Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934

 

 

☒  Filed by the Registrant                            ☐  Filed by a Party other than the Registrant

Check the appropriate box:

 

  Preliminary Proxy Statement
  CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE 14A-6(E)(2))
  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material Pursuant to §240.14a-11(c) or §240.14a-2

ON DECK CAPITAL, INC.

LOGO

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

  No fee required.
  Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
  (1)  

Title of each class of securities to which transaction applies:

 

     

  (2)  

Aggregate number of securities to which transaction applies:

 

     

  (3)  

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined):

 

     

  (4)  

Proposed maximum aggregate value of transaction:

 

     

  (5)  

Total fee paid:

 

     

  Fee paid previously with preliminary materials.
  Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
  (1)  

Amount Previously Paid:

 

     

  (2)  

Form, Schedule or Registration Statement No.:

 

     

  (3)  

Filing Party:

 

     

  (4)  

Date Filed:

 

     

 

 

 


Table of Contents

LOGO

MERGER PROPOSED—YOUR VOTE IS VERY IMPORTANT

 

 

Dear Stockholders of On Deck Capital, Inc.:

On July 28, 2020, On Deck Capital, Inc. (“OnDeck”), Enova International, Inc. (“Enova”) and Energy Merger Sub, Inc., an indirect wholly owned subsidiary of Enova, entered into a merger agreement (as it may be amended from time to time, the “merger agreement”) that provides, upon the terms and subject to the conditions set forth therein, for OnDeck to become an indirect wholly owned subsidiary of Enova (the “merger”). If the merger is completed, OnDeck stockholders will receive, in exchange for each share of OnDeck common stock held immediately prior to the merger, (1) $0.12 in cash and (2) 0.092 of a share of Enova common stock, subject to potential adjustments as specified in the merger agreement and as described herein. The OnDeck board of directors (the “OnDeck board”) has unanimously approved the merger agreement and recommends that OnDeck stockholders vote in favor of adopting the merger agreement.

Based on Enova’s closing stock price on September 3, 2020, the most recent practicable date for which such information was available, the merger consideration represented (i) approximately $1.76 in value per share of OnDeck common stock, which represents a premium of approximately 142% over OnDeck’s closing stock price on July 27, 2020, the last day before the public announcement of the execution of the merger agreement with Enova and (ii) a transaction valued at approximately $114 million. The value of the stock portion of the merger consideration to be received in exchange for each share of OnDeck common stock will fluctuate with the market value of Enova common stock until the transaction is complete. The common stock of each of Enova and OnDeck is listed on the New York Stock Exchange under the symbol “ENVA” and “ONDK,” respectively. Upon completion of the merger, former OnDeck stockholders are expected to own approximately 16.6% of the outstanding shares of Enova common stock (on a fully diluted basis), based on Enova’s outstanding equity as of July 27, 2020.

The merger cannot be completed without approval of the proposal to adopt the merger agreement by the affirmative vote of holders of a majority of the outstanding shares of OnDeck common stock entitled to vote thereon (the “merger proposal”). Because of this, OnDeck is holding a special meeting of its stockholders on October 7, 2020 to vote on the merger proposal (the “OnDeck special meeting”). Information about the OnDeck special meeting, the merger, the merger agreement, and the other business to be considered by OnDeck stockholders at the OnDeck special meeting is contained in this proxy statement/prospectus. The OnDeck has fixed the close of business on September 8, 2020 as the record date for the determination of OnDeck stockholders entitled to vote at the OnDeck special meeting. Any OnDeck stockholder entitled to attend and vote at the OnDeck special meeting is entitled to appoint a proxy to attend and vote on such stockholder’s behalf. Such proxy need not be a stockholder of OnDeck. We urge you to read this proxy statement/prospectus and the annexes and documents incorporated by reference carefully. You should also carefully consider the risks that are described in the “Risk Factors” section beginning on page 36.

The OnDeck board has unanimously (i) determined that the terms of the merger agreement and the transactions contemplated thereby are fair and in the best interests of OnDeck and the OnDeck stockholders; (ii) approved the merger agreement and the consummation of the merger; and (iii) directed that the adoption of the merger agreement be submitted to the OnDeck stockholders for adoption at the OnDeck special meeting. The OnDeck board unanimously recommends that OnDeck stockholders vote “FOR” the merger proposal as well as “FOR” the approval on an advisory (nonbinding) basis of certain compensation that may be paid or become payable to OnDeck’s named executive officers in connection with the merger, and “FOR” the adjournment of the OnDeck special meeting, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes to adopt the merger agreement.

Your vote is very important regardless of the number of shares of OnDeck common stock that you own.

Whether or not you plan to attend the OnDeck special meeting, please submit your proxy as soon as possible to make sure that your shares are represented at the meeting. If your shares are held in the name of a broker, bank or other nominee, please follow the instructions on the voting instruction card furnished by the broker, bank or other nominee. You must provide voting instructions by filling out the voting instruction card in order for your shares to be voted.

Thank you for your continued support, interest and investment in OnDeck.

 

Very truly yours,

Noah Breslow

Chief Executive Officer & Chairman of the Board

Daniel Henson

Lead Independent Director

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued in connection with the merger or determined if this proxy statement/prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

This proxy statement/prospectus is dated September 8, 2020, and is first being mailed to stockholders of OnDeck on or about September 8, 2020.


Table of Contents

 

LOGO

1400 Broadway

25th Floor

New York, New York 10018

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

To be held on October 7, 2020

To the Stockholders of OnDeck:

We are pleased to invite you to attend the special meeting of stockholders (the “OnDeck special meeting”) of On Deck Capital, Inc., a Delaware corporation (“OnDeck”), which will be held exclusively via the internet, on October 7, 2020, at 10:00 a.m., Eastern time, at www.meetingcenter.io/281867925 (the “OnDeck meeting website”) for the following purposes:

 

   

the merger proposal—to vote on a proposal to adopt the Agreement and Plan of Merger, dated as of July 28, 2020, by and among Enova International, Inc. (“Enova”), a Delaware corporation, Energy Merger Sub, Inc., an indirect wholly owned subsidiary of Enova (“Merger Sub”), and OnDeck (as it may be amended from time to time, the “merger agreement”), which is further described in the sections titled “The Merger” and “The Merger Agreement,” beginning on pages 44 and 92, respectively, and a copy of which is attached as Annex A to the proxy statement/prospectus of which this notice is a part (the “merger proposal”);

 

   

the merger-related compensation proposal—to vote on an advisory (nonbinding) proposal to approve the compensation that may be paid or become payable to OnDeck’s named executive officers that is based on or otherwise related to the merger (the “merger-related compensation proposal”); and

 

   

the adjournment proposal—to vote on a proposal to adjourn the OnDeck special meeting from time to time to a later date or time if necessary or appropriate, including to solicit additional proxies in favor of the proposal to adopt the merger agreement if there are insufficient votes at the time of the OnDeck special meeting to adopt the merger agreement (the “adjournment proposal”).

Due to concerns regarding the coronavirus outbreak (“COVID-19”) and to assist in protecting the health and well-being of our stockholders and employees, the OnDeck special meeting will be held exclusively in a virtual format to provide a consistent experience to all stockholders regardless of location on October 7, 2020 at 10:00 a.m., Eastern time. We have adopted a virtual format for the OnDeck special meeting to make participation accessible for stockholders from any geographic location with internet connectivity. We designed the format of the OnDeck special meeting to ensure that our stockholders who attend the OnDeck special meeting will be afforded the same rights and opportunities to participate as they would at an in-person meeting. You are entitled to attend and participate in the OnDeck special meeting only if you were a stockholder of record as of the close of business on September 8, 2020, the record date for the OnDeck special meeting, or hold a valid proxy of such a stockholder for the OnDeck special meeting. To be admitted to the OnDeck special meeting at www.meetingcenter.io/281867925, you must enter the password ONDK2020 and your control number which can be found on your proxy card or voting instruction card. Please note that you will not be able to attend the OnDeck special meeting in person. OnDeck stockholders of record may also vote their shares of OnDeck common stock by submitting their proxy (i) by completing, dating, signing and mailing their proxy card in the postage-paid envelope, (ii) by calling the toll-free number on their proxy card: 1-(800) 652-8683 or (iii) over the internet at the following website: www.envisionreports.com/ONDK. If you vote by mail, your proxy card must be received no later than 5:30 p.m. Eastern time on October 2, 2020. If you vote by telephone, you must do so no later than 11:59 p.m. Eastern time on October 6, 2020 and if you vote via the internet, you must do so no later than the close of polling at the OnDeck special meeting.

If you were a beneficial owner of OnDeck common stock as of the record date and you want to attend the OnDeck special meeting, you must register in advance by submitting a legal proxy from your broker, bank,


Table of Contents

trustee or other nominee reflecting your OnDeck shares along with your name and email address to Computershare at legalproxy@computershare.com or by mail to: Computershare, On Deck Capital, Inc. Legal Proxy, P.O. Box 43001, Providence, RI 02940-3001. Requests for registration must be labeled as “Legal Proxy” and be received no later than 5:00 p.m., Eastern time, on October 2, 2020.

OnDeck will transact no other business at the OnDeck special meeting, except such business as may properly be brought before the special meeting or any adjournment or postponement thereof. Please refer to the proxy statement/prospectus of which this notice is a part for further information with respect to the business to be transacted at the OnDeck special meeting.

The OnDeck board has fixed the close of business on September 8, 2020 as the record date for the OnDeck special meeting. Only OnDeck stockholders of record at the record date are entitled to vote at the OnDeck special meeting or any adjournment or postponement thereof. A complete list of stockholders entitled to vote at the OnDeck special meeting will be available for viewing by any OnDeck stockholder during ordinary business hours for a period of 10 days before the meeting, for purposes pertaining to the OnDeck special meeting, at OnDeck’s offices at 1400 Broadway, 25th Floor, New York, New York 10018, and at the time and place of the OnDeck special meeting during the full duration of the meeting. If OnDeck’s headquarters are closed for health and safety reasons related to COVID-19 during such period, the list of stockholders will be made available for inspection upon request via email to secretary@ondeck.com, subject to OnDeck’s satisfactory verification of stockholder status. The list of stockholders will also be made available online during the OnDeck special meeting at the OnDeck meeting website.

Completion of the merger is conditioned on adoption of the merger agreement by the OnDeck stockholders, which requires the affirmative vote of holders of a majority of the outstanding shares of OnDeck common stock entitled to vote thereon.

The OnDeck board has unanimously (i) determined that the terms of the merger agreement and the transactions contemplated thereby are fair and in the best interests of OnDeck and the OnDeck stockholders; (ii) approved the merger agreement and the consummation of the merger; and (iii) directed that the merger agreement be submitted to the OnDeck stockholders for adoption at the OnDeck special meeting.

The OnDeck board unanimously recommends that OnDeck stockholders vote “FOR” the merger proposal as well as “FOR” the merger-related compensation proposal and “FOR” the adjournment proposal.

Your vote is very important regardless of the number of shares of OnDeck common stock that you own. Whether or not you expect to attend the OnDeck special meeting virtually, we urge you to submit your vote in advance of the meeting. If your shares are held in the name of a broker, bank or other nominee, please vote by following the instructions on the voting instruction card furnished by the broker, bank or other nominee. If you hold your shares in your own name, submit a proxy to vote your shares as promptly as possible by (i) visiting the internet site listed on the proxy card, (ii) calling the toll-free number listed on the proxy card or (iii) submitting your proxy card by mail by using the provided self-addressed stamped envelope. Submitting a proxy will not prevent you from voting virtually, but it will help to secure a quorum and avoid added solicitation costs. Any eligible stockholder of OnDeck common stock who is present at the OnDeck special meeting may vote virtually at the OnDeck special meeting by following the instructions and entering the control number provided on their proxy card or voting instruction card, thereby revoking any previous proxy. In addition, a proxy may also be revoked in writing before the OnDeck special meeting in the manner described in the proxy statement/prospectus of which this notice is a part.

The proxy statement/prospectus of which this notice is a part (i) incorporates important business and financial information about OnDeck, Enova and Merger Sub from other documents that OnDeck and Enova have filed with the U.S. Securities and Exchange Commission (the “SEC”) and that are contained in or incorporated by reference into this proxy statement/prospectus and (ii) provides a detailed description of the merger and the


Table of Contents

merger agreement and the other matters to be considered at the OnDeck special meeting. We urge you to carefully read this proxy statement/prospectus, including any documents incorporated by reference herein, and the annexes in their entirety. In particular, we urge you to carefully read the section entitled “Risk Factors” beginning on page 36. If you have any questions concerning the merger or this proxy statement/prospectus, and would like additional copies or need help voting your shares of OnDeck common stock, please contact OnDeck’s proxy solicitors:

Innisfree M&A Incorporated

501 Madison Avenue, 20th Floor

New York, New York 10022

Stockholders in the U.S. and Canada may call toll-free: (877) 825-8772

Stockholders in other locations may call direct: (412) 232-3651

Banks and brokers may call collect: (212) 750-5833

By Order of the OnDeck Board of Directors,

Cory Kampfer

Chief Operations Officer and General Counsel

September 8, 2020

New York, New York


Table of Contents

REFERENCES TO ADDITIONAL INFORMATION

This proxy statement/prospectus incorporates by reference important business and financial information about Enova and OnDeck from other documents that are not included in or delivered with this proxy statement/prospectus. For a listing of the documents incorporated by reference into this proxy statement/prospectus, see “Where You Can Find More Information” beginning on page 159.

You may obtain any of the documents incorporated by reference into this proxy statement/prospectus without charge through the SEC website at www.sec.gov. In addition, you may obtain copies of documents filed by Enova with the SEC by accessing Enova’s website at www.enova.com under the tab “Investor Relations” and then under the heading “SEC Filings.” You may also obtain copies of documents filed by OnDeck with the SEC by accessing OnDeck’s website at www.ondeck.com under “Investors.”

You also can obtain any of the documents incorporated by reference into this proxy statement/prospectus (other than certain exhibits or schedules to such documents) without charge by requesting them in writing or by telephone as follows:

For documents related to OnDeck:

Innisfree M&A Incorporated

501 Madison Avenue, 20th Floor

New York, New York 10022

Stockholders in the U.S. and Canada may call toll-free: (877) 825-8772

Stockholders in other locations may call direct: (412) 232-3651

Banks and brokers may call collect: (212) 750-5833

For documents related to Enova:

Enova International, Inc.

175 West Jackson Blvd.

Chicago, IL 60604

Attention: Investor Relations

Telephone: (312) 568-4200

Email: IR@enova.com

To receive timely delivery of the documents in advance of the OnDeck special meeting, you should make your request no later than September 30, 2020, which is five business days before the meeting.

We are not incorporating the contents of the websites of the SEC, Enova, OnDeck or any other entity into this proxy statement/prospectus. We are providing the information about how you can obtain certain documents that are incorporated by reference into this proxy statement/prospectus at these websites only for your convenience.

 

i


Table of Contents

ABOUT THIS PROXY STATEMENT/PROSPECTUS

This document, which forms part of a registration statement on Form S-4 filed with the SEC by Enova (File No. 333-248400), constitutes a prospectus of Enova under Section 5 of the Securities Act of 1933, as amended (the “Securities Act”), with respect to the shares of common stock, par value $0.00001 per share, of Enova (“Enova common stock”) to be issued pursuant to the merger agreement. This document also constitutes a proxy statement of OnDeck under Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). It also constitutes a notice of meeting with respect to the OnDeck special meeting, at which OnDeck stockholders will be asked to consider and vote on the adoption of the merger agreement.

Enova has supplied all information contained in, and incorporated by reference into, this proxy statement/prospectus relating to Enova and Merger Sub, and OnDeck has supplied all such information relating to OnDeck.

You should rely only on the information contained in, and incorporated by reference into, this proxy statement/prospectus. Enova and OnDeck have not authorized anyone to provide you with information other than the information that is contained in, or incorporated by reference into, this proxy statement/prospectus. Enova and OnDeck take no responsibility for, and can provide no assurances as to the reliability of, any other information that others may give you. This proxy statement/prospectus is dated September 8, 2020, and you should not assume that the information contained in this proxy statement/prospectus is accurate as of any date other than such date. Further, you should not assume that the information incorporated by reference into this proxy statement/prospectus is accurate as of any date other than the date of the incorporated document. Neither the mailing of this proxy statement/prospectus to OnDeck stockholders nor the issuance by Enova of shares of Enova common stock pursuant to the merger agreement will create any implication to the contrary.

 

ii


Table of Contents

TABLE OF CONTENTS

 

QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE ONDECK SPECIAL MEETING

     1  

SUMMARY

     12  

Information about the Companies

     12  

The Merger

     13  

Merger Consideration

     13  

Treatment of OnDeck Stock Options, Other Stock-Based Awards and Cash Awards

     14  

Recommendations of the OnDeck Board of Directors

     16  

Opinion of Evercore Group L.L.C.

     16  

Interests of Directors and Executive Officers of OnDeck in the Merger

     16  

Material U.S. Federal Income Tax Consequences of the Merger

     17  

Accounting Treatment of the Merger

     18  

Appraisal Rights

     18  

Regulatory Approvals Required for the Merger

     18  

Conditions to Completion of the Merger

     18  

No Financing Contingency

     19  

No Solicitation

     19  

Termination of the Merger Agreement

     20  

OnDeck Special Meeting

     22  

Risk Factors

     24  

SELECTED HISTORICAL FINANCIAL DATA

     25  

SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA

     30  

COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA COMBINED PER SHARE INFORMATION

     31  

COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION

     33  

Market Prices

     33  

Dividend Policy

     33  

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

     34  

RISK FACTORS

     36  

Risks Related to the Merger

     36  

Risks Relating to the Combined Company after Completion of the Merger

     41  

Other Risk Factors of Enova and OnDeck

     43  

THE MERGER

     44  

Background of the Merger

     44  

Enova’s Rationale for the Transaction

     53  

Recommendations of the OnDeck Board of Directors and Its Reasons for the Merger

     53  

Opinion of Evercore Group L.L.C.

     58  

Certain Unaudited Prospective Information

     69  

Interests of Directors and Executive Officers of OnDeck in the Merger

     72  

Treatment of Equity and Performance Awards

     72  

Director and Officer Indemnification

     79  

Accounting Treatment of the Merger

     79  

Regulatory Approvals Required for the Merger

     79  

Treatment of OnDeck Stock Options, Other Stock-Based Awards and Cash Awards

     80  

Appraisal Rights

     81  

NYSE Listing of Enova Common Stock; Delisting and Deregistration of OnDeck Common Stock

     85  

Material U.S. Federal Income Tax Consequences

     86  

Restrictions on Sales of Shares of Enova Common Stock Received in the Merger

     90  

Certain Contracts between Enova and OnDeck

     91  

THE MERGER AGREEMENT

     92  

Explanatory Note Regarding the Merger Agreement

     92  

Structure of the Merger

     92  

Timing of Closing

     92  

 

iii


Table of Contents

Merger Consideration

     93  

Covenants and Agreements

     97  

Representations and Warranties

     108  

Conditions to Completion of the Merger

     111  

Termination of the Merger Agreement

     111  

Expenses

     113  

Amendments

     113  

Extension; Waivers

     113  

Governing Law; Jurisdiction; Waiver of Jury Trial

     113  

Specific Performance

     114  

Third-Party Beneficiaries

     114  

INFORMATION ABOUT THE COMPANIES

     115  

SPECIAL MEETING

     117  

Date, Time and Place

     117  

Purpose of the OnDeck Special Meeting

     117  

Recommendation of the OnDeck Board

     118  

Record Date; Stockholders Entitled to Vote

     118  

Voting by OnDeck’s Directors and Executive Officers

     118  

Quorum; Adjournment

     119  

Required Vote

     119  

Attendance at the OnDeck Special Meeting and Voting Virtually

     121  

Revocability of Proxies

     121  

Solicitation

     121  

Assistance

     122  

Tabulation of Votes

     122  

ONDECK PROPOSALS

     122  

Item 1. The Merger Proposal

     122  

Item 2. The Merger-Related Compensation Proposal

     122  

Item 3. The Adjournment Proposal

     123  

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     124  

Unaudited Pro Forma Condensed Combined Balance Sheet At June 30, 2020

     125  

Notes to Unaudited Pro Forma Condensed Combined Financial Statements

     128  

NONBINDING, ADVISORY VOTE ON MERGER-RELATED COMPENSATION FOR ONDECK’S NAMED EXECUTIVE OFFICERS

     137  

DESCRIPTION OF ENOVA CAPITAL STOCK

     138  

COMPARISON OF STOCKHOLDER RIGHTS

     142  

VALIDITY OF COMMON STOCK

     157  

EXPERTS

     157  

STOCKHOLDER PROPOSALS AND NOMINATIONS FOR ONDECK’S 2021 ANNUAL MEETING OF STOCKHOLDERS

     157  

HOUSEHOLDING OF PROXY STATEMENT/PROSPECTUS

     158  

WHERE YOU CAN FIND MORE INFORMATION

     159  

Annex A: Agreement and Plan of Merger

Annex B: Opinion of Evercore Group L.L.C.

Annex C: Section 262 of the Delaware General Corporation Law

 

iv


Table of Contents

QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE ONDECK SPECIAL MEETING

The following questions and answers briefly address certain questions that OnDeck Stockholders may have about the merger and the special meeting of OnDeck stockholders (the “OnDeck special meeting”). They may not include all the information that is important to stockholders of OnDeck. OnDeck stockholders should carefully read this entire proxy statement/prospectus, including the annexes and the other documents referred to or incorporated by reference in this proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 159 of this proxy statement/prospectus.

Q: What is the merger?

Enova International, Inc. (“Enova”), Energy Merger Sub, Inc., an indirect wholly owned subsidiary of Enova (“Merger Sub”), and On Deck Capital, Inc. (“OnDeck”) have entered into an Agreement and Plan of Merger, dated July 28, 2020 (as it may be amended from time to time, the “merger agreement”). A copy of the merger agreement is attached as Annex A to this proxy statement/prospectus. The merger agreement contains the terms and conditions of the proposed acquisition of OnDeck by Enova. Under the merger agreement, subject to satisfaction (or, to the extent permitted by law and in accordance with the merger agreement, waiver) of the conditions to the merger set forth in the merger agreement, Merger Sub will merge with and into OnDeck, with OnDeck continuing as the surviving corporation and an indirect wholly owned subsidiary of Enova (the “merger” or the “transaction”).

As a result of the merger, OnDeck will no longer be a publicly held company. Following the merger, OnDeck common stock will be delisted from the New York Stock Exchange (the “NYSE”) and will be deregistered under the Exchange Act, after which OnDeck will no longer be required under SEC rules and regulations to file periodic reports with the SEC in respect of OnDeck common stock.

Q: Why am I receiving these materials?

Enova and OnDeck are sending these materials to OnDeck stockholders to help them decide how to vote their shares of OnDeck common stock with respect to the merger and other matters to be considered at the OnDeck special meeting.

The merger cannot be completed unless the holders of a majority of the outstanding shares of OnDeck common stock vote to adopt the merger agreement. OnDeck is holding a special meeting of its stockholders to vote on a proposal necessary to approve the merger agreement (the “merger proposal”) and other matters being considered at the special meeting. Information about this special meeting, the merger and the other business to be considered by stockholders at the OnDeck special meeting is contained in this proxy statement/prospectus.

This proxy statement/prospectus constitutes both a proxy statement of OnDeck and a prospectus of Enova. It is a proxy statement because the board of directors of OnDeck (the “OnDeck Board”) is soliciting proxies from its stockholders. It is a prospectus because Enova will issue shares of its common stock as part of the consideration being paid in exchange for outstanding shares of OnDeck common stock in the merger.

Q: What will OnDeck stockholders receive in the merger?

In the merger, OnDeck stockholders will receive $0.12 in cash, without interest (as such amount of cash may potentially be adjusted pursuant to the merger agreement as described below, the “cash consideration”), and 0.092 (as such amount may potentially be adjusted pursuant to the merger agreement as described below, the “exchange ratio”) of a duly authorized, validly issued, fully paid and nonassessable share of Enova common stock (the “stock consideration” and such stock consideration and the cash consideration together, as they may potentially be adjusted pursuant to the merger agreement as described below, the “merger consideration”) for each outstanding share of OnDeck common stock (other than (i) shares held by Enova, OnDeck, Merger Sub or

 

1


Table of Contents

any of their respective direct or indirect wholly owned subsidiaries (“cancelled shares”) and (ii) shares of OnDeck common stock with respect to which appraisal rights are properly demanded and not withdrawn (“dissenting shares”) under the General Corporation Law of the State of Delaware (the “DGCL”)). Certain shares of OnDeck common stock subject to stock-based awards will be treated in the manner described under the heading “The Merger—Treatment of OnDeck Stock Options, Other Stock-Based Awards and Cash Awards.”

If the merger would otherwise result in the issuance of shares of Enova common stock (including shares that would be deliverable pursuant to converted stock-based awards pursuant to the merger agreement) in excess of 19.99% of the outstanding shares of Enova common stock immediately prior to the closing of the merger (the “share cap”), (i) the exchange ratio will be reduced by the smallest number (rounded to the nearest 0.0001) that causes the total number of shares of Enova common stock (including shares that would be deliverable pursuant to converted stock-based awards pursuant to the merger agreement) issuable in the merger to not exceed the share cap (the “exchange ratio reduction number”) and (ii) the cash consideration will be increased by an amount in cash equal to (x) the exchange ratio reduction number multiplied by (y) the average closing sale price per share of Enova common stock on the NYSE for the 10 consecutive trading days ending on the date that is two trading days immediately preceding the closing date of the merger (the “Enova trading price”).

The exchange ratio is otherwise fixed and will not be adjusted to reflect changes in the stock price of either company before the merger is complete. No fractional shares of Enova common stock will be issued in connection with the merger. Each holder of OnDeck common stock that otherwise would have been entitled to receive a fractional share of Enova common stock immediately prior to the effective time of the merger will receive an amount in cash, without interest, rounded to the nearest cent, in lieu of such fractional share. The value of such cash payment will be calculated by the exchange agent by multiplying (x) the aggregate number of fractional shares of Enova common stock that such stockholder would otherwise have been entitled to receive by (y) the Enova trading price, rounded to the nearest whole cent. Enova stockholders will continue to own their existing shares of Enova common stock, the form of which will not be changed by the transaction. For more details on the merger consideration, see “The Merger Agreement—Merger Consideration” beginning on page 93.

The merger will be treated as a taxable transaction for U.S. federal income tax purposes. Therefore, a U.S. holder (as defined below in the section entitled “The Merger—Material U.S. Federal Income Tax Consequences—General”) generally will recognize capital gain or loss equal to the difference between (1) the sum of the cash and the fair market value of any shares of Enova common stock received by such U.S. holder in the merger and (2) the U.S. holder’s adjusted tax basis in its OnDeck common stock. Except in certain circumstances described in “The Merger—Material U.S. Federal Income Tax Consequences—The Merger,” a Non-U.S. holder (as defined below in the section entitled “The Merger—Material U.S. Federal Income Tax Consequences—General”) generally will not be subject to U.S. federal income or withholding tax on any gain recognized on the exchange of OnDeck common stock for any shares of Enova common stock and cash in the merger. You are strongly urged to consult with a tax advisor to determine the particular U.S. federal, state or local or foreign income or other tax consequences of the merger to you. For additional information, see “The Merger—Material U.S. Federal Income Tax Consequences” beginning on page 86.

Q: What equity stake will OnDeck stockholders hold in Enova immediately following the merger?

Upon the completion of the merger, based on the exchange ratio, the estimated number of shares of Enova common stock issuable as the stock portion of the merger consideration is approximately 6.0 million shares, which will result in former OnDeck stockholders holding approximately 16.6% of the outstanding fully diluted shares of Enova common stock based on the number of outstanding shares of common stock and outstanding stock-based awards of Enova and OnDeck as of July 27, 2020.

For more details on the merger consideration and the treatment of OnDeck stock options and stock-based awards, see “The Merger Agreement—Merger Consideration” beginning on page 93 and “The Merger Agreement—

 

2


Table of Contents

Merger Consideration—Treatment of OnDeck Stock Options, Other Stock-Based Awards and Cash Awards” beginning on page 96, respectively.

Q: When do OnDeck and Enova expect to complete the merger?

Enova and OnDeck are working to complete the merger as soon as practicable and currently expect that the transaction will be completed in the fourth quarter of 2020. Neither Enova nor OnDeck can predict, however, the actual date on which the transaction will be completed because it is subject to certain conditions beyond each company’s control. See “The Merger Agreement—Conditions to Completion of the Merger” beginning on page 111.

Q: Is Enova’s obligation to complete the merger subject to Enova receiving financing?

No. Enova’s obligations under the merger agreement are not subject to any condition regarding its ability to finance, or obtain financing for, the merger.

Q: What happens if the merger is not completed?

If the merger agreement is not adopted by OnDeck stockholders or if the merger is not completed for any other reason, OnDeck stockholders will not receive any consideration for their shares of OnDeck common stock. Instead, OnDeck will remain an independent public company, OnDeck common stock will continue to be listed and traded on the NYSE and registered under the Exchange Act and OnDeck will continue to file periodic reports with the SEC. Under specific circumstances, OnDeck may be required to pay Enova a termination fee of $2.8 million. See “The Merger Agreement—Termination of the Merger Agreement” beginning on page 111.

Q: Will the shares of Enova common stock I acquire in the merger receive a dividend?

Enova has never declared or paid a dividend on shares of Enova common stock and has no current plans to pay a dividend. Any declaration and amount of any future dividends would require approval by the Enova board of directors (the “Enova Board”) and would depend on Enova’s financial condition, earnings and capital requirements and covenants associated with Enova’s debt obligations and other factors the Enova Board deems relevant. Under the merger agreement, Enova may not declare or pay any dividends (whether in cash, shares or property or any combination thereof) in respect of any shares of Enova common stock or other equity or voting interest prior to completion of the merger.

Q: Will I continue to have the opportunity to receive dividends in respect of my shares of OnDeck common stock?

OnDeck has never declared or paid a dividend on shares of OnDeck common stock and has no current plans to pay a dividend. OnDeck may not declare or pay any dividends (whether in cash, shares or property or any combination thereof) in respect of any shares of capital stock or other equity or voting interest prior to completion of the merger.

After the closing of the merger, former OnDeck stockholders who hold OnDeck share certificates or uncertificated shares will not be entitled to be paid dividends otherwise payable on the shares of Enova common stock into which their shares of OnDeck common stock are exchangeable until they surrender their OnDeck share certificates or uncertificated shares according to the instructions provided to them. Dividends (if any) will be accrued, without interest, and paid to the Exchange Agent to be included in the Exchange Fund for these stockholders, and these stockholders will receive the accrued dividends (if any) when they surrender their OnDeck share certificates or uncertificated shares.

 

3


Table of Contents

Q: What am I being asked to vote on, and why is this approval necessary?

OnDeck stockholders are being asked to vote on the following proposals:

 

  1.

the merger proposal—a proposal to adopt the merger agreement, a copy of which is attached as Annex A to this proxy statement/prospectus, which is further described in the sections titled “The Merger” and “The Merger Agreement,” beginning on pages 44 and 92, respectively (the “merger proposal”);

 

  2.

the merger-related compensation proposal—an advisory (nonbinding) proposal to approve the compensation that may be paid or become payable to OnDeck’s named executive officers that is based on or otherwise related to the merger (the “merger-related compensation proposal”); and

 

  3.

the adjournment proposal—a proposal to adjourn the OnDeck special meeting from time to time to a later date or time if necessary or appropriate, including to solicit additional proxies in favor of the proposal to adopt the merger agreement if there are insufficient votes at the time of the OnDeck special meeting to adopt the merger agreement (the “adjournment proposal”).

Q: What vote is required to approve each proposal at the OnDeck special meeting?

The merger proposal: The affirmative vote of holders of a majority of the outstanding shares of OnDeck common stock entitled to vote thereon is required to approve the merger proposal (the “OnDeck stockholder approval”).

The merger-related compensation proposal: The affirmative vote of holders of a majority of the shares of OnDeck common stock present virtually or represented by proxy at the OnDeck special meeting and entitled to vote thereon is required to approve the merger-related compensation proposal. Because the vote on the merger-related compensation proposal is advisory only, it will not be binding on either OnDeck or Enova. Accordingly, if the merger agreement is adopted and the merger is completed, the merger-related compensation will be payable to OnDeck’s named executive officers, subject only to the conditions applicable thereto, regardless of whether the merger-related compensation proposal is approved.

The adjournment proposal: The affirmative vote of holders of a majority of the shares of OnDeck common stock present virtually or represented by proxy at the OnDeck special meeting and entitled to vote thereon is required to approve the adjournment proposal, whether or not a quorum is present.

Q: What constitutes a quorum?

The presence at the OnDeck special meeting, via the OnDeck meeting website or represented by proxy, of the holders of a majority of the outstanding shares of OnDeck common stock entitled to vote at the OnDeck special meeting will constitute a quorum for the transaction of business at the OnDeck special meeting. Abstentions will count as votes present and entitled to vote for the purpose of determining the presence of a quorum for the transaction of business at the OnDeck special meeting. Brokers, banks or other nominees that hold shares for beneficial owners do not have discretionary authority to vote the shares as to any matter at the meeting without receiving voting instructions from the beneficial owners. Such shares will be considered to be broker non-votes and will not be counted as present for quorum purposes.

A quorum is necessary to transact business at the OnDeck special meeting. The OnDeck bylaws and the DGCL provide that whether or not a quorum is present at any meeting, the chairman of the meeting may adjourn the meeting from time to time, without notice other than by announcement at the meeting, to another time, place, if any, unless the adjournment is for more than 30 days or, after adjournment, a new record date is fixed for the adjourned meeting.

Q: How does the OnDeck Board recommend that I vote?

The OnDeck Board unanimously recommends that OnDeck stockholders vote “FOR” the merger proposal, “FOR” the merger-related compensation proposal and “FOR” the adjournment proposal.

 

4


Table of Contents

Q: What do I need to do now?

After carefully reading and considering the information contained in, and incorporated by reference into, this proxy statement/prospectus, please vote your shares as soon as possible so that your shares will be represented at the OnDeck special meeting. Please follow the instructions set forth on the proxy card or on the voting instruction card provided by the record holder if your shares are held in the name of your broker, bank or other nominee.

Please carefully consider the information contained in, and incorporated by reference into, this proxy statement/prospectus. Whether or not you plan to virtually attend the OnDeck special meeting, OnDeck encourages you to submit your proxy to vote via the internet, by telephone or by mail so that your shares will be voted in accordance with your wishes even if you later decide not to attend the OnDeck special meeting.

Q: How do I vote?

OnDeck stockholders of record as of the close of business on the record date may have their shares voted by submitting a proxy or may vote virtually at the OnDeck special meeting by following the instructions and entering the control number provided on their proxy card or voting instruction card. OnDeck recommends that OnDeck stockholders entitled to vote submit a proxy even if they plan to attend the OnDeck special meeting.

OnDeck stockholders who hold their shares beneficially in “street name” and wish to submit a proxy must provide instructions to the broker, bank, trustee or other nominee that holds their shares of record as to how to vote their shares with respect to each proposal. OnDeck stockholders who hold their shares beneficially and wish to vote at the OnDeck special meeting must receive a legal proxy and voting instruction card with a control number from their broker, bank, trustee or other nominee.

If you are a stockholder of record of OnDeck as of September 8, 2020 (the “record date”), you may submit a proxy in one of three ways or vote at the OnDeck special meeting:

 

   

Internet—OnDeck stockholders may submit their proxy over the internet at the following website: www.envisionreports.com/ONDK. Have your proxy card in hand when you access the website and follow the instructions to vote your shares. If you vote via the internet, you must do so no later than the close of polling at the OnDeck special meeting.

 

   

Telephone—OnDeck stockholders may submit their proxy by calling the toll-free number on their proxy card: 1-(800) 652-8683. Have your proxy card in hand when you call and then follow the instructions to vote your shares. If you vote by telephone, you must do so no later than 11:59 p.m. Eastern time on October 6, 2020.

 

   

Mail—OnDeck stockholders may submit their proxy by completing, dating, signing and mailing their proxy card in the postage-paid envelope. If you do not have the postage-paid envelope, please mail your completed, dated and signed proxy card to the following address: Computershare Investor Services, PO Box 505000 Louisville, KY 40233-5000. If you vote by mail, your proxy card must be received no later than 5:30 p.m. Eastern time on October 6, 2020.

 

   

At the Virtual OnDeck Special Meeting—All OnDeck stockholders may vote online by attending the OnDeck special meeting via the internet at www.meetingcenter.io/281867925, by entering the password ONDK2020 and providing the control number found on their proxy card. You must use this code to be admitted to the meeting. “Street name” holders may vote online during the OnDeck special meeting if they receive a voting instruction card with a control number. You may cast your vote electronically during the OnDeck special meeting using the control number found on your proxy card or voting instruction card. If you do not have a control number, please contact your broker, bank or other nominee as soon as possible so that you can be provided with a control number.

 

5


Table of Contents

Q: When and where is the OnDeck special meeting? What must I bring to attend the OnDeck special meeting?

