Blueprint
As filed with the U.S. Securities and Exchange Commission on April
21, 2017
Registration No. 333-216836
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PRE-EFFECTIVE
AMENDMNET NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Old Line Bancshares, Inc.
(Exact name of registrant as specified in its charter)
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Maryland
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6022
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20-0154352
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(State or other jurisdiction of
incorporation or organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification Number)
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1525 Pointer Ridge Place
Bowie, Maryland 20716
(301) 430-2500
(Address, including zip code, and telephone number, including area
code, of registrant’s principal executive
offices)
James W. Cornelsen
President and Chief Executive Officer
Old Line Bancshares, Inc.
1525 Pointer Ridge Place
Bowie, Maryland 20716
(301) 430-2500
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
With copies to:
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Frank C. Bonaventure, Jr., Esq.
Baker, Donelson, Bearman, Caldwell & Berkowitz, PC
100 Light Street
Baltimore, Maryland 21202
(410) 862-1141
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Stephen J. Deadrick
Chairman of the Board
DCB Bancshares, Inc.
26500 Ridge Road
Damascus, Maryland 20872
301-253-1000
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Andrew D. Bulgin, Esquire
Gordon Feinblatt LLC
233 East Redwood Street
Baltimore, MD 21202
(410) 576-4280
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Approximate date of
commencement of the proposed sale of the securities to the
public: As soon as practicable
after this Registration Statement becomes effective and upon completion of the merger
described in the enclosed proxy
statement/prospectus.
If the securities being registered on this Form
are being offered in connection with the formation of a holding
company and there is compliance with General Instruction G, check
the following box. ☐
If this Form is filed to register additional
securities for an offering pursuant to Rule 462(b) under the
Securities Act of 1933, as amended, check the following box and
list the Securities Act registration statement number of the
earlier effective registration statement for the same
offering.
☐
If this Form is a post-effective amendment filed
pursuant to Rule 462(d) under the Securities Act, check the
following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same
offering.
☐
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, smaller reporting
company, or an emerging growth company. See the definitions of
“large accelerated filer,” “accelerated
filer,” “smaller reporting company,” and
"emerging growth company" in Rule 12b-2 of the Exchange
Act.
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Large accelerated filer ☐
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Accelerated
filer ☒
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Non–accelerated
filer ☐
(Do
not check if a smaller reporting company)
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Smaller reporting
company ☐
Emerging growth company ☐
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If an emerging
growth company, indicate by check mark if the registrant has
elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 7(a)(2)(B) of the Securities
Act.
If
applicable, place an X in the box to designate the appropriate rule
provision relied upon in conducting this transaction:
Exchange Act Rule 13e-4(i) (Cross-Border Issuer
Tender
Offer)
☐
Exchange Act Rule 14d-1(d) (Cross-Border
Third-Party Tender
Offer)
☐
The Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until
the Registrant shall file a further amendment which specifically
states that this Registration Statement shall thereafter become
effective in accordance with Section 8(a) of the Securities
Act of 1933, as amended, or until the Registration Statement shall
become effective on such dates as the Commission, acting pursuant
to said Section 8(a), may determine.
The information in this proxy statement/prospectus is not complete
and may be changed. We may not sell the securities offered by this
proxy statement/prospectus until the registration statement filed
with the Securities and Exchange Commission is effective. This
proxy statement/prospectus does not constitute an offer to sell or
a solicitation of an offer to buy any securities in any
jurisdiction where an offer or solicitation is not
permitted.
PRELIMINARY—SUBJECT TO COMPLETION—DATED APRIL 21,
2017
OLD
LINE BANCSHARES, INC.
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DCB
BANCSHARES, INC.
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Dear
DCB Bancshares, Inc. Stockholder:
On
February 1, 2017, DCB Bancshares, Inc. (“DCB
Bancshares”) entered into an Agreement and Plan of Merger
with Old Line Bancshares, Inc. (“Old Line Bancshares”),
pursuant to which DCB Bancshares will be merged with and into Old
Line Bancshares, with Old Line Bancshares surviving the
merger.
If
the merger is completed, you will have the right to receive, for
each share of DCB Bancshares common stock you own, that number of
shares, which we refer to as the exchange ratio, of Old Line
Bancshares common stock determined by dividing $25.22 (160% of the
tangible book value of each share of DCB Bancshares common stock at
December 31, 2016) by the volume weighted average closing price of
Old Line Bancshares common stock for the ten trading days ending
two trading days before the closing of the merger (the
“Average Price), provided that if the Average Price is $27.21
or more the exchange ratio will be fixed at 0.9269 and if the
Average Price is $20.85 or less the exchange ratio will be fixed at
1.2096. If, however, the volume weighted average closing
price of Old Line Bancshares common stock during the ten trading
days ending five trading days before the effective date of the
merger (the "Closing Market Price") is less than $16.68, and the
ratio of the Closing Market Price to $27.21 is more than 20% lower
than any decrease in the NASDAQ Band Stock Index over such ten-day
period, DCB Bancshares may terminate the merger agreement,
provided, however, that Old Line Bancshares would then have the
option to increase the exchange ratio to an amount calculated as if
the Average Price was $16.68 per share, in which case no
termination will take place; if Old Line Bancshares exercises this
cure right, the exchange ratio would be greater than if calculated
in the manner described above.
The value of the per-share and aggregate merger consideration will
depend on the market price of Old Line Bancshares common stock on
the closing date of the merger. Assuming this option is not
exercised, however, the aggregate merger consideration will be
between approxmiately 1,495,256 and 1,951,302 shares of Old Line
Bancshares common stock (not including cash in lieu of fractional
shares).
