SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following tables set forth information known to the Company with respect to beneficial ownership of the Company’s common stock as of November 1, 2017 for (i) each current director of the Company, (ii) each of the Company’s named executive officers, (iii) each holder of 5.0% or greater of the Company’s common stock, and (iv) all of the Company’s directors and executive officers as a group. Unless otherwise indicated, the mailing address for each beneficial owner is care of Independence Bancshares, Inc., 500 East Washington St., Greenville, South Carolina 29601.

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SHAREHOLDER PROPOSALS

Independence does not currently anticipate holding an annual meeting of shareholders in 2017. However, if the merger is not completed as anticipated, Independence may hold a 2017 annual meeting of shareholders. If such an annual meeting is held, it will not likely fall within thirty (30) days of the anniversary of Independence’s 2016 annual meeting, which was held on November 16, 2016. Accordingly, under SEC rules, if Independence holds a 2017 annual meeting, shareholder proposals must be submitted to Independence’s Corporate Secretary at 500 East Washington Street, Greenville, South Carolina 29601, a reasonable time before Independence begins to print and send its proxy materials. Such proposals will be subject to the requirements of the proxy rules adopted under the Securities Exchange Act of 1934, as amended, and Independence’s bylaws.

Under Independence’s bylaws, any shareholder proposal to be made at an annual meeting, but which is not requested to be included in Independence’s proxy statement, must comply with the advance notice provisions and other requirements and be delivered to Independence’s Corporate Secretary at 500 East Washington Street, Greenville, South Carolina 29601 between 30 and 60 days prior to the annual meeting; provided, however, that if less than 31 days’ notice of the meeting is given to shareholders, the notice must be delivered not later than 10 days following the day on which notice of the meeting was mailed to shareholders.

WHERE YOU CAN FIND MORE INFORMATION

Independence files annual, quarterly and current reports, proxy statements and other information with the SEC under the Exchange Act. You may read and copy any of this information at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the Public Reference Room. In addition, Independence files such reports and other information with the SEC electronically, and the SEC maintains an internet website located at www.sec.gov containing this information. The reports and other information that Independence files with the SEC are also available at its website, www.independencenb.com.

Information included on Independence’s website and Independence's annual, quarterly and current reports, proxy statements and other information filed with the SEC under the Exchange Act is not incorporated by reference into this proxy statement.

You can obtain any reports, proxy statements or other information filed by Independence with the SEC, without charge, electronically at the SEC’s website above. In addition, Independence will provide you with copies of any reports, proxy statements or other information filed by Independence with the SEC, without charge, upon written or oral request to: Independence Bancshares, Inc., 500 East Washington Street, Greenville, South Carolina 29601, Attn: Corporate Secretary, telephone no. (864) 672-1776.

You should rely only on the information contained in this proxy statement. We have not authorized anyone to provide you with information that is different from what is contained in this proxy statement. The information contained in this proxy statement speaks only as of the date of this proxy statement unless the information specifically indicates that another date applies. You should not assume that the information contained in this proxy statement is accurate as of any date other than the date of this proxy statement.

If you are in a jurisdiction where the solicitation of proxies is unlawful, or if you are a person to whom it is unlawful to direct these types of activities, then the offer presented in this proxy statement does not extend to you.

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Annex A

AGREEMENT AND PLAN OF MERGER

By And Among

FIRST RELIANCE BANCSHARES, INC.,

FR MERGER SUBSIDIARY, INC.

and

INDEPENDENCE BANCSHARES, INC.

Dated as of

September 25, 2017

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AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER (this “ Agreement ”), dated as of September 25, 2017, is by and among First Reliance Bancshares, Inc., a South Carolina corporation (“ Parent ”), FR Merger Subsidiary, Inc. (“ Merger Sub ”) and Independence Bancshares, Inc., a South Carolina corporation (“ Independence ”). Except as otherwise set forth herein, capitalized and certain other terms used herein shall have the meanings set forth in Section 10.1 of this Agreement.

RECITALS

WHEREAS, the respective Boards of Directors of Parent, Merger Sub, and Independence have determined that it is in the best interests of their respective companies and shareholders for Parent to acquire Independence pursuant to the terms of this Agreement and have approved the merger of Merger Sub with and into Independence, with Independence being the surviving entity (the “ Merger ”), upon the terms and subject to the conditions set forth in this Agreement, whereby the issued and outstanding shares of Independence Common Stock will be converted into the right to receive the Merger Consideration from Parent and the issued and outstanding shares of Independence Series A Preferred Stock will be redeemed;

WHEREAS, the board of directors of Independence has determined to recommend that Independence’s shareholders approve this Agreement and the transactions contemplated hereby;

WHEREAS, the Merger is subject to the approvals of the shareholders of Independence, regulatory agencies, and the satisfaction of certain other conditions described in this Agreement; and

WHEREAS, Parent, Merger Sub, and Independence desire to make certain representations, warranties, covenants and agreements in connection with the Merger and also to prescribe various conditions to the Merger.

NOW, THEREFORE, in consideration of the above and the mutual warranties, representations, covenants, and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the Parties, intending to be legally bound, agree as follows:

ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER

1.1 Merger.

Subject to the terms and conditions of this Agreement, at the Effective Time, Merger Sub will merge with and into Independence pursuant to and with the effect provided in Section 33-11-106 of the South Carolina Business Corporation Act of 1988, as amended (“ SCBCA ”), and Independence shall be the Surviving Corporation resulting from the Merger and shall continue to be governed by the Laws of the State of South Carolina. The Merger shall be consummated pursuant to the terms of this Agreement, which has been approved and adopted by the respective boards of directors of Independence, Parent and Merger Sub.

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1.2 Time and Place of Closing.

The closing of the transactions contemplated hereby (the “ Closing ”) will take place at 9:00 A.M. Eastern Time on the date that the Effective Time occurs, or at such other time as the Parties, acting through their authorized officers, may mutually agree. The Closing shall be held at such location as may be mutually agreed upon by the Parties and may be effected by electronic or other transmission of signature pages, as mutually agreed upon.

1.3 Effective Time.

The Merger shall become effective on the date and time the Articles of Merger (the “ Articles of Merger ”) reflecting the Merger shall be filed and become effective with the Secretary of State of the State of South Carolina (the “ Effective Time ”). Subject to the terms and conditions hereof, unless otherwise mutually agreed upon in writing by the authorized officers of each Party, the Parties shall use their reasonable efforts to cause the Effective Time to occur within ten business days of the last of the following dates to occur (or, if Parent elects, on the first day of the first month after the last of the following dates to occur): (i) the effective date (including expiration of any applicable waiting period) of the last required Consent of any Regulatory Authority having authority over and approving or exempting the Merger, and (ii) the date on which the shareholders of Independence approve this Agreement to the extent such approval is required by applicable Law.

1.4 Restructure of Transactions.

Parent shall have the right to revise the structure of the Merger contemplated by this Agreement by merging Independence with and into Parent, provided , that no such revision to the structure of the Merger (i) shall result in any changes in the amount or type of the consideration which the holders of shares of Independence Series A Preferred Stock or Independence Common Stock or Independence Options are entitled to receive under this Agreement, (ii) would unreasonably impede or delay consummation of the Merger, or (iii) imposes any less favorable terms or conditions on Independence Bank or Independence. Parent may request such revision by giving written notice to Independence in the manner provided in Section 10.8, which notice shall be in the form of an amendment to this Agreement or in the form of a proposed amendment to this Agreement or in the form of an amended and restated agreement and plan of merger, and the addition of such other Exhibits hereto as are reasonably necessary or appropriate to effect such change. Independence will take any reasonable actions necessary to implement such change.

