the DGCL to have commenced its existence in Delaware on the date it originally commenced existence in Canada. The board of directors has approved the domestication, believes it to be in our best interests, and recommends approval. See “THE DOMESTICATION.”

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Our board of directors has determined to pursue the domestication for a number of reasons, the foremost being that we have no significant presence in Canada. Our corporate offices and operations are located in the United States, most of our shareholders reside there, and the principal market for our common shares is the NASDAQ Global Select Market. In addition, domiciling in the United States may eventually enable us to eliminate one level of holding company ownership (by merging our wholly owned Nicholas Financial-Florida subsidiary with and into Nicholas Financial, Inc, a Delaware corporation.) and streamline our corporate structure. We believe this will lead to greater acceptance in the capital markets, lower accounting and legal fees, and greater shareholder value. We chose the State of Delaware to be our domicile principally because the DGCL expressly accommodates continuations under the BCBCA, and also because of the comprehensive body of case law interpreting the DGCL that has evolved over the years, including case law interpreting the duties and obligations of directors and officers. We believe the domestication will unambiguously establish us as a U.S. corporation and help us achieve our strategic goals. See “THE DOMESTICATION- Principal Reasons for the Domestication.”

The domestication will change the corporate laws that apply to our shareholders from the provincial jurisdiction of British Columbia, Canada to the State of Delaware. There are material differences between the BCBCA and the DGCL. Our shareholders may have more or fewer rights under Delaware law depending on the specific set of circumstances. See “THE DOMESTICATION- Comparison of Shareholder Rights.”

We plan to complete the domestication, if approved by shareholders, after the closing of the Loan Portfolio Sale (as described in the proxy circular/prospectus), if it occurs; however, we intend to proceed with the domestication, if the requisite shareholder approval is obtained, if the Loan Portfolio Sale does not close. The registrant intends to proceed with the Loan Portfolio Sale, if the requisite shareholder approval is obtained, if the domestication is not completed. The domestication is not conditioned on the closing of the Loan Portfolio Sale and the closing of the Loan Portfolio Sale is not conditioned on the completion of the domestication. The domestication will be effective on the date set forth in the certificate of corporate domestication and certificate of incorporation, as filed with the Secretary of State of the State of Delaware. Thereafter, Nicholas Financial, Inc. will be subject to the certificate of incorporation filed in Delaware. See “THE DOMESTICATION-Proposed Certificate of Incorporation and Bylaws of Nicholas Financial, Inc.” We will be discontinued in Canada as of the date of the filing of the certificate of corporate domestication and certificate of incorporation in Delaware. After receipt of the certificate of incorporation in Delaware, the Registrar of Companies for British Columbia (the “Registrar”) will publish in the prescribed manner a notice that the Corporation has been continued into the State of Delaware. However, the board of directors may decide to delay the domestication or not to proceed with the domestication after receiving approval from our shareholders if it determines that the domestication is no longer advisable. The board of directors has not considered any alternative action if the domestication is not approved or if it decides to abandon the domestication.

The domestication will not interrupt our corporate existence, our operations, our outstanding agreements and obligations, or the trading market of our common shares. Each outstanding common share at the time of the domestication will remain issued and outstanding as a share of common stock of Nicholas Financial, Inc. after our corporate existence is continued from British Columbia, Canada under the BCBCA and domesticated in Delaware under the DGCL. Following the completion of the domestication, Nicholas Financial, Inc.’s common stock will be listed on the NASDAQ Global Select Market under the symbol “NICK”. See “RISK FACTORS- Risks Relating to the Loan Portfolio Sale.”

Regulatory and Other Approvals

The continuation is subject to the authorization of the Registrar, before applying to the Secretary of State of Delaware. The Registrar is empowered to authorize the continuation if, among other things, the Registrar is satisfied that the Corporation has filed with the Registrar all of the records that the Corporation is required to file with the Registrar under the BCBCA.

Tax Consequences of the Domestication

U.S. Federal Income Tax Consequences. We believe that the change in our jurisdiction of incorporation should constitute a tax-free reorganization within the meaning of Section 368(a)(1)(F) of the United States Internal Revenue Code and, generally, neither we nor Nicholas Financial, Inc. should recognize any gain or loss for U.S. federal income tax purposes as a result of the domestication, other than as described below or later herein in “THE DOMESTICATION—United States and Canadian Income Tax Considerations.” If, for any reason, we determine prior to closing of the domestication that the domestication would not qualify as a tax‑free reorganization within the meaning of Section 368, we will abandon the domestication.”

For U.S. shareholders, the domestication also would generally be tax-free, however, Internal Revenue Code Section 367 has the effect of potentially imposing income tax on certain holders in connection with such transactions. Pursuant to the Treasury Regulations under Internal Revenue Code Section 367, any U.S. holder that owns, directly or through attribution, 10% or more of the combined voting power of all classes of our stock (which we refer to as a 10% shareholder) will have to recognize a deemed dividend on the domestication equal to the “all earnings and profits amount,” within the meaning of Treasury Regulation Section 1.367(b) -2, attributable to such holder’s shares in the Corporation. Any U.S. shareholder that is not a 10% shareholder and whose shares have a fair market value of less than $50,000 on the date of the domestication, will recognize no gain or loss as a result of the domestication. A U.S. shareholder that is not a 10% shareholder but whose shares have a fair market value of at least $50,000 on the date of the domestication must generally recognize gain (but not loss) on the domestication equal to the difference between the fair market value of the Nicholas Financial, Inc. common stock received at the time of the domestication over the shareholder’s tax basis in our shares.

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Such a shareholder, however, instead of recognizing gain, may elect to include in income as a deemed dividend the “all earnings and profits amount” attributable to his shares in the Corporation which we refer to as a “Deemed Dividend Election.”

Based on all available information, we believe that it is possible that no U.S. shareholder of the Corporation should have a positive “all earnings and profits amount” attributable to such shareholder’s shares in the Corporation, and that we are not a “passive foreign investment company” as that term is defined in the Internal Revenue Code of 1986, as amended, or the Code, and accordingly no U.S. shareholder should be subject to tax on the domestication. Based on our limited activity at the holding company level and its consistent history of losses, we do not believe that a U.S. shareholder should have a positive “all earnings and profits” amount attributable to such shareholder’s shares in the Corporation. As a result, we believe that no U.S. shareholder should be required to include any such amount in income as a result of the domestication. However, no assurance can be given that the IRS will agree with us. If it does not agree, then a U.S. shareholder may be subject to adverse U.S. federal income tax consequences. A U.S. shareholder’s tax basis in the shares of common stock of Nicholas Financial, Inc. received in the exchange will be equal to such shareholder’s tax basis in the shares of the Corporation, increased by the amount of gain (if any) recognized in connection with the domestication or the amount of the “all earnings and profits amount” included in income by such U.S. shareholder. A U.S. shareholder’s holding period in the shares of common stock of Nicholas Financial, Inc. should include the period of time during which such shareholder held his shares in the Corporation, provided that the shares of the Corporation were held as capital assets.

See a more detailed discussion of U.S. federal income tax matters arising from the Domestication in “THE DOMESTICATION—United States and Canadian Income Tax Considerations – United States Federal Income Tax Consequences.”

Canadian Federal Tax Consequences Under the Income Tax Act. Under the Income Tax Act (Canada), or Tax Act, the change in our jurisdiction from Canada to the United States will cause our tax year to end immediately before the domestication. Furthermore, we will be deemed to have disposed of all of our property immediately before the continuation for proceeds of disposition equal to the fair market value of the property at that time. We will be subject to a separate corporate emigration tax imposed equal to the amount by which the fair market value of all of our property (principally consisting of all of the outstanding shares of capital stock of our United States operating Florida subsidiary, Nicholas Financial, as well as NDS, as defined below) immediately before the continuation exceeds the aggregate of our liabilities at that time (other than dividends payable and taxes payable in connection with the emigration tax) and the amount of paid-up capital on all of our outstanding common shares.

We have reviewed our assets, liabilities, paid-up capital and other tax balances with the assistance of our professional advisors. Based on our calculations and based on a number of key assumptions, if the market price of our common shares does not exceed $7.00 per share and the exchange rate of the Canadian dollar to the U.S. dollar remains relatively constant at CDN $1.00 equals US $0.75, the domestication is expected to result in the Corporation being liable to Canadian tax under Part XIV of the Tax Act (as defined below) of approximately $1,446,000, but we do not expect to incur any Canadian Part I income tax. This conclusion is based in part on determinations of factual matters and such key assumptions, including determinations regarding the fair market value of our assets and tax attributes, any or all of which could change prior to the effective time of the domestication. If the market price of our common shares exceeds such amount, however, or if the exchange rate of the Canadian dollar to the U.S. dollar appreciably changes or the key assumptions prove to be inaccurate, then we could incur Canadian income taxation as a result of the domestication. If the closing of the Loan Portfolio Sale or other factors cause the market price of our common shares to increase above the assumed market price of $7.00 per share, we could incur more Canadian tax under Part XIV of the Tax Act and perhaps also income tax under Part I of the Tax Act. If the closing of the Loan Portfolio Sale or other factors cause the market price of our common shares to decrease below the assumed market price of $7.00 per share, we could incur less Canadian income taxation.

Our shareholders who hold our common shares after the domestication will not be considered to have disposed of their shares by reason only of the domestication. Accordingly, the domestication will not cause Canadian resident shareholders to realize a capital gain or loss on their shares and there will be no effect on the adjusted cost base of their shares.

The foregoing is a brief summary of the principal tax considerations of the domestication only and is qualified in its entirety by the more detailed description of income tax considerations in “THE DOMESTICATION—United States and Canadian Tax Considerations” in this Circular, which shareholders are urged to read. This summary does not discuss all aspects of United States and Canadian tax consequences that may apply in connection with the domestication. Shareholders should consult their own tax advisors as to the tax consequences of the domestication applicable to them. In addition, please note that other tax consequences may arise under applicable law in other countries.

Dissent Rights of Shareholders

If you wish to dissent to the domestication and do so in compliance with Sections 237 - 247 of the BCBCA, and we proceed with the domestication, you will be entitled to be paid the fair value of the common shares you hold. Fair value is determined as of the close of business on the day before the domestication is approved by our common shareholders. If you wish to dissent, you must send written objection to the domestication to us at or before the Special Meeting. If you vote in favor of the domestication, you in effect lose your rights to dissent. If you withhold your vote or vote against the domestication, you preserve your dissent rights to the extent you comply with Sections 237 - 247 of the BCBCA.

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However, it is not sufficient to vote against the domestication or to withhold your vote. You must also provide a separate dissent notice at or before the Special Meeting. If you grant a proxy and intend to dissent, the proxy must instruct the proxy holder to vote against the domestication in order to prevent the proxy holder from voting such shares in favor of the domestication and thereby voiding your right to dissent. Under the BCBCA, you have no right of partial dissent. Accordingly, you may only dissent as to all your common shares. Sections 237 - 247 of the BCBCA is reprinted in their entirety as Exhibit E to this Circular.

If you wish to dissent to the Loan Portfolio Sale and do so in compliance with Sections 237 - 247 of the BCBCA, and we proceed with the Loan Portfolio Sale, you will be entitled to be paid the fair value of the common shares you hold. Fair value is determined as of the close of business on the day before the Loan Portfolio Sale is approved by our common shareholders. If you wish to dissent, you must send written objection to the Loan Portfolio Sale to us at or before the Special Meeting. If you vote in favor of the Loan Portfolio Sale, you in effect lose your rights to dissent. If you withhold your vote or vote against the Loan Portfolio Sale, you preserve your dissent rights to the extent you comply with Sections 237 - 247 of the BCBCA.

However, it is not sufficient to vote against the Loan Portfolio Sale or to withhold your vote. You must also provide a separate dissent notice at or before the Special Meeting. If you grant a proxy and intend to dissent, the proxy must instruct the proxy holder to vote against the domestication in order to prevent the proxy holder from voting such shares in favor of the Loan Portfolio Sale and thereby voiding your right to dissent. Under the BCBCA, you have no right of partial dissent. Accordingly, you may only dissent as to all your common shares. Sections 237 - 247 of the BCBCA is reprinted in their entirety as Exhibit E to this Circular.

Comparison of Shareholder Rights

Upon completion of the domestication, our shareholders will be holders of common stock of Nicholas Financial, Inc., a Delaware corporation, and their rights will be governed by the DGCL as well as Nicholas Financial, Inc.’s certificate of incorporation and bylaws. Shareholders should be aware that the rights they currently have under the BCBCA may, with respect to certain matters, be different than the rights they will have as stockholders under the DGCL. For example, under the BCBCA, a company has the authority to issue an unlimited number of shares whereas, under the DGCL, a Delaware corporation may only issue the number of shares that is authorized by its certificate of incorporation and stockholder approval must be obtained to amend the certificate of incorporation to authorize the issuance of additional shares. See “The Domestication – Comparison of Shareholder Rights” for a more detailed description of the material differences between the rights of Canadian shareholders and Delaware stockholders.

The Loan Portfolio Sale Proposal

As reported in the Corporation’s Form 10-Q for the quarterly period ended September 30, 2023 our automobile finance installment contracts have suffered large credit losses. If the Loan Portfolio Sale does not close, we believe that our automobile finance installment contracts will continue to rapidly suffer large credit losses, which we believe would in turn result in a significant devaluation of the receivables associated with these contracts, the Corporation and the market value of its stock and add uncertainty to our ability to successfully implement our restructuring plan. See “THE LOAN PORTFOLIO SALE-“Background” and “-Reasons for the Loan Portfolio Sale Proposal.” We also believe that if shareholders do not approve the Loan Portfolio Sale that: (i) the value of our contracts and the receivables will decrease over time; and (ii) the purchase price offered by another potential buyer, if any, will be lower than the purchase price offered in the Loan Portfolio Sale. If the loan portfolio is not sold we expect the costs to run off the business will be significant. As part of our change in operating strategy and evolving restructuring in an effort to mitigate against these potential adverse effects and to maximize shareholder value, our Board seeks to effect the sale of all or substantially all of the undertaking of the Corporation and its affiliates. In furtherance of these efforts, the Board is presenting the Loan Portfolio Sale proposal for approval by the Corporation’s shareholders. The aggregate cash purchase price of approximately $65.5 million under the Asset Purchase Agreement equates to a book value per share of approximately $9.00 per share, subject to adjustment (both increases and deductions) in accordance with the terms of the Asset Purchase Agreement, as of November 13, 2023, compared to the closing price of the Corporation’s common stock on November 13, 2023 of $4.5285 per share. As reported in the Corporation’s Form 10-Q for the quarterly period ended September 30, 2023, the book value of the Corporation’s receivables, net of unearned discounts and fees and accrued interest receivable and the allowance for credit losses was $72,152,361. The Corporation divided that net book value by 7,290,557 shares of its common stock outstanding to calculate that the implied net book value of the receivables per share of common stock was approximately $9.90 per share. As also reported in the Corporation’s Form 10-Q for the quarterly period ended September 30, 2023, the “fair value” of the Corporation’s receivables as of September 30, 2023 was $67,187,210. The Corporation divided that fair value amount by 7,290,557 shares of its common stock outstanding to calculate that the implied fair value of the receivables per share of common stock was $9.22 per share The book value per share based on the purchase price under the Asset Purchase Agreement, the closing price of the Corporation’s Common Stock on November 13, 2023, the implied net book value of the receivables per share of common stock and the implied fair value of the receivables per share of common stock is not determinative of fair value under the BCBCA for shareholders who dissent to the Loan Portfolio Sale. See “THE LOAN PORTFOLIO SALE- -Reasons for the Loan Portfolio Sale Proposal” and “-Dissent Rights of Shareholders” and “RISK FACTORS- Risks Relating to the Loan Portfolio Sale.”

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proceeds from the Loan Portfolio Sale to either acquire or invest in businesses outside of the Corporation’s traditional business and seek to maximize the value of deferred tax assets, including net operating losses, available to the Corporation. The board of directors intends to explore acquisitions of businesses in industries with respect to which they have familiarity based on their other business and investment activities; however, the board does not intend to limit its acquisition and investment activities to those businesses and industries. The overall timeframe for potential acquisitions and investments remains uncertain. The board currently believes that the long-term interests of shareholders would be best served by the Corporation using the net proceeds from the Loan Portfolio Sale to acquire and invest in other businesses instead of liquidating and distributing the net sales proceeds to shareholders because it believes that such acquisitions and investments will, over time, increase shareholder value to a greater extent than what they would receive in liquidation. The liquidation value of the Corporation was not determined in connection with the Loan Portfolio Sale because we believe that there are inherent uncertainties in establishing that value based on the nature of most of our assets and their deterioration in value. There can be no assurance that any of these acquisitions or investments in other businesses, if made, will result in greater stockholder value than the liquidation and dissolution of the Corporation. See “RISK FACTORS- Risks Relating to the Loan Portfolio Sale.” In developing the restructuring plan and considering the Loan Portfolio Sale, the Board considered at length potential strategic alternatives available to us, including identifying available strategic alternatives and transactions involving the Corporation as a whole, such as a merger, reverse merger, sale of assets, strategic partnership or other business combination transaction, that would have a reasonable likelihood of providing value to our shareholders over time in excess of the amount, if any, the shareholders would receive in a liquidation. See “THE LOAN PORTFOLIO SALE- Our Business and Operations Following Approval of the Loan Portfolio Sale Proposal.” The Board determined that none of these potential strategic alternatives, other than the Loan Portfolio Sale, were viable. Currently, the Board has no plans to liquidate the Corporation’s assets and distribute funds from liquidation to the shareholders. See “RISK FACTORS- Risks Relating to the Loan Portfolio Sale.”

The BCBCA law provides that a corporation may sell all or substantially all of its undertaking upon the recommendation of its board of directors, followed by the requisite approval of its stockholders. At the Special Meeting, you will be asked to consider and vote upon the Loan Portfolio Sale proposal to approve the Loan Portfolio Sale pursuant to the Asset Purchase Agreement. We plan to complete the domestication, if approved by shareholders, after the closing of the Loan Portfolio Sale, if it occurs; however, we intend to proceed with the domestication, if the requisite shareholder approval is obtained, if the Loan Portfolio Sale does not close. The registrant intends to proceed with the Loan Portfolio Sale, if the requisite shareholder approval is obtained, if the domestication is not completed. The domestication is not conditioned on the closing of the Loan Portfolio Sale and the closing of the Loan Portfolio Sale is not conditioned on the completion of the domestication.

The board of directors has determined that effecting the Loan Portfolio Sale pursuant to the Asset Purchase Agreement is in the best interests of the Corporation and shareholders and recommends a vote “FOR” for the Loan Portfolio Sale because it believes we will have a better chance to enhance shareholder value by using the net proceeds from the Loan Portfolio Sale to acquire or invest in other businesses rather than by continuing to operate its existing business or liquidating. The board believes that if shareholders do not approve the Loan Portfolio Sale that: (i) the value of our contracts and the receivables will decrease over time; and (ii) the purchase price offered by another potential buyer, if any, will be lower than the purchase price offered in the Loan Portfolio Sale. If the loan portfolio is not sold we expect the costs to run off the business will be significant. See “THE LOAN PORTFOLIO SALE- -Reasons for the Loan Portfolio Sale Proposal.”

Tax Consequences of the Loan Portfolio Sale

U.S. Federal Income Tax Consequences.

Subject to a more detailed discussion below in “THE LOAN PORTFOLIO SALE—United States and Canadian Income Tax Considerations – United States Federal Income Tax Consequences”, for U.S. federal income tax purposes, the proposed Loan Portfolio Sale will be treated as a sale of corporate assets in exchange for cash. Based on the terms of the Asset Purchase Agreement and our best estimates at this time of our adjusted tax basis in the Loan Portfolio, we expect the total adjusted tax basis of all our Loan Portfolio assets to exceed the total amount realized; therefore, we expect to recognize a net income tax loss on the Loan Portfolio Sale. We currently estimate such net income tax loss on the Loan Portfolio Sale to be between $25 million to #30 million, subject to certain true‑up provisions as set forth in the Asset Purchase Agreement.

Canadian Federal Tax Consequences Under the Income Tax Act.

Subject to a more detailed discussion below in “THE LOAN PORTFOLIO SALE—United States and Canadian Income Tax Considerations—Canadian Federal Income Tax Consequences”, for Canadian federal income tax purposes, the proposed Loan Portfolio Sale will be treated as a sale of corporate assets in exchange for cash. Based on the terms of the Asset Purchase Agreement and our best estimates at this time of our adjusted tax basis in the Loan Portfolio, we expect the total adjusted tax basis of all our Loan Portfolio assets to exceed the total amount realized; therefore, we expect to recognize a significant net income tax loss on the Loan Portfolio Sale. The loss should not be a taxable event to the Corporation.

