UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 11, 2008
Marlin Business Services Corp.
(Exact name of registrant as specified in its charter)
| Pennsylvania | 000-50448 | 38-3686388 | ||
| (State or other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
|
300 Fellowship Road
Mt. Laurel, NJ |
08054 | |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code: (888) 479-9111
| (Former name or former address if changed since last report.) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Item 1.01 Entry into a Material Definitive Agreement.
On March 11, 2008, Marlin Business Services Corp. (the “Company”) received approval from the Federal Deposit Insurance Corporation (“FDIC”) for federal deposit insurance for its wholly-owned subsidiary, Marlin Business Bank, an industrial bank chartered by the State of Utah (the “Bank”), and approved the Bank to commence operations effective March 12, 2008. As a result of the approval, the Company is now subject to the terms, conditions and obligations of a Letter Agreement, dated as of June 18, 2007 (the “Letter Agreement”), by and among the Company, Peachtree Equity Investment Management, Inc. (“Peachtree”) and WCI (Private Equity) LLC (“WCI”). A copy of the Letter Agreement has been filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.
On March 26, 2007, the Company announced that it had received correspondence from the FDIC approving the application for federal deposit insurance for the Bank, subject to certain conditions set forth in the order issued by the FDIC, dated as of March 20, 2007 (the “Order”). In the Order, the FDIC determined that Peachtree would indirectly control the Bank under the rebuttable presumption of control provisions of the Change in Bank Control Act of 1978, 12 C.F.R. §303.82(b)(2), because Peachtree owns over 10% of the Company’s stock and the Company has registered its shares under Section 12 of the Securities Exchange Act of 1934. In addition, the FDIC concluded in the Order that Peachtree was engaged in commercial activities that were not permissible for a financial holding company or savings and loan holding company. Therefore, the approval of the Company’s Bank application was conditioned on Peachtree and WCI, whose sole manager is Peachtree, executing a passivity agreement with the FDIC to eliminate Peachtree and WCI’s ability to control the Bank.
Peachtree, WCI and the FDIC entered into a Passivity Agreement, dated as of June 18, 2007 (the “Passivity Agreement”), which would be deemed effective on the date of issuance from the FDIC of the federal deposit insurance for the Bank. In connection with the execution of the Passivity Agreement, the Company entered into the Letter Agreement, which is also deemed effective on the date of issuance from the FDIC of the federal deposit insurance for the Bank. Therefore, the effective date for both the Passivity Agreement and the Letter Agreement is deemed to be March 11, 2008. Under the terms of the Letter Agreement, the Company agreed to create one vacancy on the Company’s Board of Directors (the “Board”) by increasing the size of the Board from six to seven directors. The Company also agreed to take all necessary action to appoint one individual proposed by Peachtree and WCI as a member of the Board who will serve as a director until the expiration of the term at the Company’s 2008 annual meeting of shareholders. In addition, the Company agreed to include an individual proposed by Peachtree and WCI on the Board’s slate of nominees for election as a director of the Company and to use its best efforts to cause the election of such individual so long as Peachtree and WCI are subject to the terms and conditions of the Passivity Agreement.
Item 8.01 Other Events.
A copy of the press release issued on March 12, 2008 by the Company to announce the opening of the Bank, as described above in Item 1.01 of this report, is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
As a result of the approval from the FDIC, the Bank, a depository institution, will be subject to regulatory oversight and examination by both the FDIC and the Utah Department of Financial Institutions. Under its banking charter, the Bank may make loans and leases and may accept all FDIC-insured deposits other than demand deposits such as checking accounts. Certain federal and state regulations apply to a broad range of banking activities and practices, including minimum capital standards, maintenance of reserves and the terms on which a bank may engage in transactions with its affiliates. In addition, the FDIC has regulatory authority under the Financial Institutions Supervisory Act (“FISA”) to prohibit the Bank from engaging in any unsafe or unsound practice in conducting its business.
