Item 1.01
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Entry into a Material Definitive Agreement.
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Merger Agreement
On August 6, 2020, Megalith Financial
Acquisition Corp., a Delaware corporation (“Megalith”), MFAC Merger Sub Inc., a Pennsylvania corporation and
(“Merger Sub”) a wholly-owned subsidiary of Megalith, BankMobile Technologies, Inc., a Pennsylvania corporation
(“BankMobile”) and Customers Bank, a Pennsylvania state chartered bank and the sole stockholder of BankMobile
(the “Bank”), entered into an Agreement and Plan of Merger (the “Merger Agreement”). The
Bank is a wholly-owned subsidiary of Customers Bancorp, Inc. (“Customers Bancorp”). Pursuant to the Merger Agreement,
at the closing of the transactions contemplated by the Merger Agreement (the “Closing”), BankMobile will merge
with and into Merger Sub (the “Merger”), with Merger Sub continuing as the surviving corporation (the “Surviving
Corporation”).
Merger Consideration
The aggregate consideration
to be paid pursuant to the Merger Agreement to the Bank will be an amount (the “Merger Consideration”) equal
to: (i) $140,000,000 minus (ii) $9,324,323 (representing a sponsor equity adjustment), plus (or minus, if negative) (iii) BankMobile’s
net working capital less a target net working capital of $10,000,000, minus (iv) the aggregate amount of any outstanding indebtedness
of BankMobile at Closing, and minus (v) the amount of any unpaid transaction expenses of BankMobile, Megalith’s transaction
expenses and other liabilities of Megalith due and owing at the Closing.
The Merger Consideration will consist
of cash and stock. The cash portion of the Merger Consideration (“Cash Consideration”) will be equal to (i)
the amount of any proceeds of the PIPE Investment (described below under “Private Placement”); plus (ii) an amount
equal to one-half (1/2) of the difference between the (A) cash and cash equivalents of Megalith, including any funds in the trust
account after giving effect to the completion of the redemption of shares of Megalith’s public stockholders (“Redemption”)
, less (B) a cash reserve to be used for the benefit of the Surviving Corporation in the Merger, in the amount of $10,000,000 (such
difference between clause (A) and (B) which resulting amount if otherwise negative shall be equal to zero, being which resulting
amount if otherwise negative shall be equal to zero, being the “Remaining Trust Account Amount”); minus (iii)
Megalith’s transaction expenses and other liabilities of Megalith due and owing at the Closing; plus (iv) the cash and cash
equivalents of BankMobile; minus (v) BankMobile’s unpaid transaction expenses; minus (vi) a cash reserve in the amount of
$5,000,000. The stock portion of the Merger Consideration consists of a number of shares
of Megalith’s Class A common stock with an aggregate value (the “Merger Consideration Share Amount”) equal
to (a) the Merger Consideration, minus (b) the Cash Consideration, with the Bank receiving a number of shares of Megalith Class
A common stock equal to the Merger Consideration Share Amount, divided by $10.38 (the “Per Share Price”).
The
Merger Consideration is subject to adjustment after the Closing based on confirmed amounts of the net working capital, the outstanding
indebtedness of BankMobile and any unpaid transaction expenses of BankMobile, as of the Closing Date. If the adjustment is a negative
adjustment in favor of Megalith, the Bank will deliver to Megalith a number of shares of Class A common stock of Megalith with
a value equal to the absolute value of the adjustment amount (with each share valued at the Per Share Price). If the adjustment
is a positive adjustment in favor of BankMobile, Megalith will issue to the Bank an additional number of shares of Class A common
Stock of Megalith with a value equal to the adjustment amount (with each share valued at the Per Share Price). The Merger Consideration
is also subject to reduction for the indemnification obligations of the Bank.
