Item 1.01 Entry into a Material
Definitive Agreement
Agreement and Plan of Merger
On October 19, 2018,
JetPay Corporation, a Delaware corporation (the “
Company
”), entered into an Agreement and Plan of Merger (the
“
Merger Agreement
”) with NCR Corporation, a Maryland corporation (“
Parent
”), and Orwell
Acquisition Corporation, a Delaware corporation and wholly-owned subsidiary of Parent (“
Merger Sub
”), providing
for the acquisition of the Company by Parent in an all cash transaction, pursuant to a tender offer (the “
Offer
”),
followed by a subsequent back-end merger of Merger Sub with and into the Company (the “
Merger
”), with the Company
surviving the Merger as a wholly-owned subsidiary of Parent.
Pursuant to the Merger
Agreement, upon the terms and subject to the conditions thereof, Merger Sub will commence the Offer for each (i) share of common
stock, par value $0.001 per share (the “
Company Common Shares
”) at a price per Company Common Share of $5.05
(the “
Company Share Offer Price
”), (ii) share of Series A Convertible Preferred Stock, par value $0.001 per
share (the “
Series A Preferred Shares
”) at a price per Series A Preferred Share equal to the greater of (A)
the Series A Liquidation Value (as defined in the Merger Agreement) of such Series A Preferred Share and (B) the amount of proceeds
that the holder of such Series A Preferred Share would receive if such Series A Preferred Share was converted into Company Common
Shares pursuant to the Series A Certificate of Designation (as defined in the Merger Agreement) and such holder received the Company
Share Offer Price for each Company Common Share issued upon such conversion (the “
Series A Offer Price
”),
(iii) each share of Series A-1 Convertible Preferred Stock, par value $0.001 per share (the “
Series A-1 Preferred Shares
”)
at a price per Series A-1 Preferred Share equal to the greater of (A) the Series A-1 Liquidation Value (as defined in the Merger
Agreement) of such Series A-1 Preferred Share and (B) the amount of proceeds that the holder of such Series A-1 Preferred Share
would receive if such Series A-1 Preferred Share was converted into Company Common Shares pursuant to the Series A-1 Certificate
of Designation (as defined in the Merger Agreement) and such holder received the Company Share Offer Price for each Company Common
Share issued upon such conversion (the “
Series A-1 Offer Price
”), and (iv) each share of Series A-2 Convertible
Preferred Stock, par value $0.001 per share (the “
Series A-2 Preferred Shares
” and, together with the Series
A Preferred Shares and the Series A-1 Preferred Shares, the “
Preferred Shares
”) at a price per Series A-2 Preferred
Share equal to the greater of (A) the Series A-2 Liquidation Value (as defined in the Merger Agreement) of such Series A-2 Preferred
Share and (B) the amount of proceeds that the holder of such Series A-2 Preferred Share would receive if such Series A-2 Preferred
Share was converted into Company Common Shares pursuant to the Series A-2 Certificate of Designation (as defined in the Merger
Agreement) and such holder received the Company Share Offer Price for each Company Common Share issued upon such conversion (the
“
Series A-2 Offer Price
” and, together with the Company Share Offer Price, the Series A Offer Price, the Series
A-1 Offer Price and the Series A-2 Offer Price, the “
Offer Prices
”). Subject to the terms and conditions of
the Merger Agreement, the Offer will initially remain open for twenty (20) business days from the date of commencement of the
Offer. If at the scheduled expiration time of the Offer any of the conditions to the Offer have not been satisfied or waived,
then the Offer may be extended on one or more occasions to permit the satisfaction of all Offer conditions.
At the effective time of the Merger (the
“
Effective Time
”), each Company Common Share or Preferred Share issued and outstanding immediately prior to
the Effective Time will be cancelled and converted into the right to receive the Company Share Offer Price, the Series A Offer
Price, the Series A-1 Offer Price or the Series A-2 Offer Price, as applicable, without interest, other than Company Common Shares
held by a holder who has properly exercised appraisal rights with respect to such Company Common Shares in accordance with Section
262 of the Delaware General Corporation Law (“
DGCL
”).