The foregoing is a brief summary of the principal tax considerations of the Loan Portfolio Sale only and is qualified in its entirety by the more detailed description of income tax considerations in “United States and Canadian Tax Considerations” in this Circular, which shareholders are urged to read. This summary does not discuss all aspects of United States and Canadian tax

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consequences that may apply in connection with the Loan Portfolio Sale. Shareholders should consult their own tax advisors as to the tax consequences of the Loan Portfolio Sale applicable to them. In addition, please note that other tax consequences may arise under applicable law in other countries.

Dissent Rights of Shareholders

However, it is not sufficient to vote against the Loan Portfolio Sale or to withhold your vote. You must also provide a separate dissent notice at or before the Special Meeting. If you grant a proxy and intend to dissent, the proxy must instruct the proxy holder to vote against the Loan Portfolio Sale in order to prevent the proxy holder from voting such shares in favor of the Loan Portfolio Sale and thereby voiding your right to dissent. Under the BCBCA, you have no right of partial dissent. Accordingly, you may only dissent as to all your common shares. Sections 237 - 247 of the BCBCA is reprinted in their entirety as Exhibit E to this Circular.

[The balance of this page has been intentionally left blank.]

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INFORMATION CONCERNING THE company

Narrative Description of Our Business.

Nicholas Financial, Inc. (“Nicholas Financial-Canada”) is a Canadian holding company incorporated under the laws of British Columbia in 1986. The business activities of Nicholas Financial-Canada are currently conducted exclusively through its wholly owned indirect subsidiary, Nicholas Financial, Inc., a Florida corporation (“Nicholas Financial-Florida”). Nicholas Financial-Florida is a specialized consumer finance company engaged primarily in acquiring and servicing automobile finance installment contracts for purchases of used and new automobiles and light trucks. Additionally, Nicholas Financial-Florida sells consumer-finance related products and, prior to the end of the third fiscal quarter of the fiscal year ended March 31, 2023, Nicholas Financial-Florida originated direct consumer loans. The Corporation disclosed in its Form 10-Q for the quarterly period ended September 30, 2023 that in connection with the Asset Purchase Agreement, the Corporation does not intend to continue any significant contract purchases and origination activities, except on a much smaller scale, than it has historically. Nicholas Data Services, Inc. (“NDS”), is a second Florida subsidiary of Nicholas Financial-Canada and it serves as the intermediate holding company for Nicholas Financial-Florida. NF Funding I, LLC (“NF Funding I”), was a wholly owned, special purpose financing subsidiary of Nicholas Financial-Florida, but that subsidiary no longer served any purpose and, as a result, it was dissolved prior to the end of the fiscal year ended March 31, 2023. As of September 30, 2023, Nicholas Financial-Florida owned 5,367,888 shares of common stock of Nicholas Financial-Canada.

Nicholas Financial-Canada, Nicholas Financial-Florida, and NDS are hereafter collectively referred to as the “Company”.

All financial information herein is designated in United States dollars.

The Company’s principal executive offices are located at 26133 US HWY 19 North, Suite 300, Clearwater, Florida 33763, and its telephone number is (727) 726-0763.

The following diagram summarizes the current organizational structure of Nicholas-Financial-Canada, NDS and Nicholas Financial-Florida, prior to the domestication. At the effective time of the domestication this organizational structure shall remain the same, except that Nicholas Financial-Canada will become a Delaware corporation.

Additional information about the Company, its business, properties and employees can be found in its our Annual Report on Form 10-K for the year ended March 31, 2023, our Report on Form 10-Q for the three months ended June 30, 2023 and our Report on Form 10-Q for the three months ended September 30, 2023, each of which is incorporated by reference into this Circular.

Legal Proceedings.

The Company is involved in certain claims and legal proceedings in the normal course of business of which one, if decided adversely to the Company, would, in the opinion of management, have a material adverse effect on the Company’s financial condition or results of operations.

Specifically, as previously disclosed in our Form 10-Q for the quarterly period ended September 30, 2023, the Company has been sued together with several other defendants, in a lawsuit styled: Nicholas Financial, Inc. v. Jeremiah Gross, No. 21CY-CV02148-01, 7th Judicial Circuit Court, Clay County, Missouri (the "Court"). On March 9, 2021 the Company filed suit against Jeremiah Gross for a deficiency balance owed to the Company following the 2018 surrender and sale of his motor vehicle which secured a loan from the Company. On April 22, 2021 a default judgment for $7,984.18 was entered against Mr. Gross. On December 22, 2021 Mr. Gross filed a motion to set aside the default judgment. The Court granted his motion on March 23, 2022. In his answer he asserted a class-action counterclaim against the Company seeking to represent a nationwide class of the Company’s customers who received allegedly deficient notices regarding the sale of their vehicles and whose vehicles were recovered and sold by the Company, and on behalf of Missouri customers who received allegedly deficient notices from the Company regarding the sale of their recovered vehicles and the calculation of the deficiency owed the Company. The Company filed its answer to the counterclaim on May 13, 2022. On September 9,

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2022 the Company filed a motion for summary judgment as to all counts of the counterclaim and the Company's claim against Mr. Gross. The motion was argued on February 16, 2023. On March 27, 2023 the Court entered an order granting the motion in part and denying the motion in part. The Court found in favor of the Company as to the counterclaim regarding presale notices and prejudgment interest, and in Mr. Gross’s favor for the counterclaim as to post-sale notices. The Court denied the Company’s motion for summary judgment as to its claim for a deficiency against Mr. Gross. The remaining claim relates to post-sale notices sent to Missouri customers. The Company’s insurer accepted the defense of this litigation under a reservation of rights. On November 13, 2023 the Company and the Company’s insurer reached agreement with Mr. Gross on the terms and conditions of a settlement for the last remaining class action claim relating to post-sale notices sent to Missouri customers. Among other things, the settlement is expected to provide that the Company’s insurer will deposit the remaining available limits under the Company’s insurance policy, which shall in no event be less than $750,000, into a qualified settlement fund in order to satisfy all remaining claims in exchange for a full release of the Company and its affiliates and the Company’s insurer from any and all past, present and future liability arising out of or relating to consumer credit contracts under which the Company or its affiliates obtained a security interest in property. The terms and conditions of the final settlement agreement will be subject to approval by the Court, and the parties in the litigation intend to seek such approval promptly following memorialization of the terms and conditions of the settlement into a final agreement. There can be no assurance that the Court will approve the terms and conditions of the final settlement agreement.

Market for Our Common Equity and Related Stockholder Matters.

Market for Common Stock. The Corporation’s common shares are traded on the NASDAQ Global Select Market under the symbol “NICK.” See “RISK FACTORS- Risks Relating to the Loan Portfolio Sale.”

Shareholders. The Corporation had approximately 114 shareholders of record as of June 10, 2023.

Dividends. The Corporation has not declared and paid cash dividends on its common shares in the recent past and has no current plans to declare or pay any cash dividends in the foreseeable future. There are no Canadian foreign exchange controls or laws that would affect the remittance of dividends or other payments to the Corporation’s non-Canadian resident shareholders. There are no Canadian laws that restrict the export or import of capital, other than the Investment Canada Act (Canada), which requires the notification or review of certain investments by non-Canadians to establish or acquire control of a Canadian business. The Corporation is not a Canadian business as defined under the Investment Canada Act because it has no place of business in Canada, has no individuals employed in Canada in connection with its business, and has no assets in Canada used in carrying on its business.

Canada and the United States of America are signatories to the Convention Between the United States of America and Canada With Respect to Taxes on Income and on Capital (the “Tax Treaty”). The Tax Treaty contains provisions governing the tax treatment of interest, dividends, gains, and royalties paid to or received by a person residing in the United States. The Tax Treaty also contains provisions to prevent the occurrence of double taxation, essentially by permitting the taxpayer to claim a tax credit for taxes paid in the foreign jurisdiction.

Earnings from U.S. subsidiaries are permanently invested in the U.S. The Corporation has not provided any Canadian income tax or U.S. withholding tax on unremitted earnings. If a dividend was paid to the Corporation from the current or accumulated earnings and profits of the U.S. subsidiary, the dividend would be subject to a U.S. withholding tax of 5%. The gross dividend (i.e., before payment of the withholding tax) would generally be included in the Corporation's Canadian taxable income. However, under certain circumstances, the Corporation may be allowed to deduct the dividends in the calculation of its Canadian taxable income. If the Corporation has no other foreign (i.e., non-Canadian) non-business income, no relief is available in that case to recover the withholding taxes previously paid.

A 15% Canadian withholding tax applies to dividends paid by the Corporation to a U.S. shareholder (including those that own less than 10% of the Corporation’s voting shares) that is an individual. The U.S. shareholder must include the gross amount of the dividends in the shareholder’s net income to be taxed at the regular rates. In general, a U.S. shareholder can obtain a foreign tax credit for U.S. federal income tax purposes with respect to the Canadian withholding tax on such dividends, but the amount of such credit is subject to a limitation that depends, in part, on the amount of the shareholder’s income and losses from other sources. A U.S. shareholder that is an individual also can elect to claim a deduction (rather than a foreign tax credit) for all non-U.S. income taxes paid by the shareholder during the particular year. The benefit of any deduction for foreign taxes may be negatively impacted by the overall limitation on deducting income and other taxes. U.S. shareholders are urged to consult their own tax advisors regarding the U.S. federal income tax treatment of any Canadian withholding tax imposed on dividends from the Corporation.

Securities Authorized for Issuance under Equity Incentive Plans. The following table sets forth information as of March 31, 2023 concerning securities authorized for issuance pursuant to our equity compensation plans.

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EQUITY COMPENSATION PLAN INFORMATION

(In thousands, except exercise price)

     
    Number of

    Weighted –

    Number of Securities

     
    Securities to

    Remaining Available

     
    be Issued Upon

    Average

    for Future Issuance

     
    Exercise of

    Exercise Price of

    Under Equity

     
    Outstanding

    Outstanding

    Compensation Plans

    Plan Category

    Options, Warrants

    Options, Warrants

    (Excluding Securities

     
    and Rights

    and Rights

    Reflected in Column (a))

     
    (a)

    (b)

    (c)

    Equity Compensation Plans

    Approved by Security Holders

    10

    $

    12.68

    662

    Equity Compensation Plans

    -

    Not Applicable

    -

    Not Approved by Security Holders

Management’s Discussion and Analysis of Financial Condition and Results of Operation.

The discussion of our financial condition and results of operation from “Management’s Discussion and Analysis of Financial Condition and Results of Operation” in our Annual Report on Form 10-K for the year ended March 31, 2023, our Report on Form 10-Q for the three months ended June 30, 2023 and our Report on Form 10-Q for the three months ended September 30, 2023 are incorporated by reference into this Circular. The “Management’s Discussion and Analysis of Financial Condition and Results of Operation” in our Annual Report on Form 10-K for the year ended March 31, 2023, our Report on Form 10-Q for the three months ended June 30, 2023 and our Report on Form 10-Q for the three months ended September 30, 2023 should be read in conjunction with our consolidated audited financial statements and notes as of and for the years ended March 31, 2023 and 2022, which are incorporated by reference into this Circular from our Annual Report on Form 10-K for the year ended March 31, 2023, our consolidated unaudited interim financial statements and notes as of June 30, 2023 and for the three month periods ended June 30, 2023 and 2022, which are incorporated by reference into this Circular from our Report on Form 10-Q for the three months ended June 30, 2023, and our consolidated unaudited interim financial statements and notes as of September 30, 2023 and for the three month periods ended September 30, 2023 and 2022, which are incorporated by reference into this Circular from our Report on Form 10-Q for the three months ended September 30, 2023. These consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles.

Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Financial Statements and Supplementary Data.

Our consolidated audited financial statements and notes as of March 31, 2023 and 2022 and the years ended March 31, 2023 and 2022 are incorporated by reference into this Circular from our Annual Report on Form 10-K for the year ended March 31, 2023. Our unaudited interim financial statements and notes for the three months ended June 30, 2023 are incorporated by reference into this Circular from our Report on Form 10-Q for the three months ended June 30, 2023 and our unaudited interim financial statements and notes for the three months ended September 30, 2023 are incorporated by reference into this Circular from our Report on Form 10-Q for the three months ended September 30, 2023.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

On August 15, 2022, the Audit Committee of the Board of Directors of the Corporation approved the engagement of FORVIS, LLP as the Corporation’s new independent registered public accounting firm for the fiscal year ending March 31, 2023, and dismissed RSM US LLP as the Corporation’s independent registered public accounting firm, in each case effective immediately. For further discussion regarding our change in independent registered public accounting firms, see our Form 8-K filed on August 17, 2022, which is incorporated by reference into this Circular.

Directors, Executive Officers and Corporate Governance.

Directors and Officers. The same persons serving as directors and officers of the Corporation immediately prior to the domestication will continue to serve as directors and officers of the Corporation following the domestication. For information regarding such persons, please refer to the information contained in (i) the Corporation’s Annual Report on Form 10-K for the year ended March 31, 2023 and (ii) the Corporation’s Notice of Annual General Meeting of Shareholders and 2023 Proxy Statement and Information Circular, which are incorporated by reference into this Circular.

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Director and Executive Compensation. The director and executive compensation programs currently offered by the Corporation are described in the Corporation’s Notice of Annual General Meeting of Shareholders and 2023 Proxy Statement and Information Circular, which is incorporated by reference into this Circular.

Corporate Governance. The corporate governance practices of the Corporation, after giving effect to the domestication, will continue to be the same as the current corporate governance practices of the Corporation. For information regarding the corporate governance practices of the Corporation, please refer to the information regarding the corporate governance practices of the Corporation contained in the Corporation’s Notice of Annual General Meeting of Shareholders and 2023 Proxy Statement and Information Circular, which is incorporated by reference into this Circular. There are differences between the Corporation’s existing articles and the Certificate of Incorporation and Bylaws as they will be in effect upon the completion of the domestication. These differences are discussed under “Comparison of Shareholder Rights”.

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RISK FACTORS

You should carefully consider the risks and uncertainties described below, together with all of the other information and risks included in, or incorporated by reference into this Circular, including our consolidated financial statements and the related notes thereto which are incorporated by reference into this Circular from our Annual Report on Form 10-K for the year ended March 31, 2023, from our Report on Form 10-Q for the three months ended June 30, 2023 and from our Report on Form 10-Q for the three months ended September 30, 2023 and the Risk Factors which are incorporated by reference into this Circular from our Annual Report on Form 10-K for the year ended March 31, 2023, from our Report on Form 10-Q for the three months ended June 30, 2023 and from our Report on Form 10-Q for the three months ended September 30, 2023, before making a decision whether to vote for the proposal described in this Circular.

The following risk factors and other information in this Circular contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and forward-looking information within the meaning of applicable Canadian legislation. This summary does not discuss all aspects of U.S. or Canadian tax consequences that may apply in connection with the domestication or Loan Portfolio Sale. In addition, please note that other tax consequences may arise under applicable law in other countries. If any of the following events or developments described below actually occur, the business, financial condition or operating results of Nicholas Financial, Inc., as a British Columbia corporation prior to the domestication, if it occurs, and as a Delaware corporation, if the domestication occurs, could be materially harmed. This could cause the trading price of its common stock to decline, and you may lose all or part of your investment.

Risks Relating to the Domestication

If the IRS does not agree with our beliefs regarding the “all earnings and profits amount” attributable to a shareholder’s shares in the Corporation, our stockholders may owe income taxes as a result of the domestication. Based on all available information, we believe that the domestication will qualify as a tax-free reorganization for U.S. federal income tax purposes and that no U.S. shareholder should be subject to U.S. federal income tax as a result of the domestication. Based on a review of information available to us, we believe that Nicholas Financial, Inc. has a deficit in “earnings and profits.” As a result, no U.S. shareholder should have a positive “all earnings and profits amount” attributable to such shareholder’s common shares, and therefore no U.S. shareholder should be required to include any such amount in income as a result of the domestication.

Based on our limited activity at the holding company level and its consistent history of, we do not believe that a U.S. shareholder should have a positive “all earnings and profits” amount attributable to such shareholder’s shares in the Corporation. However, if the IRS does not agree with our beliefs a shareholder may be subject to adverse U.S. federal income tax consequences on the domestication. Any U.S. shareholder who owns, directly or indirectly, 10% or more of the combined voting power of all classes of our common stock at the time of the domestication will have to recognize income, categorized as dividend income for U.S. federal income tax purposes, equal to the “all earnings and profits amount,” within the meaning of Treasury Regulation Section 1.367(b) -2, allocable to such U.S. shareholder’s shares in the Corporation. Any U.S. shareholder who owns less than 10% of the combined voting power of all classes of our common shares and whose shares have a fair market value of $50,000 or more on the date of the domestication will, assuming the deemed dividend election is made by such U.S. shareholder, have income in an amount equal to the lesser of the gain, if any, on the domestication or “all earnings and profits amount” attributable to his shares in Nicholas Financial, Inc. U.S. shareholders who own less than 10% of the combined voting power of all classes of our shares and whose shares have a fair market value below $50,000 are not subject to tax on the domestication. For additional information on the U.S. federal income tax consequences of the domestication, see “United States Federal Income Tax Consequences”.

The rights of our shareholders under Canadian law will differ from their rights under Delaware law, which will, in some cases, provide less protection to shareholders following the domestication.

Upon consummation of the domestication, our shareholders will become stockholders of a Delaware corporation. There are material differences between the BCBCA and the DGCL and our current articles of incorporation and the proposed certificate of incorporation and bylaws. For example, under Canadian law, many significant corporate actions such as amending a corporation’s articles of incorporation or consummating a merger require the approval of three-quarters of the votes cast by Nicholas Financial, Inc.’s shareholders, whereas under Delaware law, a majority of the total voting power of all of those entitled to vote may approve the matter. Furthermore, shareholders under Canadian law are entitled to dissent and appraisal rights under a number of extraordinary corporate actions, including an amalgamation with another unrelated corporation, certain amendments to a corporation’s articles of incorporation or the sale of all or substantially all of a corporation’s undertaking; under Delaware law, stockholders are entitled to dissent and appraisal rights for certain specified corporate transactions such as mergers or consolidations. If the domestication is approved, shareholders may be afforded less protection under the DGCL than they had under the BCBCA in certain circumstances. See “The Domestication – Comparison of Shareholder Rights”.

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The proposed domestication will result in additional direct and indirect costs whether or not it is completed.

The domestication will result in additional direct costs. We will incur attorneys’ fees, accountants’ fees, filing fees, mailing expenses and financial printing expenses in connection with the domestication. The domestication will also temporarily divert the attention of our management and employees from the day-to-day management of the business to a limited extent.

The amount of corporate tax payable by us will be affected by the value of our property on the date of the domestication. For Canadian tax purposes, on the date of the domestication we will be deemed to have a year end and will also be deemed to have sold all of our property and received the fair market value for those properties. We do not expect that we will be subject to any Canadian taxation on this deemed disposition. However, we will be subject to an additional corporate emigration tax equal to 5% of the amount by which the fair market value of our property, net of liabilities, exceeds the paid-up capital of our issued and outstanding shares. We have completed certain calculations of our tax accounts with the assistance of professional advisors, and assuming the fair market value of our property reflects the market price of our stock, a stock price of $7.00 per common share and that the exchange rate of the Canadian dollar to the U.S. dollar is CDN $1.00 equals US $0.75, the domestication is expected to result in the Corporation being liable to Canadian tax under Part XIV of the Tax Act (as defined below) of approximately $1,446,000, but we do not expect to incur any Canadian Part I income tax. We may be subject to additional corporate emigration tax if the price of our common shares increases or if the exchange rate were to change significantly or if key assumptions regarding these calculations prove inaccurate. If the closing of the Loan Portfolio Sale or other factors cause the market price of our common shares to increase above the assumed market price of $7.00 per share, we could incur more Canadian tax under Part XIV of the Tax Act and perhaps also income tax under Part I of the Tax Act. If the closing of the Loan Portfolio Sale or other factors cause the market price of our common shares to decrease below the assumed market price of $7.00 per share, we could incur less Canadian income tax.

Further, it is possible that the Canadian federal tax authorities may not accept our valuations or calculations of our tax accounts, which may result in additional taxes payable as a result of the domestication. As is customary, when a Canadian federal tax liability depends largely on factual matters, we have not applied to the Canadian federal tax authorities for a ruling on this matter and do not intend to do so.

