Item 1.01. Entry Into a Material Definitive Agreements.
On April 18, 2021, Marlin Business Services Corp., a Pennsylvania corporation
(the "Company"), entered into an Agreement and Plan of Merger (the "Merger
Agreement"), by and among the Company, Madeira Holdings, LLC, a Delaware limited
liability company ("Parent"), and Madeira Merger Subsidiary, Inc., a
Pennsylvania corporation and a wholly owned Subsidiary of Parent ("Merger Sub").
Parent and Merger Sub are subsidiaries of funds managed by HPS Investment
Partners, LLC ("HPS"). Upon the terms and subject to the conditions set forth in
the Merger Agreement, Merger Sub will be merged with and into the Company (the
"Merger"), with the Company surviving the Merger as a wholly owned subsidiary of
Parent.
At the effective time of the Merger (the "Effective Time"), each issued and
outstanding share of common stock, par value $0.01 per share, of the Company
(each, a "Share") (other than (i) Shares that immediately prior to the Effective
Time are owned by Parent, Merger Sub or any other wholly owned subsidiary of
Parent or owned by the Company or any wholly owned subsidiary of the Company
(including as treasury stock) and (ii) Shares that are held by any record holder
who is entitled to demand and properly demands payment of the fair cash value of
such Shares as a dissenting shareholder pursuant to, and who complies in all
respects with, the provisions of Subchapter 15D of the Pennsylvania Business
Corporation Law of 1988) will be cancelled and converted into the right to
receive $23.50 per Share in cash, without interest (the "Purchase Price"),
subject to the adjustment described below.
The Purchase Price is subject to potential downward adjustment equal to (a) the
amount, if any, by which "Covered Costs" exceed $8.0 million divided by (b) the
number of "Fully Diluted Shares." For purposes of the Merger Agreement, "Covered
Costs" means (i) the fees and expenses of legal and other third party advisors
and (ii) any costs and expenses associated with the payoff or settlement of a
deposit of MBB (as defined below) to the extent in excess of the par value of
such deposit or solely attributable to accrued interest with respect to such
deposit, in each case, incurred by the Company after the date of the Merger
Agreement solely in connection with the De-Banking (as defined below). "Fully
Diluted Shares" means all issued and outstanding Shares, together with all such
Shares that the Company would be required to issue assuming the conversion or
exchange of any then-outstanding warrants, options, benefit plans or
obligations, securities or instruments convertible or exchangeable into, or
rights exercisable for, such securities, but only to the extent so exercisable,
convertible or exchangeable prior to consummation of the Merger or exercisable,
convertible or exchangeable as a result of the consummation of the Merger. As a
result, the Purchase Price may be less than $23.50 per Share.
The Board of Directors of the Company unanimously (a) determined that the Merger
and the other transactions contemplated by the Merger Agreement are fair to and
in the best interests of the Company and the shareholders of the Company,
(b) approved the Merger Agreement, the Merger and the other transactions
contemplated by the Merger Agreement and (c) resolved to recommend that the
shareholders of the Company adopt the Merger Agreement.
