Item 1.01
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Entry into a Material Definitive Agreement.
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On January 9, 2018, Meta Financial Group, Inc. (the
Company) and MetaBank, a federally chartered stock savings bank and a wholly-owned subsidiary of the Company (MetaBank), entered into an Agreement and Plan of Merger (the Merger Agreement) with Crestmark Bancorp,
Inc., a Michigan corporation (Crestmark), and Crestmark Bank, a Michigan state-chartered bank and a wholly-owned subsidiary of Crestmark (Crestmark Bank). Pursuant to the Merger Agreement, upon the terms and subject to the
conditions set forth therein, Crestmark will merge with and into the Company, with the Company as the surviving entity, and, immediately thereafter, pursuant to the terms of a separate merger agreement between MetaBank and Crestmark Bank, Crestmark
Bank will merge with and into MetaBank, with MetaBank surviving as the Companys wholly-owned subsidiary (collectively, the Merger). Subject to the terms and conditions set forth in the Merger Agreement, at the effective time of the
Merger (the Effective Time), each share of common stock of Crestmark (Crestmark Common Stock), no par value per share, issued and outstanding immediately prior to the closing will automatically be converted into the right to
receive 2.65 shares of common stock, $0.01 par value per share, of the Company (Company Common Stock). In addition, subject to the terms and conditions set forth in the Merger Agreement, immediately prior to the Effective Time,
each outstanding option to purchase Crestmark Common Stock (each, a Crestmark Option) will be cancelled and converted into the right to receive an amount in cash equal to the product of the number of shares of Crestmark Common Stock
underlying such Crestmark Option, multiplied by the excess, if any, of (a) the dollar amount equal to (x) 2.65 multiplied by (y) the average closing price per share of Company Common Stock for the ten trading day period ending five
calendar days before the closing of the Merger (the Per Share Purchase Price) over (b) the exercise price of such Crestmark Option, less any applicable withholding taxes. Any Crestmark Option with an exercise price that is greater
than or equal to the Per Share Purchase Price will be cancelled and of no further force or effect. Giving effect to the Merger, Crestmarks shareholders would own approximately 25% of the outstanding shares of Company Common Stock. The Merger
Agreement was unanimously
approved by the boards of directors of each of the Company, MetaBank, Crestmark and Crestmark Bank.
The completion of
the Merger is subject to the satisfaction or waiver of certain conditions, including, without limitation: (i) requisite approval of the shareholders of Crestmark to adopt the Merger Agreement and the other transactions contemplated thereby;
(ii) requisite approval of the shareholders of the Company to (x) adopt the Merger Agreement and the other transactions contemplated thereby and (y) approve the issuance of the shares of Company Common Stock issuable in the Merger
pursuant to the Merger Agreement ((i) and (ii) are collectively referred to as the Shareholder Approvals); (iii) third party and regulatory approvals, including regulatory approvals from the Board of Governors of the Federal Reserve
System, the Office of the Comptroller of Currency and the Office of Banking for the Michigan Department of Insurance and Financial Services; (iv) the approval to list the shares of Company Common Stock issuable in the Merger pursuant to the
Merger Agreement on the NASDAQ Global Select Market; and (v) effectiveness of the registration statement on Form
S-4
used to register the shares of Company Common Stock issuable in the Merger pursuant to
the Merger Agreement. Each of the parties obligations to complete the Merger is subject to certain other conditions, including (a) subject to the standards set forth in the Merger Agreement, the accuracy of the representations and
warranties of the other parties, (b) compliance of the other parties with their covenants in all material respects; (c) the absence of a Material Adverse Effect (as defined in the Merger Agreement) on the other party; and (d) receipt
by such party of an opinion from its counsel to the effect that the Merger will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the Code).
Furthermore, the obligation of the Company to complete the Merger is subject to the satisfaction or waiver of certain additional conditions, including,
without limitation: (i) the requirement that the adjusted tangible common equity of Crestmark, as determined in accordance with the Merger Agreement, shall not be less than an agreed minimum amount, (ii) no governmental authority shall
have imposed a Burdensome Condition (as defined in the Merger Agreement), and (iii) the Companys shareholders shall have approved an increase in the number of authorized shares of Company Common Stock.