1.5 Bank Merger and Second Step Merger.

(a) Concurrently with or as soon as practicable after the execution and delivery of this Agreement, First Reliance Bank (“ First Reliance ”), a wholly owned subsidiary of Parent, and Independence National Bank (“ Independence Bank ”), a wholly owned subsidiary of Independence, shall enter into the Bank Agreement of Merger, in the form attached hereto as Exhibit A , with such changes thereto as the Parent or Independence may reasonably request, pursuant to which Independence Bank will merge with and into First Reliance (the “ Bank Merger ”). The Parties intend that the Bank Merger will become effective simultaneously with or immediately following the Effective Time.

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(b) On the Closing Date and as soon as reasonably practicable following the Effective Time, in accordance with the SCBCA, Parent shall cause the Surviving Corporation to be merged with and into Parent, with Parent being the surviving entity in the merger (the “ Second Step Merger ”). Parent shall continue its existence under the Laws of the State of South Carolina, and the separate corporate existence of the Surviving Corporation shall cease as of the effective time of the Second Step Merger. In furtherance of the foregoing, Parent shall cause articles of merger relating to the Second Step Merger to be filed with the South Carolina Secretary of State, and the Second Step Merger shall become effective as of the date and time specified in the articles of merger.

ARTICLE 2
TERMS OF MERGER

2.1 Articles of Incorporation.

At the Effective Time, the articles of incorporation of the Surviving Corporation shall be amended and restated in their entirety in the form of the articles of incorporation of Merger Sub as in effect immediately prior to the Effective Time, and as amended shall be the articles of incorporation of the Surviving Corporation until thereafter amended as provided therein and under the SCBCA.

2.2 Bylaws.

At the Effective Time, the bylaws of the Surviving Corporation shall be amended and restated in their entirety in the form of the bylaws of Merger Sub as in effect immediately prior to the Effective Time, and as amended shall be the bylaws of the Surviving Corporation until thereafter amended as provided therein and under the SCBCA.

2.3 Directors and Officers.

The directors of Merger Sub in office immediately prior to the Effective Time, together with such additional persons as may thereafter be elected, shall serve as the directors of the Surviving Corporation from and after the Effective Time in accordance with the Surviving Corporation’s articles of incorporation and bylaws, until the earlier of their resignation or removal or otherwise ceasing to be a director. The officers of Merger Sub in office immediately prior to the Effective Time, together with such additional persons as may thereafter be appointed, shall serve as the officers of the Surviving Corporation from and after the Effective Time in accordance with the Surviving Corporation’s bylaws, until the earlier of their resignation or removal or otherwise ceasing to be an officer.

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ARTICLE 3
MANNER OF REDEEMING AND CONVERTING SHARES

3.1 Effect on Independence Series A Preferred Stock and Independence Common Stock.

(a) Immediately prior to the Effective Time, in each case subject to Section 3.1(e), each share of par value $.01 per share preferred stock of Independence, designated as Preferred Stock, Series A (the “ Independence Series A Preferred Stock ”) that is issued and outstanding immediately prior to the Effective Time (other than shares of Independence Series A Preferred Stock held by either Party or any Subsidiary of either Party (and in each case other than shares of Independence Series A Preferred Stock held on behalf of third parties or held by any Parent Entity or Independence Entity as a result of debts previously contracted (such as a foreclosure on a loan) and shares of Independence Series A Preferred Stock that are owned by holders of Independence Series A Preferred Stock properly exercising their dissenters’ rights pursuant to Sections 33-13-101 through 33-13-310 of the SCBCA (the “ Series A Preferred Dissenter Shares ”))) shall be redeemed pursuant to the terms thereof by the payment of cash in the amount of $1,000.00, less any applicable withholding Taxes (the “ Per Series A Preferred Share Redemption Price ”).

(b) At the Effective Time, in each case subject to Sections 3.1(e), by virtue of the Merger and without any action on the part of the Parties, each share of Independence Common Stock that is issued and outstanding immediately prior to the Effective Time (other than shares of Independence Common Stock held by either Party or any Subsidiary of either Party (and in each case other than shares of Independence Common Stock held on behalf of third parties or held by any Parent Entity or Independence Entity as a result of debts previously contracted (such as a foreclosure on a loan)) and shares of Independence Common Stock that are owned by holders of Independence Common Stock properly exercising their dissenters’ rights pursuant to Sections 33-13-101 through 33-13-310 of the SCBCA (the “ Common Dissenter Shares ” and, together with the Series A Preferred Dissenter Shares, the “ Dissenter Shares ”)) shall be converted into the right to receive cash in the amount of $0.125 less any applicable withholding Taxes (the “ Per Common Share Merger Price ” and, together with the Per Series A Preferred Share Redemption Price, referred to herein collectively as the “ Merger Consideration ”).

(c) At the Effective Time, all shares of Independence Series A Preferred Stock and Independence Common Stock shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist as of the Effective Time, and, with the exception of shares of Independence Series A Preferred Stock or Independence Common Stock described in Section 3.1(e), each certificate previously representing any such shares of Independence Series A Preferred Stock or Independence Common Stock shall thereafter represent only the right to receive the Per Series A Preferred Share Redemption Price or the Per Common Share Merger Price, as applicable; provided , that any Dissenter Shares shall thereafter represent only the right to receive applicable payments as set forth in Section 3.6.

(d) If, prior to the Effective Time, the outstanding shares of Independence Series A Preferred Stock or Independence Common Stock shall have been increased, decreased, changed into or exchanged for a different number or kind of shares or securities as a result of a reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split, or other similar change in capitalization, or if a record date prior to the Effective Time has been established with respect to any such change in capitalization, then an appropriate and proportionate adjustment shall be made to the Per Series A Preferred Share Redemption Price or the Per Common Share Merger Price, as applicable.

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(e) Each share of Independence Series A Preferred Stock or Independence Common Stock issued and outstanding immediately prior to the Effective Time and owned by any of the Parties or their respective Subsidiaries (in each case other than shares of Independence Series A Preferred Stock or Independence Common Stock held on behalf of third parties or as a result of debts previously contracted) shall, by virtue of the Merger and without any action on the part of the holder thereof, cease to be outstanding, shall be cancelled and retired without payment of any consideration, and shall cease to exist (the “ Excluded Shares ”).

(f) At the Effective Time, each share of common stock of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and become one newly issued, fully paid, and non-assessable share of common stock of the Surviving Corporation with the same rights, powers, and privileges as the shares so converted and shall constitute the only outstanding shares of capital stock of the Surviving Corporation. From and after the Effective Time, all certificates representing shares of Merger Sub common stock shall be deemed for all purposes to represent the number of shares of common stock of the Surviving Corporation into which they were converted in accordance with the immediately preceding sentence.

3.2 Exchange Procedures.

(a) On the Closing Date, Parent shall make available to the exchange agent selected by Parent and reasonably acceptable to Independence (the “ Exchange Agent ”), for exchange in accordance with this Section 3.2, the aggregate Merger Consideration, which shall hereinafter be referred to as the “ Exchange Fund .” In the event the cash in the Exchange Fund shall be insufficient to fully satisfy all of the payment obligations to be made by the Exchange Agent hereunder, Parent shall promptly make available to the Exchange Agent the amounts so required to satisfy such payment obligations in full. The Exchange Agent shall deliver the Merger Consideration out of the Exchange Fund. Except as contemplated by this Section 3.2, the Exchange Fund will not be used for any other purpose.

