ASSET PURCHASE AGREEMENT BY AND AMONG META FINANCIAL GROUP, INC., METABANK, AND SPECIALTY CONSUMER SERVICES LP Dated as of November 9, 2016

BY AND AMONG

META FINANCIAL GROUP, INC.,

METABANK,

AND

SPECIALTY CONSUMER SERVICES LP

Dated as of November 9, 2016

 

 

 

 

THIS ASSET PURCHASE AGREEMENT (this “Agreement”) is entered into as of November 9, 2016, by and among META FINANCIAL GROUP, INC., a Delaware corporation (“Parent”), METABANK, a federally chartered stock saving bank (“Buyer”) and SPECIALTY CONSUMER SERVICES LP, a Texas limited partnership (“Seller”). Buyer and Seller are referred to collectively herein as the “Parties” and each, a “Party”.

W I T N E S S E T H

WHEREAS, Seller is engaged in the business of providing consumer tax refund advance products and services and installment loan products and services (the “Business”);

WHEREAS, Seller desires to sell certain assets and transfer certain liabilities with respect to the Business;

WHEREAS, subject to the terms and conditions set forth in this Agreement, Buyer desires to purchase certain assets and assume certain liabilities of Seller related to the Business;

WHEREAS, the Parties desire to set forth in writing the terms and conditions under which the transaction will be consummated.

NOW, THEREFORE, in consideration of the foregoing and of the representations, warranties, covenants and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the Parties, the Parties hereby agree as follows:

ARTICLE 1

DEFINITIONS

Capitalized terms used but not otherwise defined herein shall have the following meanings:

“1MC” means 1st Money Center, Inc., a Texas corporation.

“Accounts Receivable” has the meaning set forth in Section 2.1(a)(ix) of this Agreement.

“Acquired Assets” has the meaning set forth in Section 2.1(a) of this Agreement.

“Acquired Contracts” means any Contracts of Seller set forth on Schedule I hereto.

“Acquired Intellectual Property” means the Intellectual Property owned, held for use, used, sold, distributed or licensed in or by the Business, including all loan origination and loan underwriting risk engine hardware and software, all credit underwriting models and scorecards used in the Business and the data underlying such models and scorecards.

 

“Acquisition” means Buyer’s acquisition of the Acquired Assets and assumption of the Assumed Liabilities pursuant to the terms of this Agreement.

“Additional Contracts” has the meaning set forth in Section 7.13 of this Agreement.

“Affiliate” means with respect to any Person, any Person directly or indirectly controlling, controlled by, or under common control with such other Person. For purposes of this definition, “control” (including with correlative meaning, the terms “controlled by” and “under common control with”) as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities, by Contract or otherwise.

“Agreement” has the meaning set forth in the preface above.

“Allocation” has the meaning set forth in Section 2.5 of this Agreement.

“Alternative Transaction” has the meaning set forth in Section 7.8 of this Agreement.

“Applicable Laws” means all applicable federal, state, county and municipal laws, codes, Orders and other requirements of Governmental Bodies, constitutions, ordinances, statutes, rules, regulations, guidance and administrative interpretations and pronouncements as well as any arbitration proceedings.

“Assignment and Assumption Agreement” has the meaning set forth in Section 10.1(l) of this Agreement.

“Assumed Liabilities” has the meaning set forth in Section 2.1(c) of this Agreement.

“Book Value” means, with respect to any Acquired Asset and any Assumed Liability, or any Excluded Asset or Excluded Liability, as applicable, the dollar amount thereof stated on the accounting records of the applicable Seller, in each case as determined in accordance with GAAP applied on a consistent basis.

“Books and Records” has the meaning set forth in Section 8.2 of this Agreement.

“Business” has the meaning set forth in the recitals above.

“Business Day” means a day other than a Saturday, Sunday or any holiday observed by the Federal Reserve.

“Buyer” has the meaning set forth in the preface above.

“Buyer Core Representations” has the meaning set forth in Section 12.1 of this Agreement.

“Buyer Documents” means this Agreement and each other agreement, instrument or document entered into by Buyer pursuant to this Agreement.

 

“Buyer Indemnified Persons” has the meaning set forth in Section 12.2 of this Agreement.

“Cap” means an amount equal to the sum of (a) the Escrow Amount, plus (b) the Earnout Escrow Amount, plus (c) the aggregate Share Value of all the Indemnification Shares.

“Cash” means (a) cash and cash equivalents held by Seller determined in accordance with GAAP, minus (b) any outstanding checks, debts, wire transfers and debit transactions made, issued, written or drawn on any account of Seller outstanding as of Closing that have not been deducted from cash.

“Claim” means a claim for indemnification pursuant to Article 12, including a Third Party Claim.

“Closing” has the meaning set forth in Section 2.6 of this Agreement.

“Closing Cash Payment” means an aggregate amount equal to (a) Seven Million Five Hundred Thousand Dollars ($7,500,000) (the “Cash Consideration”), as adjusted pursuant to Section 2.3(a), plus (b) the amount, if any, by which the Estimated Working Capital is greater than the Target Working Capital, minus (c) the amount, if any, by which the Estimated Working Capital is less than the Target Working Capital, plus (d) the amount of all security deposits or rights thereto included in the Acquired Assets.

“Closing Consideration” has the meaning set forth in Section 2.2(a) of this Agreement.

“Closing Date” has the meaning set forth in Section 2.6 of this Agreement.

“Closing Schedule” has the meaning set forth in Section 2.3(b)(i) of this Agreement.

“Closing Working Capital” has the meaning set forth in Section 2.3(b)(i) of this Agreement.

 “Closing Working Capital Addition” has the meaning set forth in Section 2.3(a) of this Agreement.

“Closing Working Capital Reduction” has the meaning set forth in Section 2.3(a) of this Agreement.

“COBRA” has the meaning set forth in Section 7.9 of this Agreement.

“Code” means the Internal Revenue Code of 1986, as amended.

“Commercial Software” means commercially available software programs generally available to the public which have been licensed to Seller pursuant to non-negotiable “click-wrap,” “click to download,” “browsewrap” or “shrink-wrap” end-user licenses.

 “Competitive Business” has the meaning set forth in Section 8.5(a) of this Agreement.

“Computer System” has the meaning set forth in Section 4.23(g) of this Agreement.

 

“Confidential Information” means (a) any and all information concerning the Business, any Party or any Party’s Affiliates that is not generally known to the public, including historical financial statements, financial projections and budgets, historical and projected sales, capital spending budgets and plans, personnel training and techniques and materials, purchasing methods and techniques, product specifications, data, know-how, formulae, compositions, processes, designs, sketches, photographs, graphs, drawings, inventions and ideas, past, current and planned research and development, customer lists, current and anticipated customer requirements, price lists, market studies, business plans, computer software (including object code and source code), database technologies, systems, structures, architectures, processes, improvements, devices, discoveries, concepts and methods, and any other information, however documented, of the Business, any Party or any Party’s Affiliates; and (b) any and all notes, analysis, compilations, studies, summaries and other material prepared by or for any Party or any Party’s Affiliates or for the Business containing or based, in whole or in part, upon any information included in the foregoing; provided, however, Confidential Information shall not include any information that a Party can show (i) is or was generally available to the public other than as a result of disclosure by such Party or its Affiliates; or (ii) is or was lawfully acquired by such Party or its Affiliates from and after the Closing from sources that are not prohibited from disclosing such information by a legal, contractual or fiduciary obligation.

“Consent” means any approval, consent, ratification, waiver or other authorization.

“Contract” means any agreement, contract, lease, obligation, promise or undertaking (whether written or oral) that is legally binding.

 “Copyrights” has the meaning set forth in the definition of Intellectual Property.

“Disclosure Schedule” means the disclosure schedules delivered by Seller under Article 4 of this Agreement that limit or qualify the representations and warranties made by Seller under Article 4 of this Agreement.

“Earnout Escrow Amount” is defined on Schedule 2.4.

“Earnout Payments” has the meaning set forth in Section 2.4 of this Agreement.

“Effective Time” means 12:01 a.m. (Eastern time) on the Closing Date.

“Employee Benefit Plan” means any of the following (whether written, unwritten or terminated) which Seller or any of its ERISA Affiliates has at any time sponsored or maintained, or to which Seller or any of its ERISA Affiliates has at any time made contributions, or with respect to which Seller or any of its ERISA Affiliates has or could reasonably be expected to have any other Liability (contingent or otherwise) at any time: (a) any “employee welfare benefit plan,” as defined in Section 3(1) of ERISA, including, without limitation, any medical plan, life insurance plan, short-term or long-term disability plan, dental plan, and sick leave; (b) any “employee pension benefit plan,” as defined in Section 3(2) of ERISA, including, without limitation, any excess benefit, top hat or deferred compensation plan or any nonqualified deferred compensation or retirement plan or arrangement or any qualified defined contribution or defined benefit plan; or (c) any other plan, policy, program, arrangement or agreement which provides employee benefits or benefits to any current or former employee, dependent, beneficiary, director, independent contractor or like person, including, without limitation, any severance agreement or plan, personnel policy, vacation time, holiday pay, service award, moving expense reimbursement programs, material fringe benefit plan or program, bonus or incentive plan, option, restricted security, bonus or deferred bonus plan, salary reduction, change-of-control or employment agreement (or consulting agreement with a former employee).

 

“Employment Agreement” has the meaning set forth in Section 10.1(i) of this Agreement.

“Encumbrance” means any charge, claim, community property interest, condition, encumbrance, equitable interest, lien, option, pledge, mortgage, security interest, conditional sale agreement, right of first refusal, or restriction of any kind, including any restriction on use, voting, transfer, receipt of income, or exercise of any other attribute of ownership.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“ERISA Affiliate” means, with respect to any Employee Benefit Plan that is an “employee benefit plan” within the meaning of Section 3(3) of ERISA that is not exempt from ERISA pursuant to Section 4(b) thereof, any Person which is treated as being a single employer or under common control with Seller under Section 414(b), (c), (m) or (o) of the Code.

“Escrow” means the Escrow Amount held by the Escrow Agent, together with any interest and other amounts earned thereon.

“Escrow Agent” means U.S. Bank National Association, a national banking association, or such other entity mutually agreed to in writing by the Parties.

“Escrow Agreement” has the meaning set forth in Section 3.1 of this Agreement.

“Escrow Amount” means $750,000.

“Escrow Termination Date” means the twelve (12) month anniversary of the Closing Date.