Consummation of the Merger is subject to the satisfaction or (to the extent
permitted by law) waiver of specified closing conditions, including (a) the
Merger Agreement shall have been duly adopted by holders of a majority of the
votes cast by all holders of Shares entitled to vote thereon at the shareholders
meeting or any adjournment or postponement thereof (the "Shareholders Meeting")
to adopt the Merger Agreement (the "Company Requisite Vote"), (b) no
governmental entity of competent jurisdiction shall have enacted, entered,
promulgated or enforced any law, executive order, ruling, injunction or other
order (whether temporary, preliminary or permanent) that is in effect and
restrains, enjoins or otherwise prohibits the consummation of the Merger,
(c) the waiting period applicable to the consummation of the Merger under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (or any
extension thereof), shall have expired or early termination thereof shall have
been granted, (d) the Company shall have effected the "De-Banking," which
requires the Company to effect a transaction or a series of transactions which
results in (i) (A) the Company having divested its entire ownership interest in
Marlin Business Bank ("MBB") or (B) (1) the Company having submitted a letter to
the Commissioner of the Utah Department of Financial Institutions surrendering
the license and authority to conduct the business of banking held by MBB,
(2) the Federal Deposit Insurance Corporation ("FDIC") having issued an order
terminating MBB's deposit insurance from the FDIC and (3) MBB having no
remaining deposits and (ii) if the Merger were consummated, none of Parent,
Merger Sub, or their respective affiliates, directors, officers, principals or
limited partners being subject to any burdensome condition or burdensome
requirement imposed by any banking regulator or banking law, and (e) other
customary closing conditions, including the accuracy of each party's
representations and warranties and each party's compliance with
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its covenants and agreements contained in the Merger Agreement (subject to
certain qualifications as to materiality) and the absence of any change that has
had or would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect (as defined in the Merger Agreement) with respect to the
Company and its subsidiaries, taken as a whole. Consummation of the Merger is
not subject to Parent obtaining financing for or related to the transactions
contemplated by the Merger Agreement.
Subject to the terms and conditions set forth in the Merger Agreement, each of
the Company, Parent and Merger Sub has also agreed to use reasonable best
efforts to consummate the Merger and the other transactions contemplated by the
Merger Agreement as soon as practicable, and Parent and Merger Sub have agreed
to take any and all steps necessary to avoid, eliminate or resolve each and
every impediment to and obtain all consents, approvals, clearances and
authorizations under applicable law to consummate the Merger.
The Merger Agreement includes customary representations and warranties of the
Company, Parent and Merger Sub. Many of the representations made by the Company
are subject to and qualified by a Material Adverse Effect standard (as defined
in the Merger Agreement). The Company, Parent and Merger Sub have also made
certain additional covenants in the Merger Agreement, including (a) covenants by
the Company regarding the operation of its business and that of its subsidiaries
prior to the Effective Time, (b) a customary non-solicitation covenant
prohibiting the Company from soliciting, providing non-public information in
response to, or entering into discussions or negotiations with respect to,
proposals relating to alternative business combination transactions, except as
permitted under the Merger Agreement, (c) equity and debt financing covenants by
Parent and Merger Sub to use reasonable best efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary, proper
or advisable to arrange, consummate and obtain debt and equity financing for the
Merger on the terms and conditions set forth in related debt and equity
financing commitments, and (d) a customary covenant in which the Company agreed
to use its commercially reasonable efforts to provide to Parent such cooperation
as reasonably requested by Parent that is customary in connection with arranging
and obtaining the debt financing as contemplated by the debt financing
commitment.
The Merger Agreement may be terminated and the Merger may be abandoned at any
time prior to the Effective Time, whether before or after the Company Requisite
Vote is obtained:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company (i) if the Merger shall not have been
consummated on or before the date that is fifteen (15) months following the date
of the Merger Agreement (the "Termination Date"); provided, however, that the
right to terminate the Merger Agreement pursuant to this provision shall not be
available to Parent or the Company if such party (including, in the case of
Parent, Merger Sub) has breached in any material respect its obligations under
the Merger Agreement in any manner that shall have been the principal cause of
or resulted in the failure of a condition to either such party's obligation to
effect the Merger; (ii) if at the Shareholders Meeting, a proposal to adopt the
Merger Agreement shall have been voted upon by the holders of Shares and the
Company Requisite Vote shall not have been obtained; or (iii) if any order
permanently restraining, enjoining or otherwise prohibiting consummation of the
Merger shall have become final and non-appealable; provided, however, that a
party may not terminate the Merger Agreement pursuant to this provision if such
party (or, in the case of Parent, Merger Sub) has not complied in all material
respects with its obligations under the relevant provisions of the Merger
Agreement;
(c) by the Company: (i) prior to the time the Company Requisite Vote is
obtained and subject to the Company being in compliance with the relevant
obligations under the Merger Agreement, in order to accept a Superior Proposal
. . .
Item 8.01. Other Events.