(b) Unless different timing is agreed to by Parent and Independence, as soon as reasonably practicable after the Effective Time, but in any event no more than seven business days after the Effective Time, Parent shall cause the Exchange Agent to mail to the former shareholders of Independence Series A Preferred Stock or Independence Common Stock appropriate transmittal materials. The letter of transmittal shall provide instructions for the submission of certificates representing, immediately prior to the Effective Time, shares of Independence Series A Preferred Stock or Independence Common Stock (or an indemnity satisfactory to Parent and the Exchange Agent, if any of such certificates are lost, stolen, or destroyed) to each holder of record of shares of Independence Series A Preferred Stock or Independence Common Stock redeemed or converted into the right to receive the applicable portion of the Merger Consideration at the Effective Time. The Exchange Agent may establish such other reasonable and customary rules and procedures in connection with its duties as it may deem appropriate. Parent shall pay all charges and expenses, including those of the Exchange Agent, in connection with the distribution of the Merger Consideration as provided in Section 3.1. Former holders of Independence Series A Preferred Stock or Independence Common Stock will be responsible for all charges and expenses associated with replacing any lost, mutilated, stolen, or destroyed certificates, including any indemnity bond expenses, as described in Section 3.2(c).

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(c) After receipt of the transmittal materials from the Exchange Agent, each holder of shares of Independence Series A Preferred Stock or Independence Common Stock (other than Excluded Shares and Dissenter Shares) issued and outstanding at the Effective Time shall surrender the certificate or certificates representing such shares to the Exchange Agent, together with duly executed transmittal materials provided by the Exchange Agent, and shall promptly upon surrender thereof (or an indemnity satisfactory to Parent and the Exchange Agent, if any of such certificates are lost, stolen, or destroyed) the Exchange Agent shall deliver in exchange therefor the consideration provided in Section 3.1, without interest, pursuant to this Section 3.2. The certificate or certificates of Independence Series A Preferred Stock or Independence Common Stock so surrendered shall be duly endorsed as the Exchange Agent may reasonably require. Parent shall not be obligated to deliver the consideration to which any former holder of Independence Series A Preferred Stock or Independence Common Stock is entitled as a result of the Merger until such holder surrenders such holder’s certificate or certificates for exchange (or an indemnity satisfactory to Parent and the Exchange Agent, if any of such certificates are lost, stolen, or destroyed) as provided in this Section 3.2.

In the event of a transfer of ownership of shares of Independence Series A Preferred Stock or Independence Common Stock represented by one or more certificates that are not registered in the transfer records of Independence, the Merger Consideration payable for such shares as provided in Section 3.1 may be issued to a transferee if the certificate or certificates representing such shares are delivered to the Exchange Agent, accompanied by all documents required to evidence such transfer and by evidence reasonably satisfactory to the Exchange Agent that such transfer is proper and that any applicable stock transfer taxes have been paid.

In the event any certificate representing Independence Series A Preferred Stock or Independence Common Stock shall have been lost, mutilated, stolen, or destroyed, upon the making of an affidavit of that fact by the person claiming such certificate to be lost, mutilated, stolen, or destroyed and the posting by such person of a bond in such amount as the Exchange Agent may reasonably direct as indemnity against any claim that may be made against it with respect to such certificate, the Exchange Agent shall issue in exchange for such lost, mutilated, stolen, or destroyed certificate the Per Series A Preferred Share Redemption Price or the Per Common Share Merger Price, as applicable, as provided for in Section 3.1.

Any other provision of this Agreement notwithstanding, neither any Parent Entity, nor any Independence Entity, nor the Exchange Agent shall be liable to any holder of Independence Series A Preferred Stock or Independence Common Stock for any amounts paid or properly delivered in good faith to a public official pursuant to any applicable abandoned property, escheat, or similar Law.

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(d) Each of Parent and the Exchange Agent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of shares of Independence Series A Preferred Stock or Independence Common Stock or Independence Options such amounts, if any, as it is required to deduct and withhold with respect to the making of such payment under the Code or any provision of state, local, or foreign Tax Law or by any Taxing Authority or Governmental Authority. Parent and/or the Exchange Agent shall timely remit such deducted and withheld amounts to the appropriate Taxing Authority or Governmental Authority. Parent shall be fully responsible for, and shall pay, any penalty or interest arising from failure timely to remit such amounts. To the extent that any amounts are so withheld by Parent, the Surviving Corporation, or the Exchange Agent, as the case may be, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the shares of Independence Series A Preferred Stock or Independence Common Stock, as applicable in respect of which such deduction and withholding was made by Parent, the Surviving Corporation, or the Exchange Agent, as the case may be.

(e) Any portion of the Merger Consideration and cash delivered to the Exchange Agent by Parent pursuant to Section 3.2(a) that remains unclaimed by the holder of shares of Independence Series A Preferred Stock or Independence Common Stock for six months after the Effective Time (as well as any proceeds from any investment thereof) shall be delivered by the Exchange Agent to Parent. Any holder of shares of Independence Series A Preferred Stock or Independence Common Stock who has not theretofore complied with Section 3.2(b) shall thereafter look only to Parent for the consideration deliverable in respect of each share of Independence Series A Preferred Stock or Independence Common Stock such holder holds as determined pursuant to this Agreement without any interest thereon. If outstanding certificates for shares of Independence Series A Preferred Stock or Independence Common Stock are not surrendered or the payment for them is not claimed prior to the date on which such cash would otherwise escheat to or become the property of any Governmental Authority, the unclaimed items shall, to the extent permitted by abandoned property and any other applicable law, become the property of Parent (and to the extent not in its possession shall be delivered to it), free and clear of all claims or interest of any person previously entitled to such property. Neither the Exchange Agent nor any party to this Agreement shall be liable to any holder of stock represented by any certificate for any consideration paid to a Governmental Authority pursuant to applicable abandoned property, escheat or similar laws. Parent and the Exchange Agent shall be entitled to rely upon the stock transfer books of Independence to establish the identity of those persons entitled to receive the consideration specified in this Agreement, which books shall be conclusive with respect thereto. In the event of a dispute with respect to ownership of stock represented by any certificate or certificates, Parent and the Exchange Agent shall be entitled to deposit any consideration represented thereby in escrow with an independent third party and thereafter be relieved with respect to any claims thereto.

(f) Adoption of this Agreement by the shareholders of Independence shall constitute ratification of the appointment of the Exchange Agent.

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3.3 Effect on Parent Stock.

At and after the Effective Time, each share of Parent Stock issued and outstanding immediately prior to the Effective Time shall remain an issued and outstanding share of Parent Stock and shall not be affected by the Merger.

3.4 Independence Options.

(a) Prior to the Effective Time, Independence shall endeavor to have the holders of all Rights with respect to stock options granted by Independence pursuant to the Independence 2005 Stock Incentive Plan or the Independence 2013 Equity Incentive Plan (the “Independence Options” ) surrender their rights under the Independence Options in consideration of a cash payment of $0.01 per share of Independence Common Stock underlying the Independence Options.

(b) At the Effective Time, any outstanding options granted pursuant to the Independence 2013 Equity Incentive Plan (the “ 2013 Plan ”) shall be cancelled pursuant to Section 10(d) of the 2013 Plan. At the Effective Time, each share of Independence Common Stock reserved for issuance upon the exercise of any outstanding option granted pursuant to the Independence 2005 Stock Incentive Plan (the “ 2005 Plan ”) shall be converted into the right to receive, upon exercise of such option, $0.125 in cash. For the avoidance of doubt, no Independence Option shall be converted into an option to acquire any security of Parent.

(c) Independence’s board of directors and its compensation committee shall not make any grants of Independence Options following the execution of this Agreement.

(d) Independence’s board of directors or its compensation committee shall make any adjustments or amendments to or make such determinations with respect to the Independence Options necessary to effect the foregoing provisions of this Section 3.4.