Old Line
Bancshares’ common stock is listed and traded on the NASDAQ
Capital Market under the symbol “OLBK.” The closing
sales price of Old Line Bancshares’ common stock on the
NASDAQ Capital Market on February 1, 2017, immediately prior to the
public announcement of the merger, and on April 20, 2017, the
latest practicable date prior to the date of this proxy
statement/prospectus, was $27.22 and $27.23 ,
respectively.
Stockholders
of DCB Bancshares will be asked to vote on approval of the merger
agreement and the merger at an annual meeting for DCB
Bancshares’ stockholders. We cannot complete the merger
unless we obtain the required approval of the stockholders of DCB
Bancshares. The merger agreement and the merger must be approved by
the affirmative vote of holders of two-thirds of all outstanding
shares of common stock of DCB Bancshares.
The board of directors of DCB Bancshares unanimously recommends
that you vote “FOR” approval of the merger agreement
and the merger.
You should read this proxy statement/prospectus and all annexes
carefully. Before making a decision on how to vote, you should
consider the “Risk Factors” discussion beginning on
page 12 of this proxy statement/prospectus.
This proxy statement/prospectus incorporates important business and
financial information about Old Line Bancshares from reports it has
filed with the Securities and Exchange Commission (the
“SEC”). This information is available without charge at
the SEC’s Web site located at www.sec.gov or upon written request to Old Line Bancshares,
Inc., ATTN: Secretary, 1525 Pointer Ridge Place, Bowie, Maryland
20716, or oral request at (301) 430-2500. In order to ensure timely
delivery, you must request this information no later than five
business days prior to the date of the DCB Bancshares annual
meeting, or [___________ __], 2017.
Neither the SEC, any bank regulatory agency nor any state
securities commission has approved or disapproved of these
securities or passed upon the adequacy or accuracy of this proxy
statement/prospectus. Any representation to the contrary is a
criminal offense. The securities offered through this proxy
statement/prospectus are not savings accounts, deposits or other
obligations of a bank or savings association and are not insured by
the Federal Deposit Insurance Corporation or any other government
agency.
This proxy statement/prospectus is dated [________ __], 2017 and is
first being mailed to DCB Bancshares, Inc. stockholders on or about
[________ __], 2017.
DCB
BANCSHARES, INC.
26500
Ridge Road
Damascus,
Maryland 20872
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD ON [_________ __], 2017 AT 3:00 P.M.
An annual meeting
of stockholders of DCB Bancshares, Inc., a Maryland corporation,
will be held on [_________ __], 2017, at 3:00 p.m. (local time),
at The Damascus
Volunteer Fire Department Activities Center located at 10211 Lewis
Drive, Damascus, Maryland 20872, for the purpose of
considering and voting upon the following:
1.
A proposal to
approve the Agreement and Plan of Merger, dated as of February 1,
2017, by and between Old Line Bancshares, Inc. and DCB Bancshares,
Inc., as the agreement may be amended from time to time, pursuant
to which DCB Bancshares, Inc. will merge with and into Old Line
Bancshares, Inc., with Old Line Bancshares, Inc. as the surviving
entity, and the merger contemplated by the merger agreement, as
more fully described in the accompanying proxy
statement/prospectus.
2.
A proposal to
adjourn the meeting to a later date or dates, if necessary, to
permit further solicitation of additional proxies in the event
there are not sufficient votes at the time of the meeting to
approve the merger, agreement and the
merger, as more fully described in the accompanying proxy
statement/prospectus.
3.
A proposal to elect
the ten director nominees named in this proxy statement/prospectus
and on the proxy card to the board of directors of DCB Bancshares,
Inc. for the ensuing year and until their successors are duly
elected and qualified.
4.
To act upon any
other matter that may properly come before the annual meeting or
any adjournment or postponement thereof.
Only stockholders
of record at the close of business on [_________], 2017, will be
entitled to notice of and to vote at the annual meeting or any
adjournment or postponement thereof.
You are cordially
invited to attend the annual meeting in person. Whether or not you
plan to attend the annual meeting, however, we urge you to return
the enclosed proxy card in order to indicate your vote as soon as
possible. To complete the merger, the merger agreement and the
merger must be approved by the holders of two-thirds of the issued
and outstanding shares of common stock of DCB Bancshares, Inc. An
abstention, a failure to vote and a broker non-vote will have the
same effect as a vote against the approval of the merger agreement
and the merger. Whether or not you intend to attend the annual
meeting, please vote as promptly as possible by signing, dating and mailing the proxy
card. If you attend the annual meeting, you may vote in
person or by your executed proxy. If your shares are held in the
name of a broker, bank or other fiduciary, please follow the
instructions on the voting instruction card provided by such
person.
You may revoke your
proxy at any time prior to or at the meeting by written notice to
DCB Bancshares, Inc., by executing a proxy bearing a later date, or
by attending the meeting and voting in person. If you wish to
attend the annual meeting and vote in person and your shares are
held in the name of a broker, trust, bank or other nominee, you
must bring with you a proxy or letter from the broker, trustee,
bank or nominee to confirm your beneficial ownership of the
shares.
The proxy
statement/prospectus that accompanies this notice provides you with
detailed information about the proposed merger and the other
matters to be voted on at the annual meeting. It also contains
information about Old Line Bancshares, Inc. and DCB Bancshares,
Inc. and related matters. We urge you to read the entire proxy
statement/prospectus carefully. In
particular, you should read the “Risk Factors” section
beginning on page 12 for a discussion of the risks you should
consider in evaluating the proposed merger and how it will affect
you.