Representations and Warranties
The Merger Agreement contains customary
representations and warranties by each of Megalith, BankMobile and the Bank. Many of BankMobile’s representations and warranties
are qualified by materiality or Material Adverse Effect. “Material Adverse Effect” as used in the Merger Agreement
means with respect to any party, any fact, event, occurrence, change or effect that has had or reasonably expected to have a material
adverse effect to the business, assets, liabilities, results of operations or condition (financial or otherwise) of such party
and its subsidiaries, taken as a whole, or the ability of such party or any of its subsidiaries on a timely basis to consummate
the transactions contemplated by the Merger Agreement or the ancillary documents to which it is a party or bound or to perform
its obligations thereunder, in each case subject to certain customary exceptions. Certain of the representations are subject to
specified exceptions and qualifications contained in the Merger Agreement or in information provided pursuant to certain disclosure
schedules to the Merger Agreement.
Covenants of the Parties
Under the Merger Agreement, each party
agrees to use its commercially reasonable efforts to effect the Closing. The Merger Agreement also contains certain customary covenants
by the parties during the period between the signing of the Merger Agreement and the earlier of the Closing or the termination
of the Merger Agreement in accordance with its terms, including covenants regarding the conduct of their respective businesses,
efforts, access, confidentiality and public announcements, the Megalith proxy statement for the transaction (which includes the
adoption of a new equity incentive plan for Megalith with a number of awards thereunder equal to 10% of the issued and outstanding
shares of Megalith immediately after the Closing), notice of breaches, no insider trading, indemnification of directors and officers,
and other customary covenants. The parties also have agreed to the following covenants:
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Each party is subject to a “no-shop” obligation between signing of the Merger Agreement and Closing and will not
be allowed to solicit or discuss competing transactions with other potential parties during such time period.
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The Megalith board of directors after the Closing will consist of at least seven directors, including (i) the chief executive
officer of the Surviving Corporation after the Merger, (ii) two directors (at least one independent) designated by Megalith prior
to the Closing, (iii) one director designated by BankMobile prior to the Closing, and (iv) no fewer than three and up to five persons
mutually agreed upon by Megalith and BankMobile prior to the Closing, each of whom must qualify as an independent director.
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Within 24 hours after the execution of the Merger Agreement, the Bank shall deliver a stockholder written consent approving
the Merger and the Merger Agreement.
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BankMobile shall use its best efforts to deliver audited financial statements in accordance with PCAOB auditing standards by
a PCAOB qualified auditor for fiscal years ended December 31, 2019 and December 31, 2018 to Megalith by August 24, 2020, or as
promptly as practicable thereafter.
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During the interim period Megalith and BankMobile will negotiate in good faith the terms of the various transition agreements,
including (i) a Transition Services Agreement, (ii) a License Agreement, (iii) a Deposit Servicing Agreement, and (iv) an Interchange
Maintenance Agreement, all substantively consistent with the terms of the applicable term sheets attached as exhibits to the Merger
Agreement.
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Indemnification
Each party provides customary representations
and warranties in the Merger Agreement, some of which survive the Closing. A breach of certain of these representations and warranties
may result in indemnification obligations. The representations and warranties of BankMobile and Megalith relating to organization
and standing, authorization and binding agreement, capitalization and subsidiaries, finders and brokers and with respect to the
Bank, organization and standing, authorization and binding agreement, ownership of the shares of BankMobile and finders and brokers
(collectively, the “Fundamental Reps”) survive the Closing until the first anniversary of the Closing. Claims
based on fraud, willful misconduct or intentional misrepresentation (“Fraud Claims”) survive indefinitely. No
other representations and warranties survive the Closing.
The Bank will provide indemnification
for any breach of its Fundamental Reps and the Fundamental Reps of BankMobile and any Fraud Claims relating to BankMobile or against
the Bank. Megalith will provide indemnification for any breach of its Fundamental Reps and any Fraud Claim against Megalith.
