Subsequent Event

3 Months Ended

Mar. 31, 2020

Subsequent Events [Abstract]

Subsequent Event

Note 14: Subsequent Event

HKFS Acquisition

As previously announced, on January 6, 2020, we entered into a Stock Purchase Agreement (the “Purchase Agreement”) with Honkamp Krueger Financial Services, Inc. (“HKFS”), the selling stockholders named therein (the “Sellers”), and JRD Seller Representative, LLC, as the Sellers’ representative (the “Sellers’ Representative”). Pursuant to the terms and conditions of the Purchase Agreement, the Company agreed to acquire (the “HKFS Acquisition”) all of the issued and outstanding common stock of HKFS for a cash purchase price of $160 million, subject to customary purchase price adjustments, a post-closing adjustment for assets under administration and certain indemnity escrows as described more fully in the Purchase Agreement. HKFS is a registered investment advisor and wealth management business that partners with CPA firms in order to provide their consumer and small business clients with holistic planning and financial advisory services.

On April 7, 2020, the Company, HKFS, the Sellers, and the Sellers’ Representative entered into the First Amendment to the Stock Purchase Agreement (the “HKFS Amendment”). The parties mutually agreed to enter into the HKFS Amendment in response to current economic conditions. The HKFS Amendment amends the Purchase Agreement to, among other things, decrease the cash purchase price paid at closing for the HKFS Acquisition from $160 million to $100 million and replace the post-closing purchase price adjustment for assets under administration with two potential post-closing earn-out payments by the Company. Pursuant to the HKFS Amendment, the amount of the potential earn-out payments will be determined based on the Company’s assets under management and the achievement of certain performance goals on the first and second anniversaries of the date of closing. Assuming that these performance goals are fully achieved in each earn-out period, which would require substantial growth in the value of the Company’s assets under management through strong operational performance and market improvement, the potential maximum aggregate amount that the Company would be required to pay for each earn-out period is $30.0 million. Pursuant to the HKFS Amendment, if the asset values on the applicable measurement date fall below certain specified thresholds, the Company would not be required to make any earn-out payment to the Sellers for such period.

The HKFS Amendment also amends the Purchase Agreement to, among other things, (i) make it a condition to the Company’s obligation to close the transaction that the Company receive financing satisfactory to the Company, in its sole discretion, (ii) extend the outside date by which the closing shall have occurred prior to triggering the parties’ right to terminate the Purchase Agreement from May 15, 2020 to October 1, 2020, (iii) maintain a cash breakup fee of $0.8 million payable by the Company to HKFS if the Purchase Agreement is terminated by the Company because it has not received satisfactory financing or the outside date has passed, (iv) give the Company the right to set-off any indemnifiable losses against any payments due and payable by the Company to any Seller

pursuant to the Purchase Agreement, including the earn-out obligations, and (v) amend the assignment provisions to include that the Company shall remain liable under the Purchase Agreement if it assigns the Purchase Agreement as permitted therein.

Credit Agreement Amendment

On May 1, 2020, we entered into the Credit Agreement Amendment, which amended certain terms related to the Revolver under the Senior Secured Credit Facility. For additional information, see “Note 6—Debt.”