Document:

P&A Agreement (7-11-13)

Exhibit 10.1

EXECUTION COPY

PURCHASE AND ASSUMPTION AGREEMENT

among

Republic Bank & Trust Company,
a Kentucky bank and trust company,

and

H&R Block Bank,
a federal savings bank,

and

Block Financial LLC,
a Delaware limited liability company,

Dated as of July 11, 2013.

TABLE OF CONTENTS
PURCHASE AND ASSUMPTION AGREEMENT
ARTICLE I    1
DEFINITIONS    1
1.01. Certain Definitions    1
ARTICLE II    10
PURCHASE OF ASSETS AND ASSUMPTION OF LIABILITIES    10
2.01. Purchase of Assets    10
2.02. Excluded Assets    10
2.03. Assumed Liabilities    11
2.04. Excluded Liabilities    11
2.05. Nonassignable Contracts and Rights    12

ARTICLE III    13
CLOSING AND TRANSFER AMOUNT    13
3.01. Closing    13
3.02. Transfer Amount    13
3.03. Post-Closing Transfer Calculation.    14
3.04. Final Settlement    14
3.05. Purchase Price Allocation    15
3.06. Prorations    15
3.07. Custodial Accounts    15

ARTICLE IV    16
REPRESENTATIONS AND WARRANTIES OF HRB BANK AND BLOCK FINANCIAL    16
4.01. Organization and Authority.    16
4.02. Execution and Delivery.    16
4.03. Capitalization of Bank    17
4.04. Compliance with Laws, Permits and Instruments.    17
4.05. Financial Statements    18
4.06. Undisclosed Liabilities    18
4.07. Litigation    18
4.08. Consents and Approvals    18
4.09. Title to Properties    18
4.10. Absence of Certain Changes or Events    19

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4.11. Contracts.    19
4.12. Taxes and Tax Returns.    20
4.13. No Material Adverse Change; No Damage    20
4.14. Evidences of Indebtedness    20
4.15. Physical Condition of Transferred Assets    21
4.16. Regulatory Compliance    21
4.17. Books and Records    21
4.18. Interest Rate Risk Management Instruments    21
4.19. Participations    21
4.20. Finder's Fee    21
4.21. Custodial Accounts    21
4.22. Trust Accounts    21
4.23. Deposits    21
4.24. Time Deposits    21
4.25. Disclosure    22

ARTICLE V    22
REPRESENTATIONS AND WARRANTIES OF REPUBLIC    22
5.01. Organization and Qualification    22
5.02. Execution and Delivery    22
5.03. Compliance with Laws, Permits and Instruments    23
5.04. Consents and Approvals    23
5.05. Financial Statements    23
5.06. Undisclosed Liabilities    23
5.07. Litigation    23
5.08. Regulatory Compliance    24
5.09. Finder's Fee    24
5.10. Association Rights    24
5.11. Disclosure    24

ARTICLE VI    24
COVENANTS    24
6.01. Conduct of the Business in the Ordinary Course    24
6.02. Required Acts    24
6.03. Prohibited Acts    25
6.04. Regulatory Approvals    25
6.05. Access to Information and Properties    26
6.06. Agreements and Consents    26
6.07. Fees and Expenses    26
6.08. Employees    27
6.09. Notification    27

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6.10. Filings; Power of Attorney    27
6.11. Joint Marketing Master Services Agreement    27
6.12. Receivables Participation Agreement    27
6.13. BINs    27
6.14. Exclusive Dealing    27
6.15. Further Assurances    27

ARTICLE VII    28
POST-CLOSING    28
7.01. Affiliate Merger    28
ARTICLE VIII    28
CONDITIONS    28
8.01. Conditions to Obligations of HRB Bank and Block Financial    28
8.02. Conditions to Obligations of Republic    30

ARTICLE IX    32
TERMINATION, AMENDMENT, AND WAIVER    32
9.01. Termination    32
9.02. Effect of Termination    33

ARTICLE X    33
INDEMNIFICATION    33
10.01. HRB Bank's Indemnity    33
10.02. Republic Indemnity    34
10.03. Indemnity Procedure    34
10.04. Limitations on Indemnity    35
10.05. Exclusive Remedy    36

ARTICLE XI    36
TRANSITIONAL AND POST-CLOSING MATTERS    36
11.01. Notification to Customers    36
11.02. Payment of Instruments    36
11.03. Statements    37
11.04. Access to Records    37
11.05. Information Reporting    37

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11.06. Transition    37

ARTICLE XII    38
GENERAL PROVISIONS    38
12.01. Amendment    38
12.02. Waiver    38
12.03. Survival of Representations and Warranties    38
12.04. Binding Effect; Assignment    38
12.05. Severability    38
12.06. Headings    38
12.07. Entire Agreement    38
12.08. Counterparts    39
12.09. Notices    39
12.10. Governing Law; Jurisdiction; Waiver of Jury Trial.    40
12.11. Third Party Beneficiaries    41
12.12. Specific Performance    41
12.13. Mutual Drafting    41
12.14. Interpretive Provisions    41

Signature Page    S-1

List of Schedules
Schedule 3.02 - Sample Purchase Price Calculation
Schedule 6.01 - Conduct of the Business in the Ordinary Course
Schedule 8.01(i) - Required Third Party Consents

List of Exhibits
Exhibit A - Assignment and Assumption of Deposit Liabilities Agreement
Exhibit B - Assignment and Assumption of Assumed Contracts Agreement
Exhibit C - Bill of Sale
Exhibit D - Assignment and Assumption of Loans Agreement
Exhibit E - Assignment, Transfer and Appointment of Successor Custodian for Custodial Accounts
Exhibit F - Limited Power of Attorney

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PURCHASE AND ASSUMPTION AGREEMENT
THIS PURCHASE AND ASSUMPTION AGREEMENT (this “Agreement”), dated as of July 11, 2013, is made by and among Republic Bank & Trust Company, a Kentucky bank and trust company with its main office located in Louisville, Kentucky (“Republic”), H&R Block Bank, a federal savings bank with its main office located in Kansas City, Missouri (“HRB Bank”), and Block Financial LLC, a Delaware limited liability company and the sole shareholder of HRB Bank (“Block Financial”).
RECITALS
A.    Republic desires to purchase and assume, and HRB Bank desires to sell and transfer, certain assets and liabilities, including all deposit liabilities, of HRB Bank as further set forth in this Agreement (the “P&A Transaction”).

B.    Immediately prior to the closing of the P&A Transaction, HRB Bank will convert to a national banking association (the “Conversion”) and immediately following the closing of the P&A Transaction, HRB Bank will merge with and into Block Financial (the “Affiliate Merger”). The Conversion, the P&A Transaction and the Affiliate Merger will occur in immediate succession on the same date. 

C.    Republic has previously applied to convert to a national banking association (the “Republic Conversion”).

D.    Because the Conversion and the Republic Conversion will occur prior to the P&A Transaction, HRB Bank and Republic will each be a national banking association at the time of closing of the P&A Transaction.
AGREEMENT
ACCORDINGLY, in consideration of the foregoing, the mutual covenants and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.01.     Certain Definitions.  Unless the context otherwise requires, capitalized terms used in this Agreement shall have the meanings set forth below.  

“Accounting Firm” has the meaning set forth in Section 3.03(b).
“Accrued Interest” means (a) with respect to the Deposits, the interest that has been accrued but not paid on or credited to the Deposits, and (b) with respect to the Loans, the interest, fees, costs and other charges that have accrued on or been charged to the Loans but not paid by the borrower, or if applicable, a guarantor or surety therefor, or otherwise collected by offset or recourse to collateral for the applicable Loan.
“ACH” means the Automated Clearing House system.
“Affiliate” means any Person that, directly or indirectly, through one or more intermediaries, (a) owns or controls another Person, (b) is owned or controlled by another Person, or (c) is under common control or ownership with another Person, and “ownership” means the direct or indirect beneficial ownership of more 

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than 20% of the equity securities of a Person, or, in the case of a Person that is not a corporation, more than 20% of the voting and/or equity interest.
“Affiliate Merger” has the meaning set forth in the Recitals.
“Approving Authorities” means, collectively or individually, as applicable, the OCC, the Board of Governors of the Federal Reserve System and any other Governmental Entity whose approval is necessary or appropriate for Republic or HRB Bank to consummate the transactions contemplated hereby.
“Assumed Contracts” has the meaning set forth in Section 4.11(b).
“Assumed Liabilities” has the meaning set forth in Section 2.03.
“ATM” means the automated teller machine owned by HRB Bank, which is located at One H&R Block Way, Kansas City, MO 64105.
“Bank Office” means the sole location of HRB Bank located at One H&R Block Way, Kansas City, MO 64105.
“Beneficial Rights” has the meaning set forth in Section 2.05.
“BHCA” means the Bank Holding Company Act of 1956, as amended.
“BINs” means the existing bank identification numbers for the Emerald Cards, HRB Gift Cards and HRB Incentive Cards. 
“Block Financial” has the meaning set forth in the opening paragraph.
“Block Financial Capital Contribution” means a capital contribution by Block Financial to HRB Bank of sufficient cash to pay the Estimated Transfer Amount at the Closing.
“Brokered Deposits” means all Deposits that have been placed through a broker or other intermediary for which HRB Bank has incurred liability for payment of a commission or other remuneration to such broker or intermediary.
“Business Day” means any day except a Saturday, Sunday or other day on which banking institutions located in the Commonwealth of Kentucky are authorized by Law to close.

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“Call Report Instructions” means, as of any date, the then-applicable instructions to the Reports of Condition and Income as promulgated by the Federal Financial Institutions Examination Council.  
“Claim Notice” has the meaning set forth in Section 10.03(a).
“Closing” has the meaning set forth in Section 3.01.
“Closing Date” has the meaning set forth in Section 3.01.
“Code” means the Internal Revenue Code of 1986, as amended.
“Commitments” means the unfunded portion of a line of credit or other unfunded commitment to make a Consumer Loan (or additional advances with respect to a Consumer Loan) as reflected on the books and records of HRB Bank, that was legally binding on HRB Bank as of the Closing Date.
“Consent” shall mean any consent, approval, authorization, clearance, exemption, waiver, or similar affirmation by any Person pursuant to any Contract, Law, Order or Permit.
“Constituent Documents” means collectively or individually, as the case may be, the Charter and/or the Bylaws (and/or any equivalent governing documents) of a Person.
“Consumer Loans” means all Loans made primarily for personal, family or household purposes (excluding, however, all Residential Mortgage Loans), including but not limited to all Emerald Advances for the current tax season, all Emerald Advances for any prior tax season, all Secured Credit Card Accounts, all Secured Credit Card Receivables, all Unsecured Credit Card Accounts, and all Unsecured Credit Card Receivables (in each case regardless of whether a participation interest in such Emerald Advances, Secured Credit Card Accounts, Secured Credit Card Receivables, Unsecured Credit Card Accounts or Unsecured Credit Card Receivables has been sold to a third party).
“Contract” shall mean any contract, agreement, arrangement, authorization, commitment, indenture, instrument, license, lease, obligation, plan, practice, restriction, understanding, or undertaking of any kind or character, or other document to which any Person is a party or that is binding on any Person or its assets or business.
“Conversion” has the meaning set forth in the Recitals.
“Custodial Account” has the meaning set forth in Section 3.07.
“Damages” has the meaning set forth in Section 10.01.
“Deposits” mean all deposit liabilities of HRB Bank, which are defined as deposits in the FDIA, including in each case collected and uncollected Deposits plus Accrued Interest.  

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“Divestiture Transaction” means the Conversion, the P&A Transaction and the Affiliate Merger, collectively.
“EFS” means Emerald Financial Services, LLC, a Delaware limited liability company.
“Emerald Advance” means each H&R Block Emerald Advance line of credit account established pursuant to an agreement between HRB Bank and any individual.
“Emerald Cards” means the prepaid cards issued under the brand name “Emerald Card” by HRB Bank.
“Estimated Transfer Amount” has the meaning set forth in Section 3.02(d).
“Excluded Assets” has the meaning set forth in Section 2.02.
“Excluded Liabilities” has the meaning set forth in Section 2.04.
“FDIA” means the Federal Deposit Insurance Act, as amended.
“Federal Reserve Borrowings” means all borrowings of HRB Bank from the Federal Reserve Bank of Kansas City.
“FHLB Advances” means all borrowings of HRB Bank from the Federal Home Loan Bank of Des Moines.
“Final Settlement Date” has the meaning set forth in Section 3.04.
“Final Transfer Amount” has the meaning set forth in Section 3.03(a).
“Final Transfer Payment” has the meaning set forth in Section 3.04.
“GAAP” means generally accepted accounting principles as in effect in the United States. 
“Governmental Entity” means any United States, foreign, federal, state or local court, tribunal, judicial body, arbitral body, administrative agency or commission, or other governmental instrumentality.
“H&R Block” means, collectively, HRB and its subsidiaries.
“HRB” means H&R Block, Inc., a Missouri corporation.
“HRB Bank” has the meaning set forth in the opening paragraph. Following consummation of the Affiliate Merger, references to HRB Bank in this Agreement shall be deemed to refer to Block Financial, as successor to HRB Bank via merger.
“HRB Bank Disclosure Schedule” has the meaning set forth in Article IV.

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“HRB Bank Indemnifying Parties” means HRB Bank and Block Financial.
“HRB Bank Indemnified Parties” has the meaning set forth in Section 10.02.
“HRB Bank's Knowledge” means the actual and imputed knowledge of Jeffrey Brown, Greg Macfarlane, Susan Ehrlich, Greg Quarles, Alana Neale, Jim Koger and Walter Pirnot.
“HRB Financial Statements” has the meaning set forth in Section 4.05.
“HRB Gift Cards” means the prepaid cards issued by HRB Bank and identified as “gift cards.”
“HRB Incentive Cards” means the prepaid cards issued by HRB Bank and identified as “incentive cards.”
“HRB Prepaid Cards” means the Emerald Cards, HRB Gift Cards and HRB Incentive Cards.
“HRB Prepaid Card Balances” means the balances on HRB Prepaid Cards.
“HRB Products” means HRB Products, LLC, a Missouri limited liability company.
“Indemnified Party” has the meaning set forth in Section 10.03.
“Indemnifying Party” has the meaning set forth in Section 10.03(a).
“Investment Securities” means all of the readily marketable investment securities in HRB Bank's investment portfolio.
“Joint Marketing Master Services Agreement” means the Joint Marketing Master Services Agreement, including the product schedules attached thereto, to be entered into by Republic, Block Financial and EFS concurrent with the Closing, pursuant to which EFS will provide certain services to Republic and will market and distribute Republic products and services.
“Law” means any federal or state law, statute, regulation, rule, or reporting or licensing requirement applicable to a Person or its assets, liabilities or business, including those promulgated, interpreted, or enforced by any Governmental Entity.
“Liability” means any direct or indirect indebtedness, guaranty, endorsement, claim, loss, damage, deficiency, cost, expense, obligation or responsibility, fixed or unfixed, contingent or non-contingent, known or unknown, asserted or unasserted, liquidated or unliquidated, secured or unsecured.
“Lien” means any lien, pledge, claim, charge, security interest, mortgage, easement, covenant, restriction, or encumbrance of any nature whatsoever.

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“Litigation” means any complaint, action, suit, proceeding, review, arbitration or other alternative dispute resolution procedure, demand, claim, investigation or inquiry of any kind or nature, whether civil, criminal or administrative.
“Loans” means all of the following owed to or held by HRB Bank: 
(a)All loans, funded portions of lines of credit or credit plans (whether revolving or not and whether commercial or consumer), including loans secured by Deposits, extensions of credit pursuant to a credit card plan or any other extensions of credit; 

(b)All liens, rights (including rights of setoff), remedies, powers, privileges, demands, claims, priorities, equities and benefits owned or held by, or accruing or to accrue to or for the benefit of, the holder of the obligations or instruments referred to in clause (a) above, including those arising under or based upon all Records evidencing or securing a Loan (including any note, mortgage, deed of trust, security agreement, guarantee, other collateral documents, attorney opinions, all other tangible or electronic items relating to the Loans and all amendments, modifications, extensions or renewals of any of the foregoing), casualty insurance, gap/warranty and credit life insurance policies and binders, standby letters of credit, mortgagee title insurance policies and binders, payment bonds and performance bonds at any time and from time to time existing with respect to any of the obligations or instruments referred to in clause (a) above; and

(c)All amendments, modifications, renewals, extensions, refinancings, and refundings of or for any of the foregoing, and any financing statements, participation agreements, subordination agreements, and intercreditor agreements related to any of the foregoing.
 
“MasterCard” means MasterCard Incorporated, a Delaware corporation.
“Material Adverse Change” with respect to a party shall mean an event, change, or occurrence which, individually or together with any other event, change, or occurrence, has or would reasonably be expected to have a material adverse effect on (a) the business, assets or financial position of such party, or results of operations of such party, or (b) the ability of such party to perform its obligations under this Agreement or to consummate the transactions contemplated by this Agreement; provided, however, that none of the following will be taken into account in determining whether there has been a Material Adverse Change, unless such event, change, or occurrence, individually or together with any other event, change, or occurrence, has or would reasonably be expected to have a disproportionate impact on the business, assets or financial position of such party, or results of operations of such party: (i) changes in GAAP or regulatory accounting requirements; (ii) changes in Laws of general applicability to companies in the U.S. banking, financial services or tax preparation industries; (iii) changes in global or national political conditions or general economic or market conditions (including changes in prevailing interest rates, and currency exchange rates) affecting other companies in the U.S. banking industry; or (iv) any outbreak or escalation of hostilities, declared or undeclared acts of war or terrorism.

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“Mortgage Holdings” means HRB Mortgage Holdings, LLC, a Delaware limited liability company.
“MRA” means any matter requiring attention identified in connection with a report of examination issued by a Governmental Entity.
“Non-Assigned Assets” has the meaning set forth in Section 2.05.
“Notice Period” has the meaning set forth in Section 10.03(a).
“OCC” means the Office of the Comptroller of the Currency.
“Operating Cash” means all teller working cash, petty cash, vault cash and any other cash of HRB Bank located at the Bank Office or in the ATM, as of the close of business on the Closing Date.
“Order” shall mean any MRA, order, injunction, judgment, decision, award, decree, ruling, writ, or administrative decision of any Governmental Entity.
“OREO” means all real property acquired by HRB Bank through foreclosure or satisfaction of judgments or indebtedness, together with all improvements, fixtures and appurtenances located thereon and owned by HRB Bank as of the Closing Date.
“Other Correspondent Accounts” means all deposit accounts of HRB Bank located at any other bank or financial institution, other than the UMB Correspondent Accounts.
“Overdrafts” means negative balances on Deposit accounts and HRB Prepaid Cards.
“P&A Transaction” has the meaning set forth in the Recitals.
“Pending Litigation” has the meaning set forth in Section 4.07.
“Permit” shall mean any permit, approval, authorization, certificate, easement, franchise, license, or right given by any Governmental Entity to any Person, or that is or may be binding upon or inure to the benefit of any Person, or its assets or business.
“Permitted Encumbrances” means ad valorem taxes for the current year not yet due or payable, prior mineral reservations and conveyances and any other exceptions, restrictions, easements, rights of way and non-monetary encumbrances which do not materially and adversely affect the value, marketability or present use of Real Property.
“Person” means an individual, corporation, partnership, limited liability company, unincorporated association, trust, joint venture or other organization or entity or governmental entity and shall include any successor (by merger or otherwise) of such entity.

