SECURITIES PURCHASE AGREEMENT by and between META FINANCIAL GROUP, INC. and NANTAHALA CAPITAL PARTNERS SI, LP July 7, 2015

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Exhibit 10.2

 

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TABLE OF CONTENTS

 

		Page
1.	PURCHASE AND SALE OF COMMON STOCK	1
(a)	Shares of Common Stock	1
(b)	Closing	1
(c)	Purchase Price	2
(d)	Form of Payment	2
2.	BUYER’S REPRESENTATIONS AND WARRANTIES	2
(a)	Organization; Authority	2
(b)	No Public Sale or Distribution	2
(c)	Accredited Investor Status; Sophistication	2
(d)	Reliance on Exemptions	3
(e)	Certain Securities Transactions	3
(f)	Information	3
(g)	No Governmental Review	4
(h)	Transfer or Resale	4
(i)	Legends	5
(j)	No Conflicts	5
(k)	Bank Regulatory Agencies	6
(l)	Status of the Buyer	6
(m)	Stock Ownership	6
(n)	Residency	7
(o)	No Broker	7
3.	REPRESENTATIONS AND WARRANTIES OF THE COMPANY.	7
(a)	Organization and Qualification	7
(b)	Status of Company and Subsidiaries	7
(c)	Authorization; Enforcement; Validity	8
(d)	Issuance of Shares; No Restrictions on Transfer	8
(e)	No Conflicts	8
(f)	Consents	9
(g)	No General Solicitation; Placement Agent’s Fees	9
(h)	No Registration Due to Integrated Offering	9
(i)	Application of Takeover and Other Protections; Rights Agreement	9
(j)	SEC Documents; Financial Statements	9
(k)	Accuracy of Information	10
(l)	Absence of Certain Changes.	11
(m)	No Undisclosed Liabilities	12
(n)	Conduct of Business; Regulatory Permits	12
(o)	Investment Company Status	13

 

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(p)	Transactions With Affiliates	13
(q)	Agreements with Regulatory Agencies	13
(r)	Equity Capitalization	14
(s)	Subsidiaries	15
(t)	Absence of Litigation	15
(u)	Properties and Leases	15
(v)	Insurance	15
(w)	Tax Status	16
(x)	Manipulation of Price	16
(y)	Shell Company Status	16
(z)	U.S. Real Property Holding Corporation Status	16
(aa)	Allowance for Possible Loan Losses	16
(bb)	Intellectual Property	16
(cc)	No Disqualification Events	17
4.	COVENANTS.	17
(a)	Form D and Blue Sky	17
(b)	Reports	17
(c)	Listing	17
(d)	Conduct of the Business	18
(e)	Access to Information	18
(f)	Efforts to Consummate Transaction; Cooperation	19
(g)	NASDAQ Stock Issuance Notice	19
(h)	Expenses	19
(i)	Pledge of Shares	19
(j)	Disclosure of Transactions and Other Material Information	20
(k)	Certain Future Actions.	20
(l)	Standstill	23
(m)	Stock Certificates	24
(n)	Disclosure Letter Updates	24
(o)	Disqualification Events	24
(p)	Use of Proceeds	24
5.	CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL	24
6.	CONDITIONS TO THE BUYER’S OBLIGATION TO ▇▇▇▇▇▇▇▇	▇▇
▇.	SURVIVAL AND INDEMNIFICATION	27
(a)	Survival	27
(b)	Indemnification	27
(c)	Procedure	28
(d)	Reimbursement	29
8.	TERMINATION	29
(a)	Termination by Mutual Agreement	29
(b)	Termination for Failure to Close	29

 

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(c)	Termination for Breach	29
(d)	Effects of Termination	30
9.	MISCELLANEOUS	30
(a)	Definitions	30
(b)	Governing Law; Jurisdiction; Jury Trial	36
(c)	Counterparts	37
(d)	Headings	37
(e)	Severability	37
(f)	Entire Agreement; Amendments	37
(g)	Notices	37
(h)	Successors and Assigns	38
(i)	No Third Party Beneficiaries	38
(j)	Further Assurances	38
(k)	No Strict Construction	38
(l)	Remedies	38
(m)	Acknowledgment Regarding Buyer’s Shares	39
(n)	Buyer’s Acknowledgments Regarding Other Private Placements	39
(o)	Interpretive Matters	39

 

 

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SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of July 7, 2015, by and between Meta Financial Group, Inc., a Delaware corporation, with headquarters located at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ (the “Company”), and Nantahala Capital Partners SI, LP, a Delaware limited partnership (the “Buyer”).  Certain defined terms used herein are listed in Section 9(a).

WHEREAS:

NOW, THEREFORE, the Company and the Buyer hereby agree as follows:

 

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(c)        Purchase Price.  The aggregate purchase price for all the Shares to be purchased by the Buyer (the “Purchase Price”) shall be an amount equal to $768,291.56.

(d)        Form of Payment.  On the Closing Date, (i) the Buyer shall pay the Purchase Price to the Company for the Shares to be issued and sold to the Buyer at the Closing, by wire transfer of immediately available funds in accordance with the Company’s written wire instructions which shall be given to the Buyer in writing not later than one (1) day prior to the Closing Date, and (ii) the Company shall instruct its transfer agent, Computershare Trust Company, N.A. (the “Transfer Agent”), to issue and deliver to the Buyer the Shares in a single stock certificate, free and clear of all restrictive legends (except as expressly provided in Section 2(i) hereof), evidencing the number of Shares being purchased by the Buyer, which certificate shall be delivered to the Buyer at an address specified by the Buyer in writing not later than two (2) days prior to the Closing Date.

(a)        Organization; Authority.  The Buyer is a limited partnership, duly formed, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite power and authority to enter into and to consummate the transactions contemplated by this Agreement and each other Transaction Document to which it is or will be a party and otherwise to carry out its obligations hereunder and thereunder. This Agreement and each other Transaction Document to which the Buyer is or will be a party have been, or when executed and delivered will have been, duly authorized, executed and delivered by the Buyer and constitute or, when executed and delivered, will constitute the legal, valid and binding obligations of the Buyer, enforceable against the Buyer in accordance with their respective terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar Laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.

(b)        No Public Sale or Distribution.  The Buyer is acquiring the Shares for its own account and not with a view towards, or for resale in connection with, the public sale or distribution thereof, except pursuant to sales registered or exempt from the registration requirements under the 1933 Act; provided, however, that by making the representations herein, the Buyer does not agree to hold any of the Shares for any minimum or other specific term and reserves the right to dispose of the Shares at any time in accordance with or pursuant to a registration statement or an exemption from the registration requirements under the ▇▇▇▇ ▇▇▇. The Buyer does not presently have any agreement or understanding, directly or indirectly, with any Person to resell or distribute any of the Shares in violation of the 1933 Act.

(c)        Accredited Investor Status; Sophistication.

 

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(d)       Reliance on Exemptions.  The Buyer understands that the Shares are being offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and the Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of the Buyer to acquire the Shares.  The Buyer had a pre-existing substantive relationship with the Company prior to any communication between the Company and the Buyer with respect to the transactions contemplated hereby or the Other Private Placements, and the Buyer is not entering into this Agreement or otherwise agreeing to purchase the Shares as a result of any form of general solicitation or general advertising (within the meaning of Regulation D).

 

(e)      Certain Securities Transactions.  During the period (the “Pre-Announcement Period”) beginning with the date on which the Buyer commenced discussions with the Company in respect of the transactions contemplated hereby and ending on the date of the Pre-Closing 8-K filing (as defined below), neither the Buyer nor any Affiliate controlled by the Buyer, nor to the knowledge of the Buyer any Affiliate controlling the Buyer or under common control with the Buyer, has entered, or will enter, into any transaction in respect of or involving the Common Stock or any Convertible Securities or Options, including any purchase or sale, derivative or hedging transaction, other than the transactions contemplated by this Agreement.  Without limiting the foregoing, during the Pre-Announcement Period, the Buyer has not and will not engage in any transaction constituting a “short sale” (as defined in Rule 200 of Regulation SHO under the Securities Exchange Act of 1934, as amended (the “1934 Act”)) of shares of Common Stock or establish an open “put equivalent position” (within the meaning of Rule 16a-1(h) under the ▇▇▇▇ ▇▇▇) with respect to the Common Stock.

 

(f)        Information.  The Buyer and its advisors, if any, have received all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Shares which have been requested by the Buyer. The Buyer and its advisors, if any, have been afforded the opportunity to ask questions of, and have received answers from, the Company regarding the Company and the transactions contemplated hereby.  Neither such inquiries nor any other due diligence investigations conducted by the Buyer or its advisors or representatives, nor any other statement made by Buyer in this Section 2, shall modify, amend or affect the Company’s representations and warranties contained herein or the Buyer’s right to rely thereon. The Buyer understands that its investment in the Shares involves a high degree of risk. The Buyer has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the Shares.

 

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(g)       No Governmental Review.  The Buyer understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Shares or the fairness or suitability of the investment in the Shares nor have such authorities passed upon or endorsed the merits of the offering of the Shares.

 

(h)       Transfer or Resale.  The Buyer understands that:

 

 

 

The Shares may be pledged in connection with a bona fide margin account or other loan or financing arrangement secured by the Shares and such pledge of Shares shall not be deemed to be a transfer, sale or assignment of the Shares hereunder, and, except as required by applicable Law, the Buyer shall not be required to provide the Company with any notice thereof or otherwise make any delivery to the Company pursuant to this Agreement, including this Section 2(h), in connection with such a pledge.

 

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(i)         Legends.  The Buyer understands that the stock certificates representing the Shares, except as set forth below, shall bear any legend as required by the “blue sky” laws of any state and a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of such stock certificates in violation of the restrictions on transfer set forth herein):

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE 1933 ACT OR (B) AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, IN FORM AND SUBSTANCE REASONABLY ACCEPTABLE TO THE COMPANY AND THE TRANSFER AGENT FOR THE COMPANY’S COMMON STOCK, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT.