The maximum aggregate amount of indemnification
payments to which an indemnifying party will be obligated to pay (other than with respect to Fraud Claims) is capped at an amount
equal to the 15% of the Merger Consideration. Fraud claims are capped at an amount equal to the value of the Merger Consideration
actually paid under the Merger Agreement.
Any indemnification claims against
the Bank shall first be applied against the Merger Consideration Shares then owned by the Bank unless the Bank does not have any
Merger Consideration Shares at such time, in which case it shall satisfy such indemnification claims with the payment of cash.
Indemnification is the sole remedy
for breaches of the representations, warranties covenants and other agreements in the Merger Agreement except with respect to Fraud
Claims, claims seeking injunctions, specific performance or other equitable relief, or claims under the terms of the ancillary
documents.
Conditions to Consummation of
the Merger
The Merger Agreement is subject to
customary Closing conditions unless waived, including:
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the approval of Megalith’s stockholders;
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approvals of any required governmental authorities and the expiration or termination of any anti-trust waiting periods;
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receipt of specified third-party consents;
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no law or order preventing the transactions;
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no material uncured breach by the other party;
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after giving effect to the Redemption and any PIPE investments, Megalith shall have at least $5,000,001 of net tangible assets
as required by its charter;
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Megalith shall have at least $10,000,000 of cash and cash equivalents, including funds remaining in the trust account (after
giving effect to the Redemption), and the proceeds of any PIPE investments, prior to giving effect to payment of any of MFAC’s
unpaid transaction expenses or other liabilities;
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Megalith shall have amended its certificate of incorporation to (i) change its corporate name to BM Technologies Inc. or another
mutually agreed upon name and to (ii) remove the provisions relating to being a blank-check company; and
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Megalith shall have paid an amount equal to one half (1/2) of the Remaining Trust Account Amount towards the BankMobile’s
outstanding indebtedness.
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The parties shall have entered into and delivered, among other things, the Transition Services Agreement and Registration Rights
Agreement.
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In addition, unless
waived by BankMobile, the obligations of BankMobile to consummate the Merger are subject to the satisfaction of the following Closing
conditions, in addition to customary certificates and other closing deliveries: (a) the representations and warranties of Megalith
being true and correct as of the date of the Merger Agreement and as of the Closing (subject to Material Adverse Effect); (b) Megalith
having performed in all material respects the respective obligations and complied in all material respects with their respective
covenants and agreements under the Merger Agreement required to be performed or complied with on or prior the date of the Closing;
(c) absence of any Material Adverse Effect with respect to Megalith since the date of the Merger Agreement which is continuing
and uncured; (d) Megalith having delivered to BankMobile the Merger Consideration; and (e) a portion of BankMobile’s debt
owed to the Stockholder in an amount equal to one half of the Remaining Trust Account Amount having been paid down by Megalith.
Unless waived by Megalith,
the obligations of Megalith and Merger Sub to consummate the Merger are subject to the satisfaction of the following Closing conditions,
in addition to customary certificates and other closing deliveries: (a) the representations and warranties of BankMobile and the
Stockholder being true and correct as of the date of the Merger Agreement and as of the Closing (subject to Material Adverse Effect);
(b) BankMobile having performed in all material respects the respective obligations and complied in all material respects with
its covenants and agreements under the Merger Agreement required to be performed or complied with on or prior the date of the Closing;
(c) absence of any Material Adverse Effect with respect to BankMobile as a whole since the date of the Merger Agreement which is
continuing and uncured; and (d) each Lock-Up Agreements and Non-Competition Agreement being in full force and effect as of the
Closing.