“Estimated Closing Schedule” has the meaning set forth in Section 2.3(a) of this Agreement.

“Estimated Working Capital” has the meaning set forth in Section 2.3(a) of this Agreement.

“Exchange Act” means the United States Securities Exchange Act of 1934, as amended, and the rules and regulations pertaining thereto.

“Excluded Assets” has the meaning set forth in Section 2.1(b) of this Agreement.

“Excluded Business” means the business of providing to customers payday loans, title loans and durable goods on a rent-to-own basis.

 

“Excluded Contracts” means any Contracts of Seller not set forth on Schedule I hereto.

“Excluded Liabilities” has the meaning set forth in Section 2.1(d) of this Agreement.

“Family Member” means, as applied to any individual, any parent, spouse (or former spouse), child, spouse of a child, brother or sister of the individual, and each trust created for the benefit of one or more of such Persons, and each custodian of property of one or more such Persons.

“Federal Funds Rate” means the federal funds rate as quoted by the Federal Reserve Bank of New York (the “Federal Reserve”) on the relevant Business Day.

 “Final Working Capital” has the meaning set forth in Section 2.3(b)(iv) of this Agreement.

“Financial Statements” has the meaning set forth in Section 4.5(a) of this Agreement.

“Governmental Body” means any (a) federal, state, local, municipal, foreign or other government; (b) governmental or quasi‑governmental authority of any nature (including any governmental agency, branch, department, official or entity and any court or other tribunal); or (c) body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory, or taxing authority.

“Hazardous Substances” means all substances, wastes, materials or chemicals classified or regulated as hazardous or toxic or as a pollutant or contaminant under environmental laws, including petroleum and petroleum products, asbestos and asbestos‑containing materials.

“Income Taxes” means any Taxes measured by or imposed on net income.

“Indebtedness” means, with respect to any Person, all Liabilities (a) for borrowed money, whether current or funded, short‑term or long‑term, secured or unsecured, (b) for the deferred purchase price of any property or services (other than, with respect to Seller, trade accounts payable reflected as current liabilities in the Final Working Capital), (c) created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person, (d) secured by a purchase money mortgage or other Encumbrance to secure all or part of the purchase price of property subject to such mortgage or Encumbrance, (e) under leases which shall have been or are required to be, in accordance with GAAP, recorded as capital leases in respect of which such Person is liable as lessee, (f) in respect of bankers’ acceptances or letters of credit, (g) secured by Encumbrances on property acquired by such Person, whether or not such obligations were assumed by such Person at the time of acquisition of such property, (h) with respect to interest rate swaps, collars, caps and similar hedging obligations, (i) in respect of all present, future or contingent obligations of such Person existing as of Closing under deferred pay‑out, earn‑out or other similar arrangements in connection with the purchase of any business or entity, (j) with respect to Seller, for any indebtedness or any other obligations of Seller owed to its limited partners or their Affiliates or to any other Affiliate of Seller, (k) with respect to Seller, for any indebtedness or any obligation of Seller incurred for the personal benefit of any of its limited partners or their Affiliates or any other Affiliate of Seller, (l) all obligations which are directly or indirectly guaranteed by such Person or which such Person has agreed (contingently or otherwise) to purchase or otherwise acquire or in respect of which it has otherwise assured a credit against loss, (m) interest, principal, prepayment penalty, premiums, fees, or expenses, to the extent due or owing in respect of those items listed in clauses (a) through (m), whether resulting from their payment or discharge or otherwise and (n) all refinancings of any of the foregoing obligations.

 

“Indemnification Notice” has the meaning set forth in Section 12.4(b) of this Agreement.

“Indemnification Shares” means any 11,333 shares of Parent Common Stock.

“Indemnified Party” has the meaning set forth in Section 12.4(a) of this Agreement.

“Indemnifying Party” has the meaning set forth in Section 12.4(a) of this Agreement.

“Independent Accountant” has the meaning set forth in Section 2.3(b)(iv) of this Agreement.

“Intellectual Property” means intellectual property, confidential information and proprietary information, in any and all medium, including digital, and in any jurisdiction, including all U.S. and foreign (a) trademarks, service marks, trade names, Internet domain names, designs, logos, slogans and other distinctive indicia of origin, together with goodwill, registrations and applications relating to the foregoing (“Trademarks”); (b) patents and pending patent applications, invention disclosure statements, and any and all divisions, continuations, continuations-in-part, reissues, reexaminations, and any extensions thereof, any counterparts claiming priority therefrom and like statutory rights (“Patents”); (c) Software, registered and unregistered copyrights (including those in Software or in the content and information contained on any web site or social media site), rights of publicity, and all registrations and applications to register the same (“Copyrights”); and (d) trade secrets, confidential technology, know-how, inventions, processes, formulae, algorithms, models, specifications and methodologies.

“Interim Period” has the meaning set forth in Article 7 of this Agreement.

“Key Employee” means each individual set forth on Schedule II.

“Knowledge” or “knowledge” means: (a) with respect to Seller, the knowledge which any one or more of M. ▇▇▇▇▇ ▇▇▇▇▇▇ actually has and the knowledge that he would have obtained after making a reasonable due inquiry of his direct reports with responsibility for the subject matter in question; (b) with respect to Parent, the knowledge which any one or more of J. ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ actually have; and (c) with respect to Buyer, the knowledge which any one or more of J. ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ actually have.

“Leases” has the meaning set forth in Section 4.16(b) of this Agreement.

“Letter of Direction” means the letter of direction from Seller to Buyer and Parent in the form attached hereto as Exhibit A.

 

“Liability” means any liability, whether known or unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, and due or to become due, of any nature whatsoever, including any liability for Taxes.

 

 

“Material Adverse Change” means any event, change, development, or effect that individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect on (a) the Business, the Acquired Assets, or the condition (financial or otherwise) or results of operations of the Business or (b) the ability of Seller to perform its obligations under this Agreement or the Seller Documents or to consummate the Transactions; provided, however, that solely with respect to the foregoing clause (a), none of the following will be deemed in themselves, either alone or in combination, to constitute and none of the following will be taken into account in determining whether there has been, or will be, a Material Adverse Change: any change, effect, event, occurrence, state of facts or development attributable to: (i) operating, business, regulatory or other conditions in the industry in which the Seller operates; (ii) general economic conditions, including changes in the credit, debt or financial, capital markets, in each case, in the United States or anywhere else in the world; (iii) conditions in the securities markets, capital markets, credit markets, currency markets or other financial markets in the United States or any other country or region in the world, including (A) changes in interest rates in the United States or any other country or region in the world and changes in exchange rates for the currencies of any countries and (B) any suspension of trading in securities (whether equity, debt, derivative or hybrid securities) generally on any securities exchange or over-the-counter market operating in the United States or any other country or region in the world; (iv) any stoppage or shutdown of any U.S. government activity (including any default by the U.S. government or delays in payments by government agencies or delays or failures to act by any Governmental Body); (v) the announcement of the transactions contemplated by this Agreement (including the identity of Parent), including the impact thereof on clients, customers or suppliers; (vi) changes in GAAP or other accounting requirements or principles; (vii) the failure of Seller to meet or achieve the results set forth in any internal budget, plan, projection or forecast; (viii) global, national or regional political, financial, economic or business conditions, including hostilities, acts of war, sabotage or terrorism or military actions or any escalation, worsening or diminution of any such hostilities, acts of war, sabotage or terrorism or military actions existing or underway and (ix) hurricanes, earthquakes, floods, tsunamis, tornadoes, mudslides, wild fires or other natural disasters and other force majeure events in the United States or any other country or region in the world (except, in the case of clauses (i), (ii), (iii), (iv), (vi), (viii) and (ix), to the extent having a disproportionate impact on the Seller, taken as a whole, relative to other Persons operating in the same industry or industries as the Seller).

“Material Contracts” has the meaning set forth in Section 4.9(b)(xviii) of this Agreement.

“New Contracts” has the meaning set forth in Section 7.13 of this Agreement.

“Non‑disclosure Agreement” means (a) the Mutual Confidentiality Agreement, dated as of July 8, 2016, by and between Buyer and 1MC, and (b) Paragraph 14 of the Letter of Intent between Buyer and 1MC, dated July 27, 2016.

 

“OCC” means the Office of the Comptroller of the Currency.

“Order” means any cease or desist order, written agreement, memorandum of understanding, decision, injunction, judgment, order, ruling, decree, subpoena or verdict entered, issued, made or rendered by any court, administrative agency or other Governmental Body or by any arbitrator.

“Ordinary Course of Business” means the ordinary course of business consistent with past practices (none of which result from, arise out of, relate to, is in the nature of, or was caused by any breach of Contract, breach of warranty, tort, infringement, violation of Applicable Laws or Proceeding).

“Outside Date” has the meaning set forth in Section 11.1(b) of this Agreement.

“Owned Intellectual Property” has the meaning set forth in Section 4.23(e) of this Agreement.

“Parent” has the meaning set forth in the preface above.

“Parent Common Stock” shall mean the common stock of Parent, par value $0.01 per share.

“Parent Core Representations” has the meaning set forth in Section 12.1 of this Agreement.

“Parent Documents” means this Agreement and each other agreement, instrument or document entered into by Parent pursuant to this Agreement.

“Parent Material Adverse Effect” shall mean any event, change or effect that, when taken individually or together with all other adverse changes and effects, is or is likely to be materially adverse to the financial condition, properties, assets, liabilities, business, operations, results of operations or customer prospects identified as such by Parent (but only to the extent such material adverse change or effect to such customer prospects is or is likely to be materially adverse to the financial results of Parent) of Parent and its Subsidiaries, taken as a whole, or may prevent or materially delay consummation of the Transactions or otherwise prevent Parent from performing its obligations under this Agreement or any other Parent Document; provided, however, that any adverse effect that results from (a) general economic, business or industry conditions, events or matters that do not disproportionately affect Parent and its Subsidiaries taken as a whole, (b) any failure by Parent to meet published analysts estimates, projections or forecasts of revenues, earnings or other financial or business metrics, in and of itself (it being understood that the underlying cause(s) of any such failure may be taken into consideration), (c) any decline in the market price or change in the trading volume of Parent Common Stock, in and of itself (it being understood that the underlying cause(s) of any such failure may be taken into consideration), (d) political or social conditions, events or matters (whether or not pursuant to the declaration of war or the occurrence of any military or terrorist attack) that do not disproportionately affect Parent and its Subsidiaries taken as a whole, shall be disregarded in determining whether there has been or would be a “Parent Material Adverse Effect.”

