Cash America 2015 Annual Report Download - page 32

could suffer reputational risks if the losses are related to regulatory, litigation or other matters. Each of these risks
could have a Material Adverse Effect.
The Company is unable to take certain actions because such actions could jeopardize the tax-free status of the
Enova Spin-off, and the Company may forego certain transactions in order to avoid the risk of incurring
significant tax-related liabilities.
Pursuant to the Tax Matters Agreement with Enova, the Company is prohibited from taking actions that
could reasonably be expected to jeopardize the conclusions of the private letter ruling obtained in connection with
the Enova Spin-off or the opinion of counsel received by the Company. In addition, if the Company takes any
action that causes the Enova Spin-off to be taxable, then the Company would be fully liable for any resulting taxes
and expenses and Enova would only be required to indemnify the Company under the Tax Matters Agreement to the
extent Enova’s actions were responsible for the Company incurring such taxes and expenses.
The Enova Spin-off would result in a significant U.S. federal income tax liability to the Company under
Section 355(e) of the Internal Revenue Code if the Enova Spin-off is treated as part of a plan or series of related
transactions for one or more persons to acquire a fifty percent (50%) or greater interest (measured by vote or value)
in the stock of the Company. Current law generally creates a presumption that any acquisitions of the stock of the
Company within two years before or after the Enova Spin-off are part of a plan that includes the Enova Spin-off,
although the Company may be able to rebut that presumption. As a consequence, for the two years following the
Enova Spin-off, the Company will be limited in its ability to take certain actions to the extent that taking such
actions could reasonably be expected to cause the Enova Spin-off to be treated as part of a plan for one or more
persons to acquire a fifty percent (50%) or greater interest in the stock of the Company. Open market purchases of
Company common stock by third parties without any negotiation with the Company will generally not cause the
Enova Spin-off to be treated as part of such a plan. However, actions within the two-year period that could be
presumed to be part of such a plan include:
• the acquisition of fifty percent (50%) or more of the Company’s common stock by one or more persons
within the two-year period following the Enova Spin-off;
• entering into any agreement, understanding or arrangement by the Company with respect to transactions or
events (including, without limitation, stock issuances, pursuant to the exercise of stock options or otherwise,
option grants, capital contributions or an acquisition, or a series of such transactions or events) that cause
the Enova Spin-off to be treated as part of a plan pursuant to which one or more persons acquire directly or
indirectly stock of the Company representing more than a fifty percent (50%) interest in the equity of the
Company; and
• any actions that breach a representation made by the Company to the Internal Revenue Service in
connection with obtaining the private letter ruling obtained by the Company in connection with the Enova
Spin-off or by the Company to its counsel in connection with the issuance of a tax opinion by such counsel
with respect to the Enova Spin-off.
Because of the significant liability to the Company that would result from the Enova Spin-off being treated
as a taxable transaction, the Company may be limited in the amount of capital stock that it can issue to make
acquisitions or to raise additional capital for the two years following the Enova Spin-off. In addition, the potential
liability to the Company may discourage, delay or prevent a third party from acquiring control of the Company
during this two-year period pursuant to a transaction that the Company’s shareholders might otherwise consider
favorable.
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