By Order of the
Board of Directors,
/s/ Stephen J.
Deadrick
Stephen J.
Deadrick, Chairman of the Board
Damascus,
Maryland
[_______],
2017
TABLE
OF CONTENTS
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Page
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QUESTIONS
AND ANSWERS ABOUT THE SPECIAL MEETING
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1
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SUMMARY
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5
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RISK
FACTORS
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12
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SELECTED
FINANCIAL DATA OF OLD LINE BANCSHARES
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25
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COMAPATIVE
PER SHARE MARKET PRICE
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26
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CAUTION
REGARDING FORWARD-LOOKING STATEMENTS
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THE
DCB BANCSHARES SPECIAL MEETING
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28
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OWNERSHIP
OF DCB BANCSHARES COMMON STOCK
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31
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THE
MERGER AGREEMENT AND THE MERGER
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32
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General
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Background
of the Merger
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Old
Line Bancshares’ Reasons for the Merger
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39
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DCB
Bancshares’ Reasons for the Merger and Recommendation of the
Board of Directors
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40
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Opinion
of DCB Bancshares’ Financial Advisor
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42
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Terms
of the Merger
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49
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Interests
of Directors and Officers in the Merger
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66
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Accounting
Treatment
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68
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Certain
Federal Income Tax Consequences
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69
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Restrictions
on Sales of Shares by Certain Affiliates
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71
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Stock
Exchange Listing
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71
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Appraisal
Rights
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DCB
BANCSHARES – INFORMATION ABOUT DIRECTORS TO BE ELECTED TO OLD
LINE BANCSHARES’ BOARD OF DIRECTORS
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73
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COMPARISON
OF STOCKHOLDER RIGHTS
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74
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EXPERTS
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79
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LEGAL
MATTERS
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79
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ELECTION
OF DCB BANCSHARES DIRECTORS (Proposal 3)
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79
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OTHER
MATTERS
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80
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INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
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WHERE
YOU CAN FIND MORE INFORMATION
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81
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ANNEX
A AGREEMENT AND PLAN OF MERGER
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A-1
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ANNEX
B OPINION OF RP FINANCIAL, LC
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B-1
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ANNEX
C SECTIONS 3-201 THROUGH 3-213 OF THE MARYLAND
GENERAL CORPORATION LAW
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C-1
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QUESTIONS
AND ANSWERS ABOUT THE ANNUAL MEETING
The following are some questions that you, as a stockholder of DCB
Bancshares, may have regarding the merger agreement, the merger and
the other matters being considered at the annual meeting and the
answers to those questions. We urge you to read carefully the
remainder of this proxy statement/prospectus because the
information in this section does not provide all the information
that might be important to you with respect to the merger
agreement, the merger and the other matters being considered at the
annual meeting. Additional important information is also contained
in the annexes to this proxy statement/prospectus.
Q:
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Why
am I receiving this proxy statement/prospectus?
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A:
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Old Line Bancshares
and DCB Bancshares have agreed to the merger of DCB Bancshares with
and into Old Line Bancshares, which we refer to as the
“merger,” pursuant to the terms of a merger agreement
that is described in this proxy statement/prospectus. A copy of the
merger agreement is attached to this proxy statement/prospectus as
Annex A. At DCB Bancshares’ annual meeting of stockholders,
stockholders will vote on the approval of the merger agreement and
the merger and a related proposal. This proxy statement/prospectus
constitutes DCB Bancshares’ proxy statement as well as a
prospectus covering the shares of Old Line Bancshares common stock
that will be issued to stockholders of DCB Bancshares in the
merger.
In order to
complete the merger, Maryland law requires that the DCB Bancshares
stockholders vote to approve the merger. In addition, DCB
Bancshares stockholders will be asked to vote on a proposal to
adjourn the annual meeting to a later date or dates, if necessary,
to permit further solicitation of proxies in the event there are
not sufficient votes at the time of the annual meeting to approve
the merger agreement and the
merger.
Finally, because
the meeting is an annual meeting, DCB Bancshares stockholders will
be asked to vote on the election of ten directors to the DCB
Bancshares’ board of directors for the ensuing
year.
This proxy
statement/prospectus contains important information about the
merger agreement, the merger and the annual meeting of the
stockholders of DCB Bancshares, and you should read it carefully.
The enclosed voting materials allow you to vote your shares without
actually attending the annual meeting.
Your vote is
important. We encourage you to vote as soon as
possible.
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Q:
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When
and where will the annual meeting be held?
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A:
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The DCB Bancshares
annual meeting will be held at The Damascus
Volunteer Fire Department Activities Center located at 10211 Lewis
Drive, Damascus, Maryland 20872, , on [_______ __],
2017 at 3:00
p.m.
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Q:
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How
do I vote?
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A:
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If you are a
stockholder of record of DCB Bancshares as of the record date, you
may vote in person by attending the annual meeting or by signing
and returning the enclosed proxy card in the postage-paid envelope
provided.
If you hold shares
of common stock of DCB Bancshares in the name of a bank, broker or
other nominee, please follow the voting instructions provided by
your bank, broker or other nominee to ensure that your shares are
represented and voted at the annual meeting.
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Q:
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What
vote is required to approve each proposal to be voted on at the
annual meeting?
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A:
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The proposal to
approve the merger agreement and the merger requires the
affirmative vote of holders of two-thirds of the outstanding shares
of DCB Bancshares common stock entitled to vote on the proposal.