The legend set forth above shall be removed and the Company shall issue one or more certificates without such legend to the holder of the Shares upon which it is stamped, unless otherwise required by state securities Laws, if (i) such Shares are registered for resale and shall be resold pursuant to an effective registration statement under the 1933 Act, (ii) the Buyer shall have delivered to the Company an opinion of counsel reasonably acceptable to the Company, which opinion shall be in a form reasonably acceptable to the Company and the transfer agent for the Common Stock, to the effect that such Shares may be freely sold without restriction or limitation without registration under the 1933 Act, or (iii) such holder provides the Company with reasonable assurance, and certification to the effect, that (A) the Shares have been or are being sold, assigned or transferred pursuant to Rule 144 or Rule 144A or (B) such holder is not an Affiliate of the Company and the Shares can be sold by such holder pursuant to Rule 144 without any restrictions or limitations under Rule 144 and without compliance with the current public information requirement thereof.

(j)         No Conflicts.  The execution, delivery and performance by the Buyer of this Agreement and the other Transaction Documents to which it is or will be a party and the consummation by the Buyer of the transactions contemplated hereby and thereby, will not (i) result in a violation of the organizational or formation documents of the Buyer, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Buyer is a party, or (iii) result in a violation of any Law (including federal and state securities Laws) applicable to the Buyer, except in the case of clauses (ii) and (iii) above, for such conflicts, defaults, rights or violations which would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of the Buyer to perform its obligations hereunder.

 

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(k)        Bank Regulatory Agencies.  Neither the Buyer nor its Affiliates is required to obtain any consent, authorization or order of, or make any filing or registration with, any bank regulatory authority or agency, including, but not limited to, the Federal Reserve, in order for the Buyer to execute or deliver this Agreement or any of the other Transaction Documents to which it is or will be a party or perform any of its obligations under or as contemplated by this Agreement or any of the other Transaction Documents to which it is or will be a party in accordance with the terms hereof or thereof. Without limiting the generality of the foregoing sentence, the Buyer is not in “control” (rebuttably or otherwise, as such term is used in 12 C.F.R. Part 238) and has not acted in concert, and is not “acting in concert” within the meaning of 12 C.F.R. §238.31(b)(2) or (d), with any Person (including any of its Affiliates) to knowingly participate in joint activity or parallel action towards a common goal of acquiring control of the Company, whether or not pursuant to an express agreement, such that it would result in the Buyer or any of its Affiliates to be determined by the Federal Reserve (A) to have the power, directly or indirectly, to exercise a controlling influence over, or direct, the management or policies of the Company or any Subsidiary, (B) to have acquired, or to be attempting to acquire, control (rebuttably or otherwise, as such term is used in 12 C.F.R. Part 238) of the Company or any Subsidiary, or otherwise be required to register as a savings and loan holding company, as such term is defined in 12 C.F.R. § 238.2(m), (C) to be an “affiliate” (as defined under 12 C.F.R. § 238.2(a)) of any Subsidiary, such that any transactions between the Buyer and such Subsidiary would be subject to compliance with §§ 23A and 23B of the Federal Reserve Act or Regulation W, 12 C.F.R. Part 223, or (D) to be an “insider” (as defined in 12 C.F.R. § 215.2) of the Company or any Subsidiary such that any transactions between the Buyer and its Affiliates, on the one hand, and the Company and such Subsidiary, on the other, would be subject to compliance with Regulation O of 12 C.F.R. § 215.

 

(l)       Status of the Buyer.  Neither the Buyer nor any of its Affiliates shall, as a result of the Buyer entering into, or performing under, this Agreement and the other Transaction Documents to which it is or will be a party (A) have the power, directly or indirectly, to exercise a controlling influence over, or direct, the management or policies of the Company or any Subsidiary, (B) be in “control” of the Company or any Subsidiary, as such term is used in 12 C.F.R. Part 238, or otherwise be required to register as a savings and loan holding company, as such term is defined in 12 C.F.R. § 238.2(m), or (C) be an “affiliate” (as defined under 12 C.F.R. § 238.2(a)) of any Subsidiary, such that any transactions between the Buyer and such Subsidiary would be subject to compliance with §§ 23A and 23B of the Federal Reserve Act or Regulation W, 12 C.F.R. Part 223.

 

(m)       Stock Ownership.  Neither the Buyer nor any of its Affiliates own beneficially or of record any Common Stock or other securities of the Company other than (i) in the case of the Buyer, (A) as of the date hereof, the 16,349 shares of Common Stock (the “Previously Purchased Shares”), and (B) as of the Closing Date, the Shares purchased by it pursuant to this Agreement, and (ii) in the case of any such Affiliate, shares of capital stock of the Company that are held through the mutual fund holdings of such Affiliate.

 

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(n)       Residency.  The Buyer is formed in the State of Delaware and its principal place of business is located in the State of Connecticut.

(o)        No Broker.  The Buyer has not engaged any broker or other similar agent in connection with its purchase of the Shares.

3.                    REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to the Buyer as of the date hereof and as of the Closing Date that, except as otherwise disclosed or incorporated by reference and readily apparent in: (i) the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2014, or any of its other reports and forms filed with or furnished to the SEC under Section 12, 13, 14 or 15(d) of the 1934 Act after September 30, 2014 and publicly available before the date of this Agreement and, solely with respect to the representations and warranties made by the Company in this Agreement as of the Closing Date, all such other reports and forms filed or furnished by the Company with the SEC under the 1934 Act after the date of this Agreement and publicly available before the Closing Date (in each case including any amendments or supplements thereto, but excluding risk factors and/or any other disclosures of risks included in any forward-looking statement disclaimers or other statements that are similarly nonspecific and are predictive and forward-looking in nature); or (ii) the disclosure letter dated as of the date hereof separately provided to the Buyer in connection with, and containing qualifications or information with respect to the provisions of, this Agreement and, with respect to the representations and warranties made by the Company in this Agreement as of the Closing Date, as set forth in any disclosure letter delivered to the Buyer prior to the Closing Date pursuant to Section 4(n) hereof solely for purposes of the representations and warranties made by the Company in this Agreement as of the Closing Date (such disclosure letter, and, as applicable, as supplemented by the disclosure schedules delivered pursuant to Section 4(n) hereof, the “Disclosure Letter”), it being agreed that a disclosure set forth on any particular Schedule of the Disclosure Letter shall constitute disclosure on each other Schedule thereof provided it is readily apparent that the information so disclosed on the first Schedule shall apply to such other Schedule or the representation and warranty as to which such Schedule relates.

(a)       Organization and Qualification.  The Company and the Subsidiaries other than MetaBank are entities duly organized and validly existing and in good standing, and MetaBank is duly organized and validly existing, under the Laws of the jurisdiction in which they are formed, and have the requisite power and authorization to own their properties and to carry on their business as now being conducted. Each of the Company and the Subsidiaries is duly qualified as a foreign entity to do business and is in good standing in every jurisdiction in which its ownership of property or the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not reasonably be expected to have a Material Adverse Effect.

 

(b)       Status of Company and Subsidiaries.  The Company is a savings and loan holding company under the Home Owners’ Loan Act of 1933, as amended (“HOLA”), regulated and supervised primarily by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). MetaBank is a federally chartered stock savings bank duly organized and validly existing under HOLA and regulated and supervised primarily by the Office of the Comptroller of the Currency (the “OCC”). The deposit accounts of MetaBank are insured up to applicable limits by the Deposit Insurance Fund, which is administered by the Federal Deposit Insurance Corporation (the “FDIC”), and no proceedings for the termination or revocation of such insurance are pending or, to the Knowledge of the Company, threatened. The federal stock savings bank charter of MetaBank complies in all material respects with applicable Law.  MetaBank is considered “well capitalized” under the prompt corrective action provisions of the Federal Deposit Insurance Act (12 U.S.C. § 1831o and 12 C.F.R. Part 565).

 

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(c)       Authorization; Enforcement; Validity.  The Company has the requisite power and authority to enter into and perform its obligations under the Transaction Documents and to issue the Shares in accordance with the terms hereof. The execution and delivery by the Company of this Agreement and the other Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby, including the issuance of the Shares, have been duly authorized by the Company’s board of directors (the “Board of Directors”).  No further corporate consent or authorization is required by the Company, the Board of Directors or the Company’s stockholders in connection with the execution and delivery by the Company of this Agreement or any of the other Transaction Documents and the performance of the Company’s obligations hereunder and thereunder, including the issuance of the Shares.  This Agreement has been, and when executed and delivered by the Company at the Closing, each other Transaction Document will be, duly executed and delivered by the Company and constitute (or when executed and delivered will constitute) the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar Laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.

 

(d)       Issuance of Shares; No Restrictions on Transfer.  Upon the issuance of and payment for the Shares in accordance with this Agreement, such Shares will be validly issued, fully paid and nonassessable, and free and clear of all liens and/or restrictions on transfer (other than restrictions on transfer provided for by applicable federal and state securities Laws or expressly provided for herein) and will not be subject to preemptive rights of any other stockholder of the Company.  Subject to the accuracy of the representations and warranties of the Buyer in this Agreement, the offer and sale by the Company of the Shares to the Buyer hereunder will be exempt from registration under the 1933 Act.

(e)       No Conflicts.  Except as set forth on Schedule 3(e) of the Disclosure Letter, the execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby (including the issuance of the Shares) will not (i) violate the Certificate of Incorporation or the Bylaws, (ii) violate, conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of the Subsidiaries is a party, (iii) assuming the filing of a Form D and state securities Law filings, and such filings or notices as are required by the Principal Market (or the rules and regulations thereof), result in a violation of any Law, or rules and regulations of the Principal Market, applicable to the Company or any of the Subsidiaries or by which any property or asset of the Company or any of the Subsidiaries is bound or affected or (iv) result in or require the creation or imposition of any lien upon or with respect to any of the properties or assets of the Company or any of the Subsidiaries, except in the case of clauses (ii) and (iv), as would not reasonably be expected to have a Material Adverse Effect.

 

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(f)        Consents.  Neither the Company nor any of the Subsidiaries is required to obtain any consent, authorization or order of, or make any filing or registration with, any court, governmental agency (including the OCC or the Federal Reserve), or any regulatory or self‑regulatory agency (including the Principal Market) or any other Person in order for the Company to execute, deliver or perform any of its obligations under or contemplated by this Agreement in accordance with the terms hereof, other than (i) the filing with the SEC of a Form D and any the filings contemplated by Section 4(j), (ii) any other filings as may be required by any state securities agencies, and (iii) such filings as are required by the Principal Market (or the rules and regulations thereof).