Termination
The Merger Agreement
may be terminated under certain customary and limited circumstances at any time prior to the Closing, including:
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for the other party’s uncured breach;
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if there is a government order preventing the Closing;
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By either party if the Closing does not occur by November 25, 2020 (the “Outside Date”); provided that if
Megalith seeks and receives stockholder approval for a charter amendment to extend the term it has to consummate a business combination
(an “Extension”), Megalith can extend the Outside Date by the shortest of (i) three months, (ii) the period
ending on the last day for Megalith to consummate a business combination after such Extension and (iii) such period as determined
by Megalith;
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By Megalith if there has been an event after the signing of the Merger Agreement that has had a Material Adverse Effect on
BankMobile that is continuing and uncured;
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By either party if the Megalith stockholders do not approve the Merger Agreement at the special meeting of Megalith stockholders;
and
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By Megalith if the Bank does not deliver the stockholder written consent within 24 hours after the execution and delivery of
the Merger Agreement.
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Trust Account Waiver
BankMobile and the Bank agree that
each of them and each of their affiliates will not have any right, title, interest or claim of any kind in or to any monies in
Megalith’s trust account held for its public stockholders, and agrees not to, and waives any right to, make any claim against
the trust account (including any distributions therefrom).
Ancillary Agreements
During the period between signing
of the Merger Agreement and Closing, Megalith, BankMobile and the Bank will negotiate in good faith the terms of certain agreements
through which (i) the Bank will provide certain transition and other business services to the Surviving Corporation following the
Closing and (ii) the Surviving Corporation will license to the Bank certain existing BankMobile mobile banking technology to allow
the Bank to continue to service existing customers. The expected material terms of the (i) Transition Services Agreement, (ii)
License Agreement, (iii) Deposit Servicing Agreement and (iv) Interchange Maintenance Agreement are set forth in term sheets attached
as Exhibits A, B, C and D to the Merger Agreement.
The foregoing description of the Merger Agreement does not purport
to be complete and is qualified in its entirety by reference to the full text of the Merger Agreement, which is attached to this
Current Report on Form 8-K as Exhibit 2.1 and is incorporated herein by reference.
The representations, warranties and covenants of each party set
forth in the Merger Agreement have been made only for purposes of, and were and are solely for the benefit of the parties to, the
Merger Agreement, may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential
disclosures made for the purposes of allocating contractual risk between the parties to the Merger Agreement instead of establishing
these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those
applicable to investors. Accordingly, the representations and warranties may not describe the actual state of affairs at the date
they were made or at any other time, and investors should not rely on them as statements of fact. In addition, such representations
and warranties (i) with certain limited exceptions, will not survive consummation of the Merger and (ii) were made only as of the
date of the Merger Agreement or such other date as is specified in the Merger Agreement. Moreover, information concerning the subject
matter of the representations, warranties and covenants may change after the date of the Merger Agreement, which subsequent information
may or may not be fully reflected in the parties’ public disclosures. Accordingly, the Merger Agreement is included with
this filing only to provide investors with information regarding the terms of the Merger Agreement, and not to provide investors
with any other factual information regarding Customers Bancorp, the Bank, BankMobile or Megalith, their respective affiliates or
their respective businesses. The Merger Agreement should not be read alone, but should instead be read in conjunction with the
other information regarding Customers Bancorp, the Bank, BankMobile or Megalith, their respective affiliates and their respective
businesses included in the filings Customers Bancorp and Megalith make with the Securities and Exchange Commission.
Certain Relationships
Mr. Jay Sidhu, who currently serves as Chief Executive Officer and
Chairman of the Board of Customers Bancorp and Executive Chairman of the Bank, also serves as Executive Chairman of Megalith, is
one of the managing members of Megalith’s sponsor and is a Megalith stockholder. Mr. Bhanu Choudhrie, who currently serves
as a member of the board of directors of Customers Bancorp and the Bank also serves as a director of Megalith, is one of the managing
members of Megalith’s sponsor and is a Megalith stockholder. Mr. Samvir Sidhu, the son of Jay Sidhu, currently serves as
the Bank’s Vice Chairman and Chief Operating Officer and as Customers Bancorp’s Head of Corporate Development, previously
served as the Chief Executive Officer of Megalith, currently serves as a director of Megalith and is a Megalith stockholder. Ms.