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“Personal Property” means the ATM and all other equipment, furniture, appliances, fixtures, furnishings, computer equipment (hardware and software), materials, supplies, signs, structures, improvements and other items of tangible personal property (excluding the unused automated teller machine) owned by HRB Bank and located at the Bank Office, other than the Excluded Assets.
“Post-Closing Transfer Calculation” has the meaning set forth in Section 3.03(a). 
“Pro Rata Adjustment” has the meaning set forth in Section 3.06.
“Real Property” means the real property leased by HRB Bank in which the Bank Office is located, together with all improvements, improvements in progress, fixtures and appurtenances located thereon or related thereto.
“Receivables Participation Agreement” means the Receivables Participation Agreement to be entered into by Republic and a subsidiary of Block Financial concurrent with the Closing, pursuant to which, from time to time, Republic will sell and such subsidiary will purchase participation interests in certain Loans and receivables originated by Republic.
“Records” means all books, records and files relating exclusively to the Transferred Assets and the Assumed Liabilities, in every format, in the possession of HRB Bank or any of its Affiliates, agents or service providers, but not those books, records and files relating to the Excluded Assets and Retained Liabilities.
“Republic” has the meaning set forth in the opening paragraph.
“Republic Conversion” has the meaning set forth in the Recitals.
“Republic Disclosure Schedule” has the meaning set forth in Article V.
“Republic Financial Statements” has the meaning set forth in Section 5.05.
“Republic Indemnified Parties” has the meaning set forth in Section 10.01.
“Republic's Knowledge” means the actual and imputed knowledge of Steven Trager, Kevin Sipes, William Nelson and John Rippy.  
“Residential Mortgage Loans” means each first or second lien residential mortgage Loan including without limitation all of HRB Bank's right title and interest in and to such Loan, including, without limitation, the servicing rights and all escrows related to such Loan.
“Retained Contracts” means all Contracts of HRB Bank that are not set forth in Section 4.11(b) of the HRB Bank Disclosure Schedule.
“Retained Loans” means all Loans other than the Transferred Loans, including but not limited to Residential Mortgage Loans and any commercial and industrial Loans.

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“Secured Credit Card Account” means each open-end credit account that is accessed by a credit card established pursuant to a cardholder agreement between HRB Bank and any individual, that is secured by a Deposit. 
“Secured Credit Card Receivables” means all amounts shown on HRB Bank's records as amounts payable by obligors on any Secured Credit Card Account. 
“Tax” or “Taxes” means any federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Code §59A), customs, duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, escheat, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not and including any obligation to indemnify or otherwise assume or succeed to the Tax liability of any other Person.  
“Tax Return” means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.
“Third Party Claim” has the meaning set forth in Section 10.03(a).
“Threshold Amount” has the meaning set forth in Section 10.04(a).
“Time Deposits” means Deposits that are time deposits or certificates of deposit.
“Transferred Assets” has the meaning set forth in Section 2.01.
“Transferred Loans” means all Consumer Loans, regardless of whether any such Consumer Loan has been written off on the books of HRB Bank or participated, in whole or in part, to a third party, including all Accrued Interest thereon.
"UMB Correspondent Account Balances" means the amount on deposit in the UMB Correspondent Accounts.
“UMB Correspondent Accounts” means the three deposit accounts of HRB Bank with UMB Bank, n.a. which are HRB Bank's primary operating and clearing accounts.
“Unsecured Credit Card Account” means each unsecured open-end credit account that is accessed by a credit card established pursuant to a cardholder agreement between HRB Bank and any individual.
“Unsecured Credit Card Receivables” means all amounts shown on HRB Bank's records as amounts payable by obligors on any Unsecured Credit Card Account.

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ARTICLE II
PURCHASE OF ASSETS AND ASSUMPTION OF LIABILITIES
2.01.     Purchase of Assets.  Subject to the terms, conditions, representations and warranties set forth in this Agreement, except with respect to the Excluded Assets, at the Closing, HRB Bank will sell, assign, transfer, grant, bargain, deliver and convey to Republic, and Republic will purchase and otherwise acquire from HRB Bank, HRB Bank's entire right, title and interest in and to the following assets (the “Transferred Assets”):

(a)     the Transferred Loans, and all Accrued Interest on the Transferred Loans;

(b)     the Overdrafts;

(c)     the Assumed Contracts;

(d)     the Records; 

(e)     the Contracts associated with the Deposits (including the Brokered Deposits), the HRB Prepaid Cards and the Transferred Loans;

(f)     all ABA routing numbers, BINs, and customer account numbers, transit routing numbers, and any other account numbers used or held for use in connection with the Transferred Assets and/or the Assumed Liabilities;

(g)     all security and/or other deposits and prepaid expenses exclusively relating to the Transferred Assets; and

(h)     the UMB Correspondent Accounts.

2.02.     Excluded Assets.  Notwithstanding anything to the contrary in Section 2.01, all of the assets of HRB Bank that are not Transferred Assets, and the following assets, will be retained by HRB Bank and are excluded from the Transferred Assets (the “Excluded Assets”):

(a)all Investment Securities;

(b)all Residential Mortgage Loans;

(c)all OREO;

(d)all commercial and industrial Loans;

(e)the Retained Contracts;

(f)HRB Bank's membership interest in EFS;

(g)HRB Bank's membership interest in Mortgage Holdings;

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(h)HRB Bank's equity interest in any other subsidiary or other entity;

(i)HRB Bank's stock in the Federal Home Loan Bank of Des Moines (and any right to the proceeds of the redemption of such stock);

(j)all claims, demands or causes of action for refunds of taxes and governmental charges related to HRB Bank's business;  

(k)HRB Bank's corporate seal, minute books, charter, corporate stock record books, tax records, organizational documents and such other books and records as pertain to the organization, taxation or capitalization of HRB Bank;

(l)any claims, demands or causes of action or rights associated with the Excluded Assets or the Excluded Liabilities; 

(m)any intellectual property owned by, or licensed to, HRB Bank; 

(n)the Other Correspondent Accounts; 

(o)the Operating Cash; 

(p)the Personal Property; and

(q)the Real Property.

2.03.     Assumed Liabilities.  Upon the terms and subject to the conditions set forth in this Agreement, on the Closing Date, Republic will assume and agree to pay and perform, as and when due, those Liabilities of HRB Bank listed below in this Section 2.03 (the “Assumed Liabilities”):

(a)all Deposits; 

(b)all HRB Prepaid Card Balances;

(c)the payment and performance of obligations and other liabilities (other than Excluded Liabilities) arising after the Closing Date relating to the Transferred Assets or the Assumed Contracts; and

(d)the obligations arising after the Closing Date under the Commitments.

2.04.    Excluded Liabilities.  Except as and to the limited extent specifically set forth in Section 2.03, Republic is not assuming any Liabilities of HRB Bank.  Notwithstanding the provisions in Section 2.03, HRB Bank is, and following the Closing HRB Bank will continue to be, legally responsible for all Liabilities of HRB Bank other than the Assumed Liabilities (collectively, the “Excluded Liabilities”).  Without limiting the generality of the foregoing, the Excluded Liabilities include the following:

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(a)any Liability arising out of or in connection with the business of HRB Bank or any transactions or series of transactions, any facts or series of facts existing, or any events or series of events to the extent they occurred on or prior to the Closing Date (other than the Liabilities expressly assumed by Republic pursuant to Section 2.03);

(b)any Liability with respect to employment or consulting agreements, pension, profit-sharing, welfare or benefit plans, or amounts owing for commissions or compensation, termination, severance or other payments to present or former employees, officers, managers or members of HRB Bank and/or to the spouse, dependents, and beneficiaries of such individuals, regardless of whether any such person is employed by HRB Bank or Republic following the Closing; 

(c)any Liability of HRB Bank for any Taxes of any kind or nature, or any interest or penalties thereon, including, without limitation, any Tax obligations arising out of the transactions contemplated hereunder;

(d)all FHLB Advances (if any) and Federal Reserve Borrowings (if any);

(e)any Liability under or relating to the Retained Contracts; 

(f)any Liability arising from or relating to the Excluded Assets;

(g)any Liability for commissions or other payments due to brokers on any Brokered Deposits accrued prior to the Closing Date;

(h)any Liabilities arising from or related to the Pending Litigation, which are expressly retained by HRB Bank and expressly excluded from the Assumed Liabilities to be assumed by Republic; and

(i)any fee payable by HRB Bank pursuant to its engagement letter with either of Goldman, Sachs. & Co. or First Annapolis Consulting, Inc.

2.05    Nonassignable Contracts and Rights.  Notwithstanding anything to the contrary in this Agreement, no Contracts, Permits, properties, rights or other assets (collectively, the “Non-Assigned Assets”) of HRB Bank shall be deemed sold, transferred or assigned to Republic pursuant to this Agreement if the attempted sale, transfer or assignment thereof to Republic without the Consent of any other person or entity would be ineffective or would constitute a default or breach of Contract or a violation of any Law or Order, and such Consent is not obtained at or prior to the Closing.  In such case, to the extent possible, (a) the beneficial interest in or to such Non-Assigned Assets (collectively, the “Beneficial Rights”) shall in any event pass at the Closing to Republic under this Agreement; and (b) pending such Consent, Republic shall discharge, as agent for HRB Bank, the obligations of HRB Bank under such Beneficial Rights to the extent such obligations are Assumed Liabilities, and HRB Bank shall act as Republic's agent in the receipt of any benefits, rights or interest received from the Beneficial Rights.

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ARTICLE III
CLOSING AND TRANSFER AMOUNT
3.01.    Closing.  Unless this Agreement shall have been terminated in accordance with Article IX, the closing of the transactions contemplated by this Agreement (the “Closing”) shall take place (a) if the requisite approvals of the Approving Authorities (but not necessarily to the expiration of any waiting periods imposed in connection with such approvals) and the other conditions set forth in Article VIII are satisfied or waived, on or before September 30, 2013, then on a date mutually agreed upon by HRB Bank and Republic which will not be later than November 15, 2013, and (b) if the requisite approvals of the Approving Authorities and the other conditions set forth in Article VIII are not satisfied or waived on or before September 30, 2013, but are satisfied or waived on or before March 31, 2014, then on a date mutually agreed upon by HRB Bank and Republic between April 30, 2014 and June 17, 2014, and absent mutual agreement then on June 18, 2014 (the “Closing Date”).  The P&A Transaction, and all calculations made in connection therewith, shall be effective as of the close of HRB Bank's banking business on the Closing Date.   The Closing will take place, subject to the satisfaction or waiver of all conditions set forth in Article VIII, at the offices of Stinson Morrison Hecker LLP, 1201 Walnut Street, Suite 2900, Kansas City, Missouri 64106.

3.02.    Transfer Amount.  

(a)In connection with the sale by HRB Bank to Republic of the Transferred Assets and the assumption by Republic of the Assumed Liabilities as provided for herein, at the Closing, if:

		
	(i)
	the Estimated Transfer Amount is negative, HRB Bank will transfer to Republic by wire transfer of immediately available funds to an account designated by Republic an amount equal to the Estimated Transfer Amount; or 

		
	(ii)
	the Estimated Transfer Amount is positive, Republic will transfer to HRB Bank by wire transfer of immediately available funds to an account designated by HRB Bank an amount equal to the Estimated Transfer Amount.

(b)The Transfer Amount will be equal to:

		
	(i)
	the aggregate book value of the Transferred Loans, plus all Accrued Interest on the Transferred Loans;

		
	(ii)
	plus, the aggregate book value of the Overdrafts;

		
	(iii)
	plus, the aggregate UMB Correspondent Account Balances; 

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	(iv)
	minus, the sum of (A) aggregate book value of the Deposits, plus (B) all accrued and unpaid interest on the Deposits; 

		
	(v)
	plus or minus (as applicable) the Pro Rata Adjustment.

(c)If the Estimated Transfer Amount is a negative number then, prior to the Closing Date, Block Financial will make the Block Financial Capital Contribution.

(d)Three (3) Business Days prior to the Closing, HRB Bank shall deliver to Republic a written calculation of the Transfer Amount setting forth in reasonable detail HRB Bank's best estimate of the Transfer Amount calculated as of the close of business on the date that is five (5) Business Days prior to the Closing, determined in accordance with GAAP (the “Estimated Transfer Amount”).  The Estimated Transfer Amount will be subject to the approval of Republic, which approval shall not be unreasonably delayed, conditioned or withheld. 

(e)A pro forma calculation of the Transfer Amount is included in Schedule 3.02.  

3.03.    Post-Closing Transfer Calculation.

(a)On the twentieth (20th) Business Day after the Closing Date, HRB shall deliver to Republic a written calculation (the “Post-Closing Transfer Calculation”) of the Transfer Amount setting forth in reasonable detail the Transfer Amount calculated as of the close of business on the Closing Date, determined in accordance with GAAP (the “Final Transfer Amount”).

(b)If HRB Bank and Republic are unable to agree upon the Post-Closing Transfer Calculation, the disputed items or amounts concerning the Post-Closing Transfer Calculation shall be determined by PricewaterhouseCoopers LLP (the “Accounting Firm”) within fourteen (14) days following the submission of such disputed items or amounts to the Accounting Firm.  In making such calculation, the Accounting Firm may only consider those items or amounts in the Post-Closing Transfer Calculation as to which HRB Bank and Republic have disagreed.  The fees of the Accounting Firm incurred in determining the Post-Closing Transfer Calculation will be paid equally by HRB Bank and Republic.

3.04.    Final Settlement.  On the Business Day immediately following the day on which the Post-Closing Transfer Calculation shall have been finally determined pursuant to the terms of Section 3.03 (the “Final Settlement Date”), if the Final Transfer Amount is greater than the Estimated Transfer Amount, then Republic shall pay the difference to HRB Bank.  If the Final Transfer Amount is less than the Estimated Transfer Amount, then HRB Bank shall pay the difference to Republic.  In each case such payment shall be made within three (3) Business Days after the Final Settlement Date by wire transfer in immediately available funds to an account designated in writing by HRB Bank to Republic or to an account designated in writing by Republic to HRB Bank, as applicable.  Any payment pursuant to this Section 3.04 (the “Final Transfer Payment”) shall include interest on such amount for the number of days from and 

14

including the Closing Date to but excluding the Final Settlement Date at a rate equal to the effective Federal Funds rate as published by the Board of Governors of the Federal Reserve System on the Final Settlement Date.   If the Final Settlement Date is not a Business Day, the Federal Funds Rate shall be the rate applicable to federal funds transactions on the immediately preceding day for which such rate is reported.

3.05.    Purchase Price Allocation.  The allocation of the consideration paid by Republic is intended to comply with the allocation method required by Section 1060 of the Internal Revenue Code of 1986, as amended.  The parties will each report the federal, state and local and other tax consequences of the P&A Transaction (including the filing of Internal Revenue Service Form 8594) in a manner consistent with such allocation and take no position in any tax filing, return, proceeding, audit or otherwise which is inconsistent with such allocation.  Within thirty (30) days following the Closing Date, Republic shall provide to HRB Bank a schedule showing Republic's proposed allocation of the consideration payable with respect to the Transferred Assets.  Republic, on the one hand, and HRB Bank on the other, shall agree upon such allocation within sixty (60) days after the Closing Date; provided that if Republic and HRB Bank are unable to agree upon an allocation schedule within such sixty (60) day period, the allocation schedule shall be prepared by the Accounting Firm.  The fees of the Accounting Firm incurred in preparing the allocation schedule shall be paid equally by Republic and HRB Bank. 

3.06.    Prorations.  The parties intend that HRB Bank will own the Transferred Assets and be responsible for the Assumed Liabilities for its own account until the close of business on the Closing Date, and that Republic will own the Transferred Assets and be responsible for the Assumed Liabilities for its own account on and after the close of business on the Closing Date.  Thus, except as otherwise specifically provided in this Agreement, items of expense and income directly attributable to the Transferred Assets and Assumed Liabilities, other than any general overhead expenses of HRB Bank, will be prorated as of the close of business on the Closing Date, whether or not such adjustment would normally be made as of such time, including (i) payments due or made on any Assumed Contracts.  The aggregate net amount of such proration shall result in an adjustment (the “Pro-Rata Adjustment”) in the calculation of the Estimated Transfer Amount and the Final Transfer Amount as provided for in Section 3.02 and Section 3.04, respectively. 

3.07.    Custodial Accounts.  At the Closing, HRB Bank will resign as custodian with respect to any individual retirement account as to which HRB Bank is custodian (the “Custodial Account”).  At the Closing, HRB Bank will designate and appoint Republic as successor custodian under each such Custodial Account.  Republic covenants and agrees that it will, following its designation or appointment as successor custodian under the Custodial Accounts, promptly and faithfully perform, fulfill, and discharge each of the obligations required to be performed by the custodian with respect to such Custodial Accounts pursuant to Law, or pursuant to the governing documents establishing such Custodial Account.

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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF HRB BANK AND BLOCK FINANCIAL 
As a material inducement to Republic to enter into and perform its obligations under this Agreement, except as disclosed in the Disclosure Schedule (the “HRB Bank Disclosure Schedule”) delivered by HRB Bank and Block Financial to Republic before the execution of this Agreement, HRB Bank and Block Financial, jointly and severally, hereby represent and warrant to Republic as follows:
4.01.    Organization and Authority.

(a)HRB Bank is a federal savings bank, duly organized and validly existing under the Laws of the United States.  HRB Bank has all requisite corporate power and authority to carry on its business as now being conducted, to own, lease and operate its properties and assets as now owned, leased or operated and to enter into and to carry on the business and activities now conducted by it.  True and complete copies of all HRB Bank Constituent Documents, as amended to date, have been made available to Republic.  HRB Bank is an insured bank as defined in the FDIA.  HRB Bank does not own or control any Affiliate or subsidiary other than EFS and Mortgage Holdings.  HRB Bank is the sole Member of EFS and Mortgage Holdings.  Other than the Member Interests in EFS and Mortgage Holdings, HRB Bank has no equity interest, direct or indirect, in any other corporation or in any partnership, joint venture or other business enterprise or entity.

(b)Block Financial is a Delaware limited liability company, duly organized and validly existing and in good standing.  Block Financial has all requisite corporate power and authority to carry on its business as now being conducted, to own, lease and operate its properties and assets as now owned, leased or operated and to enter into and to carry on the business and activities now conducted by it, and is in good standing to do business in each jurisdiction in which the nature of its business or the ownership, leasing or operation of its properties and assets makes such qualification necessary, except where the failure to be so qualified would not reasonably be expected to create a Material Adverse Change.

4.02.    Execution and Delivery.

(a)HRB Bank has the corporate power and authority to execute, deliver and perform this Agreement and any documents, agreements or instruments to be executed by HRB Bank pursuant to this Agreement, and to consummate the transactions contemplated hereby and thereby.  The execution and delivery of this Agreement by HRB Bank and the consummation by HRB Bank of the transactions contemplated hereby have been duly authorized by the Board of Directors of HRB Bank and, other than the approval of the P&A Transaction by the sole shareholder of HRB Bank (which approval will be obtained promptly following the execution of this Agreement), no other corporate proceedings are necessary to authorize this Agreement and the P&A Transaction.  This Agreement has been, and the other agreements and documents contemplated hereby, have been or at Closing will be, duly executed by HRB Bank, and each 

16

constitutes or will constitute the legal, valid and binding obligation of HRB Bank, enforceable in accordance with its respective terms and conditions, except as enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, receivership, moratorium or similar Laws affecting creditors' rights and remedies and by general principles of equity, including principles of commercial reasonableness, good faith and fair dealing, regardless of whether enforcement is sought in a proceeding at law or in equity.