Therefore, an abstention, a failure to vote and a broker non-vote
will each have the effect of a vote against this
proposal.
The annual meeting
may be adjourned, if necessary, to solicit additional proxies in
the event there are not sufficient votes at the time of the meeting
to approve the merger proposal. The affirmative vote of the holders
of a majority of the shares of common stock cast on the matter at
the annual meeting is required to adjourn such
meeting.
The proposal to
elect the ten director nominees to the board of directors of DCB
Bancshares requires the affirmative vote of a majority of all
shares of DCB Bancshares common stock cast on that proposal.
Accordingly, an abstention, a failure to vote and a broker non-vote
will have no impact on the outcome of that proposal.
As of the record
date for the annual meeting, there were 1,613,180 shares of DCB
Bancshares common stock issued and outstanding and entitled to
vote, and directors, executive officers and their affiliates were
entitled to vote 13.0% of such shares. Directors and certain
executive officers of DCB Bancshares entitled to vote 12.9% of the
shares of DCB Bancshares common stock that are issued and
outstanding and entitled to vote as of the record date have agreed,
in writing, to vote their shares of DCB Bancshares common stock in
support of the merger agreement and the merger.
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Q:
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How
does the board of directors of DCB Bancshares recommend that I vote
on the proposals?
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A:
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The board of
directors of DCB Bancshares unanimously recommends that you vote
“FOR” the approval of the merger agreement and the
merger, as described in Proposal 1, “FOR” the approval
of the proposal to adjourn the annual meeting to solicit more
proxies, if necessary, as described in Proposal 2, and
“FOR” the election of each of the director nominees
named in Proposal 3.
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Q:
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How
many votes do I have?
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A:
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You are entitled to
one vote for each share of DCB Bancshares common stock that you
owned as of the record date.
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Q:
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What
will happen if I fail to vote or I abstain from
voting?
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A:
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If you fail to vote
or fail to instruct your bank, broker or other nominee to vote, it
will have the same effect as a vote against the proposal to approve
the merger agreement and the merger. An abstention will also have
the same effect as a vote against this proposal.
Assuming a quorum
is present, an abstention, broker non-vote or the failure to vote
will have no effect on the proposal to approve the adjournment of
the annual meeting, if necessary, to solicit additional proxies, or
on the proposal to elect the ten director nominees to the DCB
Bancshares board of directors. For this purpose, a quorum will be
present if holders of at least a majority of the outstanding shares
of common stock as of the record date are present, in person or by
proxy, at the annual meeting.
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Q:
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If
my shares are held of record by my broker, bank or other nominee
(that is, in street name), will my broker, bank or other nominee
automatically vote my shares for me?
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A:
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Generally not. If
you hold your shares in a stock brokerage account, your broker will
not vote your shares of common stock unless you provide voting
instructions to your broker. If your shares are held by a bank or
other nominee, whether your nominee may vote your shares in the
absence of instructions from you will depend on your specific
arrangement with your nominee record holder, but in the absence of
an arrangement granting such record holder discretionary authority
to vote, your record holder nominee will not have authority to vote
your shares on any matter at the annual meeting absent specific
voting instructions from you. You should instruct your broker, bank
or other nominee to vote your shares by following the instructions
provided by the broker, bank or nominee with this proxy
statement/prospectus. Please note that you may not vote shares held
in street name by returning a proxy card directly to DCB Bancshares
or by voting in person at the annual meeting unless you provide a
“legal proxy,” which you must obtain from your bank,
broker or nominee.
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Q:
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What
will happen if I return my proxy card without indicating how to
vote?
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A:
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If you sign and
return your proxy card without indicating how to vote on any
particular proposal, the DCB Bancshares common stock represented by
your proxy will be voted in favor of that proposal.
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Q:
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What
if I fail to submit my proxy card or to instruct my broker, bank or
other nominee to vote?
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A:
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If you fail to
properly submit your proxy card or otherwise vote as instructed on
the proxy card, or fail to properly instruct your broker, bank or
other nominee to vote your shares of DCB Bancshares common stock
and you do not attend the annual meeting and vote your shares in
person, your shares will not be voted unless your shares are held
of record by a non-broker and you have granted such record holder
discretionary authority to vote your shares. If your shares are not
voted, this will have the same effect as a vote against the
approval of the merger agreement and the merger, but will have no
effect on the proposal to adjourn the meeting if necessary to
solicit additional proxies or on the proposal to elect the 10
director nominees to the DCB Board of directors.
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Q:
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If
I am a stockholder of record, can I change my vote after I have
returned a proxy or voting instruction card?
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A:
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Yes. You can change
your vote at any time before your proxy is voted at the annual
meeting. You can do this in one of three ways:
● you can send a
signed notice of revocation;
● you can grant a
new, valid proxy bearing a later date; or
● if you are a holder
of record or if you hold your shares in street name and receive a
valid proxy from your broker, you can attend the annual meeting and
vote in person, which will automatically cancel any proxy
previously given, or you may revoke your proxy in person, but your
attendance alone will not revoke any proxy that you have previously
given.
If you choose
either of the first two methods, you must submit your notice of
revocation or your new proxy to the Secretary of DCB Bancshares no
later than the beginning of the annual meeting. If your shares are
held in street name by your bank, broker or other nominee, you
should follow the directions you receive from your bank, broker or
other nominee to change your voting instructions, or contact your
broker, bank or other nominee if no such instructions are
provided.
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Q:
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Am
I entitled to appraisal rights or similar rights?