Due to concerns regarding COVID-19 and to assist in protecting the health and well-being of our stockholders and employees, the OnDeck special meeting will be held exclusively in a virtual format to provide a consistent experience to all stockholders regardless of location, on October 7, 2020 at 10:00 a.m. Eastern time. We have adopted a virtual format for the OnDeck special meeting to make participation accessible for stockholders from any geographic location with internet connectivity. We designed the format of the OnDeck special meeting to ensure that our stockholders who attend the OnDeck special meeting will be afforded the same rights and opportunities to participate as they would at an in-person meeting. You are entitled to attend and participate in the OnDeck special meeting only if you were a stockholder of record as of the close of business on September 8, 2020, the record date for the OnDeck special meeting, or hold a valid proxy of such a stockholder for the OnDeck special meeting. You can attend the OnDeck special meeting at www.meetingcenter.io/281867925, by entering the password ONDK2020 and providing the control number found on their proxy card. At the meeting you will be able to listen to the meeting live, submit questions and vote your shares online during the meeting, just as you could at an in-person meeting. Shareholders of record will need to provide the control number found on their proxy card to be admitted to the meeting. If you are a stockholder of record, your control number can be found on your proxy card. Once admitted, you may submit questions and vote during the OnDeck special meeting by following the instructions that will be available on the meeting website. Please note that you will not be able to attend the OnDeck special meeting in person.

Q: How can I submit a question at the OnDeck special meeting?

OnDeck stockholders may submit questions in advance of the OnDeck special meeting by visiting www.proxyvote.com and accessing the online pre-meeting forum using the control number found on such stockholder’s proxy card or voting instruction card. Stockholders may also submit questions during the OnDeck special meeting. As part of the OnDeck special meeting, we will hold a live question and answer session during which we intend to answer questions submitted in advance of and during the meeting in accordance with the OnDeck special meeting procedures, which are pertinent to OnDeck and the meeting matters, as time permits. Questions may be submitted during the OnDeck special meeting through www.meetingcenter.io/281867925 by entering the password ONDK2020 and providing the control number found on their proxy card. Questions and answers will be grouped by topic and substantially similar questions will be grouped and answered once.

Q: What if I need technical assistance?

We encourage you to access the OnDeck special meeting before it begins. Online check-in will start shortly before the meeting on October 7, 2020. If you encounter any difficulties accessing the meeting during the check-in or meeting time, please call 1-800-586-1548 (toll-free) or 1-303-562-9288 (international).

Q: How can I vote during the OnDeck special meeting?

All stockholders of record may vote online during the OnDeck special meeting. Street name holders may vote online during the OnDeck special meeting if they have a voting instruction card with a control number, as described above. You may cast your vote electronically during the OnDeck special meeting using the control number found on your proxy card. If you do not have a control number, please contact your broker, bank or other nominee as soon as possible so that you can be provided with a control number.

Whether you plan to attend the OnDeck special meeting or not, we encourage you to vote by proxy as soon as possible.

Q: What is the difference between holding shares as a stockholder of record and as a beneficial owner?

If your shares of OnDeck common stock are registered directly in your name with the transfer agent of OnDeck, Computershare Trust Company, N.A. (“Computershare”) you are considered the stockholder of record with

 

6


Table of Contents

respect to those shares. As the stockholder of record, you have the right to vote or to grant a proxy for your vote directly to OnDeck or to a third party to vote at the OnDeck special meeting.

If your shares are held by a broker, bank or other nominee, you are considered the beneficial owner of shares held in “street name,” and your broker, bank or other nominee is considered the stockholder of record with respect to those shares. Your broker, bank or other nominee will send you, as the beneficial owner, voting instructions for you to use in directing the broker, bank or other nominee in how to vote your shares. You should follow the instructions provided by them to vote your shares. You are invited to attend the OnDeck special meeting; however, you may not vote virtually for these shares at the OnDeck special meeting, unless you obtain a legal proxy and voting instruction card with a control number from your broker, bank or other nominee that holds your shares, giving you the right to vote the shares at the OnDeck special meeting.

Q: If my shares are held in “street name” by a broker, bank or other nominee, will my broker, bank or other nominee vote my shares for me?

If your shares are held in “street name” in a stock brokerage account or by a broker, bank or other nominee, you must provide the record holder of your shares with instructions on how to vote your shares. Please follow the voting instructions provided by your broker, bank or other nominee. Please note that you may not vote shares held in street name by returning a proxy card directly to OnDeck or by voting virtually at the OnDeck special meeting, unless you provide a legal proxy and follow the instructions for voting set forth on the voting instruction card with a control number provided by your broker, bank or other nominee. Your broker, bank or other nominee is obligated to provide you with a voting instruction card for you to use.

The NYSE permits brokers to vote their customers’ stock held in street name on routine matters when the brokers have not received voting instructions from their customers. The NYSE does not, however, allow brokers to vote their customers’ stock held in street name on non-routine matters, unless they have received voting instructions from their customers. In such cases, the uninstructed shares for which the broker is unable to vote are called broker non-votes. The merger proposal, the merger-related compensation proposal and the adjournment proposal are non-routine matters on which brokers are not allowed to vote, unless they have received voting instructions from their customers.

If you are an OnDeck stockholder and you do not instruct your broker, bank or other nominee on how to vote your shares:

 

   

your broker, bank or other nominee may not vote your shares on the merger proposal, which broker non-votes, if any, will have the same effect as a vote cast “AGAINST” this proposal;

 

   

your broker, bank or other nominee may not vote your shares on the merger-related compensation proposal, which broker non-votes, if any, will have no effect on the vote for this proposal (assuming a quorum is present); and

 

   

your broker, bank or other nominee may not vote your shares on the adjournment proposal, which broker non-votes, if any, will have no effect on the vote for this proposal.

Q: What if I fail to vote or abstain?

For purposes of the OnDeck special meeting, an abstention occurs when a stockholder attends the OnDeck special meeting virtually and does not vote or returns a proxy with an “abstain” instruction.

Merger proposal: An abstention or failure to vote will have the same effect as a vote cast virtually “AGAINST” the merger proposal.

Merger-related compensation proposal: An abstention will have the same effect as a vote cast virtually “AGAINST” the merger-related compensation proposal. If an OnDeck stockholder is not present at the OnDeck special meeting and does not vote by proxy, it will have no effect on the vote for the merger-related compensation proposal (assuming a quorum is present).

 

7


Table of Contents

Adjournment proposal: An abstention from voting will have the same effect as a vote “AGAINST” the adjournment proposal. In addition, even if a quorum is not present at the OnDeck special meeting, the chairman of the OnDeck special meeting may adjourn the OnDeck special meeting to another place, date or time.

Q: What will happen if I return my proxy or voting instruction card without indicating how to vote?

If you sign and return your proxy or voting instruction card without indicating how to vote on any particular proposal, the OnDeck common stock represented by your proxy will be voted as recommended by the OnDeck Board with respect to that proposal.

Q: May I change or revoke my vote after I have submitted my proxy or voting instructions?

Yes. If you are a record holder, you may change or revoke your vote before your proxy is voted at the OnDeck special meeting as described herein. You may do this in one of three ways:

 

  (1)

submitting a proxy at a later time by internet or telephone until 11:59 p.m. Eastern time on October 6, 2020;

 

  (2)

attending and voting virtually at the OnDeck special meeting, although attendance at the OnDeck special meeting will not, by itself, revoke a proxy; or

 

  (3)

delivering, before 6:00 p.m. Eastern time on October 2, 2020, to OnDeck’s Corporate Secretary at OnDeck’s executive offices at 1400 Broadway, 25th Floor, New York, New York 10018, a proxy with a later date or a written revocation of your most recent proxy.

Please note, however, that under the rules of the NYSE, any OnDeck stockholder whose shares are held in street name by a member brokerage firm may revoke his, her or its proxy and vote his, her or its shares at the OnDeck special meeting only in accordance with the applicable rules and procedures of those exchanges, as employed by the street name holder’s brokerage firm. “Street name” holders of shares of OnDeck common stock should contact their broker, bank, trustee or other nominee to obtain instructions as to how to change their proxies. If you have instructed a bank, broker, trust or other nominee to vote your shares, you must follow the instructions received from your bank, broker, trust or other nominee to change your vote. In addition, if you hold your shares in street name, you must have a legal proxy from the record holder of the OnDeck shares and must follow the instructions for voting as set forth on the voting instruction card with a control number as provided your brokers, banks or other nominees.

Q: What are the material U.S. federal income tax consequences of the merger?

The merger will be treated as a taxable transaction for U.S. federal income tax purposes. Therefore, a U.S. holder (as defined below in the section entitled “The Merger—Material U.S. Federal Income Tax Consequences—General”) generally will recognize capital gain or loss equal to the difference between (1) the sum of the cash and the fair market value of any shares of Enova common stock received by such U.S. holder in the merger and (2) the U.S. holder’s adjusted tax basis in its OnDeck common stock.

Except in certain circumstances described in “The MergerMaterial U.S. Federal Income Tax Consequences—The Merger,” a Non-U.S. holder (as defined below in the section entitled “The Merger—Material U.S. Federal Income Tax Consequences—General”) generally will not be subject to U.S. federal income or withholding tax on any gain recognized on the exchange of OnDeck common stock for any shares of Enova common stock and cash in the merger.

In certain circumstances, beneficial owners of OnDeck common stock who expect to own an equal or greater percentage interest in Enova following the merger than their percentage interest in OnDeck prior to the merger, taking into account the application of certain constructive ownership rules, may have tax consequences that differ

 

8


Table of Contents

materially from those described above as a result of the application of Section 304 of the Internal Revenue Code of 1986, as amended (the “Code”). All references in this proxy statement/prospectus to “Section 304” are to Section 304 of the Code. As described further below under “The Merger—Material U.S. Federal Income Tax Consequences—The Merger—Special Consequences of the Merger to Beneficial Owners of OnDeck Common Stock That Also Own Enova Common Stock,” such owners may be required to include the entire amount of the consideration received as dividend income. Non-U.S. holders may be subject to U.S. federal income and withholding tax on such dividend income. In addition, withholding agents may withhold on consideration payable to all Non-U.S. holders because withholding agents may not be able to determine whether any particular Non-U.S. holder is subject to withholding as a result of these rules. Any such owners who expect to own an equal or greater percentage interest in Enova, following the merger, than their percentage interest in OnDeck prior to the merger and all Non-U.S. holders should consult their own tax advisors regarding the application of Section 304 to the merger.

Please refer to “The Merger—Material U.S. Federal Income Tax Consequences—The Merger” contained in this proxy statement/prospectus for a description of the material U.S. federal income tax consequences of the merger. Determining the actual tax consequences of the merger to you may be complex and will depend on your specific situation. You are urged to consult your tax advisor for a full understanding of the tax consequences of the merger to understand how it will impact you.

Q: Am I entitled to exercise appraisal rights in connection with the merger instead of receiving the merger consideration for my shares of OnDeck common stock?

Under Delaware law, if the merger is completed, holders of OnDeck common stock who do not vote in favor of the merger proposal and otherwise comply with the requirements and procedures of Section 262 of the DGCL may exercise their rights of appraisal, which generally entitles stockholders to receive a cash payment equal to the fair value of their OnDeck common stock exclusive of any element of value arising from the accomplishment or expectation of the merger, as determined by the Delaware Court of Chancery. The “fair value” could be higher or lower than, or the same as, the merger consideration. For a more detailed description of the appraisal rights available to OnDeck stockholders and the procedures required to exercise appraisal rights, see “The Merger—Appraisal Rights” beginning on page 81. A copy of the full text of Section 262 of the DGCL is attached as Annex C to this proxy statement/prospectus.

Q: What will happen to OnDeck stock options, other stock-based awards and cash awards?

Upon completion of the merger:

 

   

Each outstanding option that represents the right to acquire shares of OnDeck common stock (each, an “OnDeck stock option”) with an exercise price less than the merger consideration cash value (as defined below), whether vested or unvested, will be cancelled and converted into the right to receive an amount in cash (without interest) equal to (x) the merger consideration cash value minus the exercise price of such OnDeck stock option multiplied by (y) the total number of shares of OnDeck common stock subject to such OnDeck stock option. “Merger consideration cash value” is the sum of the (i) cash consideration and (ii) the product of (A) the exchange ratio, multiplied by (B) the Enova trading price.

 

   

Each outstanding OnDeck stock option with an exercise price equal to or greater than the merger consideration cash value, whether vested or unvested, will be forfeited and cancelled automatically without any consideration paid.

 

   

Each outstanding OnDeck restricted stock unit award, including any performance-vesting restricted stock units where the performance period has ended and that remain solely subject to time-based vesting on or prior to the effective time (each, an “OnDeck RSU”) held by an employee of OnDeck or any of its subsidiaries, will be assumed and converted automatically into a time vesting restricted stock

 

9


Table of Contents
 

unit award (each, an “Adjusted RSU) that, subject to vesting, will be settled for a number of shares of Enova common stock equal to the sum of (i) the product of (A) the exchange ratio, multiplied by (B) the number of shares of OnDeck common stock subject to the OnDeck RSU, plus (ii) the quotient of (A) the product of (x) the number of shares of OnDeck common stock subject to the OnDeck RSU, multiplied by (y) the cash consideration, divided by (B) the Enova trading price; provided that fractional shares may, at Enova’s election, be settled in cash (without interest), based on the fair market value of a share of Enova common stock at the time of such settlement. Each Adjusted RSU will otherwise be subject to the same terms and conditions applicable to the corresponding OnDeck RSU, including vesting terms, except that each Adjusted RSU will also immediately become fully vested upon any termination of the holder’s employment that occurs before the first anniversary of the completion of the merger and is without cause, for good reason, or due to death or disability.

 

   

Each outstanding OnDeck RSU held by a non-employee member of the OnDeck Board of Directors (an “OnDeck non-employee director”), whether vested or unvested, will automatically become vested in full and will be cancelled and converted into the right to receive the merger consideration for each share of OnDeck common stock underlying such OnDeck RSU.

 

   

Each outstanding OnDeck performance vesting restricted stock unit that may be settled in OnDeck common stock that remains subject to performance-vesting conditions (the “OnDeck PSUs”), will become vested (or will be forfeited) based on the level of achievement of performance conditions as determined in good faith by the compensation committee of OnDeck’s Board (with the consent of Enova, which will not be unreasonably withheld) prior to completion of the Merger or at target level of performance for holders of OnDeck PSUs who are also party to a change in control and severance agreement with OnDeck, which includes the OnDeck named executive officers, and will be cancelled and converted into the right to receive (A) a number of shares of Enova common stock, equal to the sum of (x) the product of (I) the exchange ratio, multiplied by (II) the number of shares of OnDeck common stock subject to vesting under the OnDeck PSU based on the achievement of performance conditions, plus (y) the quotient of (I) the product of (aa) the number of shares of OnDeck common stock described in clause (A)(x)(II) above, multiplied by (bb) the cash consideration, divided by (II) the Enova trading price, minus (B) that number of shares of Enova common stock with a fair market value equal to all required withholding taxes due upon settlement of such OnDeck PSU as described in clause (A); provided that fractional shares may, at Enova’s election, be settled in cash (without interest), based on the fair market value of a share of Enova common stock at the time of such settlement.

 

   

Each outstanding performance vesting restricted unit payable in cash (each, an “OnDeck Performance Unit Award”) that was granted in 2018 or 2020 will become vested (or will be forfeited) based on the level of achievement of performance conditions as determined in good faith by the compensation committee of OnDeck’s Board (with the consent of Enova, which will not be unreasonably withheld) prior to completion of the merger or at target level of performance for holders of OnDeck Performance Unit Awards who are also party to a change in control and severance agreements with OnDeck, which includes the OnDeck named executive officers, and will, whether vested or unvested, be converted into the right to receive, an amount in cash (without interest), equal to (i) $1.00 multiplied by (ii) the total number of units of the OnDeck Performance Unit Awards that become vested based on the determined achievement of applicable performance conditions.

 

   

Each outstanding OnDeck Performance Unit Award that was granted in 2019, whether vested or unvested, will automatically be assumed and converted into an Adjusted Performance Unit Award that, subject to satisfying applicable service vesting requirements, will be settled for an amount of cash (without interest) equal to $1.00. Each Adjusted Performance Unit Award will otherwise be subject to the same terms and conditions applicable to the corresponding OnDeck Performance Unit Award; provided that, each such Adjusted Performance Unit Award will immediately become fully vested upon any termination of the holder’s employment that occurs before the first anniversary of the closing date and is without cause, for good reason, or due to death or disability.

 

10


Table of Contents

Q: What happens if I sell my shares of OnDeck common stock after the record date but before the OnDeck special meeting?

The record date for the OnDeck special meeting (the close of business on September 8, 2020) is earlier than the date of the OnDeck special meeting and earlier than the date that the merger is expected to be completed. If you sell or otherwise transfer your shares of OnDeck common stock after the record date but before the date of the OnDeck special meeting, you will retain your right to vote at the OnDeck special meeting. However, you will not have the right to receive the merger consideration to be received by OnDeck stockholders in the merger or to demand appraisal rights. In order to receive the merger consideration or demand appraisal rights, you must hold your shares through completion of the merger.

Q: Are there any risks that I should consider in deciding whether to vote in favor of the merger proposal?

Yes. You should read and carefully consider the risk factors set forth in the section entitled “Risk Factors” beginning on page 36. You also should read and carefully consider the risk factors of Enova and OnDeck contained in the documents that are incorporated by reference into this proxy statement/prospectus.

Q: What should I do if I receive more than one set of voting materials?

If you hold shares of OnDeck common stock in “street name” and also directly as a record holder or otherwise or if you hold shares of OnDeck common stock in more than one brokerage account, you may receive more than one set of voting materials relating to the OnDeck special meeting. Please complete, sign, date and return each proxy card (or cast your vote by telephone or internet as provided on your proxy card) or otherwise follow the voting instructions provided in this proxy statement/prospectus in order to ensure that all of your shares of OnDeck common stock are voted on. If you hold your shares in “street name” through a broker, bank or other nominee, you should follow the procedures provided by your broker, bank or other nominee to vote your shares.

Q: Who will tabulate and certify the vote?

Computershare, an independent third party, will tabulate and certify the vote, and will have a representative to act as the independent inspector of election for the OnDeck special meeting.

Q: Where can I find the voting results of the OnDeck special meeting?

The preliminary voting results will be announced at the OnDeck special meeting. In addition, within four business days following certification of the final voting results, OnDeck intends to file the final voting results with the SEC on a Current Report on Form 8-K.

Q: Whom should I contact if I have any questions about the proxy materials or voting?

If you have any questions about the proxy materials, or if you need assistance submitting your proxy or voting your shares or need additional copies of this proxy statement/prospectus or the enclosed proxy card, you should contact the proxy solicitation agents for OnDeck, at:

Innisfree M&A Incorporated

501 Madison Avenue, 20th Floor

New York, New York 10022

Stockholders in the U.S. and Canada may call toll-free: (877) 825-8772

Stockholders in other locations may call direct: (412) 232-3651

Banks and brokers may call collect: (212) 750-5833

 

11


Table of Contents

SUMMARY

This summary highlights selected information contained in this proxy statement/prospectus and does not contain all the information that may be important to you. OnDeck and Enova urge you to read carefully this proxy statement/prospectus in its entirety, including the annexes. Additional important information, which OnDeck and Enova also urge you to read, is contained in the documents incorporated by reference into this proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 159. Unless stated otherwise, all references in this proxy statement/prospectus to “OnDeck” are to On Deck Capital, Inc., all references to “Enova” are to Enova International, Inc. and all references to the merger agreement are to the Agreement and Plan of Merger, dated as of July 28, 2020, by and among Enova, Energy Merger Sub, Inc. (“Merger Sub”) and OnDeck, a copy of which is attached as Annex A to this proxy statement/prospectus.

Information about the Companies

Enova

Enova is a leading technology and analytics company focused on providing online financial services. In 2019, Enova extended approximately $2.2 billion in credit or financing to borrowers. As of June 30, 2020, Enova offered or arranged loans or draws on lines of credit to consumers in 40 states in the United States and Brazil. Enova also offers financing to small businesses in all 50 states and Washington D.C. in the United States. Enova uses its proprietary technology, analytics and customer service capabilities to quickly evaluate, underwrite and fund loans or provide financing, allowing it to offer consumers and small businesses credit or financing when and how they want it. Enova’s customers include consumers who and small businesses that have bank accounts but use alternative financial services because of their limited access to more traditional credit from banks, credit card companies and other lenders. Enova was an early entrant into online lending, launching its online business in 2004, and through June 30, 2020, it has completed over 52 million customer transactions and collected more than 37 terabytes of currently accessible customer behavior data, allowing it to better analyze and underwrite its specific customer base. Enova has significantly diversified its business over the past several years having expanded the markets it serves and the financing products it offers. These financing products include installment loans and receivables purchase agreements and line of credit accounts.

Enova was incorporated under the laws of the State of Delaware on September 7, 2011. Enova common stock is traded on the NYSE under the symbol “ENVA.”

The principal executive offices of Enova are located at 175 West Jackson Boulevard, Chicago, Illinois 60604; its telephone number is (312) 568-4200; and its website is www.enova.com.

This proxy statement/prospectus incorporates important business and financial information about Enova from other documents that are not included in or delivered with this proxy statement/prospectus. For a list of the documents that are incorporated by reference in this proxy statement/prospectus, see “Where You Can Find More Information” beginning on page 159 of this proxy statement/prospectus.

OnDeck

OnDeck is a leader in transparent and responsible online lending to small businesses. OnDeck was founded in 2006 and helped pioneer the use of data analytics and digital technology to make real-time lending decisions and deliver financing rapidly to small businesses online. OnDeck offers a wide range of term loans and lines of credit customized for the needs of small business owners. Since inception, OnDeck has provided over $13 billion in loans to customers in 700 different industries across the United States, Canada and Australia.

OnDeck is a leading platform for online small business lending and continues to transform small business lending by making it efficient and convenient for small businesses to access financing through innovative lending



 

12


Table of Contents

experiences and financial products. OnDeck’s platform touches every aspect of the customer life cycle, including customer acquisition, sales, scoring and underwriting, funding, and servicing and collections. Enabled by its proprietary technology and analytics, OnDeck aggregates and analyzes thousands of data points from dynamic, disparate data sources, and the relationships among those attributes, to assess the creditworthiness of small businesses rapidly and accurately. The data points include customer activity shown on their bank statements, business and personal credit bureau reports, government filings, tax and census data. Small businesses can apply for a term loan or line of credit on OnDeck’s website and, using its proprietary OnDeck Score®, OnDeck can make funding decisions immediately and fund in as fast as 24 hours.

In 2018, OnDeck established ODX, a wholly owned subsidiary, in response to the growing demand from banks for third-party digital origination solutions. Through ODX, OnDeck offers bank and financial institution clients a comprehensive technology and services platform that facilitates online lending to small business customers.

OnDeck was incorporated under the laws of the State of Delaware on May 4, 2006. OnDeck common stock is traded on the NYSE, under the symbol “ONDK.”

The principal executive offices of OnDeck are located at 1400 Broadway, 25th Floor, New York, New York 10018; its telephone number is (888) 269-4246; and its website is www.ondeck.com.

This proxy statement/prospectus incorporates important business and financial information about OnDeck from other documents that are not included in or delivered with this proxy statement/prospectus. For a list of the documents that are incorporated by reference in this proxy statement/prospectus, see “Where You Can Find More Information” beginning on page 159 of this proxy statement/prospectus.

Merger Sub

Merger Sub is a wholly owned subsidiary of Enova. Merger Sub was formed solely for the purpose of completing the merger. Merger Sub has not carried on any activities to date, except for activities incidental to its formation and activities undertaken in connection with the merger.

Merger Sub was incorporated in the State of Delaware on July 24, 2020. The principal executive offices of Merger Sub are located at 175 West Jackson Boulevard, Chicago, Illinois 60604, and its telephone number is (312) 568-4200.

The Merger

On July 28, 2020, Enova, Merger Sub and OnDeck entered into the merger agreement, which provides that, upon the terms and subject to the conditions set forth therein and in accordance with the DGCL, Merger Sub will merge with and into OnDeck, with OnDeck continuing as the surviving corporation and an indirect wholly owned subsidiary of Enova.

Merger Consideration

In the merger, each share of OnDeck common stock that is issued and outstanding immediately prior to the effective time of the merger (other than cancelled shares and dissenting shares) will be converted into the right to receive the merger consideration, consisting of $0.12 in cash (as such amount of cash may potentially be adjusted pursuant to the merger agreement as described below, the “ cash consideration”), without interest, 0.092 (as such amount may potentially be adjusted pursuant to the merger agreement as described below, the “exchange ratio”) of a duly authorized, validly issued, fully paid and nonassessable share of Enova common stock (the “stock



 

13


Table of Contents

consideration” and such stock consideration and the cash consideration, collectively, as they may potentially be adjusted pursuant to the merger agreement as described below, the “merger consideration”). If applicable, holders of OnDeck common stock will also receive cash, without interest thereon, in lieu of any fractional shares of Enova common stock (the “fractional share consideration”) in an amount equal to the aggregate number of fractional shares of Enova common stock that would otherwise be issued to such holder of OnDeck common stock in connection with the merger multiplied by the Enova trading price (as defined below). If the merger would otherwise result in the issuance of shares of Enova common stock (including shares that would be deliverable pursuant to converted stock-based awards pursuant to the merger agreement) in excess of 19.99% of the outstanding shares of Enova common stock immediately prior to the closing of the merger (the “share cap”), (i) the exchange ratio will be reduced by the smallest number (rounded to the nearest 0.0001) that causes the total number of shares of Enova common stock (including shares that would be deliverable pursuant to converted stock-based awards pursuant to the merger agreement) issuable in the merger to not exceed the share cap (the “exchange ratio reduction number”) and (ii) the cash consideration will be increased by an amount in cash equal to (x) the volume weighted-average closing sale price of one share of Enova common stock reported on the NYSE for the 10 consecutive trading days ending on the date that is two trading days prior to the closing date (as adjusted as appropriate to reflect any stock splits, stock dividends, combinations, reorganizations, reclassifications or similar events) as reported by Bloomberg (the “Enova trading price”).

The exchange ratio is otherwise fixed and will not be adjusted to reflect changes in the stock price of OnDeck or Enova prior to the closing of the merger. The exchange ratio will, however, be adjusted appropriately to fully reflect the effect of any reclassification, recapitalization, stock split, reverse stock split, or combination, exchange of shares, or any stock dividend (including any dividend or other distribution of securities convertible into OnDeck common stock or Enova common stock, as applicable) thereon with respect to outstanding shares of capital stock of either Enova or OnDeck with a record date between the date of the merger agreement and the completion of the merger. No fractional shares of Enova common stock will be issued in connection with the merger. Each stockholder of OnDeck common stock that otherwise would have been entitled to receive a fractional share of Enova common stock immediately prior to the effective time of the merger will receive an amount in cash (after aggregating all certificates delivered by such OnDeck stockholder and rounding to three decimal places), without interest, rounded to the nearest cent, in lieu of such fractional share. The value of such cash payment will be calculated by the exchange agent and will represent the stockholder’s interest by multiplying the (x) the aggregate number of fractional shares of Enova common stock that such stockholder would otherwise have been entitled to receive by (y) the Enova trading price.

Enova stockholders will continue to own their existing shares of Enova common stock, the form of which will not be changed by the transaction.

Treatment of OnDeck Stock Options, Other Stock-Based Awards and Cash Awards

OnDeck Stock Options. Upon completion of the merger, (i) each outstanding OnDeck stock option with an exercise price less than the merger consideration cash value, whether vested or unvested, will be cancelled and converted into the right to receive an amount in cash (without interest) equal to (x) the merger consideration cash value minus the exercise price of such OnDeck stock option multiplied by (y) the total number of shares of OnDeck common stock subject to such OnDeck stock option, and (ii) each outstanding OnDeck stock option with an exercise price equal to or greater than the merger consideration cash value, whether vested or unvested, will be forfeited and cancelled automatically without any consideration paid.

OnDeck RSUs. Upon completion of the merger, each outstanding OnDeck RSU held by an employee of OnDeck or any of its subsidiaries, will be assumed and converted automatically into an Adjusted RSU that, subject to vesting, will be settled for a number of shares of Enova common stock equal to the sum of (i) the product of (A) the exchange ratio, multiplied by (B) the number of shares of OnDeck common stock subject to



 

14


Table of Contents

the OnDeck RSU, plus (ii) the quotient of (A) the product of (x) the number of shares of OnDeck common stock subject to the OnDeck RSU, multiplied by (y) the cash consideration, divided by (B) the Enova trading price; provided that fractional shares may, at Enova’s election, be settled in cash (without interest), based on the fair market value of a share of Enova common stock at the time of such settlement. Each Adjusted RSU will otherwise be subject to the same terms and conditions applicable to the corresponding OnDeck RSU, including vesting terms, except that each such Adjusted RSU will immediately become fully vested upon any termination of the holder’s employment that occurs before the first anniversary of the completion of the merger and is without cause, for good reason, or due to death or disability.

Upon completion of the merger, each outstanding OnDeck RSU held by an OnDeck non-employee director, whether vested or unvested, will automatically become vested in full and will be cancelled and converted into the right to receive the merger consideration for each share of OnDeck common stock underlying such OnDeck RSU.

OnDeck PSUs. Each outstanding OnDeck PSU will become vested (or will be forfeited) based on the level of achievement of performance conditions as determined in good faith by the compensation committee of OnDeck’s Board (with the consent of Enova, which shall not be unreasonably withheld) prior to completion of the merger or at target level of performance for holders of OnDeck PSUs who are also party to a change in control and severance agreement with OnDeck, which includes the OnDeck named executive officers, and will be cancelled and converted into the right to receive (A) a number of shares of Enova common stock, equal to the sum of (x) the product of (I) the exchange ratio, multiplied by (II) the number of shares of OnDeck common stock subject to vesting under the OnDeck PSU based on the achievement of performance conditions, plus (y) the quotient of (I) the product of (aa) the number of shares of OnDeck common stock described in clause (A)(x)(II) above, multiplied by (bb) the cash consideration, divided by (II) the Enova trading price, minus (B) that number of shares of Enova common stock with a fair market value equal to all required withholding taxes due upon settlement of such OnDeck PSU as described in clause (A); provided that fractional shares may, at Enova’s election, be settled in cash (without interest), based on the fair market value of a share of Enova common stock at the time of such settlement.

OnDeck Performance Unit Awards. Each outstanding OnDeck Performance Unit Award will become vested (or will be forfeited) based on the level of achievement of performance conditions as determined in good faith by the compensation committee of OnDeck’s Board (with the consent of Enova, which shall not be unreasonably withheld) prior to completion of the merger or at target level of performance for holders of OnDeck Performance Unit Awards who are also party to a change in control and severance agreement with OnDeck, which includes the OnDeck named executive officers, and will, whether vested or unvested, be converted into the right to receive, an amount in cash (without interest), equal to (i) $1.00 multiplied by (ii) the total number of units of the OnDeck Performance Unit Awards that become vested based on the determined achievement of applicable performance conditions.

Each outstanding OnDeck Performance Unit Award that was granted in 2019, whether vested or unvested, will automatically be assumed and converted into an Adjusted Performance Unit Award that, subject to satisfying applicable service vesting requirements, will be settled for an amount of cash (without interest) equal to $1.00. Each Adjusted Performance Unit Award will otherwise be subject to the same terms and conditions applicable to the corresponding OnDeck Performance Unit Award; provided that, each such Adjusted Performance Unit Award will immediately become fully vested upon any termination of the holder’s employment that occurs before the first anniversary of the closing date and is without cause, for good reason, or due to death or disability.

For a more complete discussion of the treatment of OnDeck stock options and other OnDeck stock-based awards, see “The Merger—Treatment of OnDeck Stock Options, Other Stock-Based Awards and Cash Awards” beginning on page 96.



 

15


Table of Contents

Recommendations of the OnDeck Board of Directors

After careful consideration, the OnDeck Board unanimously recommends that holders of OnDeck common stock vote “FOR” the merger proposal.

After careful consideration, the OnDeck Board unanimously recommends that holders of OnDeck common stock vote “FOR” the merger-related compensation proposal.

After careful consideration, the OnDeck Board unanimously recommends that holders of OnDeck common stock vote “FOR” the adjournment proposal.

For a more complete description of the OnDeck Board’s reasons for the merger and the recommendation of the OnDeck Board, see “The Merger—Enova’s Rationale for the Merger” and “The Merger—Recommendation of the OnDeck Board of Directors and Its Reasons for the Merger” beginning on pages 44 and 53, respectively.

Opinion of Evercore Group L.L.C.

OnDeck retained Evercore Group L.L.C. (“Evercore”) to act as its financial advisor in connection with the OnDeck Board’s evaluation of strategic and financial alternatives, including a possible sale of OnDeck. As part of this engagement, OnDeck requested that Evercore evaluate the fairness, from a financial point of view, of the merger consideration to be received by the holders of OnDeck common stock. At a meeting of the OnDeck Board held on July 28, 2020, Evercore rendered to the OnDeck Board its opinion to the effect that, as of that date and based upon and subject to the assumptions, limitations, qualifications and conditions described in Evercore’s opinion, the merger consideration of $0.12 in cash and 0.092 of a share of Enova common stock per share of OnDeck common stock to be received by the holders of OnDeck common stock in the merger was fair, from a financial point of view, to such holders (other than Enova and its affiliates).

The full text of the written opinion of Evercore, dated July 28, 2020, which sets forth, among other things, the procedures followed, assumptions made, matters considered and qualifications and limitations on the scope of review undertaken in rendering its opinion, is attached as Annex B to this proxy statement/prospectus and is incorporated herein by reference. OnDeck encourages you to read this opinion carefully and in its entirety. Evercore’s opinion was addressed to, and provided for the information and benefit of, the OnDeck Board (in its capacity as such) in connection with its evaluation of the proposed merger. The opinion does not constitute a recommendation to the OnDeck Board or to any other persons in respect of the merger, including as to how any holder of shares of OnDeck common stock should vote or act in respect of the merger. Evercore’s opinion does not address the relative merits of the merger as compared to other business or financial strategies that might be available to OnDeck, nor does it address the underlying business decision of OnDeck to engage in the merger.

For further information, see “The Merger—Opinion of Evercore Group L.L.C.” beginning on page 58 and the full text of the written opinion of Evercore attached as Annex B to this proxy statement/prospectus.

Interests of Directors and Executive Officers of OnDeck in the Merger

You should be aware that some of the directors and executive officers of OnDeck have interests in the merger that are different from, or are in addition to, the interests of stockholders generally. These interests include the following:

 

   

Executive officers and directors of OnDeck have arrangements with OnDeck that provide for certain benefits upon completion of the merger and/or if their employment or service is terminated under



 

16


Table of Contents
 

certain circumstances following the completion of the merger, including (i) in the case of executive officers, severance, accelerated vesting, conversion and right to receive merger consideration (or an equivalent amount) for certain equity awards and accelerated vesting of certain cash awards, and (ii) in the case of non-employee directors, accelerated vesting and conversion to a right to receive merger consideration for OnDeck RSUs.

 

   

Executive officers and directors of OnDeck have rights to indemnification, advancement of expenses and directors’ and officers’ liability insurance that will survive the completion of the merger.

 

   

As of the date of this proxy statement/prospectus, Mr. Breslow has entered into an offer letter with Enova to serve in a non-director capacity as Vice Chairman of Enova providing for (i) an annual base salary of $580,000 and (ii) subject to grant and approval by the Compensation Committee of the Enova Board, an equity award with a grant date value of $1,160,000. Subject to earlier accelerated vesting upon a qualifying termination, 75% of the equity award will vest on a date that is six months following the completion of the merger and the remaining 25% of the equity award will vest on the first anniversary of the completion of the merger.

The OnDeck Board was aware of these additional interests of their directors and executive officers and considered these potential interests, among other matters, in evaluating and negotiating the merger agreement and the merger, in approving the merger agreement and in recommending the applicable merger-related proposals.

For a further discussion of the interests of OnDeck’s directors and executive officers in the merger, see “The Merger—Interests of Directors and Executive Officers of OnDeck in the Merger” beginning on page 72.

Material U.S. Federal Income Tax Consequences of the Merger

The merger will be treated as a taxable transaction for U.S. federal income tax purposes. Therefore, a U.S. holder (as defined below in the section entitled “The Merger—Material U.S. Federal Income Tax Consequences—General”) generally will recognize capital gain or loss equal to the difference between (i) the sum of the cash and the fair market value of any shares of Enova common stock received by such U.S. holder in the merger and (ii) the U.S. holder’s adjusted tax basis in its OnDeck common stock.

Except in certain circumstances described in “The Merger—Material U.S. Federal Income Tax Consequences—The Merger,” a Non-U.S. holder (as defined below in the section entitled “The Merger—Material U.S. Federal Income Tax Consequences—General”) generally will not be subject to U.S. federal income or withholding tax on any gain recognized on the exchange of OnDeck common stock for any shares of Enova common stock and cash in the merger.