In connection with the Merger Agreement, Red Mountain Partners, L.P., Red
Mountain Investors I LLC - Series A (collectively, "Red Mountain") and Parent
entered into a Voting Agreement, dated as of April 18, 2021 (the "Voting
Agreement"), pursuant to which Red Mountain has agreed that with respect to all
Shares they currently beneficially own or that they may acquire beneficial
ownership of after the date of the Voting Agreement (the "Subject Shares") at
the Shareholders Meeting or at any other meeting of the holders of Shares at
which a vote of such holders is taken: (i) when such a meeting of the holders of
Shares is held, such holder shall appear at such meeting or otherwise cause such
holder's Subject Shares to be counted as present thereat for the purpose of
establishing a quorum and (ii) such holder shall vote or cause to be voted at
any such meeting all of such holder's Subject Shares (A) in favor of adopting
the Merger Agreement and any other actions contemplated by the Merger Agreement
in respect of which the approval of the holders of Shares is requested; (B) in
favor of adoption of any proposal in respect of which the Company's Board of
Directors has (1) determined is reasonably necessary to facilitate any of the
transactions contemplated by the Merger Agreement, (2) disclosed the
determination described in the foregoing clause (1) in the proxy statement or
other written materials disseminated to the holders of Shares and
(3) recommended to be adopted or approved by the holders of Shares; and
(C) against (1) any Acquisition Proposal (as defined in the Merger Agreement),
whether or not constituting a Superior Proposal (as defined in the Merger
Agreement), and (2) any action, proposal, transaction or agreement that would
reasonably be expected to prevent, impair, delay or otherwise interfere with the
consummation of the Merger or the other transactions contemplated by the Merger
Agreement. In addition, Red Mountain has agreed to not (I), directly or
indirectly, (a) transfer, or enter into any contract, option or other
arrangement or understanding with respect to the transfer of, any Subject Shares
to any person or entity, or (b) enter into any voting arrangement, whether by
proxy, voting agreement or otherwise, or grant a proxy or power of attorney with
respect to any Subject Shares, or deposit any Subject Shares into a voting
trust, or (II) directly or indirectly: (a) initiate, solicit or knowingly take
any action to facilitate, solicit or encourage any Acquisition Proposal or the
making of any proposal that would reasonably be expected to lead to an
Acquisition Proposal or (b) participate in any discussions or negotiations
regarding, or furnish or provide any non-public information to any person or
entity in connection with, any Acquisition Proposal; provided, that in the event
a person or entity submits an Acquisition Proposal to the Company, such holder
and its representatives may hold discussions with such person or entity solely
with respect to the terms of a proposed voting agreement with respect to the
transaction contemplated by such Acquisition Proposal following such time as the
Company determines that the Company's Board of Directors may take any of the
actions permitted under the relevant provisions of the Merger Agreement. As of
April 18, 2021, Red Mountain beneficially owned approximately 2.3 million
Shares, representing approximately 24.5% of the total outstanding Shares as of
that date.
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The foregoing description of the Voting Agreement and the transactions
contemplated thereby does not purport to be complete and is qualified in its
entirety by reference to the Voting Agreement, which is filed as Exhibit 99.1
hereto, and incorporated herein by reference.
On April 19, 2021, the Company issued a press release regarding the Merger
Agreement, a copy of which is filed as Exhibit 99.2 to this report and is
incorporated herein by reference.
Additional Information and Where to Find It
In connection with the proposed transaction, the Company will file a proxy
statement with the Securities and Exchange Commission ("SEC"). Shareholders are
strongly advised to read the proxy statement and any other relevant documents
filed with the SEC as they become available because they will contain important
information about the proposed transaction. Shareholders may obtain a copy of
the proxy statement when available along with other documents filed by the
Company, free of charge, by accessing the SEC website at www.sec.gov or the
Investors section of the Company's website at www.marlincapitalsolutions.com, or
by submitting a written request to the Company's Corporate Secretary at Marlin
Business Services Corp., c/o Corporate Secretary, 300 Fellowship Road, Mount
Laurel, New Jersey, 08054.