3.5 Rights of Former Independence Shareholders.

At the Effective Time, the stock transfer books of Independence shall be closed as to holders of Independence Series A Preferred Stock and Independence Common Stock and no transfer of Independence Series A Preferred Stock or Independence Common Stock by any holder of such shares shall thereafter be made or recognized. Until surrendered for exchange in accordance with the provisions of Section 3.2, each certificate theretofore representing shares of Independence Series A Preferred Stock or Independence Common Stock (other than certificates representing Excluded Shares and Dissenter Shares), shall from and after the Effective Time represent for all purposes only the right to receive the Per Series A Preferred Share Redemption Price or the Per Common Share Merger Price, as applicable, without interest, as provided in Article 3.

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3.6 Dissenting Shareholders.

Any holder of shares of Independence Series A Preferred Stock or Independence Common Stock who perfects such holder’s dissenters’ rights in accordance with and as contemplated by Sections 33-13-101 through 33-13-310 of the SCBCA shall be entitled to receive from the Surviving Corporation, in lieu of the Per Series A Preferred Share Redemption Price or the Per Common Share Merger Price, as applicable, the value of such shares as to which dissenters’ rights have been perfected in cash as determined pursuant to such provisions of law; provided , that no such payment shall be made to any dissenting shareholder unless and until such dissenting shareholder has complied with all applicable provisions of such law, and surrendered to Independence or Parent the certificate or certificates representing the shares for which payment is being made. In the event that, after the Effective Time, a dissenting shareholder of Independence fails to perfect, or effectively withdraws or loses such holder’s right to appraisal of and payment for such holder’s Dissenter Shares, Parent or the Surviving Corporation shall deliver to such holder of shares of Independence Series A Preferred Stock or Independence Common Stock the Per Series A Preferred Share Redemption Price or the Per Common Share Merger Price, as applicable (without interest) in respect of such shares upon surrender by such holder of the certificate or certificates representing such shares of Independence Series A Preferred Stock or Independence Common Stock held by such holder.

ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF INDEPENDENCE

Independence represents and warrants to Parent, except as set forth on the Independence Disclosure Memorandum with respect to each such Section below, as follows:

4.1 Organization, Standing, and Power.

Independence is a corporation duly organized, validly existing, and in good standing under the Laws of the State of South Carolina and is a bank holding company within the meaning of the Bank Holding Company Act of 1956 (the “ BHCA ”), duly registered and in good standing with the Federal Reserve. Independence Bank is a national banking association duly organized, validly existing and in good standing under the laws of the United States of America. Each of Independence and Independence Bank has the corporate power and authority to carry on its business as now conducted and to own, lease, and operate its Assets. Except as described on Section 4.1 of the Independence Disclosure Memorandum, neither Independence, Independence Bank, any Independence Subsidiary, nor any subsidiary of Independence Bank exercises trust powers or acts as an investment advisor, broker-dealer, or insurance agency. Each of Independence and Independence Bank is duly qualified or licensed to transact business as a foreign corporation in good standing in the states of the United States and foreign jurisdictions where the character of its Assets or the nature or conduct of its business requires it to be so qualified or licensed, except for such jurisdictions where the failure to be so qualified or licensed is not reasonably likely to have, individually or in the aggregate, an Independence Material Adverse Effect. The minute book and other organizational documents for each of Independence and Independence Bank have been made available to Parent for its review and, except as disclosed in Section 4.1 of the Independence Disclosure Memorandum, are true and complete in all material respects as in effect as of the date of this Agreement and accurately reflect in all material respects all amendments thereto and all proceedings of the respective board of directors (including any committees of the board of directors) and shareholders thereof. Independence Bank is an “insured institution” as defined in the Federal Deposit Insurance Act and applicable regulations thereunder, and the deposits held by Independence Bank are insured up to applicable limits by the FDIC’s Deposit Insurance Fund.

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4.2 Authority of Independence; No Breach by Agreement.

(a) Independence has the corporate power and authority necessary to execute, deliver, and, other than with respect to the Merger, perform this Agreement, and with respect to the Merger, upon the approval of the Merger, including any necessary approvals referred to in Sections 8.1(b) and 8.1(c) and by Independence’s shareholders in accordance with this Agreement and the SCBCA, to perform its obligations under this Agreement and to consummate the transactions contemplated hereby. The execution, delivery, and performance of this Agreement and the consummation of the transactions contemplated herein, including the Merger, have been duly and validly authorized by all necessary corporate action in respect thereof on the part of Independence, subject to the approval of this Agreement by the holders of two-thirds of the outstanding shares of Independence Series A Preferred Stock and by the holders of two-thirds of the outstanding shares of Independence Common Stock, as separate voting groups, which are the only Independence shareholder votes required for approval of this Agreement and consummation of the Merger (the “ Requisite Independence Shareholder Vote ”). Subject to any necessary approvals referred to in Sections 8.1(b) and 8.1(c) and by such Requisite Independence Shareholder Vote, this Agreement represents a legal, valid, and binding obligation of Independence, enforceable against Independence in accordance with its terms (except in all cases as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar Laws affecting the enforcement of creditors’ rights generally and except that the availability of the equitable remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding may be brought).

(b) Neither the execution and delivery of this Agreement by Independence, nor the consummation by Independence and Independence Bank of the transactions contemplated hereby, nor compliance by Independence and Independence Bank with any of the provisions hereof, will (i) conflict with or result in a breach of any provision of Independence’s articles of incorporation or bylaws or the articles of association or incorporation or bylaws of any Independence Subsidiary or any resolution adopted by the board of directors or the shareholders of any Independence Entity, or (ii) except as disclosed in Section 4.2(b) of the Independence Disclosure Memorandum, constitute or result in a Default under, or require any Consent pursuant to, or result in the creation of any Lien on any Asset of any Independence Entity under, any Contract or Permit of any Independence Entity or, (iii) subject to receipt of the requisite Consents referred to in Sections 8.1(b) and (c), constitute or result in a Default under, or require any Consent pursuant to, any Law or Order applicable to any Independence Entity or any of their respective material Assets.

(c) Except for (i) the filing of applications and notices with, and approval of such applications and notices from, the Federal Reserve, the FDIC, the OCC, and the South Carolina Board of Financial Institutions, (ii) the filing of the Articles of Merger with the Secretary of State of the State of South Carolina, (iii) any consents, authorizations, approvals, filings or exemptions in connection with compliance with the rules and regulations of the SEC or the OTC Markets Group, (iv) notices or filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, if any, no consents or approvals of or filings or registrations with any Governmental Authority are necessary in connection with the consummation by Independence of the Merger and the other transactions contemplated by this Agreement. No consents or approvals of or filings or registrations with any Governmental Authority are necessary in connection with the execution and delivery by Independence of this Agreement.

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4.3 Capital Stock.

(a) The authorized capital stock of Independence consists of 300,000,000 shares of Independence Common Stock, of which 20,502,760 shares are issued and outstanding as of the date of this Agreement, and, assuming that all of the issued and outstanding Independence Options (with respect to which each Independence Option holder, the number of shares underlying each Independence Option and the exercise price of each Independence Option are disclosed in Section 4.3(a) of the Independence Disclosure Memorandum) had been exercised, not more than an additional 3,064,380 shares would be issued and outstanding at the Effective Time, and 10,000,000 shares of preferred stock, par value $.01 per share, of which 8,425 shares of Independence Series A Preferred Stock are issued and outstanding as of the date of this Agreement. All of the issued and outstanding shares of capital stock of Independence are duly and validly issued and outstanding and are fully paid and nonassessable. None of the outstanding shares of capital stock of Independence has been issued in violation of any preemptive rights of the current or past shareholders of Independence.