 

“Parent SEC Documents” has the meaning set forth in Section 6.5.

“Parent Shares” has the meaning set forth in Section 4.26.

“part-time employee” has the meaning set forth in Section 4.20(a).

“Parties” or “Party” has the meaning set forth in the preface above.

“Patent” has the meaning set forth in the definition of Intellectual Property.

“Permit” means any approval, accreditation, consent, license, permit, registration, notice, qualification, certification, exemption, concession, waiver, non‑objection or other authorization issued, granted, given by or under the authority of any Governmental Body or pursuant to any Applicable Laws.

“Permitted Encumbrances” means those Encumbrances set forth on Schedule III hereto.

“Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a joint venture, an unincorporated organization, or a Governmental Body.

“Post‑Closing FSA” has the meaning set forth in Section 8.7(a) of this Agreement.

“Post‑Closing Working Capital Addition” has the meaning set forth in Section 2.3(c)(i) of this Agreement.

“Post‑Closing Working Capital Reduction” has the meaning set forth in Section 2.3(c)(ii) of this Agreement.

“Potential Employees” has the meaning set forth in Section 7.9(a) of this Agreement.

“Proceeding” means any claim, action, arbitration, audit, proceeding, oversight, investigation, inquiry, litigation, or suit (whether civil, criminal, administrative, investigative, or informal) commenced, brought, conducted, or heard (or capable of being heard) by or before, or otherwise involving, any Governmental Body or arbitrator.

“Protected Customers” has the meaning set forth in Section 8.5(b) of this Agreement.

“Protest Notice” has the meaning set forth in Section 2.3(b)(ii) of this Agreement.

“Purchase Price” has the meaning set forth in Section 2.2(a) of this Agreement.

“Regulatory Approvals” means (a) the approval or non‑objection, as the case may be, of the OCC, and (b) the approval, consent, license, permit, registration, certification, exemption, waiver, non‑objection or other authorization of all Governmental Bodies listed on Schedule IV hereto.

 

“Representatives” means, with respect to any Person, such Person’s directors, managers, partners, officers, employees, successors or assigns.

“Restraint” has the meaning set forth in Section 9.3(a) of this Agreement.

“Restricted Period” has the meaning set forth in Section 8.5(a) of this Agreement.

“Restricted Personnel” has the meaning set forth in Section 8.5(c) of this Agreement.

“Retained Employees” has the meaning set forth in Section 7.9(b) of this Agreement.

“▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act” means the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002, as amended, and the rules and regulations promulgated thereunder.

“Schedule Update” has the meaning set forth in Section 7.12 of this Agreement.

“SEC” means the United States Securities and Exchange Commission.

“Securities Act” means the United States Securities Act of 1933, as amended, and the rules and regulations pertaining thereto.

“Seller” has the meaning set forth in the preface above.

“Seller Confidential Parties” has the meaning set forth in Section 8.5(d) of this Agreement.

“Seller Contractors” has the meaning set forth in Section 4.14(b) of this Agreement.

“Seller Core Representations” has the meaning set forth in Section 12.1 of this Agreement.

“Seller Documents” means this Agreement and each other agreement, instrument or document entered into by Seller pursuant to this Agreement.

“Seller Employees” has the meaning set forth in Section 4.14(a) of this Agreement.

“Seller FSA” has the meaning set forth in Section 8.7(a) of this Agreement.

“Seller Indemnified Persons” has the meaning set forth in Section 12.3 of this Agreement.

“Seller Transaction Expenses” means (a) all fees, costs, expenses and obligations of Seller incurred in connection with the negotiation, documentation and consummation of the Transactions, including all fees, expenses, disbursements and other similar amounts paid to attorneys, financial advisors, accountants or other advisors; (b) all payments required to obtain third party consents in connection with the consummation of the Transactions; and (c) all change of control, severance, bonus or similar payments due by Seller to any Person under any plan, agreement or arrangement of Seller, which obligation, in each case, is payable or becomes due as a result of the consummation of the Transactions, including all Taxes that are payable by such Seller in connection with the payment of such obligation.

 

“Share Value” has the meaning set forth in Section 12.6.

“Software” means all computer programs, including any and all software implementations of algorithms, models and methodologies whether in source code or object code form, databases and compilations, including any and all electronic data and electronic collections of data, all documentation, including user manuals and training materials, related to any of the foregoing.

“Subpoenas” has the meaning set forth in Section 8.6(a) of this Agreement.

“Subsidiary” or “Subsidiaries” means, with respect to any Person of which (a) if a corporation, 50% or more of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers, or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof or (b) if a limited liability company, partnership, association or other business entity (other than a corporation), a 50% or more of partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more Subsidiaries of that Person or a combination thereof and for this purpose, a Person or Persons owns a 50% or more ownership interest in such a business entity (other than a corporation) if such Person or Persons shall be allocated 50% of such business entity’s gains or losses or shall be or control any managing director or general partner of such business entity (other than a corporation). For the purposes of this Agreement, the term Subsidiary shall include all Subsidiaries of such Subsidiary.

“Target Working Capital” means $0.

“Tax” or “Taxes” means all taxes, assessments, charges, duties, fees, levies or other charges or assessments of any kind whatsoever imposed by any Governmental Body, whether disputed or not, including all federal, state, local, foreign and other income, franchise, profits, gross receipts, capital gains, capital stock, transfer, real or personal property, escheat, unclaimed property, sales, use, value‑added, occupation, excise, severance, windfall profits, stamp, license, payroll, and social security withholding, and other withholding taxes, and other taxes, whether payable directly or by withholding and whether or not requiring the filing of a Tax Return, and shall include all estimated taxes, deficiency assessments, additions to tax, penalties and interest.

“Tax Returns” means all tax returns, statements, forms and reports (including elections, declarations, disclosures, schedules, estimated and information tax returns, and claims for refund) for Taxes, including any schedules or attachments thereto and any amendments thereof.

“Third Party Claim” has the meaning set forth in Section 12.4(b) of this Agreement.

“Third Party Licenses” has the meaning set forth in Section 4.9(b)(xv) of this Agreement.

“Threshold” has the meaning set forth in Section 12.5(a) of this Agreement.

 

“Transaction Documents” means the Buyer Documents, Parent Documents and Seller Documents.

“Transactions” means Acquisition and the other transactions contemplated by this Agreement and the other Transaction Documents.

 “Transferor” has the meaning set forth in Section 8.9 of this Agreement.

“Unresolved Claims” has the meaning set forth in Section 3.3(b) of this Agreement.

“WARN” has the meaning set forth in Section 4.21(a) of this Agreement.

“Working Capital” means the excess of the total current assets in the accounts set forth on the Estimated Closing Schedule over the total current liabilities in the accounts set forth on the Estimated Closing Schedule as determined in accordance with GAAP and, to the extent in accordance with GAAP, consistent with the methodologies and practices applied by Seller in the preparation of the Financial Statements; provided, however, that “Working Capital” shall not include (i) any Cash; (ii) any income Tax assets or liabilities; (iii) any Indebtedness; or (iv) any Seller Transaction Expenses.

ARTICLE 2

PURCHASE AND SALE

2.1           The Acquisition.

 

(a)           Acquired Assets. As of Closing, upon the terms and conditions set forth herein, Seller will sell, assign, transfer, convey and deliver to Buyer, and Buyer shall purchase, acquire and accept from Seller, all of Seller’s right, title and interest in and to all property and assets (other than the Excluded Assets) of Seller that are used in, or related to, the Business (collectively, the “Acquired Assets”), free and clear of all Encumbrances (other than Permitted Encumbrances), wherever located and whether or not said Acquired Assets appear or are reflected upon the Books and Records of Seller, which Acquired Assets shall include the following:

                                                                       

(i)            all of the tangible personal property of Seller, including machinery, vehicles, fixtures, leasehold improvements, shelving, furniture, equipment (including all computer and computer‑related equipment and servers), cell phones, PDAs and office supplies;

                                                                                    

(ii)           lists of borrowers and other customers of the Business, lists of prospective customers of the Business, and any other information (including confidential information, records and databases) of Seller relating to the Business that is necessary for Buyer to possess in connection with its administration, ownership and use of any Acquired Asset or Assumed Liability;

                                                                         

(iii)          all rights that Seller may have under any and all Acquired Contracts;

 

(iv)          all of Seller’s rights under any agreements with any of its past or present employees or consultants with respect to (1) the non-disclosure of any confidential or proprietary information of Seller related to the Business, (2) the assignment to Seller of such employee’s or consultant’s rights to any invention, or other intellectual property, in each case related to the Business, or (3) non-competition with the Business by such employee or consultant;

(v)           all rights of Seller under any warranties, indemnities, and all similar rights against third parties to the extent related to the Acquired Assets;

(vi)          all rights of Seller relating to security deposits, payments and pre‑paid expenses (other than those relating to Excluded Assets or Excluded Liabilities);

(vii)         all Acquired Intellectual Property;

(viii)        all rights of Seller in and to the Permits relating to the Business;

(ix)          any and all of the accounts receivable, notes receivable or other evidences of indebtedness of, or right to receive payment from, any Person (collectively, the “Accounts Receivable”);

(x)           all potential and existing claims, causes of action, warranties, guarantees, refunds, rights of recovery and set off of every kind and character, including rights and claims against suppliers and customers and insurance claims, if any, of Seller against any Person arising out of or related to the operation of the Business (other than claims and causes of action included in, or otherwise arising out of or related to, the Excluded Assets or Excluded Liabilities);

(xi)          all rights to the telephone numbers (and related directory listings), fax numbers, email addresses, advertising, business forms, files, documents and Books and Records, including, customer lists, customer prospect lists, customer addresses, delivery schedules, supplier lists, mailing lists and promotional materials used by Seller;

(xii)         Seller’s right, title and interest in and to its sites on the Internet, including all rights of Seller in and to all social media account registrations, and any and all goodwill associated therewith and all of Seller’s rights in the content at the websites and social media sites located at or associated with such domain names or social media account registrations;

(xiii)        all manufacturer’s warranties to the extent related to the Acquired Assets and all claims under such warranties and all rights under warranties, indemnities and similar rights against third parties (other than those relating to Excluded Assets);

(xiv)        the amount of, and any and all rights to, any insurance proceeds received by Seller after the date hereof in respect of any loss, destruction or condemnation of any Acquired Assets occurring prior to or after Closing or relating to any Assumed Liabilities;

 

(xv)         all other assets included as current assets in Final Working Capital;

(xvi)        all goodwill and going concern value of or associated with the acquired portion of the Business; and

(xvii)       without limiting any other provision contained in this Section 2.1(a), all Books and Records relating to any of the foregoing Acquired Assets or any of the Assumed Liabilities.