(b)Block Financial has the corporate power and authority to execute, deliver and perform this Agreement and any documents, agreements or instruments to be executed by Block Financial pursuant to this Agreement, and to consummate the transactions contemplated hereby and thereby.  Block Financial has taken all corporate action necessary (and no further action or proceeding on the part of Block Financial or its shareholders is necessary) to authorize the execution, delivery and performance of this Agreement and any documents, agreements or instruments to be executed by Block Financial pursuant to this Agreement, and to consummate the transactions contemplated hereby and thereby.  This Agreement has been, and the other agreements and documents contemplated hereby, have been or at Closing will be, duly executed by Block Financial and each constitutes or will constitute the legal, valid and binding obligation of Block Financial, enforceable in accordance with its respective terms and conditions, except as enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, receivership, moratorium or similar laws affecting creditors' rights and remedies generally and by general principles of equity, including principles of commercial reasonableness, good faith and fair dealing, regardless of whether enforcement is sought in a proceeding at law or in equity.

4.03.    Capitalization of Bank.  The entire authorized capital stock of HRB Bank consists of 10,000 shares of common stock, par value $1.00.  As of the date hereof, 100 shares of common stock are issued and outstanding and 100% of such shares are owned, legally and beneficially, by Block Financial.  All of the shares of HRB Bank common stock have been duly authorized, validly issued, and are fully paid and nonassessable, and have not and will not have been issued in violation of the preemptive rights of any person.

4.04.    Compliance with Laws, Permits and Instruments.

(a)HRB Bank has performed and abided by all obligations required to be performed by it to the date hereof, and has complied with, and is in compliance with, and is not in default (and with the giving of notice or the passage of time will not be in default) under, or in violation of, (i) any provision of the HRB Bank Constituent Documents, (ii) any provision of any material Contract applicable to the Transferred Assets or Assumed Liabilities, except where nonperformance, noncompliance, default or violation could not reasonably be expected to result in a Material Adverse Change, or (iii) any material Law, Order or Permit applicable to HRB Bank, the Transferred Assets or Assumed Liabilities, except where nonperformance, noncompliance, default or violation would not reasonably be expected to result in a Material Adverse Change.

(b)The execution, delivery and (provided the required regulatory approvals from the Approving Authorities are obtained) performance of this Agreement and the other 

17

agreements contemplated hereby, and the completion of the transactions contemplated hereby and thereby will not conflict in any material respect with, result in any violation or breach of or result in a material default, under (i) the HRB Bank Constituent Documents (ii) any provision of any material Contract, applicable to the Transferred Assets or Assumed Liabilities, except where nonperformance, noncompliance, default or violation could not reasonably be expected to result in a Material Adverse Change, or (iii) any material Law, Order or Permit applicable to HRB Bank, the Transferred Assets or Assumed Liabilities.

4.05.    Financial Statements.  HRB Bank and Block Financial have made available to Republic true and complete copies of the financial statements of each of HRB Bank and Block Financial identified in Section 4.05 of the HRB Bank Disclosure Schedule (the “HRB Financial Statements”).  The HRB Financial Statements (including the related notes) complied as to form, as of their respective dates, in all material respects with applicable accounting requirements, have been prepared in accordance with GAAP, fairly present the financial condition of each of HRB Bank and Block Financial at the dates thereof and the results of operations for the periods then ended (subject, in the case of unaudited statements, to notes and normal year-end audit adjustments that were not material in amount or effect), and the accounting records underlying the HRB Financial Statements accurately and fairly reflect in all material respects the transactions of HRB Bank and Block Financial.

4.06.    Undisclosed Liabilities.  Neither HRB Bank nor Block Financial has any material Liability that is not reflected in or disclosed in the HRB Financial Statements.

4.07.    Litigation.  Except for Litigation listed in Section 4.07 of the HRB Bank Disclosure Schedule (the “Pending Litigation”), there is no Litigation pending or, to HRB Bank's Knowledge, threatened against either of HRB Bank or Block Financial at law or in equity, or by or before any Governmental Entity (a) relating to the Transferred Assets or the Assumed Liabilities or (b) that challenges the validity of this Agreement or the transactions contemplated hereby, that challenges any actions taken or to be taken by HRB Bank or Block Financial pursuant hereto or thereto or that seeks to enjoin or otherwise restrain the transactions contemplated hereby or thereby.  Except as listed in Section 4.07 of the HRB Bank Disclosure Schedule, there is no material Litigation now pending in which HRB Bank or Block Financial is the plaintiff or claimant which relate to the Transferred Assets or the Assumed Liabilities.

4.08.    Consents and Approvals.  Except as set forth in Section 4.08 of the HRB Bank Disclosure Schedule, no Consent or Order of any Governmental Entity or other third party is required on the part of HRB Bank or Block Financial in connection with the execution, delivery or performance of this Agreement by HRB Bank or Block Financial, or any agreement to be executed by HRB Bank or Block Financial contemplated hereby, or the completion by HRB Bank or Block Financial of the transactions contemplated hereby or thereby, and to HRB Bank's Knowledge, no such Governmental Entity or other third party has indicated that it will withhold such Consent or Order. 

4.09.    Title to Properties.  Section 4.09 of the HRB Bank Disclosure Schedule sets forth the legal description of the parcel of Real Property leased by HRB Bank (the “Leased 

18

Real Property”).  Except as set forth in Section 4.09 of the HRB Bank Disclosure Schedule, HRB Bank has leasehold title to all of the Leased Real Property, free and clear of Liens of any kind except for Permitted Encumbrances.

4.10.    Absence of Certain Changes or Events.  Since April 30, 2013, HRB Bank has conducted its business only in the ordinary course and has not:

(a)Instituted, had instituted against it, settled or agreed to settle any Litigation relating to the Transferred Assets or Assumed Liabilities other than in the ordinary course of business;

(b)Made any, or acquiesced with any, material change in any accounting methods, principles or practices applicable to the Transferred Assets or Assumed Liabilities, except as required by applicable Law;

(c)Changed its interest rate or fee pricing policies with respect to its Deposits or Loans other than in the ordinary course of business;

(d)Amended, terminated, waived, assigned or modified the terms of any Loan or Deposit except in the ordinary course of business; or

(e)Entered into any agreement or made any commitment whether in writing or otherwise to take any of the types of action described in subsections (a) through (d) above.

4.11.    Contracts.

(a)Except as set forth in Section 4.11 of the HRB Bank Disclosure Schedule, HRB Bank is not a party to or bound by any Contract for the purchase or sale of any of the Transferred Assets or the assumption of the Assumed Liabilities, or for the grant of any preferential right to purchase any of the Transferred Assets or assume any of the Assumed Liabilities.

(b)Each of the Contracts identified in Section 4.11(b) of the HRB Bank Disclosure Schedule (the “Assumed Contracts”) constitutes and, on the Closing Date, each of the Assumed Contracts will constitute, the legal, valid and binding obligation of HRB Bank, and each of the other parties thereto.  Each of the Assumed Contracts is, and, on the Closing Date, will be, in full force and effect (except to the extent that any Assumed Contract expires in accordance with its terms).  Except as set forth in Section 4.11(b) of the HRB Bank Disclosure Schedule, HRB Bank has fulfilled and performed in all material respects its obligations under the Assumed Contracts in accordance with their respective terms.  Neither HRB Bank nor any other party to any Assumed Contract is, or is alleged to be, in breach or default under any Assumed Contract, nor does there exist any condition which with the passage of time or the giving of notice or both would result in a breach or default thereunder.  HRB Bank has made available to Republic true and complete copies of each Assumed Contract.

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4.12.    Taxes and Tax Returns.

(a)HRB Bank has duly and timely filed all Tax Returns that it was required to file under applicable Law with the appropriate Federal, state, local or foreign governmental agencies.  All such Tax Returns were correct and complete in all material respects and have been prepared in substantial compliance with all applicable Law.  All Taxes due and owing by HRB Bank (whether or not shown on any Tax Return) have been paid.  There are no Liens for Taxes (other than Taxes not yet due and payable) upon any of the assets of HRB Bank.

(b)HRB Bank has withheld and paid all Taxes required to have been withheld and paid in connection with any amounts paid or owing to any employee, independent contractor, creditor, depositor, shareholder, or other third party, and all information reporting (including Forms W-2, 1098 and 1099) required with respect thereto have been properly completed and timely filed.  HRB Bank has timely and properly taken such actions in response to and in compliance with notices from the Internal Revenue Service in respect of information reporting and backup and nonresident withholding as are required by Law, including the notation in its records of any B notices or C notices received with respect to any customers, shareholders, or payees.

(c)There is no dispute or claim concerning any Tax liability of HRB Bank either (i) claimed or raised by any authority in writing, or (ii) as to which any director or officer (or employee responsible for Tax matters) of HRB Bank has knowledge based upon personal contact with any agent of such authority.  No claim has been made in writing by any Governmental Entity in a jurisdiction where HRB Bank does not file Tax Returns that HRB Bank is, or may be, subject to taxation by that jurisdiction.

(d)HRB Bank is not a party to or bound by any tax allocation or sharing agreement, other than those listed in Section 4.12(d) of the HRB Bank Disclosure Schedule.

4.13.    No Material Adverse Change; No Damage.  There has not been any Material Adverse Change with respect to HRB Bank or Block Financial since April 30, 2013, nor has any event or condition occurred that has resulted in, or would be reasonably likely to result in, in a Material Adverse Change with respect to HRB Bank or Block Financial.

4.14.    Evidences of Indebtedness.  All of the Transferred Loans and Overdrafts are legal, valid and binding obligations of the respective obligors thereof, enforceable in accordance with their respective terms, and are not subject to any known or, to HRB Bank's Knowledge, any threatened, defenses, offsets or counterclaims that may be asserted against HRB Bank or any subsequent holder thereof; provided, however that the enforceability of the Loans may be affected by bankruptcy, reorganization, insolvency and similar laws of general application relating to or affecting the rights or remedies of creditors generally and by equitable principles that may be applied by a court in construing or enforcing such Loans.  Any collateral securing a Transferred Loan is (i) the collateral described in the applicable security agreement, mortgage, pledge, collateral assignment or other security document and (ii) subject to a valid, enforceable and perfected Lien.

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4.15.    Physical Condition of Transferred Assets.  All material tangible Transferred Assets are in good operating condition, excepting ordinary wear and tear.  HRB Bank's premises or equipment is not in need of maintenance or repairs other than ordinary routine maintenance and repairs that are not material in nature or cost.

4.16.    Regulatory Compliance.  HRB Bank is not subject to any Order of any Governmental Entity.  There are no actions or proceedings pending or, to HRB Bank's Knowledge, threatened against HRB Bank by or before any Governmental Entity.  HRB Bank has not received notice from any Governmental Entity indicating that it would oppose or not grant or issue its Consent, if required, with respect to the transactions contemplated by this Agreement. 

4.17.    Books and Records.  The Records (a) have been accurately maintained in all material respects in the ordinary course of business, (b) are substantially complete and correct in all material respects, (c) have only entered transactions therein that represent bona fide transactions, and (d) do not fail to reflect transactions involving the business of HRB Bank that properly should have been set forth therein and that have not been accurately so set forth.

4.18.    Interest Rate Risk Management Instruments.  HRB Bank has no interest rate swaps, caps, floors, option agreements or other interest rate risk management arrangements, entered into for the account of HRB Bank.

4.19.    Participations.  Each outstanding Emerald Advance, Unsecured Credit Card Receivable and Secured Credit Card Receivables originated by HRB Bank has been, or will be prior to the Closing, fully participated to an H&R Block Affiliate in a participation arrangement that meets GAAP requirements for de-recognition of assets.  

4.20.    Finder's Fee.  Except as set forth in Section 4.20 of the HRB Bank Disclosure Schedule, no broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with this Agreement or any of the transactions contemplated hereby based upon arrangements made by or on behalf of HRB Bank, or any officer, member, director or employee of HRB Bank, or any Affiliate of HRB Bank.

4.21.    Custodial Accounts.  HRB Bank has no Custodial Accounts other than individual retirement accounts.

4.22.    Trust Accounts.  HRB Bank has no trust accounts, trust assets or any other accounts or relationships of a fiduciary nature.

4.23.    Deposits.  Subject to applicable Law, all of the Deposits (other than Time Deposits) may be repriced by HRB Bank in the ordinary course of business. 

4.24.    Time Deposits.  On the date hereof and on the Closing Date, HRB Bank has and will have less than $20.1 million of Time Deposits.  

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4.25.    Disclosure.  No representation or warranty by HRB Bank or Block Financial in this Agreement, nor any statement, certificate, schedule or exhibit hereto furnished or to be furnished by or on behalf of HRB Bank or Block Financial pursuant to this Agreement or in connection with transactions contemplated hereby, contains or will contain any untrue statement of material fact or omits or will omit a material fact necessary to make the statements contained therein not misleading.

ARTICLE V
REPRESENTATIONS AND WARRANTIES OF REPUBLIC
As a material inducement to HRB Bank and Block Financial to enter into and perform its obligations under this Agreement, except as disclosed in the Disclosure Schedule (the “Republic Disclosure Schedule”) delivered by Republic to HRB Bank and Block Financial before the execution of this Agreement, Republic hereby represents and warrants to HRB Bank and Block Financial as follows:
5.01.    Organization and Qualification.  Republic is a bank and trust company duly organized and validly existing under the Laws of the Commonwealth of Kentucky.  Republic has previously filed an application with the OCC seeking approval to effectuate the Republic Conversion.  Republic has all requisite corporate power and authority to carry on its business as now being conducted, to own, lease and operate its properties and assets as now owned, leased or operated and to enter into and to carry on the business and activities now conducted by it.  True and complete copies of all Constituent Documents of Republic, as amended to date, have been made available to HRB Bank.  Republic is an insured bank as defined in the FDIA.  

5.02.    Execution and Delivery.  Republic has the corporate power and authority to execute, deliver and perform this Agreement and any documents, agreements or instruments to be executed by Republic pursuant to this Agreement, and to consummate the transactions contemplated hereby and thereby.  The execution and delivery of this Agreement by Republic and the consummation by Republic of the transactions contemplated hereby have been duly authorized by the Board of Directors of Republic, and no other corporate proceedings are necessary to authorize this Agreement and the P&A Transaction.  This Agreement has been, and the other agreements and documents contemplated hereby, have been or at Closing will be, duly executed by Republic, and each constitutes or will constitute the legal, valid and binding obligation of Republic, enforceable in accordance with its respective terms and conditions, except as enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, receivership, moratorium or similar Laws affecting creditors' rights and remedies and by general principles of equity, including principles of commercial reasonableness, good faith and fair dealing, regardless of whether enforcement is sought in a proceeding at law or in equity.

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5.03.    Compliance with Laws, Permits and Instruments.  

(a)Republic has performed and abided by all obligations required to be performed by it to the date hereof, and has complied with, and is in compliance with, and is not in default (and with the giving of notice or the passage of time will not be in default) under, or in violation of, (i) any provision of its Constituent Documents, (ii) any provision of any Contract, except where nonperformance, noncompliance, default or violation could not reasonably be expected to result in a Material Adverse Change, or (iii) any Law, Order or Permit applicable to Republic, except where nonperformance, noncompliance, default or violation would not reasonably be expected to result in a Material Adverse Change.

(b)The execution, delivery and (provided the required regulatory approvals from the Approving Authorities are obtained) performance of this Agreement and the other agreements contemplated hereby, and the completion of the transactions contemplated hereby and thereby will not conflict in any material respect with, result in any violation or breach of or result in a material default, under (i) Republic's Constituent Documents (ii) any provision of any Contract, applicable to Republic's activities, except where nonperformance, noncompliance, default or violation could not reasonably be expected to result in a Material Adverse Change, or (iii) any Law, Order or Permit applicable to Republic.

5.04.    Consents and Approvals.  Except as set forth in Section 5.04 of the Republic Disclosure Schedule, no Consent or Order of any Governmental Entity or other third party is required on the part of Republic in connection with the execution, delivery or performance of this Agreement by Republic, or any agreement to be executed by Republic contemplated hereby, or the completion by Republic of the transactions contemplated hereby or thereby, and to Republic's Knowledge, no such Governmental Entity or other third party has indicated that it will withhold such Consent or Order. 

5.05.    Financial Statements.  Republic has made available to HRB Bank true and complete copies of the Republic Bancorp, Inc. financial statements identified in Section 5.05 of the Republic Disclosure Schedule (the “Republic Financial Statements”).  The Republic Financial Statements (including the related notice) complied as to form, as of their respective dates, in all material respects with applicable accounting requirements, have been prepared in accordance with GAAP, fairly present the financial condition of Republic at the dates thereof and the results of operations for the periods then ended (subject, in the case of unaudited statements, to notes and normal year-end audit adjustments that were not material in amount or effect), and the accounting records underlying the Republic Financial Statements accurately and fairly reflect in all material respects the transactions of Republic.

5.06.    Undisclosed Liabilities.  Republic does not have any material Liability that is not reflected in or disclosed in the Republic Financial Statements.

5.07.    Litigation.  There is no Litigation pending or, to Republic's Knowledge, threatened against Republic at law or in equity, or by or before any Governmental Entity (a) relating to the Transferred Assets or the Assumed Liabilities or (b) that challenges the 

23

validity of this Agreement or the transactions contemplated hereby, that challenges any actions taken or to be taken by Republic pursuant hereto or thereto or that seeks to enjoin or otherwise restrain the transactions contemplated hereby or thereby.  

5.08.    Regulatory Compliance. Republic is not subject to any Order of any Governmental Entity.  There are no actions or proceedings pending or, to Republic's Knowledge, threatened against Republic by or before any Governmental Entity.  Republic has not received notice from any Governmental Entity indicating that it would oppose or not grant or issue its Consent, if required, with respect to the transactions contemplated by this Agreement.

5.09.    Finder's Fee.  Except as listed in Section 5.09 of the Republic Disclosure Schedule, no broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with this Agreement or any of the transactions contemplated hereby based upon arrangements made by or on behalf of Republic, or any officer, member, director or employee of Republic, or any Affiliate of Republic.  

5.10.    Association Rights.  Republic is a member in good standing of MasterCard and has full authority under applicable MasterCard operating regulations to issue Emerald Cards, use and display MasterCard trademarks. 

5.11.    Disclosure.  No representation or warranty by Republic in this Agreement, nor any statement, certificate, schedule or exhibit hereto furnished or to be furnished by or on behalf of Republic pursuant to this Agreement or in connection with transactions contemplated hereby, contains or will contain any untrue statement of material fact or omits or will omit a material fact necessary to make the statements contained therein not misleading.

ARTICLE VI
COVENANTS
6.01.    Conduct of the Business in the Ordinary Course.  Except as otherwise expressly contemplated under this Agreement or disclosed in Schedule 6.01, between the date of this Agreement and the Closing, HRB Bank will conduct its business only in the ordinary course of business consistent with past custom and practice with respect to the Transferred Assets and Assumed Liabilities, and shall incur no Assumed Liabilities other than in the ordinary course of business consistent with past custom and practice.