In certain circumstances, beneficial owners of OnDeck common stock who expect to own an equal or greater percentage interest in Enova following the merger than their percentage interest in OnDeck prior to the merger, taking into account the application of certain constructive ownership rules, may have tax consequences that differ materially from those described above as a result of the application of Section 304. As described further below under “The Merger—Material U.S. Federal Income Tax Consequences—The Merger—Special Consequences of the Merger to Beneficial Owners of OnDeck Common Stock That Also Own Enova Common Stock,” such owners may be required to include the entire amount of the consideration received as dividend income. Non-U.S. holders may be subject to U.S. federal income and withholding tax on such dividend income. In addition, withholding agents may withhold on consideration payable to all Non-U.S. holders because they may not be able to determine whether any particular Non-U.S. holder is subject to withholding as a result of these rules. Any such owners who expect to own an equal or greater percentage interest in Enova following the merger than their percentage interest in OnDeck prior to the merger and all Non-U.S. holders should consult their own tax advisors regarding the application of Section 304 to the merger.

Please refer to “The Merger—Material U.S. Federal Income Tax Consequences—The Merger” contained in this proxy statement/prospectus for a description of the material U.S. federal income tax



 

17


Table of Contents

consequences of the merger. Determining the actual tax consequences of the merger to you may be complex and will depend on your specific situation. You are urged to consult your tax advisor for a full understanding of the tax consequences of the merger to you.

Accounting Treatment of the Merger

The merger will be accounted for as an acquisition of OnDeck by Enova under the acquisition method of accounting in accordance with accounting principles generally accepted in the U.S. (“GAAP”). For additional information, see “The Merger—Accounting Treatment of the Merger” beginning on page 79.

Appraisal Rights

Under Delaware law, if the merger is completed, holders of OnDeck common stock who do not vote in favor of the adoption of the merger agreement and who otherwise comply with the requirements and procedures of Section 262 of the DGCL will be entitled to seek appraisal for, and obtain payment in cash for the judicially determined fair value of, their shares of OnDeck common stock, in lieu of receiving the merger consideration. The “fair value” could be higher or lower than, or the same as, the merger consideration. A copy of the full text of Section 262 of the DGCL is included as Annex C to this proxy statement/prospectus. OnDeck stockholders are encouraged to read Section 262 of the DGCL carefully and in its entirety. Moreover, due to the complexity of the procedures for exercising the right to seek appraisal, OnDeck stockholders who are considering exercising that right are encouraged to seek the advice of legal counsel. Failure to comply with Section 262 of the DGCL may result in loss of the right of appraisal. For a more detailed description of OnDeck stockholder’s appraisal rights, see “The Merger—Appraisal Rights” beginning on page 81.

Regulatory Approvals Required for the Merger

The merger is subject to the requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), under which Enova and OnDeck may not complete the merger until notification and report forms are furnished to the Antitrust Division of the U.S. Department of Justice (“DOJ”) and the U.S. Federal Trade Commission (“FTC”) and the HSR Act waiting period is terminated or expires. On August 11, 2020, Enova and OnDeck each filed their respective requisite notification and report form under the HSR Act with the DOJ and the FTC.

Conditions to Completion of the Merger

The parties expect to complete the merger after all of the conditions to the merger are satisfied or waived, including after the merger agreement has been adopted by the OnDeck stockholders. The parties currently expect to complete the transaction in the fourth quarter of 2020. However, it is possible that factors outside of each company’s control could require them to complete the transaction at a later time or not to complete it at all.

In addition to the approval of the merger proposal by OnDeck stockholders (the “OnDeck stockholder approval”) and the expiration or termination of the applicable waiting period under the HSR Act, each as described above, each party’s obligation to complete the merger is also subject to the satisfaction (or, to the extent permitted by law and in accordance with the merger agreement, waiver) of other conditions, including the effectiveness of the registration statement on Form S-4 of which this proxy statement/prospectus forms a part (and the absence of any stop order by the SEC), approval of the listing on the NYSE of the Enova common stock to be issued in the merger (subject to notice of official listing), the absence of a law or an injunction prohibiting the merger, the accuracy of the representations and warranties of the other party under the merger agreement (subject to the materiality standards set forth in the merger agreement), the performance by the other party of its respective obligations under the merger agreement in all material respects and delivery of an officer’s certificate by the other party certifying satisfaction of the two preceding conditions.

Neither Enova nor OnDeck can be certain when, or if, the conditions to the merger will be satisfied or waived, or that the merger will be completed. For a more complete summary of the conditions that must be



 

18


Table of Contents

satisfied or waived prior to completion of the merger, see “The Merger Agreement—Conditions to Completion of the Merger” beginning on page 111.

No Financing Contingency

Enova’s obligation to close the merger is not conditioned on its ability to obtain financing. The merger is not subject to any financing contingencies.

No Solicitation

OnDeck has agreed that it shall not, and shall cause its subsidiaries and its and their respective directors and officers not to and shall use its reasonable best efforts to cause its and its subsidiaries’ respective non-officer employees, investment bankers, attorneys, consultants, accountants and other advisors or representatives (collectively, “representatives”) not to, directly or indirectly:

 

   

solicit, initiate or take any action to knowingly encourage, facilitate or induce the submission of any acquisition proposal (as defined below) or any proposal or inquiry that would reasonably be expected to lead to an acquisition proposal;

 

   

enter into, or participate in, any discussions or negotiations with, furnish any nonpublic information relating to OnDeck or any of its subsidiaries to, provide or afford access to the business, properties, assets, books or records of OnDeck or any of its subsidiaries to, any third party that OnDeck knows or should reasonably be expected to know is seeking to make, or has made, an acquisition proposal or any inquiry or proposal that would reasonably be expected to lead to an acquisition proposal (except to notify such person as to the existence of such non-solicitation restriction);

 

   

(A) withdraw, qualify, amend or modify in any manner adverse to Enova, the OnDeck board’s recommendation that the OnDeck stockholders adopt the merger agreement in accordance with Delaware General Corporation Law (“DGCL”) (the “OnDeck board recommendation”), (B) fail to include the OnDeck board recommendation herein, (C) recommend, adopt or approve or publicly propose to recommend, adopt or approve any acquisition proposal or enter into or approve, recommend or declare advisable for OnDeck or any of its subsidiaries to execute or enter into, any agreement, letter of intent, understanding, agreement in principle or other similar arrangement (other than an acceptable confidentiality agreement) in connection with any acquisition proposal or (D) fail to recommend against any acquisition proposal or reaffirm without qualification the OnDeck board recommendation in a statement complying with Rule 14e-2(a) under the Exchange Act, in each case, with regard to an acquisition proposal that is a tender or exchange offer, by the close of business on the 10th business day after the commencement of such acquisition proposal under Rule 14d-2 (any of the foregoing described in clauses (A) through (D), an “OnDeck board recommendation change”);

 

   

take any action to make any “moratorium,” “control share acquisition,” “fair price,” “supermajority,” “affiliate transaction” or “business combination statute or regulation” or other similar anti-takeover laws and regulations under applicable law inapplicable to any third party or any acquisition proposal; or

 

   

resolve, authorize, legally commit or propose publicly to do any of the foregoing.

An “acquisition proposal” is any bona fide proposal or offer from any person or group relating to any:

 

   

direct or indirect acquisition (whether in a single transaction or a series of related transactions) of assets of OnDeck or any of its subsidiaries (including securities of OnDeck’s subsidiaries) equal to 20% or more of the consolidated assets of OnDeck and its subsidiaries;

 

   

direct or indirect acquisition (whether in a single transaction or a series of related transactions) of 20% or more of the issued and outstanding shares of OnDeck common stock or voting securities of OnDeck;



 

19


Table of Contents
   

tender offer or exchange offer that, if consummated, would result in any person or group beneficially owning 20% or more of the issued and outstanding shares of OnDeck common stock or voting securities of OnDeck; or

 

   

merger, consolidation, share exchange, business combination, joint venture, reorganization, recapitalization or similar transaction involving OnDeck or any of its subsidiaries whereby such person or group would acquire, directly or indirectly, (i) 20% or more of the consolidated assets of OnDeck and its subsidiaries or (ii) beneficial ownership of 20% or more of OnDeck’s common stock or voting securities or equity or voting securities of OnDeck’s subsidiaries representing, directly or indirectly, 20% or more of the consolidated assets of OnDeck and its subsidiaries.

The merger agreement includes customary exceptions such that if, prior to obtaining the OnDeck stockholder approval of the merger proposal (the “approval time”), the OnDeck Board receives an acquisition proposal that was not solicited in material breach of the restrictions set forth above, OnDeck may, subject to OnDeck’s compliance with certain provisions of the merger agreement (i) contact the third party that has made the acquisition proposal to ascertain the facts or clarify the terms of such acquisition proposal and (ii)(x) engage in negotiations or discussions with such third party and (y) enter into an acceptable confidentiality agreement with such third party and furnish to such third party and its representatives and financing sources nonpublic information relating to OnDeck or any of its subsidiaries pursuant to an acceptable confidentiality agreement; provided that all nonpublic information (to the extent such information has not been previously provided or made available to Enova) is provided to Enova or made available to Enova, as the case may be, substantially concurrently with the time it is provided or made available to such third party; provided, that prior to and as a condition of taking any actions described in clause (ii) above, OnDeck’s Board (or any committee thereof) must determine in good faith, after consultation with its financial advisor and outside legal counsel, that such acquisition proposal is or would reasonably be expected to lead to, a superior proposal (as defined on page 103). In addition, Enova generally has an opportunity to offer to modify the terms of the merger agreement in response to any acquisition proposal before the OnDeck Board can make an OnDeck board recommendation change or terminate the merger agreement. For a discussion of the limitations on solicitation of acquisition proposals, see “The Merger Agreement—Covenants and Agreements—No Solicitation” beginning on page 101.

Termination of the Merger Agreement

Termination

The merger agreement may be terminated, and the merger may be abandoned at any time prior to the effective time of the merger in any of the following ways:

 

   

By the mutual written consent of Enova and OnDeck.

 

   

By either Enova or OnDeck:

 

   

if there is in effect any law in any jurisdiction of competent authority or order, issued, promulgated, made, rendered or entered into by any court or other tribunal of competent jurisdiction, that permanently restrains, enjoins, makes illegal or otherwise prohibits the consummation of the merger and in the case of any such order, such order becomes final and non-appealable; except that the right to terminate the merger agreement will not be available to either Enova or OnDeck to the extent such party has failed to use its commercially reasonable efforts to resist, appeal, obtain consent pursuant to, resolve or lift, as applicable, such final and non-appealable order;

 

   

if the merger has not been completed by April 28, 2021 (such date as it may be extended, the “termination date”); provided that, if the closing has not occurred by the termination date solely because certain closing conditions relating to obtaining antitrust approval have not been satisfied due to an order arising under any antitrust law, but all other conditions have been met, then the termination date may be extended by either Enova or OnDeck until the date that is 90 days after the original termination date by written notice to the other party; provided, further, that, if the



 

20


Table of Contents
 

closing has not occurred by the termination date (as extended) solely due to any delays associated with governmental authority disruptions due to COVID-19, then the termination date will automatically be extended to 10 business days following the cessation of the relevant governmental authority disruptions; provided, further, that the right to terminate the merger agreement as described herein will not be available to either Enova nor OnDeck if such party’s beach of any provision of the merger agreement primarily causes or results in the failure to consummate the merger on or before the termination date;

 

   

if OnDeck fails to obtain the OnDeck stockholder approval at the OnDeck special meeting or at any adjournment or postponement thereof; or

 

   

if there has been a breach by the other party of any of its representations, warranties, covenants or agreements contained in the merger agreement, and such breach would result in the failure to satisfy certain conditions to the obligations of Enova and Merger Sub (in the case of a breach by OnDeck) or certain conditions to the obligations of OnDeck (in the case of a breach by Enova or Merger Sub) to the merger, and such breach is incapable of being cured by the termination date or, if capable of being cured, is not cured within 30 days following written notice thereof to the breaching party (or, if earlier, by the fifth business day prior to the termination date); provided that either party will not have the right to terminate the merger agreement if it is then in material breach of any representations, warranties, covenants or other agreements contained in the merger agreement that would result in the failure of certain conditions to the completion of the merger to be satisfied.

 

   

By Enova:

 

   

if at any time the OnDeck Board (or a committee thereof) has effected an OnDeck board recommendation change; or

 

   

in the event of the willful breach (as described below) by OnDeck of its obligations under the non-solicitation provisions of the merger agreement (as discussed beginning on page 101), unless Enova is not harmed as a result; provided that the right to terminate the merger agreement as described herein will only be available to Enova prior to the approval time.

 

   

By OnDeck:

 

   

prior to the approval time, in order to concurrently enter into a definitive agreement with respect to a superior proposal (and pay the termination fee of $2.8 million (the “termination fee”); provided that the right to terminate the merger agreement as described herein will only be available to OnDeck if it has not materially breached its obligations under the non-solicitation provisions of the merger agreement.

If the merger agreement is terminated as described above, the merger agreement will be void and have no effect, and there will be no liability or obligation on the part of any party, except that:

 

   

certain provisions contained in the merger agreement with respect to the effect of termination, the allocation of costs and expenses and the termination fee will survive the termination of the merger agreement;

 

   

the agreements contained in the confidentiality agreement between Enova and OnDeck will survive the termination of the merger agreement; and

 

   

no termination will relieve any party of any liability or damages resulting from any material breach that is a consequence of an act undertaken or a failure to take an act by the breaching party with the knowledge that taking such act or failing to take such act would, or would reasonably be excepted to, cause a material breach of the merger agreement, or that such party should have reasonably known



 

21


Table of Contents
 

would cause, or reasonably be expected to cause, such breach (a “willful breach”) by that party of the merger agreement.

Termination Fees. OnDeck has agreed to pay or cause to be paid to Enova the termination fee in connection with a termination of the merger agreement under the following circumstances:

 

   

if (A) prior to the approval time, the merger agreement is terminated by OnDeck or Enova (i) because the termination date has occurred or (ii) because OnDeck failed to obtain the OnDeck stockholder approval at the OnDeck special meeting (or any adjournment or postponement thereof); (B) following the execution and delivery of the merger agreement and prior to termination of the merger agreement, an acquisition proposal has been publicly announced or publicly made known and has not been publicly withdrawn at least three business days in advance of the OnDeck special meeting; and (C) within 12 months following termination of the merger agreement, either an acquisition proposal is consummated or OnDeck enters into a definitive agreement providing for an acquisition proposal and such acquisition proposal is subsequently consummated. For purposes of this section an acquisition proposal means an acquisition proposal for or in respect of at least fifty percent of the outstanding shares of OnDeck common stock or fifty percent of OnDeck’s consolidated assets;

 

   

if the merger agreement is terminated by Enova pursuant to an OnDeck board recommendation change or in the event of a willful breach by OnDeck of the non-solicitation provisions of the merger agreement; or

 

   

if the merger agreement is terminated by OnDeck pursuant to its entry into a definitive agreement with respect to a superior proposal.

The merger agreement further provides that if OnDeck pays the termination fee to Enova, except in the case of willful breach or fraud, Enova cannot also seek to recover any other money damages or seek any other remedy from OnDeck.

For a more detailed discussion of each party’s termination rights and the related termination fee obligations, see “The Merger Agreement—Termination of the Merger Agreement” beginning on page 111.

OnDeck Special Meeting

Date, Time, Place and Purpose

Due to concerns regarding COVID-19 and to assist in protecting the health and well-being of our stockholders and employees, the OnDeck special meeting will be held exclusively in a virtual format to provide a consistent experience to all stockholders regardless of location on October 7, 2020 at 10:00 a.m., Eastern time. To be admitted to the OnDeck special meeting at www.meetingcenter.io/281867925, you must enter the password ONDK2020 and your control number which can be found on your proxy card or voting instruction card. Please note that you will not be able to attend the OnDeck special meeting in person. OnDeck stockholders of record may also vote their shares of OnDeck common stock by submitting their proxy (i) by completing, dating, signing and mailing their proxy card in the postage-paid envelope, (ii) by calling the toll-free number on their proxy card: 1-(800) 652-8683 or (iii) over the internet at the following website: www.envisionreports.com/ONDK. If you vote by mail, your proxy card must be received no later than 5:30 p.m. Eastern time on October 2, 2020. If you vote by telephone, you must do so no later than 11:59 p.m. Eastern time on October 6, 2020 and if you vote via the internet, you must do so no later than the close of polling at the OnDeck special meeting. We have adopted a virtual format for the OnDeck special meeting to make participation accessible for stockholders from any geographic location with internet connectivity. We designed the format of the OnDeck special meeting to ensure that our stockholders who attend the OnDeck special meeting will be afforded the same rights and opportunities to participate as they would at an in-person meeting. You are entitled to attend and participate in



 

22


Table of Contents

the OnDeck special meeting only if you were a stockholder of record as of the close of business on September 8, 2020, the record date for the OnDeck special meeting, or hold a valid proxy of such a stockholder for the OnDeck special meeting.

To be admitted to the OnDeck special meeting, please visit: www.meetingcenter.io/281867925 and enter the password ONDK2020 along with your control number found on your proxy card or voting instruction card. Please note that you will not be able to attend the OnDeck special meeting in person. At the OnDeck special meeting, OnDeck stockholders will be asked to consider and vote on the merger proposal, the merger-related compensation proposal and the adjournment proposal. Completion of the merger is conditioned on the approval of the merger proposal.

If you were a beneficial owner of OnDeck common stock as of the record date and you want to attend the OnDeck special meeting, you must register in advance by submitting a legal proxy from your broker, bank, trustee or other nominee reflecting your OnDeck holdings along with your name and email address to Computershare at legalproxy@computershare.com or by mail to: Computershare, On Deck Capital, Inc. Legal Proxy, P.O. Box 43001, Providence, RI 02940-3001. Requests for registration must be labeled as “Legal Proxy” and be received no later than 5:00 p.m., Eastern time, on October 2, 2020.

Record Date; Stockholders Entitled to Vote

Only holders of record of OnDeck common stock at the close of business on September 8, 2020, the record date, will be entitled to notice of, and to vote at, the OnDeck special meeting or any adjournment or postponement thereof.

On the record date, there were 59,015,141 shares of OnDeck common stock outstanding and entitled to vote at the OnDeck special meeting. Each share of OnDeck common stock outstanding on the record date entitles the holder thereof to one vote on each proposal to be considered at the OnDeck special meeting. OnDeck stockholders may vote virtually at the OnDeck special meeting by following the instructions and entering the control number provided on their proxy card or voting instruction card or by proxy through the internet, or by telephone, or by a properly executed and delivered proxy card with respect to the OnDeck special meeting.

A complete list of stockholders entitled to vote at the OnDeck special meeting will be available for viewing by any OnDeck stockholder during ordinary business hours for a period of 10 days before the meeting, for purposes pertaining to the OnDeck special meeting, at OnDeck’s offices at 1400 Broadway, 25th Floor, New York, New York 10018, and at the time and place of the OnDeck special meeting during the full duration of the meeting. If OnDeck’s headquarters are closed for health and safety reasons related to COVID-19 during such period, the list of stockholders will be made available for inspection upon request via email to secretary@ondeck.com, subject to OnDeck’s satisfactory verification of stockholder status. The list of stockholders will also be made available online during the OnDeck special meeting at the OnDeck meeting website.

Quorum; Abstentions and Broker Non-Votes

A quorum of OnDeck stockholders is necessary for OnDeck to hold the OnDeck special meeting. The holders of a majority of the outstanding shares of OnDeck common stock entitled to vote at the OnDeck special meeting must be present virtually via the OnDeck meeting website or represented by proxy in order to constitute a quorum.

For purposes of determining whether there is a quorum, all shares that are present via the OnDeck meeting website or represented by proxy will count towards the quorum, which will include proxies received but marked as abstentions and will exclude broker non-votes.



 

23


Table of Contents

A broker non-vote occurs when a broker, bank or other nominee holding shares for a beneficial owner has not received voting instructions from the beneficial owner and the broker, bank or other nominee does not have discretionary authority to vote the shares. If you hold your shares of OnDeck common stock in street name and do not provide voting instructions to your broker, bank or other nominee, your shares will be considered to be broker non-votes and will not be considered to be present at the OnDeck special meeting for the purpose of determining the presence of a quorum.

Required Vote to Approve the Merger Proposal

Approval of the merger proposal requires the affirmative vote of holders of a majority of the outstanding shares of OnDeck common stock entitled to vote thereon. Failures to vote, broker non-votes and abstentions will have the same effect as a vote cast “AGAINST” the merger proposal.

Required Vote to Approve the Merger-Related Compensation Proposal

Approval of the merger-related compensation proposal requires the affirmative vote of holders of a majority of the shares of OnDeck common stock present virtually or represented by proxy at the OnDeck special meeting and entitled to vote thereon. Failures to vote and broker non-votes will have no effect on the vote for this proposal (assuming a quorum is present); abstentions will have the same effect as a vote cast “AGAINST” the approval of this proposal.

Required Vote to Approve the Adjournment Proposal

Approval of the adjournment proposal requires the affirmative vote of holders of a majority of the shares of OnDeck common stock present virtually or represented by proxy at the OnDeck special meeting and entitled to vote thereon to approve the adjournment proposal, whether or not a quorum is present. Failures to vote and broker non-votes will have no effect on the vote for this proposal; abstentions will have the same effect as a vote cast “AGAINST” the approval of this proposal. In addition, even if a quorum is not present at the OnDeck special meeting, the chairman of the OnDeck special meeting may adjourn the OnDeck special meeting to another place, date or time.

Voting by OnDeck’s Directors and Executive Officers

At the close of business on September 3, 2020, the most recent practicable date for which such information was available, directors and executive officers of OnDeck and their respective affiliates owned and were entitled to vote 2,210,601 shares of OnDeck common stock, representing approximately 3.75% of the shares of OnDeck common stock outstanding on that date. The number and percentage of shares of OnDeck common stock owned by directors and executive officers of OnDeck and their respective affiliates as of the record date are not expected to be meaningfully different from the number and percentage as of September 8, 2020. OnDeck currently expects its directors and executive officers to vote their shares of OnDeck common stock in favor of each of the proposals to be voted on at the OnDeck special meeting, but no director or executive officer has entered into any agreement obligating him or her to do so.

Risk Factors

You should consider all the information contained in, and incorporated by reference into, this proxy statement/prospectus in deciding how to vote for the proposals presented in the proxy statement/prospectus. In particular, you should consider the factors described under “Risk Factors” beginning on page 36.



 

24


Table of Contents

SELECTED HISTORICAL FINANCIAL DATA

Selected Historical Consolidated Financial Data of Enova

The following table sets forth selected consolidated financial information and other data for Enova as of and for each of the six months ended June 30, 2020 and June 30, 2019 and as of and for each of the years in the five-year period ended December 31, 2019. The selected consolidated statement of income data and statement of cash flows data for the years ended December 31, 2019, 2018 and 2017 and the selected consolidated balance sheet data as of December 31, 2019 and 2018 have been derived from, and are qualified by reference to, the audited consolidated financial statements included in Enova’s Annual Report on Form 10-K for the year ended December 31, 2019, which is incorporated by reference in this proxy statement/prospectus. With the exception of the removal of the results of Enova’s U.K. businesses, which were placed into administration in October 2019 and treated as discontinued operations, the selected consolidated statement of income data and statement of cash flows data for the years ended December 31, 2016 and 2015 and the selected consolidated balance sheet data as of December 31, 2017, 2016 and 2015 have been derived from audited consolidated financial statements of Enova that are not included or incorporated by reference in this proxy statement/prospectus.

The selected consolidated financial information as of and for each of the six months ended June 30, 2020 and 2019 is derived from the unaudited consolidated financial statements included in Enova’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, which is incorporated by reference in this proxy statement/prospectus. The unaudited consolidated financial information includes all adjustments, consisting solely of normal recurring adjustments, which Enova considers necessary for a fair statement of its financial position and results of operations for those periods. The results for the six months ended June 30, 2020 are not necessarily indicative of the results that might be expected for the entire year ending December 31, 2020 or any other period.

The consolidated financial information set forth below should be read in conjunction with Enova’s consolidated financial statements, related notes and other financial and operating information incorporated by reference in this proxy statement/prospectus.

 

    Six Months Ended
June 30,
    Year Ended December 31,  
    2020     2019     2019     2018     2017     2016     2015  
(In thousands, except per share data)      

Statement of Income Data:

             

Revenue

  $ 615,313     $ 523,883     $ 1,174,757     $ 972,621     $ 728,903     $ 642,091     $ 522,897  

Change in fair value/Cost of revenue

    (356,391     (242,291     (602,894     (503,405     (353,488     (301,186     (204,652
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net Revenue Gross Profit

    258,922       281,592       571,863       469,216       375,415       340,905       318,245  

Expenses

             

Marketing

    37,546       44,922       115,132       95,960       76,558       71,959       81,974  

Operations and technology

    47,770       40,636       84,262       78,367       69,631       61,043       48,416  

General and administrative

    50,287       57,295       109,204       105,143       99,754       95,461       96,354  

Depreciation and amortization

    7,674       7,615       15,055       14,200       13,282       14,408       16,922  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Expenses

    143,277       150,468       323,653       293,670       259,225       242,871       243,666  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from Operations

    115,645       131,124       248,210       175,546       116,190       98,034       74,579  

Interest expense, net

    (40,753     (37,618     (75,604     (79,364     (74,005     (66,453     (52,953

Foreign currency transaction gain (loss), net

    23       (178     (216     (2,318     381       1,569       (928

Loss on early extinguishment of debt

    —         (2,321     (2,321     (24,991     (22,895     —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before Income Taxes

    74,915       91,007       170,069       68,873       19,671       33,150       20,698  

Provision for income taxes

    21,141       21,402       42,053       5,301       2,057       13,844       8,345  

Net income from continuing operations

    53,774       69,605       128,016       63,572       17,614       19,306       12,353  

Net (loss) income from discontinued operations

    (288     (9,525     (91,404     6,526       11,626       15,296       31,639  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net Income

  $ 53,486     $ 60,080     $ 36,612     $ 70,098     $ 29,240     $ 34,602     $ 43,992  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

25


Table of Contents
    Six Months Ended
June 30,
    Year Ended December 31,  
    2020     2019     2019     2018     2017     2016     2015  
(In thousands, except per share data)      

Earnings Per Share:

             

Earnings per common share — basic:

             

Continuing operations

  $ 1.72     $ 2.07     $ 3.80     $ 1.87     $ 0.52     $ 0.58     $ 0.37  

Discontinued operations

    (0.01     (0.29     (2.71     0.19       0.35       0.46       0.96  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total earnings per common share — basic

  $ 1.71     $ 1.78     $ 1.09     $ 2.06     $ 0.87     $ 1.04     $ 1.33  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per common share — diluted:

             

Continuing operations

  $ 1.70     $ 2.02     $ 3.72     $ 1.81     $ 0.52     $ 0.58     $ 0.37  

Discontinued operations

    (0.01     (0.28     (2.66     0.18       0.34       0.46       0.96  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total earnings per common share — diluted

  $ 1.69     $ 1.74     $ 1.06     $ 1.99     $ 0.86     $ 1.03     $ 1.33  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average common shares outstanding:

             

Basic

    31,270       33,660       33,715       33,993       33,523       33,192       33,006  

Diluted

    31,592       34,451       34,398       35,176       34,132       33,462       33,026  

Other Financial Data:

             

Adjusted EPS(a)

  $ 1.89     $ 2.24     $ 4.08     $ 2.39     $ 1.03     $ 0.66     $ 0.65  

Adjusted EBITDA(a)

    130,439       145,506       275,602       202,039       138,421       117,664       104,401  

Adjusted EBITDA margin(a)

    21.2     27.8     23.5     20.8     19.0     18.3     20.0

Net revenue/gross profit margin

    42.1     53.8     48.7     48.2     51.5     53.1     60.9

Number of employees (at period end)

    1,145       1,111       1,213       1,043       939       920       911  

Balance Sheet Data (at period end):

             

Cash and cash equivalents

  $ 321,472     $ 33,849     $ 35,895     $ 28,114     $ 49,772     $ 27,577     $ 26,912  

Loans and finance receivables, net

    799,662       829,458       1,062,650       780,112       625,407       504,938       374,034  

Total assets

    1,578,973       1,390,299       1,574,352       1,334,351       1,163,669       986,550       724,851  

Long-term debt

    906,588       785,504       991,181       857,929       788,542       649,911       541,909  

Total stockholders’ equity

    476,220       406,453       376,613       347,768       281,687       241,699       205,968  

Other Operating Data:

             

Combined loans and finance receivables, gross

             

Installment loans and RPAs(b)

  $ 596,630     $ 724,361     $ 874,312     $ 726,467     $ 597,310     $ 481,688     $ 366,338  

Line of credit accounts

    226,329       263,825       392,837       227,563       170,068       144,141       100,809  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total combined loans and finance receivables, gross(b)

  $ 822,959     $ 988,186     $ 1,267,149     $ 954,030     $ 767,378     $ 625,829     $ 467,147  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Combined loan and finance receivable originations

             

Installment loans and RPAs

  $ 349,854     $ 736,537     $ 1,605,229     $ 1,584,853     $ 1,351,199     $ 1,309,746     $ 1,309,513  

Line of credit accounts

    211,164       243,488       642,915       393,547       301,255       318,385       237,325  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total combined originations

  $ 561,018     $ 980,025     $ 2,248,144     $ 1,978,400     $ 1,652,454     $ 1,628,131     $ 1,546,838  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

26


Table of Contents

 

(a)

The tables below show reconciliations of Adjusted Earnings, Adjusted Earnings per Share and Adjusted EBITDA, non-GAAP measures, to Net Income and Diluted Earnings per Share, which are the most directly comparable GAAP measures. In addition, the tables below present the calculation of Adjusted EBITDA margin, which is defined as Adjusted EBITDA as a percentage of total revenue (dollars in thousands, except per share data):

 

    Six Months Ended
June 30,
    Year Ended December 31,  
(In thousands, except per share data)   2020     2019     2019     2018     2017     2016     2015  

Net income from continuing operations

  $ 53,774     $ 69,605     $ 128,016     $ 63,572     $ 17,614     $ 19,306     $ 12,353  

Adjustments:

             

Loss on early extinguishment of debt(1)

    —         2,321       2,321       24,991       22,895       —         —    

Acquisition-related costs(2)

    —         —         —         —         (2,358     (3,300     —    

Lease termination and cease use costs(3)

    —         726       726       —         —         —         3,270  

Intangible asset amortization

    535       535       1,070       1,070       1,080       1,137       494  

Stock-based compensation expense

    7,120       6,397       11,967       11,660       11,307       8,522       9,630  

Foreign currency transaction loss (gain), net

    (23     178       216       2,318       (381     (1,569     928  

Cumulative tax effect of adjustments

    (1,797     (2,362     (3,907     (8,885     (7,435     (1,904     (5,373

Discrete tax adjustments(4)

    —         (141     (141     (11,237     (7,452     —         —    

Regulatory settlement(5)

    —         —         —         633       —         —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted earnings

  $ 59,609     $ 77,259     $ 140,268     $ 84,122     $ 35,270     $ 22,192     $ 21,302  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted earnings per share from continuing operations

  $ 1.70     $ 2.02     $ 3.72     $ 1.81     $ 0.52     $ 0.58     $ 0.37  

Adjustments:

             

Loss on early extinguishment of debt(1)

    —         0.07       0.07       0.71       0.67       —         —    

Acquisition related costs(2)

    —         —         —         —         (0.07     (0.10     —    

Lease termination and cease use costs(3)

    —         0.02       0.02       —         —         —         0.10  

Intangible asset amortization

    0.02       0.02       0.03       0.03       0.03       0.04       0.01  

Stock-based compensation expense

    0.23       0.19       0.35       0.33       0.33       0.26       0.29  

Foreign currency transaction loss (gain), net

    —         —         —         0.06       (0.01     (0.05     0.03  

Cumulative tax effect of adjustments

    (0.06     (0.08     (0.11     (0.25     (0.22     (0.07     (0.15

Discrete tax adjustments(4)

    —         —         —         (0.32     (0.22     —         —    

Regulatory settlement(5)

    —         —         —         0.02       —         —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted earnings per share

  $ 1.89     $ 2.24     $ 4.08     $ 2.39     $ 1.03     $ 0.66     $ 0.65  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

    Six Months Ended
June 30,
    Year Ended December 31,  
    2020     2019     2019     2018     2017     2016     2015  

Net income from continuing operations

  $ 53,774     $ 69,605     $ 128,016     $ 63,572     $ 17,614     $ 19,306     $ 12,353  

Depreciation and amortization expenses

    7,674       7,615       15,055       14,200       13,282       14,408       16,922  

Interest expense, net

    40,753       37,618       75,604       79,364       74,005       66,453       52,953  

Foreign currency transaction loss (gain), net

    (23     178       216       2,318       (381     (1,569     928  

Provision for income taxes

    21,141       21,402       42,053       5,301       2,057       13,844       8,345  

Stock-based compensation expense

    7,120       6,397       11,967       11,660       11,307       8,522       9,630  

Adjustments:

             

Loss on early extinguishment of debt(1)

    —         2,321       2,321       24,991       22,895       —         —    

Acquisition-related costs(2)

    —         —         —         —         (2,358     (3,300     —    

Lease termination and cease-use costs(3)

    —         370       370       —         —         —         3,270  

Regulatory settlement(5)

    —         —         —         633       —         —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

  $ 130,439     $ 145,506     $ 275,602     $ 202,039     $ 138,421     $ 117,664     $ 104,401  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA margin calculated as follows:

             

Total revenue

  $ 615,313     $ 523,883     $ 1,174,757     $ 972,621     $ 728,903     $ 642,091     $ 522,897  

Adjusted EBITDA

  $ 130,439     $ 145,506     $ 275,602     $ 202,039     $ 138,421     $ 117,664     $ 104,401  

Adjusted EBITDA as a percentage of total revenue

    21.2     27.8     23.5     20.8     19.0     18.3     20.0

 

(1)

For the years ended December 31, 2019, 2018 and 2017, Enova recorded $2.3 million ($1.8 million net of tax), $25.0 million ($19.6 million net of tax) and $22.9 million ($17.7 million net of tax) losses on early extinguishment of debt, respectively, related to the redemption of $44.1 million of securitization notes in 2019, the repurchase of

 

27


Table of Contents
  $345.0 million of principal amount of senior notes in 2018 and the repurchase of $155.0 million principal amount of senior notes and the redemption of $160.9 million of securitization notes in 2017.
(2)

For the years ended December 31, 2017 and 2016, Enova recorded a $2.4 million ($1.8 million net of tax) and a $3.3 million ($2.0 million net of tax) fair value adjustment to contingent consideration, respectively, related to a prior year acquisition.

(3)

In the first quarter of 2019, Enova recorded a $0.7 million ($0.6 million net of tax) impairment charges to operating right-of-use lease assets and leasehold improvement assets related to its decision to cease use and sublease a portion of a leased office space, and in May 2015, Enova relocated its headquarters and as a result incurred $3.3 million of facility cease-use charges ($2.1 million net of tax) consisting of remaining lease obligations and disposal costs on its prior headquarters.

(4)

For the years ended December 31, 2018 and 2017, Enova recorded income tax benefits of $11.2 million and $7.5 million, respectively, from the U.S. Tax Cuts and Jobs Act.

(5)

For the year ended December 31, 2018, Enova consented to the issuance of a Consent Order by the CFPB, pursuant to which it agreed, without admitting or denying any of the facts or conclusions made by the CFPB from its 2014 review of Enova, to pay a civil money penalty of $3.2 million, which is nondeductible for tax purposes.

 

(a)

The table below shows combined consumer loan balances, a non-GAAP measure, which is composed of company-owned consumer loan balances as reported on Enova’s consolidated balance sheets and consumer loans originated by third party lenders through the CSO programs that are not included in Enova’s financial statements but are disclosures required by GAAP:

 

    Six Months Ended
June 30,
    Year Ended December 31,  
    2020     2019     2019     2018     2017     2016     2015  
(In thousands)                                          

Installment loan and finance receivable balances, gross:

             

Company owned

  $ 590,576     $ 702,898     $ 846,752     $ 696,763     $ 563,176     $ 449,489     $ 332,215  

Guaranteed by Enova

    6,054       21,463       27,560       29,704       34,134       32,199       34,123  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Combined

  $ 596,630     $ 724,361     $ 874,312     $ 726,467     $ 597,310     $ 481,688     $ 366,338  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Line of credit account balances, gross:

             

Company owned

  $ 226,329     $ 263,825     $ 392,837     $ 227,563     $ 170,068     $ 144,141     $ 100,809  

Guaranteed by Enova

    —         —         —         —         —         —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Combined

  $ 226,329     $ 263,825     $ 392,837     $ 227,563     $ 170,068     $ 144,141     $ 100,809  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total loan and finance receivable balances, gross:

             

Company owned

  $ 816,905       966,723       1,239,589       924,326       733,244       593,630       433,024  

Guaranteed by Enova

    6,054       21,463       27,560       29,704       34,134       32,199       34,123  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Combined

  $ 822,959     $ 988,186     $ 1,267,149     $ 954,030     $ 767,378     $ 625,829     $ 467,147  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Selected Historical Consolidated Financial Data of OnDeck

The following table sets forth selected consolidated financial information and other data for OnDeck as of and for each of the six months ended June 30, 2020 and June 30, 2019 and as of and for each of the years in the five-year period ended December 31, 2019. The selected consolidated statement of operations data for the years ended December 31, 2019, 2018 and 2017 and the selected consolidated balance sheet data as of December 31, 2019 and 2018 have been derived from, and are qualified by reference to, the audited consolidated financial statements included in OnDeck’s Annual Report on Form 10-K for the year ended December 31, 2019, which is incorporated by reference in this proxy statement/prospectus. The selected consolidated statement of operations data for the years ended December 31, 2016 and 2015 and the selected consolidated balance sheet data as of December 31, 2017, 2016 and 2015 have been derived from audited consolidated financial statements and related notes of OnDeck that are not included or incorporated by reference in this proxy statement/prospectus. During the second quarter of 2019, OnDeck revised prior period financial statements to correct an immaterial error. Please refer to Note 15 to the audited consolidated financial statements included in OnDeck’s Annual Report on Form 10-K for the year ended December 31, 2019, which is incorporated by reference in this proxy statement/prospectus for additional details.