(b) Except for (i) the 3,064,380 shares of Independence Common Stock reserved for issuance pursuant to outstanding Independence Options, and (ii) the 10,531,250 shares of Independence Common Stock reserved for issuance pursuant to the conversion of the Independence Series A Preferred Stock, there are no shares of capital stock or other equity securities of Independence reserved for issuance and no outstanding Rights relating to the capital stock of Independence.

(c) Except as specifically set forth in this Section 4.3, there are no shares of Independence capital stock or other equity securities of Independence outstanding and there are no outstanding Rights with respect to any Independence securities or any right or privilege (whether pre-emptive or contractual) capable of becoming a Contract or Right for the purchase, subscription, exchange or issuance of any securities of Independence.

4.4 Independence Subsidiaries.

Independence has no Subsidiaries except Independence Bank, and Independence owns all of the equity interests in Independence Bank. No capital stock (or other equity interest) of Independence Bank is or may become required to be issued by reason of any Rights, and there are no Contracts by which Independence Bank is bound to issue (other than to another Independence Entity) additional shares of its capital stock (or other equity interests) or Rights or by which any Independence Entity is or may be bound to transfer any shares of the capital stock (or other equity interests) of Independence Bank (other than to another Independence Entity). There are no Contracts relating to the rights of any Independence Entity to vote or to dispose of any shares of the capital stock (or other equity interests) of Independence Bank. All of the shares of capital stock (or other equity interests) of Independence Bank, except as provided by Section 55 of the National Bank Act, are fully paid and nonassessable and are owned directly or indirectly by Independence free and clear of any Lien.

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4.5 Securities Offerings; Financial Statements.

(a) Each offering or sale of securities by Independence (i) was duly registered and made pursuant to an effective registration statement under the Securities Act or was made pursuant to a valid exemption from registration under the Securities Act, (ii) complied in all material respects with the applicable requirements of the Securities Laws and other applicable Laws, except for immaterial late “blue sky” filings, including disclosure and broker-dealer registration requirements, and (iii) was made pursuant to offering documents which did not, at the time such statements were made, contain any untrue statement of a material fact or omit to state a material fact required to be stated in the offering documents or necessary in order to make the statements in such documents not misleading.

(b) Each of the Independence Financial Statements (including, in each case, any related notes) was, or will be, prepared in accordance with GAAP applied on a consistent basis throughout the periods involved (except as may be indicated in the notes to such financial statements), fairly presented the consolidated financial position of Independence and Independence Bank as at the respective dates and the consolidated results of operations and cash flows for the periods indicated, except that the unaudited interim financial statements were or are subject to normal and recurring year-end adjustments which were not or are not expected to be material in amount or effect.

(c) Independence’s independent public accountants, which have expressed their opinion with respect to the Independence Financial Statements of Independence and its Subsidiaries (including the related notes), are and have been throughout the periods covered by such Financial Statements (x) a registered public accounting firm (as defined in Section 2(a)(12) of the Sarbanes-Oxley Act) (to the extent applicable during such period), and (y) “independent” with respect to Independence within the meaning of Regulation S-X. Independence’s independent public accountants have audited Independence’s year-end financial statements that are included in the Independence Financial Statements. Section 4.5(c) of the Independence Disclosure Memorandum lists all non-audit services performed by Independence’s independent public accountants for Independence or Independence Bank.

4.6 Absence of Undisclosed Liabilities.

No Independence Entity has any Liabilities required under GAAP to be set forth on a consolidated balance sheet or in the notes thereto that are reasonably likely to have, individually or in the aggregate, an Independence Material Adverse Effect, except Liabilities which are (i) accrued or reserved against in the consolidated balance sheet of Independence as of December 31, 2016, included in the Independence Financial Statements delivered prior to the date of this Agreement or reflected in the notes thereto, (ii) incurred in the ordinary course of business consistent with past practices, or (iii) incurred in connection with the transactions contemplated by this Agreement. Section 4.6 of the Independence Disclosure Memorandum lists, and Independence has attached and delivered to Parent copies of the documentation creating or governing, all securitization transactions and “off-balance sheet arrangements” (as defined in Item 303(a)(4) of Regulation S-K of the Exchange Act) effected by Independence or its Subsidiaries other than letters of credit and unfunded loan commitments or credit lines. Except as disclosed in Section 4.6 of the Independence Disclosure Memorandum or as reflected on Independence’s balance sheet at December 31, 2016, no Independence Entity is directly or indirectly liable, by guarantee, indemnity, or otherwise, upon or with respect to, or obligated, by discount or repurchase agreement or in any other way, to provide funds in respect to, or obligated to guarantee or assume any Liability of any Person for any amount in excess of $50,000 and any amounts, whether or not in excess of $50,000 that, in the aggregate, exceed $100,000. Except (x) as reflected in Independence’s balance sheet at December 31, 2016 or liabilities described in any notes thereto (or liabilities for which neither accrual nor footnote disclosure is required pursuant to GAAP or any applicable Regulatory Authority) or (y) for liabilities incurred in the ordinary course of business since December 31, 2016 consistent with past practice or in connection with this Agreement or the transactions contemplated hereby or (z) as disclosed in Section 4.6 of the Independence Disclosure Memorandum, neither Independence nor any of its Subsidiaries has any Material Liabilities or obligations of any nature.

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4.7 Absence of Certain Changes or Events.

Except as disclosed in the Independence Financial Statements delivered prior to the date of this Agreement or as disclosed in Section 4.7 of the Independence Disclosure Memorandum, (i) there have been no events, changes, or occurrences which have had, or are reasonably likely to have, individually or in the aggregate, an Independence Material Adverse Effect, (ii) none of the Independence Entities has taken any action, or failed to take any action, prior to the date of this Agreement, which action or failure, if taken after the date of this Agreement, would represent or result in a material breach or violation of any of the covenants and agreements of Independence provided in this Agreement, and (iii) since December 31, 2016, the Independence Entities have conducted their respective businesses in the ordinary course of business consistent with past practice. Section 4.7 of the Independence Disclosure Memorandum sets forth attorneys’ fees, investment banking fees, accounting fees and other costs or fees of Independence and its Subsidiaries that, based upon reasonable inquiry, are expected to be paid or accrued through the Effective Time in connection with the Merger.

4.8 Tax Matters.

(a) All Independence Entities have timely filed with the appropriate Taxing Authorities, all Tax Returns in all jurisdictions in which Tax Returns are required to be filed, and such Tax Returns are correct and complete in all material respects. Except as disclosed in Section 4.8(a) of the Independence Disclosure Memorandum, none of the Independence Entities is the beneficiary of any extension of time within which to file any Tax Return. All Taxes of the Independence Entities (whether or not shown on any Tax Return) have been fully and timely paid. There are no Liens for any Taxes (other than a Lien for current real property or ad valorem Taxes not yet due and payable) on any of the Assets of any of the Independence Entities. No claim has ever been made by an authority in a jurisdiction where any Independence Entity does not file a Tax Return that such Independence Entity may be subject to Taxes by that jurisdiction.

(b) None of the Independence Entities has received any notice of assessment or proposed assessment in connection with any Taxes, and there are no threatened or pending disputes, claims, audits, or examinations regarding any Taxes of any Independence Entity or the assets of any Independence Entity. No officer or employee responsible for Tax matters of any Independence Entity expects any Taxing Authority to assess any additional Taxes for any period for which Tax Returns have been filed. No issue has been raised by a Taxing Authority in any prior examination of Independence which, by application of the same or similar principles, could be expected to result in a proposed deficiency for any subsequent taxable period. None of the Independence Entities has waived any statute of limitations in respect of any Taxes or agreed to a Tax assessment or deficiency.