6.02.    Required Acts.  In furtherance of and without limiting Section 6.01, except as otherwise expressly contemplated under this Agreement, between the date of this Agreement and the Closing, HRB Bank will:

(a)Timely file all Tax Returns required to be filed by it and promptly pay all Taxes that become due and payable, except those being contested in good faith by appropriate proceedings, with adequate reserves established;

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(b)Promptly classify and charge off Loans and make appropriate adjustments to loss reserves in accordance with the Call Report Instructions, applicable regulatory definitions and the Uniform Retail Credit Classification and Account Management Policy; 

(c)Maintain its books of account in accordance with GAAP;

(d)Promptly inform Republic of all material issues and developments arising in relation to the Transferred Assets and the Assumed Liabilities; and

(e)Promptly take all reasonable actions to wind down all Brokered Deposits.

6.03.    Prohibited Acts.  In furtherance of and without limiting Section 6.01, except as specifically permitted under this Agreement, between the date of this Agreement and Closing, HRB Bank will not, without the prior written consent of Republic:

(a)Amend, terminate, waive, assign or modify any of the terms of any Assumed Contract, except in the ordinary course of business and only to the extent not materially adverse to HRB Bank or Republic;

(b)Amend, terminate, waive, transfer, assign or modify any of the terms of any Consumer Loan or Deposit, except in the ordinary course of business and only to the extent not materially adverse to HRB Bank or Republic;

(c)Amend, waive or modify HRB Bank's Consumer Loan and Deposit underwriting, credit servicing and operating policies and procedures, except in response to changes in Applicable Laws and  except in the ordinary course of business and only to the extent not materially adverse to HRB Bank or Republic;

(d)Sell, assign or transfer any Transferred Asset or Deposit to any other Person or encumber any Transferred Asset or Deposit; or

(e)Agree to do any of the foregoing.

6.04.    Regulatory Approvals.  

(a)Within five (5) Business Days following the date of this Agreement, each of Republic and HRB Bank will file all required regulatory applications or notices with the Approving Authorities, have published all required public notices and take such other actions that are necessary or advisable in order to consummate the transactions contemplated by this Agreement, and (i) in the case of HRB Bank, the Conversion and the Affiliate Merger, and (ii) in the case of Republic, as the Republic Conversion is pending, an application under the Bank Merger Act to be filed with the OCC; provided that the parties shall timely take all such actions that must be taken or filed at a later time at such later time.  

(b)HRB Bank will file applications with (i) the OCC, as the regulator of national banks, seeking approval to complete (A) the Conversion, (B) the P&A Transaction and 

25

(C) the Affiliate Merger; (ii) the OCC, as the regulator of federal savings banks, seeking approval to complete the Conversion and (iii) the Board of Governors of the Federal Reserve System seeking a waiver of the bank holding company filing requirements under section 3(a)(1) of the Bank Holding Company Act of 1956.  

(c)Each party will promptly furnish to the requesting party all information, data and documents required to be included in any application or statement to be made by or filed with the Approving Authorities or any other Governmental Entity in connection with the transactions contemplated by this Agreement; except to the extent that such information would be, or relates to information that would be, filed under a claim of confidentiality.  Each party agrees to cooperate and join in with the other party in the preparation, execution and processing of all such applications.  The party responsible for a filing shall promptly deliver to the other party evidence of the filing of all such applications, filings and notifications.  Each party shall promptly deliver to the other party a copy of each material Order and other correspondence received by such party from any Approving Authority or other Governmental Entity in respect of any application hereunder.

6.05.    Access to Information and Properties.  Between the date of this Agreement and the Closing Date, HRB Bank shall permit any officers, employees, representatives or agents of Republic, at Republic's cost and expense, access at all reasonable times to HRB Bank's assets and personnel, and disclose and make available to Republic and its officers, employees, representatives or agents, all books, papers and records relating to the Transferred Assets and the Assumed Liabilities as Republic may reasonably request.  HRB Bank shall cause its personnel to provide reasonable assistance to Republic in Republic's investigation of matters relating to the Transferred Assets and the Assumed Liabilities; provided such assistance does not unreasonably interfere with such personnel's job duties.  Republic will not exercise its rights under this section in a manner that materially disrupts the normal business operations of HRB Bank.

6.06.    Agreements and Consents.  Each of the parties hereto will use commercially reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper, or advisable under applicable Laws to consummate and make effective the transactions contemplated by this Agreement as expeditiously as possible.  HRB Bank will act diligently and reasonably in attempting to obtain, before the Closing Date, the Consents, in form and substance reasonably satisfactory to Republic, from any party to any Contract required to be obtained to assign or transfer any such Contract to Republic or interests therein.  

6.07.    Fees and Expenses.  Except as otherwise set forth in this Agreement, HRB Bank and Block Financial will pay their own, and Republic will pay its own, out-of-pocket expenses in connection with this Agreement, including appraisal, accounting, consulting, professional and legal fees, if any, whether or not the transactions contemplated by this Agreement are consummated.  

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6.08.    Employees.  Except as otherwise agreed between the parties in writing, between the date of this Agreement and the Closing Date, Republic Bank will not hire any employee of HRB Bank.

6.09.    Notification.  Prior to the Closing Date, HRB Bank shall promptly provide Republic (after HRB Bank has notice thereof) with written notice of, and keep Republic advised as to, (a) any Material Adverse Change in the Transferred Assets or the Assumed Liabilities and (b) any pending or, to HRB Bank's Knowledge, threatened or anticipated action, suit or proceeding that challenges the P&A Transaction.

6.10.    Filings; Power of Attorney.  Republic may file with Governmental Entities, on behalf and in the name of HRB Bank, all assignments related to the Loans and any financing statement amendments and any other documents covered by the Power of Attorney to be executed by HRB Bank on or after the Closing Date.  

6.11.    Joint Marketing Master Services Agreement.  Between the date of this Agreement and the Closing Date, the parties will negotiate in good faith to finalize the Joint Marketing Master Services Agreement.

6.12.    Receivables Participation Agreement. Between the date of this Agreement and the Closing Date, the parties will negotiate in good faith to finalize the Receivables Participation Agreement.

6.13.    BINs.  The BINs shall be transferred to Republic on a mutually agreed date on or about the Closing Date.  With respect to the BINs transfer, each party shall use commercially reasonable efforts to assist in the transfer of the BINs to Republic, including providing any notices to, or obtaining any consents from, MasterCard.

6.14.    Exclusive Dealing.  Until such time as either the Closing has occurred or this Agreement is terminated in accordance with Article IX, neither HRB Bank nor Block Financial will, directly or indirectly, through any representative or otherwise, solicit or entertain offers from, negotiate with or accept, any proposal of any other person relating to the P&A Transaction or the transactions contemplated by the Joint Marketing Master Services Agreement and the Receivables Participation Agreement or the assets, liabilities or business, in whole or in part, of HRB Bank.

6.15.    Further Assurances.  From time to time after the Closing, each party, without further consideration, shall execute and deliver, or cause to be executed and delivered, such instruments and take such action as may be reasonably necessary or requested by the other party in order to carry out the transactions contemplated by this Agreement.  Without limiting the foregoing, on and after the Closing Date, HRB Bank and Block Financial shall (a) give such further assistance to Republic and shall execute, acknowledge, and deliver all such instruments and take such further action as may be reasonably necessary and appropriate or reasonably requested by Republic effectively to transfer to, and vest in, Republic full, legal, and equitable title to the Transferred Assets and put Republic in possession of the Transferred Assets, (b) in the 

27

case of Contracts and other interests included in the Transferred Assets (i) which cannot be transferred or assigned effectively without the Consent of third parties which Consent has not been obtained prior to the Closing, to cooperate with Republic in endeavoring to obtain such Consent promptly, and if any such Consent is unobtainable, to use its commercially reasonable efforts to secure to Republic the benefits thereof in some other manner or (ii) which are otherwise not transferable or assignable, to use its commercially reasonable efforts jointly with Republic to secure to Republic the benefits and burdens thereof in some other manner (including the exercise of the rights of HRB Bank thereunder), in the case of each of clause (i) and (ii) immediately above to the extent requested by, and at the option of, Republic; provided, however, that nothing herein shall relieve HRB Bank or Block Financial of their obligations under any other section of this Agreement, and (c) use reasonable efforts to assist Republic in the orderly transfer of the Transferred Assets and Deposits.  

ARTICLE VII
POST-CLOSING
7.01.    Affiliate Merger.  Subject to regulatory approval, promptly following the Closing, HRB Bank will merge with and into Block Financial.  Pursuant to such merger, Block Financial will succeed to all of the remaining assets and liabilities of HRB Bank.  As a result of the merger, HRB Bank will close the Bank Office, surrender its bank charter and cease to exist as a separate legal entity.

ARTICLE VIII
CONDITIONS
8.01.    Conditions to Obligations of HRB Bank and Block Financial.  The obligation of HRB Bank and Block Financial to effect the P&A Transaction  is subject to the fulfillment or HRB Bank's and Block Financial's written waiver at or prior to the Closing Date of all of the following additional conditions:

(a)Regulatory Approvals.  All regulatory approvals from the Approving Authorities necessary to consummate the Republic Conversion and the Divestiture Transaction have been obtained and remain in full force and effect and all applicable waiting periods have expired.

(b)Representations and Warranties.  The representations and warranties of Republic set forth in this Agreement are true and correct in all material respects as of the date of this Agreement and as of the Closing Date (as though made on and as of the Closing Date except (i) to the extent such representations and warranties are by their express provisions made as of a specific date, and (ii) for the effect of changes or transactions permitted or contemplated by this Agreement).

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(c)Performance of Obligations.  Republic has performed all obligations, covenants and agreements required to be performed by it under this Agreement, in all material respects, prior to the Closing Date, including the delivery of the documents described in Section 8.01(k).

(d)No Adverse Action.  No Law or Order shall have been promulgated, enacted, entered, enforced or deemed applicable to this Agreement or the transactions contemplated hereby by any Governmental Entity that would (i) make this Agreement or any other agreement contemplated hereby, or the P&A Transaction or the Divestiture Transaction, illegal, invalid or unenforceable, or (ii) impose material limits in the ability of any party to this Agreement to complete this Agreement or any other agreement contemplated hereby, or the P&A Transaction or the Divestiture Transaction.

(e)Joint Marketing Master Services Agreement.  Republic has executed and delivered the Joint Marketing Master Services Agreement in a form acceptable to HRB Bank and Block Financial.

(f)Receivables Participation Agreement.  Republic has executed and delivered the Receivables Participation Agreement in a form acceptable to HRB Bank and Block Financial.

(g)No Material Adverse Change.  Since the date of this Agreement, there has been no Material Adverse Change with respect to Republic.

(h)Transfer Amount.  Republic shall have tendered the Estimated Transfer Amount (if it is a positive number).

(i)Third Party Consents.  The parties shall have obtained the third party consents identified on Schedule 8.01(i).

(j)Republic Bank Conversion.  Republic shall be a national bank.

(k)Other Deliverables.  Republic has delivered to HRB Bank and Block Financial all of the following agreements, certifications and other deliverables:

		
	(i)
	an executed Assignment and Assumption of Deposit Liabilities Agreement, in substantially the form set forth in Exhibit A;

		
	(ii)
	an executed Assignment and Assumption of Assumed Contracts Agreement, in substantially the form set forth in Exhibit B;

		
	(iii)
	an executed Bill of Sale, in substantially the form of Exhibit C.

		
	(iv)
	an executed Assignment and Assumption of Loans Agreement, in substantially the form set forth in Exhibit D;

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	(v)
	an executed Assignment, Transfer and Appointment of Successor Custodian for Custodial Accounts, in substantially the form set forth in Exhibit E;

		
	(vi)
	a certified copy of the resolutions of the Board of Directors of Republic authorizing the execution of this Agreement and the consummation of the P&A Transaction; and

		
	(vii)
	a Certificate or Certificates signed by an authorized officer of Republic stating that all of the conditions set forth in Sections 8.01(b) and (c) have been satisfied or waived, as provided therein.

8.02.    Conditions to Obligations of Republic.  The obligation of Republic to effect the P&A Transaction is subject to the fulfillment or Republic's written waiver at or prior to the Closing Date of all of the following additional conditions:

(a)Regulatory Approvals.  All regulatory approvals from the Approving Authorities necessary or appropriate to consummate the P&A Transaction have been obtained and remain in full force and effect and all applicable waiting periods have expired.

(b)Representations and Warranties.  The representations and warranties of HRB Bank and Block Financial set forth in this Agreement are true and correct in all material respects as of the date of this Agreement and as of the Closing Date (as though made on and as of the Closing Date except (i) to the extent such representations and warranties are by their express provisions made as of a specific date, and (ii) for the effect of changes or transactions permitted or contemplated by this Agreement).

(c)Performance of Obligations.  Each of HRB Bank and Block Financial has performed all obligations, covenants and agreements required to be performed by it under this Agreement, in all material respects, prior to the Closing Date, including the delivery of the documents described in Section 8.02(j).

(d)No Adverse Action.  No Law or Order shall have been promulgated, enacted, entered, enforced or deemed applicable to this Agreement, or the transactions contemplated hereby by any Governmental Entity that would (i) make this Agreement or any other agreement contemplated hereby, or the P&A Transaction, illegal, invalid or unenforceable, or (ii) impose material limits in the ability of any party to this Agreement to complete this Agreement or any other agreement contemplated hereby, or the P&A Transaction. 

(e)Joint Marketing Master Services Agreement.  EFS and Block Financial have executed and delivered the Joint Marketing Master Servicer Agreement in a form acceptable to Republic.

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(f)Receivables Participation Agreement.  EFS and Block Financial have executed and delivered the Receivables Participation Agreement in a form acceptable to Republic.

(g)No Material Adverse Change.  Since the date of this Agreement, there has been no Material Adverse Change with respect to HRB Bank or Block Financial.

(h)Transfer Amount.  HRB Bank shall have tendered the Estimated Transfer Amount (if it is a negative number).

(i)Third party Consents.  The parties shall have obtained the third party consents identified on Schedule 8.01(i).

(j)Other Deliverables.  Each of HRB Bank and Block Financial has delivered, or caused to be delivered, to Republic all of the following agreements, certifications and other deliverables:

		
	(i)
	an executed Assignment and Assumption of Deposit Liabilities Agreement, in substantially the form set forth in Exhibit A;

		
	(ii)
	an executed Assignment and Assumption of Assumed Contracts Agreement, in substantially the form set forth in Exhibit B;

		
	(iii)
	an executed Bill of Sale, in substantially the form set forth in Exhibit C;

		
	(iv)
	an executed Assignment and Assumption of Loans Agreement, in substantially the form set forth in Exhibit D;

		
	(v)
	an executed Assignment, Transfer and Appointment of Successor Custodian for Custodial Accounts, in substantially the form set forth in Exhibit E;

		
	(vi)
	an executed Limited Power of Attorney, in substantially the form set forth in Exhibit F;

		
	(vii)
	a certified copy of the resolutions of the Board of Directors and Shareholder of HRB Bank authorizing the execution of this Agreement and the consummation of the P&A Transaction;

		
	(viii)
	a Certificate or Certificates signed by an authorized officer of HRB Bank stating that all of the conditions set forth in Sections 8.02(b) and (c) have been satisfied or waived, as provided therein;

		
	(ix)
	such other bills of sale, assignments, and other instruments and documents as counsel for Republic may reasonably require as 

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necessary or desirable for transferring, assigning and conveying to Republic good, marketable and insurable title to the Transferred Assets;

		
	(x)
	the Records; and

		
	(xi)
	such other documents, instruments, certificates and other agreements as Republic may reasonably require to effect the transactions contemplated by this Agreement to be consummated as of the Closing.

ARTICLE IX
TERMINATION, AMENDMENT, AND WAIVER
9.01.    Termination.  This Agreement may be terminated at any time prior to the Closing Date:

(a)By written consent of all parties hereto; 

(b)By any party hereto at any time after June 18, 2014, or such other date as is mutually agreed upon by the Parties in writing, if the P&A Transaction has not been consummated on or prior to that date; provided, however, that the right to terminate this Agreement under this Section 9.01(b) is not available to any party whose action or failure to act has been a principal cause of or resulted in the failure of the P&A Transaction to occur on or before such date and such action or failure to act constitutes a breach of this Agreement; 

(c)By any party hereto if any Approving Authority has denied approval of any application filed in connection with the P&A Transaction;

(d)By any party hereto in the event of a material breach by the other of any representation, warranty, covenant or agreement contained in this Agreement, which breach is not cured within fifteen (15) days (or such longer period not exceeding forty (40) days in the event such breach cannot reasonably be cured within fifteen (15) days and a cure is being pursued with reasonable diligence) after written notice thereof is given to the party committing such breach or waived by such other party(ies); 

(e)By Republic, if there is a Material Adverse Change with respect to HRB Bank or Block Financial;

(f)By HRB Bank or Block Financial if there is a Material Adverse Change with respect to Republic; or

(g)By any party hereto, if the parties to this Agreement have not agreed in a separate writing to the definitive forms of the Joint Marketing Master Services Agreement and the Receivables Participation Agreement on or before September 30, 2013, by delivering to the 

32

other parties hereto a written notice of deadlock, pursuant to which termination will become effective five (5) Business Days after receipt of such notice.

9.02.    Effect of Termination.  In the event of termination of this Agreement as provided in Section 9.01 above, this Agreement becomes void and without further effect and there will be no liability on the part of any party hereto or the respective officers and directors of any party, except for Section 6.07 (regarding expenses and payment of fees) and except that no termination of this Agreement pursuant to Section 9.01(d) shall relieve the non-performing or defaulting party of any liability to any other party hereto arising from the material non-performance and/or breach prior to the date of such termination of any covenant, agreement, term, provision, representation or warranty required to be observed, performed, complied with and/or kept by such non-performing or defaulting party.

ARTICLE X
INDEMNIFICATION
10.01.    HRB Bank's Indemnity.  Subject to the provisions of this Article X, the HRB Bank Indemnifying Parties shall jointly and severally indemnify and hold Republic, and its directors, officers, employees, agents, representatives, successors and assigns (collectively, the “Republic Indemnified Parties”), harmless from and against any and all damages, losses, costs, obligations, claims, causes of action, demands, assessments, judgments, settlements or Liability (whether based on contract, tort, product liability, strict liability or otherwise and whether ultimately determined to be valid), including Taxes, and all reasonable costs and expenses (including prejudgment interest and other interest, penalties and attorneys' and accountants' fees and disbursements) of defending or asserting any of the foregoing or of enforcing this Agreement (collectively, “Damages”) asserted against, resulting to, imposed upon or incurred by any Republic Indemnified Parties after the Closing, directly or indirectly, arising out of, resulting from or in connection with:

(a)Any inaccuracy or breach of any representation or warranty (ignoring, for purposes of determining the existence of any such inaccuracy or breach or the amount of Damages with respect thereto, any qualification as to Material Adverse Change, “materiality,” “knowledge,” “HRB Bank's Knowledge” or similar qualifier set forth in such representation or warranty) or any breach or failure (regardless of whether such breach or failure is deemed “material”) to perform any covenant or agreement made or undertaken by HRB Bank in this Agreement or in any other agreement, certificate, schedule, exhibit or writing delivered by HRB Bank and/or Block Financial pursuant to this Agreement;

(b)Any of the Excluded Assets or Excluded Liabilities; 

(c)Any Liability to a third party based upon any act or omission of HRB Bank that occurred or failed to occur on or before its merger out of existence on the Closing Date; and

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(d)Any Litigation incident or relating to subsections (a), (b) or (c) of this Section 10.01.