The selected consolidated financial information as of and for each of the six months ended June 30, 2020 and 2019 is derived from the unaudited consolidated financial statements included in OnDeck’s Quarterly Report

 

28


Table of Contents

on Form 10-Q for the quarter ended June 30, 2020, which is incorporated by reference in this proxy statement/prospectus. The unaudited consolidated financial information includes all adjustments, consisting of normal recurring adjustments, which OnDeck considers necessary for a fair statement of its financial position and results of operations for those periods. The results for the six months ended June 30, 2020 are not necessarily indicative of the results that might be expected for the entire year ending December 31, 2020 or any other period.

The consolidated financial information set forth below should be read in conjunction with OnDeck’s consolidated financial statements, related notes and other financial and operating information incorporated by reference in this proxy statement/prospectus.

 

    Six Months Ended June 30,     Year Ended December 31,  
(In thousands, except per share)   2020     2019     2019     2018     2017     2016     2015  

Consolidated Statements of Operations Data

             

Interest and finance income

  $ 185,243     $ 211,440     $ 428,423     $ 382,944     $ 334,040     $ 264,411     $ 194,890  

Net interest income

    163,383       188,727       383,753       335,869       287,841       231,549       174,340  

Total operating expense

    90,794       100,234       206,325       177,490       166,170       193,974       161,585  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from operations, before provision for income taxes

  $ (64,161   $ 11,032     $ 20,122     $ 24,635     $ (14,880   $ (85,915   $ (2,389
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to On Deck Capital, Inc. common stockholders

    (56,805     9,961       27,955       27,046       (12,069     (83,391     (1,431

Net income (loss) per share attributable to On Deck Capital, Inc. common stockholders:

             

Basic

  $ (0.94   $ 0.13     $ 0.38     $ 0.36     $ (0.17   $ (1.18   $ (0.02

Diluted

    (0.94     0.13       0.36       0.34       (0.17     (1.18     (0.02

Weighted-average common shares outstanding:

             

Basic

    60,625,795       75,840,604       74,148,387       74,561,019       72,890,313       70,934,937       69,545,238  

Diluted

    60,625,795       79,013,757       76,963,749       78,549,940       72,890,313       70,934,937       69,545,238  

Consolidated Balance Sheet Data:

             

Cash and cash equivalents

  $ 71,659     $ 58,744     $ 56,344     $ 59,859     $ 71,362     $ 79,554     $ 159,822  

Loans and finance receivables

    901,126       1,207,609       1,265,312       1,169,407       952,982       1,000,628       552,791  

Total assets

    968,598       1,248,207       1,304,583       1,161,820       996,230       1,064,275       745,074  

Debt

    680,371       841,602       914,995       816,231       692,254       754,605       378,585  

Total liabilities

    742,642       915,243       993,909       859,335       731,342       801,311       415,852  

Total On Deck Capital, Inc. stockholders’ equity

    217,473       314,484       294,000       297,952       260,877       258,892       322,615  

 

29


Table of Contents

SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA

The selected unaudited pro forma condensed combined financial information (the “selected pro forma financial information”) presented below has been prepared from the respective historical consolidated financial statements of Enova and OnDeck and has been adjusted to reflect the consummation of the merger. The selected pro forma financial information has been prepared as if the merger had been completed on January 1, 2019 for statement of income purposes, and on June 30, 2020 for balance sheet purposes. The selected pro forma financial information does not reflect the costs of any integration activities or benefits that may result from realization of future cost savings due to operating efficiencies or revenue synergies expected to result from the merger.

The selected pro forma financial information, which is preliminary in nature, has been prepared from, and should be read in conjunction with, (i) the more detailed unaudited pro forma combined financial information and the related notes appearing in the section entitled “Unaudited Pro Forma Condensed Combined Financial Information” beginning on page 124 and (ii) the separate historical consolidated financial statements and related notes of each of Enova and OnDeck included elsewhere in this proxy statement/prospectus and incorporated by reference herein (see “Where You Can Find More Information” beginning on page 159).

The selected pro forma financial information is provided for illustrative purposes only and does not purport to represent what the actual consolidated results of operations or consolidated financial position of Enova would have been had the merger occurred on the dates assumed, nor is it necessarily indicative of future consolidated results of operations or consolidated financial position.

 

     Six Months Ended
June 30, 2020
    Year Ended
December 31, 2019
 
(In thousands, except per share data)       

Revenue

   $ 838,032     $ 1,636,614  

Net Revenue/Gross Profit

     198,606       860,351  

Income (Loss) from Operations

     (52,680     340,831  

Net income (loss) from continuing operations attributable to the company

     (95,105     161,856  

Earnings (loss) per common share—Basic

     (2.58     4.12  

Earnings (loss) per common share—Diluted

     (2.58     4.04  
     June 30, 2020        

Cash and cash equivalents

   $ 380,719    

Loans and finance receivables at fair value

     1,491,382    

Total assets

     2,499,982    

Long-term debt

     1,575,476    

Total liabilities

     1,806,482    

Total company stockholders’ equity

     690,452    

 

30


Table of Contents

COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA

COMBINED PER SHARE INFORMATION

The following table sets forth (i) selected Enova’s historical per share data for the six months ended June 30, 2020 and the year ended December 31, 2019, (ii) selected OnDeck’s historical per share data for the six months ended June 30, 2020 and the year ended December 31, 2019, and (iii) unaudited pro forma combined per share data for the six months ended June 30, 2020 and the year ended December 31, 2019 giving effect to the merger between Enova and OnDeck under the acquisition method of accounting as if the merger had been consummated on January 1, 2019, the beginning of the earliest period presented. This information should be read together with the consolidated financial statements and related notes of Enova and OnDeck that are incorporated by reference in this proxy statement/prospectus and with the unaudited pro forma combined financial data included under “Unaudited Pro Forma Condensed Combined Financial Information” beginning on page 124. The historical per share data is derived from audited consolidated financial statements of each of Enova and OnDeck as of and for the year ended December 31, 2019 and their respective unaudited consolidated financial statements for the six months ended June 30, 2020. The pro forma information is presented for illustrative purposes only and does not purport to represent what the actual consolidated results of operations or consolidated financial position of Enova would have been had the merger occurred as of January 1, 2019, the beginning of the earliest period presented. This information was prepared using estimated fair values and is subject to adjustment as additional information becomes available and as additional analysis is performed and is not necessarily indicative of the future consolidated results of operations or financial position of the combined company.

The historical book value per share is computed by dividing total stockholders’ equity by the number of shares of common stock outstanding at the end of the period. The pro forma earnings per share of the combined company is computed by dividing the pro forma net income by the pro forma weighted-average number of shares outstanding. The pro forma book value per share of the combined company is computed by dividing total pro forma stockholders’ equity (calculated as though the merger occurred on June 30, 2020) by the pro forma number of shares of common stock outstanding at the end of the period. The OnDeck unaudited pro forma equivalent per share financial information is computed by multiplying the Enova unaudited pro forma combined per share amounts by the exchange ratio (0.092 of a share of Enova common stock for each share of OnDeck common stock). No cash dividends were declared or paid by Enova or OnDeck with respect to the periods presented. See “Unaudited Pro Forma Condensed Combined Financial Information” beginning on page 124 for a further discussion on the financial impact of the treatment of the OnDeck RSUs and OnDeck PSUs in connection with the merger.

 

     Six Months Ended
June 30, 2020
     Year Ended
December 31, 2019
 

Enova Historical Per Share Data

     

Earnings per common share:

     

Basic

   $ 1.72      $ 3.80  

Diluted

   $ 1.70      $ 3.72  

Book value per share of common stock (as of period end)

   $ 15.82      $ 11.42  

OnDeck Historical Per Share Data

     

Earnings per common share:

     

Basic

   $ (0.94    $ 0.38  

Diluted

   $ (0.94    $ 0.36  

Book value per share of common stock (as of period end)

   $ 3.69      $ 4.43  

Enova Pro Forma Combined Per Share Data

     

Earnings per common share:

     

Basic

   $ (2.58    $ 4.12  

Diluted

   $ (2.58    $ 4.04  

Book value per share of common stock (as of period end)

   $ 17.86        N/A  

 

31


Table of Contents
     Six Months Ended
June 30, 2020
     Year Ended
December 31, 2019
 

OnDeck Pro Forma Combined Equivalent Per Share Data

     

Earnings per common share:

     

Basic

   $ (0.24    $ 0.38  

Diluted

   $ (0.24    $ 0.37  

Book value per share of common stock (as of period end)

   $ 1.64        N/A  

 

32


Table of Contents

COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION

Market Prices

The following table sets forth the closing price per share of Enova common stock and the closing price per share of OnDeck common stock as reported on the NYSE on (i) July 27, 2020, the last trading day before the public announcement of the merger by Enova and OnDeck, and (ii) September 3, 2020, the last practicable trading day before the date of this proxy statement/prospectus for which this information was available. The table also shows the equivalent market value per share of OnDeck common stock on July 27, 2020 and September 3 as determined by multiplying the closing prices of shares of Enova common stock on those dates by the exchange ratio of 0.092 and adding the cash portion of the merger consideration of $0.12 per share, without interest.

 

     Enova
Common
Stock
     OnDeck
Common
Stock
     Implied Per
Share Value of
Merger
Consideration
 

July 27, 2020

   $ 13.70      $ 0.73      $ 1.38  

September 3, 2020

   $ 17.79      $ 1.72      $ 1.76  

The market prices of Enova common stock and OnDeck common stock have fluctuated since the dates set forth above and will continue to fluctuate from the date of this proxy statement/prospectus to the date of the OnDeck special meeting and the date the merger is completed and thereafter. No assurance can be given concerning the market prices of Enova common stock or OnDeck common stock before completion of the merger or Enova common stock after completion of the merger. The exchange ratio is fixed (except for adjustments in limited circumstances pursuant to the merger agreement as described in the “The Merger Agreement—Merger Consideration—Share Cap Adjustment” beginning on page 94) and will not be adjusted to reflect changes in the stock price of either company prior to the closing of the merger, but the market price of Enova common stock (and therefore the value of the merger consideration) when received by OnDeck stockholders after the merger is completed will depend on the closing price of Enova common stock on the day such stockholders receive their shares of Enova common stock pursuant to the merger agreement. Such market price could be greater than, less than or the same as shown in the table above. Accordingly, OnDeck stockholders are advised to obtain current market quotations for Enova common stock and OnDeck common stock in deciding whether to vote for adoption of the merger agreement.

Dividend Policy

Enova does not anticipate paying any dividends on its common stock in the foreseeable future. Any declaration and amount of any future dividends will be determined by Enova’s Board and will depend on Enova’s financial condition, earnings and capital requirements, applicable law, covenants associated with the debt obligations of the combined company and any other factors that Enova’s Board believes are relevant. There can be no assurance, however, that Enova will pay any cash dividends on its common stock in the future.

 

33


Table of Contents

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This document contains certain forward-looking statements with respect to the financial condition, results of operations and business of Enova and OnDeck, the combined businesses of Enova and OnDeck and certain plans and objectives of Enova and OnDeck with respect thereto, including statements about the merger and the total transaction and the expected benefits of the transactions. These statements may be made directly in this proxy statement/prospectus or may be incorporated by reference to other documents and may include statements for the period after completion of the merger. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use words such as “anticipate,” “target,” “expect,” “estimate,” “intend,” “plan,” “goal,” “believe,” “hope,” “aim,” “continue,” “will,” “may,” “would,” “could” or “should” or other words of similar meaning. There are several factors that could cause actual plans and results to differ materially from those expressed or implied in forward-looking statements. Such factors include, but are not limited to, the following:

 

   

the ability of Enova and OnDeck to consummate the merger, including the ability to receive the required antitrust approvals (and the risk that such approvals may result in the imposition of conditions that could adversely affect the combined company or the expected benefits of the merger), and approval by the OnDeck stockholders and to satisfy the other conditions to the closing of the merger on a timely basis or at all;

 

   

the occurrence of events that may give rise to a right of one or both of the parties to terminate the merger agreement, including under circumstances that might require OnDeck to pay or cause to be paid a termination fee of $2.8 million to Enova;

 

   

the possibility that the merger is delayed or does not occur;

 

   

the possibility that the anticipated benefits from the merger cannot be realized in full or at all or may take longer to realize than expected, including risks associated with integrating the OnDeck business successfully and achieving anticipated synergies, cost savings, capital spending reductions and operating efficiencies from the merger;

 

   

negative effects of the announcement of Enova’s proposal to acquire OnDeck or the announcement or completion of the merger on the market price of Enova’s and/or OnDeck’s common stock, their respective financial performance and their respective ability to maintain relationships with suppliers and customers;

 

   

the risks related to OnDeck and Enova being restricted in the operation of their respective businesses while the merger agreement is in effect;

 

   

risks relating to fluctuations in the value of Enova’s shares to be issued in the merger, significant merger costs and/or unknown liabilities;

 

   

risks associated with third-party contracts containing change in control consent requirements and/or other provisions that may be triggered by the merger or the transactions;

 

   

risks associated with continued availability of capital and financing on favorable terms or at all;

 

   

risks associated with any merger-related litigation or appraisal proceedings;

 

   

the ability of Enova and OnDeck, or the combined company, to retain and hire key personnel;

 

   

the diversion of management’s attention from the ongoing business operations;

 

   

timing and occurrence (or nonoccurrence) of other events or circumstances that may be beyond OnDeck’s and Enova’s control;

 

   

the impact of COVID-19, including adverse impacts on customer loan delinquencies in the combined company’s loan portfolio;

 

   

changes in global, political, economic, business, competitive, market and regulatory forces;

 

34


Table of Contents
   

changes in laws and regulations or the interpretations or enforcement thereof;

 

   

changes in interest rates and fiscal and monetary policies;

 

   

future business acquisitions or disposals;

 

   

the potential liability resulting from pending or future litigation; and

 

   

other risk factors as detailed from time to time in Enova’s and OnDeck’s reports filed with the SEC, including Enova’s and OnDeck’s respective Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other documents filed with the SEC, including the risks and uncertainties set forth in, or incorporated by reference into, this proxy statement/prospectus in the section entitled “Risk Factors” beginning on page 36. See “Where You Can Find More Information” beginning on page 159.

These forward-looking statements reflect Enova’s and OnDeck’s current views with respect to future events and are based on numerous assumptions and assessments made by Enova and OnDeck in light of their experience and perception of historical trends, current conditions, business strategies, operating environments, future developments and other factors they believe appropriate. By their nature, forward-looking statements involve known and unknown risks and uncertainties because they relate to events and depend on circumstances that will occur in the future. The factors described in the context of such forward-looking statements in this document could cause Enova’s and OnDeck’s plans with respect to the merger, actual results, performance or achievements, industry results and developments to differ materially from those expressed in or implied by such forward-looking statements. Although it is believed that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct, and persons reading this document are therefore cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this proxy statement/prospectus or, in the case of a document incorporated by reference, as of the date of that document. Neither Enova nor OnDeck assumes any obligation to update the information contained in this document (whether as a result of new information, future events or otherwise), except as required by applicable law.

These and other risks, uncertainties, assumptions and other factors may be amplified or made more uncertain by the COVID-19 pandemic, which has caused significant economic uncertainty. The extent to which the COVID-19 pandemic impacts OnDeck’s and Enova’s businesses, operations and financial results, including (without limitation) the duration and magnitude of such effects, will depend on numerous factors, that are unpredictable, including, but not limited to, the duration and spread of the outbreak, its severity, the actions taken to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume.

 

35


Table of Contents

RISK FACTORS

In addition to the other information included in and incorporated by reference into this proxy statement/prospectus, including the matters addressed in “Cautionary Note Regarding Forward-Looking Statements” beginning on page 34, OnDeck stockholders should carefully consider the following risk factors before deciding whether to vote for the merger proposal. In addition, you should read and consider the risks associated with each of the businesses of OnDeck and Enova because these risks will relate to the combined company following the completion of the merger. Descriptions of some of these risks can be found in the respective Annual Reports of Enova and OnDeck on Form 10-K for the fiscal year ended December 31, 2019, as such risks may be updated or supplemented in each company’s subsequently filed Quarterly Reports on Form 10-Q or Current Reports on Form 8-K, which are incorporated by reference into this proxy statement/prospectus. You should also consider the other information in this document and the other documents incorporated by reference into this document. See “Where You Can Find More Information” beginning on page 159.

Risks Related to the Merger

The merger is subject to conditions, some or all of which may not be satisfied or completed on a timely basis, if at all. Failure to complete the merger in a timely manner or at all could have material adverse effects on Enova and OnDeck.

The completion of the merger is subject to a number of conditions, including, among others, (i) the adoption by OnDeck stockholders of the merger agreement, (ii) the termination or expiration of the waiting period under the HSR Act and (iii) the absence of an injunction prohibiting completion of the merger, which make the completion and timing of the completion of the merger uncertain. For a more detailed discussion regarding conditions to the merger, see “The Merger Agreement—Conditions to Completion of the Merger” beginning on page 111. Enova or OnDeck may terminate the merger agreement if the merger has not been completed by April 28, 2021 (such date as it may be extended, the “termination date”); provided that, if the closing has not occurred by the termination date solely to extent such closing condition has not been satisfied due to an order arising under any antitrust law, but all other conditions have been met, then the termination date may be extended by either Enova or OnDeck until the date that is 90 days after the original termination date by written notice to the other party, and such date; provided that, if the closing has not occurred by the termination date solely due to any delays associated with governmental authority disruptions due to COVID-19, then the termination date will automatically be extended to 10 business days following the cessation of the relevant governmental authority disruptions; provided, further, that neither Enova nor OnDeck can terminate the merger agreement due to the occurrence of the termination date if either party fails to fulfill any obligation under the merger agreement or has principally caused or resulted in the failure to complete the merger on or before such termination date.

If the merger is not completed, Enova’s and OnDeck’s respective ongoing businesses, financial condition, financial results and stock prices may be materially adversely affected, and without realizing any of the benefits of having completed the merger, Enova and OnDeck will be subject to a number of risks, including the following:

 

   

the market price of Enova common stock or OnDeck common stock could decline to the extent that the current market price reflects a market assumption that the transaction will be completed;

 

   

OnDeck could owe a termination fee to Enova under certain circumstances (see “The Merger Agreement—Termination of the Merger Agreement” beginning on page 111);

 

   

if the merger agreement is terminated and the OnDeck Board seeks another business combination, OnDeck stockholders cannot be certain that OnDeck will be able to find a party willing to enter into a transaction on terms equivalent to or more attractive than the terms that the other party has agreed to in the merger agreement;

 

   

the time and resources committed by OnDeck’s and Enova’s respective management to matters relating to the merger and integration planning could otherwise have been devoted to pursuing other beneficial opportunities for their respective companies;

 

36


Table of Contents
   

the merger agreement, subject to certain exceptions, restricts OnDeck and Enova from taking specified actions until the effectiveness of the merger agreement terminates. These restrictions may prevent Enova and OnDeck from pursuing otherwise attractive business opportunities, incurring expenses to grow their respective businesses or making other changes to their respective businesses that may be necessary prior to the effective time of the merger or termination of the merger agreement;

 

   

Enova and OnDeck may experience negative reactions from the financial markets or from their respective customers, funding sources, employees or other third parties;

 

   

Enova and OnDeck will be required to pay their respective costs relating to the merger, such as legal, accounting, financial advisory and printing fees, whether or not the merger is completed;

 

   

OnDeck and Enova will not realize the expected benefits from the merger; and

 

   

OnDeck’s short- and long-term liquidity position and ability to continue to fund operations may be uncertain.

In addition, if the merger is not completed, Enova and OnDeck could be subject to litigation related to any failure to complete the merger or related to any enforcement proceeding commenced against Enova and OnDeck to perform their respective obligations under the merger agreement. The materialization of any of these risks could adversely impact Enova’s and OnDeck’s respective ongoing businesses, financial condition, financial results and stock price.

Similarly, delays in the completion of the merger could, among other things, result in additional transaction costs, loss of revenue or other negative effects associated with uncertainty about completion of the merger.

The exchange ratio is fixed (except for adjustments in limited circumstances pursuant to the merger agreement) and will not be adjusted in the event of any change in either Enova’s or OnDeck’s stock price. As a result, the stock portion of the merger consideration payable to OnDeck’s stockholders may be subject to change if Enova’s stock price fluctuates.

Upon completion of the merger, each OnDeck stockholder will be entitled to receive, in addition to the cash consideration, 0.092 of a share of Enova common stock for each share of OnDeck common stock, (the “exchange ratio”). See “The Merger Agreement—Merger Consideration” beginning on page 93.

The exchange ratio will not be adjusted for changes in the market price of either Enova common stock or OnDeck common stock between the date the merger agreement was signed and completion of the merger. Due to the fixed exchange ratio, fluctuations in the price of Enova common stock will drive corresponding changes in the value of the stock portion of the merger consideration payable to each OnDeck stockholder. As a result, changes in the price of Enova common stock prior to the completion of the merger will affect the value of Enova common stock that OnDeck common stockholders will receive pursuant to the merger, and at the time of the OnDeck special meeting, OnDeck stockholders will not know or be able to determine the market value of the stock consideration they would receive upon completion of the merger. Stock price changes may result from a variety of factors, including, among others, general market and economic conditions, changes in Enova’s and OnDeck’s respective businesses, operations and prospects, market assessments of the likelihood that the merger will be completed and the timing of the merger, and many of these factors are and will be beyond Enova’s and OnDeck’s control.

The merger agreement contains provisions that limit OnDeck’s ability to pursue alternatives to the merger, could discourage a potential competing acquiror of OnDeck from making a favorable alternative transaction proposal and, in specified circumstances, could require OnDeck to pay a termination fee to Enova.

The merger agreement contains certain provisions that restrict OnDeck’s ability to initiate, solicit, knowingly encourage or facilitate or, subject to certain exceptions, engage in discussions or negotiations with

 

37


Table of Contents

respect to, or approve or recommend, any third-party proposal for an alternative transaction. Further, even if the OnDeck Board withdraws or qualifies its recommendation with respect to the adoption of the merger agreement, unless the merger agreement has been terminated in accordance with its terms, OnDeck will still be required to submit each of its merger related proposals to a vote of its stockholders at the OnDeck special meeting. In addition, Enova generally has an opportunity to offer to modify the terms of the transactions contemplated by the merger agreement in response to any third-party acquisition proposal before the OnDeck Board may withdraw or qualify its recommendation with respect to the merger-related proposals or terminate the merger agreement.

In some circumstances, upon termination of the merger agreement, OnDeck will be required to pay a termination fee of $2.8 million to Enova. See “The Merger Agreement—Covenants and Agreements—No Solicitation” beginning on page 101 and “The Merger Agreement—Termination of the Merger Agreement” beginning on page 111.

These provisions could discourage a potential third-party acquiror or merger partner that might have an interest in acquiring all or a significant portion of OnDeck or pursuing an alternative transaction from considering or proposing such a transaction, even if it were prepared to pay consideration with a higher per share cash or market value than the per share cash or market value proposed to be received or realized in the merger. In particular, the termination fee payable by OnDeck, if applicable, could result in a potential third-party acquiror or merger partner proposing to pay a lower price to the OnDeck stockholders than it might otherwise have proposed to pay absent such a fee.

If the merger agreement is terminated and OnDeck determines to seek another business combination, OnDeck may not be able to negotiate a transaction with another party on terms comparable to, or better than, the terms of the merger.

Members of the OnDeck Board and senior management have interests in the merger that are different from, or in addition to, those of other OnDeck stockholders.

In considering whether to adopt the merger agreement and approve the transactions contemplated thereby, OnDeck stockholders should recognize that members of senior management and the OnDeck Board have interests in the merger that differ from, or are in addition to, their interests as stockholders of OnDeck.

The executive officers and directors of OnDeck have arrangements with OnDeck that provide for severance, accelerated vesting of certain rights and other benefits upon completion of the merger and/or if their employment or service is terminated under certain circumstances following the completion of the merger. Executive officers and directors of OnDeck also have rights to indemnification, advancement of expenses and directors’ and officers’ liability insurance that will survive the completion of the merger. The OnDeck Board was aware of these interests and considered them, among other matters, in approving the merger agreement and making its recommendation that the OnDeck stockholders vote “FOR” the merger proposal and “FOR” the merger-related compensation proposal.

These interests are further described in “The Merger—Interests of Directors and Executive Officers of OnDeck in the Merger” beginning on page 72.

Enova’s and OnDeck’s business relationships may be subject to disruption due to uncertainty and contractual restrictions associated with the merger, which could adversely affect each party’s business.

Third parties with which Enova and OnDeck do business may experience uncertainty associated with the merger, including with respect to current or future business relationships with Enova, OnDeck or the combined business. Enova’s and OnDeck’s business relationships may be subject to disruption as parties with which Enova and/or OnDeck do business may attempt to negotiate in existing business relationships or consider entering into business relationships with parties other than Enova, OnDeck or the combined business. These disruptions could have an adverse effect on the business, financial condition, results of operations or prospects of the combined business, including an adverse effect on Enova’s ability to realize the anticipated benefits of the merger. The risk, and the adverse effect, of such disruptions could be exacerbated by a delay in completion of the merger or termination of the merger agreement.

 

38


Table of Contents

Under the terms of the merger agreement, each of Enova and OnDeck is subject to certain restrictions on the conduct of its business prior to completing the merger, which may adversely affect its ability to execute certain of its business strategies, including, in the case of OnDeck, the ability in certain cases to enter into or amend contracts, acquire or dispose of assets, incur indebtedness or incur capital expenditures. Such limitations could adversely affect each party’s businesses and operations prior to the completion of the merger. See “The Merger Agreement—Covenants and Agreements—Conduct of Business” beginning on page 97.

Each of the risks described above may be exacerbated by delays or other adverse developments with respect to the completion of the merger.

Uncertainties associated with the merger may cause a loss of management personnel and other key employees, which could adversely affect the future business and operations of the combined company.

Enova and OnDeck are dependent on the experience and industry knowledge of their officers and other key employees to execute their business plans. The combined company’s success after the completion of the merger will depend in part upon the ability of the combined company to retain key management personnel and other key employees of Enova and OnDeck. Prior to completion of the merger, current and prospective employees of Enova and OnDeck may experience uncertainty about their roles within the combined company, which may have an adverse effect on the ability of each of Enova and OnDeck to attract or retain key management and other key personnel. If employees of Enova or OnDeck depart, the integration of the companies may be more difficult and the combined business following the merger may be harmed. Furthermore, Enova may have to incur significant costs in identifying, hiring and retaining replacements for departing employees and may lose significant expertise and talent relating to the businesses of Enova or OnDeck, and Enova’s ability to realize the anticipated benefits of the merger may be adversely affected. No assurance can be given that the combined company will be able to attract or retain key management personnel and other key employees of Enova and OnDeck to the same extent that Enova and OnDeck have previously been able to attract or retain their own employees.

Potential litigation against OnDeck and Enova could result in an injunction preventing the completion of the merger or a judgment resulting in the payment of damages.

Two lawsuits relating to the merger were filed on September 1, 2020. The lawsuits, filed by purported stockholders of the Company, are captioned Sabatini v. On Deck Capital, Inc., et. al., No. 1:20-cv-01166-UNA, filed in the United States District Court for the District of Delaware as a putative class action on behalf of the stockholders of the Company (the “Sabatini Lawsuit”), and Morrison v. On Deck Capital, Inc., et. al., Index No. 654179/2020, filed in the Supreme Court of the State of New York for the County of New York as a putative class action on behalf of the stockholders of the Company (the “Morrison Lawsuit”). The Sabatini Lawsuit alleges that the registration statement filed on August 25, 2020 relating to the transactions contemplated by the merger agreement omitted material information in violation of Sections 14(a) and 20(a) of the Exchange Act and certain rules promulgated thereunder. The Morrison Lawsuit alleges, among other things, that the Company’s directors breached their fiduciary duties in connection with the merger. The lawsuits name as defendants the Company and its directors, as well as Enova, and seek, among other relief, injunctive relief. There can be no assurance regarding the ultimate outcome of these lawsuits.

Stockholders of OnDeck may file additional lawsuits against Enova, OnDeck and/or the directors and officers of either company in connection with the merger. These lawsuits could prevent or delay the completion of the merger and result in significant costs to OnDeck and/or Enova, including any costs associated with the defense and/or settlement thereof, and the indemnification of directors and officers.

Completion of the merger may trigger change in control or other provisions in certain agreements to which OnDeck is a party, which may have an adverse impact on the combined company’s business and results of operations.

The completion of the merger may trigger change in control and other provisions in certain agreements to which OnDeck is a party. If Enova and OnDeck are unable to negotiate waivers of those provisions, the

 

39


Table of Contents

counterparties may exercise their rights and remedies under the agreements, potentially terminating the agreements or seeking monetary damages. Even if Enova and OnDeck are able to negotiate waivers, the counterparties may require a fee for such waivers or seek to renegotiate the agreements on terms less favorable to OnDeck or the combined company. Any of the foregoing or similar developments may have an adverse impact on the combined company’s business and results of operations.

The shares of Enova common stock to be received by OnDeck stockholders upon completion of the merger will have different rights from shares of OnDeck common stock.

Upon completion of the merger, OnDeck stockholders will no longer be stockholders of OnDeck but will instead become stockholders of Enova, and their rights as Enova stockholders will be governed by the terms of Enova’s amended and restated certificate of incorporation and amended and restated bylaws. The terms of Enova’s amended and restated certificate of incorporation and amended and restated bylaws are in some respects materially different than the terms of OnDeck’s restated certificate of incorporation and bylaws, which currently govern the rights of OnDeck stockholders. See “Comparison of Stockholder Rights” beginning on page 142 for a discussion of the different rights associated with shares of OnDeck common stock and shares of Enova common stock.

The unaudited pro forma condensed combined financial data included in this proxy statement/prospectus are presented for illustrative purposes only, and the actual financial condition and results of operations of Enova following the completion of the merger may differ materially.

The unaudited pro forma condensed combined financial data contained in this proxy statement/prospectus are presented for illustrative purposes only, are based on various adjustments, assumptions and preliminary estimates and may not be an indication of Enova’s financial condition or results of operations following the merger and the other transactions for several reasons. The actual financial condition and results of operations of Enova following the completion of the merger may not be consistent with, or evident from, these unaudited pro forma condensed combined financial data. In addition, the assumptions used in preparing the unaudited pro forma financial information may not prove to be accurate, and other factors may affect Enova’s financial condition or results of operations following the transactions. Any potential decline in Enova’s financial condition or results of operations may cause significant variations in the stock price of Enova. For more information, see “Unaudited Pro Forma Condensed Combined Financial Information” beginning on page 124.

Financial projections relating to the combined company after the merger may not be achieved.

In connection with the merger, OnDeck prepared and considered, among other things, internal financial forecasts and analyses for Enova and OnDeck. These financial projections include assumptions regarding future operating cash flows, expenditures and income of Enova and OnDeck. These financial projections were not prepared with a view to public disclosure, are subject to significant economic, competitive, industry, regulatory and other uncertainties and may not be achieved in full, at all, or within projected time frames. The failure of Enova’s or OnDeck’s businesses to achieve projected results, including projected cash flows and leverage, could have a material adverse effect on the price of shares of the combined company’s common stock and the combined company’s financial position.

Enova and OnDeck will incur substantial transaction fees and costs in connection with the merger.

Both Enova and OnDeck expect to incur a number of nonrecurring transaction-related costs associated with consummating the merger, combining the operations of the two organizations and achieving desired benefits of the merger. These fees and costs will be substantial. Nonrecurring transaction costs include, but are not limited to, fees paid to legal, financial and accounting advisors; retention, severance, change in control and other integration-related costs; filing fees and printing costs. Additional unanticipated costs may be incurred in relation to integrating Enova’s business with the business of OnDeck. There can be no assurance that the elimination of certain duplicative costs, as well as the realization of other efficiencies related to the integration of the two businesses, will offset the incremental transaction-related costs over time. Thus, any net benefit of the merger may not be achieved in the near term, the long term or at all.

 

40


Table of Contents

Section 304 of the Internal Revenue Code, as amended may apply to the transaction and require certain stockholders who expect to own an equal or greater percentage interest in Enova following the merger than their percentage interest in OnDeck prior to the merger to include the entire amount of the consideration received as dividend income.

In certain circumstances, beneficial owners of OnDeck common stock who expect to own an equal or greater percentage interest in Enova following the merger than their percentage interest in OnDeck prior to the merger, taking into account the application of certain constructive ownership rules, may have tax consequences that differ materially from those described above as a result of the application of Section 304. As described further below under “The Merger—Material U.S. Federal Income Tax Consequences—The Merger—Special Consequences of the Merger to Beneficial Owners of OnDeck Common Stock That Also Own Enova Common Stock,” such owners may be required to include the entire amount of the consideration received as dividend income. Non-U.S. holders may be subject to U.S. federal income and withholding tax on such dividend income. In addition, withholding agents may withhold on consideration payable to all Non-U.S. holders because they may not be able to determine whether any particular Non-U.S. holder is subject to withholding as a result of these rules. Any such owners who expect to own an equal or greater percentage interest in Enova following the merger than their percentage interest in OnDeck prior to the merger and all Non-U.S. holders should consult their own tax advisors regarding the application of Section 304 to the merger.

The OnDeck Board has not requested, and does not anticipate requesting, an updated opinion from its financial advisor reflecting changes in circumstances that may have occurred since the signing of the merger agreement. As a result, the opinion of OnDeck’s financial advisor does not reflect changes in circumstances after the date of such opinion.

OnDeck received an opinion from its financial advisor on July 28, 2020 in connection with the signing of the merger agreement. The opinion was based on the financial analyses performed, which considered market and other conditions then in effect, and financial forecasts and other information made available to OnDeck’s financial advisor as of the date of such opinion. The OnDeck Board has not requested, and does not anticipate requesting, an updated opinion from its financial advisor at or prior to the time of the completion of the merger. As a result, the opinion of OnDeck’s financial advisor does not reflect changes in circumstances after the date of such opinion. Changes in the operations and prospects of Enova or OnDeck, general market and economic conditions and other factors that may be beyond the control of Enova or OnDeck, and on which OnDeck’s financial advisor opinion was based, may significantly alter the value of Enova and OnDeck or the prices of the shares of Enova common stock or OnDeck common stock by the time the merger is completed. The opinion does not speak as of the time the merger will be completed or as of any date other than the date of such opinion. The OnDeck Board’s recommendation that OnDeck stockholders vote “FOR” approval of the merger agreement, “FOR” the merger-related compensation proposal and “FOR” the adjournment proposal, however, is made as of the date of this proxy statement/ prospectus.

For a description of the opinion that OnDeck received from its financial advisor, see the section entitled “The Merger—Opinion of Evercore Group L.L.C.” beginning on page 58 and the full text of the written opinion of Evercore attached as Annex B to this proxy statement/prospectus.

Risks Relating to the Combined Company after Completion of the Merger

Enova may not achieve the intended benefits and the merger may disrupt its current plans or operations.

Enova may not be able to successfully integrate OnDeck’s business and assets or otherwise realize the expected benefits of the potential transaction, including anticipated annual operating cost and capital synergies to the extent currently anticipated or at all. Difficulties in integrating OnDeck into Enova may result in the combined company performing differently than expected, in operational challenges or in the failure to realize anticipated synergies and efficiencies in the expected time frame or at all. The integration of the two companies may result in material challenges, including the diversion of management’s attention from ongoing business

 

41


Table of Contents

concerns; retaining key management and other employees; retaining existing business and operational relationships, including customers and other counterparties, and attracting new business and operational relationships; the possibility of faulty assumptions underlying expectations regarding the integration process and associated expenses; consolidating corporate and administrative infrastructures and eliminating duplicative operations; coordinating geographically separate organizations; unanticipated issues in integrating information technology, communications and other systems; as well as unforeseen expenses or delays associated with the acquisition.

OnDeck stockholders will have a reduced ownership and voting interest after the merger and will exercise less influence over the policies of the combined company than they now have on the policies of OnDeck.

Based on the number of shares of OnDeck’s common stock outstanding as of July 27, 2020, OnDeck stockholders (by virtue of the merger) are expected to own approximately 16.6% of the combined company (on a fully diluted basis). Following the completion of the merger, the Enova common stock that OnDeck stockholders will receive as merger consideration will be represented as a percentage ownership of Enova that is smaller than such OnDeck stockholder’s percentage ownership before the completion of the merger. Because of this reduced ownership percentage, former OnDeck stockholders will have less influence over the management and policies of Enova than they currently have over OnDeck management and policies of OnDeck.