We are of the view that our principal undertaking will be carrying on an active consumer lending business (or such other business as we undertake if the Loan Portfolio Sale completed) and as these businesses are carried on by our controlled foreign affiliates the shares of NDS that we own should not be considered to be an offshore investment fund property for purposes of the Tax Act. However, this determination may change depending on the use to which the Corporation puts the proceeds of the Loan Portfolio Sale.

Risks Relating to the Loan Portfolio Sale

There are many risks and uncertainties that shareholders should consider when deciding whether to vote to approve the Loan Portfolio Proposal, including, but not limited to, those set forth below. You should carefully consider the following risk factors, together with all of the other information included in this Circular, before you decide whether to vote or instruct your vote to be cast to approve the Loan Portfolio Sale pursuant to the Asset Purchase Agreement, as described in this Circular.

•

Shareholders could vote against the Loan Portfolio Sale proposal or fail to vote, thereby making the Loan Portfolio Sale impossible. If the Loan Portfolio Sale proposal is not approved by Shareholders, we believe that our automobile finance installment contracts will rapidly suffer large credit losses which could result in a significant devaluation of the Corporation and the market value of its stock and add uncertainty to our ability to successfully implement our restructuring plan. See “THE LOAN PORTFOLIO SALE-Reasons for the Loan Portfolio Sale Proposal” and “THE LOAN PORTFOLIO SALE- Our Business and Operations Following Approval of the Loan Portfolio Sale Proposal.”

•

The Loan Portfolio Sale, even if approved by the Shareholders, may not be completed.

•

The occurrence of certain events, changes or other circumstance could give rise to the termination of the Asset Purchase Agreement, which would result in the Loan Portfolio Sale not being consummated in accordance with the Asset Purchase Agreement.

•

The Board did not seek or obtain a fairness opinion from an investment bank or other firm that the consideration to be paid for the assets being sold is fair from a financial point of view.

•

In developing the restructuring plan and considering the Loan Portfolio Sale, the Board considered potential strategic alternatives, including identifying available strategic alternatives and transactions involving the Corporation as a whole, such as a merger, reverse merger, sale of assets, strategic partnership or other business combination transaction, that would have a reasonable likelihood of providing value to our shareholders over time in excess of the amount, if any, the shareholders would receive in a liquidation. The Board determined that none of these potential strategic alternatives or transactions, other than the Loan Portfolio Sale, were viable. Currently, the Board has no plans to liquidate the Corporation’s assets and distribute funds from liquidation to the shareholders. If in the future the Board determines that liquidation of the Corporation’s assets and distribution of funds from liquidation to the shareholders is in the best interests of the shareholders, the liquidation proceeds received by shareholders at that time could be of less value to the shareholders than the value they may receive if the Loan Portfolio Sale is consummated and could be less than if the Corporation’s assets were liquidated and funds distributed to shareholders instead of consummating the Loan Portfolio Sale.

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•

If the Loan Portfolio Sale proposal is approved by the requisite vote of our shareholders and the Loan Portfolio Sale closes, among other things we intend to pursue our restructuring plan. We intend to use net proceeds from the sale to either acquire or invest in businesses outside of the Corporation’s traditional business. The board of directors intend to explore acquisitions of businesses in industries with respect to which they have familiarity based on their other business and investment activities; however, the board does not intend to limit its acquisition and investment activities to those businesses and industries. The overall timeframe for potential acquisitions and investments remains uncertain. Even if the Loan Portfolio Sale closes, the restructuring plan may not be implemented at all or, if implemented, may not be successful in achieving its intended goals. We may not be successful in identifying other businesses to acquire or invest and, if we do, we may not be able to make such acquisitions or investments on terms favorable to us, if at all. There can be no assurance that if such acquisitions or investments are made that the value to shareholders over time will exceed the amount, if any, they would receive in a liquidation. There can be no assurance that the restructuring plan will result in greater shareholder value than the liquidation and dissolution of the Corporation “THE LOAN PORTFOLIO SALE- Our Business and Operations Following Approval of the Loan Portfolio Sale Proposal.”

•

Our ability to preserve and use our net operating loss (“NOL”) carryforwards and certain other tax attributes as part of our restructuring plan, or otherwise, may be limited or may not be available for use at all. As of September 30, 2023, we maintained a deferred income tax valuation allowance of $11.3 million, the remaining state gross NOL was $53.5 million, and the remaining U.S. gross NOL amounted to $31.3 million. The U.S. NOL generated beginning in 2022 and later will carry forward indefinitely, while some state NOLs begin to expire March 31, 2039. Realization of these NOL depends on future income and if we do not generate future income our existing carryforwards would be unavailable to offset future income tax liabilities, which could materially and adversely affect our results of operations, Additionally, under Section 382 of the Internal Revenue Code, if a corporation undergoes an “ownership change,” generally defined as a greater than 50% change (by value) in its equity ownership over a rolling three-year period, the corporation’s ability to use its pre-change NOL carryforwards and other pre-change tax attributes to offset its post-change income may be limited. Similar rules may apply under state tax laws. We do not believe that we will experience an ownership change as a result of the domestication or the Loan Portfolio Sale. However, we may experience ownership changes in the future as a result of future transactions in, or issuances of, our stock, some of which may be outside our control. If a “change in ownership” occurs and if we earn net taxable income, our ability to use our pre-change NOL carryforwards, or other pre-change tax attributes, to offset U.S. and state taxable income may be subject to significant limitations or may not be available at all. Limitations on the use of our pre-change NOL carryforwards or other pre-change tax attributes or our inability to use them could adversely affect our restructuring plan by delaying or preventing its implementation.

•

If we become a shell company as defined in Rule 405 promulgated under the Securities Act and Rule 12b-2 of the Exchange Act, your ability to resell your common shares could be limited. A shell company is a company that has : (i) no or nominal operations and (ii) either no or nominal assets, assets consisting solely of cash and cash equivalents or assets consisting of any amount of cash and cash equivalents and nominal other assets. Your common shares may only be sold pursuant to an effective registration statement or an exemption from registration, if available, such as Rule 144 promulgated under the Securities Act or another exemption. Currently, there is no effective registration statement for you to resell your common shares. Rule 144 provides a potential registration exemption for resales of your common shares if all of the requirements of the rule are met. The registration exemption provided by Rule 144 is not available for resales of securities issued by a company that has been at any time a shell company, with an exception. Under this exemption, Rule 144 may be available for a company that is at any time a shell company if all of the following conditions are met: (i) the issuer of the securities that was formerly a shell company has ceased to be a shell company; (ii) the issuer of the securities is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act; (iii) the issuer of the securities has filed all Exchange Act reports and material required to be filed, as applicable, during the preceding twelve months (or such shorter period that the issuer was required to file such reports and materials), other than Form 8-K reports; and (iv) at least one year has elapsed from the time that the issuer filed current Form 10 type information with the SEC reflecting its status as an entity that is not a shell company. At the present time, the Company is not classified as a “shell company” under Rule 405 of the Securities Act or Rule 12b-2 of the Exchange Act. To the extent the Company is designated a shell company you would be unable to resell your common shares under Rule 144, unless the conditions of the exemption in Rule 144 are satisfied.

•

Our failure to meet NASDAQ’s continued listing requirements could result in a delisting of our common shares from the NASDAQ Global Select Market. If we fail to satisfy NASDAQ’s continued listing requirements NASDAQ may take steps to delist our common shares. . A delisting would likely have a negative effect on the price of our common shares and would impair your ability to sell or purchase our securities when you wish to do so. In the event of a delisting, we can provide no assurance that any action taken by us to restore compliance with listing requirements would allow our securities to become listed again, stabilize the market price or improve the liquidity of our securities or prevent future non-compliance with NASDAQ’s listing requirements. At the present time, the Company meets NASDAQ’s continued listing requirements.

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General Risk Factors

We have a material weaknesses in our internal control over financial reporting. Failure to maintain an effective system of internal control over financial reporting and disclosure controls and procedures could lead to a loss of investor confidence in our financial statements and have an adverse effect on our stock price.

As reported in our Report on Form 10-Q for the three months ended June 30, 2023 and in our Report on Form 10-Q for the three months ended September 30, 2023, which are incorporated by reference in this Circular, based on management’s evaluation the effectiveness of the Corporation’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act), our Chief Executive Officer and the Chief Financial Officer have concluded that our disclosure controls and procedures were not effective at a reasonable level of assurance as of June 30, 2023 or September 30, 2023 because of a material weakness in our internal control over financial reporting relating to the design of the controls over accounting for credit losses in accordance with FASB ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) (CECL), including the operation of these controls.

We will take certain measures to remediate the material weakness related to the design of the controls related to application of the CECL accounting standard, including designing and implementing formal procedures and controls related to secondary review of data input, model calculations, journal entries, and financial statement disclosures.

While we believe that our efforts for remediation will improve the effectiveness of our internal control over financial reporting, these remediation efforts will be ongoing and will require time to operate for management to be able to conclude that the design is effective to remediate the material weakness identified. We may conclude that additional measures are necessary to remediate the material weakness in our internal control over financial reporting, which may necessitate additional evaluation and implementation time.

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FORWARD-LOOKING STATEMENTS

From time to time, we may publish “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act and forward-looking information within the meaning of applicable Canadian securities legislation. We generally identify forward-looking statements and information with the words “plan,” “expect,” “anticipate,” “estimate,” “may,” “will,” “should” and similar expressions. We base these forward-looking statements and information on our current expectations and projections about future events.

We caution readers that a variety of factors could cause our actual results to differ materially from those discussed in, or implied by, these forward-looking statements and information. These risks and uncertainties, many of which are beyond our control, include, but are not limited to those included in the Corporation’s Form 10-K for the year ended March 31, 2023 in the Corporation’s Form 10-Q for the quarterly period ended June 30, 2023 and the Corporation’s Form 10-Q for the quarterly period ended September 30, 2023 in “FORWARD-LOOKING INFORMATION” and are incorporated by reference herein. Many factors could cause our actual results, performance or achievements to be materially different from any results, performance or achievements that may be expressed or implied by such forward-looking statements, including those set forth under the headings “Risk Factors” and “Information Concerning the Corporation”. Should one or more of these risks or uncertainties materialize, or should the assumptions underlying the forward-looking statements or information prove incorrect, actual results may vary materially from those described in this Circular as intended, planned, anticipated, believed, estimated or expected. We do not intend, and do not assume, any obligation to update these forward-looking statements or information.

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THE SPECIAL MEETING

Solicitation of Proxies

This Circular is forwarded to our shareholders in connection with the solicitation of proxies by our management for use at our special meeting of shareholders (the “Special Meeting”) to be held on April 15, 2024 at Noon (Central Time) at the offices of the company’s legal counsel, Kutak Rock LLP, located at The Omaha Building, 1650 Farnam Street, Omaha, Nebraska 68102-2186, and at any adjournments thereof for the purposes set forth in the Notice of Special Meeting, which accompanies this Circular. This Circular is dated March 19, 2024 and is first being mailed to shareholders on or about March 19, 2024.

The record date for the determination of shareholders entitled to receive notice of the Special Meeting is March 11, 2024. In accordance with the provisions of the BCBCA, we will prepare a list of the common shareholders as of the record date, all of whom will be entitled to vote their common shares to approve the special resolution for the domestication and the certificate of incorporation of Nicholas Financial, Inc. (Proposal 1 in the Notice of Special Meeting) and any other matter properly submitted for shareholder vote at the Special Meeting.

It is planned that the solicitation will be initially by mail, but proxies may also be solicited by our employees by email. The cost of such solicitation, estimated to be approximately $25,000, will be borne by us.

No person is authorized to give any information or to make any representations other than those contained in this Circular and, if given or made, such information or representations should not be relied upon as having been authorized by us. The delivery of this Circular shall not, under any circumstances, create an implication that there has not been any change in the information set forth herein since the date of this Circular. Except as otherwise stated, the information contained in this Circular is given as of March 19, 2023.

Our Common Shares

Our shareholders are entitled to one vote at all meetings of shareholders for each common share held as of the record date for the meeting. As of the record date for the Special Meeting, 7,290,557 common shares were issued and outstanding.

Under the BCBCA, the affirmative vote, whether in person or by proxy, of at least two-thirds of the votes cast by the holders of common shares at the Special Meeting is required to approve the change in jurisdiction, if a quorum is present. A quorum constitutes not less than one-third of our total outstanding common shares.

Appointment and Revocation of Proxies

Jeffrey Royal and Mark Hutchins, and each or either of them, have been appointed by the board of directors to serve as proxies for the shareholders at the Special Meeting.

Shareholders have the right to appoint persons, other than Mr. Royal and Mr. Hutchins, who need not be shareholders, to represent them at the Special Meeting. To exercise this right, the shareholder may insert the name of the desired person in the blank space provided in the form of proxy accompanying this Circular or may submit another form of proxy.

Proxies must be deposited in the manner and by the time specified in the Notice of Special Meeting.

Common shares represented by properly executed proxies will be voted by the persons appointed to serve as proxies for the shareholders on any ballot that may be called for, unless the shareholder has directed otherwise, for the proposal to approve the special resolution authorizing the change of jurisdiction and approval of the certificate of incorporation of Nicholas Financial, Inc. (Proposal 1 in the Notice of Special Meeting) and for the proposal to approve the special resolution authorizing the sale of all or substantially all of the Corporation’s undertaking in the Loan Portfolio Sale (Proposal 2 in the Notice of Special Meeting).

Each form of proxy confers discretionary authority with respect to amendments or variations to matters identified in the Notice of Special Meeting to which the proxy relates and other matters which may properly come before the Special Meeting. Management knows of no matters to come before the Special Meeting other than the matters referred to in the Notice of Special Meeting. However, if matters which are not known to management should properly come before the Special Meeting, the proxies will be voted on such matters in accordance with the best judgment of the person or persons voting the proxies.

A shareholder may revoke the proxy at any time prior to the voting thereof. In addition to revocation in any other manner permitted by law, a proxy may be revoked by an instrument in writing executed by the shareholder or his attorney authorized in writing, or if the shareholder is a corporation, by a duly authorized officer or attorney thereof (such instrument, a “Notice of Revocation”), and deposited either at the registered office of the Corporation at any time up to and including the last business day preceding the day of the Special Meeting, or any adjournment thereof, or, as to any matter in respect of which a vote shall not already have been cast pursuant to such proxy, with the Chairman of the Meeting on the day of the Meeting, or any adjournment thereof, and upon either of such deposits the proxy is revoked. If you file a Notice of Revocation, you may then vote (or abstain from voting) your shares in person at the Special Meeting; however, if you are a beneficial owner, you must first obtain a proxy from the record holder to do so.

Abstentions and broker non-votes will have no effect with respect to the matters to be acted upon at the Special Meeting.

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THE DOMESTICATION

(Proposal 1 on the Notice of Special Meeting and the accompanying Proxy)

General

The board of directors is proposing to change our jurisdiction of incorporation from the provincial jurisdiction of British Columbia, Canada to the State of Delaware through a transaction called a “continuation” under Section 308 of the BCBCA and a “domestication” under Section 388 of the DGCL (collectively referred to as a “domestication” herein), and approve a new certificate of incorporation to be effective on the date of the domestication. We will become subject to the DGCL on the date of our domestication, but will be deemed for the purposes of the DGCL to have commenced our existence in Delaware on the date we originally commenced our existence in Canada. Under the DGCL, a corporation becomes domesticated in Delaware by filing a certificate of corporate domestication and a certificate of incorporation for the corporation being domesticated. The board of directors has approved our domestication and the related certificate of incorporation of Nicholas Financial, Inc., believes it to be in our best interests, and recommends approval of the domestication and the approval of the certificate of incorporation of Nicholas Financial, Inc. to our shareholders.

The domestication will be effective on the date set forth in the certificate of corporate domestication and the certificate of incorporation, as filed with the office of the Secretary of State of the State of Delaware. Thereafter, we will be subject to the certificate of incorporation filed in Delaware, a copy of which is attached to this Circular as Exhibit C. We will be discontinued in Canada as of the date of domestication in Delaware.

The domestication will not interrupt our corporate existence or operations or the trading markets of our common shares. Each outstanding common share at the time of the domestication will remain issued and outstanding as a share of common stock of Nicholas Financial, Inc. after our corporate existence is continued from British Columbia, Canada under the BCBCA and domesticated in Delaware under the DGCL. Following the completion of the domestication, the common shares will be listed on the NASDAQ Global Select Market under the trading symbol “NICK.” See “RISK FACTORS-Risks Relating to the Loan Portfolio Sale.”

We will continue to be subject to the rules and regulations of the NASDAQ Global Select Market and the obligations imposed by each securities regulatory authority in Canada and the United States, including the SEC. In addition, we will continue to file periodic reports with the SEC pursuant to the Exchange Act. Upon our domestication, our board of directors intends to adopt bylaws, copies of which are attached to this Circular as Exhibit D. A copy of Sections 237 - 247of the BCBCA addressing dissenters’ rights in connection with the continuation is attached to this Circular as Exhibit E.

Principal Reasons for the Domestication

We are pursuing the domestication for a number of reasons, the foremost being that we have no significant presence in Canada. Our corporate offices and operations are located in the United States, most of our shareholders reside there, and the principal market for our common shares is the NASDAQ Global Select Market. Despite these strong connections with the United States, we believe we are not uniformly perceived by investors, lenders or potential strategic partners as a U.S. company. Our board of directors believes that the absence of a clear U.S. identity may prevent us from maximizing the opportunities and relationships with investors, lenders and potential partners, many of whom prefer to engage in business with a U.S. entity.

Our board of directors chose the State of Delaware to be our domicile because the DGCL expressly accommodates continuations under Section 308 of the BCBCA and because the provisions of the DGCL, specifically those dealing with the duties and obligations of directors of a Delaware corporation, have been interpreted by a substantial body of case law in the Delaware courts. We believe the domestication will unambiguously establish us as a U.S. corporation and help us achieve our strategic goals.

In considering its recommendation in favor of the domestication, our board of directors weighed the estimated tax liability to us arising from this transaction. See “The Domestication – United States and Canadian Income Tax Considerations.” With the assistance of professional advisors, we have reviewed our assets, liabilities, paid-up capital and other tax balances. Based on our calculations and based on a number of key assumptions, if the market price of our common shares does not exceed $7.00 per share and that the exchange rate of the Canadian dollar to the U.S. dollar remains relatively constant at CDN $1.00 equals US $0.75, then the domestication is expected to result in the Corporation being liable to Canadian tax under Part XIV of the Tax Act of approximately $1,446,000, but we do not expect to incur any Canadian Part I income tax. If the closing of the Loan Portfolio Sale or other factors cause the market price of our common shares to increase above the assumed market price of $7.00 per share, we could incur more Canadian tax under Part XIV of the Tax Act and perhaps also income tax under Part I of the Tax Act. If the closing of the Loan Portfolio Sale or other factors cause the market price of our common shares to decrease below the assumed market price of $7.00 per share, we could incur less Canadian income tax.

Effects of the Domestication

There are material differences between Canadian corporate law and Delaware corporate law with respect to shareholders rights, and Delaware law may offer shareholders more or less protection depending on the particular matter. A detailed overview of the material differences is set forth below.

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Applicable Law. As of the effective date of the domestication, our legal jurisdiction of incorporation will be Delaware, and we will no longer be subject to the provisions of the BCBCA. All matters of corporate law will be determined under the DGCL. We will retain our original incorporation date in Canada as our date of incorporation for purposes of the DGCL.

Assets, Liabilities, Obligations, Etc. Under Delaware law, as of the effective date of the domestication, all of our assets, property, rights, liabilities and obligations immediately prior to the domestication will continue to be our assets, property, rights, liabilities and obligations. Canadian corporate law will cease to apply to us on the date of domestication in Delaware. We will be thereafter become subject to the obligations imposed under Delaware corporate law.

Business and Operations. The domestication, if approved, will effect a change in the legal jurisdiction of incorporation as of the effective date of the domestication, but our business and operations will remain the same.

Officers and Directors. Our board of directors currently consists of five members: Jeffrey C. Royal, Mark Hutchins, Adam K. Peterson, Jeremy Q. Zhu and Brendan Keating. These directors will continue to serve as directors from and after the effective date of the domestication. Immediately following the domestication, our officers will also be unchanged. Our officers are Michael Rost (Chief Executive Officer) and Irina Nashtatik (Chief Financial Officer and Corporate Secretary).