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(c) Each Independence Entity has complied in all material respects with all applicable Laws relating to the withholding of Taxes and the payment thereof to appropriate authorities, including Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee or independent contractor, and Taxes required to be withheld and paid pursuant to Sections 1441 and 1442 of the Code or similar provisions under foreign Law.

(d) The unpaid Taxes of each Independence Entity (i) did not, as of the most recent fiscal month end, exceed the reserve for Tax Liability (rather than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face of the most recent balance sheet (rather than in any notes thereto) for such Independence Entity and (ii) do not exceed that reserve as adjusted for the passage of time through the Closing Date in accordance with past custom and practice of the Independence Entities in filing their Tax Returns.

(e) Except as described in Section 4.8(e) of the Independence Disclosure Memorandum, none of the Independence Entities is a party to any Tax allocation or sharing agreement and none of the Independence Entities has been a member of an affiliated group filing a consolidated federal income Tax Return (other than a group, the common parent of which is Independence) or has any Tax Liability of any Person (other than another Independence Entity) under Treasury Regulation Section 1.1502-6 or any similar provision of state, local or foreign Law, or as a transferee or successor, by contract or otherwise.

(f) During the five-year period ending on the date hereof, none of the Independence Entities was a “distributing corporation” or a “controlled corporation” as defined in, and in a transaction intended to be governed by Section 355 of the Code.

(g) Except as disclosed in Section 4.8(g) of the Independence Disclosure Memorandum, none of the Independence Entities has made any payments, is obligated to make any payments, or is a party to any Contract that could obligate it to make any payments that could be disallowed as a deduction under Section 280G or 162(m) of the Code, or which would be subject to withholding under Section 4999 of the Code. None of the Independence Entities has been or will be required to include any adjustment in taxable income for any Tax period (or portion thereof) pursuant to Section 481 of the Code or any comparable provision under state or foreign Tax Laws as a result of transactions or events occurring prior to the Closing. There is no taxable income of Independence that will be required under applicable tax law to be reported by Parent, for a taxable period beginning after the Closing Date which taxable income was realized prior to the Closing Date. Any net operating losses of the Independence Entities disclosed in Section 4.8(g) of the Independence Disclosure Memorandum are not subject to any limitation on their use under the provisions of Sections 382 or 269 of the Code or any other provisions of the Code or the Treasury Regulations dealing with the utilization of net operating losses other than any such limitations as may arise as a result of the consummation of the transactions contemplated by this Agreement.

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(h) Each of the Independence Entities is in compliance in all material respects with, and its records contain all information and documents (including properly completed IRS Forms W-9) necessary to comply with, all applicable information reporting and Tax withholding requirements under federal, state, and local Tax Laws, and such records identify with specificity all accounts subject to backup withholding under Section 3406 of the Code.

(i) No Independence Entity is subject to any private letter ruling of the IRS or comparable rulings of any Taxing Authority.

(j) No property owned by any Independence Entity is (i) property required to be treated as being owned by another Person pursuant to the provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as amended and in effect immediately prior to the enactment of the Tax Reform Act of 1986, (ii) “tax-exempt use property” within the meaning of Section 168(h)(1) of the Code, (iii) “tax-exempt bond financed property” within the meaning of Section 168(g) of the Code, (iv) “limited use property” within the meaning of Rev. Proc. 2001-28, (v) subject to Section 168(g)(1)(A) of the Code, or (vi) subject to any provision of state, local or foreign Law comparable to any of the provisions listed above.

(k) No Independence Entity has any “corporate acquisition indebtedness” within the meaning of Section 279 of the Code.

(l) Independence has disclosed on its federal income Tax Returns all positions taken therein that are reasonably believed to give rise to substantial understatement of federal income tax within the meaning of Section 6662 of the Code.

(m) No Independence Entity has participated in any reportable transaction, as defined in Treasury Regulation Section 1.6011-4(b)(1), or a transaction substantially similar to a reportable transaction.

(n) Independence has made available to Parent complete copies of (i) all federal, state, local and foreign income or franchise Tax Returns of the Independence Entities relating to the taxable periods since December 31, 2013 and (ii) any audit report issued within the last four years relating to any Taxes due from or with respect to the Independence Entities.

(o) No Independence Entity nor any other Person on its behalf has (i) filed a consent pursuant to Section 341(f) of the Code (as in effect prior to the repeal under the Jobs and Growth Tax Reconciliation Act of 2003) or agreed to have Section 341(f)(2) of the Code (as in effect prior to the repeal under the Jobs and Growth Tax Reconciliation Act of 2003) apply to any disposition of a subsection (f) asset (as such term is defined in Section 341(f)(4) of the Code (as in effect prior to the repeal under the Jobs and Growth Tax Reconciliation Act of 2003)) owned by any Independence Entities, (ii) executed or entered into a closing agreement pursuant to Section 7121 of the Code or any similar provision of Law with respect to the Independence Entities, or (iii) granted to any Person any power of attorney that is currently in force with respect to any Tax matter. No Independence Entity has, or ever had, a permanent establishment in any country other than the United States, or has engaged in a trade or business in any country other than the United States that subjected it to tax in such country.

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For purposes of this Section 4.8, any reference to Independence or any Independence Entity shall be deemed to include any Person which merged with or was liquidated into or otherwise combined with Independence or an Independence Entity.

4.9 Allowance for Possible Loan Losses; Loan and Investment Portfolios, etc.

(a) Independence’s allowance for possible loan, lease, securities, or credit losses (the “ Allowance ”) shown on the balance sheets of Independence included in the most recent Independence Financial Statements dated prior to the date of this Agreement was, and the Allowance shown on the balance sheets of Independence included in the Independence Financial Statements as of dates subsequent to the execution of this Agreement will be, as of the dates thereof, adequate (within the meaning of GAAP and applicable regulatory requirements or guidelines) to provide for all known or reasonably anticipated losses relating to or inherent in the loan, lease and securities portfolios (including accrued interest receivables, letters of credit, and commitments to make loans or extend credit), by the Independence Entities as of the dates thereof. The Independence Financial Statements fairly present the values of all loans, leases, securities, tangible and intangible assets and liabilities, and any impairments thereof on the bases set forth therein.

(b) As of the date hereof, all loans, discounts and leases (in which any Independence Entity is lessor) reflected on Independence’s Financial Statements were, and with respect to the consolidated balance sheets delivered as of the dates subsequent to the execution of this Agreement will be as of the dates thereof, (a) at the time and under the circumstances in which made, made for good, valuable and adequate consideration in the ordinary course of business and are the legal and binding obligations of the obligors thereof, (b) evidenced by genuine notes, agreements, or other evidences of indebtedness, and (c) to the extent secured, have been secured, to the Knowledge of Independence, by valid liens and security interests which have been perfected. Accurate lists of all loans, discounts and financing leases as of December 31, 2016 and on a monthly basis thereafter, and of the investment portfolios of each Independence Entity as of such date, have been and will be made available to Parent concurrently with the Independence Disclosure Memorandum. Except as specifically set forth in Section 4.9(b) of the Independence Disclosure Memorandum, neither Independence nor Independence Bank is a party to any written or oral loan agreement, note, or borrowing arrangement, including any loan guaranty, that was, as of the most recent month-end (i) delinquent by more than 30 days in the payment of principal or interest, (ii) to Independence’s Knowledge, otherwise in material default for more than 30 days, (iii) classified as “substandard,” “doubtful,” “loss,” “other assets especially mentioned” or any comparable classification by Independence or by any applicable Regulatory Authority or Reserve, (iv) an obligation of any director, executive officer or 10% shareholder of any Independence Entity who is subject to Regulation O of the Federal Reserve Board (12 C.F.R. Part 215), or any person, corporation or enterprise controlling, controlled by or under common control with any of the foregoing, or (v) in violation of any Law.