10.02.    Republic Indemnity.  Subject to the provisions of this Article X, Republic shall indemnify and hold HRB Bank and Block Financial, and their directors, officers, employees, agents, representatives, successors and assigns (the “HRB Bank Indemnified Parties”) harmless from and against any and all Damages asserted against, resulting to, imposed upon or incurred by any HRB Bank Indemnified Parties after the Closing, directly or indirectly, arising out of, resulting from or in connection with: 

(a)Any inaccuracy or breach of any representation or warranty (ignoring, for purposes of determining the existence of any such inaccuracy or breach or the amount of Damages with respect thereto, any qualification as to Material Adverse Change, “materiality,” “knowledge,” “Republic's Knowledge” or similar qualifier set forth in such representation or warranty) or any breach or failure (regardless of whether such breach or failure is deemed “material”) to perform any covenant or agreement made or undertaken by Republic in this Agreement or in any other agreement, certificate, schedule, exhibit or writing delivered by Republic pursuant to this Agreement;  

(b)The Assumed Liabilities;

(c)Any Liability to a third party based upon any act or omission of Republic that occurs or fails to occur; and

(d)Any Litigation incident or relating to subsections (a), (b) or (c) of this Section 10.02.

10.03.    Indemnity Procedure.  All claims for indemnification by a party seeking to be indemnified (an “Indemnified Party”) under this Article X shall be asserted and resolved as follows:

(a)In the event that any claim or demand for which the HRB Bank Indemnifying Parties or Republic, as applicable (each, an “Indemnifying Party”) would be liable to an Indemnified Party hereunder is asserted against or sought to be collected from such Indemnified Party by a third party, including a Governmental Entity (a “Third Party Claim”), such Indemnified Party shall with reasonable promptness give notice (the “Claim Notice”) to the Indemnifying Party of such claim or demand, specifying the nature of and specific basis for such claim or demand and the amount or the estimated amount thereof to the extent then feasible (which estimate shall not be conclusive of the final amount of such claim and demand).  Failure to provide a Claim Notice of any such claim or demand shall not affect the Indemnifying Party's duties or obligations under this Article X, except to the extent the Indemnifying Party is materially prejudiced thereby. The Indemnifying Party shall have ten (10) days from the delivery or mailing of the Claim Notice (the “Notice Period”) to notify the Indemnified Party (i) whether or not it disputes the liability of the Indemnifying Party to the Indemnified Party hereunder with respect to such claim or demand, and (ii) whether or not it desires, at the cost and expense of the 

34

Indemnifying Party, to defend the Indemnified Party against such claim or demand; provided, however, that any Indemnified Party is hereby authorized, but is not obligated, prior to and during the Notice Period, to file any motion, answer or other pleading that it shall deem necessary or appropriate to protect its interests or those of the Indemnifying Party, and provided further, that in respect of a claim or demand for Taxes no such right of the Indemnifying Party to defend shall apply unless and to the extent the Indemnified Party consents.  If the Indemnifying Party notifies the Indemnified Party within the Notice Period that it desires to defend the Indemnified Party against such claim or demand, the Indemnifying Party shall, subject to the preceding sentence and the last sentence of this paragraph, have the right to control the defense against the claim by all appropriate proceedings and any settlement negotiations; provided, however, that to the satisfaction of the Indemnified Party, the Indemnifying Party shall indemnify and secure the Indemnified Party against such contested claims by posting a bond or otherwise.  If the Indemnifying Party undertakes the defense of the Third Party Claim, then the Indemnified Party shall have the right to participate in the defense of the Third Party Claim at its own expense.  If the Indemnifying Party fails to respond to the Indemnified Party within the Notice Period or after electing to defend fails to commence or diligently pursue such defense, then the Indemnified Party shall have the right, but not the obligation, to undertake or continue the defense of and to compromise or settle (exercising reasonable business judgment) the claim or other matter, all on behalf, for the account and at the risk of the Indemnifying Party.  Notwithstanding the foregoing, if the basis of the proceeding relates to a condition or operations which existed or were conducted both prior to and after the Closing Date, each party shall have the same right to participate in the proceeding without either party having the right of control.

(b)If requested by the Indemnifying Party, the Indemnified Party agrees, at the Indemnifying Party's expense, to reasonably cooperate with the Indemnifying Party and its counsel in contesting any Third Party Claim that the Indemnifying Party elects to contest.

(c)If any Indemnified Party should have a claim or demand against the Indemnifying Party hereunder that does not involve a Third Party Claim, the Indemnified Party shall send a Claim Notice with respect to such claim or demand to the Indemnifying Party.  Failure to provide a Claim Notice of any such claim or demand shall not affect the Indemnifying Party's duties or obligations under this Article X, except to the extent the Indemnifying Party is materially prejudiced thereby.    If the Indemnifying Party disputes such claim, such dispute shall be resolved by mutual agreement of the Indemnifying Party and Indemnified Party or by litigation in an appropriate court of competent jurisdiction. 

10.04.    Limitations on Indemnity.  

(a)Notwithstanding the foregoing, neither the HRB Bank Indemnifying Parties nor Republic shall be required to indemnify the Republic Indemnified Parties or the HRB Bank Indemnified Parties, as applicable, in respect of any Damages suffered by the Republic Indemnified Parties or the HRB Bank Indemnified Parties, as applicable, unless the aggregate amount of the Indemnifying Parties obligation under this Article X exceeds an amount equal to $50,000 (the “Threshold Amount”), in which case the HRB Bank Indemnifying Parties or Republic, as applicable, will be required to indemnify the Republic Indemnified Parties or the 

35

HRB Bank Indemnified Parties, as applicable, for all Damages regardless of the Threshold Amount.

(b)The aggregate amount of Damages actually paid by an Indemnifying Party under this Article X shall not exceed $100 million.

(c)No indemnification will be provided by any Indemnifying Party for any claim for indemnification which is made more than two (2) years following the Closing Date. Notwithstanding the foregoing, if at the end of such period there shall be pending any indemnification claim by a person, such person shall continue to have the right to seek such indemnification with respect to such claim notwithstanding such expiration.

(d)No Indemnified Party shall be required to (i) incur any material out-of-pocket costs or expenses or pay any other material amounts to third parties, except to the extent that the Indemnifying Party has acknowledged in writing that such costs, expenses or other amounts constitute indemnifiable Losses hereunder, (ii) make any claims under existing insurance policies, or (iii) take any other action to the extent such action would adversely affect such Indemnified Party in any material respect.

10.05.    Exclusive Remedy.  After the Closing Date, this Article X shall provide the exclusive remedy for any of the matters addressed herein or other claims arising out of this Agreement, provided that the foregoing shall not be deemed to limit the rights of any party to seek equitable remedies (including specific performance or injunctive relief) or seek Damages in the case of any fraud, willful or knowing breach or misrepresentation. 

ARTICLE XI
TRANSITIONAL AND POST-CLOSING MATTERS
11.01.    Notification to Customers.  

(a)Republic will, jointly with HRB Bank, unless otherwise required earlier by applicable Law or Contract, on a date promptly after the Closing Date, prepare and mail to each customer whose Deposit is to be assumed by Republic and whose Loan is to be purchased by Republic, a letter, in form and substance reasonably satisfactory to the parties, informing such Person of the nature of this transaction and the services to be provided by Republic in the Bank Office on and after the Closing Date.

(b)Either as part of or in addition to the notification to customers described in Section 11.01(a), subject to the terms of the Joint Marketing Master Services Agreement, Republic may provide notification of changes in terms to the products that will take effect shortly following the Closing Date and will provide additional notices to customers of changes to occur upon conversion of the Deposit Accounts to Republic's processing system.

11.02.    Payment of Instruments.  Following the Closing, Republic agrees to pay all checks, drafts, and withdrawal orders (including ACH debits)  with respect to the Deposits to 

36

the extent that (a) such payment is in accordance with applicable Law and the overdraft and other policies applicable to such Deposits, (b) they are otherwise properly payable, and (c) they are presented to Republic by mail, over its counters, or by any other authorized means.   Republic shall in all other respects discharge, in the usual course of business, the duties and obligations of HRB Bank with respect to the Deposits and the balances due and owing thereunder.  Subject to the terms of the Joint Marketing Master Services Agreement, HRB Bank shall cooperate in a commercially reasonable fashion with Republic to enable Republic to (x) amend and reissue Contracts and disclosures relating to the Deposits, Transferred Loans and Overdrafts, (y) reissue cards (other than Emerald Cards) issued to customers with respect to the Deposits and Transferred Loans, no later than the date on which such reissuance would be required by MasterCard, and (z) otherwise facilitate the transfer of such customers' business relationships to Republic.

11.03.    Statements.  To the extent required by applicable Law or Contract, (a) HRB Bank will issue statements to its customers that include all transactions with respect to the Deposits and the Loans through an agreed-upon date, and (b) Republic will issue statements for all transactions with respect to the Deposits and the Loans thereafter.  Interest and service charge calculations will be processed on behalf of  HRB Bank on such customer statements as of the close of business on the Closing Date.

11.04.    Access to Records.  HRB Bank and Republic mutually agree to maintain all records and other documents relating to the Transferred Assets and Assumed Liabilities for such periods as provided in HRB Bank and Republic's respective record retention policies and required by applicable Law, and to examine, inspect, copy and reproduce such records and other documents relating to such Transferred Assets and Assumed Liabilities as may be reasonably requested by the other party.  Any charges for such examination and photocopying will be at a rate not greater than the examining party's customary rates for similar requests by its customers.

11.05.    Information Reporting.  With respect to the Loans and Deposits purchased and assumed by Republic pursuant to this Agreement, HRB Bank will be responsible for reporting to the customer and to the Internal Revenue Service (and any state or local taxing authority as required by Law) all interest paid or earned by the customer prior to and including the Closing Date, and Republic will be responsible for reporting to the customer and to the Internal Revenue Service (and any state or local taxing authority as required by Law) all interest paid or earned by the customer after the Closing Date.

11.06.    Transition.  From and after the date of this Agreement, HRB Bank and Republic agree to fully cooperate with and assist one another in connection with the transition and conversion of all customer accounts, files (including data processing files) and other information which are being purchased and assumed by Republic pursuant to the terms hereof, including without limitation providing all information that Republic may reasonably request at such times and in such formats as Republic may reasonably request.  Additionally, each of Republic and HRB Bank agree to provide each other, upon reasonable prior notice, with such information and data as is necessary to allow HRB Bank and Republic to comply with all tax, regulatory reporting, audit or other compliance obligations relating to the customers, employees 

37

(to the extent applicable) and Transferred Assets and Assumed Liabilities, and each of HRB Bank and Republic agree to timely take any and all action as required by Law to comply with such tax, regulatory and/or reporting obligations.  

ARTICLE XII
GENERAL PROVISIONS
12.01.    Amendment.  This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto.

12.02.    Waiver.  Any term, condition or provision of this Agreement may be waived in writing at any time by the party which is, or whose shareholders are, entitled to the benefits thereof.  No failure or delay on the part of either party hereto to exercise any right, power, or privilege hereunder or under any instrument executed pursuant hereto operates as a waiver nor does any single or partial exercise of any right, power, or privilege preclude any other further exercise thereof or the exercise of any other right, power, or privilege.

12.03.    Survival of Representations and Warranties.  The parties hereto agree that all of the representations and warranties contained in this Agreement shall survive for a period of two (2) years subsequent to the Closing Date.  

12.04.    Binding Effect; Assignment.  Subject to Section 2.05, no party may assign its rights or obligations under this Agreement without the prior written consent of the other parties to this Agreement.  Subject to the preceding sentence, all terms of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.  

12.05.    Severability.  Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable Law, but if any provision of this Agreement if held to be prohibited by or invalid under applicable Law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remaining provisions of this Agreement.

12.06.    Headings.  Article, Section, Subsection, and Paragraph titles, captions and headings herein are inserted only as a matter of convenience and for reference, and in no way define, limit, extend, or describe the scope of this Agreement or the intent of any provision hereof.

12.07.    Entire Agreement.  Except as relates to the Joint Marketing Master Services Agreement and the Receivables Participation Agreement, this Agreement and the Schedules and Exhibits hereto constitutes the entire agreement between and among the parties with respect to the subject matter hereof, supersedes all prior negotiations, representations, warranties, commitments, offers, letters of interest or intent, proposal letters, Contracts, or understandings with respect thereto.  

38

12.08.    Counterparts.  This Agreement may be executed in one or more counterparts, and any party to this Agreement may execute and deliver this Agreement by executing and delivering any of such counterparts, each of which when executed and delivered shall be deemed to be an original and all of which taken together shall constitute one and the same instrument.  The exchange of copies of this Agreement and of signature pages by facsimile or electronic mail transmission shall constitute effective execution and delivery of this Agreement as to the parties and may be used in lieu of the original Agreement for all purposes.  Signatures of the parties transmitted by facsimile or electronic mail shall be deemed to be their original signatures for all purposes.

12.09.    Notices.  All notices required or permitted under this Agreement must be given in writing, reference this Agreement and will be deemed delivered and given (i) upon personal delivery to the party to be notified; (ii) on the date received if sent by registered or certified U.S. mail, return receipt requested, postage and charges prepaid; or (iii) one Business Day after deposit with a nationally-recognized commercial overnight courier, specifying next day delivery, with written verification of receipt.  All communications shall be sent to the following addresses (or at such other address for a party as shall be specified by like notice):

(a)    If to Republic:

Republic Bank & Trust Company
601 West Market Street
Louisville, Kentucky 40202
Attn: Steven Trager
Email: strager@republicbank.com 
Telephone:  502-561-7122

With copies to:
    	
		
	Republic Bank & Trust Company
601 West Market Street 
Louisville, Kentucky 40202
Attn: John Rippy
Email: jrippy@republicbank.com
Telephone:  502-560-8683
	Goodwin Procter LLP
Attn: Lynne B. Barr 
Exchange Place, 53 State Street
Boston, MA 02109
lbarr@goodwinprocter.com
Telephone: 617-570-1610

(b)    If to HRB Bank:

H&R Block Bank
One H&R Block Way
Kansas City, MO 64105
Attn: Greg Quarles
Email: greg.quarles@hrblock.com
Telephone: 816-854-5709

39

With copies to:        	
		
	H&R Block, Inc.
One H&R Block Way
Kansas City, MO 64105
Attn:  Walter Pirnot, Senior Corporate Counsel
Email: wpirnot@hrblock.com
Telephone: 816-854-5757
	Stinson Morrison Hecker LLP
Attn: Mike Lochmann
1201 Walnut Street, Suite 2900
Kansas City, MO 64106
Email: mlochmann@stinson.com
Telephone: (816) 691-3208

(c)    If to Block Financial: 
        	
		
	Block Financial, LLC
One H&R Block Way
Kansas City, MO 64105
Attn: Susan Ehrlich, President of Financial Services
Email: susan.ehrlich@hrblock.com
Telephone: 816-854-4788

	 
	 

	With copies to:
	 

	 
	 

	H&R Block, Inc.
One H&R Block Way
Kansas City, Missouri 64105
Attn:  Tom Gerke, Chief Legal Officer
Email: tom.gerke@hrblock.com
Telephone: 816-854-6060
	Stinson Morrison Hecker LLP
Attn: Mike Lochmann
1201 Walnut Street, Suite 2900
Kansas City, Missouri 64106
Email: mlochmann@stinson.com
Telephone: (816) 691-3208

provided, however, that the providing of notice to counsel shall not, of itself, be deemed the providing of notice to a party hereto. 
12.10.    Governing Law; Jurisdiction; Waiver of Jury Trial.

(a)This Agreement is governed by and controlled as to validity, enforcement, interpretation, effect, and in all other respects by the internal laws of the State of Missouri applicable to Contracts made in that state, without reference to its conflicts of laws principles.

(b)Except as otherwise expressly provided in this Agreement, any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall be brought in the Circuit Court of Jackson County, Missouri, or the United States District Court for the Western District of Missouri, and each of the parties hereby consents to the jurisdiction of such courts 

40

(and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by Law, any objection which it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding which is brought in any such court has been brought in an inconvenient forum.  Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court.  Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 12.09 shall be deemed effective service of process on such party.

(c)EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

12.11.    Third Party Beneficiaries.  The parties intend that this Agreement is not to benefit or create any right or cause of action in or on behalf of any Person other than the parties hereto and their affiliates.  No future or present employee or customer of any of the parties is to be treated as a third party beneficiary in or under this Agreement.

12.12.    Specific Performance.  The parties acknowledge that monetary damages could not adequately compensate the parties in the event of a breach of this Agreement by one party, that the non-breaching party or parties would suffer irreparable harm in the event of such breach and that the non-breaching party or parties have, in addition to any other rights or remedies it or they may have at law or in equity, specific performance and injunctive relief as a remedy for the enforcement hereof.

12.13.    Mutual Drafting.  This Agreement is the mutual product of the parties hereto and each provision hereof has been subject to the mutual consultation, negotiation and agreement of each party and shall not be construed for or against any party.