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A:
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Yes. Under Maryland
law, DCB Bancshares stockholders may exercise their rights as
objecting stockholders to demand the payment of the fair value of
their shares of DCB Bancshares common stock in connection with the
merger. These rights are occasionally referred to as
“appraisal rights” in this proxy statement/prospectus.
The provisions of Maryland law governing appraisal rights are
complex, and you should study them carefully if you wish to
exercise these rights. Multiple steps must be taken to properly
exercise and perfect such rights. A copy of Sections 3-201 through
3-213 of the Maryland General Corporation Law (“MGCL”)
is included with this proxy statement/prospectus as Annex
C.
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Q:
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What
are the material United States federal income tax consequences of
the merger to stockholders?
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A:
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In general, for
United States federal income tax purposes, DCB Bancshares
stockholders are not expected to recognize a gain or loss on the
exchange of their shares of DCB Bancshares common stock for shares
of Old Line Bancshares common stock. DCB Bancshares stockholders
will recognize a gain in connection with cash received in lieu of
fractional shares of Old Line Bancshares common stock.
DCB Bancshares
stockholders are urged to consult their tax advisors for a full
understanding of the tax consequences of the merger to them because
tax matters are very complicated and, in many cases, tax
consequences of the merger will depend on your particular facts and
circumstances. See “The Merger Agreement and the Merger
– Certain Federal Income Tax
Consequences.”
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Q:
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When
do you expect the merger to be completed?
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A:
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Old Line Bancshares
and DCB Bancshares are working to complete the merger as soon as is
reasonably practicable, with a target date of June 30, 2017.
However, the merger is subject to various federal and state
regulatory approvals and other conditions, in addition to approval
by the stockholders of DCB Bancshares, and it is possible that
factors outside the control of both companies could result in the
merger being completed at a later time, or not at all. There may be
a substantial amount of time between the DCB Bancshares annual
meeting and the completion of the merger.
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Q:
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What
do I need to do now?
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Carefully read and
consider the information contained in this proxy
statement/prospectus, including its annexes. After you have
carefully read these materials, as soon as possible either (i)
indicate on the attached proxy card how you want your shares to be
voted, then sign, date and mail the proxy card in the enclosed
postage-paid envelope, or (ii) if you hold your shares in street
name, follow the voting instructions provided by your bank, broker
or other nominee to direct it how to vote your shares, so that your
shares may be represented and voted at the annual
meeting.
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Q:
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What
will I receive in the merger?
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A:
|
As more fully
described in this proxy statement/prospectus, you will receive
shares of Old Line Bancshares common stock in exchange for each of
your shares of DCB Bancshares common stock.
|
Q:
|
Do
I need to do anything with my shares of DCB Bancshares common stock
now?
|
A:
|
No. Please do not
send in your DCB Bancshares stock certificates with your proxy
card. You will be sent a letter of transmittal that includes
instructions for sending in your DCB Bancshares stock certificates
at a later date.
|
Q:
|
Whom
should I call if I have any questions?
|
A:
|
If you have
questions about the merger or the other matters to be voted on at
the annual meeting or desire additional copies of this proxy
statement/prospectus or additional proxy cards you should
contact:
Robert L.
Carpenter, Jr.
Co-Chief Executive
Officer and Executive Vice President - Chief Financial
Officer
DCB Bancshares,
Inc.
26500 Ridge
Road
Damascus, Maryland
20872
301-368-9112
|
SUMMARY
This summary highlights selected information from this proxy
statement/prospectus, including information incorporated by
reference into this proxy statement/prospectus. It does not contain
all of the information that may be important to you. We urge you to
carefully read the entire document so that you fully understand the
merger and the related transactions. Each item in this summary
refers to the page of this proxy statement/prospectus on which that
subject is discussed in more detail. Unless otherwise indicated in
this proxy statement/prospectus or the context otherwise requires,
all references in this proxy statement/ prospectus to “Old
Line Bancshares” refer to Old Line Bancshares, Inc., all
references to “DCB Bancshares” refer to DCB Bancshares,
Inc.
The Companies
Old Line Bancshares, Inc.
1525 Pointer Ridge
Place
Bowie, Maryland
20716
Telephone: (301)
430-2500
Old Line Bancshares
was incorporated under the laws of the State of Maryland on April
11, 2003 to serve as the holding company of Old Line Bank. On May
22, 2003, the stockholders of Old Line Bank approved the
reorganization of Old Line Bank into a holding company structure
pursuant to which Old Line Bank became a subsidiary of Old Line
Bancshares. The reorganization became effective on September 15,
2003. Old Line Bancshares is registered as a bank holding company
under the Bank Holding Company Act of 1956, as amended (the
“Bank Holding Company Act”), and subject to regulation
by the Board of Governors of the Federal Reserve Board (the
“FRB”) and the Maryland Commissioner of Financial
Regulation (the “Maryland Commissioner”).
On April 1, 2011,
Old Line Bancshares acquired Maryland Bankcorp, Inc., the parent
company of Maryland Bank & Trust Company, N.A. On May 10, 2013,
Old Line Bancshares acquired WSB Holdings, Inc.
(“WSB”), the parent company of The Washington Savings
Bank, F.S.B., and on December 4, 2015, Old Line Bancshares acquired
Regal Bancorp, Inc., the parent
company of Regal Bank & Trust (“Regal
Bank”). The acquisition
of Regal Bank strengthened Old Line Bank’s status as the
third largest independent commercial bank based in Maryland, with
assets of more than $1.5 billion at closing and 23 full service
branches serving eight Maryland counties.