(b)           Excluded Assets. Other than the Acquired Assets, Buyer is not purchasing or acquiring, and Seller is not selling or transferring, any other asset, property or right of Seller, including all of the following assets, properties and rights of Seller (collectively, the “Excluded Assets”):

(i)            the formal limited liability company and corporate records, including organizational documents, qualifications to conduct business as a foreign entity, minute books and other records having exclusively to do with the organization of Seller and taxpayer and other identification numbers, along with any books and records that are solely related to the Excluded Assets and the Excluded Liabilities;

(ii)           the consideration received by Seller pursuant to this Agreement;

(iii)          all assets of or relating to any Employee Benefit Plan;

(iv)         any refund claims of Seller for Taxes, net operating loss carryforwards, capital loss carryforwards, and other similar Tax attributes of Seller;

(v)           all Tax returns of Seller and workpapers related to Taxes;

(vi)          all Cash (except to the extent payable by Seller to Buyer pursuant to the terms of this Agreement, including pursuant to Section 8.7(a);

(vii)         all Excluded Contracts;

(viii)        all equity securities of RSVP Loans LLC, a Texas limited liability company, and any other Subsidiaries of Seller;

(ix)          all bank accounts;

(x)           all loans made by Seller in connection with the Business, Excluded Business or otherwise; and

 

(xi)          all assets, properties and rights of, or used by, Seller exclusively in the Excluded Business or other business operations outside of the Business.

(c)           Assumed Liabilities. Subject to the terms and conditions set forth in this Agreement, from and after Closing, Seller will transfer to Buyer, and Buyer shall assume, pay, perform and discharge, and indemnify Seller in accordance with Article 12 with respect to, the following (and only the following) obligations and liabilities of Seller to the extent required to be paid, performed, satisfied or discharged from and after Closing (collectively, the “Assumed Liabilities”):

(i)            Seller’s obligations and Liabilities with respect to the Acquired Contracts arising from and after Closing;

(ii)           accounts payable and accrued expenses of Seller (other than Taxes payable by Seller pursuant to Section 2.1(d)(iii)), in each case, to the extent included as current liabilities in the calculation of Final Working Capital;

(iii)          Transfer Taxes payable by Buyer pursuant to Section 8.4(d); and

(iv)         Any (A) property Tax relating to the Business or the Acquired Assets or the Assumed Liabilities for any taxable periods, or portions of periods, after the Closing Date and (B) sales and use Tax relating to the Business or the Acquired Assets or the Assumed Liabilities for any taxable periods, or portions of periods, after the Closing Date.

(d)           Excluded Liabilities. Notwithstanding anything else contained in this Agreement or in any other Transaction Document, Buyer shall not assume any Liabilities of Seller other than the Assumed Liabilities (collectively, the “Excluded Liabilities”), including the following:

(i)            Indebtedness;

(ii)           Seller Transaction Expenses;

(iii)          any (A) Taxes of Seller, any stockholder of Seller, or any of their Affiliates for any taxable period and (B) Taxes relating to the Business or the Acquired Assets or the Assumed Liabilities for any taxable period ending on or prior to the Closing Date; provided, however, excluding (x) Transfer Taxes payable by the Buyer pursuant to Section 8.4(d), (y) Taxes included in Section 2.1(c)(iv) as Assumed Liabilities, and (z) Taxes resulting from any transactions occurring on the Closing Date after the Closing outside of the Ordinary Course of Business;

(iv)         any claims of any direct or indirect equity holder of Seller or any Affiliate, heir, beneficiary, successor or assign of such equity holder or any of its Affiliates, against Seller or Buyer as successor or transferee to Seller;

(v)           the Excluded Assets;

 

(vi)          any Liabilities arising out of or in connection with any Proceeding to the extent it relates to facts or events occurring prior to Closing, including (i) any Proceeding instituted or involving ▇▇▇▇▇▇▇ (▇▇▇▇) Short, (ii) any Proceeding instituted against or involving Artisan Consumer Services, LLC, a Texas limited liability company, RTO Fleet Management LLC, a Texas limited liability company, Artisan Acquireco, LLC, a Texas limited liability company, or any other direct or indirect subsidiary or Affiliate of Seller, or (iii) any matters that are or should be set forth on Schedule 4.10;

(vii)         any obligations under any Applicable Laws relating to acts, omissions, circumstances or conditions to the extent existing or arising (whether then known or unknown) on or prior to the Closing Date, whether or not such acts, omissions, circumstances or conditions constituted a violation of any Applicable Laws as then in effect;

(viii)        any claims of any current or former employee or contractor of Seller including (a) compensation, bonus, commission, severance, termination, vacation, pension and other payments and benefits (including post-retirement benefits, payroll expenses and any Liability for termination of, any collective bargaining Contract or pension plan), whether owing under any severance policy, and employment Contract, collective bargaining Contract, any Employee Benefit Plan or otherwise, (b) personal injury, worker’s compensation or disability claims allegedly arising during employment or engagement by Seller or any of its Affiliates (regardless of when such claim is made or asserted), (c) equity-based awards or any profit sharing, equity appreciation right or phantom equity awards or (d) under WARN or any similar Applicable Laws;

(ix)           any Liabilities under any Contract occurring prior to Closing, by reason of or for any default, breach or penalty, whether known or unknown;

(x)            any Liabilities of or related to the Excluded Business;

(xi)           obligations under all Excluded Contracts;

(xii)          any Liabilities associated with making, servicing or facilitating loans, or providing underwriting advisory services for loans; and

(xiii)         any Liability of or associated with any Employee Benefit Plan.

2.2           Consideration for the Acquisition.

 

(a)          The aggregate consideration for the sale, transfer, assignment, conveyance and delivery of the Acquired Assets (the “Purchase Price”) shall be an amount equal to (i) Fifteen Million Dollars ($15,000,000) payable in cash and 133,328 shares Parent Common Stock issued as provided herein (the “Closing Consideration”), plus (ii) the Earnout Payments contemplated by Section 2.4 hereof, if any, plus (iii) the amount, if any, by which the Final Working Capital is greater than the Target Working Capital, minus (iv) the amount, if any, by which the Final Working Capital is less than the Target Working Capital, plus (v) the amount of all security deposits or rights thereto included in the Acquired Assets, plus (vi) the Buyer’s assumption of the Assumed Liabilities. The Closing Consideration shall be subject to adjustment as provided in Section 2.3 hereof.

 

(b)           At Closing, the Closing Consideration shall be paid by Buyer as follows:

(i)            Buyer shall deposit with the Escrow Agent the Escrow Amount and the Indemnification Shares;

(ii)           Buyer shall cause an aggregate of 113,328 shares of Parent Common Stock to be issued to Seller, provided that Seller hereby directs that 101,995 of such shares of Parent Common Stock be issued by book entry directly to Seller’s equity holders in accordance with the Letter of Direction and directs that the Indemnification Shares be issued and delivered in accordance with the Escrow Agreement; and

(iii)          Buyer shall pay to Seller in cash by wire transfer of immediately available funds to the account or accounts designated by Seller the Closing Cash Payment, minus the Escrow Amount.

 

2.3           Purchase Price Adjustments.

 

(a)           Adjustments at Closing. At least five (5) Business Days prior to the Closing Date, Seller shall deliver to Buyer a schedule (the “Estimated Closing Schedule”) of the calculation of the estimated Working Capital as of the Effective Time (the “Estimated Working Capital”) and the Closing Working Capital Reduction or Closing Working Capital Addition, as applicable. The accuracy of the Estimated Closing Schedule shall be certified by an officer of Seller. Buyer and its representatives shall be given reasonable access to all of Seller’s Books and Records relating to the Estimated Closing Schedule. The amount, if any, by which the Target Working Capital exceeds the Estimated Working Capital shall be the “Closing Working Capital Reduction” and the amount, if any, by which the Estimated Working Capital exceeds the Target Working Capital shall be the “Closing Working Capital Addition”. The Cash Consideration shall be (i) reduced by the amount of any Closing Working Capital Reduction or (ii) increased by the amount of any Closing Working Capital Addition.

(b)           Adjustments After Closing.

(i)           As soon as practicable after the Closing Date but no later than the 90th day after the Closing Date, Buyer shall deliver to Seller a schedule (the “Closing Schedule”) of its calculation of (A) the Working Capital as of the Effective Time (the “Closing Working Capital”) and (B) the Post‑Closing Working Capital Reduction or Post‑Closing Working Capital Addition, as applicable.

 

(ii)          Within forty five (45) days after Seller’s receipt of the Closing Schedule, Seller may deliver written notice (the “Protest Notice”) of its objections to Buyer’s calculation of the Closing Working Capital and the proposed modification of the Closing Schedule, together with a written statement explaining in reasonable detail the reasons for the objections and the basis for the proposed modification. If Seller does not deliver such notice of objection within such 45‑day period, then the Closing Schedule, and Buyer’s calculation of the Closing Working Capital as shown thereon, shall be final, conclusive and binding on the Parties. Any amounts not disputed in the Protest Notice (if one is delivered) shall be deemed to be accepted by Seller as final. Upon receipt of the Closing Schedule, Seller and its respective accountants will be given reasonable access to the relevant books, records, workpapers and personnel during reasonable business hours for the purpose of verifying the Closing Schedule.

(iii)         If Buyer disagrees with all or any portion of Seller’s proposed modifications of the Closing Schedule, then Buyer shall notify Seller and Buyer and Seller shall negotiate in good faith to reach an agreement during the 30‑day period immediately following delivery by Seller of the Protest Notice. If Buyer and Seller reach such an agreement, such agreement shall be final, conclusive and binding on the Parties.