Pursuant to
the Merger Agreement, each option (“
Company Option
”) outstanding immediately prior to the Effective Time
that is unvested will become fully vested, and each Company Option that is then outstanding will, automatically and without
any action required on the part of the holder thereof, be cancelled in exchange for the right of the holder thereof to
receive (without interest) an amount in cash equal to the product of (x) the total number of Company Common Shares underlying
the Company Option immediately prior to the Effective Time multiplied by (y) the excess, if any, of the Company share Offer
Price over the per-share exercise price of such Company Option, less applicable tax withholdings. Pursuant to the Merger
Agreement, each warrant to purchase Shares or Preferred Shares (“
Warrant
”) that remains unexercised and
outstanding prior to the Effective Time shall be cancelled and, in full consideration of such cancellation, will be converted
into and thereafter evidence the right to receive, without interest, an amount in cash equal to the product of (a) the
aggregate number of Company Common Shares or Preferred Shares underlying such Warrant, multiplied by (b) the excess, if any,
of the applicable Offer Price over the per Share or Preferred Share exercise price under such Warrant.
The Merger
Agreement and the transactions contemplated by the Merger Agreement were recommended to the Company’s Board of
Directors (the “
Company Board
”) by a special committee of the Company Board consisting of members
independent of the owners of the Series A Preferred Shares. Following such recommendation, the Company Board (i) approved and declared that the Merger Agreement, the Merger and the other transactions contemplated by the
Merger Agreement are fair to and in the best interests of the stockholders of the Company and the Company, (ii) approved the
Merger Agreement and the other transactions contemplated by the Merger Agreement, including the Merger, on the terms and
subject to the conditions set forth in the Merger Agreement, (iii) determined to recommend that the stockholders of the
Company accept the Offer and tender their shares to Merger Sub pursuant to the Offer and (iv) elected, to the extent permitted by
applicable law, to make inapplicable all state takeover laws or similar laws, to the extent they might otherwise apply, to
the execution, delivery, performance or consummation of the Merger Agreement or any other transaction contemplated by the
Merger Agreement.
The obligation of Merger Sub to purchase
the Company Common Shares and Preferred Shares is subject to certain customary conditions, including, among others, (i) that the
number of Company Common Shares and Preferred Shares validly tendered and “received” (as defined in Section 251(h)(6)
of the DGCL), and not validly withdrawn, prior to the expiration of the Offer, together with the number of Company Common Shares
and Preferred Shares then-owned by Merger Sub or its affiliates equals a majority of the voting power of the issued and outstanding
Company Common Shares and Preferred Shares, (ii) the expiration or termination of any applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, (iii) the accuracy, subject to various standards, of the Company’s representations
and warranties contained in the Merger Agreement, (iv) the absence of a Company Material Adverse Effect (as defined in the Merger
Agreement) and (v) the absence of a data compromise occurring or that is discovered involving more than 7 million cards and causing
at least $7 million of direct damages.
Following the consummation of the Offer
and subject to the satisfaction or waiver of certain customary conditions set forth in the Merger Agreement, the Merger will be
effected pursuant to the procedure provided under Section 251(h) of the DGCL, without a meeting or vote of the Company’s
stockholders. The Merger will be effected as promptly as practicable after the conditions to the Merger have been satisfied or
waived.
The Merger Agreement contains representations
and warranties customary for transactions of this type. The Company has agreed to various customary covenants and agreements, including,
among others, agreements to conduct its business in the ordinary course during the period between the execution of the Merger Agreement
and the Effective Time and not to engage in certain kinds of transactions during that period.
The Company is subject
to customary “no-shop” restrictions on its, its subsidiaries’ and their respective representatives’ abilities
to initiate, solicit or encourage acquisition proposals from third parties and to provide information to, or participate in discussions
or negotiations with, third parties regarding acquisition proposals. However, the Company and its subsidiaries and their respective
representatives may engage in the foregoing activities with any third party that makes an unsolicited written acquisition proposal
that the Company Board has determined in good faith, after consultation with its outside legal counsel and financial advisor, and
based on information then available, that such acquisition proposal constitutes, or could reasonably be expected to lead to, or
result in, a Superior Proposal (as defined in the Merger Agreement).
