Item 1.01 Entry into Material Definitive Agreement
Merger Agreement
As previously announced, Megalith Financial Acquisition Corp. (“Megalith”), MFAC Merger Sub Inc. (“Merger Sub”), Customers Bancorp, Inc. ("Customers Bancorp"), Customers Bank and BankMobile Technologies, Inc., a wholly-owned subsidiary of Customers Bank (“BankMobile”) had entered into an Agreement and Plan of Merger (as amended to date, the “Merger Agreement”), which provided for the merger of BankMobile with and into Merger Sub (the “Merger”), with Merger Sub surviving the Merger as a wholly-owned subsidiary of Megalith. On January 4, 2021, the parties to the Merger consummated the transactions contemplated by the Merger Agreement (as defined below) (the “Transactions”). In connection with the Closing (as defined below) of the Merger, Megalith changed its name to BM Technologies, Inc. (“BMT”).
Item 2.01 of this Current Report discusses the consummation of the Transactions and events contemplated by the Merger Agreement which took place on January 4, 2021 (the “Closing”), and is incorporated into this Item 1.01 by reference.
Transition Services Agreement
In connection with the Closing, on January 4, 2021, Customers Bank entered into that certain Transition Services Agreement (the “Transition Services Agreement”) with BMT. Pursuant to the Transition Services Agreement, each party agrees for a period of up to twelve months from the Closing to provide certain transition services listed therein to the other party. In consideration for the services, BMT will pay Customers Bank a service fee of $12,500 per month, plus any expenses associated with the services. BMT may terminate the Transition Services Agreement without penalty with at least 30 days advance written notice if it determines there is no longer a business need for the services. Either party may terminate upon at least 30 days advance written notice for a material uncured default of the other party’s obligations, or if the other party seeks or is subject to liquidation or bankruptcy.
The foregoing description of the Transition Services Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Transition Services Agreement, a copy of which is attached as Exhibit 10.1 hereto and is incorporated herein by reference.
Software License Agreement
In connection with the Closing, on January 4, 2021, BMT entered into that certain Software License Agreement (the “License Agreement”) with Customers Bank, providing that BMT grants a non-exclusive, nontransferable, royalty-free license to use the mobile banking technology provided by BMT to Customers Bank for a period of ten years. The License Agreement may be terminated upon either party’s uncured material breach, provided that if the agreement is terminated for BMT’s uncured material breach, then BMT shall pay Customers Bank an early termination fee equal to the product of $10 million, and the number of whole months remaining in the term divided by 120. The license is subject to certain other restrictions on use and
customary conditions set forth in the License Agreement. The foregoing description of the License Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the License Agreement, a copy of which is attached as Exhibit 10.2 hereto and is incorporated herein by reference.
Deposit Servicing Agreement
In connection with the Closing, on January 4, 2021, BMT entered into that certain Deposit Processing Services Agreement (the “Deposit Servicing Agreement”) with Customers Bank, providing that Customers Bank would establish and maintain deposit accounts and other banking services in connection with customized products and services offered by BMT, and BMT would provide certain other related services in connection with the accounts. The initial term continues until December 31, 2022, which shall automatically renew for additional three year terms unless either party gives written notice of nonrenewal within 180 days prior to the expiration of the term. The Deposit Servicing Agreement may be terminated early by either party upon material breach, upon notice of an uncured objection from a regulatory authority, or by the Company upon 90 days’ written notice upon the satisfaction of certain conditions. As compensation, Customers Bank will retain any and all revenue generated from the funds held in the deposit accounts, and Customers Bank will pay BMT a monthly servicing fee equal to 150 basis points for deposit servicing and 150 basis points for net interest margin sharing, and a monthly interchange fee equal to all debit card interchange revenues on demand deposit accounts generated by BMT for Customers Bank plus the difference between Durbin Exempt and Durbin regulated interchange revenue, as determined pursuant to the Deposit Servicing Agreement.
The foregoing description of the Deposit Servicing Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Deposit Servicing Agreement, a copy of which is attached as Exhibit 10.3 hereto and is incorporated herein by reference.
Non-Competition Agreement
In connection with the Closing, on January 4, 2021, Customers Bank entered into that certain Non-Competition and Non-Solicitation Agreement (the “Non-Competition Agreement”) in favor of and for the benefit of BMT, BankMobile and each of their respective affiliates and successors (each, a “Covered Party”), providing that Customers Bank will not for a period of 4 years after the Closing directly or indirectly engage in the Business (as defined in the Non-Competition Agreement) in the Territory (as defined in the Non-Competition Agreement), except for white label digital banking services with previously identified parties and passive investments of no more than 2% of a class of equity interests of a competitor that is publicly traded. Customers Bank also agreed not to directly or indirectly hire or solicit any employees of a Covered Party.
The foregoing description of the Non-Competition Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Non-Competition Agreement, a copy of which is attached as Exhibit 10.4 hereto and is incorporated herein by reference.
Loan Agreement
In connection with the Closing, on January 4, 2021, BMT and the Surviving Subsidiary entered into a Loan Agreement (the “Loan Agreement”) with Customers Bank (the “Lender”) providing for a line of credit of up to $10 million, subject to a borrowing base requirement based on BMT’s and Surviving Subsidiary’s accounts receivables. Borrowings made under the Loan Agreement are subject to an interest rate equal to the 1-month London Interbank Offered Rate (“LIBOR”) plus 375 basis points, and are secured by the assets of BMT and Surviving Subsidiary. Borrowed funds may be repaid at any time without penalty. Concurrent with signing the Loan Agreement, BMT drew approximately $5.4 million under the Loan Agreement to refinance intercompany debt owed by BankMobile to Customers Bank immediately prior to the Closing.
The foregoing description of the Loan Agreement is qualified in its entirety by reference to the full text of the Loan Agreement, a copy of which is attached as Exhibit 10.5 hereto and is incorporated herein by reference.