(iv)         If, within the 30‑day negotiation period described in Section 2.3(b)(iii), Buyer and Seller are unable to reach an agreement on the Closing Schedule, they shall promptly thereafter cause KPMG or another national accounting firm (the “Independent Accountant”) reasonably satisfactory to Seller and Buyer to review this Agreement and the disputed items or amounts for the purpose of calculating the Final Working Capital. In making such calculation, the Independent Accountant shall consider only those items or amounts in the Closing Schedule as to which Buyer and Seller have disagreed within the allowable periods set forth herein. The determination by the Independent Accountant of the disagreed amounts shall be based solely on presentations by Buyer and Seller, and shall not involve the Independent Accountant’s independent review. The Independent Accountant shall deliver to Seller and Buyer, as promptly as practicable, a report setting forth its calculations. Any determination by the Independent Accountant shall not be outside the range defined by the respective amounts in the Closing Schedule proposed by Buyer and Seller’s proposed adjustments thereto (after giving effect to any disputed items that were resolved by Buyer and Seller prior to submission to the Independent Accountant), and such determination shall be final, conclusive, binding and non‑appealable upon the Parties. Each of Buyer, on the one hand, and Seller, on the other hand, shall bear that percentage of the fees and expenses of the Independent Accountant equal to the proportion (expressed as a percentage) of the dollar value of the disputed amounts determined in favor of the other Party by the Independent Accountant. For purposes of this Agreement, “Final Working Capital” means the Working Capital as of the Effective Time as finally determined pursuant to this Section 2.3(b).

 

(v)           The provisions of Section 2.3(b)(iv) are not intended to, and shall not be interpreted to, require that Buyer and Seller refer to the Independent Accountant (a) any dispute arising out of a breach by one of the Parties of its obligations under this Agreement, (b) any dispute the resolution of which requires a construction or interpretation of this Agreement other than this Section 2.3 and the definitions related hereto and any other Section of this Agreement as necessary to enable the Independent Accountant to resolve the dispute submitted to it pursuant to this Section 2.3, or (c) any other dispute other than a dispute related to the mathematical calculation of the Post‑Closing Working Capital Addition or Post‑Closing Working Capital Reduction or the accounting treatment of any asset or liability, or item of income or expense, that affects the calculation of the Post‑Closing Working Capital Addition or Post‑Closing Working Capital Reduction, or both.

(c)           Within five (5) Business Days following the determination of the Final Working Capital pursuant to Section 2.3(b):

(i)            if the Final Working Capital exceeds the Estimated Working Capital, Buyer shall pay to Seller, by wire transfer of immediately available funds to the account or accounts designated by Seller, an amount in cash equal to the amount of such excess (such amount, the “Post‑Closing Working Capital Addition”); and

(ii)           if the Final Working Capital is less than the Estimated Working Capital, Seller shall be responsible for and pay to Buyer, by wire transfer of immediately available funds to an account or accounts designated by Buyer, an amount in cash equal to the amount of such deficit (such amount, the “Post‑Closing Working Capital Reduction”).

If any amount in excess of seventy-five thousand dollars ($75,000) is paid from the Escrow Amount to Buyer with respect to any obligations of Seller under this Section 2.3, Seller shall be obligated to replenish the Escrow Amount by promptly depositing additional funds in the amount of any such payment in excess of seventy-five thousand dollars ($75,000) into the account to be held and administered in accordance with the Escrow Agreement.

2.4           Earnout Payment. Seller shall be eligible to receive payments (the “Earnout Payments”) pursuant to the terms set forth on Schedule 2.4.

 

2.5           Allocation. The Purchase Price (and all other capitalized costs or other items of consideration for Tax purposes, including any adjustments thereto), shall be allocated among the Acquired Assets in accordance with Code Section 1060 and the Treasury regulations thereunder (and any similar provision of state, local or foreign Applicable Laws). The Parties agree that Schedule 2.5 sets forth a reasonable example of such allocation. Within thirty (30) days following the determination of the final Purchase Price pursuant to Section 2.3, Buyer shall prepare an allocation of the Purchase Price substantially consistent with Schedule 2.5, and provide such allocation to the Seller. Seller shall be deemed to have accepted such determination unless Seller notifies Buyer in writing of Seller’s proposed allocation within thirty (30) days after receipt of the Buyer’s proposed allocation. If Seller provides such notice to Buyer, the parties shall proceed in good faith to determine mutually the matters in dispute; provided, that if Buyer and Seller are unable to resolve any such disputes within thirty (30) days of the notice from Seller, they shall refer such disputes to the Independent Accountant and the Independent Accountant shall resolve such disputes pursuant to the procedures set forth in Section 2.3(b)(iv) (provided, however, that the Independent Accountant’s fees and expenses shall be paid 50% by Seller and 50% by Buyer) (the final allocation, the “Allocation”). The Allocation (which shall be revised by Buyer, substantially consistent with Schedule 2.5, to reflect any subsequent adjustments to the Purchase Price) shall be binding upon the Parties. The Parties shall, and shall cause their respective Affiliates to, report for Tax and other relevant purposes (and shall defend in any Tax Proceeding) the Transactions in a manner consistent with the Allocation and any amendment thereto and not take any position inconsistent therewith, except as otherwise required by Applicable Laws. Sellers shall timely deliver all such documents and other information as Buyer may reasonably request in order to prepare the Allocation or any amendment thereto.

 

2.6           Closing. Closing (“Closing”) of the Transactions contemplated by this Agreement shall take place not later than five (5) Business Days following the later of (a) the first date on which Buyer and Seller can lawfully consummate the Transactions under Applicable Laws, and (b) the satisfaction or waiver of the conditions set forth in Article 9 (the date of Closing, the “Closing Date”). Closing shall be held at 10:00 a.m. prevailing Eastern time on the Closing Date at the Washington, D.C. office of ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP, or at such other time and place as Buyer and Seller may agree. At Closing, Buyer and Seller shall execute and deliver all of the documents and take all other actions which are contemplated by the terms of this Agreement.

 

2.7           Withholding. Notwithstanding anything to the contrary contained in this Agreement, Buyer shall be entitled to deduct and withhold from the Purchase Price all Taxes that Buyer is required to withhold under Applicable Laws, and all such withheld amounts shall be treated as delivered to Seller hereunder.

 

ARTICLE 3

THE ESCROW

The Escrow shall secure Seller’s obligations under this Agreement and shall be established, administered and payable on the following terms and conditions:

3.1           Escrow Agreement. The Escrow shall be governed by an escrow agreement in a form mutually agreed by the Parties and the Escrow Agent (the “Escrow Agreement”).

3.2           Escrow Amount; Indemnification Shares. Buyer shall deliver the Escrow Amount and the Indemnification Shares to the Escrow Agent at Closing and shall deliver the Earnout Escrow Amount (if any) to the Escrow Agent in accordance with Schedule 2.4. The Escrow Agent shall invest the cash portions of the Escrow Amount and Earnout Escrow Amount in an interest bearing account at an FDIC‑insured, well‑capitalized financial institution selected by Buyer and Seller. Interest on such cash portions of the Escrow Amount and Earnout Escrow Amount shall be added to the Escrow and shall be paid upon distribution of the Escrow as provided in the Escrow Agreement. If, at any time subsequent to the Closing and prior to the date that no Indemnification Shares remain held in the Escrow, the number of shares of Parent Common Stock are proportionately increased or decreased, changed or converted into or exchanged for a different number or kind of shares of stock or other securities of Parent or of another corporation or other property, including cash (whether as a result of a stock split, stock dividend, combination or exchange of shares, exchange for other securities, reclassification, reorganization, redesignation, merger, consolidation, recapitalization or otherwise), then any Indemnification Shares held in the Escrow shall be adjusted in a manner to appropriately and equitably reflect any such increase or decrease, change, conversion or exchange in the manner set forth in the Escrow Agreement with respect to such Indemnification Shares.

 

3.3           Distribution of the Escrow. The Escrow shall be distributed as follows:

(a)           Subject to the other subsections of this Section 3.3, within three (3) Business Days after the Escrow Termination Date, Buyer and Seller shall issue a joint written instruction to the Escrow Agent to disburse the remainder of the Escrow not subject to a Claim to Seller in accordance with the Escrow Agreement.

(b)          Notwithstanding the foregoing, in the event there are Claims by the Buyer Indemnified Parties that are outstanding or unsatisfied as of the Escrow Termination Date (“Unresolved Claims”), and the amount of the Escrow as of the Escrow Termination Date exceeds the aggregate amount of the Unresolved Claims (including the entire claimed amount in dispute), then within three (3) Business Days following the Escrow Termination Date, Buyer and Seller shall issue a joint written instruction to the Escrow Agent to disburse such excess to Seller in accordance with the Escrow Agreement.

(c)           Within three (3) Business Days of the final resolution or disposition of all Unresolved Claims in accordance with this Agreement, Seller and Buyer shall issue a joint written instruction to the Escrow Agent to disburse to Seller the Escrow remaining after any disbursements required in respect of the final resolution or disposition of the Unresolved Claims, all in accordance with the Escrow Agreement.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF SELLER

Seller represents and warrants to Buyer and Parent that:

4.1           Incorporation and Company Power. Each Seller is duly organized, validly existing and in good standing under Applicable Laws of its jurisdiction of formation, and is in good standing and duly qualified to do business as a foreign company in all jurisdictions where the nature of the property owned or leased by it or its use, or the nature or conduct of its business, makes such qualification necessary, except where failure to be so duly qualified would not have a Material Adverse Change. Schedule 4.1 sets forth the jurisdiction of formation of Seller and all jurisdictions in which Seller is qualified or licensed to do business as a foreign company.

4.2           Required Action. Seller has all requisite power and authority to execute and deliver this Agreement and each other Seller Document to which Seller is or will be a party, to perform its obligations hereunder and thereunder and to consummate the Transactions. The execution, delivery and consummation of this Agreement and each other Seller Document has been duly and validly authorized by the board of directors, board of managers or other governing body of Seller in accordance with the requirements of its organizational documents and all Applicable Laws, and no other company action is necessary by Seller to consummate the Transactions.

 

4.3           Authorized Execution. This Agreement and each other Seller Document has been duly executed and delivered by duly authorized officers of Seller. This Agreement and each other Seller Document constitutes the legal, valid and binding agreement and obligation of Seller, enforceable against Seller in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, moratorium, receivership, and other similar laws affecting the rights of creditors generally or by equitable principles (regardless of whether enforcement is sought at law or in equity).