The Merger Agreement contains customary representations, warranties and covenants by each party, including, without limitation, covenants regarding:
(i) the conduct of their respective businesses during the period between the execution of the Merger Agreement and the Effective Time, and (ii) the calling and holding of special meetings of shareholders of the Company and Crestmark for
the purpose of obtaining the Shareholder Approvals.
Crestmark has also agreed to certain covenants relating to Acquisition Proposals (as defined in the Merger
Agreement), which prohibit Crestmark and its subsidiaries from, among other things, (i) initiating, soliciting, knowingly inducing or encouraging or knowingly taking any action to facilitate the making of any inquiry, offer or proposal that
would constitute, or would reasonably be expected to lead to, an Acquisition Proposal, (ii) participating in discussions or negotiations with respect to an Acquisition Proposal, (iii) furnishing any
non-public
information or data relating to Crestmark or its subsidiaries or affording any access to the business, properties, assets, books, records or other
non-public
information or personnel of Crestmark or its subsidiaries in connection with an Acquisition Proposal or (iv) entering into any agreement, agreement in principle or letter of intent with respect (or otherwise relating) to any Acquisition
Proposal. Notwithstanding the foregoing, and subject to Crestmarks compliance with the terms of the Merger Agreement, these restrictions are subject to a
fiduciary-out
provision that permits
Crestmark to provide information to and participate in discussions or negotiations with any third party in respect of an unsolicited Acquisition Proposal if Crestmarks board of directors reasonably determines in good faith that (a) such
Acquisition Proposal either constitutes, or is reasonably likely to lead to, a Superior Proposal (as defined in the Merger Agreement) and (b) the failure to take such action would be inconsistent with Crestmarks board of directors to its
shareholders under applicable law.
The Merger Agreement may be terminated by mutual written consent of the parties. The Merger Agreement also contains
certain other termination rights, including, among others, the right of the Company or Crestmark to terminate if (i) the Merger shall not have become effective on or before June 30, 2018, as may be extended automatically for two months in
order to obtain regulatory approvals, (ii) the consummation of the Merger has been enjoined or prohibited by any governmental authority, (iii) the Shareholder Approvals are not obtained, or (iv) the other party breaches such
partys representations and covenants and such breach would result in the closing conditions relating to the truth and completeness of such partys representations and warranties and the performance and compliance with its covenants not
being satisfied.
The Merger Agreement further provides that upon termination of the Merger Agreement, under specified circumstances, (i) Crestmark
may be required to pay the Company a termination fee of $10 million, or (ii) the Company may be required to pay Crestmark a termination fee of $10 million.
In connection with the execution of the Merger Agreement, certain of Crestmarks directors and senior executives and holders of Crestmark Common Stock,
representing an aggregate of approximately 34% of Crestmark Common Stock, have entered into voting agreements with the Company pursuant to which, among other things, each such Crestmark shareholder agreed to vote their shares of Crestmark Common
Stock in favor of the Merger Agreement and the transactions contemplated thereby at the special meeting of Crestmarks shareholders in connection with the Merger.
In addition, pursuant to the terms of the Merger Agreement, Meta has agreed that, effective as of the Effective Time, each of W. David Tull, Crestmarks
Chairman and Chief Executive Officer, and one additional individual, designated jointly by the Company and Crestmark, will be appointed to the board of directors of each of the Company and MetaBank, increasing the total number of directors of the
Company to nine directors.