(g)       No General Solicitation; Placement Agent’s Fees.  None of the Company or any of the Subsidiaries or any of their Affiliates, nor any Person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with the offer or sale of the Shares.  The Company shall be responsible for the payment of any placement agent’s fees, financial advisory fees, or brokers’ commissions (other than for Persons engaged by or on behalf of the Buyer or any of the Other Investors) relating to or arising out of the transactions contemplated hereby.  The Company shall pay, and hold the Buyer harmless against, any liability, loss or expense (including, without limitation, reasonable attorney’s fees and out-of-pocket expenses) arising in connection with any fee claimed by any placement agent, financial advisor or broker claiming to have been engaged by the Company, or to otherwise have been acting on the Company’s behalf, in connection with the transactions contemplated hereby.  Neither the Company nor any of the Subsidiaries has engaged any placement agent or other similar agent in connection with the sale of the Shares.

(h)       No Registration Due to Integrated Offering.  None of the Company, the Subsidiaries, any of the Affiliates of the Company, and any Person acting on their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would require registration of the offer or sale to the Buyer of any of the Shares under the 1933 Act.  None of the Company or the Subsidiaries or any Person acting on their behalf will take any action or steps referred to in the preceding sentence that would require registration of the offer or sale to the Buyer of any of the Shares under the 1933 Act (except as contemplated by the Registration Rights Agreement).

(i)        Application of Takeover and Other Protections; Rights Agreement.  The Company and its Board of Directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Certificate of Incorporation or any certificates of designations or the Laws of the jurisdiction of its formation or incorporation which is or could become applicable to the Buyer as a result of the transactions contemplated by this Agreement, including the Company’s issuance of the Shares and the Buyer’s ownership of the Shares.

(j)         SEC Documents; Financial Statements.

 

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(k)        Accuracy of Information.  All factual information, taken as a whole, furnished by or on behalf of the Company in writing to the Buyer on or prior to the date of this Agreement for purposes of this Agreement and all other such factual information, taken as a whole, furnished by the Company on behalf of itself and the Subsidiaries in writing to the Buyer pursuant to the terms of this Agreement does not, when taken together with the SEC Documents, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading; provided, however, that with respect to any projected financial information or forward-looking statements, business assumptions, strategic plans or similar information, the Company represents only that such information was prepared in good faith based upon assumptions, and subject to such qualifications, believed to be reasonable at the time.  The Company understands and confirms that the Buyer will rely on the representations and warranties contained in this Section 3 in effecting transactions in securities of the Company.

 

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(i)         Except as disclosed in Schedule 3(l)(i) of the Disclosure Letter or in the SEC Documents, since September 30, 2014, no event or events have occurred that, individually or in the aggregate, has had, or would reasonably be expected to have, a Material Adverse Effect.

 

 

 

 

 

 

 

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(m)       No Undisclosed Liabilities.  Neither the Company nor any of the Subsidiaries is subject to any liabilities or obligations of any nature (absolute, accrued, contingent or otherwise) which are not properly reflected or reserved against in the Company’s financial statements included in the SEC Documents to the extent required to be so reflected or reserved against in accordance with generally accepted accounting principles in the United States except for, since the date of the most recent balance sheet included in the SEC Documents, liabilities or obligations (i) that are listed or disclosed in Schedule 3(m) included in the Disclosure Letter, (ii) arising in the ordinary course of business consistent with past practices, (iii) incurred under this Agreement or the securities purchase agreements entered into with Other Investors in connection with the Other Private Placements or in connection with the transactions contemplated hereby or thereby, or (iv) that have not had, and would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.

(n)       Conduct of Business; Regulatory Permits.

 

 

 

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(o)       Investment Company Status.  The Company is not, and upon consummation of the sale of the Shares will not be, an “investment company”, or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment company” as such terms are defined in the Investment Company Act of 1940, as amended.

(p)       Transactions With Affiliates.  Except as set forth in the SEC Documents and other than the outstanding stock options and/or unvested restricted stock disclosed on Schedule 3(p) of the Disclosure Letter, none of the officers, directors or employees of the Company or any of the Subsidiaries, or any of their respective Family Members, is presently a party to any transaction with the Company or any of the Subsidiaries (other than for services as employees, officers, directors or consultants), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from, any such officer, director, employee or Family Member, or, to the Knowledge of the Company, any corporation, partnership, trust or other entity in which any such officer, director, employee or Family Member has a substantial interest or is an officer, director, trustee or partner.

(q)       Agreements with Regulatory Agencies.  Except as set forth on Schedule 3(q) of the Disclosure Letter:

 

 

 

 

 

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(r)        Equity Capitalization.  As of the date hereof, the authorized capital stock of the Company consists of (i) 10,000,000 shares of Common Stock, par value $.01 per share, of which as of the date of this Agreement, 6,966,700 are issued and 6,946,450 are outstanding and 795,369 shares are reserved for issuance pursuant to securities outstanding as of the date of this Agreement and exercisable or exchangeable for, or convertible into, shares of Common Stock, and (ii) 800,000 shares of preferred stock, par value $.01 per share, of which as of the date of this Agreement none are issued and outstanding.  All of such outstanding and reserved shares have been, or upon issuance will be, validly issued and fully paid and nonassessable.  Except for any shares to be issued in connection with the Acquisition, the Transaction Documents, or as disclosed in Schedule 3(r) of the Disclosure Letter:  (i) none of the Company’s capital stock is subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by the Company; (ii) other than shares of Common Stock issuable to the Buyer hereunder or the shares of Common Stock issued to any Other Investor pursuant to any Other Private Placement, as of the date hereof there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any capital stock of the Company or any of the Subsidiaries, or contracts or arrangements by which the Company or any of the Subsidiaries is or may become bound to issue additional capital stock of the Company or any of the Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any capital stock of the Company or any of the Subsidiaries; (iii) except as provided in the Registration Rights Agreement to be executed with the Buyer on the Closing Date, and except for registration rights to be granted to any Other Investor pursuant to any registration rights agreement entered into by the Company in connection with any Other Private Placement, as of the date hereof there are no agreements or arrangements under which the Company or any of the Subsidiaries remains obligated to register the sale of any of their securities, whether presently outstanding or securities that may be issued subsequently, under the 1933 Act; (iv) there are no outstanding securities or instruments of the Company or any of the Subsidiaries which contain any redemption or similar provisions, and as of the date of this Agreement, there are no contracts, commitments or arrangements by which the Company or any of the Subsidiaries is or may become bound to redeem a security of the Company or any of the Subsidiaries; (v) there are no securities or instruments of the Company containing anti-dilution or similar provisions, other than provisions for equitable adjustments upon a stock split, stock dividend, combination or similar recapitalizations with respect to the Company’s capital stock; and (vi) the Company does not have any stock appreciation rights or “phantom stock” plans or agreements or any similar plan or agreement.  To the Company’s Knowledge, no stockholder of the Company has entered into any agreement with any other stockholder with respect to the voting of equity securities of the Company.  The Company has furnished to the Buyer true, correct and complete copies of the Company’s Certificate of Incorporation, as amended and as in effect on the date of this Agreement (the “Certificate of Incorporation”), and the Company’s Bylaws, as amended and as in effect on the date of this Agreement (the “Bylaws”).

 

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(s)       Subsidiaries.  Schedule 3(s) of the Disclosure Letter sets forth a complete and accurate list of all direct and indirect Subsidiaries as of the date of this Agreement, showing in each case as of the date of this Agreement (as to each such Subsidiary) the jurisdiction of its formation, and, with respect to each non-wholly owned Subsidiary, the number of shares, membership interests or partnership interests (as applicable) of each class of its equity interests authorized, and the number outstanding, on the date of this Agreement and the percentage of each such class of its equity interests owned (directly or indirectly) by the Company, and the number of shares covered by all outstanding options, warrants, rights of conversion or purchase and similar rights as of the date of this Agreement.  All of the outstanding equity interests in each of the Subsidiaries have been validly issued, are fully paid and non-assessable and are owned by the Company or one or more of the Subsidiaries, free and clear of all liens.  Except as set forth in Schedule 3(s) of the Disclosure Letter, the Company or one or more of the Subsidiaries has the unrestricted right to vote, and (subject to limitations imposed by applicable Law) to receive dividends and distributions on, all capital securities of the Subsidiaries as owned by the Company or such Subsidiary.

 

(t)        Absence of Litigation.  Except as set forth in Schedule 3(t) of the Disclosure Letter or as set forth in the SEC Documents, there is no action, suit, proceeding, inquiry or investigation before or by the Principal Market, any court, public board, government agency, arbiter, mediator, self-regulatory organization or body pending or, to the Knowledge of the Company, threatened against or affecting the Company or any of the Subsidiaries, or, to the Company’s Knowledge, any of the Company’s or the Subsidiaries’ officers or directors, that (i) is reasonably likely to have a Material Adverse Effect or (ii) purports to affect the legality, validity or enforceability of this Agreement or the consummation of the transactions contemplated by this Agreement.

 

(u)        Properties and Leases.  The Company and the Subsidiaries have good and marketable title to all real properties and all other material properties and assets that purport to be owned by them, in each case free from liens, encumbrances, claims and defects that would affect the value thereof or interfere with the use made or to be made thereof by them, except for such defects in title or liens, encumbrances and claims that would not, individually or in the aggregate, reasonably be likely to result in a Material Adverse Effect.  The Company and the Subsidiaries hold all leased real or personal property under valid and enforceable leases with no exceptions that would interfere with the use made or to be made thereof by them, and neither the Company nor any of the Subsidiaries has any notice of any claim of any sort that has been asserted by anyone adverse to the rights of the Company or any such Subsidiary under any such leases, or affecting or questioning the rights of such entity to the continued possession of the leased premises, except for such title exceptions or claims that would not, individually or in the aggregate, reasonably be likely to result in a Material Adverse Effect.

 

(v)       Insurance.  The Company and each of the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as companies engaged in a similar business would, in accordance with good business practice, customarily be insured.