12.14.    Interpretive Provisions.  For purposes of this Agreement, (a) the words “including” and “include” shall be deemed to be followed by the words “including without limitation” and “include without limitation,” respectively and (b) the words “herein,” “hereof,” “hereby,” “hereto” or “hereunder” refer to this Agreement.  Unless the context otherwise requires, references in this Agreement:  (a) to Articles, Sections, Subsections, Paragraphs, Exhibits and Schedules mean the Articles, Sections, Subsections and Paragraphs of, and the Exhibits and Schedules attached to, this Agreement; (b) to an agreement, instrument or other document means such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof and by this Agreement; and (c) to a statute means such statute as amended from time to time and includes any successor legislation thereto and any regulations promulgated thereunder.  The Schedules and Exhibits referred to in this Agreement shall be construed with and as an integral part of this Agreement to the same extent as if they were set forth verbatim herein.  
[Execution page follows]

41

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed by their respective officers thereunto duly authorized as of date first above written.
REPUBLIC BANK & TRUST COMPANY

By:                        
Name:    Steven E. Trager
Title:    Chairman and Chief Executive Officer

H&R BLOCK BANK

By:                        
Name:    Greg M. Quarles
Title:    President and Chief Executive Officer

BLOCK FINANCIAL LLC

By:                        
Name:    Gregory J. Macfarlane
Title:    President

Purchase and Assumption Agreement Signature Page
S-1

42

Exhibit A
ASSIGNMENT AND ASSUMPTION OF DEPOSIT LIABILITIES AGREEMENT
This ASSIGNMENT AND ASSUMPTION OF DEPOSIT LIABILITIES AGREEMENT is dated this _____ day of _______________, 2013, by and between H&R Block Bank, a national banking association (“HRB Bank”), and Republic Bank & Trust Company, a national banking association (“Republic”).  Capitalized terms not otherwise defined herein have the same meaning as specified in the Agreement (as defined below).
W I T N E S S E T H:
WHEREAS, HRB Bank and Republic entered into a Purchase and Assumption Agreement, dated as of July 11, 2013 (the “Agreement”), pursuant to which Republic has agreed to purchase, and HRB Bank has agreed to sell, the Transferred Assets.
NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby acknowledged by HRB Bank and Republic, HRB Bank hereby assigns, transfers and sets over to Republic all of HRB Bank's rights and interest in and to, and Republic does hereby assume all of HRB Bank's liabilities and obligations with respect to, all Deposits, as further specified in the Agreement.
This Assignment and Assumption of Deposit Liabilities Agreement shall be binding upon and shall inure to the benefit of HRB Bank, Republic and each of their respective successors and assigns, and shall be subject to the terms and conditions of the Agreement.  In the event of a conflict between any of the terms and provisions hereof and the Agreement, the Agreement shall be deemed to control.
This Assignment and Assumption of Deposit Liabilities Agreement, and the rights and obligations of the parties hereunder, shall be governed by and construed in accordance with the laws of the Commonwealth of Kentucky and applicable federal laws and regulations.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and Assumption of Deposit Liabilities Agreement to be executed as of the date first above written
REPUBLIC BANK & TRUST COMPANY

By:                            
Name:    Steven E. Trager
Title:    Chairman and Chief Executive Officer

H&R BLOCK BANK

By:                            
Name:    Greg M. Quarles
Title:    President and Chief Executive Officer

Exhibit A

  
Exhibit B
ASSIGNMENT AND ASSUMPTION OF ASSUMED CONTRACTS AGREEMENT
This ASSIGNMENT AND ASSUMPTION OF CONTRACTS AGREEMENT is dated this _____ day of _______________, 2013, by and between H&R Block Bank, a national banking association (“HRB Bank”), and Republic Bank & Trust Company, a national banking association (“Republic”).  Capitalized terms not otherwise defined herein have the same meaning as specified in the Agreement (as defined below)
W I T N E S S E T H:
WHEREAS, HRB Bank and Republic entered into a Purchase and Assumption Agreement, dated as of July 11, 2013 (the “Agreement”), pursuant to which Republic has agreed to purchase, and HRB Bank has agreed to sell, substantially the Transferred Assets.
NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby acknowledged by HRB Bank and Republic, HRB Bank hereby assigns, transfers and sets over to Republic all of HRB Bank's rights and interest in and to, and Republic does hereby assume all of HRB Bank's liabilities and obligations with respect to, the following:
(a)    All Assumed Contracts as further specified in the Agreement.
This Assignment and Assumption of Contracts Agreement shall be binding upon and shall inure to the benefit of HRB Bank, Republic and each of their respective successors and assigns, and shall be subject to the terms and conditions of the Agreement.  In the event of a conflict between any of the terms and provisions hereof and the Agreement, the Agreement shall be deemed to control.
This Assignment and Assumption of Contracts Agreement, and the rights and obligations of the parties hereunder, shall be governed by and construed in accordance with the laws of the Commonwealth of Kentucky and applicable federal laws and regulations.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and Assumption of Contracts Agreement to be executed as of the date first above written.
REPUBLIC BANK & TRUST COMPANY

By:                        
Name:    Steven E. Trager
Title:    Chairman and Chief Executive Officer

H&R BLOCK BANK

By:                    
Name:    Greg M. Quarles
Title:    President and Chief Executive Officer

Exhibit B

    
Exhibit C
BILL OF SALE
This BILL OF SALE is dated this _____ day of _______________, 2013 by H&R Block Bank, a national banking association (“HRB Bank”).  Capitalized terms not otherwise defined herein shall have the same meaning as specified in the Agreement (as defined below).
W I T N E S S E T H:
WHEREAS, HRB Bank and Republic Bank & Trust Company, a national banking association (“Republic”) entered into an Purchase and Assumption Agreement, dated as of July 11, 2013 (the “Agreement”), pursuant to which Republic has agreed to purchase, and HRB Bank has agreed to sell, substantially the Transferred Assets. 
NOW, THEREFORE, HRB Bank, for good and valuable consideration, receipt of which is hereby acknowledged, does hereby grant, bargain, sell, assign, set over, convey and transfer to Republic all of its right, title and interest in and to the Transferred Assets.
HRB Bank does hereby covenant and agree to and with Republic that it (i) is seized of, and has the right to convey to Republic, such title to the Transferred Assets as is provided in the Agreement, (ii) will warrant and defend said title to the Transferred Assets in the manner provided in the Agreement, and (iii) shall, from time to time, at the request of Republic, execute, acknowledge and deliver to Republic any and all further instruments, documents, endorsements, assignments, information, materials and other papers as may be reasonably required to transfer the Transferred Assets to Republic and to give full force and effect to the full intent and purposes of this Bill of Sale and the provisions of the Agreement.  In the event of a conflict between any of the terms and provisions hereof and the Agreement, the Agreement shall be deemed to control.
This Bill of Sale, and the rights and obligations of the parties hereunder, shall be governed by and construed in accordance with the laws of the Commonwealth of Kentucky and applicable federal laws and regulations.
IN WITNESS WHEREOF, HRB Bank has caused this Bill of Sale to be duly executed as of the date first above written.
H&R BLOCK BANK

By:                    
Name:    Greg M. Quarles
Title:    President and Chief Executive Officer

Exhibit C

    
Exhibit D
ASSIGNMENT AND ASSUMPTION OF LOANS AGREEMENT
This ASSIGNMENT AND ASSUMPTION OF LOANS AGREEMENT is dated this _____ day of _______________, 2013, by and between H&R Block Bank, a national banking association (“HRB Bank”), and Republic Bank & Trust Company, a national banking association (“Republic”).  Capitalized terms not otherwise defined herein have the same meaning as specified in the Agreement (as defined below)
W I T N E S S E T H:
WHEREAS, HRB Bank and Republic entered into an Purchase and Assumption Agreement, dated as of July 11, 2013 (the “Agreement”), pursuant to which Republic has agreed to purchase, and HRB Bank has agreed to sell, the Transferred Assets.
NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby acknowledged by HRB Bank and Republic, HRB Bank hereby assigns, transfers and sets over to Republic all of HRB Bank's rights and interest in and to, and Republic does hereby assume the Transferred Loans and Overdrafts, as further specified in the Agreement.
This Assignment and Assumption of Loans Agreement shall be binding upon and shall enure to the benefit of HRB Bank, Republic and each of their respective successors and assigns, and shall be subject to the terms and conditions of the Agreement.  In the event of a conflict between any of the terms and provisions hereof and the Agreement, the Agreement shall be deemed to control.
This Assignment and Assumption of Loans Agreement, and the rights and obligations of the parties hereunder, shall be governed by and construed in accordance with the laws of the Commonwealth of Kentucky and applicable federal laws and regulations.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and Assumption of Loans Agreement to be executed as of the date first above written
REPUBLIC BANK & TRUST COMPANY

By:                    
Name:    Steven E. Trager
Title:    Chairman and Chief Executive Officer

H&R BLOCK BANK

By:                    
Name:    Greg M. Quarles
Title:    President and Chief Executive Officer

Exhibit D

    Exhibit E
ASSIGNMENT, TRANSFER AND APPOINTMENT OF SUCCESSOR
CUSTODIAN FOR CUSTODIAL ACCOUNTS

This ASSIGNMENT, TRANSFER AND APPOINTMENT OF SUCCESSOR CUSTODIAN FOR CUSTODIAL ACCOUNTS is dated this _____ day of _______________, 2013, by and between H&R Block Bank, a national banking association (“HRB Bank”), and Republic Bank & Trust Company, a national banking association (“Republic”).  Capitalized terms not otherwise defined herein have the same meaning as specified in the Agreement (as defined below)
W I T N E S S E T H:
WHEREAS, HRB Bank and Republic entered into an Purchase and Assumption Agreement, dated as of July 11, 2013 (the “Agreement”), pursuant to which Republic has agreed to purchase, and HRB Bank has agreed to sell, the Transferred Assets.
NOW, THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged by HRB Bank and Republic, HRB Bank and Republic hereby take the following actions:
		
	(a)
	HRB Bank hereby resigns as custodian with respect to each Custodial Account as to which HRB Bank is a custodian and hereby designates and appoints Republic as successor custodian under such Custodial Account; and

		
	(b)
	Republic hereby accepts such appointment and assumes and agrees to perform the obligations required to be performed by it as custodian with respect to each such Custodial Account, as further specified in the Agreement.

This Assignment, Transfer and Appointment of Successor Custodian for Custodial Accounts shall be binding upon and shall inure to the benefit of HRB Bank, Republic and each of their respective successors and assigns, and shall be subject to the terms and conditions of the Agreement.  In the event of a conflict between any of the terms and provisions hereof and the Agreement, the Agreement shall be deemed to control.
This Assignment, Transfer and Appointment of Successor Custodian for Custodial Accounts, and the rights and obligations of the parties hereunder, shall be governed by and construed in accordance with the laws of the Commonwealth of Kentucky and applicable federal laws and regulations.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment, Transfer and Appointment of Successor Custodian for Custodial Accounts to be executed as of the date first above written.
REPUBLIC BANK & TRUST COMPANY

By:                    
Name:    Steven E. Trager
Title:    Chairman and Chief Executive Officer

H&R BLOCK BANK

By:                    
Name:    Greg M. Quarles
Title:    President and Chief Executive Officer

Exhibit E

Exhibit F
LIMITED POWER OF ATTORNEY
Republic Bank & Trust Company, a national banking association located in Louisville, Kentucky (“Republic”), is hereby appointed, authorized, instructed and directed to act as Attorney-in-fact on behalf and in the name of H&R Block Bank, a national banking association (“HRB Bank”), to execute, acknowledge, seal and deliver on behalf of HRB Bank, all instruments of transfer and conveyance, including deeds, assignments, satisfactions, and lien releases, appropriately completed, with all ordinary or necessary endorsements, acknowledgments, affidavits and supporting documents and other papers as may be necessary or appropriate to evidence and effect the sale and transfer of any asset of HRB Bank, including all loans and leases held by HRB Bank and the collateral or property with respect thereto to Republic, to enable Republic to bill, collect, service and administer all loans and deal with, manage and operate all other assets transferred thereby, and to give full force and effect to the provisions hereof, pursuant to that certain Purchase and Assumption Agreement, dated as of July 11, 2013, between HRB Bank and Republic.  HRB Bank hereby ratifies and confirms all actions Republic may cause to be taken on its behalf pursuant to this Limited Power of Attorney now and in the future.  A photocopy of this Limited Power of Attorney is valid as an original for all purposes.
The authority herein contained extends to any interest in the loans and assets transferred from HRB Bank to Republic and all renewals, extensions, substitutions, and replacements therefor, and all instruments evidencing same, all books and records related thereto, and all guarantees and security therefor.
This Limited Power of Attorney shall be governed by the laws of the Commonwealth of Kentucky in all respects.  Should any provision hereof be held invalid, that invalidity shall not affect the other provisions which shall remain in full force and effect.
IN WITNESS WHEREOF, H&R Block Bank has caused this Limited Power of Attorney to be duly executed as of ___________, 2013.
H&R BLOCK BANK

By:        
Name:    Greg M. Quarles
Title:    President and Chief Executive Officer

Exhibit FNEITHER THE ISSUANCE AND SALE OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, 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 SECURITIES ACT OF 1933, AS
AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION
IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING,
THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES.

 

	Principal Amount: $42,500.00	Issue Date: April 9, 2013
	Purchase Price: $42,500.00	 

 

 

CONVERTIBLE PROMISSORY NOTE

 

FOR VALUE RECEIVED,
SOUTHERN PRODUCTS, INC., a Nevada corporation (hereinafter called the “Borrower”), hereby promises to pay to
the order of ASHER ENTERPRISES, INC., a Delaware corporation, or registered assigns (the “Holder”) the sum of
$42,500.00 together with any interest as set forth herein, on January 15, 2014 (the “Maturity Date”), and to pay interest
on the unpaid principal balance hereof at the rate of eight percent (8%) (the “Interest Rate”) per annum from the date
hereof (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment
or otherwise. This Note may not be prepaid in whole or in part except as otherwise explicitly set forth herein. Any amount of principal
or interest on this Note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from
the due date thereof until the same is paid (“Default Interest”). Interest shall commence
accruing on the date that the Note is fully paid and shall be computed on the basis of a 365-day year and the actual number
of days elapsed. All payments due hereunder (to the extent not converted into common stock, $0.001 par value per share (the “Common
Stock”) in accordance with the terms hereof) shall be made in lawful money of the United States of America. All payments
shall be made at such address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the
provisions of this Note. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a business
day, the same shall instead be due on the next succeeding day which is a business day and, in the case of any interest payment
date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account
for purposes of determining the amount of interest due on such date. As used in this Note, the term “business day”
shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the city of New York, New York are authorized
or required by law or executive order to remain closed. Each capitalized term used herein, and not otherwise defined, shall have
the meaning ascribed thereto in that certain Securities Purchase Agreement dated the date hereof, pursuant to which this Note was
originally issued (the “Purchase Agreement”).

 

This Note is free from
all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other
similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.

 

The following terms shall
apply to this Note:

    	 

    	 

    

Article
I. CONVERSION RIGHTS

 

Conversion Right.
The Holder shall have the right from time to time, and at any time during the period beginning on the date which is one hundred
eighty (180) days following the date of this Note and ending on the later of: (i) the Maturity Date and (ii) the date of payment
of the Default Amount (as defined in Article III) pursuant to Section 1.6(a) or Article III, each in respect of the remaining outstanding
principal amount of this Note to convert all or any part of the outstanding and unpaid principal amount of this Note into fully
paid and non- assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock
or other securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified at the conversion price
(the “Conversion Price”) determined as provided herein (a “Conversion”); provided, however,
that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of this Note upon conversion
of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares
of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Notes or the unexercised
or unconverted portion of any other security of the Borrower subject to a limitation on conversion or exercise analogous to the
limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of this
Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder
and its affiliates of more than 4.99% of the outstanding shares of Common Stock. For purposes of the proviso to the immediately
preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended (the “Exchange Act”), and Regulations 13D-G thereunder, except as otherwise provided in clause (1)
of such proviso, provided, further, however, that the limitations on conversion may be waived by the Holder
upon, at the election of the Holder, not less than 61 days’ prior notice to the Borrower, and the provisions of the conversion
limitation shall continue to apply until such 61st day (or such later date, as determined by the Holder, as may be specified in
such notice of waiver). The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined
by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect on the date specified in
the notice of conversion, in the form attached hereto as Exhibit A (the “Notice of Conversion”), delivered to the Borrower
by the Holder in accordance with Section 1.4 below; provided that the Notice of Conversion is submitted by facsimile or e-mail
(or by other means resulting in, or reasonably expected to result in, notice) to the Borrower before 6:00 p.m., New York, New York
time on such conversion date (the “Conversion Date”). The term “Conversion Amount” means, with respect
to any conversion of this Note, the sum of (1) the principal amount of this Note to be converted in such conversion plus
(2) at the Holder’s option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided
in this Note to the Conversion Date, plus (3) at the Holder’s option, Default Interest, if any, on the amounts referred
to in the immediately preceding clauses (1) and/or (2) plus (4) at the Holder’s option, any amounts owed to the Holder
pursuant to Sections 1.3 and 1.4(g) hereof.

    	2

    	 

    

Conversion Price.

 

Calculation
of Conversion Price. The conversion price (the “Conversion Price”) shall equal the Variable
Conversion Price (as defined herein) (subject to equitable adjustments for stock splits, stock dividends or rights offerings by
the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, combinations, recapitalization,
reclassifications, extraordinary distributions and similar events). The "Variable Conversion Price" shall mean
55% multiplied by the Market Price (as defined herein) (representing a discount rate of 45%).  “Market
Price” means the average of the lowest three (3) Trading Prices (as defined below) for the Common Stock during the ten (10)
Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. “Trading Price” means, for
any security as of any date, the closing bid price on the Over-the-Counter Bulletin Board, or applicable trading market (the “OTCBB”)
as reported by a reliable reporting service (“Reporting Service”) designated by the Holder (i.e. Bloomberg) or, if
the OTCBB is not the principal trading market for such security, the closing bid price of such security on the principal securities
exchange or trading market where such security is listed or traded or, if no closing bid price of such security is available in
any of the foregoing manners, the average of the closing bid prices of any market makers for such security that are listed in the
“pink sheets” by the National Quotation Bureau, Inc. If the Trading Price cannot be calculated for such security on
such date in the manner provided above, the Trading Price shall be the fair market value as mutually determined by the Borrower
and the holders of a majority in interest of the Notes being converted for which the calculation of the Trading Price is required
in order to determine the Conversion Price of such Notes. “Trading Day” shall mean any day on which the Common Stock
is tradable for any period on the OTCBB, or on the principal securities exchange or other securities market on which the Common
Stock is then being traded.

 

Conversion Price During
Major Announcements. Notwithstanding anything contained in Section 1.2(a) to the contrary, in the event the Borrower (i) makes
a public announcement that it intends to consolidate or merge with any other corporation (other than a merger in which the Borrower
is the surviving or continuing corporation and its capital stock is unchanged) or sell or transfer all or substantially all of
the assets of the Borrower or (ii) any person, group or entity (including the Borrower) publicly announces a tender offer to purchase
50% or more of the Borrower’s Common Stock (or any other takeover scheme) (the date of the announcement referred to in clause
(i) or (ii) is hereinafter referred to as the “Announcement Date”), then the Conversion Price shall, effective upon
the Announcement Date and continuing through the Adjusted Conversion Price Termination Date (as defined below), be equal to the
lower of (x) the Conversion Price which would have been applicable for a Conversion occurring on the Announcement Date and (y)
the Conversion Price that would otherwise be in effect. From and after the Adjusted Conversion Price Termination Date, the Conversion
Price shall be determined as set forth in this Section 1.2(a). For purposes hereof, “Adjusted Conversion Price Termination
Date” shall mean, with respect to any proposed transaction or tender offer (or takeover scheme) for which a public announcement
as contemplated by this Section 1.2(b) has been made, the date upon which the Borrower (in the case of clause (i) above) or the
person, group or entity (in the case of clause (ii) above) consummates or publicly announces the termination or abandonment of
the proposed transaction or tender offer (or takeover scheme) which caused this Section 1.2(b) to become operative.

 

Authorized Shares.
The Borrower covenants that during the period the conversion right exists, the Borrower will reserve from its authorized and unissued
Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock upon the full
conversion of this Note issued pursuant to the Purchase Agreement. The Borrower is required at all times to have authorized and
reserved five times the number of shares that is actually issuable upon full conversion of the Note (based on the Conversion Price
of the Notes in effect from time to time)(the “Reserved Amount”). The Reserved Amount shall be increased from time
to time in accordance with the Borrower’s obligations pursuant to Section 4(g) of the Purchase Agreement. The Borrower represents
that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. In addition, if the Borrower shall
issue any securities or make any change to its capital structure which would change the number of shares of Common Stock into which
the Notes shall be convertible at the then current Conversion Price, the Borrower shall at the same time make proper provision
so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved, free from preemptive rights,
for conversion of the outstanding Notes. The Borrower (i) acknowledges that it has irrevocably instructed its transfer agent to
issue certificates for the Common Stock issuable upon conversion of this Note, and (ii) agrees that its issuance of this Note
shall constitute full authority to its officers and agents who are charged with the duty of executing stock certificates to execute
and issue the necessary certificates for shares of Common Stock in accordance with the terms and conditions of this Note.