In addition,
together, Old Line Bancshares and Old Line Bank own 100% of the
interest in Pointer Ridge Office Investment, LLC (“Pointer
Ridge”). Pointer Ridge owns the commercial office building in
which Old Line Bancshares and Old Line Bank lease and operate their
main headquarters as well as a branch of Old Line
Bank.
Old Line Bank is a
trust company chartered by the State of Maryland. Old Line Bank was
originally chartered in 1989 as a national bank under the name
“Old Line National Bank.” Old Line Bank converted to a
Maryland-chartered trust company exercising the powers of a
commercial bank in June 2002, and does not exercise trust powers -
its regulatory structure is the same as a Maryland chartered
commercial bank. Old Line Bank is regulated by the Maryland
Commissioner and by the Federal Deposit Insurance Corporation
(“FDIC”) and is subject to regulation, supervision and
regular examination by the Maryland Commissioner and the FDIC. Old
Line Bank’s deposits are insured to the maximum legal limits
by the FDIC. Its current market area consists of the suburban
Maryland counties of Anne Arundel, Calvert, Charles, Montgomery,
Prince George’s and St. Mary’s (Washington, D.C.
suburbs) and Baltimore and Carroll (Baltimore City
suburbs).
At December 31,
2016, Old Line Bancshares had consolidated assets, deposits and
stockholders’ equity of approximately $1.7 billion, $1.3
billion and $150.7 million, respectively.
Old Line
Bancshares’ common stock is listed and traded on the NASDAQ
Capital Market under the symbol “OLBK.”
DCB Bancshares, Inc.
26500 Ridge
Road
Damascus, Maryland
20872
Telephone:
301-253-1000
DCB Bancshares,
Inc. was incorporated under the laws of the State of Maryland on
March 30, 2016 to serve as the holding company of Damascus
Community Bank. On April 27, 2016, the stockholders of Damascus
Community Bank approved the reorganization of Damascus Community
Bank into a holding company structure pursuant to which Damascus
Community Bank became a subsidiary of DCB Bancshares. The
reorganization became effective on September 1, 2016. DCB
Bancshares is registered with the FRB as a bank holding company
under the Bank Holding Company Act and is subject to supervision
and examination by the FRB.
Damascus Community
Bank is a Maryland commercial bank chartered on April 23, 1987 that
is engaged in a general commercial and retail banking business.
Damascus Community Bank has one inactive subsidiary, Chesapeake
Industrial Leasing Co., Inc., a Maryland corporation that was
formed for the purpose of leasing commercial equipment. Damascus
Community Bank is regulated by the Maryland Commissioner and by the
FDIC and is subject to regulation, supervision and regular
examination by the Maryland Commissioner and the FDIC. Damascus
Community Bank’s deposits are insured to the maximum legal
limits by the FDIC. In addition to its main banking office in
Damascus, Montgomery County, Maryland, Damascus Community Bank has
two full-service branches in Montgomery County, Maryland
(Gaithersburg and Clarksburg), two full-service branches located in
Frederick County, Maryland (Monrovia and Frederick), and one
full-service branch located in Carroll County, Maryland (Mount
Airy).
At December 31,
2016, DCB Bancshares had consolidated assets, deposits and
stockholders’ equity of approximately $310.5 million, $277.8
million and $25.4 million, respectively.
DCB Bancshares'
common stock is quoted on OTC Pink marketplace of the OTC Markets
Group under the symbol “DCBB.”
The DCB Bancshares Annual meeting
Date, Time and Place of Annual meeting (see page 28)
DCB
Bancshares will hold an annual meeting of stockholders on
[___________ __], 2017 at 3:00 p.m., local time, at The Damascus
Volunteer Fire Department Activities Center located at 10211 Lewis
Drive, Damascus, Maryland 20872. The DCB Bancshares board of
directors has set the close of business on [_________], 2017 as the
record date for determining stockholders entitled to notice of, and
to vote at, the annual meeting. On the record date, there were
1,613,180 shares of DCB Bancshares common stock
outstanding.
Matters to be Considered at the Annual meeting (see page
28)
Stockholders of DCB
Bancshares will be asked at the annual meeting to vote on (i) a
proposal to approve the merger agreement and the merger, (ii) a
proposal to adjourn the annual meeting to solicit additional
proxies, if necessary, in the event there are not sufficient votes
at the time of the meeting to approve the merger agreement and the
merger, (iii) a proposal to elect the ten director nominees named
in this proxy statement/prospectus to the board of directors of DCB
Bancshares for the ensuing year, and (iv) any other business that
properly arises during the annual meeting or any adjournment or
postponement thereof.
Under the terms of
the merger agreement, Old Line Bancshares will acquire DCB
Bancshares by merging DCB Bancshares with and into Old Line
Bancshares. Pursuant to a separate agreement, we anticipate that
immediately after the merger, Damascus Community Bank will merge
with and into Old Line Bank, with Old Line Bank being the surviving
bank.
A copy of the
merger agreement is attached to this proxy statement/prospectus as
Annex A.
Consideration to be Received in the Merger (page 50)
If the merger is completed, each outstanding share
of common stock of DCB Bancshares will be exchanged for that number
of shares of Old Line Bancshares common stock determined by
dividing $25.22 (160% of the tangible book value of each share of
DCB Bancshares common stock at December 31, 2016) by the volume
weighted average closing price of Old Line Bancshares common stock
for the ten trading days ending two trading days before the closing
of the merger (the “Average Price"), provided that,
except as discussed in the following sentence, if the Average Price is $27.21 or more the
exchange ratio will be fixed at 0.9269 and if the Average Price is
$20.85 or less the exchange ratio will be fixed at 1.2096. The
number of shares of Old Line Bancshares common stock that will be
exchanged for each outstanding share of DCB Bancshares common stock
may be increased if Old Line Bancshares exercises its option to
increase the merger consideration to avoid termination of the
merger agreement based on recent closing prices of Old Line
Bancshares common stock prior to the merger, as further described
below under “– Old
Line Bancshares and DCB Bancshares can Amend or Terminate the
Merger Agreement.”