Participants in Solicitation
The Company and its directors, executive officers, and certain other members of
its management and employees may be deemed to be participants in the
solicitation of proxies from its shareholders in connection with the proposed
transaction. Information regarding the interests of such directors and executive
officers in the solicitation will be more specifically set forth in the proxy
statement concerning the proposed transaction that will be filed with the SEC.
In addition to the proxy statement, the Company files annual, quarterly and
special reports, proxy statements and other information with the SEC. You may
read and copy any reports, statements or other information at the SEC public
reference room in Washington, D.C. Please call the SEC at 1-800-SEC-3030 for
further information on the public reference rooms. Marlin's filings with the SEC
are also available to the public from commercial document-retrieval services and
at the website maintained by the SEC at http://www.sec.gov.
Forward-Looking Statements
This document contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Such forward-looking statements
represent only the Company's current beliefs regarding future events and are not
guarantees of performance or results. All forward-looking statements (including
statements regarding expectations of future financial and operating results)
involve risks, uncertainties and contingencies, many of which are beyond our
control, which may cause actual results, performance or achievements to differ
materially from anticipated results, performance or achievements. All statements
contained in this document that are not clearly historical in nature are
forward-looking, and the words "anticipate," "believe," "expect," "estimate,"
"plan," "may," "could", "intend" and similar expressions are generally intended
to identify forward-looking statements. Economic, business, funding, market,
competitive, legal and/or regulatory factors, among others (including but not
limited to the impact of the COVID-19 pandemic), affecting our business are
examples of factors that could cause actual results to differ materially from
those described in the forward-looking statements. Other factors that may cause
actual results to differ from expected results include, among others: the
occurrence of any event, change or other circumstances that
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could give rise to the termination of the agreements with HPS; the risk that the
Company's shareholders may not approve the merger; the risk that the necessary
regulatory approvals for the merger may not be obtained or may be obtained
subject to conditions that are not anticipated; the risk that the Company will
be unable to complete the surrender banking licenses and authority and
termination of FDIC insured deposits of MBB within the time period required
under the Merger Agreement, if at all; the risk that the costs associated with
the surrender banking licenses and authority and repayment of FDIC insured
deposits of MBB exceed the $8.0 million threshold set forth in the Merger
Agreement and the consideration paid to the Company's shareholders is thus
reduced; risks that HPS may not have sufficient funds to consummate the Merger;
risks that the Company's business may suffer as a result of uncertainties
surrounding the proposed transaction; litigation or other legal proceedings
relating to the proposed transaction; unexpected costs, charges or expenses
resulting from the proposed transaction; risks related to the disruption of
management time from ongoing business operations due to the proposed
transaction; the effect of the announcement of the proposed transactions on the
Company's business plans, including the impact on the Company's relationships
with, and ability to retain, partners, customers, regulators, and employees; and
other risks to the consummation of the transaction, including the risk that the
transactions will not be consummated within the expected time period or at all.
More detailed information about these factors is contained under the headings
"Forward-Looking Statements" and "Risk Factors" in our periodic reports filed
with the SEC, including the most recent Annual Report on Form 10-K and Quarterly
Reports on Form 10-Q, which are also available in the "Investors" section of our
website. Except as required by law, we are under no obligation to (and expressly
disclaim any such obligation to) update or alter our forward-looking statements,
whether as a result of new information, future events or otherwise. Investors
are cautioned not to place undue reliance on such forward-looking statements.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
Exhibit No. Description
2.1 Agreement and Plan of Merger, dated as of April 18, 2021, among
Marlin Business Services Corp., Madeira Holdings, LLC, and
Madeira Merger Subsidiary, Inc.
99.1 Voting Agreement, dated as of April 18, 2021, among Red
Mountain Partners, L.P., Red Mountain Investors I LLC - Series A,
and Madeira Holdings, LLC
99.2 Press Release issued April 19, 2021
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document)
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MARLIN BUSINESS SERVICES CORP. 