In connection with the parties execution and delivery of the Merger Agreement, MetaBank entered into an employment
agreement with Michael Goik, Crestmark Banks current President and Chief Operating Officer (the Employment Agreement), pursuant to which Mr. Goik will serve as Executive Vice President and President of the Crestmark division
of MetaBank as of the Closing Date (as defined in the Merger Agreement). The Employment Agreement will have an initial three-year term (the Initial Term), which will commence upon the Closing Date, and provides for a one year extension
on each anniversary of the expiration of Initial Term or any subsequent renewal term, unless earlier terminated in accordance with the terms of the Employment Agreement. The Employment Agreement entitles Mr. Goik to an annual base salary
equal to $435,000 (subject to annual review and adjustment by the MetaBank board of directors). The Employment Agreement also provides for incentive compensation opportunities that are performance based and consist of the Companys customary
bonus program and incentives based upon Mr. Goiks base salary. In addition, pursuant to the Employment Agreement, Mr. Goik will receive a $2.20 million signing bonus that is payable within thirty (30) days following the
Closing Date. Mr. Goik will be entitled to participate in all MetaBank benefit plans, programs and arrangements that are commensurate with Mr. Goiks position and responsibilities. Additionally, MetaBank will provide Mr. Goik
substantially similar
perquisites, in the aggregate, as he received as an officer of Crestmark Bank immediately prior to the Closing Date. Pursuant to, and subject to the conditions set forth in, the Employment
Agreement, Mr. Goik and the Company will enter into a Restricted Stock Agreement as of the Closing Date with respect to an award of a number of restricted shares of Company Common Stock to be agreed upon by the parties but not to exceed a total
value of $3.8 million as of the Closing Date of the Merger (the Initial Equity Award), which will be subject to certain vesting conditions.
In the event Mr. Goiks employment is terminated due to death, Disability, without Cause or for Good Reason (each as defined in the Employment
Agreement), Mr. Goik (or his estate or beneficiaries, as the case may be) will be entitled to (i) receive his base salary through the effective date of termination and any earned but unpaid bonus for any completed fiscal year, and
(ii) subject to execution of a release of claims Mr. Goik may have against the Company and its affiliates, (A) continued payment of Mr. Goiks base salary (as in effect as of the termination date) for two years following his
termination (his Base Salary), (B) a
pro-rata
portion of the annual bonus payment for the year of the termination based on actual performance, (C) payment of the premiums required to continue
health care coverage for up to 18 months, and (D) acceleration of the Initial Equity Award. In the event Mr. Goiks employment is terminated by the Company within 12 months following a Change of Control (as defined in the Employment
Agreement), due to death, Disability, without Cause or for Good Reason, Mr. Goik will be eligible to receive his Base Salary in a lump sum payment and the payments in (B)-(D) above and any accrued amounts (as noted in (i) above) will be
paid at the same rate and form as noted above. In addition, the Employment Agreement provides for a
24-month
non-solicitation
period (both employees and business
relationships) and a
24-month
non-compete
requirement in addition to other restrictive covenants. The Employment Agreement also provides for clawback of compensation
paid to Mr. Goik under certain circumstances.
A copy of the Merger Agreement is attached as Exhibit 2.1 to this report, and a copy of a form of
voting agreement is attached hereto as Exhibit 10.1, and each is incorporated herein by reference. The foregoing descriptions of the Merger Agreement and the voting agreements do not purport to be complete and are qualified in their entirety by
reference to the full text of the Merger Agreement and the voting agreements.
The Merger Agreement is attached to this Current Report on Form
8-K
to provide Company shareholders with information regarding the terms of the Merger Agreement and the transactions contemplated thereby and is not intended to modify or supplement any factual disclosures about
the Company in the Companys public reports filed with the U.S. Securities and Exchange Commission (the SEC). In particular, the Merger Agreement and the above summary of its terms are not intended to be, and should not be relied
upon as, disclosures regarding any facts or circumstances relating to the Company, MetaBank, Crestmark, Crestmark Bank, their respective subsidiaries and affiliates or any other party. The representations, warranties and covenants contained in the
Merger Agreement have been negotiated only for the purpose of the Merger Agreement and are intended solely for the benefit of the parties thereto. In many cases, these representations, warranties and covenants are subject to limitations agreed upon
by the parties and are qualified by certain supplemental disclosures provided by the parties to one another in connection with the execution of the Merger Agreement. Furthermore, many of the representations and warranties in the Merger Agreement are
the result of a negotiated allocation of contractual risk among the parties to the Merger Agreement and, taken in isolation, do not necessarily reflect facts about the Company, MetaBank, Crestmark, Crestmark Bank, their respective subsidiaries and
affiliates or any other party. Likewise, any references to materiality contained in the representations and warranties may not correspond to concepts of materiality applicable to investors or shareholders. Accordingly, investors should read the
Merger Agreement in conjunction with the other information about the Company that it includes in reports, statements and other filings it makes with the SEC. Finally, information concerning the subject matter of the representations and warranties
may change after the date of the Merger Agreement, and any such changes may not be fully reflected in the Companys public disclosures.