 

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(w)       Tax Status.  (i) Each of the Company and the Subsidiaries has (A) duly and timely filed (including pursuant to applicable extensions granted without penalty) all material Tax Returns required to be filed by it, (B) paid in full all Taxes due, whether or not shown as due on such Tax Returns, other than such Taxes being contested in good faith or such Taxes the nonpayment of which would not, individually or in the aggregate, reasonably be likely to result in a Material Adverse Effect, and (C) made adequate provision for any unpaid Taxes not yet due in the financial statements of the Company (in accordance with GAAP); (ii) no material deficiencies for any Taxes have been proposed, asserted or assessed in writing against or with respect to any Taxes due by or Tax Returns of the Company or any of the Subsidiaries, which deficiencies have not since been resolved, except for Taxes proposed, asserted or assessed that are being contested in good faith by appropriate proceedings and for which reserves adequate in accordance with GAAP have been provided in the financial statements of the Company; and (iii) there are no material liens for Taxes upon the assets of either the Company or its material Subsidiaries except for statutory liens for current Taxes not yet due or liens for Taxes that are being contested in good faith by appropriate proceedings and for which reserves adequate in accordance with GAAP have been provided in the financial statements of the Company.

(x)        Manipulation of Price.  The Company has not, and to its Knowledge no one acting on its behalf has, taken, directly or indirectly, any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale of any of the Shares to the Buyer hereunder.

(y)       Shell Company Status.  The Company is not, and has never been, an issuer of the type described in paragraph (i) of Rule 144.

(z)        U.S. Real Property Holding Corporation Status.  The Company is not, nor has ever been, a U.S. real property holding corporation within the meaning of Section 897 of the Code.

 

(aa)      Allowance for Possible Loan Losses.  The allowance for possible loan or credit losses (the “Allowance”) shown on the consolidated balance sheets of each Subsidiary, as applicable, included in the most recent SEC Documents dated prior to the date of this Agreement was, as of the dates thereof, adequate (within the meaning of GAAP and applicable regulatory requirements or guidelines) to provide for all known, reasonably anticipated or probable losses relating to or inherent in the loan and lease portfolios (including accrued interest receivables) of such Subsidiary and other extensions of credit (including letters of credit and commitments to make loans or extend credit) by such Subsidiary as of the date thereof; provided, however, that there can be no assurance that future losses will not exceed the Allowance, or that additional provisions for loan losses will not be required in future periods, and provided, further, that it is understood that the Company’s determination of the Allowance is subject to review by the Company’s bank regulator, which can require the establishment of additional general or specific allowances.

 

(bb)     Intellectual Property.  Except as would not have a Material Adverse Effect, (i) the Company owns or has the right to use all Intellectual Property necessary to conduct its business as currently conducted (the “Company Intellectual Property”) and (ii) to the Company’s Knowledge, no Person is infringing, violating or misappropriating any Company Intellectual Property.

 

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(cc)      No Disqualification Events.  None of the Company, any of its predecessors, any director, executive officer, other officer of the Company participating in the offering contemplated hereby, any beneficial owner (as that term is defined in Rule 13d-3 under the ▇▇▇▇ ▇▇▇) of 20% or more of the Company’s outstanding voting equity securities, calculated on the basis of voting power, any “promoter” (as that term is defined in Rule 405 under the ▇▇▇▇ ▇▇▇) connected with the Company in any capacity at the Closing Date, any placement agent or dealer participating in the offering of the Shares and any of such agents’ or dealer’s directors, executive officers, other officers participating in the offering of the Shares (each, a “Covered Person” and, together, “Covered Persons”) is subject to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to (viii) under the 1933 Act (a “Disqualification Event”). The Company has exercised reasonable care to determine (i) the identity of each person that is a Covered Person; and (ii) whether any Covered Person is subject to a Disqualification Event.  The Company has complied, to the extent applicable, with its disclosure obligations under Rule 506(e) under the 1933 Act.  With respect to each Covered Person, the Company has established procedures reasonably designed to ensure that the Company receives notice from each such Covered Person of (i) any Disqualification Event relating to that Covered Person, and (ii) any event that would, with the passage of time, become a Disqualification Event relating to that Covered Person; in each case occurring up to and including any Closing Date.  The Company is not for any other reason disqualified from reliance upon Rule 506 of Regulation D under the 1933 Act for purposes of the offer and sale of the Shares.

(a)        Form D and Blue Sky.  The Company agrees to file a Form D with respect to the Shares as required under Regulation D and to provide a copy thereof to the Buyer promptly after such filing.  The Company shall, on or before the Closing Date, take such action (if any) as the Company shall reasonably determine is necessary in order to obtain an exemption for or to qualify the Shares for sale to the Buyer at the Closing pursuant to this Agreement under applicable securities or “Blue Sky” laws of the states of the United States (or to obtain an exemption from such qualification), and shall provide evidence of any such action so taken to the Buyer on or prior to the Closing Date.  The Company shall make all filings and reports relating to the offer and sale to the Buyer of the Shares required under applicable securities or “Blue Sky” laws of the states of the United States following the Closing Date.

(b)       Reports.  For as long as the Buyer holds the Shares, the Company shall timely file all reports required to be filed with the SEC pursuant to the 1934 Act from and after the date hereof and so long as the Company shall be required to do so under the 1934 Act.  For as long as the Buyer holds the Shares, if the Company is not required to file reports pursuant to the 1934 Act, it will prepare and furnish to the Buyer and make publicly available in accordance with Rule 144(c) such information as is required for the Buyer to sell the Shares under Rule 144.

 

(c)       Listing.  Subject to the occurrence of the Closing, the Company shall promptly secure the listing of all of the Shares upon the Principal Market and, at all times while the Common Stock is listed on the Principal Market, and for so long as the Buyer holds the Shares, shall maintain such listing of all Shares.  The Company shall use its commercially reasonable efforts to maintain authorization for the Common Stock for quotation on the Principal Market or any other Eligible Market, and so long as the Buyer owns at least 33% of the number of Shares originally purchased hereunder, neither the Company nor any of the Subsidiaries shall take any action which would reasonably be expected to result in the delisting or suspension of the Common Stock on the Principal Market or any other Eligible Market (other than in connection with a change of listing to another Eligible Market and excluding ordinary temporary suspensions in connection with announcements of material Company news).  The Company shall pay all fees and expenses in connection with satisfying its obligations under this Section 4(c).

 

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(d)       Conduct of the Business.  Commencing on the date hereof and ending on the earlier of the Closing Date and the date that this Agreement shall terminate in accordance with Section 8 hereof (the “Interim Period”), the Company shall, and shall cause each Subsidiary to, use commercially reasonable efforts to carry on and maintain and preserve its business in the ordinary course of business; provided, however, that nothing contained in this sentence shall limit, preclude or require any actions that the Board of Directors or the board of directors of such Subsidiary (as the case may be) may, in good faith, determine to be inconsistent with their duties or the Company’s or such Subsidiary’s obligations under applicable Law; and, provided, further, that nothing contained in this sentence shall limit or preclude the Company or such Subsidiary from terminating any contract, license, loan or other extension of credit made or extended to any borrower, customer or other obligor, or other agreement or right, or entry into the Purchase Agreement, as the Company or such Subsidiary, as the case may be, shall in its good faith judgment deem necessary, appropriate or advisable.

(e)       Access to Information.  During the Interim Period and upon reasonable advance written notice from the Buyer, the Company shall (and shall cause each of the Subsidiaries to) provide to officers, directors, managers, employees, accountants, counsel, consultants, advisors and representatives of the Buyer (collectively, the “Buyer Representatives”), solely for the purpose of evaluating the transactions contemplated by this Agreement, reasonable access, during normal business hours, to members of the Company Executive Team and to such other employees of the Company and the Subsidiaries as specifically approved by a member of the Company Executive Team, and to the assets, properties, agreements, books and records of the Company and the Subsidiaries.  During the Interim Period, the Company shall and shall cause each of the Subsidiaries to (i) furnish promptly to a Buyer Representative all information concerning its finances, operations, business, properties, personnel and condition (financial or otherwise), and respond to such inquiries, in each case as may from time to time be reasonably requested by such Buyer Representative, and (ii) use commercially reasonable efforts to make available during normal business hours to such Buyer Representative, upon request, the appropriate individuals (including management, personnel, employees, attorneys, accountants and other professionals) for reasonable inquiries regarding the Company’s and the Subsidiaries’ finances, operations, business, properties, personnel and condition (financial or otherwise).  Notwithstanding the foregoing provisions of this Section 4(e), nothing contained herein shall require the Company or any of the Subsidiaries to disclose any information to the extent that the Company reasonably believes that (x) such information is a trade secret or competitively sensitive proprietary information or because there exists, or the Company reasonably believes there exists, a conflict or a potential conflict of interest between the Company and the Buyer, (y) disclosure would cause a violation of any applicable Law or any confidentiality agreement or undertaking in effect and binding upon the Company or such Subsidiary or (z) disclosure would cause a risk of a loss of privilege to the Company or such Subsidiary, in which case with respect to clause (x) or (y) the parties hereto will make appropriate substitute disclosure arrangements, if such arrangements can be made by the parties using their commercially reasonable efforts and without such violation.  The Buyer acknowledges and agrees that all information so provided the Buyer and its Buyer Representatives is and shall be subject to the terms of the Confidentiality Agreement.

 

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(f)        Efforts to Consummate Transaction; Cooperation.  Each party hereto shall use its commercially reasonable efforts to satisfy on a timely basis each of the covenants and conditions to be satisfied by it as provided in Sections 4, 5 and 6 of this Agreement.  Each party shall refrain from taking any action which would render any representation or warranty contained in Sections 2 and 3 hereof inaccurate in any material respect as of the Closing Date.  Each party hereto shall promptly notify the other party of (i) any event or matter that would reasonably be expected to cause any of its representations or warranties to be untrue in any material respect as of the Closing Date or that would reasonably be expected to cause any of the conditions to Closing provided in Section 5 or 6, as the case may be, not to be satisfied in the manner contemplated herein, or (ii) any action, suit or proceeding that shall be instituted or threatened against such party to restrain, prohibit or otherwise challenge the legality of any of the transactions contemplated by this Agreement.