Treatment of Outstanding Capital Stock and Options

The existing share certificates representing our common shares will continue to represent the same number of the same class of our common stock after the domestication without any action on your part. You will not be required to exchange any share certificates. We will only issue new certificates to you representing shares of capital stock of Nicholas Financial, Inc. upon a transfer of your shares or at your request. Holders of our outstanding options will continue to hold the same securities, which will remain exercisable for an equivalent number of shares of the same class of common stock of Nicholas Financial, Inc., for the equivalent exercise price per share, without any action by the holder.

Shareholder Approval

The domestication is subject to various conditions, including approval of the special resolution authorizing the domestication and the approval of the certificate of incorporation of Nicholas Financial, Inc. by our shareholders at the Special Meeting. A copy of the special resolution is attached to this Circular as Exhibit A-1. Under the BCBCA, the change of jurisdiction requires affirmative votes, whether in person or by proxy, of at least three-quarters of the votes cast by the holders of our common shares at the Special Meeting where a quorum, or not less than one-third of our total outstanding common shares is present in person or by proxy. Assuming we receive the requisite shareholder approval for the domestication, our board of directors will retain the right to terminate or abandon the domestication if it determines that consummating the domestication would be inadvisable or not in our best interests, or if all of the respective conditions to consummation of the domestication have not occurred. There are no time limits on the duration of the authorization resulting from a favorable shareholder vote.

Regulatory and Other Approvals

The change of jurisdiction is subject to the prior authorization of the Registrar of Companies for British Columbia. The director is empowered to authorize the change of jurisdiction if, among other things, he is satisfied that the change of jurisdiction will not adversely affect our creditors or shareholders.

Subject to obtaining the authorization of the continuation by the Registrar and the approval of our shareholders, before applying to the Secretary of State of Delaware, we anticipate that we will file a certificate of corporate domestication and a certificate of incorporation with the Secretary of State of the State of Delaware pursuant to the DGCL promptly following the Special Meeting, and that we will be domesticated in Delaware on the effective date of such filings. Promptly thereafter, we intend to give notice to the Registrar that we have been domesticated under the laws of the State of Delaware and the Registrar will publish in the prescribed manner a notice that the Corporation has been continued into the State of Delaware.

Comparison of Shareholder Rights

The principal attributes of our capital stock before and after domestication are comparable, however, there will be material differences in the rights of our shareholders under Delaware law as described below.

General. On the effective date of the domestication, we will be deemed for purposes of the DGCL to have been incorporated under the laws of the State of Delaware from our inception and we will be governed by the Delaware certificate of incorporation filed with the certificate of corporate domestication. Differences between British Columbian corporate law and Delaware corporate law and between our current articles of incorporation and the proposed Delaware certificate of incorporation and bylaws will result in various changes in the rights of our shareholders. The following summary comparison highlights provisions of applicable British Columbian corporate law and our current British Columbia articles of incorporation and Delaware corporate law and the proposed certificate of incorporation and bylaws of Nicholas Financial, Inc. The proposed certificate of incorporation and bylaws of Nicholas Financial, Inc. are attached to this Circular as Exhibit C and Exhibit D, respectively. The following summary is not a complete statement of the rights of

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shareholders or a complete description of the specific provisions referred to below. This summary is qualified in its entirety by reference to the BCBCA and the DGCL and our current articles of incorporation and the proposed Delaware certificate of incorporation and bylaws, which shareholders should read.


	Nicholas Financial, Inc., as a British Columbia company	Nicholas Financial, Inc., as a Delaware corporation
Capital Structure	Under our current British Columbian articles of incorporation, we presently have the authority to issue 50,000,000 common shares, no par value per share, and 5,000,000 preferred shares, no par value per share, issuable in series.	Under our proposed Delaware certificate of incorporation, Nicholas Financial, Inc. will have the authority to issue a total of 55,000,000 shares of capital stock, consisting of 50,000,000 shares of common stock, no par value per share, and 5,000,000 shares of preferred stock, no par value per share.
Franchise Tax	Under British Columbia law, there is no franchise tax on our authorized capital stock.	Pursuant to Delaware law, Nicholas Financial, Inc. will initially be required to pay an annual corporate franchise tax of approximately $200,000 in order to maintain its good standing as a Delaware corporation. The amount of that annual franchise tax could change if Nicholas Financial, Inc.’s capital structure changes
Shareholder Approval; Vote on Extraordinary Corporate Transactions	British Columbia law generally requires a vote of shareholders on a greater number and diversity of corporate matters than Delaware law, such as a corporate name change, a creation of a new class of shares or an increase or decrease of the minimum or maximum number of directors. Furthermore, many matters requiring shareholder approval under British Columbia law must be approved by a special resolution of not less than three-quarters of the votes cast by Nicholas Financial, Inc.’s shareholders who voted on those matters. In some cases, such as an amendment to the articles that affects classes of shares differently, a special resolution to approve an extraordinary corporate action is also required to be approved separately by the holders of a class or series of shares, whether or not shares of such class or series otherwise carry the right to vote.	Under the DGCL, the affirmative vote of the holders of two-thirds of the outstanding stock entitled to vote thereon (or the affirmative vote of the holders of a majority of such outstanding stock, if a statement to that effect was included in the articles at the time they were initially filed or is included in an amendment to the articles approved by the affirmative vote of the holders of two-thirds of the then outstanding stock entitled to vote thereon) is required to authorize any merger, share exchange, consolidation, dissolution or sale of all or substantially all of the assets of the corporation, except that, unless required by its certificate of incorporation: no authorizing shareholder vote is required to approve a plan of merger or share exchange if (i) the articles of incorporation of the surviving corporation will not differ from the corporation’s articles (other than certain inconsequential differences), (ii) each shareholder of the surviving corporation whose shares were outstanding immediately before the effective date of the transaction will hold the same number of shares, with identical designations, preferences, limitations, and relative rights, immediately after the transaction, (iii) the number of voting shares outstanding immediately after the transaction plus the number of voting shares issuable as a result of the transaction, either by conversion or upon the exercise of rights and warrants issued pursuant to the transaction, will not exceed by more than 20 percent the total number of voting shares of the surviving corporation

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	Nicholas Financial, Inc., as a British Columbia company	Nicholas Financial, Inc., as a Delaware corporation
		outstanding immediately before the transaction, and (iv) the number of participating shares (defined to mean shares that entitled their shareholders to participate without limitation in dividends) outstanding immediately after the transaction plus the number of participating shares issuable as a result of the transaction, either by the conversion or upon the exercise of rights and warrants issued pursuant to the transaction, will not exceed by more than 20 percent the total number of participating shares outstanding immediately before the transaction. In certain cases, a plan of merger or share exchange is also required to be approved separately by the holders of a class or series of shares.
Amendments to the Governing Documents	Under British Columbia law, amendments to the articles of incorporation generally require the approval of not less than three-quarters of the votes cast by Nicholas Financial Inc.’s shareholders voting on the resolution. If the proposed amendment would affect a particular class of securities in certain specified ways, the holders of shares of that class would be entitled to vote separately as a class on the proposed amendment, whether or not the shares otherwise carried the right to vote.	Under the DGCL, the board of directors must first recommend the amendment to the certificate of incorporation to the shareholders unless the board determines that, because of conflict of interest or other special circumstances, it cannot make a recommendation. Unless a greater level of approval is required by the articles or by the board (which can condition its submission of a proposed amendment on any basis), the amendment must be approved by (i) a majority of the votes entitled to be cast on the amendment by any voting group with respect to which the amendment would create dissenters’ appraisal rights and (ii) a majority of the votes cast by any other voting group entitled to vote on the amendment. The DGCL also provides that the board of directors may amend or repeal a corporation’s bylaws unless the certificate of incorporation reserve the power exclusively to the shareholders in whole or in part or unless the shareholders, in amending, adding or repealing a particular bylaw, provide expressly that the board may not amend or repeal that bylaw. The foregoing notwithstanding, the shareholders may amend or repeal a corporation’s bylaws even though the bylaws may also be amended or repealed by the board of directors. The proposed bylaws of Nicholas Financial, Inc. are consistent with these DGCL provisions.

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	Nicholas Financial, Inc., as a British Columbia company	Nicholas Financial, Inc., as a Delaware corporation
Place of Meetings	The BCBCA provides that meetings of shareholders must be held at the place within British Columbia, unless otherwise provided in the articles. Our articles provide that meetings of shareholders may be held in any location as may be determined by our directors.	The DGCL provides that meetings of the stockholders be held at any place in or outside of Delaware designated by, or in the manner provided in, the certificate of incorporation or bylaws. The proposed bylaws of Nicholas Financial, Inc. provide that meetings of the stockholders will be held at any place designated by the board of directors.
Quorum of Shareholders	The BCBCA provides that, unless the articles provide otherwise, a quorum of shareholders is two shareholders entitled to vote at the meeting whether present personally or by proxy at a meeting of shareholders. The current articles provide that holders of shares representing, in the aggregate, not less than one third of the shares entitled to vote at a meeting of shareholders, whether present in person or represented by proxy, will constitute a quorum at that meeting.	Under the DGCL, the certificate of incorporation or bylaws may specify the required quorum, but generally a quorum may consist of not less than one-third of the total voting power. The proposed bylaws of Nicholas Financial, Inc. provide that the holders of not less than one third of the voting power of the outstanding shares entitled to vote at the meeting shall constitute a quorum at a meeting of stockholders.
Call of Meetings	The BCBCA provides that a special meeting of shareholders may be called by the directors. In addition, the holders of not less than five percent of our issued voting shares may requisition the directors requiring them to call and hold a special meeting for the purposes stated in the requisition.	The DGCL provides that a special meeting of the stockholders may be called by the board of directors or by any person or persons as may be authorized by the certificate of incorporation or bylaws. The proposed bylaws of Nicholas Financial, Inc. provide that a special meeting of stockholders may be called by the directors, by the chairman or by the president and chief executive officer
Shareholder Consent in Lieu of Meeting	Under the BCBCA, shareholders can take action by written resolution and without a meeting only if all shareholders entitled to vote on that resolution sign the written resolution.	Under the DGCL, unless otherwise limited by the certificate of incorporation, stockholders may act by written consent without a meeting if holders of outstanding stock representing not less than the minimum number of votes that would be necessary to take the action at an annual or special meeting execute a written consent providing for the action. The proposed bylaws of Nicholas Financial, Inc. specifically allow the shareholders to take action by written resolution.
Director Election, Qualification and Number	The BCBCA provides for the election of directors by a majority of votes cast at an annual meeting of shareholders. The BCBCA states that a public company must have at least three directors.	The DGCL has no similar requirements, however, the governance standards of NASDAQ require a majority of a listed company’s directors to be independent. The proposed bylaws of Nicholas Financial, Inc. prescribe a minimum of three and a maximum of eleven directors

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	Nicholas Financial, Inc., as a British Columbia company	Nicholas Financial, Inc., as a Delaware corporation
Fiduciary Duty of Directors	Directors of a company incorporated under the BCBCA have fiduciary obligations to the corporation. The BCBCA requires directors of a British Columbia company, in exercising their powers and discharging their duties, to act honestly and in good faith with a view to the best interests of the corporation and exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.	The fiduciary obligations of directors of corporations incorporated or organized under the DGCL are more expansive and run not just to the corporation but to the corporation’s shareholders. These obligations fall into two broad categories: duty of care and a duty of loyalty. The duty of care requires a director to act in good faith, with the care an ordinarily prudent person in a like position would exercise under similar circumstances, and in a manner he or she believes to be in the best interests of the corporation. It is qualified by the business judgment rule, which protects a disinterested director from personal liability to the corporation and its shareholders if the director acted in good faith, was reasonably informed and rationally believed the action taken was in the best interests of the corporation. The duty of loyalty requires directors to exercise their powers in the interests of the corporation and not in the directors own interest or in the interest of another person (including a family member) or organization. Stated more simply, the duty of loyalty precludes directors from using their corporate position to make a personal profit or gain, or for other personal advantage.
Personal Liability of Directors	The BCBCA prescribes circumstances where directors can be liable for malfeasance or nonfeasance. Certain actions to enforce a liability imposed by the BCBCA must be brought within two years from the date of the resolution authorizing the act at issue. A director will be deemed to have complied with his fiduciary obligations to the corporation under the BCBCA if he relied in good faith on: • financial statements represented to him by an officer or in a written report of the auditors fairly reflecting the financial condition of the corporation; or • a report of a person whose profession lends credibility to a statement made by the professional person. The BCBCA also contains other provisions limiting personal liability of a corporation’s directors.	The personal liability of a director under the DGCL for breach of his or her fiduciary duty is expansive and can be established by the corporation, through a derivative action brought on behalf of the stockholders, or by an aggrieved stockholder, in a separate action. The proposed certificate of incorporation of Nicholas Financial, Inc. seeks to limit such personal liability, however these limitations may not be effective with respect to the following proscribed conduct under the DGCL: • any breach of the director’s duty of loyalty to the corporation or its stockholders; • acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; • an unlawful payment of a dividend or an unlawful stock purchase or redemption; and • any transaction from which the director derived an improper personal benefit.

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    Nicholas Financial, Inc., as a British Columbia company

    Nicholas Financial, Inc., as a Delaware corporation

    Indemnification of Officers and Directors

    Under the BCBCA and pursuant to our current articles, we will indemnify present or former directors or officers against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment that is reasonably incurred by the individual in relation to any civil, criminal, administrative, investigative or other proceeding in which the individual is involved because of his or her association with us. In order to qualify for indemnification such directors or officers must:
•have acted honestly and in good faith with a view to the best interests of the corporation; and
•in the case of a criminal or administrative action or proceeding enforced by a monetary penalty, have had reasonable grounds for believing that such conduct was lawful.
We currently have indemnity agreements in place for all of our directors and officers, and we carry liability insurance for our and our subsidiaries’ officers and directors. These agreements will continue following the domestication.
The BCBCA also provides that such persons are entitled to indemnity from the corporation in respect of all costs, charges and expenses reasonably incurred in connection with the defense of any such proceeding if the person was not judged by the court or other competent authority to have committed any fault or omitted to do anything that the person ought to have done, and otherwise meets the qualifications for indemnity described above.

    Delaware law permits a corporation to indemnify its present or former directors and officers, employees and agents made a party, or threatened to be made a party, to any third party proceeding by reason of the fact that such person is or was a director, officer, employee or agent of the corporation, against expenses (including attorney’s fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, if such person:
•acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation; and
•with respect to any criminal action or proceeding, had no reasonable cause to believe such conduct was unlawful.
In a derivative action, or an action by or in the right of the corporation, the corporation is permitted to indemnify directors, officers, employees and agents against expenses actually and reasonably incurred by them in connection with the defense or settlement of an action or suit if they acted in good faith and in a manner that they reasonably believed to be in or not opposed to the best interests of the corporation. However, in such a case, no indemnification shall be made if the person is adjudged liable to the corporation, unless and only to the extent that, the court in which the action or suit was brought or the Chancery Court of the State of Delaware shall determine upon application that such person is fairly and reasonably entitled to indemnity for such expenses despite such adjudication of liability to the corporation.
The DGCL allows the corporation to advance expenses before the resolution of an action, if in the case of current directors and officers, such persons agree to repay any such amount advanced if they are later determined not to be entitled to indemnification. The proposed bylaws of Nicholas Financial, Inc. generally provide for mandatory indemnification and advancement of expenses of our directors and officers to the fullest extent permitted under the DGCL; provided, however, that directors and officers shall not be entitled to indemnification for actions initiated by such parties unless the board of directors authorizes such action. Following the domestication, Nicholas Financial, Inc. will carry liability insurance for its and its subsidiaries’ officers and directors.

   

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	Nicholas Financial, Inc., as a British Columbia company	Nicholas Financial, Inc., as a Delaware corporation
Derivative Actions	Under the BCBCA, a complainant, who is defined as either a present or former registered holder or beneficial owner of a security of a corporation or any of its affiliates; a present or former director or officer of a corporation or any of its affiliates; the Registrar of Companies for British Columbia; or any other person who, in the discretion of a court, is a proper person to make an application under the BCBCA relating to shareholder remedies, may apply to the court for the right to bring an action in the name of and on behalf of a corporation or any of its subsidiaries, or to intervene in an existing action to which they are a party for the purpose of prosecuting, defending or discontinuing the action on behalf of the entity. Under the BCBCA, the court must be satisfied that: • the complainant has given proper notice to the directors of the corporation or its subsidiary of the complainant’s intention to apply to the court if the directors of the corporation or its subsidiary will not bring, diligently prosecute or defend or discontinue the action; • the complainant is acting in good faith; and • it appears to be in the interest of the corporation or its subsidiary that the action be brought, prosecuted, defended or discontinued. Under the BCBCA, the court in a derivative action may make any order it sees fit including orders pertaining to the control or conduct of the lawsuit by the complainant or the making of payments to former and present shareholders and payment of reasonable legal fees incurred by the complainant.	Similarly, under Delaware law a stockholder may bring a derivative action on behalf of the corporation to enforce a corporate right, including the breach of a director’s duty to the corporation. Delaware law requires that the plaintiff in a derivative suit be a stockholder of the corporation at the time of the wrong complained of and remain so throughout the duration of the suit; that the plaintiff make a demand on the directors of the corporation to assert the corporate claim unless the demand would be futile; and that the plaintiff is an adequate representative of the other stockholders.
Dissenters’ Rights	The BCBCA provides that shareholders of a corporation entitled to vote on certain matters are entitled to exercise dissent rights and demand payment for the fair value of their shares. Dissent rights exist when there is a vote upon matters such as: • any amalgamation with another corporation (other than with certain affiliated corporations);	The DGCL grants the holder of any class or series of shares to dissent from and obtain payment of the fair value of his shares with respect to any plan of merger to which the corporation is a party (other than mergers with certain subsidiary corporations) requiring shareholder approval; any plan of share exchange to which the corporation is a party as the corporation whose shares will be acquired, if the shareholder is entitled to vote on the plan; the sale or exchange of all or substantially all of the property of the

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	Nicholas Financial, Inc., as a British Columbia company	Nicholas Financial, Inc., as a Delaware corporation
	• an amendment to our articles of incorporation to add, change or remove any provisions restricting the issue, transfer or ownership of shares; • an amendment to our articles of incorporation to add, change or remove any restriction upon the business or businesses that the corporation may carry on; • a continuation under the laws of another jurisdiction; • a sale, lease or exchange of all or substantially all the property of the corporation other than in the ordinary course of business; and • a court order permitting a shareholder to dissent in connection with an application to the court for an order approving an arrangement proposed by the corporation. However, a shareholder is not entitled to dissent if an amendment to the articles of incorporation is effected by a court order approving a reorganization or by a court order made in connection with an action for an oppression remedy.	corporation other than in the normal course of business, if the shareholder is entitled to vote on the sale or exchange, including a sale in dissolution, but not including a sale pursuant to court order or a sale for cash pursuant to a plan through which all of the net proceeds of sale will be distributed to the shareholders within one year; an amendment to the articles that materially and adversely affects the dissenting shareholder because it (i) alters or abolishes a preferential right, (ii) creates, alters or abolishes a right in respect of redemption, (iii) alters or abolishes a preemptive right, (iv) excludes or limits the right of shares to be voted on any matter or to accumulate votes, or (v) reduces the number of shares owned by a shareholder to a fractional share if the fractional share so created is to be acquired for cash; and any corporate action taken pursuant to a shareholder vote to the extent the articles, bylaws or a resolution of the board provides that voting or nonvoting shareholders are entitled to dissent and obtain payment for their shares.
Oppression Remedy	Under the BCBCA, a complainant has the right to apply to a court for an order where an act or omission of the corporation or an affiliate effects a result, or the business or affairs of which are or have been conducted in a manner, or the exercise of the directors’ powers are or have been exercised in a manner, that is oppressive or unfairly prejudicial to or that unfairly disregards the interests of any security holder, creditor, director or officer of the corporation. On such application, the court may make any interim or final order it thinks fit, including an order restraining the conduct complained of.	The DGCL does not contain a similar remedy, although causes of action seeking to obtain comparable remedies can be asserted against a corporation and its affiliates under any of several common law theories.

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    Nicholas Financial, Inc., as a British Columbia company

    Nicholas Financial, Inc., as a Delaware corporation

    Business Combinations

    There is no comparable provision relating to business combinations under the BCBCA, but restrictions on business combinations involving interested parties do exist under applicable Canadian securities laws.