The market price of the combined company’s common stock may be affected by factors different from those affecting the price of Enova or OnDeck common stock.

Upon completion of the merger, holders of Enova common stock and OnDeck common stock will be holders of common stock of Enova. As the businesses of Enova and OnDeck are different, the results of operations, as well as the price of the combined company’s common stock may in the future be affected by factors different from those factors affecting Enova and OnDeck as independent stand-alone companies. The combined company will face additional risks and uncertainties that Enova or OnDeck may currently not be exposed to as independent companies.

The market price of Enova’s common stock may decline as a result of the merger.

The market price of Enova common stock may decline as a result of the merger if, among other things, the combined company is unable to achieve the expected benefits of the potential transaction (including anticipated annual operating cost and capital synergies) in connection with the integration of Enova’s and OnDeck’s businesses, or if the transaction costs related to the merger are greater than expected. The market price also may decline if the combined company does not achieve the perceived benefits of the transaction as rapidly or to the extent anticipated by financial or industry analysts or if the effect of the merger on the combined company’s financial position, results of operations or cash flows is not consistent with the expectations of financial or industry analysts.

The COVID-19 pandemic’s impact on the combined company’s business and operations is uncertain.

The COVID-19 pandemic has, and will likely continue to, severely impact global economic conditions, resulting in substantial volatility in the global financial markets, increased unemployment, and operational challenges resulting from measures that governments and other authorities have imposed, and may continue to impose, to control its spread, such as travel restrictions, business and school closures, quarantines, and shelter-in-place orders. The combined company will have exposure to jurisdictions that have been and may continue to be severely impacted by the COVID-19 pandemic, such as the United States. If the COVID-19 pandemic persists or worsens or if governmental actions to curtail the COVID-19 pandemic are unsuccessful or result in further economic disruption, the adverse impact on the global economy will deepen. The combined company could experience reduced customer demand, higher delinquencies and other negative impacts to its financial position.

 

42


Table of Contents

Other Risk Factors of Enova and OnDeck

Enova’s and OnDeck’s businesses are and will be subject to the risks described above. In addition, Enova and OnDeck are and will continue to be subject to the risks described in Enova’s and OnDeck’s respective Annual Reports on Form 10-K for the fiscal year ended December 31, 2019, as updated by subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, all of which are filed with the SEC and incorporated by reference into this proxy statement/prospectus. For the location of information incorporated by reference into this proxy statement/prospectus, see “Where You Can Find More Information” beginning on page 159.

 

43


Table of Contents

THE MERGER

The following is a discussion of the transaction and the material terms of the merger agreement between Enova and OnDeck. You are urged to read the merger agreement carefully and in its entirety. A copy of the merger agreement is attached as Annex A to this proxy statement/prospectus and incorporated by reference herein. This summary does not purport to be complete and may not contain all of the information about the merger that is important to you. This section is not intended to provide you with any factual information about Enova or OnDeck. Such information can be found elsewhere in this proxy statement/prospectus and in the public filings Enova and OnDeck make with the SEC that are incorporated by reference into this document, as described in “Where You Can Find More Information” beginning on page 159.

Background of the Merger

As part of its ongoing evaluation of OnDeck’s business, the OnDeck Board, together with OnDeck management, regularly reviews OnDeck’s performance, long-term strategic plan, operations, competitive position, future prospects and potential ways to enhance stockholder value. These reviews have included discussions as to whether, in order to enhance stockholder value, OnDeck should pursue various acquisitions, alter its capital structure, or pursue a sale of the entire company or one or more of OnDeck’s business divisions or loan portfolios. As a part of this ongoing evaluation, the OnDeck Board and OnDeck management had considered potential strategic alternatives and engaged in discussions with potential counterparties.

In furtherance of the OnDeck Board’s consideration of potential strategic alternatives, OnDeck engaged in discussions to acquire, in an all-stock transaction, a state-chartered banking entity referred to as Party A beginning in the first half of 2019. In March 2020, as a result of COVID-19 and its significant impact on the value of OnDeck common stock, discussions with Party A were terminated.

On February 28, 2020, OnDeck received an unsolicited, nonbinding, preliminary indication of interest from a potential counterparty referred to as Party B, a strategic buyer backed by a financial sponsor, to acquire 100% of OnDeck in an all-cash transaction.

On March 4, 2020, the OnDeck Board held a meeting with members of OnDeck management in attendance. During that meeting, the OnDeck Board and OnDeck management discussed, among other things (i) Party B’s indication of interest, (ii) conducting a review of strategic alternatives available to OnDeck and (iii) the COVID-19 outbreak and the potential for significant and unprecedented disruption in the global economy, including with respect to small businesses (which comprise OnDeck’s client base), and the potential adverse impacts with respect to OnDeck’s business. Following this discussion, the OnDeck Board authorized OnDeck management to solicit proposals from nationally recognized investment banks to assist the OnDeck Board in a review of potential options available to OnDeck, including executing on its strategy as a standalone company and strategic alternatives.

On March 11, 2020, Mr. Kenneth A. Brause, Chief Financial Officer of OnDeck, contacted the financial advisor to Party B to gauge whether Party B remained interested in pursuing an acquisition of OnDeck. Party B did not respond further to OnDeck’s outreach.

In mid-March 2020, in order to secure additional liquidity in light of changes to the macroeconomic environment caused by the COVID-19 pandemic, OnDeck drew down the remaining $35 million of availability under its corporate line facility (the “Corporate Line Facility”). After that draw, the total outstanding principal amount under the Corporate Line Facility was $105 million.

Also in mid-March 2020, members of the OnDeck Board and OnDeck management conducted a series of interviews with four nationally recognized investment banks, and received formal presentations and proposals from two of these investment banks, including Evercore, to act as financial advisor to OnDeck in connection with a review of strategic alternatives.

 

44


Table of Contents

In the days following the investment bank interviews, and in recognition of Evercore’s qualifications, expertise, reputation, experience and knowledge of OnDeck’s business, OnDeck executed an engagement letter with Evercore effective as of March 23, 2020.

On March 23, 2020, OnDeck publicly withdrew its financial guidance for the 2020 fiscal year due to the significant and ongoing uncertainties relating to the COVID-19 pandemic.

In late March 2020, in light of the uncertainty associated with the COVID-19 pandemic and its potential impact on OnDeck’s business, the emerging challenging economic environment and OnDeck’s worsening financial outlook, including with respect to its liquidity position, the OnDeck Board commenced an exploratory process for a potential transaction (the “Process”) and directed representatives of Evercore to reach out to potential counterparties who may have interest in a strategic transaction with OnDeck, including a potential acquisition of OnDeck.

Starting in March 2020, OnDeck management commenced a review of potential financing alternatives to replace the Corporate Line Facility and began contacting potential sources of alternative financing, including sources of mezzanine debt. Throughout the Process, OnDeck management held negotiations with multiple alternative financing sources and reported the status of such negotiations on an ongoing basis to the OnDeck Board for its deliberation in the context of OnDeck’s standalone position.

Beginning in April 2020, representatives of Evercore, at the direction of and in consultation with the OnDeck Board and OnDeck management, contacted 84 parties through a combination of outbound calls and responses to inbound inquiries regarding OnDeck. The potential counterparties contacted, including Enova and Party B, were reviewed and approved by OnDeck management and the OnDeck Board. OnDeck ultimately entered into confidentiality agreements with 36 parties who expressed interest in participating in the Process. Party B declined to participate in the Process. All of the confidentiality agreements contained customary standstill provisions that would automatically terminate upon the entry by OnDeck into a definitive acquisition agreement with a third party. Following the execution of confidentiality agreements, members of OnDeck management and representatives of Evercore facilitated the due diligence review of OnDeck by such interested parties. During this time, OnDeck management, with the assistance of its advisors, prepared a management presentation and engaged in other preparatory work relating to the Process.

As the COVID-19 pandemic worsened throughout March and April of 2020, the OnDeck Board, together with OnDeck management and representatives of Evercore and Kirkland & Ellis LLP (“Kirkland”), counsel to OnDeck, held regular meetings to discuss, among other things, OnDeck’s performance and liquidity position, the status of negotiations with lenders under its debt facilities and updates on the Process.

On April 1, 2020, representatives of Evercore, at the direction of the OnDeck Board, sent a draft confidentiality agreement to Jefferies LLC (“Jefferies”), financial advisor to Enova, and on April 3, 2020, OnDeck entered into a confidentiality agreement with Enova.

On April 6, 2020, OnDeck implemented several temporary austerity measures to reduce its expenditures in order to reduce costs and preserve liquidity, including, among other things, a significant curtailment of its marketing spend, a hiring freeze, employee furloughs and reductions in pay for non-furloughed employees and members of the OnDeck Board.

On April 7, 2020, the OnDeck Board held a meeting with members of OnDeck management and representatives of Evercore and Kirkland in attendance. At the meeting, representatives of Evercore updated the OnDeck Board on the Process and OnDeck management updated the OnDeck Board on OnDeck’s financial and liquidity positions. The OnDeck Board then discussed the impacts of the COVID-19 pandemic on the business operations of OnDeck and its competitors and concerns regarding the risk of a potential asset performance payout event (an “APPE”) or event of default under the Corporate Line Facility absent receiving a waiver from the lenders thereunder or entering into an amendment thereto.

On April 28, 2020, at the direction of the OnDeck Board, representatives of Evercore sent to each of the active potential counterparties in the Process a letter setting forth the procedures for the submission of initial indications of interest by May 14, 2020.

 

45


Table of Contents

On April 30, 2020, in connection with its announcement of its first quarter 2020 earnings, OnDeck announced that it was anticipating the following trends related to the impact of the COVID-19 pandemic and its associated effects: (i) an 80% or more reduction in second quarter loan originations, (ii) increased loan repayment delinquencies (and related charge-offs) and (iii) reduced operating margins, reflecting lower repayment yields.

Also, on April 30, 2020, OnDeck began the process of temporarily suspending its term loan and many of its line of credit loan originations and notifying its lending partners of this decision.

Over the course of April through July of 2020, OnDeck held 16 telephonic management presentations with 16 potential counterparties. During the management presentations, OnDeck management discussed, among other things, OnDeck’s actual loan origination activities as compared to the 2020 Financial Forecast and Scenario 1 (each as defined below).

On May 7, 2020, the OnDeck Board held a meeting with members of OnDeck management and representatives of Evercore and Kirkland in attendance. At the meeting, the OnDeck Board discussed OnDeck’s interactions with potential counterparties in the Process, as well as the potential challenges associated with conducting a strategic process during the COVID-19 pandemic. Representatives of Evercore reviewed with the OnDeck Board a preliminary analysis of historical market premiums paid in transactions involving public companies in the lending industry.

On the same day, an early amortization event occurred with respect to the Series 2019-1 notes issued by OnDeck’s wholly owned subsidiary OnDeck Asset Securitization Trust II LLC (“ODAST”) due to an asset amount deficiency under such series of notes. As a result, beginning on the next payment date, all loan collections held by ODAST (after payment of accrued interest and expenses) would be applied to pay down the Series 2018-1 notes and the Series 2019-1 notes on a pro rata basis.

On May 8, 2020, at the direction of the OnDeck Board, representatives of Evercore shared OnDeck Management’s current 2020 financial forecast (the “2020 Financial Forecast”) with the potential counterparties who had entered into confidentiality agreements and remained involved in the Process.

On May 11, 2020, the OnDeck Board held a meeting with OnDeck management and representatives of Kirkland in attendance. During that meeting, representatives of Kirkland provided an overview of certain legal matters relevant to the OnDeck Board, including with respect to fiduciary duties.

Later on May 11, 2020, OnDeck reported in its Form 10-Q for the quarter ending on March 31, 2020 a going concern qualification, as required under ASC Topic 205-40, citing decreased cash flows, higher than expected loan delinquencies and, in turn, lower cash collections. As a result of the foregoing adverse cash flow, loan delinquency and cash collection effects, OnDeck reported that it was not in compliance with certain of its debt agreements and expected additional non-compliance in future periods if OnDeck’s mitigation efforts were unsuccessful, which may result in a loss of its ability to borrow under those debt agreements, early amortization events and/or events of default.

On May 12, 2020, an amortization event occurred with respect to the Series 2018-1 notes issued by ODAST due to an asset amount deficiency under such series of notes.

On May 14, 2020, OnDeck received three nonbinding, preliminary indications of interest to acquire 100% of OnDeck from Party E, a potential strategic buyer backed by a financial sponsor, Party F, a potential strategic buyer backed by a financial sponsor, and from Enova, respectively. Party E’s proposal provided for an all-cash offer that valued OnDeck between $50 million and $75 million (or between $0.78 and $1.17 per share of OnDeck common stock). Party F’s proposal provided for an all-cash offer that valued OnDeck between $100 and $125 million (or between $1.60 and $2.00 per share of OnDeck common stock). Enova’s proposal (the “Initial

 

46


Table of Contents

Enova Proposal”) provided for an all-stock merger transaction at a fixed exchange ratio of 0.085 shares of Enova Common Stock that would yield an implied value of $0.91 per share of OnDeck Common Stock. At the close of trading on May 14, 2020 the price per share of OnDeck Common Stock was $0.66.

On May 15, 2020, OnDeck received a preliminary indication of interest to acquire 100% of OnDeck from Party D, a potential strategic buyer backed by a financial sponsor (the “Party D Initial Proposal”), which provided for an all-cash offer that valued OnDeck between $80 million and $110 million (or between $1.28 and $1.80 per share of OnDeck Common Stock).

On May 16, 2020, OnDeck received a preliminary proposal for a transaction commonly referred to as a PIPE from Party G, a financial investor (the “Party G Initial Proposal”). The Party G Initial Proposal was an offer for a convertible note issued by OnDeck to Party G in exchange for $75 million. Under the Party G Initial Proposal, the convertible note issued by OnDeck would have a five-year maturity, would pay an 8% coupon and, on an as-converted basis, would represent a 55% ownership interest in OnDeck by Party G.

On May 17, 2020, OnDeck received a preliminary proposal to acquire certain of OnDeck’s loan portfolio from Party C, a potential strategic buyer backed by a financial sponsor (the “Party C Initial Proposal”). The Party C Initial Proposal involved Party C purchasing approximately $1.3 billion of OnDeck’s loan portfolio for $40 million. Following the Party C Initial Proposal, Party C did not submit any additional proposals in connection with the Process.

On May 18, 2020, the OnDeck Board held a meeting with OnDeck management and representatives of Evercore and Kirkland in attendance to discuss the six preliminary proposals OnDeck had received and to discuss potential next steps. At this meeting, OnDeck management updated the OnDeck Board on the status of negotiations with respect to OnDeck’s debt facilities, noting that OnDeck management continued to seek a permanent amendment to the Corporate Line Facility, while also seeking more immediate relief to waive the required monthly repayments triggered by the occurrence of an APPE, which would commence on June 17, 2020. During the meeting, representatives of Evercore provided an overview of the interactions with the potential counterparties in the Process noting that, with respect to each of the proposals with a range of proposed values, each potential counterparty conditioned the higher end of such range on satisfactory loan portfolio performance. The OnDeck Board also reviewed the other material terms from the six proposals. At the conclusion of the meeting, the OnDeck Board instructed representatives of Evercore to continue discussions with each of the parties that submitted proposals. Additionally, the OnDeck Board determined that, in light of (i) the complexity of OnDeck’s liquidity position, (ii) the challenges it would continue to face during negotiations with the Corporate Line Facility and (iii) the extremely challenging business environment, it should continue to evaluate all potential alternatives within the ongoing Process.

On May 28, 2020, the OnDeck Board held a meeting with OnDeck management and representatives of Evercore and Kirkland in attendance. During that meeting, representatives of Evercore provided the OnDeck Board with an update on the Process, including an overview of further interactions with potential counterparties to date. OnDeck management also provided an update on OnDeck’s financial position, including, among other things, its available liquidity and the status of negotiations with lenders under the Corporate Line Facility. The OnDeck Board directed OnDeck management to prepare long-range financial projections to aid the OnDeck Board in evaluating the proposals from potential counterparties.

Throughout May, June and July 2020 OnDeck obtained temporary waivers and/or amendments to certain of OnDeck’s warehouse debt facilities to attempt to address some of the impacts of the COVID-19 pandemic on OnDeck’s business.

On June 3, 2020, OnDeck was notified by the NYSE that the average closing price of OnDeck Common Stock over the immediately preceding 30 consecutive trading day period, was below the $1.00 minimum average closing price per share required to maintain a listing on the NYSE.

 

47


Table of Contents

On June 4, 2020, the OnDeck Board held a meeting with OnDeck management and representatives of Evercore and Kirkland in attendance. During that meeting, OnDeck management presented to the OnDeck Board two sets of preliminary financial projections based on the following scenarios for OnDeck’s performance on a stand-alone basis: (i) Scenario 1 assumed, among other things, (x) a quick economic recovery accompanied by increased consumer confidence and strong loan origination growth in the second half of 2020, (y) OnDeck obtaining a long-term sustainable amendment from its lenders under the Corporate Line Facility and (z) OnDeck securing new mezzanine debt in an amount sufficient to satisfy its liquidity needs; and (ii) Scenario 2 assumed a slower economic recovery and lower loan origination levels as compared to Scenario 1 (collectively, the “Scenarios”). OnDeck management also presented a case, which assumed, among other things, a slower economic recovery and an inability of OnDeck to obtain relief under the Corporate Line Facility, resulting in a rapid repayment of amounts outstanding thereunder and OnDeck ceasing new loan originations in the third quarter of 2020 to preserve liquidity, ultimately resulting in a wind-down of OnDeck. OnDeck management also updated the OnDeck Board on OnDeck’s liquidity position, highlighting that, while OnDeck had been able to receive temporary relief under certain of its warehouse debt facilities, there had been no resolution to the Corporate Line Facility negotiations to date. OnDeck management also noted that OnDeck management was continuing to seek to obtain mezzanine financing in order to ease its liquidity constraints. Representatives of Evercore then reviewed with the OnDeck Board a preliminary overview of each of the Scenarios, which were previously provided to the OnDeck Board. As a part of its review, representatives of Evercore and OnDeck management reviewed a number of challenges facing OnDeck that were related to the COVID-19 pandemic, including, among other things, (i) a decrease in OnDeck’s net cash position by approximately $20 million over the month of May 2020, (ii) OnDeck’s 2020 first quarter losses being greater than consensus expectations, (iii) OnDeck’s April 2020 performance being lower than previously anticipated and (iv) a revised outlook for 2020, which was worse than previously contemplated in the 2020 Financial Forecast.

On June 5, 2020, at the direction of the OnDeck Board, representatives of Evercore sent to each of the active potential counterparties in the Process a letter setting forth the procedures for the final round of the Process and requesting the submission of final round proposals by June 22, 2020 (which date was later extended to June 30, 2020 in response to requests from each of the active potential counterparties). This letter included directions to provide a markup of the draft merger agreement that had been prepared by Kirkland and previously provided to the active potential counterparties.

On June 8, 2020, OnDeck began to restart a limited amount of loan originations, targeting current and past customers with strong performance histories and, at the direction of the OnDeck Board, representatives of Evercore conveyed this information to each of the active potential counterparties in the Process.

On June 11, 2020, representatives from Party F informed representatives of Evercore that it was no longer interested in pursuing a potential acquisition of OnDeck due to the amount of capital Party F believed would be required in order to return OnDeck to its historical loan origination levels. Representatives of Evercore subsequently communicated this information regarding Party F to the OnDeck Board.

Also on June 11, 2020, at the direction of the OnDeck Board, representatives of Evercore shared with each of the active potential counterparties in the Process OnDeck’s actual performance results for the month of May 2020.

On June 16, 2020, the OnDeck Board held a meeting with OnDeck management and representatives of Evercore and Kirkland in attendance to discuss, among other things, OnDeck’s liquidity needs and OnDeck’s restart to its loan originations. At the meeting OnDeck management presented financial projections for each of the Scenarios previously reviewed with the OnDeck Board that were updated to reflect the COVID-19 pandemic’s ongoing impact on OnDeck’s results and operations. Representatives of Evercore also reviewed with the OnDeck Board a preliminary financial analysis based on the updated Scenarios. Also during the meeting, Mr. Brause informed the OnDeck Board that on June 17, 2020 OnDeck would be required to make its first amortization payment of approximately $13 million under the Corporate Line Facility because OnDeck had triggered an APPE and had been unable to secure a waiver from its lenders. Mr. Brause also discussed with the Board that (i) under the current terms of the Corporate Line Facility, upon the triggering of an additional APPE, OnDeck would shortly be required to make additional monthly amortization payments of $21 million until the

 

48


Table of Contents

Corporate Line Facility was paid off absent agreement from the lenders thereunder to waive such repayment obligations or otherwise provide relief and (ii) OnDeck continued to seek mezzanine financing from various potential lenders to safeguard its liquidity (and Mr. Brause updated the OnDeck Board on the status of these negotiations). Following these presentations, the OnDeck Board and OnDeck management discussed the various challenges facing OnDeck, including, among other things, (a) the difficulties being encountered in securing a long-term sustainable amendment to the Corporate Line Facility, (b) increasing loan delinquencies, (c) government-mandated stay-at-home orders and the impact on small business customers, (d) the potential need for permanent reductions in the OnDeck labor force and (e) reduced loan originations compared to those contemplated in the Scenarios.

On June 23, 2020, the OnDeck Board held a meeting with OnDeck management and representatives of Evercore and Kirkland in attendance. During that meeting Mr. Brause updated the OnDeck Board on the status of negotiations with the lenders under the Corporate Line Facility noting, among other things, that OnDeck had secured a temporary waiver delaying the effectiveness of monthly $21 million amortization payments until July 14, 2020 in exchange for a payment against the principal of $5 million (which could be credited against future required payments). The OnDeck Board discussed various headwinds and related liquidity concerns facing OnDeck. Among other things, the OnDeck Board discussed (i) the reduced cash flows of the business due to the significant increase in loan delinquencies, (ii) the need to use additional cash in the near-term to meet the accelerated repayment obligations under the Corporate Line Facility arising from the additional APPE, (iii) the operating expenses of the business and (iv) OnDeck’s cash reserves and the potential need to obtain alternate financing to assist with financing a restart of loan originations. The OnDeck Board then reviewed OnDeck’s options for preserving liquidity, including permanent reductions to OnDeck’s full-time workforce and other potential cost reductions, as well as the risks associated with taking such actions.

On June 25, 2020, at the direction of the OnDeck Board, representatives of Evercore shared Scenario 1 with the parties remaining in the Process. During the course of the Process, the remaining parties were provided with updates by OnDeck’s management as to OnDeck’s actual loan origination numbers and its overall performance as compared to Scenario 1.

On June 26, 2020, at the request of Enova, representatives of Vedder Price P. C. (“Vedder Price”), counsel to Enova, and representatives of Kirkland had a telephonic discussion to review certain material terms of the draft merger agreement that was previously provided to all remaining parties in the process.

On June 30, 2020, the OnDeck Board held a meeting with OnDeck management and representatives of Evercore and Kirkland in attendance. During the meeting, Mr. Brause updated the OnDeck Board on negotiations with the lenders under the Corporate Line Facility and OnDeck’s other debt facilities, noting that OnDeck had not yet secured a permanent amendment to the Corporate Line Facility and that a $21 million amortization payment would be due on July 17, 2020. The OnDeck Board discussed OnDeck’s performance and the likelihood that OnDeck would need to cease loan originations in the coming months to preserve liquidity. Also during that meeting, OnDeck management discussed OnDeck’s operational performance and its liquidity position in comparison to each of the Scenarios that were updated as of June 23, 2020. OnDeck management explained that each of the Scenarios had been refined to reflect OnDeck’s loan origination activity, the adverse impact of government loan assistance programs on the demand for OnDeck’s loan products and OnDeck management’s views as to the most likely outcomes to the negotiations with lenders under OnDeck’s debt facilities. The OnDeck Board then engaged in an in-depth discussion with respect to the assumptions underlying the Scenarios.

Later on June 30, 2020, OnDeck received revised proposals from Party E, Party G and Enova. Party E’s revised proposal (the “Party E Round 2 Proposal”) included a markup of the draft merger agreement and provided for an all-cash, nonbinding offer to acquire 100% of OnDeck, at $80 million (or $1.28 per share of OnDeck Common Stock) and indicated that Party E would require 45 days of exclusivity to complete due diligence and finalize definitive documentation. The Party E Round 2 Proposal also included (a) a covenant framework requiring OnDeck to originate and renew loans at forecasted volumes during the time between signing and closing of a potential transaction with Party E and (b) a provision that OnDeck stockholders would retain the net proceeds from the disposal of certain non-core OnDeck assets, if such disposition could be

 

49


Table of Contents

completed prior to closing (which the OnDeck Board did not believe could yield meaningful additional value for its stockholders). Party G’s revised proposal (the “Party G Round 2 Proposal”) was on substantially the same terms as the Party G Initial Proposal and stated that Party G would require 60–90 days to complete due diligence and finalize definitive documentation. Enova’s revised proposal (the “Enova Round 2 Proposal”) included a markup of the draft merger agreement and provided for an acquisition of 100% of OnDeck in an all-stock transaction at a fixed exchange ratio of 0.090 shares of Enova Common Stock per share of OnDeck Common Stock, yielding an implied equity value of $1.29 per share of OnDeck Common Stock. OnDeck stockholders would own approximately 15.5% of the combined company per the Enova Round 2 Proposal. Enova requested exclusivity in the Enova Round 2 Proposal and indicated that, with exclusivity, it was prepared to complete diligence and execute definitive documentation within seven to 14 days. At the close of trading on June 30, 2020 the price per share of OnDeck Common Stock was $0.72.

On July 7, 2020, the OnDeck Board held a meeting with OnDeck management and representatives of Evercore and Kirkland in attendance to discuss the terms of the proposals received from Party E, Party G and Enova on June 30, 2020 (collectively, the “Second Round Proposals”), as well as the status of negotiations with lenders with respect to the Corporate Line Facility. At the meeting, Mr. Brause informed the Board that no amendment with respect to the Corporate Line Facility had yet been obtained and reminded the OnDeck Board that, as a result, absent a waiver or amendment, the next amortization payment of $21 million was due on July 17, 2020. During the meeting representatives of Evercore reviewed with the OnDeck Board an overview of the material financial terms of the Second Round Proposals and a preliminary financial analysis of the proposals received, including, among other things, a contribution analysis with respect to the Enova Round 2 Proposal. Following Evercore’s review of its preliminary financial analysis of the Second Round Proposals and the Enova Round 2 Proposal, the OnDeck Board discussed, among other things, the (x) assumptions around synergies and growth for the combined company, which had been included in the Enova Round 2 Proposal (the “Enova Projections”), (y) potential upside of a transaction with Enova that would result from the OnDeck stockholders’ pro forma stake in the combined company (and their relative share of synergies and revenue growth) and (z) the fact that the price per share of Enova common stock had appreciated in excess of 40% between the Initial Enova Proposal and the Enova Round 2 Proposal. Representatives of Kirkland then reviewed the material legal issues presented by the markups received from Party E and Enova, including a discussion on the timing each party had indicated that it required to complete diligence and negotiate definitive documentation, as well as the Board’s fiduciary duties in the context of a sale transaction. After an in-depth discussion, the OnDeck Board directed OnDeck management and representatives of Evercore to further engage with Party E and Enova (including, with respect to Enova, to further understand the underlying assumptions with respect to the Enova Projections, including the projected pace at which the combined company could resume pre-COVID-19 levels of loan originations). The OnDeck Board also determined not to further engage with Party G at this time, given that the Party G Round 2 Proposal was not an attractive financing alternative at the coupon rate and valuation proposed.

On July 8, 2020, OnDeck terminated approximately 20% of its U.S. employees to reduce ongoing operating costs and preserve liquidity.

On July 9, 2020, representatives of Party D indicated to representatives of Evercore that concerns around OnDeck’s warehouse debt facilities and its international business divisions would negatively impact the valuation levels at which they would potentially be willing to acquire OnDeck (and any proposal would be below the bottom range of the Party D Initial Proposal) and as a result determined not to submit a proposal in the final round of the Process. Representatives of Evercore subsequently communicated this information regarding Party D to the OnDeck Board.

On July 10, 2020, the OnDeck Board held a meeting with OnDeck management and representatives of Evercore and Kirkland in attendance. Mr. Brause noted that OnDeck still had not reached an agreement with its lenders to delay the $21 million amortization payment under the Corporate Line Facility that would be due on July 17, 2020. OnDeck management informed the OnDeck Board that loan origination performance was tracking below the projections in both Scenario 1 and Scenario 2, and that OnDeck management believed that Scenario 2 represented the more realistic set of financial projections for OnDeck as a stand-alone entity for a variety of reasons, including the most up-to-date loan

 

50


Table of Contents

origination data and the status of negotiations with OnDeck’s lenders. Representatives from Evercore then provided the OnDeck Board with updated preliminary financial analyses based on each of the Scenarios.

On July 12, 2020, the OnDeck Board held a meeting with OnDeck management and representatives of Evercore and Kirkland in attendance. The OnDeck Board further reviewed and discussed the Scenarios, including the likelihood that Scenario 1 (as then currently contemplated) would be unachievable for OnDeck as a stand-alone entity due to the current status of the economic recovery from the COVID-19 pandemic, the related weaker-than-anticipated restart in loan originations and OnDeck’s inability to fund the loan originations modeled in Scenario 1. Following these discussions, the OnDeck Board determined that Scenario 2 was the most realistic set of projections and approved Scenario 2 for use by Evercore in connection with its financial analysis and opinion (as described in the sections titled “Certain Unaudited Prospective Information” and “The Merger—Opinion of Evercore Group L.L.C.” beginning on pages 69 and 58, respectively of this proxy statement/prospectus, the “OnDeck Projections”). Representatives of Evercore then reviewed Evercore’s updated preliminary financial analysis, which included updated analyses comparing the Enova Round 2 Proposal against (i) the preliminary financial analysis of OnDeck based on Scenario 2 and (ii) the Party E Round 2 Proposal. The OnDeck Board then discussed, in light of Enova’s request for exclusivity, the risk of losing the transaction with Enova if OnDeck did not grant Enova exclusivity as well as the OnDeck Board’s fiduciary duties in connection with granting exclusivity. The OnDeck Board also discussed the strategic rationale of a business combination with Enova including, among other things, (x) Enova’s diversified lending platform, to which OnDeck would bring an expanded lending vertical dedicated to small businesses, (y) the potentially significant synergies to be realized in a combination of OnDeck and Enova and (z) the benefits Enova’s strong liquidity position would bring in the event of a slower economic recovery and/or a worsening of the COVID-19 pandemic, among other things. Based on the foregoing, as well as the additional time required by Party E to complete due diligence, the OnDeck Board determined to seek an increase in the Enova Round 2 Proposal of $10 million. The OnDeck Board then directed representatives of Evercore to engage with representatives of Jefferies to this effect and authorized OnDeck management to enter into exclusivity, subject to a sufficient increase in value of the Enova Round 2 Proposal.

Later on July 12, 2020, representatives of Evercore, at the direction of the OnDeck Board, informed representatives of Jefferies that the Enova Round 2 Proposal did not represent a value at which OnDeck would be willing to transact or upon which OnDeck could grant exclusivity. During that discussion, representatives from Jefferies communicated an updated proposal (the “Revised Enova Proposal”) to acquire OnDeck for 0.092 shares of Enova Common Stock and $0.12 in cash per share of OnDeck Common Stock, which represented an increase of approximately $10 million (12%) in value as compared to the Enova Round 2 Proposal and requested that OnDeck enter into an exclusivity agreement through a targeted signing date of July 28, 2020. OnDeck stockholders would own approximately 16.7% of the combined company per the Revised Enova Proposal.

Following the meeting of the OnDeck Board, on July 13 and July 14, 2020, representatives of Evercore, at the direction of the OnDeck Board informed Party E and Party G that the OnDeck Board was not willing to move forward with those parties based on the Party E Round 2 Proposal and the Party G Round 2 Proposal.

On July 13, 2020, OnDeck and Enova executed an exclusivity agreement through July 28, 2020.

On July 14, 2020, the OnDeck Board held a meeting to discuss the next steps for conducting reverse due diligence on Enova and negotiating definitive transaction agreements.

Commencing on July 15, 2020 through July 27, 2020, OnDeck engaged in reverse due diligence on Enova and Enova conducted additional due diligence with respect to OnDeck. OnDeck’s reverse due diligence consisted of the review of documents and materials and several telephonic discussions with Enova management across six workstreams and focused on the material assumptions contained in the Enova Projections, the potential synergies to be achieved in the merger, the regulatory risks associated with Enova’s business, Enova’s international operations, Enova’s liquidity and capital adequacy, Enova’s technology, and Enova’s risk and financial practices.

 

51


Table of Contents

On July 16, 2020 (but effective as of on July 14, 2020), OnDeck obtained a waiver under its Corporate Line Facility to further delay the effectiveness of the increased monthly principal repayments triggered by the additional APPE. In consideration for the waiver, OnDeck agreed to make a principal repayment of $8.1 million (which is the approximately $13 million that would have been payable on July 17, 2020 as a result of the first APPE, less the $5 million principal repayment made in connection with the waiver signed on June 23, 2020). OnDeck additionally agreed that if an amendment to the Corporate Line Facility was not entered into or if the waiver was not otherwise extended, OnDeck would be required to make an additional $7.9 million principal repayment by July 31, 2020 and the monthly principal repayments of $21 million triggered by the additional APPE would commence on August 17, 2020 and continue until the Corporate Line Facility was repaid in full.

On July 17, 2020, Kirkland sent a revised draft of the merger agreement to Vedder Price.

Also on July 17, 2020, Mr. Breslow and Mr. Fisher, Chief Executive Officer, President and Chairman of Enova discussed a potential role for Mr. Breslow as the vice chairman of the combined company. Neither Mr. Breslow nor Mr. Fisher discussed compensation or the specific responsibilities of Mr. Breslow’s role until after the execution of the merger agreement.

On July 24, 2020, the OnDeck Board held a meeting to discuss OnDeck’s reverse due diligence review of Enova to date, with representatives of Evercore and Kirkland in attendance. During that meeting, OnDeck management provided a detailed overview of the reverse due diligence performed noting, among other things, that Enova (as it had previously publicly disclosed) is subject to increased regulatory risk and scrutiny as compared to OnDeck due to its participation in the sub-prime and near prime consumer lending spaces, and potentially more exposed to changes in policies or enforcement by certain regulators. Representatives of Evercore and OnDeck management also discussed with the OnDeck Board the Enova Projections and indicated that while the assumptions therein for loan origination growth were generally in line with OnDeck’s own models, given the uncertainty in the macroeconomic environment and its impact on discount rates relied upon for fair value accounting, OnDeck management believed it was appropriate to apply a 10% reduction to the forecasted net income in the Enova Projections. The OnDeck Board engaged in an in-depth discussion with representatives of Evercore and OnDeck management regarding the outcome of their reverse due diligence investigation. After further discussion, the OnDeck Board approved for Evercore’s use in connection with its analysis and opinion the Enova Projections as adjusted by OnDeck management with the 10% reduction to forecast net income (as adjusted, the “OnDeck Adjusted Enova Projections”).

From July 24, 2020 until July 28, 2020, representatives of OnDeck and Enova, along with their respective advisors, held numerous discussions to resolve the remaining open issues in the merger agreement, including, among other things, (i) the treatment of employee equity awards, (ii) the parameters within which OnDeck would be permitted to amend its current debt facilities and incur additional debt and (iii) Enova’s obligations in connection with obtaining required regulatory approvals.

On July 26, 2020, at a meeting of the OnDeck Board, representatives from Evercore provided an update to its preliminary financial analysis based on further analysis of the OnDeck Adjusted Enova Projections. Following an in-depth discussion by the OnDeck Board, which included discussions relating to the assumptions underlying Evercore’s analysis, representatives from Kirkland updated the OnDeck Board on the remaining open items in the merger agreement, which included (i) the parameters around OnDeck’s ability to amend its current debt facilities and incur additional debt, (ii) restrictions on OnDeck’s ability to operate its business between execution of the merger agreement and the effective time of the merger, (iii) the treatment of employee equity awards and (iv) payments of bonuses to OnDeck’s employees. Representatives of Kirkland also reviewed with the OnDeck Board its fiduciary duties in the context of the potential transaction with Enova. Also at the meeting, the OnDeck Board reviewed a disclosure statement provided by Evercore, which indicated that there were no prior or current engagements or relationships between Evercore, on the one hand, and either Enova or OnDeck, on the other hand, during the prior two-year period. The OnDeck Board concluded that, based upon the information provided by Evercore, Evercore did not have any relationships that would be likely to impair its ability to provide independent advice to the OnDeck Board.