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Capital Requirements. The Bank is subject to capital adequacy guidelines issued by the Federal Financial Institutions Examination Council (the “FFIEC”). These risk-based capital and leverage guidelines make regulatory capital requirements more sensitive to differences in risk profiles among banking organizations and consider off-balance sheet exposures in determining capital adequacy. Under the rules and regulations of the FFIEC, at least half of a bank’s total capital is required to be “Tier I capital,” comprised of common equity, retained earnings and a limited amount of non-cumulative perpetual preferred stock. The remaining capital, “Tier II capital,” may consist of other preferred stock, a limited amount of term subordinated debt or a limited amount of the reserve for possible credit losses. The FFIEC has also adopted minimum leverage ratios for banks, which are calculated by dividing Tier I capital by total quarterly average assets. Recognizing that the risk-based capital standards principally address credit risk rather than interest rate, liquidity, operational or other risks, many banks are expected to maintain capital in excess of the minimum standards.
Prompt Corrective Action . The FDIC Improvement Act of 1991 (“FDICIA”) requires, among other things, federal bank regulatory authorities to take prompt corrective action with respect to FDIC-insured institutions that do not meet certain minimum capital requirements. To be “well-capitalized” under the prompt corrective action provisions, a bank must have a ratio of combined Tier I and Tier II capital to risk-weighted assets of not less than 10%, a ratio of Tier I capital to risk-weighted assets of not less than 6%, and a ratio of Tier I capital to average assets of not less than 5%. Pursuant to the Order, the Bank must have beginning paid-in capital funds of not less than $12 million.
Pursuant to certain provisions of FDICIA and related regulations with respect to prompt corrective action, FDIC-insured institutions, such as the Bank, may only accept brokered deposits without FDIC permission if they meet specified capital standards. FDIC-insured institutions are also subject to restrictions with respect to the interest they may pay on brokered deposits unless they are “well-capitalized.”
Dividends . The Bank may supply funds to its parent companies or affiliates, subject to certain legal limitations contained in Utah state law. Under Utah law, an industrial bank may declare a dividend out of net profits after providing for all expenses, losses, interest and taxes accrued or due and after complying with required transfers to surplus accounts. In addition, it is possible that the FDIC, pursuant to its authority under FISA, could claim that a dividend payment might under some circumstances be an unsafe or unsound practice. Pursuant to the Order, the Bank shall pay no dividends during the first three years of operations without the prior written approval of the FDIC and the State of Utah.
Transfers of Funds and Transactions with Affiliates . Sections 23A and 23B of the Federal Reserve Act and applicable regulations impose restrictions on the Bank that limit the transfer of funds by the Bank to the Company and certain of its affiliates, in the form of loans, extensions of credit, investments or purchases of assets. These transfers by the Bank to the Company or any other single affiliate are limited in amount to 10% of the Bank’s capital and surplus, and transfers to all affiliates are limited in the aggregate to 20% of the Bank’s capital and surplus. These loans and extensions of credit are also subject to various collateral requirements. Sections 23A and 23B of the Federal Reserve Act and applicable regulations also require generally that the Bank’s transactions with its affiliates be on terms no less favorable to the Bank than comparable transactions with unrelated third parties. Pursuant to the Order, the Bank may complete a de novo purchase of approximately $35-$40 million of eligible leases and loans from Marlin Leasing Corporation during the four-month period following the Bank’s opening.
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Restrictions on Ownership.
Subject to certain exceptions, the Change in Bank Control Act of 1978, as amended,
prohibits a person or group of persons from acquiring “control” of a bank holding company unless the FDIC has been
notified 60 days prior to such acquisition and has not objected to the transaction. Under a rebuttable presumption in
the Change in Bank Control Act, the acquisition of 10% or more of a class of voting stock of a bank holding company
with a class of securities registered under Section 12 of the Securities Exchange Act of 1934, such as the Company,
would, under the circumstances set forth in the presumption, constitute acquisition of control of the bank holding
company. The regulations provide a procedure for challenging this rebuttable control presumption.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
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Exhibit Number
Description
Letter Agreement, dated as of June 18, 2007, by and between
Marlin Business Services Corp., Peachtree Equity Investment
Management, Inc. and WCI (Private Equity) LLC.
Press Release dated March 12, 2008.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned hereunto duly authorized.
Dated: March 17, 2008
MARLIN BUSINESS SERVICES CORP.
By:
/
s/Daniel P. Dyer
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Name: Daniel P. Dyer
Title: Chief Executive Officer
Exhibit 10.1
PERSONAL AND CONFIDENTIAL
June 18, 2007
Peachtree Equity Investment Management, Inc.