4.4           Noncontravention; Required Filings.

 

(a)          Except as set forth on Schedule 4.4(a), the execution and delivery of this Agreement, the compliance with its terms and provisions by Seller (including the execution and delivery of any document required to be executed by Seller), do not and will not (i) conflict with or violate the certificate of formation or bylaws or equivalent organizational document of Seller; (ii) materially conflict with or materially violate or result in a material breach of any Applicable Laws, (iii) breach, constitute a default (or an event that, with notice or lapse of time or both, would become a default) under, require any Consent of any Person pursuant to, give others any right of termination, amendment, modification, acceleration or cancellation of, allow the imposition of any fees or penalties, require the offering or making of any payment or redemption, give right to any increased, guaranteed, accelerated or additional rights or entitlement of any Person or otherwise materially adversely affect any right of Seller under or result in the creation of any Encumbrance on any property, asset or right of Seller pursuant to any Acquired Contract, Lease, or obligation, whether similar or dissimilar, by which Seller is bound.

(b)          Except as set forth on Schedule 4.4(b), no Permit is required to be sought, filed or obtained by Seller in connection with the execution, delivery and performance by Seller of this Agreement and the other Seller Documents or the consummation of the Transactions.

4.5           Financial Statements.

 

(a)          Seller has made available to Buyer true and accurate copies of the following:  (i) the unaudited balance sheet of Seller and the related statement of operations for the period ended December 31, 2015 (the “2015 Financials”), (ii) the unaudited  balance sheet of Seller as of August 31, 2016 and the related statements of operations for Seller for the eight-month period then ended (“2016 Financial Statements” and together with the 2015 Financials, the “Financial Statements”), and (iii) the report of Agreed-Upon Procedures prepared by ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ dated November 8, 2016 with respect to the 2016 tax season.

 

(b)          Except as set forth on Schedule 4.5(b), the Financial Statements present fairly in all material respects, in accordance with GAAP, the financial position of Seller as of the dates specified and the results of its operations for the periods specified, except for the absence of footnotes and certain year‑end adjustments typically made in audited financial statements, none of which will be material individually or in the aggregate. Since August 31, 2016, there has been no material change in Seller’s reserve on accrual amounts or policies.

(c)           Seller maintains a system of internal accounting controls sufficient to provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in material conformity with GAAP and to maintain asset and liability accountability. Seller has never received any written notification of any (x) significant deficiency in the internal controls over financial reporting of Seller, (y) material weakness in the internal controls over financial reporting of Seller or (z) fraud, whether or not material, that involves management or other employees of Seller who have a significant role in the financial reporting of Seller.

4.6           Material Liabilities. Seller does not have any Liabilities except (a) those Liabilities set forth on Schedule 4.6, (b) Liabilities fully reflected or reserved against, or otherwise disclosed, in the Financial Statements, and the footnotes thereto, or (c) Liabilities incurred since August 31, 2016 in the Ordinary Course of Business.

4.7           Absence of Certain Changes. Except as set forth on Schedule 4.7, since August 31, 2016, Seller (i) has carried on the Business only in the Ordinary Course of Business and in accordance with Applicable Laws, and (ii) has not:

(a)          experienced any event, circumstance or change (financial or otherwise) which has, or could reasonably be expected to have, a Material Adverse Change;

(b)          experienced any material loss, damage or destruction of or to any of the Acquired Assets;

(c)          (i) increased the compensation payable by Seller to any of the Seller Employees, except for increases in compensation in the Ordinary Course of Business, (ii) paid or agreed to pay any severance, termination pay or stay bonus to, or entered into any employment or severance agreement with, any Seller Employees, or (iii) increased the benefits under, amended, terminated or instituted, any Employee Benefit Plan outside of the Ordinary Course of Business;

(d)          adjusted or written off any Accounts Receivable or reduced reserves for Accounts Receivable outside of the Ordinary Course of Business;

(e)          changed any financial reporting, Tax or accounting methods or practices employed by Seller or changed the adopted depreciation or amortization policies, except as required by GAAP;

(f)           sold, transferred, abandoned or otherwise disposed of any assets used in the Business nor pledged, mortgaged, or subjected any Acquired Asset to any Encumbrance (other than Permitted Encumbrances) or other restriction;

 

(g)          consummated a merger, consolidation, liquidation, dissolution or similar transaction or acquired the assets (other than acquisitions of inventory, replacement parts and other operating assets in the Ordinary Course of Business) or business of any Person;

(h)           sold, assigned, transferred, disposed of, or abandoned or permitted to lapse any material Permits or material intangible assets, or disclosed any material proprietary confidential information to any Person, or granted any license or sublicense of any rights under or with respect to any Acquired Intellectual Property;

(i)            conducted cash management customs and practices (including the timing of, invoicing and collection of receivables and the accrual and payment of payables and other current liabilities) and maintained the Books and Records outside of the Ordinary Course of Business;

(j)            made any loans or advances to, or guarantees for the benefit of, or entered into any transaction or Contract with, any employees of Seller or any Affiliate of Seller;

(k)           amended, cancelled, or terminated any Acquired Contract, or entered into any Material Contract;

(l)            made or committed to make any capital expenditures that are, in the aggregate, in excess of $50,000;

(m)          incurred any Indebtedness other than Indebtedness incurred in the Ordinary Course of Business under a Material Contract;

(n)          entered into any closing agreement or similar arrangement with respect to Taxes or any settlement of any material Proceeding for Taxes;

(o)          filed any Tax Return in a manner inconsistent with the Ordinary Course of Business, amended any Tax Return, made, changed or revoked any Tax elections (other than an initial Tax election filed in the Ordinary Course of Business) or filed any claim for a material Tax refund; or

(p)          entered into any Contract to do or engage in any of the foregoing.

4.8           Tax Matters.

 

(a)          Seller has filed all material Tax Returns required to be filed by it. All such Tax Returns as so filed disclose all Taxes required to be paid for the periods covered thereby. Seller has paid all material Taxes due and owing. Seller has withheld and paid or accrued all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder or other third party. Except as disclosed in Schedule 4.8(a), no written claim has been made by any taxing authority in any jurisdiction where Seller does not file Tax Returns that Seller is or may be subject to Taxes (or additional Taxes, as applicable) by that jurisdiction. The most recent Financial Statement reflects an adequate reserve for Taxes payable as of the date of such Financial Statement. Seller has made available to Buyer complete and accurate copies of all federal, state, local and foreign Tax Returns filed by or on behalf of it for the last three (3) years.

 

(b)          Seller has not waived any statute of limitation in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency.

(c)          Except as disclosed in Schedule 4.8(c)(i), Seller (x) has not received written notice (1) of the commencement of or (2) that it is currently the subject of a Tax Proceeding by the Tax authorities of any nation, state or locality, and (y) has not received any written notice of a proposed adjustment, deficiency or underpayment of any Taxes that has not otherwise been settled. Except as disclosed in Schedule 4.8(c)(ii), Seller (x) has not been a member of an “affiliated group” as defined in Section 1504 of the Code (or analogous combined, consolidated or unitary group defined under state, local or foreign income Tax law) subsequent to January 1, 2011, (y) has no Tax sharing, allocation, indemnification or similar agreements in effect with any Person, other than with respect to standard terms and conditions of an agreement for the purchase or sale of products or services in the Ordinary Course of Business including any standard customer software license agreements, and (z) is not a party to any joint venture, partnership or other arrangement or Contract that is treated as a partnership for income Tax purposes in any jurisdiction. There are no material deferred intercompany transactions between Seller and its affiliates which will result in the recognition of income upon the consummation of the transaction contemplated by this Agreement.

(d)          Except as disclosed in Schedule 4.8(d), Seller does not have pending any private letter ruling from the IRS or any comparable ruling from any other taxing authority.

(e)          Seller has not been a party to, or a promoter of, a “listed transaction” within the meaning of Section 6707A(c)(2) of the Code and Treasury Regulations Section 1.6011‑4(b)(2).

(f)            Buyer will not be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any: (i) change on the part of Seller in its method of accounting, for a taxable period ending on or prior to the Closing Date, (ii) “closing agreement” to which Seller is a party described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign Tax law) executed by it on or prior to the Closing Date, (iii) installment sale or open transaction disposition made by Seller on or prior to the Closing Date, (iv) prepaid amount received by Seller on or prior to the Closing Date, or (v) pursuant to an election by Seller under Section 108(i) of the Code made prior to the Closing Date.

4.9           Contracts.

 

(a)          Seller has made available to Buyer a correct and complete copy of each written Acquired Contract (as amended to date) and a written summary setting forth the terms and conditions of each oral Acquired Contract, if any.

 

(b)           Schedule 4.9(b) contains a correct and complete list of the following Contracts to which Seller is a party or by which the Business or any of the Acquired Assets is otherwise bound or subject to:

(i)            any Contract that involves performance of services or delivery of goods by, for or to Seller, of an amount or value in excess of $50,000 annually, including all “Program Agreements,” “Servicing Agreements” and like Contracts with any Person relating to the underwriting of, providing capital to, servicing or other operation of, any tax refund advance or installment loan services or products;

(ii)           all Employee Benefit Plans and Contracts providing for bonuses, pensions, options, equity purchases, deferred compensation, retirement payments, profit sharing, collective bargaining or the like, or any Contract or agreement with any labor union;

(iii)          all (A) employment Contracts, (B) other Contracts for services that require the payment of more than $50,000 annually by Seller and (C) Contracts relating to loans by Seller to any officers or employees of Seller;

(iv)          all Contracts (A) that provide for any severance obligation of Seller to any current or former employee or other service provider or (B) that contain any change of control or similar provisions in respect of any employees, service providers or partners of Seller;

(v)           all Contracts for the purchase of any fixed asset, inventory or materials that involve future obligations in excess of $50,000 (other than purchase orders and sales orders entered into in the Ordinary Course of Business);

(vi)          all Contracts with respect to Indebtedness;

(vii)         all Contracts with respect to real property;

(viii)        all Contracts under which Seller is the lessee of or holds or operates any personal property owned by any other party in excess of $50,000;

(ix)           all Contracts under which Seller is the lessor of or permits any other Person to hold or operate any property, real or personal, owned or controlled by Seller;

(x)            all Contracts that contain any fixed or indexed pricing, “most-favored nation” pricing or similar pricing terms or provisions regarding minimum volumes, volume discounts;

(xi)           all Contracts containing covenants limiting the freedom of Seller to compete in any line of business or with any other Person anywhere in the world, including any Contracts granting exclusive rights to another Person;

 

(xii)          all Contracts for acquisitions or dispositions (by merger, purchase or sale of assets or equity securities or otherwise) of material assets, as to which Seller has continuing material obligations or material rights and all Contracts containing any rights to acquire;

(xiii)         all Contracts with any Governmental Body;

(xiv)         all Contracts pursuant to which Seller leases, licenses or otherwise authorizes another Person to use, distribute, sell, resell or incorporate any Acquired Intellectual Property, or any other license, development agreement, escrow agreement or other Contract relating to any of the Acquired Intellectual Property;

(xv)          all Contracts pursuant to which Seller leases or licenses from another Person the right, or is otherwise authorized by another Person to use, distribute, sell, resell or incorporate any Acquired Intellectual Property other than licenses of Commercial Software (“Third Party Licenses”);

(xvi)         any Contract that requires Seller to maintain the confidentiality of any proprietary information of any third party or any other material confidentiality, secrecy or non-disclosure contract other than any contracts, terms of use and the like for “off the shelf” software, software, websites or databases that Seller is deemed to have accepted or agreed to by accessing or using such software, websites and databases;

(xvii)        all Contracts containing “key man” or “key personnel” provisions;

(xviii)       all other Contracts that are material to Acquired Assets or the operations of Business not otherwise disclosed pursuant to this Section 4.9(b) (clauses (i) through (xvii), collectively, the “Material Contracts”).