If the exchange
ratio is fixed based on the formula described above, the value of
the merger consideration will be dependent upon the value of Old
Line Bancshares common stock and, therefore, will fluctuate with
the market price of Old Line Bancshares common stock. Accordingly,
if the exchange ratio is fixed, any change in the price of Old Line
Bancshares common stock prior to the merger will affect the market
value of the merger consideration that stockholders of DCB
Bancshares will receive as a result of the merger. For more
information, see “The Merger Agreement and the Merger –
Terms of the Merger – What DCB Bancshares Stockholders Will
Receive in the Merger.”
As an
example, assuming the Average Price was $27.63, which was the volume weighted
average closing price of Old Line Bancshares common stock for the
ten trading days ending two trading days before April 20, 2017, the
most recent practical date prior to the date hereof, a DCB
Bancshares stockholder who owned 100 shares of DCB common stock
immediately prior to the effective time of the merger would receive
in the merger 92
shares of Old Line Bancshares common stock (which would have a
value of $2,505.16
based on the closing sales price for Old Line Bancshares common
stock of $27.23 on
April 20, 2017) and $19.06 of cash in lieu of a fractional share of
Old Line Bancshares common stock.
Surrender of Stock Certificates (page 52)
No more than five
business days following the effective date of the merger a letter
of transmittal will be sent to DCB Bancshares stockholders
containing instructions for use in surrendering their DCB
Bancshares stock certificates in exchange for the merger
consideration.
Do
not send in your stock certificates until you receive the letter of
transmittal and instructions from the exchange agent.
The DCB Bancshares Board of
Directors Unanimously Recommends
Stockholder Approval (see page 28)
The DCB Bancshares
board of directors believes that the merger is in the best
interests of DCB Bancshares and its stockholders, and unanimously
recommends that stockholders vote “FOR” approval of the merger
agreement and the merger.
Opinion of DCB Bancshares’ Financial Advisor (see page
42)
In connection with
the merger, DCB Bancshares’ financial advisor, RP®
Financial, LC. (“RP Financial”), delivered a written
opinion, dated February 1, 2017, to the DCB Bancshares board of
directors as to the fairness, from a financial point of view and as
of the date of the opinion, to the holders of DCB Bancshares common
stock of the merger consideration in the proposed merger. The full
text of the opinion, which describes the procedures followed,
assumptions made, matters considered, and qualifications and
limitations on the review undertaken by RP Financial in preparing
the opinion, is attached as Annex B to this proxy
statement/prospectus. The opinion
was for the information of, and was directed to, the DCB Bancshares
board of directors (in its capacity as such) in connection with its
consideration of the financial terms of the merger. The opinion did
not address the underlying business decision of DCB Bancshares to
engage in the merger or enter into the merger agreement or
constitute a recommendation to the DCB Bancshares board in
connection with the merger, and it does not constitute a
recommendation to any holder of DCB Bancshares common stock as to
how to vote in connection with the merger or any other
matter.
Approval of the Merger Requires the Affirmative Vote of
Stockholders Holding Two-Thirds of the Shares of DCB Bancshares
Common Stock Outstanding on the Record Date of [________ __], 2017
(see page 29)
The approval of the
merger agreement and the merger by stockholders of DCB Bancshares
requires the approval of the holders of at least two-thirds of the
shares of DCB Bancshares common stock that are issued and
outstanding as of the record date of [_______ __], 2017. Each
holder of shares of DCB Bancshares common stock outstanding on the
record date will be entitled to one vote for each share held. The
vote required for approval of the merger agreement and the merger
is a percentage of all outstanding shares of DCB Bancshares common
stock. Therefore, an abstention, a failure to vote and a broker
non-vote will each have the same effect as a vote against the
approval of the merger agreement and the merger.
DCB Bancshares’ Directors and Certain Executive Officers have
Agreed to Vote in Favor of the Merger Agreement (see pages 29 and
68)
As of the record
date for the DCB Bancshares annual meeting, there were 1,613,180
shares of DCB Bancshares common stock issued and outstanding and
entitled to vote. The directors and certain executive officers of
DCB Bancshares have agreed, in writing, to vote all shares of DCB
Bancshares common stock for which they are the record or beneficial
owner “FOR” the
approval of the merger agreement and the merger. As of the record
date, such directors and executive officers are entitled to vote
12.9% of the issued and outstanding shares of the DCB Bancshares
common stock.
DCB Bancshares’ Directors and Management may have Interests
in the Merger that Differ from Your Interests (see page
66)
The directors and
executive officers of DCB Bancshares have interests in the merger
as directors and employees that are different from your interests
as a DCB Bancshares stockholder. These interests include, among
others, provisions in the merger agreement regarding Old Line
Bancshares and Old Line Bank board positions, payments to be made
to the Co-Chief Executive Officers of DCB Bancshares pursuant to
existing change in control agreements, as well as indemnification
and insurance provisions included in the merger
agreement.
DCB
Bancshares’ board of directors was aware of these interests
and considered them in approving and recommending the merger
agreement, the merger and the related transactions.