(g)       NASDAQ Stock Issuance Notice.  At least fifteen (15) days prior to the issuance of the Shares hereunder (but in any event as soon as reasonably practicable following the date hereof), the Company shall file with the NASDAQ OMX Listing Center the notice, appropriately completed, required by NASDAQ Stock Market Rule 5250(e)(2)(D) in respect of the Shares issuable hereunder and the shares of capital stock issuable in connection with the Other Private Placements, and thereafter prepare and file such amendments and supplements thereto as shall be required, and respond to such inquiries (if any) from the NASDAQ OMX Listing Center (or the Principal Market) relating thereto, in each case on a timely basis.  At the request of the Buyer, the Company shall provide copies to the Buyer of such filing and any such amendments and supplements in advance of the filing of any thereof.  The Buyer shall reasonably cooperate, in a timely manner, in connection with the Company’s obligations under this Section 4(g), including, without limitation, furnishing the Company in a timely manner upon request with all information with respect to the Buyer as may be required to be included in the NASDAQ Stock Market Rule notice filing or any amendment or supplement thereto.

(h)       Expenses.  Each party hereto shall be responsible for its own costs and expenses incurred by it in connection with the transactions contemplated hereby.

(i)         Pledge of Shares.  The Company acknowledges and agrees that the Shares may be pledged by the Buyer and that such pledge of the Shares shall not be deemed to be a transfer, sale or assignment of the Shares hereunder, and, except as required by applicable Law, the Buyer shall not be required to provide the Company with any notice thereof or otherwise make any delivery to the Company pursuant to this Agreement; provided, however, that the Buyer and its pledgee shall be required to provide notice to the Company and comply with the applicable provisions hereof, including the requirements of Section 2(l), in order to effect (and otherwise in connection with) any sale, transfer or assignment of the Shares to such pledgee.

 

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(j)        Disclosure of Transactions and Other Material Information.  On or before 5:30 p.m., New York City time, on the fourth (4^th) Business Day following (i) the date of this Agreement the Company shall issue a press release and file a current report on Form 8-K describing the terms of the transactions contemplated by this Agreement, in the form required by the 1934 Act and attaching this Agreement (and, as appropriate, any other Transaction Document) as an exhibit to such filing (including such attachment, the “Pre-Closing 8-K”), and (ii) such other matters as are required or deemed appropriate by the Company to be disclosed under Form 8-K relating to the transactions contemplated hereby, in the form required by the 1934 Act.  In addition, following the Closing, the Company may file a press release and a Form 8-K relating to the Closing of the transactions contemplated hereby to the extent deemed appropriate by the Company (the “Post-Closing 8‑K”).  A reasonable time prior to issuing any press release referred to in the previous two sentences, the Company shall provide the Buyer with a copy of the proposed press release and shall consult with the Buyer with respect to the content of such press release and Pre-Closing 8-K, or Post-Closing 8-K, as the case may be, and consider in good faith any comments proposed by the Buyer.  Subject to the foregoing, none of the Company and the Subsidiaries nor the Buyer shall issue any press releases or any other public statements with respect to the transactions contemplated hereby; provided, however, that (i) the Company shall be entitled, without the prior approval of the Buyer, to make any press release or other public disclosure with respect to such transactions in substantial conformity with the Pre-Closing 8-K or the Post-Closing 8-K, as the case may be (provided that the Company shall consult with the Buyer in connection with any such press release or other public disclosure prior to its release and consider in good faith any comments proposed by the Buyer) and (ii) either party may make such disclosure as is required by applicable Law.

 

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“Benchmark Price” means, in the case of any Excess Shares sold pursuant to this Section 4(k)(ii), (x) during the period commencing on the Closing Date and ending on the eighteen (18) month anniversary of the Closing Date, the greater of the Fair Market Value per share of the Excess Shares and the price per share paid hereunder for the Shares at the Closing, and (y) at any time after the eighteen (18) month anniversary of the Closing Date, the Fair Market Value per share of such Excess Shares.

 

“Fair Market Value” means, in the case of any Excess Shares sold pursuant to this Section 4(k)(ii), (a) if the Common Stock is traded on an Eligible Market, the price which represents the trailing 20-trading day (including trading days on which no Common Stock were in fact traded) average of the closing “bid” price (determined without regard to after-hours trading or any other trading outside of the regular trading session trading hours) of the Common Stock ending on (and including) the trading day immediately preceding the date that is one (1) trading day prior to the date on which such Excess Shares shall have been so sold or (b) if the Common Stock is not so traded, the fair market value (per share) of Common Stock as of the date that is one (1) trading day immediately preceding the date on which such Excess Shares shall have been sold as determined in good faith between the Company and the Buyer; provided, however, that if the Company and the Buyer do not reach an agreement as to the fair market value of such Common Stock by the date on which the Company shall be required to make any payment to the Buyer pursuant to this Section 4(k)(ii), then such fair market value shall be determined by an independent, nationally recognized investment banking firm, accounting firm or appraisal firm selected by the Buyer and reasonably acceptable to the Company and paid for by the Company and the date on which any payment required to be made by the Company to the Buyer pursuant to this Section 4(k)(ii) shall be extended until the date that is three (3) Business Days following the date on which such valuation firm shall have delivered to the Company and the Buyer its fair market value determination (which determination shall, for purposes of this Section 4(k)(ii), be conclusive and binding on the parties hereto absent manifest error).

 

“Market Price” means, with respect to any Excess Shares sold by the Buyer pursuant to this Section 4(k)(ii), the fair market value thereof, per share, based on the price that would be obtained by a seller of such Excess Shares who was acting in good faith and in a commercially reasonable manner on the date of such sale; provided, however, that if any such Excess Shares are sold at any time during which the Company’s Common Stock is listed on any national securities exchange or quoted on the over-the-counter bulletin board, then the “Market Price” shall be deemed to be the closing price of such shares of Common Stock as reported on such national securities exchange or bulletin board on the date of sale of such Excess Shares.

 

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(l)         Standstill.  The Buyer hereby agrees that, during the period commencing on the Closing Date and ending on the second annual anniversary thereof (the “Standstill Period”), unless specifically invited in writing by the Company, the Buyer will not, and will not permit any director, officer or Affiliate of the Buyer to, in any manner, directly or indirectly (including by directing or causing any other Person that is not the Buyer or a director, officer or Affiliate of the Buyer):

 

 

 

 

The Buyer further agrees that it shall not, and shall not permit any director, officer or Affiliate of the Buyer to, during the Standstill Period, directly or indirectly, publicly request the Company (or its directors, officers, employees or agents) to amend or waive any provision of this Section 4(l) (including this sentence).

 

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(m)      Stock Certificates.  In connection with the Closing, the Company shall instruct the Transfer Agent to issue the stock certificate representing the Shares as required by this Agreement and take such actions as shall be reasonably requested by the Transfer Agent such that such stock certificate shall be delivered to the Buyer within five (5) Business Days after the Closing Date.

(n)      Disclosure Letter Updates.  No later than two Business Days prior to the Closing Date, the Company shall amend or supplement the Disclosure Letter with respect to any matter or event arising or occurring after the date hereof to the extent necessary or desirable in order to make the representations and warranties being made by the Company pursuant to this Agreement as of the Closing Date true and correct as of the Closing Date.

(o)       Disqualification Events.  The Company will notify the Buyer in writing, prior to the Closing Date of (i) any Disqualification Event relating to any Covered Person and (ii) any event that would, with the passage of time, become a Disqualification Event relating to any Covered Person.

(p)       Use of Proceeds.  The Company will use the proceeds from the sale of the Shares as follows: (i) to finance the Acquisition (including to pay any expenses associated with the Acquisition) and (ii) the remainder shall be used for general corporate purposes (including to pay expenses associated with the transactions contemplated hereby).

The obligation of the Company hereunder to issue and sell the Shares to the Buyer at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions; provided that these conditions are for the Company’s sole benefit and (to the extent permitted by applicable Law) may be waived by the Company at any time in its sole discretion by providing the Buyer with prior written notice thereof:

 

 

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The obligation of the Buyer hereunder to purchase the Shares at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for the Buyer’s sole benefit and (to the extent permitted by applicable Law) may be waived by the Buyer at any time in its sole discretion by providing the Company with prior written notice thereof:

 

 

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(1)        The representations and warranties of the Company set forth in Sections 3(a), 3(b), 3(c), 3(d), 3(g), 3(h), 3(i), 3(l)(i), 3(x), 3(y), 3(z) and 9(n) (the “Fundamental Representations”) shall be true and correct in all respects as of the date hereof and as of the Closing Date (except for representations and warranties that speak as of a specific date, which shall be true and correct as of such specified date);

 

(2)        The representations and warranties of the Company set forth in Section 3 hereof, other than the Fundamental Representations, shall be true and correct in all material respects (except for those representations and warranties that are qualified by materiality or Material Adverse Effect or like qualifiers, which shall be true and correct in all respects) as of the date hereof and as of the Closing Date (except for representations and warranties that speak as of a specific date, which shall be true and correct in all material respects (or, if such representation and warranty is qualified by materiality or Material Adverse Effect, in all respects) as of such specified date);

 

(3)       The Company shall have performed, satisfied and complied with in all material respects the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing Date; and

 

(4)       The Buyer shall have received a certificate, executed by the Chief Executive Officer or Chief Financial Officer (or other senior executive officer reasonably acceptable to the Buyer) of the Company, dated as of the Closing Date, that the conditions set forth in each of clauses (1) through and including (3) above have been satisfied, and further certifying that the facts, events or circumstances described in updates to the Disclosure Letter and in any document filed or furnished with the SEC under the 1934 Act after the date hereof and publicly available before the Closing Date have not had, and are reasonably expected not to have, a Material Adverse Effect.

 

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(a)        Survival.  Unless this Agreement is terminated under Section 8, the representations and warranties of the Company and the Buyer contained in Sections 2 and 3 and the agreements and covenants set forth in Sections 4, 7, 8 and 9(b) shall survive the Closing and the delivery of the Shares.