    	3

    	 

    

If, at any time the Borrower
does not maintain the Reserved Amount it will be considered an Event of Default under Section 3.2 of the Note.

 

Method of Conversion.

 

Mechanics of Conversion.
Subject to Section 1.1, this Note may be converted by the Holder in whole or in part at any time from time to time after the Issue
Date, by (A) submitting to the Borrower a Notice of Conversion (by facsimile, e-mail or other reasonable means of communication
dispatched on the Conversion Date prior to 6:00 p.m., New York, New York time) and (B) subject to Section 1.4(b), surrendering
this Note at the principal office of the Borrower.

 

Surrender of Note Upon
Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance with the
terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless the entire unpaid principal
amount of this Note is so converted. The Holder and the Borrower shall maintain records showing the principal amount so converted
and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Borrower, so as
not to require physical surrender of this Note upon each such conversion. In the event of any dispute or discrepancy, such records
of the Borrower shall, prima facie, be controlling
and determinative in the absence of manifest error. Notwithstanding the foregoing, if any portion of this Note is converted as
aforesaid, the Holder may not transfer this Note unless the Holder first physically surrenders this Note to the Borrower, whereupon
the Borrower will forthwith issue and deliver upon the order of the Holder a new Note of like tenor, registered as the Holder (upon
payment by the Holder of any applicable transfer taxes) may request, representing in the aggregate the remaining unpaid principal
amount of this Note. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions
of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note represented
by this Note may be less than the amount stated on the face hereof.

 

Payment of Taxes.
The Borrower shall not be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery
of shares of Common Stock or other securities or property on conversion of this Note in a name other than that of the Holder (or
in street name), and the Borrower shall not be required to issue or deliver any such shares or other securities or property unless
and until the person or persons (other than the Holder or the custodian in whose street name such shares are to be held for the
Holder’s account) requesting the issuance thereof shall have paid to the Borrower the amount of any such tax or shall have
established to the satisfaction of the Borrower that such tax has been paid.

 

Delivery of Common Stock
Upon Conversion. Upon receipt by the Borrower from the Holder of a facsimile transmission or e-mail
(or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in this
Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates
for the Common Stock issuable upon such conversion within three (3) business days after such receipt (the “Deadline”)
(and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordance with
the terms hereof and the Purchase Agreement.

 

Obligation of Borrower
to Deliver Common Stock. Upon receipt by the Borrower of a Notice of Conversion, the Holder shall be deemed to be the holder
of record of the Common Stock issuable upon such conversion, the outstanding principal amount and the amount of accrued and unpaid
interest on this Note shall be reduced to reflect such conversion, and, unless the Borrower defaults on its obligations under this
Article I, all rights with respect to the portion of this Note being so converted shall forthwith terminate except the right to
receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion. If the Holder shall
have given a Notice of Conversion as provided herein, the Borrower’s obligation to issue and deliver the certificates for
Common Stock shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same,
any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person or any action to enforce
the same, any failure or delay in the enforcement of any other obligation of the Borrower to the holder of record, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of any obligation to the Borrower,
and irrespective of any other circumstance which might otherwise limit such obligation of the Borrower to the Holder in connection
with such conversion. The Conversion Date specified in the Notice of Conversion shall be the Conversion Date so long as the Notice
of Conversion is received by the Borrower before 6:00 p.m., New York, New York time, on such date.

    	4

    	 

    

Delivery of Common Stock
by Electronic Transfer. In lieu of delivering physical certificates representing the Common Stock issuable upon conversion,
provided the Borrower is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer (“FAST”)
program, upon request of the Holder and its compliance with the provisions contained in Section 1.1 and in this Section 1.4, the
Borrower shall use its best efforts to cause its transfer agent to electronically transmit the Common Stock issuable upon conversion
to the Holder by crediting the account of Holder’s Prime Broker with DTC through its Deposit Withdrawal Agent Commission
(“DWAC”) system.

 

Failure to Deliver Common
Stock Prior to Deadline. Without in any way limiting the Holder’s right to pursue other remedies,
including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion
of this Note is not delivered by the Deadline (other than a failure due to the circumstances described in Section 1.3 above, which
failure shall be governed by such Section) the Borrower shall pay to the Holder $2,000 per day in cash, for each day beyond the
Deadline that the Borrower fails to deliver such Common Stock. Such cash amount shall be paid to Holder by the fifth day of the
month following the month in which it has accrued or, at the option of the Holder (by written notice to the Borrower by the first
day of the month following the month in which it has accrued), shall be added to the principal amount of this Note, in which event
interest shall accrue thereon in accordance with the terms of this Note and such additional principal amount shall be convertible
into Common Stock in accordance with the terms of this Note. The Borrower agrees that the right to convert is a valuable right
to the Holder. The damages resulting from a failure, attempt to frustrate, interference with such conversion right are difficult
if not impossible to qualify. Accordingly the parties acknowledge that the liquidated damages provision contained in this Section
1.4(g) are justified.

 

Concerning the Shares.
The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred unless (i) such shares are sold
pursuant to an effective registration statement under the Act or (ii) the Borrower or its transfer agent shall have been furnished
with an opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable
transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from
such registration or (iii) such shares are sold or transferred pursuant to Rule 144 under the Act (or a successor rule) (“Rule
144”) or (iv) such shares are transferred to an “affiliate” (as defined in Rule 144) of the Borrower who agrees
to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an Accredited Investor (as defined
in the Purchase Agreement). Except as otherwise provided in the Purchase Agreement (and subject to the removal provisions set forth
below), until such time as the shares of Common Stock issuable upon conversion of this Note have been registered under the Act
or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that
can then be immediately sold, each certificate for shares of Common Stock issuable upon conversion of this Note that has not been
so included in an effective registration statement or that has not been sold pursuant to an effective registration statement or
an exemption that permits removal of the legend, shall bear a legend substantially in the following form, as appropriate:

 

“NEITHER THE ISSUANCE AND SALE
OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, 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 SECURITIES
ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE
FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING
THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT
SECURED BY THE SECURITIES.”

    	5

    	 

    

The
legend set forth above shall be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer
legend if (i) the Borrower or its transfer agent shall have received an opinion of counsel, in form, substance and scope customary
for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Common Stock may be made
without registration under the Act, which opinion shall be accepted by the Company so that the sale or transfer is effected or
(ii) in the case of the Common Stock issuable upon conversion of this Note, such security is registered for sale by the Holder
under an effective registration statement filed under the Act or otherwise may be sold pursuant to Rule 144 without any restriction
as to the number of securities as of a particular date that can then be immediately sold. In the event that the Company does not
accept the opinion of counsel provided by the Buyer with respect to the transfer of Securities pursuant to an exemption from registration,
such as Rule 144 or Regulation S, at the Deadline, it will be considered an Event of Default pursuant to Section 3.2 of the Note.

 

Effect of Certain Events.

 

Effect of Merger, Consolidation,
Etc. At the option of the Holder, the sale, conveyance or disposition of all or substantially all of the assets of the Borrower,
the effectuation by the Borrower of a transaction or series of related transactions in which more than 50% of the voting power
of the Borrower is disposed of, or the consolidation, merger or other business combination of the Borrower with or into any other
Person (as defined below) or Persons when the Borrower is not the survivor shall either: (i) be deemed to be an Event of Default
(as defined in Article III) pursuant to which the Borrower shall be required to pay to the Holder upon the consummation of and
as a condition to such transaction an amount equal to the Default Amount (as defined in Article III) or (ii) be treated pursuant
to Section 1.6(b) hereof. “Person” shall mean any individual, corporation, limited liability company, partnership,
association, trust or other entity or organization.

 

Adjustment Due to Merger,
Consolidation, Etc. If, at any time when this Note is issued and outstanding and prior to conversion of all of the Notes, there
shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of
which shares of Common Stock of the Borrower shall be changed into the same or a different number of shares of another class or
classes of stock or securities of the Borrower or another entity, or in case of any sale or conveyance of all or substantially
all of the assets of the Borrower other than in connection with a plan of complete liquidation of the Borrower, then the Holder
of this Note shall thereafter have the right to receive upon conversion of this Note, upon the basis and upon the terms and conditions
specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion, such stock, securities
or assets which the Holder would have been entitled to receive in such transaction had this Note been converted in full immediately
prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such case appropriate
provisions shall be made with respect to the rights and interests of the Holder of this Note to the end that the provisions hereof
(including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares issuable upon conversion
of the Note) shall thereafter be applicable, as nearly as may be practicable in relation to any securities or assets thereafter
deliverable upon the conversion hereof. The Borrower shall not affect any transaction described in this Section 1.6(b) unless (a)
it first gives, to the extent practicable, thirty (30) days prior written notice (but in any event at least fifteen (15) days prior
written notice) of the record date of the special meeting of shareholders to approve, or if there is no such record date, the consummation
of, such merger, consolidation, exchange of shares, recapitalization, reorganization or other similar event or sale of assets (during
which time the Holder shall be entitled to convert this Note) and (b) the resulting successor or acquiring entity (if not the Borrower)
assumes by written instrument the obligations of this Section 1.6(b). The above provisions shall similarly apply to successive
consolidations, mergers, sales, transfers or share exchanges.

 

Adjustment Due to Distribution.
If the Borrower shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock
as a dividend, stock repurchase, by way of return of capital or otherwise (including any dividend or distribution to the Borrower’s
shareholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off)) (a “Distribution”),
then the Holder of this Note shall be entitled, upon any conversion of this Note after the date of record for determining shareholders
entitled to such Distribution, to receive the amount of such assets which would have been payable to the Holder with respect to
the shares of Common Stock issuable upon such conversion had such Holder been the holder of such shares of Common Stock on the
record date for the determination of shareholders entitled to such Distribution.

    	6

    	 

    

Adjustment Due to Dilutive
Issuance. If, at any time when any Notes are issued and outstanding, the Borrower issues or sells, or in accordance with this
Section 1.6(d) hereof is deemed to have issued or sold, any shares of Common Stock for no consideration or for a consideration
per share (before deduction of reasonable expenses or commissions or underwriting discounts or allowances in connection therewith)
less than the Conversion Price in effect on the date of such issuance (or deemed issuance) of such shares of Common Stock (a “Dilutive
Issuance”), then immediately upon the Dilutive Issuance, the Conversion Price will be reduced to the amount of the consideration
per share received by the Borrower in such Dilutive Issuance.

 

The Borrower shall
be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or grants any warrants, rights or
options (not including employee stock option plans), whether or not immediately exercisable, to subscribe for or to purchase Common
Stock or other securities convertible into or exchangeable for Common Stock (“Convertible Securities”) (such warrants,
rights and options to purchase Common Stock or Convertible Securities are hereinafter referred to as “Options”) and
the price per share for which Common Stock is issuable upon the exercise of such Options is less than the Conversion Price then
in effect, then the Conversion Price shall be equal to such price per share. For purposes of the preceding sentence, the “price
per share for which Common Stock is issuable upon the exercise of such Options” is determined by dividing (i) the total amount,
if any, received or receivable by the Borrower as consideration for the issuance or granting of all such Options, plus the minimum
aggregate amount of additional consideration, if any, payable to the Borrower upon the exercise of all such Options, plus, in the
case of Convertible Securities issuable upon the exercise of such Options, the minimum aggregate amount of additional consideration
payable upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable,
by (ii) the maximum total number of shares of Common Stock issuable upon the exercise of all such Options (assuming full conversion
of Convertible Securities, if applicable). No further adjustment to the Conversion Price will be made upon the actual issuance
of such Common Stock upon the exercise of such Options or upon the conversion or exchange of Convertible Securities issuable upon
exercise of such Options.

 

Additionally, the
Borrower shall be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or sells any Convertible
Securities, whether or not immediately convertible (other than where the same are issuable upon the exercise of Options), and the
price per share for which Common Stock is issuable upon such conversion or exchange is less than the Conversion Price then in effect,
then the Conversion Price shall be equal to such price per share. For the purposes of the preceding sentence, the “price
per share for which Common Stock is issuable upon such conversion or exchange” is determined by dividing (i) the total amount,
if any, received or receivable by the Borrower as consideration for the issuance or sale of all such Convertible Securities, plus
the minimum aggregate amount of additional consideration, if any, payable to the Borrower upon the conversion or exchange thereof
at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of
Common Stock issuable upon the conversion or exchange of all such Convertible Securities. No further adjustment to the Conversion
Price will be made upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities.

 

Purchase Rights.
If, at any time when any Notes are issued and outstanding, the Borrower issues any convertible securities or rights to purchase
stock, warrants, securities or other property (the “Purchase Rights”) pro rata to the record holders of any class of
Common Stock, then the Holder of this Note will be entitled to acquire, upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights which such Holder could have acquired if such Holder had held the number of shares of Common Stock acquirable
upon complete conversion of this Note (without regard to any limitations on conversion contained herein) immediately before the
date on which a record is taken for the grant, issuance or sale of such Purchase Rights or, if no such record is taken, the date
as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.

 

Notice of Adjustments.
Upon the occurrence of each adjustment or readjustment of the Conversion Price as a result of the events described in this Section
1.6, the Borrower, at its expense, shall promptly compute such adjustment or readjustment and prepare and furnish to the Holder
a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment
is based. The Borrower shall, upon the written request at any time of the Holder, furnish to such Holder a like certificate setting
forth (i) such adjustment or readjustment, (ii) the Conversion Price at the time in effect and (iii) the number of shares of Common
Stock and the amount, if any, of other securities or property which at the time would be received upon conversion of the Note.

    	7

    	 

    

Trading Market Limitations.
Unless permitted by the applicable rules and regulations of the principal securities market on which
the Common Stock is then listed or traded, in no event shall the Borrower issue upon conversion of or otherwise pursuant to this
Note and the other Notes issued pursuant to the Purchase Agreement more than the maximum number of shares of Common Stock that
the Borrower can issue pursuant to any rule of the principal United States securities market on which the Common Stock is then
traded (the “Maximum Share Amount”), which shall be 4.99% of the total shares outstanding on the Closing Date (as defined
in the Purchase Agreement), subject to equitable adjustment from time to time for stock splits, stock dividends, combinations,
capital reorganizations and similar events relating to the Common Stock occurring after the date hereof. Once the Maximum Share
Amount has been issued, if the Borrower fails to eliminate any prohibitions under applicable law or the rules or regulations of
any stock exchange, interdealer quotation system or other self-regulatory organization with jurisdiction over the Borrower or any
of its securities on the Borrower’s ability to issue shares of Common Stock in excess of the Maximum Share Amount, in lieu
of any further right to convert this Note, this will be considered an Event of Default under Section 3.3 of the Note.

 

Status as Shareholder.
Upon submission of a Notice of Conversion by a Holder, (i) the shares covered thereby (other than the shares, if any, which cannot
be issued because their issuance would exceed such Holder’s allocated portion of the Reserved Amount or Maximum Share Amount)
shall be deemed converted into shares of Common Stock and (ii) the Holder’s rights as a Holder of such converted portion
of this Note shall cease and terminate, excepting only the right to receive certificates for such shares of Common Stock and to
any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure by the Borrower to
comply with the terms of this Note. Notwithstanding the foregoing, if a Holder has not received certificates for all shares of
Common Stock prior to the tenth (10th) business day after the expiration of the Deadline with respect to a conversion of any portion
of this Note for any reason, then (unless the Holder otherwise elects to retain its status as a holder of Common Stock by so notifying
the Borrower) the Holder shall regain the rights of a Holder of this Note with respect to such unconverted portions of this Note
and the Borrower shall, as soon as practicable, return such unconverted Note to the Holder or, if the Note has not been surrendered,
adjust its records to reflect that such portion of this Note has not been converted. In all cases, the Holder shall retain all
of its rights and remedies (including, without limitation, (i) the right to receive Conversion Default Payments pursuant to Section
1.3 to the extent required thereby for such Conversion Default and any subsequent Conversion Default and (ii) the right to have
the Conversion Price with respect to subsequent conversions determined in accordance with Section 1.3) for the Borrower’s
failure to convert this Note.

 

Prepayment. Notwithstanding
anything to the contrary contained in this Note, at any time during the period beginning on the Issue Date and ending on the date
which is thirty (30) days following the issue date, the Borrower shall have the right, exercisable on not less than three (3) Trading
Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, in
accordance with this Section 1.9. Any notice of prepayment hereunder (an “Optional Prepayment Notice”) shall be delivered
to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay
the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment
Notice. On the date fixed for prepayment (the “Optional Prepayment Date”), the Borrower shall make payment of the Optional
Prepayment Amount (as defined below) to or upon the order of the Holder as specified by the Holder in writing to the Borrower at
least one (1) business day prior to the Optional Prepayment Date. If the Borrower exercises its right to prepay the Note, the Borrower
shall make payment to the Holder of an amount in cash (the “Optional Prepayment Amount”) equal to 120%, multiplied
by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid
principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred
to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof. If the Borrower
delivers an Optional Prepayment Notice and fails to pay the Optional Prepayment Amount due to the Holder of the Note within two
(2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant
to this Section 1.9.

    	8

    	 

    

Notwithstanding anything
to the contrary contained in this Note, at any time during the period beginning on the date which is thirty-one (31) days following
the issue date and ending on the date which is sixty (60) days following the issue date, the Borrower shall have the right, exercisable
on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal
and accrued interest), in full, in accordance with this Section 1.9. Any Optional Prepayment Notice shall be delivered to the Holder
of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and
(2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice.
On the Optional Prepayment Date, the Borrower shall make payment of the Second Optional Prepayment Amount (as defined below) to
or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to the
Optional Prepayment Date. If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder
of an amount in cash (the “Second Optional Prepayment Amount”) equal to 125%, multiplied by the sum of: (w) the then
outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this
Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x)
plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers an Optional
Prepayment Notice and fails to pay the Second Optional Prepayment Amount due to the Holder of the Note within two (2) business
days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section
1.9.

 

Notwithstanding anything
to the contrary contained in this Note, at any time during the period beginning on the date which is sixty-one (61) days following
the issue date and ending on the date which is ninety (90) days following the issue date, the Borrower shall have the right, exercisable
on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal
and accrued interest), in full, in accordance with this Section 1.9. Any Optional Prepayment Notice shall be delivered to the Holder
of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and
(2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice.
On the Optional Prepayment Date, the Borrower shall make payment of the Third Optional Prepayment Amount (as defined below) to
or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to the
Optional Prepayment Date. If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder
of an amount in cash (the “Third Optional Prepayment Amount”) equal to 130%, multiplied by the sum of: (w) the then
outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this
Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x)
plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers an Optional
Prepayment Notice and fails to pay the Third Optional Prepayment Amount due to the Holder of the Note within two (2) business days
following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section
1.9.

 

Notwithstanding any to the
contrary stated elsewhere herein, at any time during the period beginning on the date that is ninety-one (91) day from the issue
date and ending one hundred twenty (120) days following the issue date, the Borrower shall have the
right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding
Note (principal and accrued interest), in full, in accordance with this Section 1.9. Any Optional Prepayment Notice shall be delivered
to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay
the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment
Notice. On the Optional Prepayment Date, the Borrower shall make payment of the Fourth Optional Prepayment Amount (as defined below)
to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to
the Optional Prepayment Date. If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder
of an amount in cash (the “Fourth Optional Prepayment Amount”) equal to 135%, multiplied by the sum of: (w) the then
outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this
Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x)
plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers an Optional
Prepayment Notice and fails to pay the Fourth Optional Prepayment Amount due to the Holder of the Note within two (2) business
days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section
1.9.