Luvleen Sidhu, the daughter of Jay Sidhu, currently serves as the Chief Executive Officer and as a director of BankMobile and is
expected to continue to serve in those roles with the Surviving Corporation. Certain of these individuals also expect to participate
in the private placement by Megalith of shares of its Class A common stock to be completed in connection with the Closing.
In light of these relationships, Customers Bancorp appointed a special
committee consisting of independent directors with their own counsel and financial advisors. The special committee reviewed
the transaction, obtained a fairness opinion in connection with the transaction, and made a unanimous recommendation to Customers
Bancorp’s board of directors for approval. Customers Bancorp’s board of directors approved the transaction by
a majority vote, with the above-mentioned directors recusing themselves from the deliberation and voting process and no director
voting against the transaction.
Related Agreements
Sponsor Share Letter
Concurrently with the execution of the Merger Agreement,
Megalith’s sponsor, MFAC Investor Holdings, LLC (“Sponsor”), will enter into a letter agreement (the
“Sponsor Share Letter”) with Megalith and BankMobile, pursuant to which Sponsor agrees to (a) forfeit (i)
all of its 6,195,778 private placement warrants unless $10 million remains in the trust account after the Redemption, in
which case none of the warrants will be forfeited and (ii) 2,932,222 of its founder shares and (b) subject an additional
300,000 of its founder shares to potential vesting and forfeiture based on a stock-price based earnout over a seven year
period from the Closing, and (c) transfer 101,703 of its founder shares to the Bank at Closing. Sponsor also acknowledged the
transfer of (i) 178,495 of its founder shares to a private placement investor, it will also transfer 1,311,501 private
placement warrants to such investor unless such transfer would trigger a warrant price adjustment under section 4.3.2 of the
warrant agreement, with such amounts subject to adjustment in accordance with the relevant investment documents.
The foregoing description of the Sponsor Share Letter does not purport
to be complete and is qualified in its entirety by reference to the full text of the Sponsor Share Letter, which is attached to
this Current Report on Form 8-K as Exhibit 10.1 and is incorporated herein by reference.
Lock-Up Agreement
Simultaneously with the Closing, the
Bank will enter into a lock-up agreement (the “Lock-Up Agreement”) providing for a lock-up period commencing
on the Closing Date and ending on the earlier of (x) 180 days from the Closing, (y) the date Megalith consummates a liquidation,
merger, share exchange or other similar transaction with an unaffiliated third party and (z) the date on which the closing sale
price of the common stock of Megalith equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations
and recapitalizations and the like) for any twenty (20) trading days within any thirty (30) trading day period commencing at least
ninety (90) days after the Closing; provided that commencing 90 days after the Closing the Bank make transfer shares in block trades
or privately negotiated transactions if the transferee agrees to be bound by the Lock-Up Agreement.
Non-Competition and Non-Solicitation
Agreement
Simultaneously with the Closing, the
Bank will enter into a non-competition and non-solicitation agreement (the “Non-Competition Agreement”), pursuant
to which it agrees not to compete with Megalith, BankMobile and their respective subsidiaries during the four-year period following
the Closing and, during such four-year restricted period, not to solicit employees or customers or clients of such entities. The
agreement also contains customary non-disparagement and confidentiality provisions.
Registration Rights Agreement
Simultaneously with the Closing, the
Bank will enter into a registration rights agreement (the “Registration Rights Agreement”) with Megalith providing
for the right to three demand registrations, piggy-back registrations and shelf registrations with respect to the Merger Consideration
Shares.
The foregoing descriptions of the Lock-Up Agreement, the Non-Competition
Agreement and the Registration Rights Agreement do not purport to be complete and are qualified in their entirety by reference
to the full text of the form of such agreements, which are attached to this Current Report on Form 8-K as Exhibits 10.2,
10.3 and 10.4 and are incorporated herein by reference.