    Section 203 of the DGCL provides, with some exceptions, that a Delaware corporation may not engage in any business combination with a person, or an affiliate or associate of such person, who is an interested stockholder for three years from the time that person became an interested stockholder unless:
•the board of directors approved the transaction before the “interested stockholder” obtained such status;
•upon consummation of the transaction that resulted in the stockholder becoming an “interested stockholder,” the “interested stockholder” owned at least 85% of a Delaware corporation’s outstanding voting stock at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding those shares owned (i) by persons who are directors and are also officers and (ii) employee stock plans in which the participants do not have the right to determine confidentially whether shares held subject to the plans will be tendered in the tender or exchange offer; or
•on or subsequent to such date, the business combination or merger is approved by the board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by two-thirds of the holders of the outstanding common stock not owned by the “interested stockholder.”
A “business combination” is defined to include mergers, asset sales and other transactions resulting in financial benefit to a stockholder. In general, an “interested stockholder” is a person who, together with affiliates and associates, owns 15% or more of a corporation’s voting stock or within three years did own 15% or more of a corporation’s voting stock.
A corporation may, at its option, exclude itself from the coverage of Section 203 by an appropriate provision in its certificate of incorporation. The proposed certificate of incorporation of Nicholas Financial, Inc. does not contain such an exclusion from Section 203 of the DGCL.

   

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	Nicholas Financial, Inc., as a British Columbia company	Nicholas Financial, Inc., as a Delaware corporation
Examination of Corporate Records	Under the BCBCA, shareholders, creditors and their personal representatives may examine certain corporate records, such as the securities register and a list of shareholders, and any other person may do so on payment of a reasonable fee. Each such person must provide an affidavit containing specific information. A list of shareholders or information from a securities register may not be used except in connection with an effort to influence the voting of shareholders of the corporation, an offer to acquire securities of the corporation or any other matter relating to the affairs of the corporation.	Under Delaware law, for any proper purpose, shareholders have the right to inspect, upon written demand under oath stating the purpose for such inspection, the corporation’s stock ledger, list of stockholders and other specified books and records, and to make copies or extracts of the same. A proper purpose means a purpose reasonably related to a person’s interest as a stockholder
Anti-Takeover Effects	There are no comparable provisions relating to protection from hostile take-over attempts under the BCBCA. However, the current articles do contain provisions for the staggered election of the board of directors. In addition, as noted above under “Call of Meetings”, the holders of not less than five percent of our issued voting shares may requisition the directors requiring them to call and hold a special meeting for the purposes stated in the requisition.	Some powers granted to companies under Delaware law may allow a Delaware corporation to make itself potentially less vulnerable to hostile takeover attempts. These powers include the ability to: • implement a staggered board of directors, which prevents an immediate change in control of the board; • require that notice of nominations for directors be given to the corporation prior to a meeting where directors will be elected, which may give management an opportunity to make a greater effort to solicit its own proxies; • only allow the board of directors to call a special meeting of stockholders, which may deny a raider the ability to call a meeting to make disruptive changes; • eliminate stockholders’ action by written consent, which would require a raider to attend a meeting of stockholders to approve any proposed action by the corporation; • remove a director from a staggered board only for cause, which gives some protection to directors on a staggered board from arbitrary removal; • provide that the power to determine the number of directors and to fill vacancies be vested solely in the board, so that the incumbent board, not a raider, would control vacant board positions; and

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	Nicholas Financial, Inc., as a British Columbia company	Nicholas Financial, Inc., as a Delaware corporation
		• provide for supermajority voting in some circumstances, including mergers and certificate of incorporation amendments; and issue “blank check” preferred stock, which may be used to make a corporation less attractive to a raider. The proposed certificate of incorporation and bylaws of Nicholas Financial, Inc. include the following provisions, which may discourage a hostile takeover attempt: • a requirement that stockholders provide prior notice to nominate directors; • prohibitions on the ability of stockholders to call a special meeting of stockholders; • provisions that give the board of directors the authority to determine the number of directors and fill vacancies on the board of directors; and • provisions that give the board of directors the authority to issue preferred stock having rights, privileges, limitations and other characteristics that are established by the board of directors without shareholder approval.

Proposed Certificate of Incorporation and Bylaws of Nicholas Financial, Inc.

We have included provisions in the proposed certificate of incorporation and bylaws of Nicholas Financial, Inc. that do not simply reflect the default provisions of Delaware law. They are as follows:

“Blank-Check” Preferred Stock Issuance Authority for Board of Directors. Under Delaware law, the powers, preferences and rights, and the qualifications, limitations or restrictions in respect of any series of preferred stock must be set forth in the certificate of incorporation, or, if authority is vested in the board of directors by the certificate of incorporation, in the resolutions providing for the issuance of such series of preferred stock. The proposed certificate of incorporation of Nicholas Financial, Inc. contains a provision granting its board of directors the authority to fix by resolution the rights, preferences, limitations and other characteristics in respect of any series of preferred stock.

Increase or Decrease In Amount of Authorized Stock. Under Delaware law, the holders of outstanding shares of a class of stock are entitled to vote as a class on a proposed amendment to increase or decrease the number of authorized shares of such class unless the certificate of incorporation provides that such number of shares may be increased or decreased by the affirmative vote of holders of a majority of the voting power of the outstanding stock entitled to vote.

The proposed certificate of incorporation of Nicholas Financial, Inc. contains such a provision and requires the vote of the holders of a majority of the voting power of all of its outstanding stock entitled to vote to increase or decrease the aggregate number of authorized shares of any class of stock.

Bylaws. Under Delaware law, unless otherwise provided in the certificate of incorporation or bylaws, the holders of a majority in voting power of the shares present at a meeting of stockholders have the power to adopt, amend or repeal the bylaws of the corporation. In addition, if the certificate of incorporation so provides, the board of directors also has the power to adopt, amend or repeal the bylaws. The proposed certificate of incorporation of Nicholas Financial, Inc. provides that the board of directors has the power to make, alter or repeal the bylaws. Additionally, the proposed bylaws of Nicholas Financial, Inc. provide that a majority in outstanding voting power of the shares entitled to vote shall have the power to adopt, amend or repeal the bylaws.

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Stockholder Action by Written Consent. Under Delaware law, unless otherwise provided in a corporation’s certificate of incorporation, stockholders representing a majority of the outstanding voting power of a corporation entitled to vote on a matter may act by written consent. The proposed certificate of incorporation of Nicholas Financial, Inc. will allow action by written consent of the stockholders.

Presentation of Nominations and Proposals at Meetings of Stockholders. The DGCL does not specify whether or how stockholders can nominate directors or submit other proposals for consideration at meetings of stockholders. The proposed bylaws of Nicholas Financial, Inc. contain procedures governing stockholder nominations To nominate an individual to the board of directors of Nicholas Financial, Inc. at an annual or special stockholders meeting, or to present other proposals at an annual meeting, a stockholder must provide advance notice to Nicholas Financial, Inc., in the case of an annual meeting, not fewer than 90 days nor more than 120 days prior to the first anniversary of the date of Nicholas Financial, Inc.’s annual meeting for the preceding year and, in the case of a special meeting, not later than the close of business on the later of the 90th day prior to such special meeting or the 10th day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the board of directors to be elected at such meeting.

Number of Directors. Under Delaware law, the number of directors is fixed by, or in the manner provided in, the bylaws of a corporation, unless the certificate of incorporation fixes the number of directors. The proposed bylaws of Nicholas Financial, Inc. provides that the number of directors must be set by a resolution adopted by a majority of the authorized number of directors. The proposed bylaws of Nicholas Financial, Inc. provide that the number of directors on the board of directors may not be less than five nor more than eleven.

Vacancies and Newly Created Directorships. Under Delaware law, vacancies and newly created directorships may be filled by a majority of directors then in office unless the certificate of incorporation or the bylaws otherwise provide. The proposed bylaws of Nicholas Financial, Inc. provide that any vacancies and newly created directorships on the board of directors may be filled by a majority of the directors then in office.

Dissent Rights of Shareholders

Sections 237 - 247 of the BCBCA is reprinted in their entirety as Exhibit E to this Circular. Shareholders may exercise their dissent rights in connection with the proposal to approve the continuation (Proposal 1 in the Notice of Special Meeting).

If you wish to dissent and do so in compliance with Sections 237 - 247 of the BCBCA, you will be entitled to be paid the fair value of the shares you hold if the continuation occurs. Fair value is determined as of the close of business on the day before the continuation is approved by shareholders.

If you wish to dissent, you must send us your written objection to the continuation at or before the Special Meeting. If you vote in favor of the continuation, you in effect lose your rights to dissent. If you abstain or vote against the continuation, you preserve your dissent rights if you comply with Sections 237 - 247 of the BCBCA.

However, it is not sufficient to vote against the continuation or to abstain. You must also provide a separate dissent notice at least two days before the date of the Special Meeting. If you grant a proxy and intend to dissent, the proxy must instruct the proxy holder to vote against the continuation in order to prevent the proxy holder from voting such shares in favor of the continuation and thereby voiding your right to dissent. Under the BCBCA, you have no right of partial dissent. Accordingly, you may only dissent as to all your shares.

Under Section 242 of the BCBCA, you may dissent for shares that are registered in your name, or that you hold on behalf of a beneficial owner of the shares which are registered in the dissenter’s name, provided that the dissenter makes a statement to that effect, and the name and address of the beneficial owner, in accordance with Section 242(4) of the BCBCA (the “Dissent Notice”). In such case, the Dissent Notice should set forth the number of shares in respect of which the Dissent Rights are being exercised (the “Notice Shares”) and: (a) if such Notice Shares constitute all of the shares of Nicholas Financial, Inc. which the dissenting shareholder is the registered and beneficial owner and the registered and a statement to the effect that the shareholder owns no other shares of Nicholas Financial, Inc. beneficially; (b) if such Notice Shares constitute all of the shares of which the dissenting shareholder is both the registered and beneficial owner, but the registered Shareholder owns additional shares beneficially, a statement to that effect and the names of the registered shareholders of those other shares and the number of shares held by each such registered shareholder and a statement that written notices of dissent are being or have been sent with respect to such other shares; and (c) if the dissent rights are being exercised by a registered shareholder who is not the beneficial owner of such shares, a statement to that effect and the name and address of the non-registered shareholder and a statement that the registered shareholder is dissenting with respect to all shares of the non-registered shareholder registered in such registered shareholder’s name.

When and if the continuation is approved, we are required by Section 243 of the BCBCA to notify each shareholder who has filed a Dissent Notice of our intention to proceed. This notice must be sent promptly after the later of: (i) the date on which Nicholas Financial, Inc. forms the intention to proceed, and (ii) the date on which the notice of dissent was received. We will not send a notice to any dissenting shareholder who voted to approve the continuation or who has withdrawn a Dissent Notice.

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Within one month after receiving from us the above notice of our intention to proceed, you must send us a written statement of dissent signed by the dissenter, and any applicable beneficial owner, that the dissenter, and any applicable beneficial owner, that the dissenter requires Nicholas Financial, Inc. to purchase all of the Notice Shares, and the certificates, if any representing the Notice Shares duly endorsed for transfer, in accordance with Section 244 of the BCBCA to complete the dissent.

If the dissent is being exercised by the dissenting shareholder on behalf of a non-registered shareholder, a written statement that: (i) is signed by the non-registered shareholder on whose behalf dissent is being exercised; and (ii) sets out whether or not the such non-registered shareholders is the beneficial owner of other shares and, if so, sets out: (A) the names of the registered owners of those other shares, (B) the number, and the class and series, if applicable, of those other shares that are held by each of those registered owners, and (C) that dissent is being exercised in respect of all of those other shares, all in accordance with Section 244 of the BCBCA. Upon such delivery, a dissenting shareholder will be bound to sell and the Corporation will be bound to purchase the shares subject to the demand for a payment equal to their fair value as of the day before the day on which the continuation resolution was passed by the shareholders, excluding any appreciation or depreciation in anticipation of the vote (unless such exclusion would be inequitable). If you fail to send us a Dissent Notice, a written statement of dissent, or your share certificates within the appropriate time frame, you will forfeit your right to dissent and your right to be paid the fair value of your shares. The Corporation or its transfer agent will endorse on your share certificates a notice that you are a dissenting shareholder and will return the share certificates to you.

Once you send your written statement of dissent and share certificates to us, you cease to have any rights as a shareholder. Your only remaining right is the right to be paid the fair value of your common shares. Your rights as a shareholder will be reinstated if:

•

you withdraw your written statement of dissent prior to an offer being made by us to pay out your Notice Shares;

•

we fail to make you an offer of payment and you withdraw the dissent notice; or

•

the continuation does not happen.

We must promptly send you a written offer to pay for your Notice Shares. This must include a written offer to pay you an amount considered by our board of directors to be the fair value of your shares accompanied by a statement showing how that value was determined. The offer must include a statement showing the manner used to calculate the fair value. Each offer to pay shareholders must be on the same terms. We must pay you for your shares promptly after you accept our offer. Any such offer lapses if we do not receive your acceptance within 30 days after the offer to pay has been made to you.

If we fail to make an offer to pay for your shares, or if you fail to accept the offer within the specified period, we or the dissenter may, apply to a court to fix a fair value for your common shares.

All dissenting shareholders whose shares have not been purchased will be joined as parties and bound by the decision of the court. We are required to notify each affected dissenting shareholder of the date, place and consequences of the application and of his right to appear and be heard in person or by counsel. The court may determine whether any person who is a dissenting shareholder should be joined as a party. The court will then fix a fair value for the shares of all dissenting shareholders who have not accepted a payment offer from us. The final order of a court will be rendered against us for the amount of the fair value of the shares of all dissenting shareholders. The court may, in its discretion, allow a reasonable rate of interest on the amount payable to each dissenting shareholder and appoint an appraiser to assist in the determination of a fair value for the shares.

THIS IS ONLY A SUMMARY OF THE DISSENTING SHAREHOLDER PROVISIONS OF THE BCBCA. THEY ARE TECHNICAL AND COMPLEX. IT IS SUGGESTED THAT IF YOU WANT TO AVAIL YOURSELF OF YOUR RIGHTS THAT YOU SEEK YOUR OWN LEGAL ADVICE. FAILURE TO COMPLY STRICTLY WITH THE PROVISIONS OF THE BCBCA MAY PREJUDICE YOUR RIGHT OF DISSENT. SECTIONS 237 - 247 OF THE BCBCA ARE ATTACHED HEREIN AS EXHIBIT E AND IS INCORPORATED HEREIN BY REFERENCE.

United States and Canadian Income Tax Considerations

The domestication may have income tax consequences in both the United States and Canada. The material tax consequences of the domestication to us and our current shareholders are summarized below.

United States Federal Income Tax Consequences.

The following discussion sets forth certain material United States federal income tax consequences of the domestication to Nicholas Financial, Inc., the British Columbia, Canada corporation (hereinafter referred to as the “Corporation”), and the U.S. Holders (as defined below) and Non-U.S. Holders (as defined below) of its common shares, as well as certain of the expected material federal income and estate tax consequences of the ownership and disposition of the shares of common stock of Nicholas Financial, Inc., the Delaware corporation. Legal conclusions contained in this section, unless otherwise noted, are the opinion of Kutak Rock LLP, U.S. tax counsel to the Corporation.

This discussion does not address all aspects of taxation that may be relevant to particular holders in light of their personal investment or tax circumstances or to persons that are subject to special tax rules. In particular, this description of United States tax

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consequences does not address the tax treatment of special classes of holders, such as banks, insurance companies, tax-exempt entities, financial institutions, broker-dealers, persons holding shares of our capital stock as part of a hedging or conversion transaction or as part of a “straddle,” United States expatriates, holders who acquired their common shares in the Corporation pursuant to the exercise of employee stock options or otherwise as compensation or through a tax-qualified retirement plan and holders who exercise dissent rights. We assume in this discussion that you hold our capital stock as a capital asset within the meaning of the Internal Revenue Code of 1986, as amended, or the Code. This discussion is based on current provisions of the Code, United States Treasury Regulations, judicial opinions, published positions of the United States Internal Revenue Service, or the IRS, and other applicable authorities, all as in effect on the date of this Circular and all of which are subject to differing interpretations or change, possibly with retroactive effect. This discussion does not give a detailed discussion of any state, local or foreign tax considerations. We urge you to consult your tax advisor about the United States federal tax consequences of acquiring, holding, and disposing of the capital stock of the Corporation and Nicholas Financial, Inc., as well as any tax consequences that may arise under the laws of any foreign, state, local, or other taxing jurisdiction or under any applicable tax treaty.

As used in this summary, the term “U.S. Holder” means a beneficial owner of our capital stock that is for United States federal income tax purposes:

•

a citizen or resident of the United States;

•

a corporation (including any entity treated as a corporation for United States federal income tax purposes) created or organized under the laws of the United States, any state thereof, or the District of Columbia;

•

an estate the income of which is taxable in the United States regardless of its source; or

•

a trust, the administration of which is subject to the primary supervision of a United States Court and one or more United States persons have the authority to control all substantial decisions of the trust, or that has a valid election in effect under applicable United States Treasury regulations to be treated as a United States person.

If a partnership (including for this purpose any other entity, either organized within or without the United States, that is treated as a partnership for United States federal income tax purposes) holds the shares, the tax treatment of a partner as a beneficial owner of the shares, generally will depend upon the status of the partner and the activities of the partnership. Foreign partnerships also generally are subject to special United States federal income tax documentation requirements. A beneficial owner of our capital stock who is not a U.S. Holder is referred to below as a “Non-U.S. Holder.”

Code Section 368 Reorganization Provisions. Under Section 368(a)(1)(F) of the Code, a reorganization is a “mere change in identity, form , or place of organization of one corporation, however effected.” Pursuant to the domestication, the Corporation will change its jurisdiction of incorporation from Canada to Delaware. The change in our place of incorporation should constitute a reorganization within the meaning of Code Section 368(a)(1)(F) and generally should not represent a taxable transaction to the Corporation for United States federal income tax purposes.

Effects of Code Section 367. Code Section 367 applies to certain non-recognition transactions involving foreign corporations. When it applies, Code Section 367 has the effect of imposing income tax on U.S. Holders in connection with transactions that would otherwise be tax free. Code Section 367 would apply to the domestication under the circumstances discussed below.

U.S. Holders who own, directly or by attribution, 10% or more of the voting power of the Corporation’s common shares, which we refer to as a 10% Shareholder, would be required to recognize as dividend income the “all earnings and profits amount”, which we refer to as the “all earnings and profits amount”, as determined under Section 1.367(b) -2 of the United States Treasury Regulations, attributable to their shares in the Corporation.

A U.S. Holder that is not a 10% Shareholder is not required to include the “all earnings and profits amount” attributable to such U.S. Holder’s shares in the Corporation in income. Instead, absent making an election discussed below to include the “all earnings and profits amount” attributable to such U.S. Holder’s shares in the Corporation in income, which we refer to as a Deemed Dividend Election, such U.S. Holder must recognize gain, but will not recognize any loss, on his or her shares if such shares have a fair market value of $50,000 or more on the date of the exchange and the fair market value of Nicholas Financial, Inc. stock received in the exchange exceeds the U.S. Holder’s tax basis of the shares of the Corporation surrendered in the exchange. However, such U.S. Holder can make the Deemed Dividend Election to include in income as a dividend the “all earnings and profits amount” attributable to the shares owned by such U.S. Holder in the Corporation If a U.S. Holder makes such an election, then such holder does not recognize any gain on the exchange.

A Deemed Dividend Election can be made only if the company gives the U.S. Holder the information which provides the “all earnings and profits amount” for such holder and the U.S. Holder elects and files certain notices with such holder’s federal income tax return for the year in which the exchange occurred. U.S. Holders should consult with their own tax advisors regarding whether to make the Deemed Dividend Election and, if advisable, the appropriate filing requirements with respect to this election.

A U.S. Holder that is not a 10% Shareholder and owns shares in the Corporation with a fair market value of less than $50,000 on the day of the exchange is not subject to tax on the domestication.

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The term “all earnings and profits amount” as defined under Treas.Reg.§1.367(b) -2(d) means the net positive earnings (if any) of a foreign corporation that are determined according to principles substantially similar to those applicable to domestic corporations, but taking into account the adjustments under the provisions of Code §312(k) relating to the computation of depreciation, Code §312(n) relating to adjustments to earnings and profits for certain items that more closely conform to economic gain or loss, and the miscellaneous provisions under Code §964 relating to foreign taxes and foreign corporation’s earnings and profits. Code §964 and §986, and the regulations thereunder, contain the rules for adjusting earnings and profits under foreign GAAP to U.S. GAAP and U.S. tax accounting, as well as rules for determining the currency in which earnings must be computed for U.S. tax purposes.