(c)           Except as set forth on Schedule 4.9(c), Seller has performed and is performing, in all material respects, all contractual and other obligations required to be performed by Seller pursuant to each Acquired Contract. With respect to each Acquired Contract, (i) the Contract is legal, valid and binding, enforceable (except as the enforceability thereof may be limited by bankruptcy, insolvency or other similar laws of general application relating to or affecting the enforcement of creditors’ rights, and subject to the application of general principles of equity), and is in full force and effect and (ii) it will continue to be such a legal, valid, binding and enforceable Contract, and in full force and effect, as against Buyer and, to Seller’s Knowledge, each other party thereto on identical terms following the consummation of the Transactions contemplated hereby. With respect to each Acquired Contract, neither Seller, nor to Seller’s Knowledge, any other party to such Acquired Contract, is in breach or default, and no event has occurred which, with notice or lapse of time, would constitute a breach or default by Seller or, to Seller’s Knowledge, any other party to such Acquired Contract, or permit termination, modification, or acceleration under such Acquired Contract, and (iii) Seller has not, and to Seller’s Knowledge, no other party to an Acquired Contract has, repudiated or cancelled any Acquired Contract or has threatened to do so.

 

4.10         Litigation. Except as set forth on Schedule 4.10, there is no pending, or to Seller’s Knowledge, threatened, Proceeding against Seller, Seller’s properties or Seller’s Representatives (in their capacity as such), nor, to Seller’s Knowledge, is there any basis therefor. Neither Seller, nor Seller’s business operations (including the Business), property or any property leased by Seller (including any of the Acquired Assets) nor any of the Assumed Liabilities is the subject of any Order or governmental investigation or inquiry.

4.11         Advisor Fees. Seller has not incurred nor will it incur, directly or indirectly, any Liability for brokerage, finder’s, financial advisor’s or agent’s fees or commissions by virtue of any commitment made by Seller in connection with this Agreement.

4.12         Capitalization; Equity Ownership; Subsidiaries. Schedule 4.12 sets forth the entire authorized equity securities and the total number of issued and outstanding equity securities of Seller. Except for Persons identified on Schedule 4.12, no Person owns or holds, has any interest in, whether legal, equitable or beneficial, or has the right to purchase, any equity securities of Seller.

4.13         Title to Assets; Encumbrances. Except as set forth on Schedule 4.13, Seller has good and valid title to (and sufficient rights to use) all of the Acquired Assets, or with respect to leased Acquired Assets, valid leasehold interests in, free and clear of all Encumbrances of any nature, except:

(a)          such Encumbrances which are purchase money security interests entered into in the Ordinary Course of Business as reflected on its Books and Records;

(b)          the applicable lessor’s interests in leased tangible real and personal property reflected on its Books and Records;

(c)          such Encumbrances for Taxes and assessments not yet due and payable or that are being contested in good faith; and

(d)          Encumbrances as do not materially detract from the value or interfere with the use or operation of the asset subject thereto.

Except for the Excluded Assets, the Acquired Assets (i) constitute all of the property and assets owned, leased, licensed or controlled by Seller and (ii) constitute all of the assets necessary for Buyer to carry on the Business after Closing in the manner currently conducted by Seller as of the date hereof. All tangible Acquired Assets have no material defects, are in good operating condition and repair and have been maintained consistent with industry standards, ordinary wear and tear excepted, and are adequate and suitable for their present uses.

 

4.14         Labor Matters.

 

(a)          Schedule 4.14(a) sets forth a complete and accurate list of all individuals employed by Seller as of the date hereof (“Seller Employees”) by: name; job position; principal location of employment; exempt or non‑exempt classification; base salary or wage rate; and commission, incentive pay, or other bonus pay opportunities. The foregoing list shall be updated at and as of the Closing Date. Except as disclosed on Schedule 4.14(a), all Seller Employees are terminable at will, without notice or severance benefits. Except as disclosed on Schedule 4.14(a), Seller represents that no such employee is subject to any written agreements, offer letters, policies, or other agreement or promise that provide for a term of employment, severance or other benefits upon termination or rights upon a change in control. Seller has no Knowledge that any Seller Employee will or may cease to be an employee because of the consummation of the Transactions.

(b)          Schedule 4.14(b) sets forth a complete and accurate list of all Persons who are engaged as an independent contractor by Seller as of the Closing Date (“Seller Contractors”) by: name; description of services; payment terms; and principal work location. Except as disclosed on Schedule 4.14(b), all Seller Contractors are terminable at will, without notice or penalty or fees. Except as disclosed on Schedule 4.14(b), no Seller Contractor is subject to any written agreements or terms of engagement.

(c)          Seller is not a party to any collective bargaining agreements, labor Contracts, or other agreements with a labor organization, trade or labor union, employees’ association or similar organization representing any Seller Employees, nor is any such agreement presently being negotiated. To Seller’s Knowledge, there are no pending or threatened labor organization activities, questions concerning representation, or unfair labor charges or grievances by or on behalf of any Seller Employees.

(d)          To Seller’s Knowledge, Seller is in compliance in all material respects with all Applicable Laws concerning or arising out of its employment relationships with the Seller Employees. Except as disclosed on Schedule 4.14(d), there are no pending or, to Seller’s Knowledge, threatened complaints, claims, charges, reports, grievances, or other proceedings filed with a court or Governmental Body alleging employment discrimination, harassment, retaliation, wage and hour violations, or other unlawful employment matter. To Seller’s Knowledge, there are no pending or threatened audits or investigations by a Governmental Body relating to employment matters. Seller represents that, as of the Closing Date, Seller has not engaged in any conduct triggering Liability under WARN.

4.15         Environmental Laws. Each Seller, and the existence, use and operation of the Acquired Assets, are in material compliance with all applicable environmental laws. There is no Order pending, or to Seller’s Knowledge, threatened against Seller, or any real property owned or leased by Seller relating to or arising from any environmental law. Seller has not treated, stored, disposed of, arranged for or knowingly permitted the disposal of, transported, handled or released any Hazardous Substances, or owned or operated any property or facility, or taken any other action, in each case that has given or would give rise to material liabilities, including any material Liability for response costs, corrective action costs, personal injury, property damage, natural resources damages or attorney fees, pursuant to any environmental laws. All real property leased by Seller (including pursuant to a Lease) and the use thereof materially complies with all Applicable Laws related to the use of such property.

 

4.16         Leased Real Properties.

 

(a)          Seller does not own and has never owned any real property that relates to or is used in connection with the Business or the Acquired Assets.

(b)          Schedule 4.16(b) attached hereto lists all leases, subleases, occupancy agreements or similar agreements under which Seller occupies (or has the right to occupy) pursuant to a lease, license or similar arrangement any real property interest used in connection with the Business (collectively, the “Leases”), and the applicable Seller is entitled to possession of the real property subject to such Lease as lessee in accordance with the terms of the respective Leases. Except as shown on Schedule 4.16(b), the Leases have not been amended, modified or supplemented. Seller has made available to Buyer a true, correct and complete copy of each Lease as amended, modified or supplemented. Each Lease is an existing legal, valid and binding obligation of Seller and, to Seller’s Knowledge, each other party thereto, subject to bankruptcy, insolvency, reorganization, moratorium, receivership, conservatorship and similar laws relating to the rights and remedies of creditors, as well as to general principles of equity; and there does not exist with respect to Seller’s obligations thereunder, or, to Seller’s Knowledge, with respect to the obligations of the lessor thereof, any material default, or event or condition which constitutes or, after notice or passage of time or both, would constitute a material default, on the part of Seller lessee or the lessor under any such Lease. There are no tenants or other parties claiming by, through or under Seller that have a possessory right in and to any space in respect of any real property subject to any such Lease. As used in this Section 4.16(b), the term “lessor” includes any sub‑lessor of the property to Seller. There are no subleases relating to any real property subject to a Lease created or suffered to exist by Seller, or to Seller’s Knowledge, created or suffered to exist by any other Person.

(c)          With respect to the real property subject to each Lease, Seller has a good and valid leasehold interest in such real property on and subject to the terms of its applicable Lease, it being understood that Seller makes no representations or warranties about matters affecting the respective landlords’ fee title to such real property subject to the applicable Lease.

4.17         Permits. Seller has materially complied with each, and is not in violation of any Permit to which Seller or the Business is subject and has not failed to obtain or to adhere to the requirements of any of the Permits materially necessary to occupy, own, use, operate and conduct the Business and the Acquired Assets as presently occupied, owned, used, operated or conducted or presently contemplated to be occupied, owned, used, operated or conducted, as the case may be. All Permits (along with the owner and the expiration and renewal date of each) are listed on Schedule 4.17, and correct and complete copies of each Permit have previously been made available to Buyer. All Permits are valid, in force and in good standing. No notices have been received by Seller with respect to (a) any actual or alleged violation of, or failure to comply with, any term or requirement of any Permit, or (b) any threatened, pending or possible sanction, revocation, withdrawal, termination, rescission, suspension, cancellation, modification, corrective action or limitation of, or with respect to, any Permit. All applications required to be filed for renewal of any Permits have been timely filed and all other filings required to have been made with respect to such Permits have been duly made on a timely basis. No Permit is held in the name of any Representative or other Person on behalf of Seller.