 

(b)       Indemnification.  Subject to the other terms and conditions of this Section 7, the Company shall indemnify, defend and hold harmless the Buyer, its Affiliates and their respective partners, directors, officers, employees, advisors and representatives (each, an “Indemnified Party” and collectively, the “Indemnified Parties”) against any and all Losses

 

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(including actions brought by the Buyer or the Company or any equity holders of the Company or derivative actions brought by any Person claiming through or in the Company’s name other than actions brought by the Company for breach of any of the Buyer’s representations, warranties or covenants made by it under this Agreement), proceedings or investigations (whether formal or informal), or threats thereof, based upon, resulting from, relating to or arising out of (i) any breach of any representation or warranty of the Company in this Agreement, (ii) any breach of any covenant, agreement or obligation of the Company contained in this Agreement, or (iii) any action, suit or proceeding initiated by one or more stockholders of the Company (other than the Buyer) as a result of the transactions contemplated by this Agreement that are to be consummated on the Closing Date; provided, that if and to the extent that such indemnification is unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of such Losses which shall be permissible under applicable Laws; and, provided, further, that the Company shall have no obligation to indemnify, defend or hold harmless (or make contribution to the payment and satisfaction to) any Indemnified Party to the extent the Losses suffered by such Indemnified Party arise out of or result from a breach of any representation, warranty or covenant made or to be complied with by such Indemnified Party hereunder or the gross negligence or willful misconduct of such Indemnified Party.

(c)        Procedure.  Promptly after receipt by an Indemnified Party of notice by a third party of any complaint or the commencement of any audit, investigation, action or proceeding with respect to which such Indemnified Party may be entitled to receive payment from the Company for any Losses, such Indemnified Party will notify the Company in writing following the Indemnified Party’s receipt of such complaint or of notice of the commencement of such audit, investigation, action or proceeding; provided, however, that the failure to so notify the Company in writing will not relieve the Company from liability under this Agreement with respect to such claim unless such failure to notify the Company in writing results in the forfeiture of material rights or defenses otherwise available to the Company with respect to such claim.  The Company will have the right, upon written notice delivered to the Indemnified Party within twenty (20) days thereafter, which notice shall include the Company’s written statement that it is assuming full responsibility for any Losses resulting from such audit, investigation, action or proceeding, to assume the defense of such audit, investigation, action or proceeding, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of the fees and disbursements of such counsel.  In the event, however, that the Company declines or fails to assume the defense of the audit, investigation, action or proceeding on the terms provided above or to employ counsel reasonably satisfactory to the Indemnified Party, in either case within such twenty (20) day period, then such Indemnified Party may employ counsel to represent or defend it in any such audit, investigation, action or proceeding and the Company will pay the reasonable fees and disbursements of such counsel as incurred; provided, however, that the Company will not be required to pay the fees and disbursements of more than one counsel plus appropriate local counsel for all Indemnified Parties in any jurisdiction in any single audit, investigation, action or proceeding.  In any audit, investigation, action or proceeding with respect to which indemnification is being sought hereunder, the Indemnified Party or the Company, whichever is not assuming the defense of such action, will have the right to participate in such matter and to retain its own counsel at such party’s own expense.  The Company or the Indemnified Party, as the case may be, shall at all times use reasonable efforts to keep the Company or the Indemnified Party, as the case may be, reasonably apprised of the status of the defense of any matter the defense of which they are maintaining and to cooperate in good faith with each other with respect to the defense of any such matter.  No Indemnified Party may settle or compromise any claim or consent to the entry of any judgment with respect to which indemnification is being sought hereunder without the prior written consent of the Company, unless (i) the Company fails to assume and maintain the defense of such claim pursuant to this Section 7(c) or (ii) such settlement, compromise or consent (A) includes an unconditional release of the Company from all liability arising out of such claim, (B) does not contain any admission or statement suggesting any wrongdoing or liability on behalf of the Company, and (C) does not contain any equitable order, judgment or term which in any manner affects, restrains or interferes with the business of the Company or any of the Company’s Affiliates.  The Company may not, without the prior written consent of the Indemnified Party (which consent shall not be unreasonably withheld or delayed), settle or compromise any claim or consent to the entry of any judgment with respect to which indemnification is being sought hereunder unless such settlement, compromise or consent (A) includes an unconditional release of the Indemnified Party from all liability arising out of such claim, (B) does not contain any admission or statement suggesting any wrongdoing or liability on behalf of the Indemnified Party, (C) does not contain any equitable order, judgment or term which in any manner affects, restrains or interferes with the business of the Indemnified Party or any of the Indemnified Party’s Affiliates and (D) does not require payment of any amount that is not being paid by the Company.

 

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(d)        Reimbursement.  In the event the Company is obligated to indemnify for expenses, the Company shall, subject to the provisions of this Section 7, upon presentation of appropriate invoices containing reasonable detail, reimburse each Indemnified Party for all such expenses (including reasonable expenses of investigation and reasonable fees, disbursements and other charges of counsel in connection with any claim, action, suit or proceeding) as they are incurred by such Indemnified Party.  “Losses” means all losses, claims (including any claim by a third party), damages and expenses (including reasonable expenses of investigation and reasonable fees, disbursements and other charges of counsel in connection with any claim, action, suit or proceeding) actually incurred by the Indemnified Party in connection with any claim, action, suit or proceeding.

(a)       Termination by Mutual Agreement.  This Agreement may be terminated prior to the Closing by mutual written agreement of the Company and the Buyer.

 

(b)       Termination for Failure to Close.  In the event that the Closing shall not have occurred on or before 5:00 p.m., New York City Time, on September 30, 2015, either the Company or the Buyer shall have the option to terminate this Agreement at the close of business on such date or at any time thereafter, without liability to such party, by the giving of written notice of termination, unless the Closing has not occurred by reason of the failure of the party seeking to terminate this Agreement to comply in all material respects with its obligations under this Agreement.

 

(c)       Termination for Breach.  This Agreement may be terminated by the Company or the Buyer in the event the other party is in breach in any material respect of any representation, warranty, covenant or agreement contained in this Agreement such that the conditions to the nonbreaching party’s obligation to consummate the transactions contemplated by this Agreement would not be satisfied, the terminating party has notified the other party of the breach, and such breach has continued without cure for a period of ten (10) Business Days after the notice of breach.

 

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(d)       Effects of Termination.  In the event of any termination of this Agreement as provided in Section 8(a), 8(b) or 8(c), this Agreement (other than this Section 8(d), Section 7 and Section 9, which shall remain in full force and effect) shall forthwith become wholly void and of no further force and effect; provided, that the Company will remain liable to the Buyer for any breach of this Agreement by the Company existing at the time of such termination, the Buyer will remain liable to the Company for any breach of this Agreement by the Buyer existing at the time of such termination, and the Buyer or the Company, as the case may be, may seek such remedies against the other with respect to any such breach as are provided in this Agreement or as are otherwise available at Law or in equity.

(a)        Definitions.

 

“1933 Act” has the meaning set forth in Whereas clause A.

 

“1934 Act” has the meaning set forth in Section 2(e).

 

“Acquisition” means the first of any of the following after the date of this Agreement: (i) a consolidation, merger or other business combination of the Company or any Subsidiary, on the one hand, with or into another Person, on the other hand (including, for the avoidance of doubt, through the acquisition of equity interests in another Person), immediately after giving effect to which the Company or any Subsidiary holds, directly or indirectly, a majority of the combined voting power of the surviving entity or entities entitled to vote generally for the election of a majority of the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities, or (ii) an acquisition by the Company or any Subsidiary, directly or indirectly, of all or substantially all of the assets of another Person; provided that, in any such case, such transaction is approved by the Board of Directors and provides for the payment or other delivery by, or on behalf of, the Company or any Subsidiary of aggregate consideration (whether in the form of cash or otherwise) of not less than $40 million.

 

“Affiliate” means any Person controlling, controlled by or under common control with any other Person.  For purposes of this definition, “control” (including “controlled by” and “under common control with”) 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 the ownership of securities, partnership or other ownership interests, by contract or otherwise.

 

“Agreement” has the meaning set forth in the preamble.

 

“Allowance” has the meaning set forth in Section 3(aa).

 

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“Board of Directors” has the meaning set forth in Section 3(c).

 

“Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks in the City of New York are authorized or required by Law to remain closed.

 

“Buyer” has the meaning set forth in the preamble.

 

“Buyer Controlled Entity” means any Person controlled, directly or indirectly, by the Buyer.

 

“Buyer Representatives” has the meaning set forth in Section 4(e).

 

“Bylaws” has the meaning set forth in Section 3(r).

 

“Certificate of Incorporation” has the meaning set forth in Section 3(r).

 

 “Closing” has the meaning set forth in Section 1(b).

 

“Closing Date” has the meaning set forth in Section 1(b).

 

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

 

“Common Stock” has the meaning set forth in Whereas clause B.

 

“Company” has the meaning set forth in the preamble.

 

“Company Controlled Affiliate” means any Affiliate controlled, directly or indirectly, by the Company.

 

“Company Executive Team” means J. ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇.

 

“Company Intellectual Property” has the meaning set forth in Section 3(bb).

 

“Confidentiality Agreement” means the confidentiality letter agreement, dated as of July 1, 2015, by and between Nantahala Capital Management, on behalf of its managed funds and accounts, and the Company.

 

“Contingent Obligation” means, as to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to any indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto.

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“Convertible Securities” means any stock or securities (other than Options) convertible into or exercisable or exchangeable for shares of Common Stock.

 

“Covered Person” and “Covered Persons” has the meaning set forth in Section 3(cc).

 

“Disclosure Letter” has the meaning set forth in Section 3.

 

“Disqualification Event” has the meaning set forth in Section 3(cc).

 

“Eligible Market” means the NYSE MKT, the NASDAQ Capital Market, the NASDAQ Global Market, the NASDAQ Global Select Market, the New York Stock Exchange or the Over-the-Counter Bulletin Board.

 

“Excess Shares” has the meaning set forth in Section 4(k)(ii).

 

“Family Member” means, with respect to any Person, such Person’s spouse, children, parents or siblings.

 

“FDIC” has the meaning set forth in Section 3(b).

 

“Federal Reserve” has the meaning set forth in Section 3(b).

 

“Fundamental Representations” has the meaning set forth in Section 6(vi)(1).