The Merger Agreement
contains certain customary termination rights for the Company and Parent including, among others, the right to terminate in the
event that the Merger has not been consummated on or before February 28, 2019. Additionally, the Company has agreed to pay Parent
a termination fee of $6,187,500 in cash upon termination of the Merger Agreement under certain specified circumstances, including
in connection with a termination of the Merger Agreement by the Company to enter into a Superior Proposal or a change in the Company
Board’s recommendation that the Company’s stockholders accept the Offer.
The Merger Agreement
has been filed as an exhibit hereto to provide investors with information regarding its terms. It is not intended to provide any
other factual information about the Company. In particular, the representations and warranties and/or covenants contained in the
Merger Agreement were made only for the purposes of the Merger Agreement as of the specific dates therein, and were solely for
the benefit of the parties to the Merger Agreement. The representations and warranties and/or covenants contained in the Merger
Agreement may be subject to limitations agreed upon by the parties to the Merger Agreement and are qualified by information in
confidential disclosure schedules provided in connection with the signing of the Merger Agreement. These confidential disclosure
schedules contain information that modifies, qualifies and creates exceptions to the representations and warranties and/or covenants
set forth in the Merger Agreement. Moreover, certain representations and warranties and/or covenants contained in the Merger Agreement
may be subject to a standard of materiality provided for in the Merger Agreement and have been used for the purpose of allocating
risk among the parties, rather than establishing matters of fact. Investors should not rely on the representations, warranties
and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the Company or any
of its subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations and warranties and/or
covenants may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in
the Company’s public disclosures.
The foregoing description
of the Merger Agreement and the transactions contemplated thereby does not purport to be complete and is qualified in its entirety
by the full text of the Merger Agreement, a copy of which is filed as Exhibit 2.1, respectively, hereto and incorporated by reference
herein.
Tender and Support Agreement
Concurrent with and
as an inducement to Parent entering into the Merger Agreement and incurring the obligations set forth therein, certain holders
of Company Common Shares and Preferred Shares (collectively, the “
Covered Holders
”) entered into Tender and
Support Agreements with Parent and Merger Sub (the “
Tender and Support Agreements
”) with respect to, subject
to certain exceptions, all Company Common Shares and Preferred Shares beneficially owned by such stockholders (collectively, the
“
Covered Shares
”). The parties subject to the Tender and Support Agreements have agreed to, subject to certain
exceptions, tender, pursuant to and in accordance with the terms of the Offer, the Company Common Shares and the Preferred Shares
subject to the Tender and Support Agreements. The holders of 100% of the Company’s issued and outstanding Series A Preferred
Shares have executed Tender and Support Agreements in support of the transactions.
Each Tender and Support
Agreement will terminate on the earliest to occur of (i) the termination of the Merger Agreement for any reason; (ii) the Merger
becoming effective in accordance with the terms and provisions of the Merger Agreement; (iii) the acquisition by Parent or Merger
Sub of all the Covered Shares of the Covered Holder, whether pursuant to the Offer, the Merger or otherwise; (iv) is agreed to
in writing by Parent and the Covered Holder; (v) if the Covered Holder is a trust whose trustee is not a director or officer of
the Company, the determination by such trustee of the Covered Holder following a material development, event, fact, occurrence
or material change in circumstances that first occurs or first arises after the date of such Tender and Support Agreement that
was not known or reasonably foreseeable by the trustee of the Covered Holder, after consultation with its outside legal counsel,
that the failure to terminate the Tender and Support Agreement would violate the trustee’s fiduciary duties under applicable
law; (vi) the Company Board making a Change in Recommendation (as defined in the Merger Agreement); or (vii) if the Offer has expired
without acceptance for payment of the Covered Shares pursuant to the Offer occurring on or before 5:30 p.m. (Philadelphia, Pennsylvania
time) on the first business day following such expiration of the Offer.
A form of the Tender
and Support Agreement applicable to Company Common Shares and a form of Tender and Support Agreement applicable to Series A Preferred
Shares are included as Annex A and Annex B, respectively, of the Merger Agreement, filed herewith, and are incorporated herein
by reference. The foregoing descriptions of the form of Tender and Support Agreements are only a summary, does not purport to be
complete and are qualified in its entirety by reference to the full text of the form of Tender and Support Agreements.