WCI (Private Equity) LLC
1170 Peachtree Street, Suite 1610
Atlanta, GA 30309
Attention: Matthew J. Sullivan
Re: Marlin Business Services Corp. Board Representative
Dear Sirs:
This Letter Agreement relates to the attached Passivity Agreement, dated June 18, 2007 (the “Passivity Agreement”), by and between Peachtree Equity Investment Management, Inc. and WCI (Private Equity) LLC (collectively, the “Peachtree Group”) and the Federal Deposit Insurance Corporation (the “FDIC”). The FDIC has required that the Peachtree Group enter into the Passivity Agreement as a condition to the FDIC’s approval of the application for the issuance of Federal deposit insurance (the “FDIC Insurance”) under the Federal Deposit Insurance Act (12 U.S.C. §1815) for Marlin Business Bank (the “Marlin Bank”), a proposed state nonmember bank being formed as a direct subsidiary of Marlin Business Services Corp. (the “Company”).
In consideration for the Peachtree Group entering into and complying with the Passivity Agreement, the Company hereby agrees to the following provisions of this Letter Agreement during the term from the Effective Date (as defined below) until such time as the Peachtree Group is no longer subject to any of the terms and provisions of the Passivity Agreement (the “Term”). For purposes of this Letter Agreement, “Effective Date” shall mean the effective date of the issuance of the FDIC Insurance for Marlin Bank that occurs after the satisfaction by the Company and the Marlin Bank of all the conditions in the Order of the FDIC, dated March 20, 2007.
As soon as reasonably practicable after the Effective Date, but no event later the thirty (30) days after the Effective Date: (i) the Company shall create one vacancy on the Company’s Board of Directors (the “Board”) by increasing the size of the Board from six (6) to seven (7) directors; and (ii) the Company shall take all necessary action to promptly appoint one individual proposed by the Peachtree Group (the “Peachtree Director”) as a member of the Board, to serve as a director until the expiration of the term ending at the Company’s 2008 annual meeting of shareholders and until his or her successor has been duly elected and qualified or his or her earlier death, resignation or removal; provided, however that any individual proposed as the initial Peachtree Director must meet the qualifications to serve as a member of the Board as reasonably determined in good faith by either the Board or the Nominating and Governance Committee of the Board (the “Nominating and Governance Committee”). For so long as the Peachtree Director meets the definition of “independent” as defined by the listing standards of the Nasdaq Stock Market (“Director Independence”), the Peachtree Director shall at all times be treated as an independent director and shall be granted all the rights and protections afforded to the Company’s independent directors.
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Peachtree Equity Investment Management, Inc.
WCI (Private Equity) LLC
June 18, 2007
Page Two
Currently with the appointment of the Peachtree Director to the Board, the Board shall appoint the Peachtree Director to serve on the Nominating and Governance Committee; provided that (i) the Peachtree Director satisfies the definition of Director Independence and (ii) such appointment and service meets the requirements of other applicable laws, rules and regulations.
During the Term, the Company shall include the Peachtree Director in the Board’s slate of nominees for election as a director of the Company and use its reasonable best efforts to cause the election of the Peachtree Director at each annual meeting of shareholders including, without limitation, recommending that the Company’s shareholders vote in favor of the election of the Peachtree Director at such annual meeting and voting the shares of Company Common Stock represented by all proxies granted by shareholders in connection with the solicitation of proxies by the Board of Directors in connection with such meeting in favor of the Peachtree Director, except for such proxies that specifically indicate a vote to withhold authority with respect to the Peachtree Director. Neither the Board nor the Company shall take any position, make any statements or take any action inconsistent with such recommendations.
If, during the Term, there shall occur a vacancy in a Board seat previously occupied by the Peachtree Director by reason of the resignation, removal, death or incapacity of the Peachtree Director, then the Company shall take all necessary action to promptly fill such vacancy by an individual proposed by the Peachtree Group, unless the Nominating and Governance Committee reasonably determines in good faith that such individual does not meet the qualifications of the Board as then in effect, in which case the Peachtree Group shall promptly propose another individual so qualified to be appointed in accordance with the provisions of this paragraph. If as a result of a vacancy describe in this paragraph, the Nominating and Governance Committee does not include a Peachtree Director, the Board shall currently upon the appointment a new Peachtree Director to the Board, appoint such Peachtree Director to the Nominating and Governance Committee; provided that such director meets the qualifications set forth in paragraph four of this Letter Agreement. Any replacement director appointed pursuant to this paragraph shall also be referred to as a “Peachtree Director.”