 

“Fundamental Terms” has the meaning set forth in Section 9(n).

 

“GAAP” means U.S. generally accepted accounting principles.

 

“Governmental Entity” means any federal, state, local or foreign, court, governmental, legislative, judicial, administrative or regulatory authority, agency, commission, body or other governmental entity or self-regulatory organization or stock exchange, including the OCC, the FDIC, the SEC and NASDAQ.

 

“HOLA” has the meaning set forth in Section 3(b).

 

“Indebtedness” of any Person means, without duplication (i) all indebtedness (including principal, interest, fees and charges) for borrowed money, but exclusive of “deposits” (as defined in 12 U.S.C. § 1813(l)), (ii) all obligations issued, undertaken or assumed as the deferred purchase price of property or services (including, without limitation, “capital leases” in accordance with generally accepted accounting principles) (other than trade payables incurred in the ordinary course of business), (iii) all reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar instruments, (iv) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses, (v) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property), (vi) all monetary obligations under any leasing or similar arrangement which, in connection with generally accepted accounting principles, consistently applied for the periods covered thereby, is classified as a capital lease, (vii) all indebtedness referred to in clauses (i) through (vi) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by any Person, even though the Person which owns such assets or property has not assumed or become liable for the payment of such indebtedness; provided that the amount of the indebtedness included in “Indebtedness” pursuant to this clause (vii) shall be limited to the fair market value of the property or asset subject to such mortgage, lien, pledge, charge, security interest or other encumbrance, and (viii) all Contingent Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (i) through (vii) above.

 

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“Indemnified Party” or “Indemnified Parties” has the meaning set forth in Section 7(b).

 

“Insolvent” means, with respect to any Person, that (i) the fair value of the assets of such Person, at a fair valuation, will exceed his, her or its debts and liabilities, subordinated, contingent or otherwise; (ii) the present fair saleable value of the property of such Person will be greater than the amount that will be required to pay the probable liability of his, her or its debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (iii) such Person will be able to pay his, her or its debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (iv) such Person will not have unreasonably small capital with which to conduct the business in which he, she or it is engaged as such business is now conducted.

 

“Intellectual Property” means any and all of the following in any jurisdiction throughout the world: (i) trademarks and service marks, including all applications and registrations and the goodwill connected with the use of and symbolized by the foregoing; (ii) copyrights, including all applications and registrations related to the foregoing; (iii) trade secrets and confidential know-how; (iv) patents and patent applications; (v) internet domain name registrations; and (vi) other intellectual property and related proprietary rights, interests and protections.

 

“Interim Period” has the meaning set forth in Section 4(d).

 

“Knowledge of the Company” or phrases of similar effect (including the words “Known” or “Know”) means the knowledge, after reasonable investigation, of the individuals listed on Schedule 9(a) attached hereto.

 

“Law” means any statute, ordinance, license, rule, regulation, order, demand, writ, injunction, decree or judgment of any Governmental Entity, including any of the foregoing which relate to the business of banking generally, lending activities, deposit taking, money transmission, stored value cards, credit cards, savings associations, savings and loan holding companies, trust operations, government contracts, national security, and protection of classified information, including, without limitation, the Home Owners Loan Act of 1934, the Savings and Loan Holding Company Act, the Bank Secrecy Act, the United States Foreign Corrupt Practices Act, the Fair Housing Act, the Home Mortgage Disclosure Act, the Equal Credit Opportunity Act, the Community Reinvestment Act of 1977, the Gramm‑▇▇▇▇▇‑▇▇▇▇▇▇ Act, the Fair Consumer Credit Protection Act, and all regulations promulgated thereunder.

 

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“Losses” has the meaning set forth in Section 7(d).

 

“Material Adverse Effect” means any fact, circumstance, effect, event or change (whether or not constituting a breach of a representation, warranty, covenant or agreement set forth in this Agreement) that, individually or in the aggregate with all other facts, circumstances, effects, events or changes, has a material adverse effect on the business, properties, assets, operations, results of operations or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or on the Company’s ability to consummate the transactions contemplated hereby, or on the authority or ability of the Company to perform its obligations under this Agreement, but shall not include facts, circumstances, effects, events or changes: (i) generally affecting any of the industries in which the Company, taken together with the Subsidiaries, operates in the United States or elsewhere in the world or the economy or the financial or securities markets in the United States or elsewhere in the world; (ii) resulting from political conditions, including acts of war (whether or not declared), armed hostilities and terrorism, or developments or changes therein; (iii) resulting from any announcement of this Agreement or any of the other agreements entered into with the Other Investors in the Other Private Placements or the transactions contemplated hereby or thereby, in each case, solely to the extent due to such announcement; (iv) resulting from a change in the Company’s stock price or the trading volume in the Common Stock in and of itself (it being understood that the underlying circumstances, event or reasons giving rise to any such failure (to the extent provided for in this definition) can be taken into account in determining whether a Material Adverse Effect has occurred or would reasonably be expected to occur); or (v) resulting from a failure to meet securities analysts’ published revenue or earnings predictions for the Company in and of itself (it being understood that the underlying circumstances, event or reasons giving rise to any such failure (to the extent provided for in this definition) can be taken into account in determining whether a Material Adverse Effect has occurred or would reasonably be expected to occur); provided, however, that the facts, circumstances, events or changes set forth in clause (i) above may be taken into account in determining whether there is or has been a Material Adverse Effect if and only to the extent such act, circumstance, event, effect or change has a materially disproportionate impact on the Company and the Subsidiaries relative to the other participants in the industries in which the Company and the Subsidiaries operate.

 

 “MetaBank” means MetaBank, a federally-chartered savings association and wholly-owned subsidiary of the Company.

 

“Non-Pro-Rata Stock Repurchase” has the meaning set forth in Section 4(k)(ii).

 

“OCC” has the meaning set forth in Section 3(b).

 

“Options” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.

 

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“Other Investor” means any Person who has executed a securities purchase agreement dated as of June 25, 2015, June 29, 2015 or the date hereof pursuant to which such Person has agreed to purchase shares of Common Stock in connection with the Other Private Placements.

 

“Other Private Placements” has the meaning set forth in Whereas clause D.

 

“Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization or a government or any department or agency thereto.

 

“Post-Closing 8-K” has the meaning set forth in Section 4(j).

 

“Pre-Announcement Period” has the meaning set forth in Section 2(e).

 

“Pre-Closing 8-K” has the meaning set forth in Section 4(j).

 

“Pre-Redemption Period” has the meaning set forth in Section 4(k)(ii).

 

“Previously Purchased Shares” has the meaning set forth in Section 2(m).

 

“Principal Market” means the NASDAQ Global Select Market.

 

“Purchase Price” has the meaning set forth in Section 1(c).

 

“Registration Rights Agreement” means a Registration Rights Agreement between the Company and the Buyer substantially in the form set forth on Exhibit A hereto.

 

“Regulation D” has the meaning set forth in Whereas clause A.

 

“Regulatory Agreement” has the meaning set forth in Section 3(q)(i).

 

“Rule 144” has the meaning set forth in Section 2(h)(i).

 

“Rule 144A” has the meaning set forth in Section 2(h)(i).

 

“▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act” has the meaning set forth in Section 3(j)(iii).

 

“SEC” has the meaning set forth in Whereas clause A.

 

“SEC Documents” has the meaning set forth in Section 3(j)(i).

 

“Shares” has the meaning set forth in Section 1(a).

 

“Standstill Period” has the meaning set forth in Section 4(l).

 

“Stock Reduction Triggering Event” has the meaning set forth in Section 4(k)(ii).

 

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 “Subsidiaries” means MetaBank and any other entity (including any joint venture) in which the Company, directly or indirectly, owns capital stock or holds an equity or similar interest having general voting power in respect of more than fifty percent (50%) of all of the capital stock or equity or similar interest of such entity or joint venture.

 

“Tax” means all federal, state, local, foreign or other governmental taxes, assessments, duties, fees, levies or similar charges of any kind imposed by a Governmental Entity, including, but not limited to, all income, profit, gross receipts, franchise, excise, property, use, intangibles, sales, payroll, social security, employment, value added, withholding and other taxes, and including all interest, penalties and additional amounts imposed with respect to such amounts, whether as a primary obligor or as a result of being a “transferee” (within the meaning of Section 6901 of the Code or any other applicable Law) of another Person or as a result of being a member of an affiliated, consolidated, unitary or combined group.

 

“Tax Return” means any return, declaration, report, claim for refund, information return, statement or other document relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

 

“Transaction Documents” means, collectively, this Agreement, the Registration Rights Agreement and each of the other agreements and instruments the Company or the Buyer is, or will be, a party or by which it is, or will be, bound in connection with the transactions contemplated hereby and thereby.

 

“Transfer Agent” has the meaning set forth in Section 1(d).

 

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If to the Company:

 

Meta Financial Group, Inc.

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Facsimile:  (▇▇▇) ▇▇▇-▇▇▇▇

Attention:  J. ▇▇▇▇▇ ▇▇▇▇▇

 

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with a copy (for informational purposes only) to:

 

▇▇▇▇▇▇ ▇▇▇▇▇▇ Rosenman LLP

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Facsimile:  (▇▇▇) ▇▇▇-▇▇▇▇

Attention:  ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.

 

If to the Buyer:

Nantahala Capital Partners SI, LP

c/o Nantahala Capital Management, LLC

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Facsimile:  (▇▇▇) ▇▇▇-▇▇▇▇

Attention:  ▇▇▇▇▇▇ ▇▇▇▇▇▇

 

or to such other address and/or facsimile number and/or to the attention of such other Person as the recipient party has specified by written notice given to each other party pursuant to this Section.

 

(h)        Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns.  Neither the Company nor the Buyer shall assign or delegate this Agreement or any of its rights or obligations hereunder without the prior written consent of the other party hereto.

(i)         No Third Party Beneficiaries.  This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.

 

(j)        Further Assurances.  Each party hereto shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as any other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

 

(k)        No Strict Construction.  The language used in this Agreement will be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rules of strict construction will be applied against any party.