 

52


Table of Contents

On July 28, 2020, the OnDeck Board held a meeting with OnDeck management and representatives of Evercore and Kirkland in attendance. Representatives of Kirkland and OnDeck management reviewed the principal terms of the proposed merger agreement, including, among other things, resolutions to open points previously described for the OnDeck Board. Also at this meeting, representatives of Evercore reviewed with the OnDeck Board its financial analysis of the merger consideration and delivered to the OnDeck Board Evercore’s opinion to the effect that, as of that date and based upon and subject to the assumptions, limitations, qualifications and conditions described in Evercore’s opinion, the merger consideration of $0.12 in cash and 0.092 of a share of Enova common stock per share of OnDeck common stock to be received by the holders of shares of OnDeck common stock in the merger was fair, from a financial point of view, to such holders (other than Enova and its affiliates). The OnDeck Board further discussed the potential transaction and various reasons and factors that members of the OnDeck Board considered in forming their view that the proposed transaction was advisable and in the best interests of OnDeck and its stockholders. The OnDeck Board then, taking into account the foregoing and its previous meetings and discussions, unanimously determined that the merger agreement and the transactions contemplated thereby were fair to, advisable, and in the best interests of OnDeck and its stockholders. The OnDeck Board therefore approved the merger agreement and the transactions contemplated thereby and resolved to recommend that OnDeck stockholders vote to approve the merger agreement at a meeting of stockholders to be called for the purposes of acting thereon (for additional detail, see “Recommendation of the OnDeck Board of Directors and Its Reasons for the Merger” beginning on page 53).

Also on July 28, 2020, in connection with the approval of the merger agreement and the transactions contemplated thereby, the Compensation Committee of the OnDeck Board approved the compensation and benefits-related matters which are described in greater detail under the heading “Interests of Directors and Executive Officers of OnDeck in the Merger” beginning on page 72.

On the same day, Kirkland and Vedder Price exchanged final drafts of the merger agreement and other related ancillary documents, and the parties announced the execution of the merger agreement.

Enova’s Rationale for the Transaction

Enova believes that its acquisition of OnDeck will:

 

   

create a leading online financial services company with increased scale, more diversified revenues, stronger cash-flow potential and increased flexibility to drive long-term growth and shareholder value, while maintaining balance sheet strength;

 

   

be accretive in the first year post-closing and create opportunities for significant cost and revenue synergies;

 

   

bolster Enova’s portfolio of leading brands and products and provide the scale and resources to invest in and drive innovation;

 

   

enhance Enova’s ability to serve changing industry and customer landscapes to further support small businesses and consumers in the wake of the COVID-19 pandemic; and

 

   

combine experienced management and strong, innovative and customer-oriented work cultures.

Recommendations of the OnDeck Board of Directors and Its Reasons for the Merger

By unanimous vote, the OnDeck Board, at a meeting held on July 28, 2020, (i) determined that the terms of the merger agreement, the merger and the other transactions contemplated by the merger agreement are fair to, and in the best interest of, OnDeck and the OnDeck stockholders, (ii) declared advisable and approved the merger agreement and the consummation of the merger and the other transactions contemplated by the merger agreement, (iii) determined the execution and delivery by OnDeck of the merger agreement and all agreements and documents related and ancillary thereto and contemplated thereby, the performance by OnDeck of its covenants and agreements contained therein and consummation of the merger and the other transactions

 

53


Table of Contents

contemplated by the merger agreement and the ancillary agreements are authorized and approved and (iv) resolved (subject to certain exception set forth in the merger agreement) to recommend the adoption of the merger agreement by the OnDeck stockholders.

The OnDeck Board unanimously recommends that OnDeck stockholders vote “FOR” the merger proposal, “FOR” the nonbinding compensation advisory proposal and “FOR” the adjournment proposal.

In evaluating the merger agreement and the transactions contemplated thereby, the OnDeck Board consulted with OnDeck’s management team and outside legal and financial advisors. The OnDeck Board also considered and evaluated various factors over several meetings of the OnDeck Board held since March 2020, including the following factors (not necessarily in order of relative importance), each of which the OnDeck Board believed supported its unanimous recommendation that OnDeck stockholders vote in favor of the merger:

Challenges OnDeck Faces as an Independent Company; Comprehensive Transaction Process

The OnDeck Board considered the possibility of continuing to operate OnDeck as an independent public company, including the related risks and uncertainties and the prospects for OnDeck going forward as an independent entity. In doing so, the OnDeck Board considered the following:

 

   

the landscape of the small business lending sector and the uncertainty surrounding projected macroeconomic conditions in the near term and long term, particularly in light of the COVID-19 pandemic;

 

   

the decline in originations, net increase in loan delinquencies since the first quarter of 2020 and acceleration of OnDeck’s obligations to repay indebtedness, and the associated impact on capital and liquidity, that OnDeck was experiencing, and the possibility that such issues could subsist or the rate of decline increase in the event the COVID-19 pandemic persisted or a prolonged economic downturn were to emerge, and the likelihood that the combined company would be better positioned to meet these challenges;

 

   

the current and historical financial condition, results of operations and business of OnDeck and OnDeck’s financial plan and prospects if it were to remain an independent company, the risks associated with achieving and executing upon OnDeck’s financial plan (in particular in light of the uncertainties in macroeconomic conditions, and the small business segment in particular) and the other risks disclosed under “Risk Factors” in OnDeck’s most recent annual report on Form 10-K and OnDeck’s most recent Quarterly Report on Form 10-Q;

 

   

the monthly principal repayments required to be paid by OnDeck to its lenders in respect of asset performance payout events under the Corporate Line Facility due to the impact of COVID-19 on OnDeck’s portfolio performance, among other things;

 

   

the possibility that OnDeck would not be able to obtain long-term sustainable amendments from its lenders under all of its warehouse debt facilities and the Corporate Line Facility;

 

   

the possibility that OnDeck would not be able to obtain alternative financing arrangements on suitable terms;

 

   

the ability of OnDeck to continue to comply with the portfolio performance covenants in its warehouse debt facilities and its securitizations, and the impact of such compliance on OnDeck’s financial flexibility and its ability to return loan originations to historical levels;

 

   

the fact that, given origination rates and the status of lender negotiations, and despite the implementation of operational expenditure reductions, such as curtailing marketing spend, implementing a hiring freeze and employee furloughs and reductions in pay for non-furloughed employees and members of the OnDeck Board, OnDeck’s liquidity position and outlook remained challenged;

 

54


Table of Contents
   

the prospect that if OnDeck were to cease to have sufficient available liquidity before reaching an acceptable arrangement with its lenders, it could be required to file for bankruptcy;

 

   

the fact that OnDeck’s average 30-day closing price for its common stock had been below the $1.00 minimum average closing price per share required to maintain listing on the NYSE; and

 

   

the ability of OnDeck as a stand-alone entity to retain key personnel and attract new talent, particularly in light of operational expenditure reductions OnDeck had implemented.

The OnDeck Board considered the results of the strategic review process conducted by the OnDeck Board with the assistance of OnDeck’s management and legal and financial advisors, which included the following:

 

   

a review of other potential strategic alternatives, including the possibility of continuing to operate OnDeck as an independent public company;

 

   

a review of proposals received by OnDeck from potential new financing sources to provide mezzanine financing;

 

   

a review of the status of negotiations with OnDeck’s existing lenders with respect to a modification of the terms of its existing lending arrangements to provide additional liquidity and flexibility for originations;

 

   

the fact that 84 parties were contacted regarding their potential interest in a sale transaction involving OnDeck, 36 parties entered into confidentiality agreements with OnDeck and only three parties submitted final round bids. With the exception of Enova, none of these contacts resulted in proposals that the OnDeck Board believed were reasonably likely to create greater value for OnDeck’s stockholders than the merger. The OnDeck Board also considered the fact that press articles that OnDeck was reviewing its strategic alternatives had been published by third parties prior to signing, meaning that parties who had not been previously contacted were aware of the process and could have reached out to OnDeck; and

 

   

the course of negotiations with Enova, including that Enova increased its offer and the OnDeck Board’s belief that the terms of the merger were the best reasonably available.

Merger Consideration; Certainty of Value; Liquidity

 

   

Compelling Value on Both a Relative and Absolute Basis. The OnDeck Board considered the aggregate value and nature of the consideration to be received in the merger by OnDeck stockholders, including the fact that:

 

   

based on the closing trading price of Enova common stock of $13.70 on July 27, 2020, the last trading day prior to public announcement of the merger, the merger consideration represented an implied value of $1.38 per share of OnDeck common stock and premiums of 90.4% to the $0.73 trading price of OnDeck common stock on July 27, 2020 and 43.6% to the 90-day volume weighted-average price of OnDeck common stock;

 

   

the cash component of the merger consideration provides OnDeck stockholders with immediate and certain value to the extent of the cash consideration; and

 

   

that a majority of the merger consideration will be paid in shares of Enova common stock, which would result in OnDeck stockholders immediately prior to the transaction holding approximately 16.7% of the common stock of the combined company immediately following completion of the merger, thus providing OnDeck stockholders with a continuing equity interest in the combined company and the ability to participate in any potential growth in the earnings and cash flows of a

 

55


Table of Contents
 

larger, more firmly capitalized company, in any synergies achieved by the combined company and in any potential future appreciation in the value of the combined company shares following the merger.

 

   

Opinion of Evercore. The OnDeck Board considered the opinion of Evercore, dated July 28, 2020, to the OnDeck Board to the effect that, as of that date and based upon and subject to the assumptions, limitations, qualifications and conditions described therein, the merger consideration of $0.12 in cash and 0.092 of a share of Enova common stock per share of OnDeck common stock to be received by the holders of shares of OnDeck common stock in the merger was fair, from a financial point of view, to such holders (other than Enova and its affiliates) as more fully described below in the section titled “The Merger—Opinion of Evercore Group L.L.C.” beginning on page 58.

 

   

Potential for Bridge Financing. The OnDeck Board considered that the merger agreement contemplates that Enova and OnDeck negotiate in good faith to enter into definitive documentation for bridge financing, if requested by OnDeck, which would assist OnDeck with any liquidity constraints during the pendency of the merger and reduce near-term operational risks.

 

   

Enova’s Liquidity Position. The OnDeck Board considered the superior balance sheet strength and financial position of Enova, which will result in the combined company being better able to sustain prolonged COVID-19 and macroeconomic impacts.

Merger Agreement

 

   

Terms of the Merger Agreement. The OnDeck Board reviewed and considered the terms of the merger agreement, taken as a whole, including the parties’ representations, warranties and covenants and the circumstances under which the merger agreement may be terminated, and concluded that such terms are fair to OnDeck. The OnDeck Board also reviewed and considered the conditions to the completion of the merger, including regulatory approvals, which it believes are likely to be satisfied on a timely basis. The OnDeck Board noted in particular that the completion of the merger is not subject to any financing condition or any condition based upon Enova stockholder approval, which enhances the likelihood of the merger’s consummation.

 

   

Opportunity to Receive Alternative Acquisition Proposals and to Terminate the Merger in Order to Accept a Superior Proposal. The OnDeck Board considered the terms of the merger agreement related to OnDeck’s ability to respond to unsolicited acquisition proposals and determined that third parties would be unlikely to be deterred from making a competing proposal by the provisions of the merger agreement, and the OnDeck Board may, under certain circumstances, furnish information and enter into discussions and negotiations in connection with a competing proposal. In this regard, the OnDeck Board considered that:

 

   

subject to its compliance with the applicable provisions of merger agreement (including providing Enova with the opportunity to match any superior proposal), the OnDeck Board can change its recommendation to OnDeck stockholders with respect to the adoption of the merger agreement prior to OnDeck stockholders’ adoption of the merger agreement if the OnDeck Board determines in good faith (after consultation with its financial and legal advisors) that a competing proposal is a superior proposal or, with respect to an intervening event, the failure to take such action would be reasonably likely to be inconsistent with the OnDeck Board’s fiduciary duties;

 

   

subject to its compliance with the applicable provisions of the merger agreement, the OnDeck Board may terminate the merger agreement in order to enter into a superior proposal; and

 

   

while the merger agreement contains a termination fee of $2.8 million that OnDeck would be required to pay to Enova in certain circumstances, including if (i) Enova terminates the merger agreement in connection with a change in the OnDeck Board’s recommendation to its stockholders with respect to adoption of the merger agreement or (ii) OnDeck terminates the

 

56


Table of Contents
 

merger agreement in order to enter into a definitive agreement with respect to a superior proposal, the OnDeck Board believed that the termination fee is reasonable in light of the circumstances and would not discourage competing acquisition proposals from credible third parties willing and able to make such proposals.

 

   

Stockholder Approval; Appraisal Rights. The OnDeck Board considered the fact that the merger agreement must be approved by OnDeck’s stockholders and that OnDeck’s stockholders will have the right to exercise appraisal rights rather than accept the merger consideration.

Negative Factors

The OnDeck Board also considered certain risks and other potentially negative factors related to entering into the merger agreement, including:

 

   

Fixed Exchange Ratio. That because the stock portion of the merger consideration is based on a fixed exchange ratio rather than a fixed value, OnDeck stockholders bear the risk of a decrease in the trading price of Enova common stock during the pendency of the merger, and the merger agreement does not provide OnDeck with a collar or a value-based termination right (although the OnDeck Board determined that the exchange ratio was appropriate and the risks acceptable in view of the relative intrinsic values and financial performance of OnDeck and Enova).

 

   

Risks Associated with the Pendency of the Merger. The risks and contingencies relating to the announcement and pendency of the merger, including the potential for diversion of management and employee attention and the potential effect of the combination on the businesses of both companies and the restrictions on the conduct of OnDeck’s business during the period between the execution of the merger agreement and the completion of the transactions contemplated thereby as set forth in the merger agreement.

 

   

Risks Associated with COVID-19. The unknown risks relating to the COVID-19 pandemic and the impact on the global economy and on the combined company’s business and profitability.

 

   

Possible Failure to Achieve Synergies. The potential challenges and difficulties in integrating the operations of OnDeck and Enova and the risk that anticipated cost savings and operational efficiencies between the two companies, or other anticipated benefits of the merger, might not be realized or might take longer to realize than expected.

 

   

Termination Fee. That OnDeck would be required to pay to Enova a termination fee of $2.8 million in certain circumstances, including in the event the OnDeck Board was to terminate the merger agreement in order for OnDeck to enter into a superior proposal (should one be made), or if the merger agreement were to be terminated by Enova in connection with a change in the OnDeck Board’s recommendation to its stockholders with respect to adoption of the merger agreement.

 

   

Restrictions on Third-Party Discussions and Alternative Proposals. That the merger agreement restricts OnDeck’s ability to solicit alternative transactions and to provide confidential due diligence information to, or engage in discussions with, third parties interested in pursuing an alternative transaction.

 

   

Regulatory Risk. The risks associated with the fact that Enova’s current consumer lending-focused business was subject to increased regulatory risk and scrutiny compared to OnDeck’s commercial lending-focused business, and potentially more exposed to changes in policies or enforcement by certain regulators.

 

   

Merger Consideration Taxable. That, for U.S. federal income tax purposes, the cash consideration to be received by OnDeck’s stockholders in the transactions generally would be taxable to the stockholders.

 

57


Table of Contents
   

Other Risks. Risks of the type and nature described under the sections entitled “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors,” beginning on pages 34 and 36, respectively.

The OnDeck Board believed that, overall, the potential benefits of the merger to OnDeck stockholders outweighed the risks and uncertainties of the merger.

In addition, the OnDeck Board was aware of and considered that OnDeck’s directors and executive officers may have interests in the merger that may be different from, or in addition to, their interests as stockholders of OnDeck generally, as described below under the heading “Interests of Directors and Executive Officers of OnDeck in the Merger” beginning on page 72.

The foregoing discussion of factors considered by the OnDeck Board is not intended to be exhaustive but includes the material factors considered by the OnDeck Board. In light of the variety of factors considered in connection with its evaluation of the merger, the OnDeck Board did not find it practicable to, and did not quantify or otherwise assign relative weights to the specific factors considered in reaching its determinations and recommendations. Moreover, each member of the OnDeck Board applied his or her own personal business judgment to the process and may have given different weight to different factors. The OnDeck Board did not undertake to make any specific determination as to whether any factor, or any particular aspect of any factor, supported or did not support its ultimate determination. The OnDeck Board based its recommendation on the totality of the information presented.

Opinion of Evercore Group L.L.C.

OnDeck retained Evercore to act as its financial advisor in connection with the OnDeck Board’s evaluation of strategic and financial alternatives, including a possible sale of OnDeck. As part of this engagement, OnDeck requested that Evercore evaluate the fairness, from a financial point of view, of the merger consideration to be received by the holders of OnDeck common stock (other than Enova and its affiliates). At a meeting of the OnDeck Board held on July 28, 2020, Evercore rendered to the OnDeck Board its opinion to the effect that, as of that date and based upon and subject to the assumptions, limitations, qualifications and conditions described in Evercore’s opinion, the merger consideration of $0.12 in cash and 0.092 of a share of Enova common stock per share of OnDeck common stock to be received by the holders of OnDeck common stock in the merger was fair, from a financial point of view, to such holders (other than Enova and its affiliates).

The full text of the written opinion of Evercore, dated July 28, 2020, which sets forth, among other things, the procedures followed, assumptions made, matters considered and qualifications and limitations on the scope of review undertaken in rendering its opinion, is attached as Annex B to this proxy statement/prospectus and is incorporated herein by reference. OnDeck encourages you to read this opinion carefully and in its entirety. Evercore’s opinion was addressed to, and provided for the information and benefit of, the OnDeck Board (in its capacity as such) in connection with its evaluation of the proposed merger. The opinion does not constitute a recommendation to the OnDeck Board or to any other persons in respect of the merger, including as to how any holder of shares of OnDeck common stock should vote or act in respect of the merger. Evercore’s opinion does not address the relative merits of the merger as compared to other business or financial strategies that might be available to OnDeck nor does it address the underlying business decision of OnDeck to engage in the merger.

In connection with rendering its opinion, Evercore, among other things:

 

   

reviewed certain publicly available business and financial information relating to Enova that Evercore deemed to be relevant, including publicly available research analysts’ estimates;

 

   

reviewed certain publicly available business and financial information relating to OnDeck that Evercore deemed to be relevant, including management of OnDeck’s conclusion set forth in OnDeck’s

 

58


Table of Contents
 

Form 10-Q for the quarterly period ended March 31, 2020 that, absent certain mitigating actions described therein, the uncertainty surrounding OnDeck’s future non-compliance in its debt facilities, ability to negotiate some of its existing facilities or repay outstanding indebtedness, and maintain sufficient liquidity raises substantial doubt about OnDeck’s ability to continue as a going concern, as well as publicly available research analysts’ estimates;

 

   

reviewed certain internal projected financial data relating to Enova prepared and furnished to Evercore by management of Enova (the “Enova Projections”);

 

   

reviewed certain internal projected financial data relating to OnDeck and furnished to Evercore by the management of OnDeck (the “OnDeck Projections”), and the Enova Projections, as adjusted by management of OnDeck (the “OnDeck Adjusted Enova Projections”), each as approved for Evercore’s use by OnDeck management (together, the “Projections”);

 

   

discussed with the management of Enova its assessment of the past and current operations of Enova, the current financial condition and prospects of Enova, and the Enova Projections, and discussed with the management of OnDeck its assessment of the past and current operations of OnDeck and Enova, the current financial condition and prospects of OnDeck and Enova, and the Enova Projections and the Projections;

 

   

reviewed the reported prices and the historical trading activity of the OnDeck common stock and the Enova common stock;

 

   

compared the financial performance of OnDeck and Enova and their respective stock market trading multiples with those of certain other publicly traded companies that Evercore deemed relevant;

 

   

reviewed the financial terms and conditions of a draft, dated July 27, 2020, of the merger agreement; and

 

   

performed such other analyses and examinations and considered such other factors that Evercore deemed appropriate.

For purposes of Evercore’s analysis and opinion, Evercore assumed and relied upon the accuracy and completeness of the financial and other information publicly available, and all of the information supplied or otherwise made available to, discussed with, or reviewed by Evercore, without any independent verification of such information (and did not assume responsibility or liability for any independent verification of such information), and further relied upon the assurances of the managements of OnDeck and Enova that they were not aware of any facts or circumstances that would make such information inaccurate or misleading. With respect to the Enova Projections, Evercore assumed with the consent of the OnDeck Board that they had been reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of the management of Enova as to the future financial performance of Enova and the other matters covered thereby. With respect to the Projections, Evercore assumed with the consent of the OnDeck Board that they had been reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of the management of OnDeck as to the future financial performance of OnDeck and Enova, as applicable, and the other matters covered thereby, and for purposes of Evercore’s analysis and opinion, Evercore relied, at the direction of the management of OnDeck, on the Projections. Evercore expressed no view as to the Enova Projections, the Projections or the assumptions on which they were based.

For purposes of Evercore’s analysis and opinion, Evercore assumed, in all respects material to its analysis, that the final executed merger agreement would not differ from the draft merger agreement reviewed by Evercore, that the representations and warranties of each party contained in the merger agreement were true and correct, that each party would perform all of the covenants and agreements required to be performed by it under the merger agreement and that all conditions to the consummation of the merger would be satisfied without waiver or modification thereof. Evercore further assumed, in all respects material to its analysis, that all governmental, regulatory or other consents, approvals or releases necessary for the consummation of the merger would be obtained without any delay, limitation, restriction or condition that would have an adverse effect on

 

59


Table of Contents

OnDeck, Enova or the consummation of the merger or reduce the contemplated benefits to the holders of the OnDeck common stock of the merger. In addition, Evercore assumed, in all respects material to its analysis, that there would be no adjustment to the merger consideration pursuant to Section 2.9(c) of the merger agreement.

Evercore did not conduct a physical inspection of the properties or facilities of OnDeck or Enova and did not make or assume any responsibility for making any independent valuation or appraisal of the assets or liabilities (including any contingent, derivative or other off-balance sheet assets and liabilities) of OnDeck or Enova, nor was Evercore furnished with any such valuations or appraisals, nor did Evercore evaluate the solvency or fair value of OnDeck or Enova under any state or federal laws relating to bankruptcy, insolvency or similar matters. Evercore’s opinion was necessarily based upon information made available to Evercore as of the date thereof and financial, economic, market and other conditions as they existed and as could be evaluated on the date thereof. Evercore’s opinion noted that subsequent developments may affect Evercore’s opinion and that Evercore did not and does not have any obligation to update, revise or reaffirm its opinion. Evercore is not an expert in the evaluation of loan, mortgage or similar portfolios or allowances for losses with respect thereto, and Evercore was not requested to, and did not, conduct a review of individual credit files or loan, mortgage or similar portfolios. Evercore expressed no opinion or view as to the adequacy or sufficiency of allowances for losses or other matters with respect thereto, and Evercore assumed that each of OnDeck and Enova has, and the pro forma combined company will have, appropriate reserves to cover any such losses.

Evercore was not asked to pass upon, and expressed no opinion with respect to, any matter other than the fairness to the holders of the OnDeck common stock (other than Enova and its affiliates), from a financial point of view, of the merger consideration. Evercore did not express any view on, and its opinion did not address, the fairness of the proposed merger to, or any consideration received in connection therewith by, the holders of any other class of securities, creditors or other constituencies of OnDeck, nor as to the fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of OnDeck, or any class of such persons, whether relative to the merger consideration or otherwise. Evercore was not asked to, nor did it express any view on, and its opinion did not address, any other term or aspect of the merger agreement or the merger, including, without limitation, the structure or form of the merger, or any term or aspect of any other agreement or instrument contemplated by the merger agreement or entered into or amended in connection with the merger agreement. Evercore’s opinion did not address the relative merits of the merger as compared to other business or financial strategies that might be available to OnDeck, nor did it address the underlying business decision of OnDeck to engage in the merger. Evercore’s opinion did not constitute a recommendation to the OnDeck Board or to any other persons in respect of the merger, including as to how any holder of shares of the OnDeck common stock should vote or act in respect of the merger. Evercore did not express any opinion as to the prices at which shares of the OnDeck common stock or the Enova common stock would trade at any time, as to the potential effects of volatility in the credit, financial and stock markets on OnDeck, Enova or the merger or as to the impact of the merger on the solvency or viability of OnDeck or Enova or the ability of OnDeck or Enova to pay their respective obligations when they come due. Evercore is not a legal, regulatory, accounting or tax expert and assumed the accuracy and completeness of assessments by OnDeck and its advisors with respect to legal, regulatory, accounting and tax matters.

Set forth below is a summary of the material financial analyses reviewed by Evercore with the OnDeck Board on July 28, 2020 in connection with rendering its opinion. The following summary, however, does not purport to be a complete description of the analyses performed by Evercore. The order of the analyses described and the results of these analyses do not represent relative importance or weight given to these analyses by Evercore. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data that existed on or before July 27, 2020 (the last full trading date prior to the rendering of Evercore’s opinion), and is not necessarily indicative of current market conditions.

For purposes of its analyses and reviews, Evercore considered general business, economic, market and financial conditions, industry sector performance, and other matters, as they existed and could be evaluated as of the date of its opinion, many of which are beyond the control of OnDeck and Enova. The estimates contained in

 

60


Table of Contents

Evercore’s analyses and reviews, and the ranges of valuations resulting from any particular analysis or review, are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by Evercore’s analyses and reviews. In addition, analyses and reviews relating to the value of companies, businesses or securities do not purport to be appraisals or to reflect the prices at which companies, businesses or securities actually may be sold. Accordingly, the estimates used in, and the results derived from, Evercore’s analyses and reviews are inherently subject to substantial uncertainty.

The following summary of Evercore’s financial analyses includes information presented in tabular format. In order to fully understand the analyses, the tables should be read together with the full text of each summary. The tables are not intended to stand alone and alone do not constitute a complete description of Evercore’s financial analyses. Considering the tables below without considering the full narrative description of Evercore’s financial analyses, including the methodologies and assumptions underlying such analyses, could create a misleading or incomplete view of such analyses.

Summary of Evercore’s Financial Analyses

Calculation of implied value of merger consideration

Evercore calculated the implied value of the merger consideration as of July 28, 2020 by multiplying the exchange ratio of 0.092 by the closing stock price per share of Enova common stock of $13.70 as of July 27, 2020 to derive an implied value for the stock consideration as of that date of $1.26 per share of OnDeck common stock. Evercore added this amount to the cash consideration of $0.12 per share of OnDeck common stock to derive an implied value of the merger consideration per share of OnDeck common stock as of July 27, 2020 of $1.38 per share.

OnDeck Analyses

Selected Public Company Trading Analysis

Evercore reviewed and compared certain financial information of OnDeck to corresponding financial multiples and ratios for the following selected publicly traded specialty finance and FinTech lenders that were deemed by Evercore to be similar to OnDeck in one or more respects, including, without limitation, business model and business mix (for purposes of this section, the “OnDeck selected companies”).

Specialty Finance Non-Bank—Consumer / Small and Midsized Businesses

 

   

Consumer Portfolio Services, Inc.

 

   

Curo Group Holdings Corp.

 

   

Elevate Credit, Inc.

 

   

Enova International Inc.

 

   

Newtek Business Services Corp.

 

   

Regional Management Corp.

 

   

World Acceptance Corporation

Tech-Enabled Consumer Firms—Small and Medium Enterprise Lenders

 

   

Greensky, Inc.

 

   

LendingClub Corporation

 

61


Table of Contents

Specialty Finance Banks—Consumer / Small and Midsized Businesses

 

   

Axos Financial, Inc.

 

   

CIT Group Inc.

 

   

Live Oak Bancshares, Inc.

 

   

Marlin Business Services Corp.

 

   

Medallion Financial Corp.

 

   

Meta Financial Group, Inc.

Small Capitalization Technology Firms for Small and Midsized Businesses

 

   

Blucora, Inc.

 

   

GAIN Capital Holdings, Inc.

For each of the OnDeck selected companies, Evercore calculated the closing price per share of the company’s common stock as of July 27, 2020 as a multiple of such company’s estimated earnings per share, or “EPS,” for calendar years 2020 and 2021, referred to below as 2020E EPS and 2021E EPS, respectively, and as a multiple of such company’s tangible book value per share as of March 31, 2020 (or most recently available), referred to below as “TBVPS.” Estimated financial data of the OnDeck selected companies were based on publicly available research analysts’ estimates.

This analysis indicated the following:

 

Financial Metric

   High      Low      Median  

Specialty Finance Non-Bank—Consumer / Small & Midsized Businesses

        

2020E EPS

     23.7x        3.0x        9.7x  

2021E EPS

     12.3x        3.1x        5.3x  

TBVPS

     2.52x        0.53x        0.96x  

Tech-Enabled Consumer Firms—Small & Medium Enterprise Lenders

        

2020E EPS

     NM        NM        NM  

2021E EPS

     23.0x        23.0x        23.0x  

TBVPS

     0.45x        0.45x        0.45x  

Specialty Finance Banks—Consumer / Small & Midsized Businesses

        

2020E EPS

     7.4x        6.8x        7.1x  

2021E EPS

     29.9x        3.9x        7.3x  

TBVPS

     1.76x        0.37x        1.18x  

Small Capitalization Technology Firms for Small & Midsized Businesses

        

2020E EPS

     2.4x        2.4x        2.4x  

2021E EPS

     21.9x        6.1x        14.0x  

TBVPS

     0.80x        0.80x        0.80x  

Overall

        

2020E EPS

     23.7x        2.4x        7.1x  

2021E EPS

     29.9x        3.1x        6.7x  

TBVPS

     2.52x        0.37x        0.99x  

Note: NM means not meaningful because multiples were below 0.0x or above 30.0x.

Based on the multiples it derived for the OnDeck selected companies and based on its professional judgment and experience, Evercore applied a price to net income multiple reference range of 4.0x to 8.0x to OnDeck’s estimated calendar year 2022 net income, based on the OnDeck Projections (noting that OnDeck’s estimated net income for calendar years 2020 and 2021 was forecast to be negative), then discounted the resulting implied aggregate equity values to present value using a discount rate of 25%, based on an estimate of OnDeck’s cost of

 

62


Table of Contents

equity, and divided the resulting present values by the number of fully diluted shares of OnDeck common stock outstanding as of June 30, 2020 to derive a range of implied per share equity values. This resulted in a range of implied equity values per share for OnDeck common stock of $0.55 to $1.11, compared to the implied value of the merger consideration of $1.38 per share.

Evercore also calculated, for reference purposes only, an illustrative range of implied per share equity values using the same methodology as described above, without discounting the implied aggregate equity values to present value. This resulted in an illustrative range of implied equity values per share of OnDeck common stock of $0.69 to $1.38, compared to the implied value of the merger consideration of $1.38 per share.

Based on the multiples it derived for the OnDeck selected companies and based on its professional judgment and experience, Evercore applied a price to TBVPS multiple reference range of 0.30x to 0.90x to OnDeck’s tangible book value of $197.9 million as of March 31, 2020, and divided the resulting implied aggregate equity values by the number of fully diluted shares of OnDeck common stock outstanding as of June 30, 2020 to derive a range of implied per share equity values. This resulted in a range of implied equity values per share of OnDeck common stock of $0.90 to $2.69, compared to the implied value of the merger consideration of $1.38 per share.

Although none of the OnDeck selected companies is directly comparable to OnDeck, Evercore selected these companies because they are publicly traded companies that Evercore, in its professional judgment and experience, considered generally relevant to OnDeck for purposes of its financial analyses. In evaluating the OnDeck selected companies, Evercore made judgments and assumptions with regard to general business, economic and market conditions affecting the OnDeck selected companies and other matters, as well as differences in the OnDeck selected companies’ financial, business and operating characteristics. Accordingly, an evaluation of the results of this analysis is not entirely mathematical. Rather, this analysis involves complex considerations and judgments regarding many factors that could affect the relative values of the OnDeck selected companies and the multiples derived from the OnDeck selected companies. Mathematical analysis, such as determining the mean or median, is not in itself a meaningful method of using the data of the OnDeck selected companies.

Dividend Discount Model Analysis

Evercore performed a dividend discount model analysis to determine a range of implied equity values per share for OnDeck common stock on a stand-alone basis. Evercore calculated a range of implied equity values per share of OnDeck common stock based on the sum of the discounted after-tax net present values of (i) potential dividends that OnDeck is estimated to be able to pay to equity holders for the six months ending December 31, 2020 and for the calendar years ending December 31, 2021 through December 31, 2024, assuming a target tangible common equity to total assets ratio, or “TCE / TA,” of 20% provided by OnDeck management, and (ii) the projected terminal value of future dividends after the calendar year 2024 payable to equity holders as of December 31, 2024.

In calculating the implied equity value per share valuation range of OnDeck on a stand-alone basis, Evercore used the OnDeck Projections for estimated total assets, tangible common equity and net income, and a long-term growth rate of 10% for OnDeck’s net income thereafter provided by OnDeck management. Evercore then calculated the maximum amount of possible dividends that could be paid out in each year from the last six months of calendar year 2020 through calendar year 2024 based on a TCE / TA of 20%, and calculated the terminal value of the potential dividends payable after calendar year 2024 by applying a range of price to next twelve months, or “NTM,” net income multiples of 4.0x to 8.0x to OnDeck’s estimated net income for calendar year 2025, based on the OnDeck Projections. To determine the implied equity value per share, Evercore utilized a range of discount rates from 20% to 30%, based on an estimate of OnDeck’s cost of equity, to discount to present value the potential dividends payable during the last six months of calendar year 2020 through calendar year 2024, and the terminal value of the potential dividends payable thereafter.

 

 

63


Table of Contents

Utilizing these ranges of discount rates and terminal value multiples, Evercore derived an implied equity value per share valuation range for OnDeck common stock of $0.41 to $1.39, compared to the implied value of the merger consideration of $1.38 per share.

Other Factors—OnDeck

Evercore also noted certain other factors, which were not considered material to its financial analyses with respect to its opinion, but were referenced for informational purposes only, including, among other things, the following:

Year-to-Date Trading Range

Evercore reviewed historical trading prices of shares of OnDeck common stock during the year-to-date period ended July 27, 2020, noting that the low and high closing prices during such period ranged from $0.61 to $4.22 per share of OnDeck common stock, respectively.

Equity Research Analyst Price Targets

Evercore reviewed selected public market trading price targets for the shares of OnDeck common stock prepared and published by equity research analysts that were publicly available as of July 27, 2020. These price targets reflect analysts’ estimates of the future public market trading price of the shares of OnDeck common stock at the time the price target was published. As of July 27, 2020, the range of selected equity research analyst price targets per share of OnDeck common stock published during the preceding three-month period was $1.25 to $2.00. Public market trading price targets published by equity research analysts do not necessarily reflect current market trading prices for the shares of OnDeck common stock and these target prices and the analysts’ earnings estimates on which they were based are subject to risk and uncertainties, including factors affecting the financial performance of OnDeck and future general industry and market conditions.

Contribution Analysis

Evercore analyzed the respective implied relative contributions of OnDeck and Enova to the pro forma combined company based on:

 

   

equity market capitalization as of July 27, 2020;

 

   

estimated calendar year 2021 GAAP net income, based on Wall Street analyst estimates; and

 

   

estimated calendar year 2022 GAAP net income, based on the OnDeck Projections.

This analysis indicated the relative contributions of OnDeck and Enova to the pro forma combined company set forth in the table below, in each case compared to the implied pro forma ownership percentage in the combined company for OnDeck stockholders in the merger of approximately 16.7% (excluding the $0.12 in cash per share of OnDeck common stock).

 

Metric

   OnDeck
Contribution
    Enova Contribution  

Equity Market Capitalization

     9.5     90.5

2021E GAAP Net Income (Wall Street Estimates)

     4.4     95.6

2022E GAAP Net Income (OnDeck Projections)

     5.5     94.5 %(1) 

 

(1)

Net Income for Enova reflects OnDeck Adjusted Enova Projections.

Evercore noted that the OnDeck Projections for net income were negative in calendar years 2020 and 2021.

 

64


Table of Contents

Enova Analyses

Selected Public Company Trading Analysis

Evercore reviewed and compared certain financial information of Enova to corresponding financial multiples and ratios for the following selected publicly traded specialty finance, FinTech, and installment and pawn lenders that were deemed by Evercore to be similar to Enova in one or more respects, including, without limitation, business model and business mix (for purposes of this section, the “Enova selected companies”).

Specialty Finance Non-Bank—Consumer / Small and Midsized Businesses

 

   

Consumer Portfolio Services, Inc.

 

   

Curo Group Holdings Corp.

 

   

Elevate Credit, Inc.

 

   

Newtek Business Services Corp.

 

   

Regional Management Corp.

 

   

World Acceptance Corporation

Tech-Enabled Consumer Firms—Small and Medium Enterprise Lenders

 

   

Greensky, Inc.

 

   

LendingClub Corporation

 

   

On Deck Capital, Inc.

Specialty Finance Banks—Consumer / Small and Midsized Businesses

 

   

Axos Financial, Inc.

 

   

CIT Group Inc.

 

   

Live OakBancshares, Inc.

 

   

Marlin Business Services Corp.

 

   

Medallion Financial Corp.

 

   

Meta Financial Group, Inc.

Installment and Pawn Lenders

 

   

EZCORP, Inc.

 

   

FirstCash, Inc.

 

   

OneMain Holdings, Inc.

For each of the Enova selected companies, Evercore calculated the closing price per share of the company’s common stock as of July 27, 2020 as a multiple of such company’s estimated earnings per share, or “EPS,” for calendar years 2020 and 2021, referred to below as 2020E EPS and 2021E EPS, respectively, and as a multiple of such company’s tangible book value per share as of March 31, 2020 (or most recently available), referred to below as “TBVPS.” Estimated financial data of the Enova selected companies were based on publicly available research analysts’ estimates.