If, during the Term, the Peachtree Group exercises its rights under the Registration Rights Agreement (as defined below) to request that Company Common Stock held by the Peachtree Group (the “Peachtree Shares”) be registered, then the Company shall, in addition to its other obligations thereunder, actively participate in the offering and sale of the Peachtree Shares as reasonably requested by the Peachtree Group, including, without limitation, the participation of the Company’s senior management in responding to underwriters’ due diligence inquiries and in taking part in investor roadshow presentations. For purposes of this Letter Agreement, “Registration Rights Agreement” shall mean Second Amended and Restated Registration Rights Agreement, dated April 7, 2000, as amended by the Second Amendment dated July 2001.
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Peachtree Equity Investment Management, Inc.
WCI (Private Equity) LLC
June 18, 2007
Page Three
The Company hereby represents and warrants to the Peachtree Group that (a) the Board has approved the actions to be taken by the Company under this Letter Agreement and (b) this Letter Agreement is a valid and binding obligation of the Company.
If in connection with any other party entering into a similar passivity agreement with the FDIC on behalf of the Company, the Company provides such party rights or privileges that could reasonably be determined to be more favorable to such party than are set forth herein, the Company shall promptly notify the Peachtree Group in writing of such favorable terms and, upon acceptance by the Peachtree Group, this Letter Agreement shall be deemed to have been modified so that the Peachtree Group shall receive and be entitled to the benefits of the more favorable terms.
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Peachtree Equity Investment Management, Inc.
WCI (Private Equity) LLC
June 18, 2007
Page Four
Very truly yours,
MARLIN BUSINESS SERVICES CORP.
By:
/s/ George D. Pelose
George D. Pelose
Chief Operating Officer and General Counsel
Confirmed and Agreed to:
PEACHTREE EQUITY INVESTMENT MANAGEMENT, INC.
By: /s/ David Christopher
WCI (PRIVATE EQUITY) LLC
By: /s/ David Christopher
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Exhibit 99.1
MARLIN BUSINESS BANK OPENS
Mount Laurel, NJ, March 12, 2008 – Marlin Business Services Corp. (NASDAQ: MRLN) is pleased to announce the opening of its Industrial Loan Bank, Marlin Business Bank, located in Salt Lake City, Utah.
“We’re very excited to announce the opening of Marlin Business Bank and the opportunities it offers our business. Our plan to launch this bank began in October 2005 and we’re pleased to have successfully completed the process. Our immediate plan for the bank is to broaden our sources of funding at lower cost insured deposit rates,” said Daniel P. Dyer, CEO of Marlin Business Services Corp. “Other plans for the bank include initiatives that fit with our small business lending strategy. We believe the bank is a competitive differentiator for Marlin, and it will serve as a key enhancement to our business model.”
About Marlin Business Services Corp.
Marlin Business Services Corp. is a nationwide provider of equipment leasing and working capital solutions primarily to small businesses. The Company’s principal operating subsidiary, Marlin Leasing Corporation, finances over 70 equipment categories in a segment of the market generally referred to as “small-ticket” leasing (i.e. leasing transactions less than $250,000). The Company was founded in 1997 and completed its initial public offering of common stock on November 12, 2003. In addition to its executive offices in Mount Laurel, NJ, Marlin has regional offices in or near Atlanta, Chicago, Denver and Philadelphia and Salt Lake City. For more information, visit www.marlincorp.com or call toll free at (888) 479-9111.
Forward-Looking Statements
This release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All forward-looking statements (including statements regarding 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 release that are not clearly historical in nature are forward-looking, and the words “anticipate,” “believe,” “expect,” “estimate,” “plan,” “may,” “intend,” and similar expressions are generally intended to identify forward-looking statements. Economic, business, funding, market, competitive, legal and/or regulatory factors, among others, affecting our business are examples of factors that could cause actual results to differ materially from those described in the forward-looking statements. More detailed information about these factors is contained in our filings with the SEC, including the sections captioned “Risk Factors” and “Business” in the Company’s Form 10-K filed with the Securities and Exchange Commission. 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.
CONTACT: Marlin Business Services Corp. Lynne Wilson
1-888-479-9111 ext. 4108