(l)        Remedies.  The Buyer shall have all rights and remedies set forth in this Agreement and all rights and remedies which it has been granted at any time under any other agreement or contract and all of the rights which such holders have under any Law.  Each party hereto shall be entitled to enforce its rights hereunder specifically (without posting a bond or other security or proving actual damages), to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by Law.  Notwithstanding anything to the contrary contained herein, neither party hereto shall be entitled to consequential, special, exemplary, indirect or incidental damages hereunder.

 

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(m)       Acknowledgment Regarding Buyer’s Shares.  The Company acknowledges and agrees that the Buyer is acting solely in the capacity of arm’s length purchaser with respect to this Agreement and the transactions contemplated hereby.  The Company further acknowledges that the Buyer is not acting as a financial advisor or fiduciary of the Company or any of the Subsidiaries (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby, and any advice given by the Buyer or any of its representatives or agents in connection with this Agreement and the transactions contemplated hereby is merely incidental to the Buyer’s purchase of the Shares.  The Company further represents to the Buyer that the Company’s decision to enter into this Agreement has been based solely on the independent evaluation by the Company and its representatives.

(n)        Buyer’s Acknowledgments Regarding Other Private Placements.  Except as set forth in the proviso to this sentence, the Buyer acknowledges and agrees that it is entering into (or will enter into) this Agreement and each other Transaction Document to which it is or will be a party without relying on any representation and warranty of, or any other statement made by, the Company or any of its advisors or representatives to the effect that the terms, conditions and provisions of this Agreement and such other Transaction Documents are based on the same terms, conditions and provisions as those terms, conditions and provisions agreed to by the Company and any Other Investor in connection with any Other Private Placement; provided, that the Company hereby represents and warrants that this Agreement and each of the securities purchase agreements entered into by the Other Investors in connection with the Other Private Placements are on the date hereof, and will be on the Closing Date, substantially the same with respect to the following provisions (or absence thereof, as the case may be), and the terms of each such provision are not more or less favorable in any respect to the Buyer as compared to any Other Investor: (i) the manner of computing the Purchase Price (as set forth in Section 1(c) hereof), (ii) the outside date by which any party hereto or thereto, as applicable, may terminate such agreement if the Closing of the transactions contemplated hereby or thereby, as applicable, shall not have occurred (as set forth in Section 8(b) hereof), (iii) the definition of “Material Adverse Effect” (as set forth in Section 9(a) hereof), (iv) the indemnification provisions (as set forth in Section 7 hereof), and (v) the absence of a provision relating to the Buyer or any Other Investor being entitled to receive reimbursement from the Company of any of its costs or expenses related to entering into this Agreement or the securities purchase agreements entered into in connection with the Other Private Placements, as the case may be (other than pursuant to the indemnification provisions to the extent provided therein, if at all, which indemnification provisions are substantially the same) (collectively, the “Fundamental Terms”).  In the event that the Company agrees to amend any of the Fundamental Terms for any Other Investor in connection with any Other Private Placement, the Company shall notify the Buyer within one (1) Business Day of such amendment (which, in any event, shall be not less than one (1) Business Day prior to the Closing Date) and provide to the Buyer a draft of the revised securities purchase agreement or other transaction document, as applicable.

 

(o)       Interpretive Matters.  Unless the context otherwise requires, (a) all references to Sections, Schedules, Appendices or Exhibits are to Sections, Schedules, Appendices or Exhibits contained in or attached to this Agreement, (b) words in the singular or plural include the

 

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singular and plural and pronouns stated in either the masculine, the feminine or neuter gender shall include the masculine, feminine and neuter, (c) the words “hereof,” “herein” and words of similar effect shall reference this Agreement in its entirety, and (d) the use of the word “including” in this Agreement shall be by way of example rather than limitation.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the Buyer and the Company have caused their respective signature page to this Securities Purchase Agreement to be duly executed as of the date first written above.

 

 

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META FINANCIAL GROUP, INC.

SECURITIES PURCHASE AGREEMENT

This Meta Financial Group, Inc. Disclosure Letter (the “Disclosure Letter”) is the Disclosure Letter referred to in, and is being delivered pursuant to, the Securities Purchase Agreement, dated as of July 7, 2015 (the “Agreement”), by and between Meta Financial Group, Inc., a Delaware corporation (“Company”), and Nantahala Capital Partners SI, LP, a Delaware limited partnership (“Buyer”).  Capitalized terms used herein and not otherwise defined shall have the meaning ascribed to them in the Agreement, unless the context otherwise requires.

The information and disclosures made in this Disclosure Letter are subject to, and made under, the following terms and conditions:

The information included in this Disclosure Letter is disclosed confidentially and is subject to the obligations of confidentiality contained in the Confidentiality Agreement.  The information provided in this Disclosure Letter is being provided solely for the purpose of making the required disclosures to Buyer under the Agreement.  Except as expressly required by the Agreement, the inclusion of any fact, item, matter, circumstance, transaction, action, proceeding, or event in a Schedule hereof is not deemed to be an admission or representation that the fact, item, matter, circumstance, transaction, action, proceeding, or event is or is not material or would or could have a Material Adverse Effect, and such inclusion shall not be deemed an acknowledgement that such fact, item, matter, circumstance, transaction, action, proceeding, or event is required to be disclosed pursuant to the Agreement.  The introductory language and the heading to each Schedule are inserted for convenience of reference only and shall not create a different standard for disclosure from that set forth in the Agreement.  Further, the use of headings in this Disclosure Letter shall not create a representation regarding the completeness or accuracy of the organization of the information in this Disclosure Letter.  In disclosing this information in this Disclosure Letter, Company expressly does not waive any attorney-client privilege associated with such information, nor any protection afforded by the work-product doctrine with respect to any of the matters disclosed or discussed herein.

In accordance with the Agreement, Company hereby discloses to Buyer the following:

 

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None.

 

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None.

 

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None.

 

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None.

 

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None.

 

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None of the officers, directors or employees of the Company or any of its subsidiaries is a party to any affiliate transaction with any of the Subsidiaries.

See the Company’s Annual Report on Form 10-K filed December 12, 2014 and the Company’s Proxy Statement on Schedule DEF 14A filed on December 16, 2014 for a description of the Company’s stock option and incentive plans and information regarding options and restricted shares outstanding thereunder.

As of July 6, 2015, the executive officers of the Company held the number of unexercised options for shares of Common Stock and shares of unvested restricted common stock set forth opposite their names below:

As of July 6, 2015, all other employees, officers, directors and consultants of the Company and its Subsidiaries held a total of 225,620 unexercised options and 4,230 shares of unvested restricted stock.

 

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(i)	Section 3(q)(i) – Regulatory Agreements.

As previously disclosed in public filings with the SEC, on July 15, 2011, the Company and MetaBank each stipulated and consented to a Cease and Desist Order (together, the “Orders” or the “Consent Orders”) issued by the Office of Thrift Supervision (the “OTS”), imposing various restrictions and compliance requirements on the Company and the Bank, respectively.  On August 7, 2014, the Office of the Comptroller of the Currency (“OCC”), as successor to the OTS as a result of the ▇▇▇▇-▇▇▇▇▇ ▇▇▇▇ Street Reform and Consumer Protection Act of 2010, terminated the Bank’s Consent Order.  On May 26, 2015, the Federal Reserve Board announced that on May 21, 2015, it had terminated the Consent Order relating to the Company.

(ii)	Section 3(q)(ii) – Pending or threatened Regulatory Agreements; capital restoration plans.

The information presented elsewhere in this Schedule 3(q) is incorporated herein by reference.

(iii)

Section 3(q)(iii) – Initiated or pending proceedings, enforcement actions, or formal investigations.

None.

(iv)	Section 3(q)(iv) – Resolutions of proceedings, enforcement actions, or formal investigations.

As previously disclosed in public filings with the SEC, on July 15, 2011, the Company and MetaBank each stipulated and consented to the Consent Orders issued by the OTS.

On August 7, 2014, the Company announced that its bank subsidiary, MetaBank, had been released from its Consent Order by the OCC. The Consent Order was terminated effective August 7, 2014.

On May 26, 2015, the Federal Reserve Board announced that on May 21, 2015, it had terminated the Consent Order relating to the Company. The Consent Order was originally issued by the Office of Thrift Supervision.

(v)	Section 3(q)(v) – Unresolved violations, criticisms or exceptions.

None.

 

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(vi)	Section 3(q)(vi) – Formal inquiries by or disagreement or disputes with any Government Agency.

None.

 

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(i)	Capital Stock of Company Subject to Preemptive Rights or Similar Rights or Liens, etc.

None.

(ii)	Outstanding Options, Warrants, Convertible Securities, Rights to Subscribe, etc. Relating to the Company and its Subsidiaries

The options and other securities described or referenced on Schedule 3(p) of this Disclosure Letter.

(iii)

Registration Obligations of the Company or its Subsidiaries

None.

(iv)	Agreements of the Company or its Subsidiaries That May Require Redemption of Securities of the Company

(A)

Securities Purchase Agreement, dated as of January 29, 2010, between the Company and NetSpend Holdings, Inc.

(B)

Securities Purchase Agreement, dated as of May 9, 2012, between the Company and ACP MFG Holdings, LLC.

(C)

Securities Purchase Agreement, dated as of May 9, 2012, among the Company and Boathouse Row I, LP, Boathouse Row II, LP and Boathouse Row Offshore, LTD.

(D)

Securities Purchase Agreement, dated as of May 9, 2012, between the Company and Long Meadow Holdings, L.P.

(v)	Securities of the Company or its Subsidiaries With Anti-Dilution Rights, etc.

None.

(vi)	Stock Appreciation Rights and Phantom Stock Plans of the Company

None.

 

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The following are the direct and indirect subsidiaries of the Company, showing the owner thereof, percentage interest held and jurisdiction of organization:

 

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None.

 

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	COMPANY:
	META FINANCIAL GROUP, INC.
	By:
		Name:     J. ▇▇▇▇▇ ▇▇▇▇▇
		Title:       Chief Executive Officer
	BUYER:
	NANTAHALA CAPITAL PARTNERS SI, LP
	By:	Nantahala Capital Management, LLC
	Its:	Investment Manager
	By:
	Name:	▇▇▇▇▇▇ ▇▇▇▇▇▇
	Title:	Manager