 

65


Table of Contents

This analysis indicated the following:

 

Financial Metric

   High      Low      Median  

Specialty Finance Non-Bank—Consumer / Small & Midsized Businesses

        

2020E EPS

     23.7x        3.0x        11.2x  

2021E EPS

     12.3x        3.1x        5.6x  

TBVPS

     1.37x        0.53x        0.72x  

Tech-Enabled Consumer Firms—Small & Medium Enterprise Lenders

        

2020E EPS

     NM        NM        NM  

2021E EPS

     23.0x        23.0x        23.0x  

TBVPS

     0.45x        0.22x        0.34x  

Specialty Finance Banks—Consumer / Small & Midsized Businesses

        

2020E EPS

     7.4x        6.8x        7.1x  

2021E EPS

     29.9x        3.9x        7.3x  

TBVPS

     1.76x        0.37x        1.18x  

Installment and Pawn Lenders

        

2020E EPS

     21.1x        16.8x        18.9x  

2021E EPS

     16.0x        6.3x        7.3x  

TBVPS

     11.33x        0.87x        2.64x  

Overall

        

2020E EPS

     23.7x        3.0x        11.2x  

2021E EPS

     29.9x        3.1x        6.9x  

TBVPS

     11.33x        0.22x        1.02x  

Note: NM means not meaningful because multiples were below 0.0x or above 30.0x.

Based on the multiples it derived for the Enova selected companies and based on its professional judgment and experience, Evercore applied a price to net income multiple reference range of 4.0x to 8.0x to Enova’s estimated calendar year 2021 net income, based on publicly available research analyst estimates, which are referred to below as Street Estimates, and the OnDeck Adjusted Enova Projections, and divided the resulting present values by the number of fully diluted shares of Enova common stock outstanding as of June 30, 2020 to derive a range of implied per share equity values. This resulted in a range of implied equity values per share for Enova common stock as set forth in the table below, compared to the closing price per share of Enova common stock as of July 27, 2020 of $13.70.

The results of the Selected Public Company Trading Analysis for Enova are summarized in the following table:

 

Methodology

   Multiple Range      Implied Per Share Value  

Price / 2021E Net Income

(Street Estimates)

     4.0x – 8.0x      $ 16.76 – $33.51  

Price / 2021E Net Income

(OnDeck Adjusted Enova Projections)

     4.0x – 8.0x      $ 14.14 – $28.27  

Although none of the Enova selected companies is directly comparable to Enova, Evercore selected these companies because they are publicly traded companies that Evercore, in its professional judgment and experience, considered generally relevant to Enova for purposes of its financial analyses. In evaluating the Enova selected companies, Evercore made judgments and assumptions with regard to general business, economic and market conditions affecting the Enova selected companies and other matters, as well as differences in the Enova selected companies’ financial, business and operating characteristics. Accordingly, an evaluation of the results of this analysis is not entirely mathematical. Rather, this analysis involves complex considerations and judgments regarding many factors that could affect the relative values of the Enova selected companies and the multiples derived from the Enova selected companies. Mathematical analysis, such as determining the mean or median, is not in itself a meaningful method of using the data of the Enova selected companies.

 

66


Table of Contents

Dividend Discount Model Analysis

Evercore performed a dividend discount model analysis to determine a range of implied equity values per share for Enova common stock on a stand-alone basis. Evercore calculated a range of implied equity values per share of Enova common stock based on the sum of the discounted after-tax net present values of (i) potential dividends that Enova is estimated to be able to pay to equity holders for the six months ending December 31, 2020 and for the calendar years ending December 31, 2021 through December 31, 2024, assuming a target tangible common equity to total assets ratio, or “TCE / TA,” of 15% as provided by Enova management and approved for Evercore’s use by OnDeck management, and (ii) the projected terminal value of future dividends after the calendar year 2024 payable to equity holders as of December 31, 2024.

In calculating the implied equity value per share valuation range of Enova on a stand-alone basis, Evercore used the OnDeck Adjusted Enova Projections for estimated total assets, tangible common equity and net income, and a long-term growth rate of 10% for Enova’s net income thereafter provided by Enova management and approved for Evercore’s use by OnDeck management. Evercore then calculated the maximum amount of possible dividends that could be paid out in each year from the last six months of calendar year 2020 through calendar year 2024 based on a TCE / TA of 15%, and calculated the terminal value of the potential dividends payable after calendar year 2024 by applying a range of price to NTM net income multiples of 4.0x to 8.0x to Enova’s estimated net income for calendar year 2025, based on the OnDeck Adjusted Enova Projections. To determine the implied equity value per share, Evercore utilized a range of discount rates from 14% to 18%, based on an estimate of Enova’s cost of equity, to discount to present value the potential dividends payable during the last six months of calendar year 2020 through calendar year 2024, and the terminal value of the potential dividends payable thereafter.

Utilizing these ranges of discount rates and terminal value multiples, Evercore derived an implied equity value per share valuation range for Enova common stock of $37.96 to $74.22, compared to the closing price per share of Enova common stock as of July 27, 2020 of $13.70.

Other Factors—Enova

Evercore also noted certain other factors, which were not considered material to its financial analyses with respect to its opinion, but were referenced for informational purposes only, including, among other things, the following:

Year-to-Date Trading Range

Evercore reviewed historical trading prices of shares of Enova common stock during the year-to-date period ended July 27, 2020, noting that the low and high closing prices during such period ranged from $8.59 to $26.79 per share of Enova common stock, respectively.

Equity Research Analyst Price Targets

Evercore reviewed selected public market trading price targets for the shares of Enova common stock prepared and published by equity research analysts that were publicly available as of July 27, 2020. These price targets reflect analysts’ estimates of the future public market trading price of the shares of Enova common stock at the time the price target was published. As of July 27, 2020, the range of selected equity research analyst price targets per share of Enova common stock was $18.00 to $40.00. Public market trading price targets published by equity research analysts do not necessarily reflect current market trading prices for the shares of Enova common stock and these target prices and the analysts’ earnings estimates on which they were based are subject to risk and uncertainties, including factors affecting the financial performance of Enova and future general industry and market conditions.

 

67


Table of Contents

Illustrative Price to Tangible Book Value Analysis

Evercore also reviewed an illustrative range of implied per share equity values of Enova common stock, based on an analysis of the Enova selected public companies described above. Based on the multiples it derived for the Enova selected companies and based on its professional judgment and experience, Evercore applied a price to TBVPS multiple reference range of 2.50x to 4.50x to Enova’s tangible book value of $168.4 million as of March 31, 2020, and divided the resulting implied aggregate equity value by the number of fully diluted shares of Enova common stock outstanding as of June 30, 2020 to derive a range of implied per share equity values. This resulted in an illustrative range of implied equity values per share for Enova common stock of $13.99 to $25.18, compared to the closing price per share of Enova common stock as of July 27, 2020 of $13.70.

Miscellaneous

The foregoing summary of Evercore’s financial analyses does not purport to be a complete description of the analyses or data presented by Evercore to the OnDeck Board. In connection with the review of the merger by the OnDeck Board, Evercore performed a variety of financial and comparative analyses for purposes of rendering its opinion. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary described above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Evercore’s opinion. In arriving at its fairness determination, Evercore considered the results of all the analyses and did not draw, in isolation, conclusions from or with regard to any one analysis or factor considered by it for purposes of its opinion. Rather, Evercore made its determination as to fairness on the basis of its professional judgment and experience after considering the results of all the analyses. In addition, Evercore may have given various analyses and factors more or less weight than other analyses and factors, and may have deemed various assumptions more or less probable than other assumptions. As a result, the ranges of valuations resulting from any particular analysis or combination of analyses described above should not be taken to be the view of Evercore with respect to the actual value of the shares of OnDeck common stock. Rounding may result in total sums set forth in this section not equaling the total of the figures shown.

Evercore prepared these analyses for the purpose of providing an opinion to the OnDeck Board as to the fairness, from a financial point of view, of the merger consideration to the holders of shares of OnDeck common stock (other than Enova and its affiliates). These analyses do not purport to be appraisals or to necessarily reflect the prices at which the business or securities actually may be sold. Any estimates contained in these analyses are not necessarily indicative of actual future results, which may be significantly more or less favorable than those suggested by such estimates. Accordingly, estimates used in, and the results derived from, Evercore’s analyses are inherently subject to substantial uncertainty, and Evercore assumes no responsibility if future results are materially different from those forecasted in such estimates.

Evercore’s financial advisory services and its opinion were provided for the information and benefit of the OnDeck Board (in its capacity as such) in connection with its evaluation of the proposed merger. The issuance of Evercore’s opinion was approved by an Opinion Committee of Evercore.

Evercore did not recommend any specific amount of consideration to the OnDeck Board or OnDeck’s management or that any specific amount of consideration constituted the only appropriate consideration in the merger for the holders of OnDeck common stock.

Pursuant to the terms of Evercore’s engagement letter with OnDeck, OnDeck has paid Evercore retainer fees in the amount of approximately $750,000, and OnDeck has agreed to pay Evercore additional fees for its services in the amount of approximately $3.25 million, of which $1 million was paid upon delivery of Evercore’s opinion and the balance of which will be payable contingent upon the consummation of the merger, as well as an additional fee in an amount not to exceed $1 million, which is payable at OnDeck’s sole discretion. OnDeck has also agreed to reimburse Evercore for its expenses and to indemnify Evercore against certain liabilities arising out of its engagement.

 

68


Table of Contents

During the two-year period prior to the date of its opinion, Evercore and its affiliates have not been engaged to provide financial advisory or other services to OnDeck and Evercore has not received any compensation from OnDeck during such period. In addition, during the two-year period prior to the date of its opinion, Evercore and its affiliates have not been engaged to provide financial advisory or other services to Enova and Evercore has not received any compensation from Enova during such period. Evercore may provide financial advisory or other services to OnDeck and Enova in the future, and in connection with any such services Evercore may receive compensation.

Evercore and its affiliates engage in a wide range of activities for its and their own accounts and the accounts of customers, including corporate finance, mergers and acquisitions, equity sales, trading and research, private equity, placement agent, asset management and related activities. In connection with these businesses or otherwise, Evercore and its affiliates and/or its or their respective employees, as well as investment funds in which any of them may have a financial interest, may at any time, directly or indirectly, hold long or short positions and may trade or otherwise effect transactions for their own accounts or the accounts of customers, in debt or equity securities, senior loans and/or derivative products or other financial instruments of or relating to OnDeck or its affiliates, Enova, potential parties to the merger and their respective affiliates or persons that are competitors, customers or suppliers of OnDeck.

OnDeck engaged Evercore to act as a financial advisor based on Evercore’s qualifications, experience and reputation. Evercore is an internationally recognized investment banking firm and regularly provides fairness opinions to its clients in connection with mergers and acquisitions, leveraged buyouts and valuations for corporate and other purposes.

Certain Unaudited Prospective Information

General Note Regarding Certain Unaudited Prospective Financial Information

Neither OnDeck nor Enova, as a matter of course, publicly disclose long-term consolidated forecasts as to future performance, earnings or other results given, among other reasons, the uncertainty, unpredictability and subjectivity of the underlying assumptions and estimates.

The summary of the OnDeck Projections, OnDeck Adjusted Enova Projections and the Enova Projections (collectively referred to herein as the financial projections) are included in this proxy statement/prospectus to give OnDeck’s stockholders access to nonpublic information that was provided to OnDeck’s Board and Evercore in the course of evaluating the proposed merger, and are not intended to influence your decision whether to vote in favor of the merger proposal or any other proposal at the OnDeck special meeting. The inclusion of this information should not be regarded as an indication that any of OnDeck, Enova, or any of their respective advisors or other representatives or any other recipient of this information considered, or now considers, it to be necessarily predictive of actual future performance or events, or that it should be construed as financial guidance, and such summary projections set forth below should not be relied on as such.

While presented with numeric specificity, the financial projections reflect numerous estimates and assumptions made with respect to business, economic, market, competition, regulatory and financial conditions and matters specific to OnDeck’s and Enova’s business that are inherently subject to significant uncertainties and contingencies, including risks and uncertainties described or incorporated by reference in the sections entitled “Cautionary Note Regarding Forward-Looking Statements,” “Where You Can Find More Information,” and “Risk Factors,” beginning on pages 34, 159 and 36, respectively. The financial projections reflect both assumptions as to certain business decisions that are subject to change and, in many respects, subjective judgment, and thus are susceptible to multiple interpretations and periodic revisions based on actual experience and business developments. OnDeck can give no assurance that the financial projections and the underlying estimates and assumptions will be realized and actual results will likely differ, and may differ materially, from those reflected in the financial projections, whether or not the merger is completed.

 

69


Table of Contents

In addition, since the financial projections cover multiple years, such information by its nature becomes more speculative with each successive year. This information constitutes “forward-looking statements” and actual results may differ materially and adversely from those projected.

The financial projections were not prepared with a view toward public disclosure, nor were they prepared with a view toward compliance with published guidelines of the Securities and Exchange Commission or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. Neither OnDeck’s independent registered public accounting firm, nor any other independent accountants, have compiled, examined or performed any procedures with respect to the unaudited prospective financial and operating information contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability. The report of the independent registered public accounting firm to OnDeck contained in its Annual Report on Form 10-K for the year ended December 31, 2019, which is incorporated by reference into this proxy statement/prospectus, relates to historical financial information of OnDeck, and such report does not extend to the projections included below and should not be read to do so.

Furthermore, the financial projections do not take into account any circumstances or events occurring after the date it was prepared. OnDeck can give no assurance that, had the financial projections been prepared as of the date of this proxy statement/prospectus, similar estimates and assumptions would be used. Except as required by applicable securities laws, OnDeck does not intend to, and disclaims any obligation to, make publicly available any update or other revision to the financial projections to reflect circumstances existing since their preparation or to reflect the occurrence of unanticipated events, even in the event that any or all of the underlying assumptions are shown to be in error or to reflect changes in general economic or industry conditions. The financial projections do not take into account all the possible financial and other effects on OnDeck or Enova of the merger, the effect on OnDeck or Enova of any business or strategic decision or action that has been or will be taken as a result of the merger agreement having been executed, or the effect of any business or strategic decisions or actions that would likely have been taken if the merger agreement had not been executed, but which were instead altered, accelerated, postponed or not taken in anticipation of the merger. Further, the unaudited prospective financial and operating information does not take into account the effect on OnDeck or Enova of any possible failure of the merger to occur. None of OnDeck or its affiliates, officers, directors, advisors or other representatives has made, makes or is authorized in the future to make any representation to any OnDeck stockholder or other person regarding OnDeck’s or Enova’s ultimate performance compared to the information contained in the financial projections or to the effect that the forecasted results will be achieved. The inclusion of the financial projections herein should not be deemed an admission or representation by OnDeck or its advisors or any other person that it is viewed as material information of OnDeck, particularly in light of the inherent risks and uncertainties associated with such forecasts. There can be no assurance that the projected results contained in the unaudited prospective financial information will be realized or that actual results will not be materially lower or higher than estimated, whether or not the merger is completed. The summary of the unaudited prospective financial information included above is not being included to influence OnDeck’s stockholder’s decision on whether to vote in favor of the merger, but is being provided solely because it was made available to the OnDeck Board and Evercore in connection with the merger.

The financial projections contain non-GAAP financial measures within the meaning of the applicable rules and regulations of the SEC. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures as used by Enova, OnDeck or the combined company may not be comparable to similarly titled amounts used by other companies.

In light of the foregoing, and considering that the OnDeck special meeting will be held several months after the financial projections were prepared, as well as the uncertainties inherent in any forecasted information, OnDeck stockholders are cautioned not to place undue reliance on such information, and OnDeck urges all OnDeck stockholders to review OnDeck’s and Enova’s most recent SEC filings for a description of OnDeck’s and Enova’s reported financial results. See “Where You Can Find More Information” beginning on page 159.

 

70


Table of Contents

OnDeck Projections

In connection with the OnDeck Board’s consideration of the merger and other strategic alternatives available to OnDeck, OnDeck management prepared certain unaudited financial projections regarding OnDeck’s future financial performance for the years 2020 through 2024 on a stand-alone basis, assuming OnDeck would continue as an independent company without giving effect to the merger, which are referred to herein as the OnDeck Projections. The OnDeck Projections were provided to the OnDeck Board and were also provided to Evercore and approved by OnDeck for Evercore’s use in connection with its financial analyses and opinion as described in the section titled “The Merger—Opinion of Evercore Group L.L.C.” beginning on page 58 of this proxy statement/prospectus.

The following table presents a summary of the OnDeck Projections:

 

     2020E     2021E     2022E      2023E      2024E  
(Dollars in millions)       

Net revenues

   $ 101.3     $ 149.6     $ 191.4      $ 215.8      $ 240.0  

Income (loss) from operations, before provision for income taxes

     (71.3     (21.4     13.7        30.9        47.6  

Net income (loss) attributable to On Deck Capital, Inc. common stockholders

     (65.9     (19.4     11.4        25.9        27.6  

Enova Projections and OnDeck Adjusted Enova Projections

In connection with discussions relating to the merger, Enova management prepared certain unaudited financial projections regarding Enova’s future financial performance on a stand-alone basis, which we refer to herein as the Enova Projections, and which were made available to OnDeck management. In connection with its evaluation of the merger, OnDeck management reduced by 10% the net income forecasts in the Enova Projections for the calendar years 2020 through 2024. The Enova Projections as adjusted by OnDeck management are referred to herein as the OnDeck Adjusted Enova Projections. The 10% reduction to the net income forecasts was applied by OnDeck’s management in light of, among other things, the uncertainty in the macroeconomic environment and its impact on discount rates. The Enova Projections and the OnDeck Adjusted Enova Projections were provided to the OnDeck Board and were also provided to Evercore. The OnDeck Adjusted Enova Projections were approved by the OnDeck Board for Evercore’s use in connection with its financial analyses and opinion as described in the section titled “The Merger—Opinion of Evercore Group L.L.C.” beginning on page 58 of this proxy statement/prospectus.

The Enova Projections and the OnDeck Adjusted Enova Projections reflect numerous estimates and assumptions with respect to industry performance, general business, economic, market and financial conditions and matters specific to Enova’s business, such as competitive conditions, many of which are beyond Enova’s control. The Enova Projections were, in general, prepared for internal use and are subjective in many respects. As a result, the prospective results may not be realized and actual results may be significantly higher or lower. OnDeck’s stockholders are urged to review Enova’s most recent SEC filings for a description of risk factors with respect to Enova’s business as well as “Risk Factors” beginning on page 36 of this proxy statement/prospectus, with respect to risks associated with the combined company.

The following table presents a summary of the Enova Projections:

 

     2020E      2021E      2022E      2023E      2024E  
(Dollars in millions)       

Revenues

   $ 1,020.9      $ 1399.7      $ 1858.5      $ 2,490.1      $ 3,103.3  

EBITDA(1)

     177.3        258.9        402.1        563.6        733.4  

Net Income / (Loss)

     60.9        118.2        217.6        316.1        419.4  

 

(1)

EBITDA is defined as net earnings from continuing operations before interest expense, taxes, depreciation and amortization.

 

71


Table of Contents

The following table presents the net income forecasts in the OnDeck Adjusted Enova Projections:

 

     2020E      2021E      2022E      2023E      2024E  
(Dollars in millions)       

Net Income / (Loss)

   $ 54.9      $ 106.4      $ 195.8      $ 284.5      $ 377.5  

The Enova Projections and OnDeck Adjusted Enova Projections were not prepared with a view toward compliance with published guidelines of the Securities and Exchange Commission or the guidelines established by the American Institute of Certified Public Accountants for preparation or presentation of prospective financial information.

The Enova Projections included in this document were prepared by, and are the responsibility of, Enova’s management. Enova’s independent registered public accounting firm has not audited, reviewed, examined, compiled nor applied agreed-upon procedures with respect to the accompanying unaudited financial projections and, accordingly, Enova’s independent registered public accounting firm does not express an opinion or any other form of assurance with respect thereto. The PricewaterhouseCoopers LLP report incorporated by reference in this proxy statement/prospectus relates to Enova’s previously issued financial statements. It does not extend to the unaudited financial projections and should not be read to do so.

Neither OnDeck nor Enova intends to update or otherwise revise the above financial projections to reflect circumstances existing after the date when made or to reflect the occurrence of future events, even in the event that any or all of the assumptions underlying such financial projections are no longer appropriate, except as may be required by applicable law.

Interests of Directors and Executive Officers of OnDeck in the Merger

In considering the recommendation of the OnDeck Board that OnDeck stockholders vote “FOR” the merger proposal, the merger-related compensation proposal and the adjournment proposal from time to time if necessary or appropriate, including to solicit additional proxies, OnDeck stockholders should be aware that OnDeck’s directors and executive officers have interests in the merger that may be different from, or in addition to, those of OnDeck stockholders generally. The OnDeck Board was aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement and the merger, in approving the merger agreement and in recommending the applicable merger-related proposals.

The following discussion sets forth certain of these interests in the merger of each person who has served as a non-employee director or executive officer of OnDeck since January 1, 2020.

Treatment of Equity and Performance Awards

The amounts described in the equity and cash award tables below have been calculated assuming that (a) as required under SEC rules, the closing price of a share of OnDeck common stock on the completion of the merger is $1.44, which is equal to the average closing price of a share of OnDeck common stock over the first five business days following the first public announcement of the merger (such assumed value, the “Estimated Closing Date Value”), (b) the closing date of the merger is September 3, 2020 (the latest practicable date prior to the filing of this proxy statement/prospectus) and (c) all executive officers of OnDeck experience a qualifying termination of employment as of the closing date of the merger. In addition, the amounts described in the equity and cash award tables below do not forecast any grants, additional issuances, dividends, additional deferrals or forfeitures of any equity or stock-based awards following the date of this filing. Depending on when the completion of the merger occurs, certain awards shown in the tables may vest in accordance with their terms.

OnDeck Stock Options

As described below under “The Merger—Treatment of OnDeck Stock Options, Other Stock-Based Awards and Cash Awards—OnDeck Stock Options,” each in-the-money OnDeck stock option will be cancelled and

 

72


Table of Contents

converted into the right to receive an amount in cash (without interest) equal to (x) the merger consideration cash value minus the exercise price of such OnDeck stock option multiplied by (y) the total number of shares of OnDeck common stock subject to such OnDeck stock option and each out-of-the-money OnDeck stock option will be cancelled for no consideration.

The following table provides information for each of the named executive officers and directors of OnDeck who hold OnDeck stock options regarding the aggregate number of shares of OnDeck common stock underlying outstanding in-the-money OnDeck stock options as of the assumed closing date of the merger of September 3, 2020 and the estimated value of such stock options. All in-the money OnDeck stock options held by Messrs. Breslow, Kampfer, and Verni are vested. Neither OnDeck’s executive officers who are not a named executive officer nor any of OnDeck’s non-employee directors, other than Mr. Verni, hold in-the-money OnDeck stock options, nor are any of them expected to hold any stock options as of the assumed closing date of the merger. However, the actual value of the OnDeck stock options cannot be determined with any certainty until the closing date of the merger.

 

Name

   Shares Covered by Vested
In-the-Money OnDeck
Stock Options
     Estimated Value of Vested
In-the-Money OnDeck
Stock Options(1)
 

Executive Officers

     

Noah Breslow

     1,884,304      $ 1,662,781  

Ken Brause

     —          —    

Cory Kampfer

     70,417      $ 53,235  

Nick Brown

     —          —    

Andrea Gellert(2)

     —          —    

Non-Employee Director

     

Ronald F. Verni

     105,000        106,155  

 

(1)

The estimated value of the in-the-money OnDeck stock options is equal to the product of (i) the difference between (A) the Estimated Closing Date Value, minus (B) the applicable per share exercise price of each such stock option, and (ii) the number of shares underlying each such stock option.

(2)

Ms. Gellert ceased serving OnDeck as its Chief Revenue Officer on February 15, 2020. Ms. Gellert does not currently, nor is she expected to, hold any OnDeck stock options as of the assumed date of the merger.

OnDeck RSUs

As described below under “The Merger—Treatment of OnDeck Stock Options, Other Stock-Based Awards and Cash Awards—OnDeck RSUs,” each OnDeck RSU, held by an employee of OnDeck will be assumed and converted automatically into a time vesting restricted stock unit award (each, an “Adjusted RSU”) that, subject to vesting, will be settled for a number of Enova common stock equal to the sum of (i) the product of (A) the exchange ratio, multiplied by (B) the number of shares of OnDeck common stock subject to the OnDeck RSU, plus (ii) the quotient of (A) the product of (x) the number of shares of OnDeck common stock subject to the OnDeck RSU, multiplied by (y) the cash consideration, divided by (B) the Enova trading price; provided that fractional shares may, at Enova’s election, be settled in cash (without interest), based on the fair market value of a share of Enova common stock at the time of such settlement. Each such Adjusted RSU will remain subject to applicable service vesting requirements, but will immediately become fully vested upon any termination of the holder’s employment that occurs before the first anniversary of the completion of the merger that is without cause, for good reason, or due to death or disability. In addition, each outstanding OnDeck RSU held by an OnDeck non-employee director, whether vested or unvested, will automatically become vested in full and will be cancelled and converted into the right to receive the merger consideration for each share of OnDeck common stock underlying such OnDeck RSU. For purposes of clarity, OnDeck performance vesting restricted stock units granted in 2019 (the “2019 OnDeck PSUs”) are no longer subject to performance-vesting conditions and are considered OnDeck RSUs under the merger agreement.

 

73


Table of Contents

The following table provides information for each of the Section 16 executive officers and non-employee directors of OnDeck regarding the number of shares of OnDeck common stock covered by OnDeck RSUs (including the 2019 OnDeck PSUs) held as of the assumed closing date of the merger of September 3, 2020 and the estimated value of such OnDeck RSUs. However, the actual value of the outstanding OnDeck RSUs cannot be determined with any certainty until the actual vesting event occurs.

 

Name

   Number of Outstanding
OnDeck RSUs
     Estimated Value of
Outstanding OnDeck RSUs(1)
 

Executive Officers

     

Noah Breslow

     407,847      $ 585,668  

Ken Brause

     183,584      $ 263,627  

Cory Kampfer

     181,450      $ 260,562  

Nick Brown

     163,390      $ 234,628  

Andrea Gellert(2)

     —          —    

Mark Torossian

     80,948      $ 116,241  

Non-Employee Directors

     

Daniel Henson

     115,550      $ 165,930  

Chandra Dhandapani

     128,444      $ 184,446  

Bruce P. Nolop

     115,550      $ 165,930  

Manolo Sanchez

     128,444      $ 184,446  

Jane J. Thompson

     205,431      $ 294,999  

Ronald F. Verni

     115,550      $ 165,930  

Neil E. Wolfson

     205,431      $ 294,999  

 

(1)

The estimated value of the OnDeck RSUs is equal to the product of (i) the number of outstanding OnDeck RSUs for each individual and (ii) the Estimated Closing Date Value.

(2)

Ms. Gellert ceased serving OnDeck as its Chief Revenue Officer on February 15, 2020. Ms. Gellert does not currently nor is she expected to, hold any OnDeck RSUs as of the assumed date of the merger.

OnDeck PSUs

As described below under “The Merger—Treatment of OnDeck Stock Options, Other Stock-Based Awards and Cash Awards—OnDeck PSUs,” with respect to OnDeck PSU held by holders of OnDeck PSUs who are also party to a change in control and severance agreement (such as the executive officers) with OnDeck, the compensation committee of OnDeck’s Board (with the consent of Enova, which shall not be unreasonably withheld) will, prior to the closing, determine the level of achievement of the performance conditions to be target level, and each such OnDeck PSU will become vested based on the target level of achievement and will be cancelled and converted into the right to receive (A) a number of shares of Enova common stock, equal to the sum of (x) the product of (I) the exchange ratio, multiplied by (II) the number of shares of OnDeck common stock subject to vesting under the OnDeck PSU based on the achievement of performance conditions, plus (y) the quotient of (I) the product of (aa) the number of shares of OnDeck common stock described in clause (A)(x)(II) above, multiplied by (bb) the cash consideration, divided by (II) the Enova trading price, minus (B) that number of shares of Enova common stock with a fair market value equal to all required withholding taxes due upon settlement of such OnDeck PSU as described in clause (A); provided that fractional shares may, at Enova’s election, be settled in cash (without interest), based on the fair market value of a share of Enova common stock at the time of such settlement.

The following table provides information for each of the Section 16 executive officers of OnDeck regarding the number of outstanding OnDeck PSUs held as of the assumed closing date of the merger of September 3, 2020 and the estimated value such OnDeck PSUs. Neither OnDeck’s executive officers who are not a named executive officer nor any of OnDeck’s non-employee directors hold OnDeck PSUs and none are expected to hold any

 

74


Table of Contents

OnDeck PSUs as of the assumed closing date of the merger. However, the actual value of the outstanding OnDeck PSUs cannot be determined with any certainty until the actual vesting event occurs.

 

Name

   Shares Covered by Unvested
OnDeck PSUs
     Estimated Value of Unvested
OnDeck PSUs(1)
 

Noah Breslow

     154,143      $ 221,349  

Ken Brause

     45,814      $ 65,789  

Cory Kampfer

     45,814      $ 65,789  

Nick Brown

     36,651      $ 52,631  

Andrea Gellert(2)

     —          —    

 

(1)

The estimated value of the OnDeck PSUs is equal to product of (i) the number of outstanding OnDeck PSU for each executive officer (assuming OnDeck’s achievement of target level performance) and (ii) the Estimated Closing Date Value.

(2)

Ms. Gellert ceased serving OnDeck as its Chief Revenue Officer on February 15, 2020. Ms. Gellert does not currently, nor is she expected to, hold any OnDeck PSUs as of the assumed date of the merger.

OnDeck Performance Unit Awards

As described below under “The Merger—Treatment of OnDeck Stock Options, Other Stock-Based Awards and Cash Awards—OnDeck Performance Unit Awards,” with respect to OnDeck Performance Unit Awards granted in 2018 or 2020 held by those who are also party to a change in control and severance agreement with OnDeck (such as the executive officers), OnDeck’s Board will, prior to the closing, determine the level of achievement of the performance conditions to be target level, and each such OnDeck Performance Unit Award will, be cancelled and converted into the right to receive, an amount in cash (without interest), equal to (i) $1.00 multiplied by (ii) the total number of units of the OnDeck Performance Unit Awards that become vested based on the determined achievement of applicable performance conditions. In addition, each outstanding OnDeck Performance Unit Award that was granted in 2019, whether vested or unvested, will automatically be assumed and converted into an Adjusted Performance Unit Award that, subject to continued service vesting, will be settled for an amount of cash (without interest) equal to $1.00. Each such Adjusted Performance Unit Award will otherwise be subject to the same terms and conditions applicable to the corresponding OnDeck Performance Unit Award, but will immediately become fully vested upon any termination of the holder’s employment that occurs before the first anniversary of the completion of the merger that is without cause, for good reason, or due to death or disability.

The following table provides information for each of the executive officers of OnDeck regarding the value of such OnDeck Performance Unit Awards ($1.00 per unit) assuming OnDeck’s achievement of target level performance held as of the assumed closing date of the merger of September 3, 2020. None of OnDeck’s non-employee directors currently holds OnDeck Performance Unit Awards or is expected to hold any OnDeck Performance Unit Awards as of the assumed closing date of the merger.

 

Name

   Estimated Value of Unvested
OnDeck Performance
Unit Awards
 

Noah Breslow

   $ 673,369  

Ken Brause

   $ 404,248  

Cory Kampfer

   $ 302,248  

Nick Brown

   $ 327,587  

Andrea Gellert(1)

   $ —    

Mark Torossian

   $ 100,000  

 

(1)

Ms. Gellert ceased serving OnDeck as its Chief Revenue Officer on February 15, 2020. Ms. Gellert does not currently nor is expected to hold any OnDeck Performance Unit Awards as of the assumed date of the merger.

 

75


Table of Contents

Potential Severance Payments in Connection with the Merger

Change in Control Agreements

OnDeck has entered into change in control and severance agreements with each of its named executive officers (the “Change in Control Agreements”). The Change in Control Agreements provide for certain payments and benefits in the event of the executive’s termination without “Cause” or a resignation for “Good Reason” (each defined below) during the three months preceding or the 12 months following a change in control of OnDeck. Specifically, each named executive officer will be entitled to (i) 12 months’ base salary, payable as a lump sum; (ii) 100% of the target short-term incentive bonus, payable as a lump sum; (iii) a prorated portion of the target short-term incentive bonus for the year of termination, payable as a lump sum; (iv) reimbursement of COBRA premiums for 12 months; and (v) the full acceleration of all outstanding equity awards.

Payouts under the Change in Control Agreements are contingent on each named executive officer’s execution and non-revocation of a release of claims in favor of OnDeck and continued compliance with applicable restrictive covenants. The Change in Control Agreements contain a best-net cutback provision whereby any severance payable in connection with a change in control that will be subject to an excise tax under Section 280G of the Code will either be (x) reduced to the amount necessary to prevent the imposition of an excise tax or (y) paid in full, whichever amount is greater after giving effect to the excise tax and other applicable taxes.

Under the Change in Control Agreements’ “Cause” is defined as (i) an act of dishonesty made by an executive in connection with the executive’s responsibilities as an employee; (ii) an executive’s conviction of, or plea of nolo contendere to, a felony or any crime involving fraud or embezzlement; (iii) an executive’s gross misconduct; (iv) an executive’s unauthorized use or disclosure of any proprietary information or trade secrets of OnDeck or any other party to whom the executive owes an obligation of nondisclosure as a result of the executive’s relationship with OnDeck; (v) an executive’s willful breach of any obligations under any written agreement or covenant with OnDeck; (vi) an executive’s failure to cooperate in good faith with a governmental or internal investigation of OnDeck or its directors, officers or employees, if OnDeck has requested the executive’s cooperation; or (vii) continued failure to perform an executive’s employment duties after the executive has received a written demand of performance from OnDeck which specifically sets forth the factual basis for OnDeck’s belief that Executive has not substantially performed his duties and has failed to cure such non-performance to OnDeck’s satisfaction within 10 business days after receiving such notice.

Under the Change in Control Agreements, “Good Reason” is defined as executive’s voluntary termination, within 30 days following the expiration of any OnDeck cure period (discussed below) following the occurrence of one or more of the following, without executive’s consent: (i) a material reduction of Executive’s duties, authority or responsibilities; (ii) a material reduction in executive’s base salary other than a one-time reduction of not more than 10% that also is applied to substantially all of OnDeck’s other executive officers; or (iii) a material change in the geographic location of executive’s primary work facility or location; provided that a relocation of less than 50 miles from executive’s then-present location will not be considered a material change in geographic location. Executive may not resign for Good Reason without first providing OnDeck with written notice within 90 days of the initial existence of the condition that executive believes constitutes Good Reason specifically identifying the acts or omissions constituting the grounds for Good Reason and a reasonable cure period of not less than 30 days following the date of such notice.

The merger will constitute a “change in control” under the Change in Control Agreements. For the quantification of the value of the severance payments and benefits described above that would be payable to OnDeck’s named executive officers upon a qualifying termination in connection with the merger, see the section entitled “Golden Parachute Compensation Table” below.

 

76


Table of Contents

Share Ownership

As described below under “The Merger—Merger Consideration—Conversion of Shares,” non-employee directors and executive officers of OnDeck beneficially own shares of OnDeck common stock, which will be entitled to receive the merger consideration in respect of each share of OnDeck common stock beneficially owned by them.

 

Name

   Number of Outstanding
Shares of OnDeck Common
Stock Owned
 

Noah Breslow(1)

     1,022,000  

Ken Brause

     45,619  

Cory Kampfer

     265,808  

Andrea Gellert(2)

     67,062  

Nick Brown

     74,325  

Chandra Dhandapani

     45,711  

Daniel Henson

     130,324  

Bruce P. Nolop

     131,037  

Manolo Sanchez

     45,711  

Jane J. Thompson

     106,106  

Ronald F. Verni

     117,106  

Neil E. Wolfson

     226,854  

 

(1)

Includes (i) 32,000 shares held to a trust for Mr. Breslow’s minor daughter for which Mr. Breslow’s spouse serves as trustee; and (ii) 32,000 shares held in a trust for Mr. Breslow’s minor son for which Mr. Breslow’s spouse serves as trustee.

(2)

Andrea Gellert’s ownership of OnDeck common stock as of February 28, 2020.

New Compensation Arrangements with Enova

Any executive officers and directors who become officers, directors or employees or who otherwise are retained to provide services to Enova or the surviving corporation may enter into new individualized compensation arrangements and may participate in cash or equity incentive or other benefit plans maintained by Enova. As of the date of this proxy statement/prospectus, Mr. Breslow has entered into an offer letter with Enova to serve in a non-director capacity as Vice Chairman of Enova providing for (i) an annual base salary of $580,000 and (ii) subject to grant and approval by the Compensation Committee of the Enova Board, an equity award with a grant date value of $1,160,000. Subject to earlier accelerated vesting upon a qualifying termination, 75% of the equity award will vest on a date that is six months following the completion of the merger and the remaining 25% of the equity award will vest on the first anniversary of the completion of the merger. Additionally, Mr. Breslow’s acceptance of this offer of employment as of the closing of the merger shall be deemed a termination of his employment for “Good Reason” for all purposes of his Change in Control Agreement as of such date.