Based on all available information, we believe that it is possible that no U.S. Holder should have a positive “all earnings and profits amount” attributable to such U.S. Holder’s shares of the Corporation, and accordingly no U.S. Holder, neither a 10% Shareholder nor a U.S. Holder that is not a 10% Shareholder and who makes a Deemed Dividend Election, should be required to include any such amount in income on the domestication. However, no assurance can be given that the IRS will agree with us. If it does not, a U.S. Holder may be subject to adverse U.S. federal tax consequences. Further, Kutak Rock expresses no opinion as to whether any U.S. Holder would or would not have a positive “all earnings and profits amount” attributable to such holder’s shares in the Corporation.

Passive Foreign Investment Company Considerations. In addition to the discussion under the heading “Effects of Code Section 367” above, the domestication might be a taxable event to U.S. Holders if the Corporation is or ever was a passive foreign investment company, or a PFIC, under Section 1297 of the Code, provided that Section 1291(f) of the Code is currently effective.

Generally, a foreign corporation is a PFIC if 75% or more of its gross income for a taxable year is passive income or if, on average for such taxable year, 50% or more of the value of its assets held by the corporation during a taxable year produce or are held to produce passive income. Passive income includes dividends, interest, rents and royalties, but excludes rents and royalties that are derived in the active conduct of a trade or business and that are received from an unrelated person, as well as interest, dividends, rents and royalties received from a related person that are allocable to income of such related person other than passive income. For purposes of these rules, the Corporation would be considered to own the assets of and recognize the income of any subsidiary corporations as to which it owns 25% or more of the value of their outstanding stock, in proportion to such ownership. If a foreign corporation is classified as a PFIC for any taxable year during which a U.S. Holder owns stock in the foreign corporation, the foreign corporation generally remains thereafter classified as a PFIC with respect to that stockholder. The Corporation believes that it is not and has never been a PFIC. Accordingly, the domestication should not be a taxable event for any U.S. Holder based on an application of the PFIC rules. However, the determination of whether a foreign corporation is a PFIC is primarily factual and there is little administrative or judicial authority on which to rely to make a determination. Hence, the IRS might not agree that the Corporation is not a PFIC. Further, Kutak Rock LLP expresses no opinion as to whether the Corporation is or is not a PFIC.

Section 1291(f) of the Code generally requires that, to the extent provided in regulations, a United States person who disposes of stock of a PFIC recognizes gain notwithstanding any other provision of the Code. No final Treasury regulations have been promulgated under this statute. Proposed Treasury regulations were promulgated in 1992 with a retroactive effective date. If finalized in their current form, these regulations would generally require gain recognition by United States persons exchanging common shares of the Corporation for common stock of Nicholas Financial, Inc., if the Corporation were classified as a PFIC at any time during such United States person’s holding period in such stock and such person had not made either a “qualified electing fund” election under Code Section 1295, for the first taxable year in which such U.S. Holder owned shares of the Corporation or in which the Corporation was a PFIC, whichever is later; or a “mark-to-market” election under Code Section 1296. The tax on any such gain so recognized would be imposed at the rate applicable to ordinary income and an interest charge would apply based on a complex set of computational rules designed to offset the tax deferral to such stockholders on our undistributed earnings. However, we are unable to predict at this time whether, in what form, and with what effective date, final Treasury Regulations under Code Section 1291(f) will be adopted.

Basis and Holding Period Considerations. If the domestication is a tax free reorganization within the meaning of Section 368 of the Code, the tax basis of Nicholas Financial, Inc.’s stock received by the shareholder in the exchange will equal his or her tax basis in the Corporation’s shares surrendered in the exchange increased by any gain recognized by such U.S. Holder in the exchange or the “all earnings and profits amount” included in the income of such U.S. Holder. The holding period for the Nicholas Financial, Inc. common stock will be the same as the U.S. Holder holding period for the common shares of the Corporation surrendered in the exchange, provided that the shares were held as a capital asset.

If the domestication is not a tax free reorganization within the meaning of Section 368 of the Code, the tax basis of Nicholas Financial, Inc.’s stock distributed to the U.S. Holder will equal his or her tax basis in the shares surrendered plus any gain recognized. The holding period will begin on the date of the exchange.

Consequences to Non-U.S. Holders. The exchange of common shares of the Corporation for common stock of Nicholas Financial, Inc. by a Non-U.S. Holder will not be a taxable transaction for such holder for United States federal income tax purposes.

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Dividends. Nicholas Financial, Inc. does not anticipate paying cash dividends on its stock. Were it do so, however, dividends paid to Non-U.S. Holders would generally be subject to withholding of United States federal income tax at the rate of 30%, or such lower rate as may be specified by an applicable income tax treaty, provided Nicholas Financial, Inc. has received proper certification (generally on IRS Form W-8BEN) of the application of such income tax treaty. A Non-U.S. Holder that is eligible for a reduced rate of United States federal withholding tax under an income tax treaty may obtain a refund or credit of any excess amounts withheld by filing an appropriate claim for a refund with the IRS. Pursuant to the income tax treaty between the United States and Canada (the “Treaty”), dividends paid by a United States corporation to a Canadian resident where each qualifies for benefits under the Treaty are subject to United States federal withholding tax at a maximum rate of 15%. Non-U.S. Holders should consult their tax advisors regarding their eligibility for claiming benefits under the Treaty and regarding their particular circumstances to claim a tax credit or tax deduction against their Canadian (or other) tax liability for any United States federal withholding tax.

Dividends that are effectively connected with a Non-U.S. Holder’s conduct of a trade or business in the United States or, if provided in an applicable income tax treaty, dividends that are attributable to a Non-U.S. Holder’s permanent establishment in the United States, are not subject to the U.S. withholding tax, but are instead taxed in the manner applicable to U.S. Holders. In that case, we will not have to withhold United States federal withholding tax if the Non-U.S. Holder complies with applicable certification and disclosure requirements (generally on IRS Form W-8ECI). In addition, dividends received by a foreign corporation that are effectively connected with the conduct of a trade or business in the United States may be subject to a branch profits tax at a 30% rate, or a lower rate specified in an applicable income tax treaty.

Gain on Disposition. A Non-U.S. Holder generally will not be subject to United States federal income tax, including by way of withholding, on gain recognized on a sale or other disposition of stock of Nicholas Financial, Inc. unless any one of the following is true:

•

the gain is effectively connected with the Non-U.S. Holder’s conduct of a trade or business in the United States and, if an applicable tax treaty requires, attributable to a U.S. permanent establishment maintained by such Non- U.S. Holder;

•

the Non-U.S. Holder is an individual who is present in the United States for 183 or more days in the taxable year of the sale, exchange or other disposition and certain other requirements are met; or

•

the stock of Nicholas Financial, Inc. constitutes a United States real property interest by reason of our status as a “United States real property holding corporation” (which we refer to as a “USRPHC”) for United States federal income tax purposes at any time during the shorter of the period during which such Non-U.S. Holder holds the stock of Nicholas Financial, Inc.; or the five-year period ending on the date such Non-U.S. Holder disposes of the stock of Nicholas Financial, Inc. and, in the event of common stock that is regularly traded on an established securities market for tax purposes, the Non-U.S. Holder held, directly or indirectly, at any time within the five-year period preceding such disposition more than 5% of such regularly traded common stock.

We do not anticipate that Nicholas Financial, Inc. will become a USRPHC. However, since the determination of USRPHC status in the future will be based upon the composition of its assets from time to time and there are uncertainties in the application of certain relevant rules, there can be no assurance that it will not become a USRPHC in the future.

U.S. Federal Estate Taxes. Capital stock of Nicholas Financial, Inc. owned or treated as owned by an individual who at the time of death is a Non-U.S. Holder will be included in his or her estate for United States federal estate tax purposes, unless an applicable estate tax treaty provides otherwise.

Information Reporting and Backup Withholding. A Non-U.S. Holder may have to comply with specific certification procedures to establish that the holder is not a United States person as described above (generally on IRS Form W-8BEN), or otherwise establish an exemption, in order to avoid backup withholding and information reporting tax requirements with respect to our payments of dividends on the stock of Nicholas Financial, Inc.

The payment of the proceeds of the disposition of stock by a Non-U.S. Holder to or through the United States office of a broker generally will be reported to the IRS and reduced by backup withholding unless the Non-U.S. Holder either certifies its status as a Non-U.S. Holder under penalties of perjury or otherwise establishes an exemption and the broker has no actual knowledge to the contrary. Information reporting requirements, but not backup withholding, will also apply to payments of the proceeds from sales of our stock by foreign offices of United States brokers or foreign brokers with certain types of relationships to the United States, unless the broker has documentary evidence in its records that the holder is a Non-U.S. Holder and certain other conditions are met, or the holder otherwise establishes an exemption.

Backup withholding is not an additional tax. Any amounts that are withheld under the backup withholding rules will be refunded or credited against the Non-U.S. Holder’s United States federal income tax liability if certain required information is furnished to the IRS. Non-U.S. Holders should consult their own tax advisors regarding application of backup withholding in their particular circumstance and the availability of and procedure for obtaining an exemption from backup withholding under current United States Treasury regulations.

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Material Canadian Federal Tax Considerations Under the Income Tax Act

The following is a summary of the material Canadian federal income tax considerations generally applicable to the Corporation and to shareholders of the Corporation in connection with the domestication. The summary applies to the Corporation and to holders of shares who, for the purposes of the Income Tax Act (Canada), or Tax Act, hold shares as capital property, who deal at arm’s length, and are not affiliated, with the Corporation and in the case of a shareholder who is or is deemed to be resident in Canada for purposes of the Tax Act, for whom the Canadian dollar is the functional currency for the purposes of the Tax Act. This summary does not apply to shareholders that are “financial institutions” as defined for the purposes of the “mark-to-market” rules in the Tax Act or in respect of whom the Corporation will, at any time after the domestication, be a “foreign affiliate” for purposes of the Tax Act. Such shareholders should consult their own tax advisors with respect to the particular tax consequences to them of the domestication, which tax consequences may vary depending upon their particular circumstances.

Legal conclusions contained in this section, unless otherwise noted, are the opinion of Thorsteinssons LLP (“Canadian Counsel”) insofar as they relate to matters of Canadian federal income tax law and are dependent on the accuracy of representations made to Canadian Counsel by management of the Corporation for this purpose.

This summary is based upon the current provisions of the Tax Act, the regulations thereunder, all proposals to amend the Tax Act and the regulations publicly announced by the Department of Finance prior to the date hereof and the current published administrative and assessing practices of the Canada Revenue Agency, or CRA. This summary does not otherwise take into account or anticipate any changes in law, whether by legislative, judicial, governmental or administrative decision or action, nor does it take into account provincial, territorial or foreign income tax legislation or considerations, except as specifically stated below.

This summary has limited applicability to partnerships, estates, trusts, persons subject to specialized tax treatment such as registered charities or tax-exempt persons, tax deferred retirement savings or other plans, real estate investment trusts or mutual funds. It is strongly recommended that each shareholder consult his or her own tax advisors with respect to the particular tax consequences to them of the domestication, which tax consequences may vary depending upon his or her own particular circumstances.

The Corporation. Upon the domestication, the Corporation will cease to be a Canadian resident corporation and a “public corporation” for the purposes of the Tax Act. The taxation year of the Corporation that would otherwise have included the time of the domestication will be deemed to end immediately before that time and a new taxation year will be deemed to have begun at that time. In addition, each property owned by the Corporation immediately before the deemed year end will be deemed to have been disposed of for proceeds of disposition equal to the fair market value of the property at that time. The Corporation will be subject to income tax under Part I of the Tax Act on any income and net taxable capital gains arising as a result of the deemed dispositions of its properties. The Corporation will be deemed to have reacquired each such property at the time of its domestication at a cost equal to its deemed proceeds of disposition.

The Corporation will also be subject to an additional tax under Part XIV of the Tax Act on the amount by which the fair market value, immediately before its deemed year end resulting from the domestication, of all of the property owned by the Corporation exceeds the total of its liabilities and the paid-up capital of all the issued and outstanding shares of the Corporation immediately before the deemed year end. This additional tax is generally payable at the rate of 25 percent, but will be reduced to 5 percent under the Canada-United States Income Tax Convention (the “Treaty”) unless it can reasonably be concluded that one of the main reasons for the Corporation becoming resident in the United States was to reduce the amount of such additional tax or Canadian withholding tax.

The Canadian tax consequences to the Corporation associated with the proposed domestication will be dependent principally upon the valuation of the property of the Corporation, and upon certain Canadian tax amounts, accounts and balances of the Corporation, each as of the time of the domestication. Canadian Counsel is not qualified to opine on such valuations and has relied upon a certificate of management of the Corporation with respect to both such valuations and the Canadian tax amounts, accounts and balances of the Corporation. In particular, management of the Corporation has advised that, in its view and as of the date hereof, the current fair market value of the properties of the Corporation does not materially exceed the tax costs of such properties and the estimated available tax-free surplus balances of its foreign affiliates in respect of a tax election pursuant to subsection 93(1) of the Tax Act (the “Canadian Income Tax Differential”). Management has further advised that, in its view and as of the date hereof, the current fair market value of the properties of the Corporation materially exceeds the aggregate of the paid-up capital of the shares and the liabilities of the Corporation (the “Canadian Part XIV Tax Differential”). Provided that the Canadian Part XIV Tax Differential is as described in this paragraph, the estimated Part XIV tax of approximately $1,446,000 is expected to apply as a result of the domestication. This estimate is based in part on determinations of factual matters and a number of key assumptions any or all of which could change prior to the effective time of the domestication or prove to be inaccurate, in which case the actual Part XIV tax could be materially greater than the estimated amount.

Shareholders are cautioned that the Canadian Income Tax Differential described above is not supported by independent valuations, audits, or tax opinions. Furthermore, the CRA may not agree with the Corporation’s determination of fair market value at the relevant time. It is also possible that the fair market value of the Corporation’s property may change between the date hereof and the time of the domestication. Should unforeseen events lead to a potential for greater tax liability than currently expected, the board of directors has the right to not proceed with the domestication.

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Subsequent to the domestication, the Corporation will not be subject to Canadian federal income tax except on its income from business operations that are attributable to a permanent establishment in Canada and on gains from the disposition of “taxable Canadian property” (as defined in the Tax Act) which are not otherwise exempt from Canadian tax under the provisions of the Treaty.

Shareholders Resident in Canada. The following portion of the summary is applicable to a holder of common shares who is or is deemed to be resident in Canada for purposes of the Tax Act and who will continue to be resident in Canada at all times while such holder holds the shares (a “Resident Shareholder”).

A Resident Shareholder who is resident in Canada for purposes of the Tax Act will not be considered to have disposed of his or her shares or to have realized a taxable capital gain or loss by reason only of the domestication. The domestication will also have no effect on the adjusted cost base of a Resident Shareholder’s shares.

Following the domestication, any dividends received by a Resident Shareholder on shares will be included in computing the shareholder’s income as U.S. source non-business income. As described below, such dividends may be subject to U.S. withholding tax. A Resident Shareholder will be entitled to include any U.S. taxes that are required to be withheld on the dividend in computing any deduction or a foreign tax credit under the Tax Act in relation thereto, subject to the detailed rules of the Tax Act. A Resident Shareholder who is an individual will not be entitled to the gross-up and dividend tax credit rules normally applicable to taxable dividends on shares of taxable Canadian corporations. Similarly, a Resident Shareholder that is a corporation will not be entitled to a deduction in respect of any dividends received as it would for dividends received on shares of a taxable Canadian corporation. A Resident Shareholder that is a “Canadian-controlled private corporation” (as defined in the Tax Act) will be subject to the rules that can impose an additional refundable tax of 10 2/3% on such dividends.

The tax treatment under the Tax Act of a disposition or deemed disposition of shares by a Resident Shareholder will not be affected by the domestication and such a disposition arising after the domestication will generally result in a capital gain (or capital loss) to the extent that the proceeds of disposition, net of any reasonable costs of disposition, exceed (or are less than) the adjusted cost base to the holder of the shares immediately before the disposition. One-half of any capital gain (a “taxable capital gain”) realized by a Resident Shareholder on a Share will be included in the Resident Shareholder’s income for the year of disposition. One-half of any capital loss (an “allowable capital loss”) realized is required to be deducted by the Resident Shareholder against taxable capital gains realized in the year of disposition. Any excess of allowable capital losses over taxable capital gains of the Resident Shareholder for the year of disposition may be carried back up to three taxation years or forward indefinitely and deducted against net taxable capital gains in those other years to the extent and in the circumstances prescribed in the Tax Act.

Following the domestication, the Corporation will cease to be a public corporation for purposes of the Tax Act. However, Canadian Counsel has been advised that the Corporation intends that the shares continue to be listed on the NASDAQ. Provided that the shares are listed on a designated stock exchange such as the NASDAQ at the time of the domestication and thereafter, the shares will continue to be qualified investments while they are so listed on a designated stock exchange for trusts governed by registered retirement savings plans, registered retirement income funds, deferred profit-sharing plans, education savings plans, tax‑free savings accounts, registered disability savings plans and first‑time home buyers plans.

Following the domestication, shares of the Corporation will be “specified foreign property” for the purposes of the foreign property reporting rules in Section 233.3 of the Tax Act and may be shares of a foreign affiliate of a holder of the Corporation’s shares. Resident Shareholders should consider the implications of this on their reporting obligations, if any, under these rules which may include reporting ownership of such shares on forms T1135 and T1134.

Shareholders Not Resident in Canada. The following portion of this summary is applicable to a holder of common shares who, for the purposes of the Tax Act and at all relevant times, (i) has not been, is not and will not be resident or deemed to be resident in Canada and (ii) does not, will not and will not be deemed to use or hold the shares in carrying on a business in Canada (a “Non-resident Shareholder”). Special rules, which are not discussed in this summary, may apply to a holder that is an insurer carrying on business in Canada and elsewhere.

A Non-resident Shareholder will not be considered to have disposed of his or her shares or to have realized a taxable capital gain or loss by reason only of the domestication. The domestication will also have no effect on the adjusted cost base of a Non-resident Shareholder’s shares for purposes of the Tax Act. After the domestication, dividends paid to a Non-resident Shareholder on shares will not be subject to Canadian withholding tax.

Non-resident Shareholders will not be subject to Canadian tax on any capital gain arising on the eventual disposition of shares after the domestication because the shares will not be “taxable Canadian property” provided that it continues to be the case that the shares do not derive their value, directly or indirectly, principally from certain Canadian connected property, notably real property located in Canada, Canadian resource property (as defined in the Tax Act) and property used or held in respect of a business carried on in Canada.

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Tax Treatment of Dissenting Shareholders

Please see the discussion of the treatment of dissenting shareholders under the heading “Tax Treatment of Dissenting Shareholders” below.

SHAREHOLDERS ARE URGED TO CAREFULLY REVIEW THIS DESCRIPTION AND TO CONSULT THEIR OWN TAX ADVISORS AS TO DETERMINE ANY SPECIFIC TAX CONSEQUENCES TO THE SHAREHOLDER IN CONNECTION WITH THE DOMESTICATION PROPOSAL, INCLUDING, ANY U.S. FEDERAL INCOME TAX CONSEQUENCES, CANADIAN INCOME TAX CONSEQUENCES AND/OR ANY U.S., CANADIAN NON-INCOME, STATE, PROVINCIAL, LOCAL OR NON-U.S. OR NON-CANADIAN TAX CONSEQUENCES RELAVANT TO SUCH STOCKHOLDER AS A RESULT OF THE DOMESTICATION.

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THE LOAN PORTFOLIO SALE

(Proposal 2 on the Notice of Special Meeting and the accompanying Proxy)

General

At the Special Meeting, you will be asked to consider and vote upon a proposal to approve the sale of all or substantially all of the undertaking of the Corporation, consisting of automobile finance installment contracts, (the “Loan Portfolio Sale”) pursuant to the Master Asset Purchase Agreement dated November 13, 2023, by and between Westlake Services, LLC dba Westlake Financial, a California limited liability company (“Westlake”), the Corporation and Nicholas Financial, Inc., a Florida corporation and wholly-owned indirect subsidiary of the Corporation (“Nicholas Financial-Florida”), substantially in the form attached to this Circular as Exhibit F (such agreement, the “Asset Purchase Agreement,” and such proposal the “Loan Portfolio Sale”), which was ratified and approved by the Board on November 13, 2023, subject to shareholder approval. The Board also recommended that our shareholders approve the Loan Portfolio Sale pursuant to the Asset Purchase Agreement.