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(c) All securities held by Independence or Independence Bank, as reflected in the consolidated balance sheets of Independence included in the Independence Financial Statements, are carried in accordance with GAAP, specifically including Accounting Standards Codification Topic 320, Investments – Debt and Equity Securities. Except as disclosed in Section 4.9(c) of the Independence Disclosure Memorandum and except for pledges to secure public and trust deposits and Federal Home Loan Bank advances, to Independence’s Knowledge, none of the securities reflected in the Independence Financial Statements as of December 31, 2016, and none of the securities since acquired by Independence or Independence Bank is subject to any restriction, whether contractual or statutory, which impairs the ability of Independence or Independence Bank to freely dispose of such security at any time, other than those restrictions imposed on securities held to maturity under GAAP, pursuant to a clearing agreement or in accordance with Laws.

(d) All interest rate swaps, caps, floors, option agreements, futures and forward contracts and other similar risk management arrangements, whether entered into for Independence’s own account, or for the account of Independence Bank or its customers (all of which were disclosed in Section 4.9(d) of the Independence Disclosure Memorandum), were entered into (a) in the ordinary and usual course of business consistent with past practice and in compliance with all applicable laws, rules, regulations and regulatory policies, and (b) with counterparties believed to be financially responsible at the time; and each of them constitutes the valid and legally binding obligation of Independence or Independence Bank, enforceable in accordance with its terms (except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws of general applicability relating to or affecting creditors’ rights or by general equity principles), and is in full force and effect. Neither Independence nor Independence Bank, nor to Independence’s Knowledge, any other party thereto, is in breach of any material obligation under any such agreement or arrangement.

4.10 Assets.

(a) To Independence’s Knowledge, except as disclosed in Section 4.10 of the Independence Disclosure Memorandum or as disclosed or reserved against in the Independence Financial Statements delivered prior to the date of this Agreement, the Independence Entities have good and marketable title, free and clear of all Liens, to all of their respective Assets that they own. In addition, to Independence’s Knowledge, all tangible properties used in the businesses of the Independence Entities are in good condition, reasonable wear and tear excepted, and are usable in the ordinary course of business consistent with Independence’s past practices.

(b) All Assets which are material to Independence’s business, held under leases or subleases by any of the Independence Entities, are held under valid Contracts enforceable in accordance with their respective terms, and each such Contract is in full force and effect.

(c) The Independence Entities currently maintain insurance, including bankers’ blanket bonds, with insurers of recognized financial responsibility, similar in amounts, scope, and coverage to that maintained by other peer organizations. None of the Independence Entities has received notice from any insurance carrier that (i) any policy of insurance will be canceled or that coverage thereunder will be reduced or eliminated, (ii) premium costs with respect to such policies of insurance will be substantially increased, or (iii) similar coverage will be denied or limited or not extended or renewed with respect to any Independence Entity, any act or occurrence, or that any Asset, officer, director, employee or agent of any Independence Entity will not be covered by such insurance or bond. There are presently no claims for amounts exceeding $25,000 individually or in the aggregate pending under such policies of insurance or bonds, and no notices of claims in excess of such amounts have been given by any Independence Entity under such policies. Except as disclosed in Section 4.10(c) of the Independence Disclosure Memorandum, Independence has made no claims, and no claims are contemplated to be made, under its current policies of directors’ and officers’ errors and omissions or other insurance or its current bankers’ blanket bond; and no claims are pending, or have been made during the past three years, under any prior Independence directors’ and officers’ errors and omissions or other insurance or bankers’ blanket bond.

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(d) The Assets of the Independence Entities include all Assets required by Independence Entities to operate the business of the Independence Entities as presently conducted which, for the sake of clarity, does not include online consumer lending or mobile-based payment processing. All real and personal property which is material to the business of Independence or Independence Bank that is leased or licensed by it is held pursuant to leases or licenses which are valid and enforceable in accordance with their respective terms and such leases and licenses will not terminate or lapse prior to the Effective Time or thereafter by reason of completion of any of the transactions contemplated by this Agreement. All improved real property owned or leased by Independence or Independence Bank is in material compliance with all applicable laws, including zoning laws and the Americans with Disabilities Act of 1990.

4.11 Intellectual Property; Information Systems; and Privacy Policies.

(a) Except as disclosed in Section 4.11(a) of the Independence Disclosure Memorandum, each Independence Entity owns or has a license to use all of the Intellectual Property used by such Independence Entity in the course of its business as presently conducted, including sufficient rights in each copy possessed by each Independence Entity. Each Independence Entity is the owner of or has a license, with the right to sublicense, to any Intellectual Property sold or licensed to a third party by such Independence Entity in connection with such Independence Entity’s business operations, and such Independence Entity has the right to convey by sale or license any Intellectual Property so conveyed. To Independence’s Knowledge, no Independence Entity is in Default under any of its Intellectual Property licenses. To Independence’s Knowledge, no proceedings have been instituted, or are pending or to the Knowledge of Independence threatened, which challenge the rights of any Independence Entity with respect to Intellectual Property used, sold, or licensed by such Independence Entity in the course of its business, nor has any person claimed or alleged any rights to such Intellectual Property. To Independence’s Knowledge, the conduct of the business of the Independence Entities does not infringe any Intellectual Property of any other person. Except as disclosed in Section 4.11 of the Independence Disclosure Memorandum, no Independence Entity is obligated to pay any recurring royalties to any Person with respect to any such Intellectual Property. Independence does not have any Contracts with its directors, officers, or employees which require such officer, director, or employee to assign any interest in any Intellectual Property to an Independence Entity and to keep confidential any trade secrets, proprietary data, customer information, or other business information of an Independence Entity, and to Independence’s Knowledge, no such officer, director, or employee is party to any Contract with any Person other than an Independence Entity which requires such officer, director or employee to assign any interest in any Intellectual Property to any Person other than an Independence Entity or to keep confidential any trade secrets, proprietary data, customer information, or other business information of any Person other than an Independence Entity. To Independence’s Knowledge, no officer, director, or employee of any Independence Entity is party to any confidentiality, nonsolicitation, noncompetition, or other Contract which restricts or prohibits such officer, director, or employee from engaging in activities competitive with any Person, other than an Independence Entity.

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(b) Independence owns or has a valid right to access and use all computer systems, programs, networks, hardware, software, software engines, database, operating systems, websites, website content and links and equipment used to process, store, maintain and operate data, information and functions owned, used or provided by Independence (the “ Independence Information Systems ”). Independence has taken all steps in accordance with prevailing standards in the banking industry in the United States and the applicable regulations of the Regulatory Authorities to secure the Independence Information Systems from unauthorized access and use by any Person, and to ensure to the maximum extent reasonably and commercially practicable, the continued, uninterrupted and error-free operation of Independence Information Systems. Except as set forth in Section 4.11(b) of the Independence Disclosure Memorandum, (i) there have been no unauthorized intrusions or breaches of security with respect to Independence Information Systems; (ii) there has not been any material malfunction of Independence Information Systems that has not been promptly remedied in all respects. Independence Information Systems comply, and for the previous five years have complied, in all material respects with all applicable Laws, including the Americans with Disabilities Act.