 

4.18         Compliance with Laws.

 

(a)          Except as set forth on Schedule 4.18(a), Seller is and has always been in material compliance with all Applicable Laws, including Applicable Laws relating to anti-money laundering, economic sanctions and terrorist financing, the monitoring and reporting of suspicious activity, the protection of non-public customer information, identity theft and consumer protection. Neither Seller nor, to the Seller’s Knowledge, any of its officers in their capacities as such has received any Order or other communication from any Governmental Body or any other Person that Seller is not in compliance in any respect with any Applicable Laws or been subject to a Proceeding.

(b)          Seller is not in material conflict with, or in material default or material violation of (i) any Applicable Laws or (ii) any Permits.

(c)          As of the date hereof, there is no material unresolved violation, comment or exception by any Governmental Body with respect to any report or statement relating to any examinations or inspections of Seller. Within the past four (4) years, Seller has not been notified in writing by any Governmental Body that it is considering issuing, initiating, ordering or requesting any regulatory enforcement action, audit, evaluation, examination, agreement, commitment letter, board resolutions or similar undertaking to which Seller is or would be subject.

4.19         Agreements with Governmental Bodies. Seller is not subject to any Order, nor is a party to any written agreement or memorandum of understanding with, nor is a party to any commitment letter or similar undertaking to, nor is a recipient of any supervisory letter from, nor has adopted any board resolutions at the request of, any Governmental Body that materially restricts the conduct of its business (including the Business) or its management, nor has Seller been advised by any Governmental Body that it is considering issuing or requesting any of the foregoing.

 

4.20         Employee Benefit Plans.

 

(a)          Seller has provided (i) a correct and complete list of all Seller Employees, giving name, job title, employer, current compensation paid or payable, and sick and vacation leave that is accrued but unused, (ii) correct and complete copies of any and all fringe benefits and personnel policies applicable to the Seller Employees, (iii) the employment dates and job titles of each such person and (iv) categorization of each such person as a full-time or part-time employee of Seller. For purposes of this paragraph, “part-time employee” means an employee who is employed for an average of fewer than forty (40) hours per week or who has been employed for fewer than six (6) of the twelve (12) months preceding the date on which notice is required pursuant to the “Worker Adjustment and Retraining Notification Act” and the regulations promulgated thereunder (collectively, “WARN”), 29 U.S.C. §2102 et seq. Except as provided in Schedule 4.20(a), Seller is not a party to any employment Contract and all of the Seller Employees are employed on an “at will” basis.

 

(b)          Schedule 4.20(b)(i) lists each Employee Benefit Plan. Each Employee Benefit Plan has been maintained, funded and administered in all material respects in accordance with the terms of such Employee Benefit Plan and complies in form and operation in all material respects with the applicable requirements of ERISA, the Code and other Applicable Laws. Except as set forth on Schedule 4.20(b)(iii), Seller has not engaged, directly or indirectly, in a prohibited transaction (as defined in Section 4975 of the Code or Section 406 of ERISA) in connection with any Employee Benefit Plan and for which a statutory, regulatory or class or individual exemption does not apply. There are no pending or, to Seller’s Knowledge, threatened Proceedings (other than routine claims for benefits in the Ordinary Course of Business) asserted or instituted against (i) any Employee Benefit Plan or its assets, (ii) Seller or any ERISA Affiliate with respect to any Employee Benefit Plan or (iii) any fiduciary with respect to any Employee Benefit Plan.

(c)          Seller has made available to Buyer copies of (i) each written Employee Benefit Plan, as amended to the date hereof, together with audited financial statements and actuarial reports for the three most recent plan years, if any, (ii) each funding vehicle with respect to each such plan, (iii) the most recent and any other determination letter, ruling or notice issued by or filed with any Governmental Body with respect to such plan, (iv) the Form 5500 Annual Report for the three most recent plan years, (v) the most recent summary plan description or summary of modifications and (vi) each other document, explanation or communication which describes any relevant aspect of any such plan that is not disclosed in previously available materials. A description of any unwritten Employee Benefit Plans, including a description of any material terms of such plan, is set forth in Schedule 4.20(c). Each Employee Benefit Plan that is intended to be a “qualified plan” under Section 401(a) of the Code has received a favorable determination letter from the IRS on which it can rely and there are no facts or circumstances that would jeopardize such qualification.

(d)          Except as set forth on Schedule 4.20(d), neither Seller nor any ERISA Affiliate maintains, sponsors, contributes to, provides or has any Liability with respect to post-retirement medical benefits, post-retirement death benefits or other post-retirement welfare benefits to its current or former employees, except as required by Section 4980B of the Code and at the sole expense of the participant or the beneficiary of the participant. Seller does not maintain any Employee Benefits Plan that is an “employee welfare benefit plan”, as defined in Section 1 of ERISA, that has provided any “disqualified benefit”, as defined in Section 4976 of the Code, with respect to which an excise Tax could be imposed under Section 4976 of the Code. Except as set forth on Schedule 4.20(d), neither Seller nor any predecessor that operated the Business of Seller or any ERISA Affiliate has at any time participated in or made contributions to, has, or had any other liability with respect to, a plan which is a “multiemployer plan” as defined in Section 4001 of ERISA, a “multiemployer plan” within the meaning of Section 3(37) of ERISA, a “multiple employer plan” within the meaning of Code Section 413(c), a “multiple employer welfare arrangement” within the meaning of Section 3(40) of ERISA, or, except as disclosed on Schedule 4.20(d), a plan which is subject to Section 302 or Title IV of ERISA or is otherwise a defined benefit pension plan.

 

(e)          No Employee Benefit Plan or other Contract by or to which Seller or any ERISA Affiliate is bound or otherwise has any Liability under could reasonably be expected to require any payment or transfer of money, property or other consideration on account of or in connection with the Transactions. No payment or transfer due in connection with the consummation of the Transactions could constitute an “excess parachute payment” within the meaning of Section 280G of the Code.

(f)           Each Employee Benefit Plan which is a “non-qualified deferred compensation plan”, as defined in Section 409A(d)(1) of the Code, has been in a written form that complies with Section 409A of the Code such that it could not reasonably be expected that, in the event of an audit by the Internal Revenue Service of Seller, any ERISA Affiliate or any individual participating in such Employee Benefit Plan, the additional Tax described in Section 409A(a)(1)(B) would be assessed against any such participant with respect to benefits due or accruing under such Employee Benefit Plan.

(g)          No Employee Benefit Plan is or has ever been subject to laws outside the United States or covers any current or former service provider outside the United States.

4.21         Insurance. Schedule 4.21(a) sets forth all of the insurance policies, binders, or bonds maintained by Seller, including policy number and carrier, true and correct copies of which have been made available to Buyer. Schedule 4.21(b) sets forth a correct and complete list of all pending insurance claims relating to Seller and, since December 31, 2014, any instances of a denial of coverage of Seller by any insurance company with respect to any of such pending claims. Seller is insured with reputable insurers against such risks and in such amounts as the management of Seller reasonably has determined to be prudent in accordance with industry practices. All such insurance policies are in full force and effect; Seller is in material compliance thereunder and all premiums which are due and payable have been paid; and all claims thereunder have been filed in due and timely fashion. To Seller’s Knowledge, no event or condition has happened or presently exists with respect to any insurer that constitutes a material default or material breach or, after a notice or lapse of time, or both, would constitute a material default or material breach by such insurer under any of the insurance policies of Seller.

 

4.22         Prohibited Payments. Seller has not, directly or indirectly: (a) made or agreed to make any contribution, payment or gift to any government official, employee or agent where either the contribution, payment or gift or the purpose thereof was illegal under any Applicable Laws; (b) established or maintained any unrecorded fund or asset for any purpose or made any false entries on the Books and Records of Seller for any reason, that was illegal under any Applicable Laws; (c) made or agreed to make any contribution, or reimbursed any political gift or contribution made by any other Person, to any candidate for federal, state, local or foreign public office; or (d) paid or delivered any fee, commission or other sum of money or item of property, however characterized, to any finder, agent, government official or other party, which (i) in any manner relates to the Acquired Assets or the Business, and (ii) is or was illegal under any Applicable Laws at the time of such payment.

 

4.23         Intellectual Property and Information Technology.

 

(a)           Schedule 4.23(a) sets forth, for the Intellectual Property owned by Seller, a correct and complete list of all U.S., state and foreign: (i) Patents issued or pending, (ii) Trademark registrations and applications for registration (including Internet domain name registrations) and material unregistered Trademarks and (iii) Copyright registrations and applications for registration, including, where applicable (i.e., not including items not subject to registration or an application for registration), the name of the registered owner, date of registration or application and name of registration body where the registration or application was made. All renewal and maintenance fees in respect of the items listed on Schedule 4.23(a) (if applicable) have been duly paid, and none of the registrations therefor are currently the subject of any challenge, opposition, nullity Proceeding or interference nor, to Seller’s Knowledge, any threat in writing to commence same.

(b)          Schedule 4.23(b) sets forth all material Software that is owned by Seller.

(c)          Each Seller owns, or possesses all licenses or other legal rights necessary to use, sell, distribute or license, all Acquired Intellectual Property, free and clear of all Encumbrances (other than the terms and conditions of any Third Party Licenses). Each item of Acquired Intellectual Property will, immediately subsequent to Closing, continue to be owned or available for use, sale, distribution or license by Buyer on terms which are identical to those pursuant to which Seller, immediately prior to Closing, owned or had the right to use, sell, distribute or license, as applicable, such item. Such Seller has licenses for all Commercial Software used in the Business and use of such Commercial Software is in accordance with such licenses.

(d)           Except as set forth on Schedule 4.23(d):

(i)             no claims, or, to Seller’s Knowledge, threats of claims, have been asserted in writing by any Person against Seller within the past three years alleging that the use, sale, distribution or license of any Acquired Intellectual Property, or the conduct of the business of Seller, infringes, misappropriates, dilutes or otherwise violates any Intellectual Property of any Person;

(ii)           neither the use, sale, distribution or license of any Acquired Intellectual Property nor the conduct of the Business by Seller has infringed, misappropriated, diluted or otherwise violated or currently infringes, misappropriates, dilutes or otherwise violates, any Intellectual Property of any Person;

(iii)           no Person is infringing, misappropriating, diluting or violating any Acquired Intellectual Property; and

(iv)          Seller has not undertaken or authorized legal counsel to undertake any investigation or to write an opinion as to whether any Acquired Intellectual Property infringes, misappropriates or otherwise violates any third-party Intellectual Property.

 

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