The board of directors has determined that the Loan Portfolio Sale is in the best interests of the shareholders and recommends a vote “FOR” for the Loan Portfolio Sale because it believes we will have a better chance to enhance shareholder value by using the net proceeds from the Loan Portfolio Sale to acquire or invest in other businesses rather than by continuing to operate its existing business or liquidating. The board believes that if shareholders do not approve the Loan Portfolio Sale that: (i) the value of our contracts and the receivables will decrease over time; and (ii) the purchase price offered by another potential buyer, if any, will be lower than the purchase price offered in the Loan Portfolio Sale. If the loan portfolio is not sold we expect the costs to run off the business will be significant. See “THE LOAN PORTFOLIO SALE- -Reasons for the Loan Portfolio Sale Proposal.”

Background

The Corporation announced in a Form 8-K filed on November 3, 2022 a change in its operating strategy and restructuring plan with the goal of reducing operating expenses and freeing up capital to increase shareholder returns, whether by acquiring loan portfolios or businesses or by investing outside of our traditional business. As also previously disclosed: during fiscal 2023 the Company did not complete any bulk portfolio purchases; all of our direct loan licenses have been cancelled, not renewed, or otherwise terminated; all of ours brick and mortar branch locations in 18 states were closed, with the headquarters in Florida and central operations office remaining; we expect our total direct loans portfolio to be reduced over time as such direct loans are paid off or otherwise liquidated until there are no direct loans in our portfolio. The Corporation also disclosed in its Form 10-Q for the quarterly period ended September 30, 2023 that in connection with the Asset Purchase Agreement, the Corporation does not intend to continue any significant contract purchases and origination activities, except on a much smaller scale, than it has historically. The Board continued to evaluate the restructuring plan and strategic alternatives to continuation of the existing business, including investments outside of our traditional business. See “Reasons for the Loan Portfolio Sale Proposal” below.

In July 2023, Westlake contacted Jeremy Zhu, a director of the Corporation, to inquire if there was any potential interest in preliminary discussions regarding the sale of the loan portfolio to Westlake. Mr. Zhu later participated in the negotiations of the sale of the loan portfolio to Westlake as set forth below. The inquiry was immediately brought to the attention of the Board; however, the Board decided to focus on the existing business and act to minimize losses, rather than pursue sale of the loan portfolio at that time. See “INTEREST OF MANAGEMENT IN THE DOMESTICATION AND LOAN PORTFOLIO SALE” regarding Mr. Zhu’s lack of current or prior relationship with Westlake.

Prior to a Board meeting held on August 24, 2023, the Board requested that the CFO provide updated financial information reflecting the effects of recent adverse developments in the loan portfolio. Prior to the meeting, Westlake and a Director held further preliminary discussions regarding any potential interest in a sale of the loan portfolio to Westlake. Based on information then available, the tax implications associated with selling the loan portfolio prior to the proposed domestication weighed in favor of pursuing the proposed domestication and not pursuing a potential sale of the loan portfolio to Westlake or any other potential buyer at that time.

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On September 1, 2023, Westlake provided a proposed, draft Letter of Intent regarding its potential purchase of our loan portfolio.

On a call held on September 6, 2023 the Board discussed whether or not to continue discussions with Westlake regarding the proposed sale. While the Board was open to further discussions, a determinative decision was not made at that time.

Soon after the September 6 board call, the board was made aware of adverse developments in the loan portfolio, including charge offs, increased at a rate higher than expected, indicating a likely significant deterioration of financial condition and future business prospects. These developments and the expectation that they would likely continue and increase were of such significance to cause the Corporation, along with its legal counsel, to engage in further discussions with Westlake and its legal counsel regarding a proposed sale of the loan portfolio. See “Reasons for the Loan Portfolio Sale Proposal” below.

On September 14, 2023 legal counsel for the Corporation received the first draft of the Asset Purchase Agreement from Westlake and its legal counsel. Members of the Board were informed of the receipt of the draft and the general terms and conditions of the draft. The Board authorized a Director along with the Corporation’s legal counsel to initiate discussions regarding the draft with Westlake and its legal counsel.

At a Board meeting on October 5, 2023 in response to a request from the Board to assess the recent adverse developments in the loan portfolio, the Corporation’s Chief Financial Officer presented several financial models reflecting the potential effects of continuing credit losses on the current business, operations and financial condition and likely future business prospects for the Corporation over the next four years. The models were based on the assumptions that: credit losses continue at certain assumed rates, one that was believed to be the most likely, another at a rate slightly less than that assumed most likely and another at a rate much less than that assumed most likely; our loan portfolio is run off, new loan originations are less than $1 million annually; no loan portfolio acquisitions are made; Westlake continues to service our loan portfolio, we continue to employ approximately the same number of employees or fewer and the Financial Accounting Standards Board’s current expected credit losses methodology for estimating allowances for credit losses is applied. The models indicated that, based on the assumptions used, that the book value per share of the Corporation’s common stock is likely to decrease or remain relatively stagnant over the next four years and the Corporation’s net income and cash flow are likely to be adversely impacted. The various models included the estimated effect of selling the loan portfolio at different times and indicated that the potential sales price of the receivables would decrease over time. See “Reasons for the Loan Portfolio Sale Proposal” below. The expected deterioration of the Corporation’s financial condition, future business prospects were of such a magnitude that the Board believed that the benefits to the Corporation and its shareholders by consummating the Loan Portfolio Sale prior to the domestication outweighed the tax implications associated with selling the loan portfolio prior to the proposed domestication. After full consideration and discussion of the financial models and the Corporation’s likely business and financial prospects, potential options to pursue and other factors relevant to determining whether to continue the Corporation’s business or pursue other options, the Board determined to fully pursue the proposed sale to Westlake if mutually agreeable terms and conditions could be reached.

During October and November 2023, Jeremy Zhu, a director of the Corporation, and the Corporation’s legal counsel negotiated the provisions of the Asset Purchase Agreement and exchanged multiple drafts of the Asset Purchase Agreement. The Board was kept informed of these negotiations. See “INTEREST OF MANAGEMENT IN THE DOMESTICATION AND LOAN PORTFOLIO SALE” regarding Mr. Zhu’s lack of current or prior relationship with Westlake.

On November 7, 2023 the Board conducted a call to discuss the draft Asset Purchase Agreement. The Board engaged in a full discussion of the terms and conditions of the Asset Purchase Agreement and other significant corporate and financial developments, including the lawsuit described in “LEGAL PROCEEDINGS.” In light of these developments, the Board determined to continue the negotiations with Westlake regarding the Asset Purchase Agreement and the Loan Portfolio Sale.

On November 13, 2023 the Board approved the Asset Purchase Agreement and Loan Portfolio Sale, conditioned on receiving the requisite shareholder approval.

On November 13. 2023 the Asset Purchase Agreement was executed by Westlake and Nicholas Financial-Florida.

The Asset Purchase Agreement

The “Seller” under the Asset Purchase Agreement is the Corporation’s wholly owned subsidiary, Nicholas Financial-Florida. The “Purchaser” is Westlake. All capitalized, undefined terms used herein shall have the meanings ascribed to such terms in the Asset Purchase Agreement.

Summary

The following is a summary of the key terms of the Asset Purchase Agreement, which are further described under and qualified in their entirety by the full text of the Asset Purchase Agreement a copy of which is attached to this Circular as Exhibit F. You are encouraged to read the Asset Purchase Agreement in its entirety.

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The Parties

The Seller under the Asset Purchase Agreement is the Corporation’s wholly owned indirect subsidiary, Nicholas Financial-Florida. The Corporation is also a party to the Asset Purchase Agreement. The Purchaser is engaged in the business of consumer automotive financing by purchasing retail installment sales contracts from automobile dealers and finance companies, and financing and purchasing unsecured consumer loan contracts. The Purchaser’s principal executive office is located at 4751 Wilshire Boulevard, Suite 100, Los Angeles, California 90010.

Prior to entering into the Asset Purchase Agreement, there have been significant business relationships and material agreements between the Purchaser or its affiliates and the Corporation and its affiliates. The Purchaser is the beneficial owner of approximately 6.9% of the Corporation’s common stock as of March 11, 2024. As previously disclosed, on November 3, 2022, Nicholas Financial-Florida entered into a loan servicing agreement (the “Servicing Agreement”) with Westlake Portfolio Management, LLC, a California limited liability company and affiliate of the Purchaser (“WPM”). Under the Servicing Agreement, the Corporation originates and acquires receivables and Westlake performs the servicing duties with respect to such receivables, including without limitation managing, servicing, administering and collecting on the receivables, including with respect to any repossession of any financed vehicle securing a receivable under which it is determined that payments thereunder are not likely to be resumed. Unless earlier terminated in accordance with its provisions, the Servicing Agreement shall expire upon the earliest to occur of (i) the date on which the Company sells, transfers or assigns all outstanding receivables to a third party (including Westlake), (ii) the date on which the last receivable is repaid or otherwise terminated, or (iii) three years from the closing date of the Servicing Agreement. As previously disclosed, on January 18, 2023, Nicholas Financial-Florida and NDS entered into a new senior secured revolving credit facility (the “Loan and Security Agreement”) with Westlake Capital Finance, LLC, a California limited liability company (the “Lender”), who is an affiliate of WPM, the servicer of substantially all of our receivables, and the Purchaser.

Principal Terms and Conditions

The following is a summary of the principal terms and conditions of the Asset Purchase Agreement, which are further described under and qualified in their entirety by the full text of the Asset Purchase Agreement. Pursuant to the Asset Purchase Agreement, the parties agreed to, among other things, the following terms and conditions:

The Assets Being Sold

Subject to the terms and conditions of the Asset Purchase Agreement, Seller will sell to Westlake at closing all of the conveyed interests (which are summarized below), for the purchase price, as adjusted (See “Purchase Price and Purchase Price Adjustment” below). The contracts and the corresponding receivables payable under the contracts that will be included in the conveyed assets will be sold at a discount.

The conveyed interests include: (i) the specified motor vehicle retail installment sale contracts and unsecured consumer loan contracts evidencing the receivables; (ii) the specified receivables related to the contracts and the corresponding security interest in the financed vehicles; (iii) all monies due or to become due after September 30, 2023 with respect to the contracts and the receivables; (iv) the vehicles securing the debt related to the receivables including the certificates of title (or other ownership documents), and all other interests and other property securing the contracts; (v) the proceeds from physical damage, credit life, credit disability, comprehensive, collision and other insurance policies, if any, covering the vehicles or purchasers of the vehicles or any other person who owes payments on the receivables and rebates of premiums and other amounts relating to any insurance policies and other items financed under the contracts, to the extent applied (or to be applied) to reduce the principal balance of the related contract after September 30, 2023; (vi) all books and records related to any of the foregoing including payment history, personal information and original application of the purchasers of the vehicles or any other person who owes payments on the receivables;, (vii) all proceeds thereof; and (viii) all liabilities or obligations (including taxes) in connection with the foregoing items.

The ownership of the conveyed interests shall not transfer until closing, and the ownership of the conveyed interests will not transfer if closing does not occur.

Purchase Price and Purchase Price Adjustments

On the closing date for the Loan Portfolio Sale, Purchaser will pay the “purchase price” to the Seller. The purchase price will be based on a discount applied to the outstanding principal balance of purchased receivables due as of September 30, 2023. All accrued interest on all accounts less than 60 days delinquent will be included in the purchase price. Receivables not included in the Loan Portfolio Sale are those identified as subject to: (i) the lawsuit styled Nicholas Financial, Inc. v. Jeremiah Gross, No. 21CY-CV02148-01, 7th Judicial Circuit, Clay County, Missouri summarized in “LEGAL PROCEEDINGS” as of September 30, 2023 (ii) bankruptcy as of September 30, 2023; (iii) charge off as of September 30, 2023; (iv) a delinquency status of not less than 120 days as of September 30, 2023; or (v) being an unsecured motor vehicle retail installment sale contract as of September 30, 2023). Subject to adjustment (both increases and deductions) as set forth in the Asset Purchase Agreement, the purchase price will be approximately $65.6 million. See the Asset Purchase Agreement attached hereto as Exhibit F.

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Closing Date

The closing of the purchase and sale of the conveyed interests will take place on a date mutually agreed to by Seller and Purchaser after the shareholders approve the Loan Portfolio Sale. Seller and Purchaser have agreed to make their best effort to close the Loan Portfolio Sale no more than ten business days after the date of shareholder approval. Additionally, closing will occur only if Seller has entered into a settlement agreement regarding the lawsuit styled Nicholas Financial, Inc. v. Jeremiah Gross, No. 21CY-CV02148-01, 7th Judicial Circuit, Clay County, Missouri summarized in “Legal Proceedings” above that is reasonably satisfactory to Purchaser. On the Closing Date, Purchaser shall pay the Purchase Price, as adjusted, in immediately available funds to Seller.

Representations and Warranties of Seller

The Asset Purchase Agreement contains a number of representations and warranties of Seller to Purchaser relating to, among other things: organization and good standing; power, authority and binding obligation; no violation; no proceedings; and compliance with laws. The Asset Purchase Agreement also includes representations and warranties of Seller to Purchaser regarding each contract, the schedule of receivables, no prior lien; and title.

Seller Breach of Representations or Warranties and Repurchase of Receivables

If Seller violates any representation or warranty in the Asset Purchase Agreement regarding a file related to a contract sold to the Purchaser and such violation is discovered and not cured within 120 days of the closing date, Seller shall repurchase the related receivable for the purchase price related to the receivable, minus any payments received by Purchaser after the closing date related to such receivable’s principal balance. To the extent Seller fails to perform any repurchase obligation, Nicholas Financial-Canada will fulfill such obligations.

Representations and Warranties of Purchaser

The Asset Purchase Agreement contains a number of representations and warranties of Purchaser to Seller relating to, among other things: organization and good standing; power, authority and binding obligation; no violation; no proceedings; compliance with laws; servicing of the contracts; and sufficiency of funds to pay the purchase price and consummate the transactions contemplated by the Asset Purchase Agreement

Servicing Under the Servicing Agreement

On and after September 30, 2023, the services of WPM required under the Servicing Agreement shall continue pursuant to the terms and conditions of the Servicing Agreement. Except as otherwise provided for in the Asset Purchase Agreement, the duties and obligations of each party under the Servicing Agreement shall remain in full force and effect unless and until closing takes place. On and after the closing date, Seller shall not repossess any vehicles, other than as provided for in the Asset Purchase Agreement, as requested by Purchaser.

Closing Conditions

Closing cannot occur without the requisite approval of Nicholas Financial-Canada’s shareholders. Additionally, closing will occur only if Seller has entered into a settlement agreement regarding the lawsuit styled Nicholas Financial, Inc. v. Jeremiah Gross, No. 21CY-CV02148-01, 7th Judicial Circuit, Clay County, Missouri summarized in “LEGAL PROCEEDINGS” above. On the closing date, Purchaser must pay the purchase price in immediately available funds to Seller Assignor by wire transfer.

Termination Events and Break Fee

The Asset Purchase Agreement may be terminated prior to closing:

•

By mutual written consent of Seller and Purchaser:

•

By either Seller or Purchaser if the other party materially breaches the Asset Purchase Agreement and the breach has not been waived by the non-breaching party or cured by the breaching party within fifteen days following notice of such breach being delivered by the non-breaching party to the breaching party; or

•

By Seller if shareholder approval of the Loan Portfolio Sale is not obtained and/or no settlement agreement is reached regarding the matter described in “LEGAL PROCEEDINGS”.

Survival; Indemnification Obligations

Seller will indemnify Purchaser against any third-party claims, lawsuits, arbitrations, administrative claims, or other proceedings in which Purchaser is named as a party or potential party and relating in any way to, and to the extent of, (i) Seller’s failure to comply with the provisions of the Asset Purchase Agreement, including with respect to data and other files and records provided to Purchaser or which Seller failed to provide to Purchaser, or any applicable law, including all consumer protection laws, and (ii) any liabilities due to the acts or omissions of any of Seller’s predecessor’s in interest in the receivables. Seller will hold harmless Purchaser, its directors, officers and employees for all losses and reasonable expenses, including reasonable attorneys’ fees, settlements and

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judgments, incurred by Purchaser in connection with any such third-party claims described in the prior sentence (collectively, the “Indemnified Losses”). Seller’s obligation to indemnify Purchaser with respect to Indemnified Losses will apply regardless of whether the third-party claim arises in contract, tort, negligence, strict liability or otherwise, except to the extent for third-party claims that allege the fault or negligence of Purchaser.

Additionally, Seller will indemnify Purchaser and its respective assigns and their attorneys, accountants, employees, officers, and directors (each, a “Covered Purchaser Person”) with respect to all third-party claims, actions, suits, proceedings, losses, costs, liabilities, claims, damages, and expenses of every kind and character, including reasonable attorneys’ fees (collectively “Damages”), as incurred, to the extent resulting from or relating to or arising out of:

(i)

a material breach of any representation, warranty, covenant or agreement made by the Seller in the Asset Purchase Agreement;

(ii)

any legal action relating to the lawsuit styled Nicholas Financial, Inc. v. Jeremiah Gross, No. 21CY-CV02148-01, 7th Judicial Circuit, Clay County, Missouri summarized in “LEGAL PROCEEDINGS” above;

(iii)

actions or omissions of the Seller, or any of its employees or agents, occurring prior to the closing date with respect to any receivable or financed vehicle; or

(iv)

any failure of a receivable to be originated in compliance with all requirements of law.

The indemnification obligations of Seller under the Asset Purchase Agreement will survive for a period of twelve months from the Closing Date, excluding indemnification obligations relating to the lawsuit styled Nicholas Financial, Inc. v. Jeremiah Gross, No. 21CY-CV02148-01, 7th Judicial Circuit, Clay County, Missouri summarized in “LEGAL PROCEEDINGS” above which shall survive indefinitely and indemnification obligations for third party claims which relate to the fraud, gross negligence, or willful misconduct of Seller, which shall survive for a period twenty-four) months from the closing date.

Purchaser will assume the defense and indemnify Seller and its respective assigns and their attorneys, accountants, employees, officers, and directors (each, a “Covered Seller Person”) against any third-party claims, lawsuits, arbitrations, administrative claims, or other proceedings in which a Covered Seller Person is named as a party or potential party and relating to, and to the extent of: (i) Purchaser’s failure to comply with the provisions of the Asset Purchase Agreement or any applicable law, including all consumer protection laws; (ii) any material breach of any representation, warranty, covenant or agreement made by Purchaser in the Asset Purchase Agreement; and (iii) Purchaser’s handling of any customer, contract, vehicle or conveyed interest following the Closing Date. To the full extent permitted by law, Purchaser will hold harmless, and assume the defense of a Covered Seller Person and their respective directors, officers and employees for all losses and reasonable expenses, including reasonable attorneys’ fees, settlements and judgments, incurred by Seller in connection with any such third-party claims. Purchaser’s obligation to defend and indemnify a Covered Seller Person under the Asset Purchase Agreement will apply regardless of whether the third-party claim arises in contract, tort, negligence, strict liability or otherwise, except to the extent of third-party claims that allege the fault or negligence of a Covered Seller Person.

Additionally, Purchaser will indemnify the Seller and its respective Covered Seller Persons with respect to all Damages, as incurred, to the extent resulting from or relating to or arising out of the inaccuracy, nonfulfillment or breach of any representation, warranty, covenant or agreement made by Purchaser in this Agreement.