    	9

    	 

    

Notwithstanding any to the
contrary stated elsewhere herein, at any time during the period beginning on the date that is one hundred twenty-one (121) day
from the issue date and ending one hundred fifty (150) days following the issue date, the Borrower shall
have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the
outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.9. Any Optional Prepayment Notice
shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its
right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the
Optional Prepayment Notice. On the Optional Prepayment Date, the Borrower shall make payment of the Fifth Optional Prepayment Amount
(as defined below) to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business
day prior to the Optional Prepayment Date. If the Borrower exercises its right to prepay the Note, the Borrower shall make payment
to the Holder of an amount in cash (the “Fifth Optional Prepayment Amount”) equal to 140%, multiplied by the sum of:
(w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal
amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses
(w) and (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers
an Optional Prepayment Notice and fails to pay the Fifth Optional Prepayment Amount due to the Holder of the Note within two (2)
business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant
to this Section 1.9.

Notwithstanding any to the
contrary stated elsewhere herein, at any time during the period beginning on the date that is one hundred fifty-one (151) day from
the issue date and ending one hundred eighty (180) days following the issue date, the Borrower shall
have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the
outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.9. Any Optional Prepayment Notice
shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its
right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the
Optional Prepayment Notice. On the Optional Prepayment Date, the Borrower shall make payment of the Sixth Optional Prepayment Amount
(as defined below) to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business
day prior to the Optional Prepayment Date. If the Borrower exercises its right to prepay the Note, the Borrower shall make payment
to the Holder of an amount in cash (the “Sixth Optional Prepayment Amount”) equal to 145%, multiplied by the sum of:
(w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal
amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses
(w) and (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers
an Optional Prepayment Notice and fails to pay the Sixth Optional Prepayment Amount due to the Holder of the Note within two (2)
business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant
to this Section 1.9.

After the expiration of one
hundred eighty (180) following the date of the Note, the Borrower shall have no right of prepayment.

    	10

    	 

    

Article
II.  CERTAIN COVENANTS

 

Distributions on Capital
Stock. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s
written consent (a) pay, declare or set apart for such payment, any dividend or other distribution (whether in cash, property or
other securities) on shares of capital stock other than dividends on shares of Common Stock solely in the form of additional shares
of Common Stock or (b) directly or indirectly or through any subsidiary make any other payment or distribution in respect of its
capital stock except for distributions pursuant to any shareholders’ rights plan which is approved by a majority of the Borrower’s
disinterested directors.

 

Restriction on Stock Repurchases.
So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s written consent
redeem, repurchase or otherwise acquire (whether for cash or in exchange for property or other securities or otherwise) in any
one transaction or series of related transactions any shares of capital stock of the Borrower or any warrants, rights or options
to purchase or acquire any such shares.

 

Borrowings. So
long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent,
create, incur, assume guarantee, endorse, contingently agree to purchase or otherwise become liable upon the obligation of any
person, firm, partnership, joint venture or corporation, except by the endorsement of negotiable instruments for deposit or collection,
or suffer to exist any liability for borrowed money, except (a) borrowings in existence or committed on the date hereof and of
which the Borrower has informed Holder in writing prior to the date hereof, (b) indebtedness to trade creditors or financial institutions
incurred in the ordinary course of business or (c) borrowings, the proceeds of which shall be used to repay this Note.

 

Sale of Assets. So
long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent,
sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary course of business. Any consent
to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition.

 

Advances and Loans.
So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent,
lend money, give credit or make advances to any person, firm, joint venture or corporation, including, without limitation, officers,
directors, employees, subsidiaries and affiliates of the Borrower, except loans, credits or advances (a) in existence or committed
on the date hereof and which the Borrower has informed Holder in writing prior to the date hereof, (b) made in the ordinary course
of business or (c) not in excess of $100,000.

    	11

    	 

    

Article
III.  EVENTS OF DEFAULT

 

If any of the following events
of default (each, an “Event of Default”) shall occur:

 

Failure to Pay Principal
or Interest. The Borrower fails to pay the principal hereof or interest thereon when due on this
Note, whether at maturity, upon acceleration or otherwise.

 

Conversion and the Shares.
The Borrower fails to issue shares of Common Stock to the Holder (or announces or threatens in writing
that it will not honor its obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in accordance
with the terms of this Note, fails to transfer or cause its transfer agent to transfer (issue)
(electronically or in certificated form) any certificate for shares of Common Stock issued to the Holder upon conversion of or
otherwise pursuant to this Note as and when required by this Note, the Borrower directs its transfer agent not to transfer or delays,
impairs, and/or hinders its transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate
for shares of Common Stock to be issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required
by this Note, or fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent
from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for
any shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this
Note (or makes any written announcement, statement or threat that it does not intend to honor the obligations described in this
paragraph) and any such failure shall continue uncured (or any written announcement, statement or threat not to honor its obligations
shall not be rescinded in writing) for three (3) business days after the Holder shall have delivered a Notice of Conversion. It
is an obligation of the Borrower to remain current in its obligations to its transfer agent. It shall be an event of default of
this Note, if a conversion of this Note is delayed, hindered or frustrated due to a balance owed by the Borrower to its transfer
agent. If at the option of the Holder, the Holder advances any funds to the Borrower’s transfer agent in order to process
a conversion, such advanced funds shall be paid by the Borrower to the Holder within forty eight (48) hours of a demand from the
Holder.

 

Breach of Covenants.
The Borrower breaches any material covenant or other material term or condition contained in this Note and any collateral documents
including but not limited to the Purchase Agreement and such breach continues for a period of ten (10) days after written notice
thereof to the Borrower from the Holder.

 

Breach of Representations
and Warranties. Any representation or warranty of the Borrower made herein or in any agreement, statement or certificate given
in writing pursuant hereto or in connection herewith (including, without limitation, the Purchase Agreement), shall be false or
misleading in any material respect when made and the breach of which has (or with the passage of time will have) a material adverse
effect on the rights of the Holder with respect to this Note or the Purchase Agreement.

 

Receiver or Trustee.
The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors, or apply for or consent to
the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee
shall otherwise be appointed.

 

Judgments. Any money
judgment, writ or similar process shall be entered or filed against the Borrower or any subsidiary of the Borrower or any of its
property or other assets for more than $50,000, and shall remain unvacated, unbonded or unstayed for a period of twenty (20) days
unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.

 

Bankruptcy. Bankruptcy,
insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy
law or any law for the relief of debtors shall be instituted by or against the Borrower or any subsidiary of the Borrower.

 

Delisting of Common Stock.
The Borrower shall fail to maintain the listing of the Common Stock on at least one of the OTCBB or an equivalent replacement exchange,
the Nasdaq National Market, the Nasdaq SmallCap Market, the New York Stock Exchange, or the American Stock Exchange.

    	12

    	 

    

Failure to Comply with
the Exchange Act. The Borrower shall fail to comply with the reporting requirements of the Exchange Act; and/or the Borrower
shall cease to be subject to the reporting requirements of the Exchange Act.

 

Liquidation. Any dissolution,
liquidation, or winding up of Borrower or any substantial portion of its business.

 

Cessation of Operations.
Any cessation of operations by Borrower or Borrower admits it is otherwise generally unable to pay its debts as such debts
become due, provided, however, that any disclosure of the Borrower’s ability to continue as a “going concern”
shall not be an admission that the Borrower cannot pay its debts as they become due.

 

Maintenance of Assets.
The failure by Borrower to maintain any material intellectual property rights, personal, real property or other assets which are
necessary to conduct its business (whether now or in the future).

 

Financial Statement Restatement.
The restatement of any financial statements filed by the Borrower with the SEC for any date or period from two years prior to the
Issue Date of this Note and until this Note is no longer outstanding, if the result of such restatement would, by comparison to
the unrestated financial statement, have constituted a material adverse effect on the rights of the Holder with respect to this
Note or the Purchase Agreement.

 

Reverse Splits. The
Borrower effectuates a reverse split of its Common Stock without twenty (20) days prior written notice to the Holder.

 

Replacement of Transfer
Agent. In the event that the Borrower proposes to replace its transfer agent, the Borrower fails to provide, prior to the effective
date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to
the Purchase Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved
Amount) signed by the successor transfer agent to Borrower and the Borrower.

    	13

    	 

    

Cross-Default. 
Notwithstanding anything to the contrary contained in this Note or the other related or companion documents, a breach or default
by the Borrower of any covenant or other term or condition contained in any of the Other Agreements, after the passage of all applicable
notice and cure or grace periods, shall, at the option of the Holder, be considered a default under this Note and the Other Agreements,
in which event the Holder shall be entitled (but in no event required) to apply all rights and remedies of the Holder under the
terms of this Note and the Other Agreements by reason of a default under said Other Agreement or hereunder. “Other Agreements”
means, collectively, all agreements and instruments between, among or by: (1) the Borrower, and, or for the benefit of, (2) the
Holder and any affiliate of the Holder, including, without limitation, promissory notes; provided, however, the term “Other
Agreements” shall not include the related or companion documents to this Note. Each of the loan transactions will be cross-defaulted
with each other loan transaction and with all other existing and future debt of Borrower to the Holder.

Upon the occurrence and
during the continuation of any Event of Default specified in Section 3.1 (solely with respect to failure to pay the principal hereof
or interest thereon when due at the Maturity Date), the Note shall become immediately due and payable and the Borrower shall pay
to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the Default Sum (as defined herein). 
UPON THE OCCURRENCE AND DURING THE CONTINUATION OF ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2, THE NOTE SHALL BECOME IMMEDIATELY
DUE AND PAYABLE AND THE BORROWER SHALL PAY TO THE HOLDER, IN FULL SATISFACTION OF ITS OBLIGATIONS HEREUNDER, AN AMOUNT EQUAL TO:
(Y) THE DEFAULT SUM (AS DEFINED HEREIN); MULTIPLIED BY (Z) TWO (2). Upon the occurrence and during the continuation of any Event
of Default specified in Sections 3.1 (solely with respect to failure to pay the principal hereof or interest thereon when due on
this Note upon a Trading Market Prepayment Event pursuant to Section 1.7 or upon acceleration), 3.3, 3.4, 3.6, 3.8, 3.9, 3.11,
3.12, 3.13, 3.14, and/or 3. 15 exercisable through the delivery of written notice to the Borrower by such Holders (the “Default
Notice”), and upon the occurrence of an Event of Default specified the remaining sections of Articles III (other than failure
to pay the principal hereof or interest thereon at the Maturity Date specified in Section 3,1 hereof), the Note shall become immediately
due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to
the greater of (i) 150% times the sum of (w) the then outstanding principal amount of this Note plus (x) accrued
and unpaid interest on the unpaid principal amount of this Note to the date of payment (the “Mandatory Prepayment Date”)
plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and/or (x) plus (z) any amounts owed
to the Holder pursuant to Sections 1.3 and 1.4(g) hereof (the then outstanding principal amount of this Note to the date of payment
plus the amounts referred to in clauses (x), (y) and (z) shall collectively be known as the “Default Sum”) or
(ii) the “parity value” of the Default Sum to be prepaid, where parity value means (a) the highest number of shares
of Common Stock issuable upon conversion of or otherwise pursuant to such Default Sum in accordance with Article I, treating the
Trading Day immediately preceding the Mandatory Prepayment Date as the “Conversion Date” for purposes of determining
the lowest applicable Conversion Price, unless the Default Event arises as a result of a breach in respect of a specific Conversion
Date in which case such Conversion Date shall be the Conversion Date), multiplied by (b) the highest Closing Price for the
Common Stock during the period beginning on the date of first occurrence of the Event of Default and ending one day prior to the
Mandatory Prepayment Date (the “Default Amount”) and all other amounts payable hereunder shall immediately become due
and payable, all without demand, presentment or notice, all of which hereby are expressly waived, together with all costs, including,
without limitation, legal fees and expenses, of collection, and the Holder shall be entitled to exercise all other rights and remedies
available at law or in equity. 

 

If the Borrower fails to
pay the Default Amount within five (5) business days of written notice that such amount is due and payable, then the Holder shall
have the right at any time, so long as the Borrower remains in default (and so long and to the extent that there are sufficient
authorized shares), to require the Borrower, upon written notice, to immediately issue, in lieu of the Default Amount, the number
of shares of Common Stock of the Borrower equal to the Default Amount divided by the Conversion Price then in effect.

    	14

    	 

    

 Article
IV. MISCELLANEOUS

Failure or Indulgence
Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privileges. All rights and remedies existing hereunder are cumulative to, and
not exclusive of, any rights or remedies otherwise available.

 

Notices. All notices,
demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless
otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt
requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand
delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most
recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective
(a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at
the address or number designated below (if delivered on a business day during normal business hours where such notice is to be
received), or the first business day following such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service,
fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:

 

	

 If to the Borrower, to: 
	 
	SOUTHERN PRODUCTS, INC.
	115 East Wilson Street - Unit B
	Costa Mesa, CA 92627
	Attn: EDWARD MEADOWS, Chief Executive Officer
	facsimile: 
	 
	With a copy by fax only to (which copy shall not constitute notice):
	 
	Kyleen Cane
	Cane•Clark LLP
	3273 E. Warm Springs Rd
	Las Vegas, NV 89120
	 
	If to the Holder:
	 
	ASHER ENTERPRISES, INC.
	1 Linden Pl., Suite 207
	Great Neck, NY. 11021
	Attn: Curt Kramer, President
	facsimile: 516-498-9894
	 
	With a copy by fax only to (which copy shall not constitute notice):
	 
	Naidich Wurman Birnbaum & Maday, LLP
	80 Cuttermill Road, Suite 410
	Great Neck, NY 11021
	Attn: Bernard S. Feldman, Esq.
	facsimile: 516-466-3555

    	15

    	 

    

Amendments. This Note
and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder. The term “Note”
and all reference thereto, as used throughout this instrument, shall mean this instrument (and the other Notes issued pursuant
to the Purchase Agreement) as originally executed, or if later amended or supplemented, then as so amended or supplemented.

 

Assignability. This
Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its
successors and assigns. Each transferee of this Note must be an “accredited investor” (as defined in Rule 501(a) of
the 1933 Act). Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with
a bona fide margin account or other lending arrangement.

 

Cost of Collection.
If default is made in the payment of this Note, the Borrower shall pay the Holder hereof costs of collection, including reasonable
attorneys’ fees.

 

Governing Law. This
Note shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts
of laws. Any action brought by either party against the other concerning the transactions contemplated by this Note shall be brought
only in the state courts of New York or in the federal courts located in the state and county of Nassau. The parties to this Note
hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense
based on lack of jurisdiction or venue or based upon forum non conveniens. The Borrower and Holder waive trial by jury.
The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs. In the event that
any provision of this Note or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable
statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall
be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably
waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this
Agreement or any other Transaction Document by mailing a copy thereof via registered or certified mail or overnight delivery (with
evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any other manner permitted by law.

 

Certain Amounts. Whenever
pursuant to this Note the Borrower is required to pay an amount in excess of the outstanding principal amount (or the portion thereof
required to be paid at that time) plus accrued and unpaid interest plus Default Interest on such interest, the Borrower and the
Holder agree that the actual damages to the Holder from the receipt of cash payment on this Note may be difficult to determine
and the amount to be so paid by the Borrower represents stipulated damages and not a penalty and is intended to compensate the
Holder in part for loss of the opportunity to convert this Note and to earn a return from the sale of shares of Common Stock acquired
upon conversion of this Note at a price in excess of the price paid for such shares pursuant to this Note. The Borrower and the
Holder hereby agree that such amount of stipulated damages is not plainly disproportionate to the possible loss to the Holder from
the receipt of a cash payment without the opportunity to convert this Note into shares of Common Stock.

 

Purchase Agreement.
By its acceptance of this Note, each party agrees to be bound by the applicable terms of the Purchase Agreement.

    	16

    	 

    

Notice of Corporate Events.
Except as otherwise provided below, the Holder of this Note shall have no rights as a Holder of Common Stock unless and only to
the extent that it converts this Note into Common Stock. The Borrower shall provide the Holder with prior notification of any meeting
of the Borrower’s shareholders (and copies of proxy materials and other information sent to shareholders). In the event of
any taking by the Borrower of a record of its shareholders for the purpose of determining shareholders who are entitled to receive
payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including by way of merger,
consolidation, reclassification or recapitalization) any share of any class or any other securities or property, or to receive
any other right, or for the purpose of determining shareholders who are entitled to vote in connection with any proposed sale,
lease or conveyance of all or substantially all of the assets of the Borrower or any proposed liquidation, dissolution or winding
up of the Borrower, the Borrower shall mail a notice to the Holder, at least twenty (20) days prior to the record date specified
therein (or thirty (30) days prior to the consummation of the transaction or event, whichever is earlier), of the date on which
any such record is to be taken for the purpose of such dividend, distribution, right or other event, and a brief statement regarding
the amount and character of such dividend, distribution, right or other event to the extent known at such time. The Borrower shall
make a public announcement of any event requiring notification to the Holder hereunder substantially simultaneously with the notification
to the Holder in accordance with the terms of this Section 4.9.

 

Remedies. The Borrower
acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent
and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for a breach
of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Borrower
of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity,
and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach
of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without
any bond or other security being required.

 

IN WITNESS WHEREOF, Borrower
has caused this Note to be signed in its name by its duly authorized officer this April 9, 2013.

 

	SOUTHERN PRODUCTS, INC.
	By: /s/ Edward Meadows
	Chief Executive Officer

    	17

    	 

    

EXHIBIT A

NOTICE OF
CONVERSION 

 

The undersigned hereby elects
to convert $_________________ principal amount of the Note (defined below) into that number
of shares of Common Stock to be issued pursuant to the conversion of the Note (“Common Stock”) as set forth
below, of SOUTHERN PRODUCTS, INC., a Nevada corporation (the “Borrower”) according to the conditions of the convertible
note of the Borrower dated as of April 9, 2013 (the “Note”), as of the date written below. No fee will be charged to
the Holder for any conversion, except for transfer taxes, if any.

 

Box Checked as to applicable
instructions:

 

	[ ] The Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal Agent Commission system (“DWAC Transfer”).
	 
	Name of DTC Prime Broker:   
	Account Number:  
	 
	[  ] The undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are based on the Holder’s calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto:
	 
	ASHER ENTERPRISES, INC.
	1 Linden Pl., Suite 207
	Great Neck, NY. 11021
	Attention: Certificate Delivery 
	(516) 498-9890
	 
	Date of Conversion:  ____________
	Applicable Conversion Price: $____________
	Number of Shares of Common Stock to be Issued 
	    Pursuant to Conversion of the Notes: ______________
	Amount of Principal Balance Due remaining
	    Under the Note after this conversion:______________
	 
	ASHER ENTERPRISES, INC.
	 
	By:_____________________________
	Name:Curt Kramer
	Title: President
	Date:  ______________ 
	1 Linden Pl., Suite 207
	Great Neck, NY. 11021

 

    	18

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