Quantification of Potential Payments

For an estimate of the value of the payments and benefits described above that would be payable to OnDeck’s named executive officers upon a qualifying termination in connection with the merger, see the section entitled “Golden Parachute Compensation Table” below.

Golden Parachute Compensation Table

The following table sets forth the information required by Item 402(t) of Regulation S-K regarding the compensation for each of the named executive officers of OnDeck that is based on or otherwise becomes payable immediately prior to, or upon the effectiveness of, the merger, assuming (i) the closing of the merger occurs on September 3, 2020; (ii) each of the named executive officers experiences a qualifying termination as of the closing date of the merger; (iii) the named executive officers’ respective base salary rate and annual target bonus remain unchanged from those that were in effect as of the date of this filing; (iv) OnDeck stock options, OnDeck RSUs, OnDeck PSUs and OnDeck Performance Unit Awards outstanding as of the date hereof do not otherwise vest prior to the completion of the merger; (v) for purposes of determining the value of OnDeck stock-based awards, the value of a share of OnDeck common stock is equal to the Estimated Closing Date Value;

 

77


Table of Contents

(vi) OnDeck PSUs and OnDeck Performance Unit Awards vest at target performance levels, (vii) no named executive officer receives any additional equity grants prior to completion of the merger; and (viii) each named executive officer has properly executed any required releases and complied with all requirements (including any applicable restrictive covenants) necessary in order to receive the payments and benefits. Some of the assumptions used in the table below are based upon information not currently available and, as a result, the actual amounts to be received by any of the individuals below may materially differ from the amounts set forth below.

The payments described in the table below are made pursuant to the arrangements discussed in “—Potential Severance Payments in Connection with the Merger”.

 

Name

   Cash(1)      Equity(2)      Perquisites/
benefits(3)
     Total  

Noah Breslow

   $ 1,935,815      $ 807,017      $ 25,288      $ 2,768,120  

Ken Brause

   $ 1,209,889      $ 329,416      $ 25,288      $ 1,564,593  

Cory Kampfer

   $ 967,877      $ 326,351        —        $ 1,294,228  

Nick Brown

   $ 993,216      $ 287,259      $ 21,558      $ 1,302,033  

Andrea Gellert(4)

   $ —        $ —        $ —        $ —    

 

(1)

Amounts shown reflect the severance payments made pursuant to each executive officer’s Change in Control Agreement as described in detail above. The base salary severance, target short-term incentive bonus, prorated short-term incentive bonus and 2019 OnDeck Performance Unit Awards included in this column are considered to be “double-trigger” payments, which means that both a change in control, such as the merger, and a qualifying termination of employment must occur prior to any payment being provided to the named executive officer. The amounts attributable to the 2018 and 2020 OnDeck Performance Unit Awards are considered to be “single trigger” payments and will become vested upon completion of the merger. The amounts attributable to the 2018 and 2020 OnDeck Performance Unit Awards, the base salary severance, target short-term incentive bonus, prorated short-term incentive bonus and 2019 OnDeck Performance Unit Awards are set forth in the table below.

 

     Single Trigger      Double Trigger      Total Cash  

Name

   2018 and 2020
OnDeck
Performance
Unit Awards
     Base Salary
Severance
     Target Short-
Term
Incentive
Bonus
     Prorated
Short-Term
Incentive
Bonus
     2019 OnDeck
Performance
Unit Awards
 

Noah Breslow

   $ 556,500      $ 580,000      $ 580,000      $ 102,446      $ 116,869      $ 1,935,815  

Ken Brause

   $ 357,500      $ 415,000      $ 332,000      $ 58,641      $ 46,748      $ 1,209,889  

Cory Kampfer

   $ 255,500      $ 365,000      $ 255,500      $ 45,129      $ 46,748      $ 967,877  

Nick Brown

   $ 277,500      $ 365,000      $ 255,500      $ 45,129      $ 50,087      $ 993,216  

Andrea Gellert

   $ —        $ —        $ —        $ —        $ —        $ —    

 

(2)

Amounts shown reflect the value provided in respect of OnDeck RSUs, OnDeck PSUs, and OnDeck Performance Unit Awards as more fully described above under “—Treatment of Equity and Performance Awards”. All stock options held by our named executive officers have already vested pursuant to the terms applicable to such awards and are not included in this amount. The amounts attributable to the 2018 and 2020 OnDeck PSUs are considered “single trigger” and will become vested upon completion of the merger. The amounts in this column attributable to OnDeck RSUs and 2019 OnDeck PSUs are considered to be “double-trigger,” which means that both a change in control, such as the merger, and a qualifying termination of employment must occur prior to any payment being provided to the named executive officer. The amounts attributable to the 2018 and 2020 OnDeck PSUs and 2019 OnDeck PSUs are set forth in the table below.

 

     Single Trigger      Double Trigger      Total Equity  

Name

   2018 and 2020
OnDeck PSUs
     OnDeck RSUs      2019 OnDeck PSUs  

Noah Breslow

   $ 221,349      $ 561,354      $ 24,314      $ 807,017  

Ken Brause

   $ 65,789      $ 253,901      $ 9,726      $ 329,416  

Cory Kampfer

   $ 65,789      $ 250,836      $ 9,726      $ 326,351  

Nick Brown

   $ 52,631      $ 224,207      $ 10,421      $ 287,259  

Andrea Gellert

   $ —        $ —        $ —        $ —    

 

78


Table of Contents
(3)

Amounts shown reflects reimbursement of COBRA premiums for a period of 12 months. Mr. Kampfer has currently waived his rights to participate in OnDeck’s health plan and accordingly is not eligible for such reimbursement. However, if as of his termination of employment, Mr. Kampfer is a participant in OnDeck’s health plan, he would be eligible for reimbursement of COBRA premiums for a period of 12 months with an approximate value of $25,288.

 

(4)

Ms. Gellert ceased serving OnDeck as its Chief Revenue Officer on February 15, 2020. Ms. Gellert will not receive any additional compensation in connection with the merger.

Director and Officer Indemnification

Under the merger agreement, certain indemnification and insurance rights exist in favor of OnDeck and its subsidiaries’ current and former directors and officers. For information about these rights, see “The Merger Agreement—Covenants and Agreements—Indemnification and Insurance of OnDeck Directors and Officers” beginning on page 106.

Accounting Treatment of the Merger

In accordance with current accounting guidance, the merger will be accounted for using the acquisition method. As a result, the recorded assets and liabilities of Enova will be carried forward at their recorded amounts, the historical operating results will be unchanged for the prior periods being reported on and the assets and liabilities of OnDeck will be adjusted to their respective estimated fair values at the closing date of the merger. In addition, all identified intangible assets will be recorded at estimated fair value and included as part of the net assets acquired. Any excess (shortage) of the purchase price, consisting of cash plus the number of shares of Enova common stock to be issued to former OnDeck stockholders and holders of OnDeck stock options, OnDeck RSUs and OnDeck PSUs, as applicable, at fair value, over the fair value of the tangible and identifiable intangible assets of OnDeck on the closing date of the merger will be accounted for as goodwill (bargain purchase gain). In accordance with current accounting guidance, any goodwill will not be amortized but will be evaluated for impairment annually. Identified finite life intangible assets will be amortized over their estimated lives. Further, the acquisition method of accounting will result in the operating results of OnDeck being included in the operating results of Enova beginning from the closing date of the merger.

Regulatory Approvals Required for the Merger

The merger is subject to the requirements of the HSR Act and the related rules and regulations, which provide that certain transactions may not be completed until notification and report forms have been furnished to the DOJ and the FTC and until certain waiting periods have been terminated or have expired. The HSR Act requires Enova and OnDeck to observe a 30-calendar-day waiting period after the submission of their respective HSR filings before consummating their transaction, unless the waiting period is earlier terminated. If either agency issues a Request for Additional Information and Documentary Material prior to the expiration of the initial waiting period, the parties must observe a second 30-calendar-day waiting period, which begins to run only after each of the parties has substantially complied with the request for additional information.

On August 11, 2020, Enova and OnDeck each filed a notification and report form under the HSR Act with the DOJ and the FTC, which filings started the initial 30-calendar-day waiting period required by the HSR Act.

Enova and OnDeck are not currently aware of any material governmental consents, approvals or filings that are required prior to the parties’ completion of the transaction other than those under the HSR Act described

 

79


Table of Contents

above. If additional approvals, consents, clearances or filings are required to complete the transaction, Enova and OnDeck intend to seek such consents and approvals and make such filings.

Enova and OnDeck expect to complete the transaction in the fourth quarter of 2020. Although Enova and OnDeck believe that they will receive the required consents and approvals to complete the transaction, neither can give any assurance as to the timing of these consents and approvals or as to Enova’s and OnDeck’s ultimate ability to obtain such consents or approvals (or any additional consents or approvals that may otherwise become necessary) or that such consents or approvals will be obtained on terms and subject to conditions satisfactory to Enova and OnDeck. The expiration or termination of any applicable waiting period under the HSR Act relating to the merger is a condition to the obligation of each of Enova and OnDeck to complete the merger.

Treatment of OnDeck Stock Options, Other Stock-Based Awards and Cash Awards

OnDeck Stock Options. Upon completion of the merger, (i) each outstanding OnDeck stock option with an exercise price less than the merger consideration cash value, whether vested or unvested, will be cancelled and converted into the right to receive an amount in cash (without interest) equal to (x) the merger consideration cash value minus the exercise price of such OnDeck stock option multiplied by (y) the total number of shares of OnDeck common stock subject to such OnDeck stock option, and (ii) each outstanding OnDeck stock option with an exercise price equal to or greater than the merger consideration cash value, whether vested or unvested, will be forfeited and cancelled automatically without any consideration paid. “Merger consideration cash value” is the sum of the (i) cash consideration and (ii) the product of (A) the exchange ratio, multiplied by (B) the Enova trading price.

OnDeck RSUs. Upon completion of the merger, each outstanding OnDeck RSU held by an employee of OnDeck or any of its subsidiaries, will be assumed and converted automatically into an Adjusted RSU that, subject to vesting, will be settled for a number of shares of Enova common stock equal to the sum of (i) the product of (A) the exchange ratio, multiplied by (B) the number of shares of OnDeck common stock subject to the OnDeck RSU, plus (ii) the quotient of (A) the product of (x) the number of shares of OnDeck common stock subject to the OnDeck RSU, multiplied by (y) the cash consideration, divided by (B) the Enova trading price; provided that fractional shares may, at Enova’s election, be settled in cash (without interest), based on the fair market value of a share of Enova common stock at the time of such settlement. Each Adjusted RSU will otherwise be subject to the same terms and conditions applicable to the corresponding OnDeck RSU, including vesting terms, except that each such Adjusted RSU will immediately become fully vested upon any termination of the holder’s employment that occurs before the first anniversary of the completion of the merger and is without cause, for good reason, or due to death or disability.

Upon completion of the merger, each outstanding OnDeck RSU held by an OnDeck non-employee director, whether vested or unvested, will automatically become vested in full and will be cancelled and converted into the right to receive the merger consideration for each share of OnDeck common stock underlying such OnDeck RSU.

OnDeck PSUs. Each outstanding OnDeck PSU will become vested (or will be forfeited) based on the level of achievement of performance conditions as determined in good faith by the compensation committee of OnDeck’s Board (with the consent of Enova, not to be unreasonably withheld) prior to completion of the merger or at target level of performance for holders of OnDeck PSUs who are also party to a change in control and severance agreement with OnDeck, which includes the OnDeck named executive officers, and will be cancelled and converted into the right to receive (A) a number of shares of Enova common stock, equal to the sum of (x) the product of (I) the exchange ratio, multiplied by (II) the number of shares of OnDeck common stock subject to vesting under the OnDeck PSU based on the achievement of performance conditions, plus (y) the quotient of (I) the product of (aa) the number of shares of OnDeck common stock described in clause (A)(x)(II) above, multiplied by (bb) the cash consideration, divided by (II) the Enova trading price, minus (B) that number of shares of Enova common stock with a fair market value equal to all required withholding taxes due upon

 

80


Table of Contents

settlement of such OnDeck PSU as described in clause (A); provided that fractional shares may, at Enova’s election, be settled in cash (without interest), based on the fair market value of a share of Enova common stock at the time of such settlement.

OnDeck Performance Unit Awards. Each outstanding OnDeck Performance Unit Award granted in 2018 or 2020 will become vested (or will be forfeited) based on the level of achievement of performance conditions as determined in good faith by the compensation committee of OnDeck’s Board (with the consent of Enova, not to be unreasonably withheld) prior to completion of the merger or at target level of performance for holders of OnDeck Performance Unit Awards who are also party to a change in control and severance agreement with OnDeck, which includes the OnDeck named executive officers, and will, whether vested or unvested, be converted into the right to receive, an amount in cash (without interest), equal to (i) $1.00 multiplied by (ii) the total number of units of the OnDeck Performance Unit Awards that become vested based on the determined achievement of applicable performance conditions.

Each outstanding OnDeck Performance Unit Award that was granted in 2019, whether vested or unvested, will automatically be assumed and converted into an Adjusted Performance Unit Award that, subject to satisfying service vesting requirements, will be settled for an amount of cash (without interest) equal to $1.00. Each Adjusted Performance Unit Award will otherwise be subject to the same terms and conditions applicable to the corresponding OnDeck Performance Unit Award; provided that, each such Adjusted Performance Unit Award will immediately become fully vested upon any termination of the holder’s employment that occurs before the first anniversary of the closing date and is without cause, for good reason, or due to death or disability.

For additional information on OnDeck’s stock-based awards, see “The Merger—Interests of Directors and Executive Officers of OnDeck in the Merger” beginning on page 72.

Appraisal Rights

OnDeck Stockholders’ Appraisal Rights

Under Delaware law, holders of shares of OnDeck common stock are entitled to appraisal rights in connection with the merger; provided that such holders meet all of the conditions set forth in Section 262 of the DGCL. If the merger is completed, holders of record of shares of OnDeck common stock who continuously hold shares through the effective time who did not vote in favor of the merger and who otherwise complied with the applicable statutory procedures under Section 262 of the DGCL will be entitled to appraisal rights in connection with the merger under Section 262 of the DGCL.

The following discussion is not a complete statement of the law pertaining to appraisal rights under the DGCL and is qualified in its entirety by the full text of Section 262 of the DGCL, which is attached hereto as Annex C. All references in Section 262 of the DGCL and in this summary to a “stockholder” are to the record holder of shares of OnDeck common stock as to which appraisal rights are asserted. A person having a beneficial interest in shares held of record in the name of another person, such as a broker or nominee, must act promptly to cause the record holder to follow the steps summarized below properly and in a timely manner to demand and perfect appraisal rights. Stockholders should carefully review the full text of Section 262 of the DGCL as well as the information discussed below.

Under the DGCL, if the merger is effected, holders of shares of OnDeck common stock who (i) did not cast their vote in favor of the merger, (ii) follow the procedures set forth in Section 262 of the DGCL and (iii) do not thereafter properly withdraw their demand for appraisal of such shares or otherwise lose their appraisal rights, in each case, in accordance with the DGCL, will be entitled to have such shares appraised by the Court of Chancery and to receive payment of the “fair value” of such shares, exclusive of any element of value arising from the accomplishment or expectation of the merger, as determined by such court, together with interest, if any, to be paid upon the amount determined to be the fair value. The “fair value” could be greater than, less than or the same as the merger consideration.

 

81


Table of Contents

Under Section 262 of the DGCL, OnDeck is required not less than 20 days before the special meeting to vote on the merger to notify each of the holders of OnDeck common stock who are entitled to appraisal rights that appraisal rights are available for any or all of such shares, and is required to include in such notice a copy of Section 262 of the DGCL. This proxy statement constitutes a formal notice of appraisal rights under Section 262 of the DGCL. Any holder of shares of OnDeck common stock who wishes to exercise such appraisal rights, or who wishes to preserve such holder’s right to do so, should review the following discussion and Annex C carefully because failure to timely and properly comply with the procedures specified may result in the loss of appraisal rights under the DGCL.

Any stockholder wishing to exercise appraisal rights should consider consulting legal counsel before attempting to exercise such rights.

If you wish to exercise your appraisal rights, you should carefully review the text of Section 262 of the DGCL set forth in Annex C hereto and consider consulting your legal advisor. If you fail to timely and properly comply with the requirements of Section 262 of the DGCL, your appraisal rights may be lost. To exercise appraisal rights with respect to your shares of OnDeck common stock, you must:

 

   

NOT vote your shares of OnDeck common stock in favor of the merger;

 

   

deliver to OnDeck a written demand for appraisal of your shares before the taking of the vote on the merger proposal at the OnDeck special meeting, as described further below under “—Written Demand by the Record Holder”;

 

   

continuously hold your shares of OnDeck common stock through the effective time; and

 

   

otherwise comply with the procedures set forth in Section 262 of the DGCL.

Written Demand by the Record Holder

All written demands for appraisal should be addressed to OnDeck’s Corporate Secretary at OnDeck’s executive offices at 1400 Broadway, 25th Floor, New York, New York 10018. Such demand will be sufficient if it reasonably informs OnDeck of the identity of the stockholder and that the stockholder intends thereby to demand appraisal of such stockholder’s shares. Under Section 262 of the DGCL, a proxy or vote against the merger does not constitute such a demand.

The written demand for appraisal must be executed by or for the record holder of shares, fully and correctly, as such holder’s name appears on the stock records of OnDeck. If the shares are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, execution of the demand must be made in that capacity, and if the shares are owned of record by more than one person, such as in a joint tenancy or a tenancy in common, the demand must be executed by or for all joint owners. An authorized agent, including one of two or more joint owners, may execute the demand for appraisal for a stockholder of record. However, the agent must identify the record owner(s) and expressly disclose the fact that, in executing the demand, the agent is acting as agent for the record owner(s).

A beneficial owner of shares of OnDeck common stock held in “street name” who wishes to exercise appraisal rights should take such actions as may be necessary to ensure that a timely and proper demand for appraisal is made by the record holder of the shares. If the shares are held through a brokerage firm, bank or other nominee who in turn holds the shares through a central securities depository nominee, a demand for appraisal of such shares must be made by or on behalf of the depository nominee and must identify the depository nominee as the record stockholder. Any beneficial owner who wishes to exercise appraisal rights and holds shares through a nominee holder is responsible for ensuring that the demand for appraisal is timely made by the record stockholder. The beneficial holder of the shares should instruct the nominee holder that the demand for appraisal should be made by the record holder of the shares, which may be a central securities depository nominee if the shares have been so deposited.

 

82


Table of Contents

Filing a Petition for Appraisal

Within 120 days after the effective time, but not thereafter, the surviving corporation (which, in this case, will be OnDeck), or any holder of shares of OnDeck common stock who has complied with Section 262 of the DGCL and is entitled to appraisal rights under Section 262, may commence an appraisal proceeding by filing a petition in the Court of Chancery, with a copy served on OnDeck in the case of a petition filed by a stockholder, demanding a determination of the fair value of the shares held by all holders who did not adopt the merger and properly demanded appraisal of such shares. If no such petition is filed within that 120-day period, appraisal rights will be lost for all dissenting stockholders. OnDeck is under no obligation to, and has no present intention to, file a petition, and holders should not assume that OnDeck will file a petition or that it will initiate any negotiations with respect to the fair value of shares of OnDeck common stock. Accordingly, it is the obligation of the holders of shares of OnDeck common stock to initiate all necessary action to perfect their appraisal rights in respect of the shares within the period prescribed in Section 262 of the DGCL.

Within 120 days after the effective time, any holder of shares of OnDeck common stock who has complied with the requirements for exercise of appraisal rights will be entitled, upon written request, to receive from the surviving corporation a statement setting forth the aggregate number of shares not voted in favor of the merger and with respect to which demands for appraisal have been received and the aggregate number of holders of such shares. Such statement must be mailed within 10 days after a written request therefor has been received by the surviving corporation or within 10 days after the expiration of the period for delivery of demands for appraisal, whichever is later.

Notwithstanding the requirement that a demand for appraisal must be made by or on behalf of the record owner of shares, a person who is the beneficial owner of shares held either in a voting trust or by a nominee on behalf of such person, and as to which demand has been properly made and not effectively withdrawn, may, in such person’s own name, file a petition for appraisal or request from the surviving corporation the statement described in this paragraph.

Upon the filing of such petition by any such holder of shares, service of a copy thereof must be made upon the surviving corporation, which will then be obligated within 20 days after such service to file with the Register in Chancery of the Court of Chancery (which we refer to as the “Delaware Register in Chancery”) a duly verified list (which we refer to as the “verified list”) containing the names and addresses of all stockholders who have demanded payment for their shares and with whom agreements as to the value of their shares have not been reached. Upon the filing of any such petition, the Court of Chancery may order the Delaware Register in Chancery to provide that notice of the time and place fixed for the hearing on the petition be mailed to the surviving corporation and all of the stockholders shown on the verified list. Such notice will also be published at least one week before the day of the hearing in a newspaper of general circulation published in the City of Wilmington, Delaware, or in another publication determined by the Court of Chancery. The costs of these notices are borne by the surviving corporation.

After notice to the stockholders as required by the Court of Chancery, the Court of Chancery is empowered to conduct a hearing on the petition to determine those stockholders who have complied with Section 262 of the DGCL and who have become entitled to appraisal rights thereunder. The Court of Chancery may require the stockholders who demanded appraisal for their shares of OnDeck common stock and who hold shares represented by certificates to submit their stock certificates to the Delaware Register in Chancery for notation thereon of the pendency of the appraisal proceeding, and, if any such stockholder fails to comply with the direction, the Court of Chancery may dismiss the proceedings as to that stockholder. Pursuant to Section 262 of the DGCL, assuming that immediately prior to the merger shares of OnDeck common stock continue to be listed on the NYSE, the Court of Chancery will dismiss the appraisal proceedings as to all holders of shares who are otherwise entitled to appraisal rights, unless (i) the total number of shares entitled to appraisal rights exceeds 1% of the outstanding shares of OnDeck common stock eligible for appraisal, or (ii) the value of the merger consideration provided in the merger for such total number of shares exceeds $1,000,000.

 

83


Table of Contents

Determination of Fair Value

After the Court of Chancery determines which stockholders are entitled to appraisal, the appraisal proceeding will be conducted in accordance with the rules of the Court of Chancery, including any rules specifically governing appraisal proceedings. Through the appraisal proceeding, the Court of Chancery will determine the fair value of the shares, exclusive of any element of value arising from the accomplishment or expectation of the merger, together with interest, if any, to be paid upon the amount determined to be the fair value.

Unless the Court of Chancery in its discretion determines otherwise for good cause shown, and except as otherwise provided in Section 262 of the DGCL, interest from the effective time through the date of payment of the judgment will be compounded quarterly and will accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the effective time and the date of payment of the judgment. At any time before the entry of judgment in the proceedings, the surviving corporation may pay to each stockholder entitled to appraisal an amount in cash, in which case interest shall accrue thereafter as provided in Section 262 of the DGCL only upon the sum of (i) the difference, if any, between the amount so paid and the fair value of the shares as determined by the Court of Chancery, and (ii) interest theretofore accrued, unless paid at that time.

In determining fair value, the Court of Chancery will take into account all relevant factors. In Weinberger v. UOP, Inc., the Supreme Court of Delaware discussed the factors that could be considered in determining fair value in an appraisal proceeding, stating that “proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court” should be considered and that “[f]air price obviously requires consideration of all relevant factors involving the value of a company.” The Delaware Supreme Court stated that, in making this determination of fair value, the Court of Chancery must consider market value, asset value, dividends, earnings prospects, the nature of the enterprise and any other facts that could be ascertained as of the date of the merger that throw any light on future prospects of the merged corporation. Section 262 of the DGCL provides that fair value is to be “exclusive of any element of value arising from the accomplishment or expectation of the merger.” In Cede & Co. v. Technicolor, Inc., the Delaware Supreme Court stated that such exclusion is a “narrow exclusion [that] does not encompass known elements of value,” but which rather applies only to the speculative elements of value arising from such accomplishment or expectation. In Weinberger, the Supreme Court of Delaware also stated that “elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the merger and not the product of speculation, may be considered.”

Stockholders considering appraisal should be aware that the fair value of their shares of OnDeck common stock as so determined could be more than, the same as or less than the merger consideration and that an investment banking opinion as to the fairness, from a financial point of view, of the consideration payable in a sale transaction, such as the merger, is not an opinion as to, and does not otherwise address, “fair value” under Section 262 of the DGCL. Although OnDeck believes that the merger consideration is fair, no representation is made as to the outcome of the appraisal of fair value as determined by the Court of Chancery. Neither Enova nor OnDeck anticipates offering more than the merger consideration to any stockholder exercising appraisal rights, and Enova and OnDeck reserve the right to assert, in any appraisal proceeding, that for purposes of Section 262 of the DGCL, the fair value of a share of OnDeck common stock is less than the merger consideration.

Upon application by the surviving corporation or by any holder of shares of OnDeck common stock entitled to participate in the appraisal proceeding, the Court of Chancery may, in its discretion, proceed to trial upon the appraisal prior to the final determination of the stockholders entitled to an appraisal. Any holder of shares of OnDeck common stock whose name appears on the verified list and, if such shares are represented by certificates and if so required, who has submitted such stockholder’s certificates of stock to the Delaware Register in Chancery, may participate fully in all proceedings until it is finally determined that such stockholder is not entitled to appraisal rights. The Court of Chancery will direct the payment of the fair value of the shares of

 

84


Table of Contents

OnDeck common stock, together with interest, if any, by the surviving corporation to the stockholders entitled thereto. Payment will be so made to each such stockholder, in the case of holders of uncertificated stock, forthwith, and, in the case of holders of shares represented by certificates, upon the surrender to the surviving corporation of such stockholder’s certificates. The Court of Chancery’s decree may be enforced as other decrees in such Court may be enforced.

The costs of the action (which do not include attorneys’ fees or the fees and expenses of experts) may be determined by the Court of Chancery and taxed upon the parties as the Court of Chancery deems equitable. Upon application of a stockholder, the Court of Chancery may order all or a portion of the expenses incurred by a stockholder in connection with an appraisal proceeding, including, without limitation, reasonable attorneys’ fees and the fees and expenses of experts utilized in the appraisal proceeding, to be charged pro rata against the value of all the shares of OnDeck common stock entitled to appraisal. In the absence of an order, each party bears its own expenses.

Any stockholder who has duly demanded appraisal rights for shares of OnDeck common stock in compliance with Section 262 of the DGCL will not, after the effective time, be entitled to vote such shares for any purpose or be entitled to the payment of dividends or other distributions thereon, except dividends or other distributions payable to holders of record of shares of OnDeck common stock as of a date or time prior to the effective time.

At any time within 60 days after the effective time, any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party will have the right to withdraw such stockholder’s demand for appraisal and to accept the terms offered in the merger; after this period, the stockholder may withdraw such stockholder’s demand for appraisal only with the consent of OnDeck. If no petition for appraisal is filed with the Court of Chancery within 120 days after the effective time, stockholders’ rights to appraisal shall cease, and all holders of shares of OnDeck common stock will be entitled to receive the merger consideration. Inasmuch as OnDeck has no obligation to file such a petition and has no present intention to do so, any holder of shares of OnDeck common stock who desires such a petition to be filed is advised to file it on a timely basis. Any stockholder may withdraw such stockholder’s demand for appraisal by delivering to OnDeck a written withdrawal of its demand for appraisal and acceptance of the merger consideration, except that (i) any such attempt to withdraw made more than 60 days after the effective time will require written approval of OnDeck and (ii) no appraisal proceeding in the Court of Chancery shall be dismissed as to any stockholder without the approval of the Court of Chancery, and such approval may be conditioned upon such terms as the Court of Chancery deems just. Notwithstanding the foregoing, any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party may withdraw such stockholder’s demand for appraisal and accept the terms offered upon the merger within 60 days after the effective time.

If you wish to exercise your appraisal rights, you must not vote your shares of OnDeck common stock in favor of the merger, and you must comply with the procedures set forth in Section 262 of the DGCL. If you fail to take any required step in connection with the exercise of appraisal rights, it will result in the termination or waiver of your appraisal rights.

The foregoing summary of the rights of OnDeck stockholders to seek appraisal rights under Delaware law does not purport to be a complete statement of the procedures to be followed by OnDeck stockholders desiring to exercise any appraisal rights available thereunder and is qualified in its entirety by reference to Section 262 of the DGCL. The proper exercise of appraisal rights requires adherence to the applicable provisions of the DGCL. A copy of Section 262 of the DGCL is included as Annex C hereto.

NYSE Listing of Enova Common Stock; Delisting and Deregistration of OnDeck Common Stock

Prior to the completion of the merger, OnDeck will cooperate with Enova and use its reasonable best efforts to take, or cause to be taken, all actions and do all things reasonably necessary, proper or advisable to pursuant to

 

85


Table of Contents

applicable law and rules and regulations of NYSE to cause the delisting of the OnDeck common stock from NYSE as promptly as practicable after the effectiveness of the merger and the deregistration of the OnDeck common stock pursuant to the exchange act as promptly as practicable after such delisting.

Enova shall take, or cause to be taken, all actions and to do or cause to be do all things reasonably necessary, proper or advisable on its part to cause Enova common stock to be issued in the merger to be approved for listing on the NYSE, subject to official notice of issuance, and obtain any necessary state securities law or “blue sky” permits required to issue Enova common stock.

If the merger is completed, OnDeck common stock will cease to be listed on the NYSE and will be deregistered under the Exchange Act, after which OnDeck will no longer be required under SEC rules and regulations to file periodic reports with the SEC with respect to OnDeck common stock.

Material U.S. Federal Income Tax Consequences

General

The following is a general discussion of the material U.S. federal income tax consequences of the merger to holders of OnDeck common stock that exchange their OnDeck common stock for the merger consideration.

This discussion is based upon the Code, U.S. Treasury regulations promulgated under the Code and court and administrative rulings and decisions, all as in effect on the date of this proxy statement/prospectus. These authorities may change, possibly retroactively, or be subject to differing interpretations, and any such change or differing interpretation could affect the accuracy of the statements and conclusions set forth in this discussion.

This discussion addresses only those beneficial owners of OnDeck common stock that hold their OnDeck common stock as a “capital asset” (generally, property held for investment) within the meaning of Section 1221 of the Code. This discussion is not a complete description of all of the U.S. federal income tax consequences of the merger and, in particular, does not address any tax consequences arising under the unearned income Medicare contribution tax enacted pursuant to the Health Care and Education Reconciliation Act of 2010, nor does it address any tax consequences arising under the laws of any state, local or non-U.S. jurisdiction, or under any U.S. federal laws other than those pertaining to the income tax. Further, this discussion does not address all aspects of U.S. federal income taxation that may be relevant to you in light of your individual circumstances or that may be applicable to you if you are subject to special treatment under the U.S. federal income tax laws, including if you are:

 

   

a bank or other financial institution;

 

   

a tax-exempt organization;

 

   

a real estate investment trust or real estate mortgage investment conduit;

 

   

an entity or arrangement classified as a partnership for U.S. federal income tax purposes or other pass-through entity, such as a subchapter S corporation (or an investor in such an entity or arrangement);

 

   

an insurance company;

 

   

a regulated investment company or a mutual fund;

 

   

a broker-dealer or trader in stocks and securities, or currencies;

 

   

a trader in securities that elects the mark-to-market method of accounting for its securities;

 

   

a person subject to the alternative minimum tax provisions of the Code;

 

   

a person who received OnDeck common stock through the exercise of an employee stock option, through a tax-qualified retirement plan or otherwise as compensation;

 

86


Table of Contents
   

a person who has a functional currency other than the U.S. dollar;

 

   

an accrual-method taxpayer who is required to accelerate the recognition of any item of gross income with respect to OnDeck common stock as a result of such income being recognized on an applicable financial statement;

 

   

a person who holds OnDeck common stock as part of a hedge, straddle, constructive sale, conversion or other integrated transaction;

 

   

a person who owns or has owned (directly, indirectly or constructively) 5% or more of shares of OnDeck common stock or Enova common stock (by vote or value) or otherwise exercises control over OnDeck’s or Enova’s corporate affairs;

 

   

a grantor trust;

 

   

a controlled foreign corporation or passive foreign investment company; or

 

   

a U.S. expatriate.

No ruling has been requested from the Internal Revenue Service (the “IRS”) in connection with the merger or related transactions. Accordingly, the discussion below neither binds the IRS nor precludes it from adopting a contrary position. Furthermore, no opinion of counsel has been or will be rendered with respect to the tax consequences of the merger or related transactions.

For purposes of this discussion, the term “U.S. holder” means a beneficial owner of shares of OnDeck common stock or, after the completion of the merger, Enova common stock that is, for U.S. federal income tax purposes:

 

   

an individual citizen or resident of the United States;

 

   

a corporation (including any entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia;

 

   

an estate the income of which is subject to U.S. federal income taxation regardless of its source; or

 

   

a trust if (i) its administration is subject to the primary supervision of a court within the United States and one or more United States persons, within the meaning of Section 7701(a)(30) of the Code, have the authority to control all substantial decisions of the trust; or (ii) it has a valid election in effect under applicable U.S. Treasury regulations to be treated as a United States person for U.S. federal income tax purposes.

A “Non-U.S. holder” is any beneficial owner of OnDeck common stock or, after the completion of the merger, Enova common stock that, for U.S. federal income tax purposes, is an individual, corporation, estate or trust that is not a U.S. holder.

If an entity or an arrangement treated as a partnership for U.S. federal income tax purposes beneficially owns shares of OnDeck common stock, the U.S. federal income tax consequences to a partner in such partnership (or owner of such entity) generally will depend on the status of the partner, certain elections made at the partner level and the activities of the partnership (or entity). Any entity treated as a partnership for U.S. federal income tax purposes that beneficially owns shares of OnDeck common stock, and any partners in such partnership, should consult their own tax advisors with respect to the tax consequences of the merger in their specific circumstances.

All beneficial owners of OnDeck common stock are urged to consult their tax advisors regarding the particular federal, state, local and non-U.S. tax consequences to them of the merger.

 

87


Table of Contents

The Merger

U.S. Holders

The merger will be a taxable transaction for U.S. federal income tax purposes. Therefore, a U.S. holder generally will recognize capital gain or loss equal to the difference, if any, between (i) the sum of any cash, including any cash received in lieu of fractional shares of Enova common stock, and the fair market value of any Enova common stock as of the merger received by such U.S. holder in the merger and (ii) the U.S. holder’s adjusted tax basis in its OnDeck common stock.

Capital gains of a non-corporate U.S. holder will generally be eligible for the preferential U.S. federal income tax rates applicable to long-term capital gains if the U.S. holder has held its OnDeck common stock for more than one year as of the date of the merger. The deductibility of capital losses is subject to limitations. If a U.S. holder acquired different blocks of OnDeck common stock at different times or different prices, the U.S. holder must determine its tax basis and holding period separately for each block of OnDeck common stock.

A U.S. holder’s aggregate tax basis in Enova common stock received in the merger will equal the fair market value of such stock as of the merger. A U.S. holder’s holding period in any shares of Enova common stock received in the merger will begin the day after the merger.

U.S. holders who hold shares of both OnDeck common stock and Enova common stock at the time of the merger may be subject to different U.S. federal income tax treatment in the merger, as described below under “—Special Consequences of the Merger to Beneficial Owners of OnDeck Common Stock That Also Own Enova Common Stock”.

U.S. holders are urged to consult their own tax advisors as to the particular tax consequences of the merger, including the effect of U.S. federal state and local tax laws or foreign tax laws.

Non-U.S. Holders

Subject to the discussion below under the section entitled “—Information Reporting and Backup Withholding” and the discussion below under the section entitled “—Special Consequences of the Merger to Holders of OnDeck Common Stock That Also Own Enova Common Stock,” a Non-U.S. holder generally will not be subject to U.S. federal income or withholding tax on the exchange of OnDeck common stock for Enova common stock and cash in the merger, unless:

 

   

any gain recognized on the exchange is effectively connected with the Non-U.S. holder’s conduct of a trade or business in the United States (and, if an income tax treaty applies, is attributable to a U.S. permanent establishment of the Non-U.S. holder);

 

   

the Non-U.S. holder is an individual who is present in the United States for 183 days or more during the taxable year that includes the date of the merger, and certain other conditions are satisfied; or

 

   

OnDeck is or has been a U.S. real property holding corporation (a “USRPHC”), as defined in Section 897 of the Code at any time within the five-year period preceding the merger and certain other conditions are satisfied. OnDeck believes that, as of the effective time of the merger, OnDeck will not have been a USRPHC at any time within the five-year period ending on the date thereof.

If the Non-U.S. holder’s gain is described in the first bullet, then the Non-U.S. holder will generally be subject to U.S. federal income tax under the rules described above as if it were a U.S. stockholder of OnDeck common stock and, in the case of a foreign corporation, may be subject to an additional “branch profits tax” at a 30% rate (or such lower rate as may be specified by an applicable income tax treaty).

If the Non-U.S. holder is described in the second bullet, then such Non-U.S. holder will generally be subject to U.S. federal income tax at a 30% rate (or such lower rate as may be specified by an applicable income tax treaty) on the gain, which may be offset by certain U.S. source capital losses of the Non-U.S. holder.

 

88