Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. CardConnect Corp. (1614818) 10-Q published on May 10, 2017 at 4:33 pm
Reporting Period: Mar 30, 2017
In November, 2016, a merchant, TS Kao, Inc. and its principal Teh Shou Kao (the “Plaintiffs”), filed a class action complaint against the Company asserting various claims including declaratory relief seeking to invalidate the Company’s merchant contracts or terms in such contracts, breach of contract and unjust enrichment seeking to monetary damages. The Company intends to vigorously defend itself from the claims asserted to oppose any motion for class certification that Plaintiffs file. The Company is unable to make an estimate of a reasonably possible loss because the matter is at an early stage and no discovery has occurred.
In connection with the MertzCo Merger, the Company entered into an escrow agreement dated April 3, 2017 with Michael J. Mertz, and Continental Stock Transfer & Trust Company (the “Escrow Agent”) providing for the Escrow Agent to hold 236,850 shares of the Equity Consideration in an escrow fund (the “Escrow Fund”) to secure certain rights of the Company with respect to Mr. Mertz’s indemnification obligations under the Merger Agreement (the “Escrow Agreement”). Assuming no claims are asserted, half of the Escrow Fund will be released to Mr. Mertz on January 3, 2018 and the remaining portion of the Escrow Fund will be released to Mr. Mertz on October 3, 2018.
Also in connection with the MertzCo Merger, the Company entered into an employment agreement dated April 3, 2017 with Mr. Mertz and CardConnect, LLC (the “Employment Agreement”). Commencing on April 3, 2017, Mr. Mertz will serve as the Chief Sales Officer of the Company and its subsidiaries. The initial term of Mr. Mertz’s employment period extends for five years and thereafter automatically will renew for additional one-year periods unless either party notifies the other that it does not wish to renew the agreement no later than sixty (60) days prior to the end of the current term. Mr. Mertz will earn an annual base salary of $400,000, subject to increase by the Company’s compensation committee. Subject to continued employment, Mr. Mertz will be eligible to receive, in respect of each full calendar year, an annual bonus based on the
As an inducement to enter into the Employment Agreement, on April 3, 2017, Mr. Mertz was granted non-qualified stock options pursuant to an inducement non-qualified stock option award agreement (the “Inducement Award”) to purchase 400,000 shares of common stock of the Company at an exercise price equal to the fair market value of the Company’s common stock on the grant date. Such options vest and become exercisable in four annual installments beginning on the first anniversary of the date of the grant, except that such non-qualified stock options will become fully vested and exercisable (i) if Mr. Mertz’s employment is terminated by the Company without cause or by Mr. Mertz with good reason or (ii) upon a “change of control” as defined in the Inducement Award.
The transaction will be accounted for as a business combination, which requires the Company to record the assets acquired and liabilities assumed at fair value as of the acquisition date. The initial accounting for the acquisition is not complete as of May 10, 2017. The fair values of the assets acquired and the liabilities assumed have been determined provisionally and are subject to adjustment as the Company obtains additional information. Additional time is needed to complete the valuation of assets and liabilities and to evaluate the basis differences for assets and liabilities for financial reporting and tax purposes. The provisional estimated acquisition-date fair values of major classes of assets acquired and liabilities assumed, including a reconciliation to the total purchase consideration, are as follows:
On May 8, 2017, the Company entered into indemnification agreements (“Indemnification Agreements”) with each of its directors and executive officers (“Indemnitees”). Each Indemnification Agreement provides, among other things, that the Company will indemnify and hold harmless each Indemnitee for certain expenses to the fullest extent permitted or authorized by law, including the Delaware General Corporation Law, in effect on the date of the Indemnification Agreement or as it may be amended to provide more advantageous rights to the Indemnitee, against any and all Expenses (as defined in the Indemnification Agreements). The Indemnification Agreements also provide that the Company must advance payment of certain Expenses to an Indemnitee, subject to receipt of an undertaking from the Indemnitee to return such advance if it is it is ultimately determined that the Indemnitee is not entitled to indemnification. The indemnification rights provided under the Indemnification Agreements are not exclusive of any other right which an Indemnitee may have or hereafter acquire under any applicable law, the Company’s Certificate of Incorporation or Bylaws, each as may be amended and restated from time to time, insurance policy, or any other agreement or vote of shareholder or directors or otherwise.