Reasons for the Loan Portfolio Sale Proposal

As reported in the Corporation’s Form 10-Q for the quarterly period ended September 30, 2023 our automobile finance installment contracts have suffered large credit losses. If the Loan Portfolio Sale does not close, we believe that our automobile finance installment contracts will continue to rapidly suffer large credit losses, which we believe would in turn result in a significant devaluation of the receivables associated with these contracts, the Corporation and the market value of its stock and add uncertainty to our ability to successfully implement our restructuring plan. See “THE LOAN PORTFOLIO SALE-“Background” and “-Reasons for the Loan Portfolio Sale Proposal.” We also believe that if shareholders do not approve the Loan Portfolio Sale that: : (i) the value of our contracts and the receivables will decrease over time; and (ii) the purchase price offered by another potential buyer, if any, will be lower than the purchase price offered in the Loan Portfolio Sale. If the loan portfolio is not sold we expect the costs to run off the business will be significant. As part of our change in operating strategy and evolving restructuring in an effort to mitigate against these potential adverse effects and to maximize shareholder value, our Board seeks to effect the sale of all or substantially all of the undertaking of the Corporation and its affiliates. In furtherance of these efforts, the Board is presenting the Loan Portfolio Sale proposal for approval by the Corporation’s shareholders. The aggregate cash purchase price of approximately $65.5 million under the Asset Purchase Agreement equates to a book value per share of approximately $9.00 per share, subject to adjustment (both increases and deductions) in accordance with the terms of the Asset Purchase Agreement, as of November 13, 2023, compared to the closing price of the Corporation’s common stock on November 13, 2023 of $4.5285 per share. As reported in the Corporation’s Form 10-Q for the quarterly period ended September 30, 2023, the book value of the Corporation’s receivables, net of unearned discounts and fees and accrued interest receivable and the allowance for credit losses was $72,152,361. The Corporation divided that net book value by 7,290,557 shares of its common stock outstanding to calculate that the implied net book value of the receivables per share of common stock was approximately $9.90 per share. As also reported in the Corporation’s Form 10-Q for the quarterly period ended September

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30, 2023, the “fair value” of the Corporation’s receivables as of September 30, 2023 was $67,187,210. The Corporation divided that fair value amount by 7,290,557 shares of its common stock outstanding to calculate that the implied fair value of the receivables per share of common stock was $9.22 per share The book value per share based on the purchase price under the Asset Purchase Agreement, the closing price of the Corporation’s Common Stock on November 13, 2023, the implied net book value of the receivables per share of common stock and the implied fair value of the receivables per share of common stock is not determinative of fair value under the BCBCA for shareholders who dissent to the Loan Portfolio Sale. See “Dissent Rights of Shareholders” below.

If the Loan Portfolio Sale proposal is approved by the requisite vote of our shareholders and the Loan Portfolio Sale closes, among other things we intend to continue to pursue our restructuring plan. As part of our restructuring plan, we intend to use net proceeds from the Loan Portfolio Sale to either acquire or invest in businesses outside of the Corporation’s traditional business and seek to maximize the value of deferred tax assets, including net operating losses, available to the Corporation. The board of directors intends to explore acquisitions of businesses in industries with respect to which they have familiarity based on their other business and investment activities; however, the board does not intend to limit its acquisition and investment activities to those businesses and industries. The overall timeframe for potential acquisitions and investments remains uncertain. The board currently believes that the long-term interests of shareholders would be best served by the Corporation using the net proceeds from the Loan Portfolio Sale to acquire and invest in other businesses instead of liquidating and distributing the net sales proceeds to shareholders because it believes that such acquisitions and investments will, over time, increase shareholder value to a greater extent than what they would receive in liquidation. The liquidation value of the Corporation was not determined in connection with the Loan Portfolio Sale because we believe that there are inherent uncertainties in establishing that value based on the nature of most of our assets and their deterioration in value. There can be no assurance that any of these acquisitions or investments in other businesses, if made, will result in greater stockholder value than the liquidation and dissolution of the Corporation. See “RISK FACTORS- Risks Relating to the Loan Portfolio Sale.” In developing the restructuring plan and considering the Loan Portfolio Sale, the Board considered at length potential strategic alternatives available to us, including identifying available strategic alternatives and transactions involving the Corporation as a whole, such as a merger, reverse merger, sale of assets, strategic partnership or other business combination transaction, that would have a reasonable likelihood of providing value to our shareholders over time in excess of the amount, if any, the shareholders would receive in a liquidation. See “THE LOAN PORTFOLIO SALE- Our Business and Operations Following Approval of the Loan Portfolio Sale Proposal.” The Board determined that none of these potential strategic alternatives, other than the Loan Portfolio Sale, were viable. Currently, the Board has no plans to liquidate the Corporation’s assets and distribute funds from liquidation to the shareholders.

If the Loan Portfolio Sale is not approved by Shareholders and depending on the accuracy of the assumptions we have used, we believe that the book value per share of our common stock is likely to decrease or remain relatively stagnant over the next four years and our net income and cash flow are likely to be adversely impacted. If credit losses continue at a rate that we believe is the most likely, our loan portfolio is run off, new loan originations are less than $1 million annually, no loan portfolio acquisitions are made, Westlake continues to service our loan portfolio and we continue to employ approximately the same number of employees or fewer, then we believe that the book value per share of our common stock is likely to decrease, we are likely to suffer net losses and our cash flow could be negative over the course of the next four years. If credit losses are less than what we believe are most likely over the next four years, the book value per share of common stock could remain relatively stagnant or decrease to a lesser extent, we could experience both net income and net losses and we could have both positive and negative net cash flow in different years over the next four years. We also believe that if shareholders do not approve the Loan Portfolio Sale that the costs to run off the business will be significant. Although we believe the assumptions we have used are reasonable, there can be no assurance that they are reasonable, accurate, comprehensive or will be correct or that the impacts on our book value, net income and cash flow will be accurate. The actual book value of our common

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stock, net income and net cash flow may differ materially, either adversely or positively, from those we believe are most likely based on the assumptions we have used.

In reaching its decision to approve the Asset Purchase Agreement and to recommend that stockholders vote to approve the Loan Portfolio Sale, including the consideration to be received in the Loan Portfolio Sale, the Board, in consultation with management, considered a number of factors, including, but not limited to, the risk factors described elsewhere in this Circular or referred to herein, as well as the following factors:

•

if the Loan Portfolio Sale proposal is not approved by Shareholders we believe that our automobile finance installment contracts will continue to rapidly suffer large credit losses, which we believe would in turn result in a significant devaluation of the receivables associated with these contracts, the Corporation and the market value of its stock and add uncertainty to our ability to successfully implement our restructuring plan. We also believe that if shareholders do not approve the Loan Portfolio Sale that: (i) the value of our contracts and the receivables will decrease over time; and (ii) the purchase price offered by another potential buyer, if any, will be lower than the purchase price offered in the Loan Portfolio Sale. If the loan portfolio is not sold we expect the costs to run off the business will be significant;

•

the Board’s understanding of and familiarity with, and discussions with our management regarding, our current business, operations and financial condition and likely future business prospects for the Corporation if our restructuring plans are not pursued (as well as the risks and costs involved in pursuing our restructuring plans);

•

the potential ability to return value to our shareholders by pursuing our evolving restructuring plan in conjunction with the Loan Portfolio Sale;

•

the value of the consideration (including the liabilities and obligations to be assumed by the Purchaser) to be received by the Corporation pursuant to the Asset Purchase Agreement which will be paid all in cash;

•

the representation of the Purchaser that it has sufficient cash on hand or other sources of immediately available funds to enable it to timely make payment of the purchase price and consummate the transactions contemplated by the Asset Purchase Agreement;

•

the reasonableness of the conditions to the Loan Portfolio Sale, including Purchaser’s agreement to limit the survival period applicable to the representations and warranties to 12 months (excluding indemnification obligations relating to the lawsuit styled Nicholas Financial, Inc. v. Jeremiah Gross, No. 21CY-CV02148-01, 7th Judicial Circuit, Clay County, Missouri summarized in “LEGAL PROCEEDINGS” above which shall survive indefinitely and indemnification obligations for third party claims which relate to the fraud, gross negligence, or willful misconduct of Seller, which shall survive for a period twenty-four) months from the closing date);

•

the likelihood that the Loan Portfolio Sale will be completed based in part on Westlake’s familiarity, as servicer, with the automobile finance installment contracts, which we believe that other third parties might not obtain even through their own due diligence, and on the probability that the shareholder approval necessary to complete the Loan Portfolio Sale will be obtained;

•

the Loan and Security Agreement with the Lender would require Seller to pay prepayment penalties, termination penalties and a fee for the sale of the contracts to a third party, which another third‑party purchaser might deduct from the purchase price it would offer; and

•

the likelihood that if our shareholders do not approve the Loan Portfolio Sale, there may not be any other offers from potential acquirers.

Our Board also considered potential drawbacks or risks relating to the Loan Portfolio Sale, including the following risks and potentially negative factors, but determined that these potential risks and factors were outweighed by the expected benefits of the Loan Portfolio Sale:

•

the risks and contingencies relating to the announcement and pendency of the Loan Portfolio Sale;

•

the incurrence of significant costs and expenses in connection with attempting to complete the Loan Portfolio Sale, including legal, accounting and other costs;

•

the fact that the assets being sold to Purchaser include substantially all of our non-cash assets;

•

that the Company could become a shell company (see “RISK Factors-Risks Relating to the Loan Portfolio Sale”);

•

that the common shares could be delisted by NASDAQ (see “RISK Factors-Risks Relating to the Loan Portfolio Sale”);

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that the Asset Purchase Agreement obligates us to indemnify Purchaser and certain of its related parties against certain damages;

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one or more third parties could assert claims against us, either before or after the closing, and seek damages or other remedies. We might be required to spend substantial time and resources defending any such claims, and any amounts paid to any such third parties would reduce the net amount received from the transaction; and

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that certain of our officers and directors may have interests with respect to the Loan Portfolio Sale in addition to their interests as stockholders generally.

The foregoing discussion of the factors considered by the Board is not intended to be exhaustive, but rather includes material factors considered by the directors. The Board also considered other factors, including those described in the section entitled “Risk Factors Relating to the Loan Portfolio Sale” beginning on page 15 of this Circular, in deciding to approve, and recommending that our stockholders authorize, the Loan Portfolio Sale. In reaching its decision and recommendation to our shareholders, the Board did not quantify or assign any relative weights to the factors considered and individual directors may have given different weights to different factors. In addition, the Board did not undertake to make any specific determination as to whether any particular factor, or any aspect of any particular factor, was favorable or unfavorable to its ultimate determination, but rather conducted an overall analysis of the factors described above.

Our Business and Operations Following Approval of the Loan Portfolio Sale Proposal

If the Loan Portfolio Sale proposal is approved by the requisite vote of our shareholders and the Loan Portfolio Sale closes, among other things we intend to pursue our restructuring plan. We intend to use net proceeds from the sale to either acquire or invest in businesses outside of the Corporation’s traditional business. The board of directors intend to explore acquisitions of businesses in industries with respect to which they have familiarity based on their other business and investment activities; however, the board does not intend to limit its acquisition and investment activities to those businesses and industries. The overall timeframe for potential acquisitions and investments remains uncertain. In exploring and considering potential acquisitions and investments, the Board intends to pursue opportunities that would have a reasonable likelihood of providing value to our shareholders over time in excess of the amount, if any, the shareholders would receive in a liquidation. The Board currently believes that the long-term interests of shareholders would be best served by the Corporation pursuing the Loan Portfolio Sale, the restructuring plan and other strategic initiatives that the Board may subsequently determine are in the best interests of shareholders. There can be no assurance that any of these alternatives will result in greater stockholder value than the liquidation and dissolution of the Corporation. See “RISK FACTORS- Risks Relating to the Loan Portfolio Sale.”

Shareholder Approval

The closing of the Loan Portfolio Sale is subject to various conditions, including approval of the special resolution authorizing the Loan Portfolio Sale by our shareholders at the Special Meeting. A copy of the special resolution is attached to this Circular as Exhibit A-2. Under the BCBCA, the Loan Portfolio Sale requires affirmative votes, whether in person or by proxy, of at least three-quarters of the votes cast by the holders of our common shares at the Special Meeting where a quorum, or not less than one-third of our total outstanding common shares is present in person or by proxy. Assuming we receive the requisite shareholder approval for the Loan Portfolio Sale, the Loan Portfolio Sale may not close or may be terminated if the conditions to consummation of the Loan Portfolio Sale have not occurred pursuant to the terms of the Asset Purchase Agreement. There are no time limits on the duration of the authorization resulting from a favorable shareholder vote.

Dissent Rights of Shareholders

Sections 237 - 247 of the BCBCA is reprinted in their entirety as Exhibit E to this Circular. Shareholders may exercise their dissent rights in connection with the proposal to approve the Loan Portfolio Sale Proposal 2 in the Notice of Special Meeting).

If you wish to dissent and do so in compliance with Sections 237 - 247 of the BCBCA, you will be entitled to be paid the fair value of the shares you hold if the Loan Portfolio Sale occurs. Fair value is determined as of the close of business on the day before the Loan Portfolio Sale is approved by shareholders.

If you wish to dissent, you must send us your written objection to the continuation at or before the Special Meeting. If you vote in favor of the Loan Portfolio Sale, you in effect lose your rights to dissent. If you abstain or vote against the Loan Portfolio Sale, you preserve your dissent rights if you comply with Sections 237 - 247 of the BCBCA.

However, it is not sufficient to vote against the Loan Portfolio Sale or to abstain. You must also provide a separate dissent notice at least two days before the date of the Special Meeting. If you grant a proxy and intend to dissent, the proxy must instruct the proxy holder to vote against the Loan Portfolio Sale in order to prevent the proxy holder from voting such shares in favor of the Loan Portfolio Sale and thereby voiding your right to dissent. Under the BCBCA, you have no right of partial dissent. Accordingly, you may only dissent as to all your shares.

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When and if the Loan Portfolio Sale is approved, we are required by Section 243 of the BCBCA to notify each shareholder who has filed a Dissent Notice of our intention to proceed. This notice must be sent promptly after the later of: (i) the date on which Nicholas Financial, Inc. forms the intention to proceed, and (ii) the date on which the notice of dissent was received. We will not send a notice to any dissenting shareholder who voted to approve the Loan Portfolio Sale or who has withdrawn a Dissent Notice.

If the dissent is being exercised by the dissenting shareholder on behalf of a non-registered shareholder, a written statement that: (i) is signed by the non-registered shareholder on whose behalf dissent is being exercised; and (ii) sets out whether or not the such non-registered shareholders is the beneficial owner of other shares and, if so, sets out: (A) the names of the registered owners of those other shares, (B) the number, and the class and series, if applicable, of those other shares that are held by each of those registered owners, and (C) that dissent is being exercised in respect of all of those other shares, all in accordance with Section 244 of the BCBCA. Upon such delivery, a dissenting shareholder will be bound to sell and the Corporation will be bound to purchase the shares subject to the demand for a payment equal to their fair value as of the day before the day on which the Loan Portfolio Sale resolution was passed by the shareholders, excluding any appreciation or depreciation in anticipation of the vote (unless such exclusion would be inequitable). If you fail to send us a Dissent Notice, a written statement of dissent, or your share certificates within the appropriate time frame, you will forfeit your right to dissent and your right to be paid the fair value of your shares. The Corporation or its transfer agent will endorse on your share certificates a notice that you are a dissenting shareholder and will return the share certificates to you.

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you withdraw your written statement of dissent prior to an offer being made by us to pay out your Notice Shares;

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we fail to make you an offer of payment and you withdraw the dissent notice; or

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the Loan Portfolio Sale does not happen.

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United States and Canadian Income Tax Considerations

The Loan Portfolio Sale may have income tax consequences in both the United States and Canada. The material tax consequences of the Loan Portfolio Sale to us and our current shareholders are summarized below.

United States Federal Income Tax Consequences.

For U.S. income tax purposes, the proposed Loan Portfolio Sale will be treated as a sale of corporate assets in exchange for cash, subject to certain true‑up provisions as set forth in the Asset Purchase Agreement. The amount of gain or loss we recognize with respect to the sale of the Loan Portfolio will be measured by the difference between the amount realized by us in connection with the Loan Portfolio Sale and our adjusted tax basis the Loan Portfolio. Based on the terms of the Asset Purchase Agreement and our best estimates at this time of our adjusted tax basis in the Loan Portfolio, we expect the total adjusted tax basis of all our Loan Portfolio assets to exceed the total amount realized; therefore, we expect to recognize a net income tax loss on the Loan Portfolio Sale. We currently estimate such net income tax loss on the Loan Portfolio Sale to be between $25 million to $30 million, subject to certain true‑up provisions as set forth in the Asset Purchase Agreement.

The determination of the amount of gain (if any) or loss we will recognize for tax purposes on the Loan Portfolio Sale and whether and to what extent our tax attributes will be available to reduce gain (if any) is highly complex and is based in part upon facts that will not be fully known until the completion of the Loan Portfolio Sale.

Material Canadian Federal Tax Considerations Under the Income Tax Act

The following is a summary of the material Canadian federal income tax considerations generally applicable to the Corporation and to shareholders of the Corporation in connection with the Loan Portfolio Sale. The summary applies to the Corporation and to holders of shares who, for the purposes of the Income Tax Act (Canada), or Tax Act, hold shares as capital property, who deal at arm’s length, and are not affiliated, with the Corporation and in the case of a shareholder who is or is deemed to be resident in Canada for purposes of the Tax Act, for whom the Canadian dollar is the functional currency for the purposes of the Tax Act. This summary does not apply to shareholders that are “financial institutions” as defined for the purposes of the “mark-to-market” rules in the Tax Act or in respect of whom the Corporation will, at any time after the Loan Portfolio Sale, be a “foreign affiliate” for purposes of the Tax Act.

This summary has limited applicability to partnerships, estates, trusts, persons subject to specialized tax treatment such as registered charities or tax-exempt persons, tax deferred retirement savings or other plans, real estate investment trusts or mutual funds. It is strongly recommended that each shareholder consult his or her own tax advisors with respect to the particular tax consequences to them of the Loan Portfolio Sale, which tax consequences may vary depending upon his or her own particular circumstances.

Tax Treatment of the Company

The Corporation is liable to tax under the Tax Act in each taxation year on the amount of its income for the year.

In computing its income for each taxation year, the Corporation must include its share of any “foreign accrual property income” (“FAPI”) of any of its “controlled foreign affiliates” (“CFA”) or any direct or indirect subsidiary thereof that is itself a CFA (“Indirect CFA”) whether or not the Corporation actually receives a distribution of such FAPI. FAPI is generally reduced by a deduction in respect of foreign accrual tax paid by the relevant CFA or Indirect CFA.

While the Corporation does not expect that any of its income from its loan portfolio or the proceeds from the sale of the loan portfolio is FAPI, to the extent that any CFA or Indirect CFA of the Company earns income that is characterized as FAPI, the FAPI of the CFA allocable to the Corporation must be included in computing the income of the Corporation for Canadian federal income tax purposes for the fiscal year of the Corporation in which the taxation year of the CA or the Indirect CFA ends, whether the Corporation receives a distribution of that FAPI or not.

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The adjusted cost base to the Company of its shares of the particular CFA in which the FAPI was deemed to have accrued will be increased by the net amount so included in the income of the Corporation. At such time as the Corporation receives dividends from NDS or any other CFA of amounts that were previously included in its income as FAPI, that dividend will effectively not be taxable to the Corporation and there will be a corresponding reduction in the adjusted cost base to the Corporation of its shares of the particular CFA.

The Corporation is required to include in its income for each taxation year all dividends received (or deemed to be received) by it form CFAs in respect of CFA income that is not FAPI. The Corporation may then be entitled to a corresponding deduction in computing its taxable income in respect of all or a portion of dividends received. The nature and extent of the deduction in respect of foreign affiliates will depend on the surplus accounts of the foreign affiliate that paid the dividend.

Tax Treatment of Dissenting Shareholders

A Holder who validly exercises dissent rights concerning the Domestication or the Loan Portfolio Sale (A “Dissenting Holder”) will be entitled to be paid the fair value of the Holder’s Corporation shares.

Canadian Resident Dissenting Holders

If the Loan Portfolio Sale closes prior to the domestication, a Dissenting Holder who, at all relevant times, and for purposes of the Tax Act and any applicable income tax treaty or convention, is resident or deemed to be a resident of Canada (a “Dissenting Resident Holder”) will be deemed to have received a taxable dividend equal to the amount, if any, by which the amount received for the Corporation Shares (less the amount of interest, if any, awarded by the Court) exceeds the paid‑up capital of such shares (as determined under the Tax Act).

Dissenting Resident Holders will be required to include in computing income for a taxation year the amount of any such deemed dividend on the Corporation Shares.

In the case of a Dissenting Resident Holder that is an individual (other than certain trusts), such dividends will be subject to the grow‑up and dividend tax credit rules normally applicable in respect of “taxable dividends” received from “taxable Canadian corporations” (each as defined in the Tax Act). An enhanced dividend tax credit will be available to individuals in respect of “eligible dividends” (as defined in the Tax Act) designated by the Corporation in accordance with the provisions of the Tax Act.

In the case of a Dissenting Resident Holder that is a corporation, any deemed dividend will be included in income for that taxation year and generally will be deductible in computing its taxable income for that year. However, in some circum

SEC Form 424B3 filed by Nicholas Financial Inc.