(c) Independence’s use or handling of the confidential information of its customers and consumers (“ Confidential Customer Information ”) does not currently, and did not at any time during the five years immediately preceding the date hereof (the “past five years”), violate any Applicable Law or regulations of any Regulatory Authority. Independence has not received any notice that it is or may be in violation of any data privacy or data security Laws or any such regulations. Independence has not distributed or displayed any Confidential Customer Information in violation of any of the rules or regulations of any Regulatory Authority or in breach of any Contract to which it is a party or is bound. Currently, Independence does, and at all times during the past five years Independence has, (i) posted on its website and mailed to its customers, as and to the extent required by such Laws, rules or regulations, true and correct copies of the privacy policies governing Independence’s use and collection of Confidential Customer Information, and (ii) all of Independence’s privacy policies describe in all material respects Independence’s use, collection, display and distribution of any such Confidential Customer Information. Accurate and complete copies of the current versions of all such privacy policies, and any other privacy policies publicly disclosed by or on behalf of Independence at any time during past five years, have been provided or made available to Parent. Independence’s operation of its business is consistent and compliant with the current version of Independence’s privacy policies and, during the past five years was consistent and compliant with all such policies as in effect at any time or from time to time during those five years. Independence has taken all steps, in accordance with prevailing banking industry practices and the applicable requirements of the Regulatory Authorities, to secure its websites, services and Confidential Customer Information from unauthorized access or use by any Person and, except as otherwise disclosed in Section 4.11(c) of the Independence Disclosure Memorandum, Independence has not granted to any third party any rights to access or use any of such information, including for purposes of soliciting Independence’s customers or consumers. A copy of all internally or externally prepared reports or audits prepared since December 31, 2013 that describe or evaluate Independence’s information security procedures have been provided or made available to Parent. Except as otherwise set forth in Section 4.11(c) of the Independence Disclosure Memorandum, none of the Confidential Customer Information or Independence’s websites or services have been the target of any successful or attempted unauthorized access, denial-of-service assault or other similar attack. Except as disclosed in Section 4.11(c) of the Independence Disclosure Memorandum, Independence has not granted to any third party any rights to use any of such information including for purposes of soliciting Independence’s customers or consumers.

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(d) Without limiting the generality of the foregoing provisions of this Section 4.11, Independence maintains safeguards designed, in accordance with the requirements of the Gramm-Leach-Bliley Act, to protect and maintain the confidentiality of the non-public personally identifiable information of its customers and consumers.

4.12 Environmental Matters.

(a) Independence has delivered, or caused to be delivered or made available to Parent, true and complete copies of, all environmental site assessments, test results, analytical data, boring logs, permits for storm water, wetlands fill, or other environmental permits for construction of any building, parking lot or other improvement, and other environmental reports and studies in the possession of any Independence Entity relating to its Participation Facilities and Operating Properties. Except as disclosed in Section 4.12(a) of the Independence Disclosure Memorandum, the officers of Independence do not have actual knowledge of any material violations of Environmental Laws on properties that secure loans made by Independence or Independence Bank.

(b) Except as disclosed in Section 4.12(b) of the Independence Disclosure Memorandum, the officers of Independence do not have actual knowledge that any Independence Entity, its Participation Facilities, and its Operating Properties are not, and have not been, in compliance with Environmental Laws in all material respects.

(c) Except as disclosed in Section 4.12(c) of the Independence Disclosure Memorandum, there is no Litigation pending or environmental enforcement action, investigation, or Litigation threatened before any Governmental Authority or other forum in which any Independence Entity or any of its Operating Properties or Participation Facilities (or Independence in respect of such Operating Property or Participation Facility) has been or, with respect to threatened Litigation, may be named as a defendant (i) for alleged noncompliance (including by any predecessor) with or Liability under any Environmental Law or (ii) relating to the release, discharge, spillage, or disposal into the environment of any Hazardous Material, whether or not occurring at, on, under, adjacent to, or affecting (or potentially affecting) a site currently or formerly owned, leased, or operated by any Independence Entity or any of its Operating Properties or Participation Facilities.

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(d) During the period of (i) any Independence Entity’s ownership or operation of any of their respective current properties, (ii) any Independence Entity’s participation in the management of any Participation Facility, or (iii) any Independence Entity’s holding of a security interest in any Operating Property, except as disclosed in Section 4.12(d) of the Independence Disclosure Memorandum, the officers of Independence do not have actual knowledge of any releases, discharges, spillages, or disposals of Hazardous Material in, on, under, adjacent to, or affecting (or potentially affecting) such properties. Prior to the period of (i) any Independence Entity’s ownership or operation of any of their respective current properties, (ii) any Independence Entity’s participation in the management of any Participation Facility, or (iii) any Independence Entity’s holding of a security interest in any Operating Property, except as disclosed in Section 4.12(d) of the Independence Disclosure Memorandum, the officers of Independence do not have actual knowledge that there were any releases, discharges, spillages, or disposals of Hazardous Material in, on, under, or affecting any such property, Participation Facility or Operating Property. During and prior to the period of (i) Independence Entity’s ownership or operation of any of their respective current properties, (ii) any Independence Entity’s participation in the management of any Participation Facility, or (iii) any Independence Entity’s holding of a security interest in any Operating Property, except as disclosed in Section 4.12(d) of the Independence Disclosure Memorandum, the officers of Independence do not have actual knowledge of any violations of any Environmental Laws, including but not limited to unauthorized alterations of wetlands.

4.13 Compliance with Laws.

(a) The Parties understand and agree that nothing in this Agreement shall require or permit any Independence Entity to disclose Confidential Supervisory Information to any Parent Entity, and no disclosure, representation, or warranty shall be required to be made (or any other action taken) pursuant to this Agreement that would involve the disclosure of confidential supervisory information of a Governmental Authority.

(b) Each of the Independence Entities has in effect all Permits and has made all filings, applications, and registrations with Governmental Authorities that are required for it to own, lease, or operate its assets and to carry on its business as now conducted, and there has occurred no Default under any such Permit applicable to their respective businesses or employees conducting their respective businesses.

(c) None of the Independence Entities is in Default under any Laws or Orders applicable to its business or employees conducting its business.

(d) Since June 5, 2014, none of the Independence Entities has received any notification or communication from any Governmental Authority (A) asserting that Independence or any of its Subsidiaries is in Default under any of the Permits, Laws, or Orders which such Governmental Authority enforces, (B) threatening to revoke any Permits, or (C) requiring Independence or any of its Subsidiaries (x) to enter into or consent to the issuance of a cease and desist order, formal agreement, directive, commitment, or memorandum of understanding, or (y) to adopt any resolution of its board of directors or similar undertaking.

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(e) There (A) is no unresolved violation, criticism, or exception by any Governmental Authority with respect to any report or statement relating to any examinations or inspections of Independence or any of its Subsidiaries, (B) are no notices or correspondence received by Independence with respect to formal or informal inquiries by, or disagreements or disputes with, any Governmental Authority with respect to Independence’s or any of Independence’s Subsidiaries’ business, operations, policies, or procedures since its inception, and (C) is not any pending or, to Independence’s Knowledge, threatened, nor has any Governmental Authority indicated an intention to conduct any, investigation, or review of it or any of its Subsidiaries.

(f) None of the Independence Entities nor any of its directors, officers, employees, or Representatives acting on its behalf has offered, paid, or agreed to pay any Person, including any Government Authority, directly or indirectly, anything of value for the purpose of, or with the intent of obtaining or retaining any business in violation of applicable Laws, including (1) using any corporate funds for any unlawful contribution, gift, entertainment, or other unlawful expense relating to political activity, (2) making any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds, (3) violating any provision of the Foreign Corrupt Practices Act of 1977, as amended, or (4) making any bribe, rebate, payoff, influence payment, kickback, or other unlawful payment.