Regulatory Approval Must be Obtained and Other Conditions Must be
Satisfied Before the Merger can be Completed (see pages 59 and
63)
Old Line
Bancshares’ and DCB Bancshares’ obligations to complete
the merger are subject to various conditions that are usual and
customary for this kind of transaction, including obtaining
approval from the FRB and the Maryland Commissioner for the merger
and obtaining approval of the FDIC and the Maryland Commissioner
for the bank merger (which is included in any references to
regulatory “approvals” in this proxy
statement/prospectus). Old Line Bancshares and/or Old Line Bank
filed the appropriate applications for approval with the FRB, the
FDIC and the Maryland Commissioner on March 17, 2017. In addition
to the required regulatory approvals, the merger will be completed
only if certain conditions, including the following, are satisfied
or waived by the companies:
●
DCB
Bancshares’ stockholders must approve the merger agreement
and the merger;
●
No more than 10% of
the outstanding shares of DCB Bancshares common stock have been
qualified for appraisal rights under Maryland law;
●
Each party must
receive an opinion from its counsel or independent certified public
accountants that:
●
the merger
constitutes a tax-free reorganization under Section 368(a) of the
Internal Revenue Code of 1986, as amended (the “Internal
Revenue Code”); and
with respect to the
opinion received by DCB Bancshares, any gain realized in the merger
will be recognized only to the extent of cash or other property
(other than Old Line Bancshares common stock) received in the
merger, including cash received in lieu of fractional share
interests; and
●
Each party’s
representations and warranties contained in the merger agreement
must be correct except to the extent that if not true and correct
it would not have a material adverse effect on the party or the
party’s ability to consummate the merger (with certain
exceptions), and each party must have performed all of its
obligations set forth in the merger agreement.
The merger
agreement attached to this proxy statement/prospectus as Annex A
describes all of the conditions that must be met before the merger
may be completed.
Old Line Bancshares and DCB Bancshares can Amend or Terminate the
Merger Agreement (see page 60)
DCB Bancshares and
Old Line Bancshares may agree to terminate the merger agreement and
not complete the merger at any time before the merger is completed.
Each company also may unilaterally terminate the merger agreement
in certain circumstances, including if:
●
The merger is not
completed on or prior to October 31, 2017 or, because of the
failure to obtain any required regulatory approval or consent by
such date, the merger is not completed by November 30, 2017, if the
failure to complete the merger by that date is not due to a
material breach of the merger agreement by the party seeking to
terminate it.
●
There has been a
definitive written denial of a required regulatory approval or
consent, or the permanent withdrawal of an application for approval
or consent at the request of a regulatory authority.
●
The other party has
materially breached any representation, warranty, covenant or other
agreement in the merger agreement, and such breach either by its
nature cannot be cured prior to the closing of the merger or
remains uncured 30 days after receipt by such party of written
notice of such breach (provided that if such breach cannot
reasonably be cured within such 30-day period but may reasonably be
cured within 60 days and cure is being diligently pursued, then
termination can occur only after expiration of such 60-day period),
if the party terminating the merger agreement is not in material
breach.
●
DCB
Bancshares’ stockholders vote on but fail to approve the
merger agreement and the merger.
●
DCB Bancshares or
any DCB Bancshares subsidiary receives (with respect to DCB
Bancshares’ right to terminate) or enters into, approves or
resolves to approve (with respect to Old Line Bancshares’
right to terminate) an agreement, agreement in principle, letter of
intent or similar instrument with a view to being acquired, or more
than 50% of its assets or liabilities being acquired, by any person
other than Old Line Bancshares, or to sell 10% or more of its
outstanding equity securities, in a transaction the DCB Bancshares
board of directors determines is more favorable to the stockholders
of DCB Bancshares, which we refer to as a superior DCB Bancshares
transaction.
In addition, DCB
Bancshares may terminate the merger agreement if:
●
Old Line Bancshares
or any Old Line Bancshares subsidiary enters into a definitive term
sheet, letter of intent, agreement or similar agreement to merge,
as a result of which Old Line Bancshares is not the surviving
entity or Old Line Bancshares’ directors as of February 1,
2017 do not comprise the majority of the surviving entity’s
board of directors, with any person other than DCB Bancshares, and
the DCB Bancshares board of directors determines, after considering
the advice of counsel and its financial advisor, that such
transaction is not in the best interests of DCB Bancshares’
stockholders.
●
The volume weighted
average closing price of Old Line Bancshares common stock during
the ten trading days ending five trading days before the effective
date of the merger (the “Closing Market Price”) is less
than $16.68, and the ratio of the Closing Market Price to $27.21 is
more than 20% lower than any decrease in the NASDAQ Bank Stock
Index over such period, provided, however, that Old Line Bancshares
would then have the option to increase the consideration to be paid
in the merger (as a practical matter, by increasing the exchange
ratio) to an amount calculated as if the Average Price was $16.68
per share, in which case no termination will take place (the
“Walk-Away Cure Right”).
Finally, Old Line
Bancshares may terminate the merger agreement if DCB
Bancshares’ board of directors withdraws, changes or modifies
its recommendation to stockholders to approve the merger agreement
and the merger, or authorizes, recommends or publicly proposes, or
publicly announces an intention to authorize, recommend or propose,
an agreement to enter into a superior DCB Bancshares
transaction.
Old Line Bancshares
and DCB Bancshares can agree to amend the merger agreement in any
way. Either company can waive any of the requirements of the other
company in the merger agreement, except that neither company can
waive the requirement that the companies receive all required
regulatory approvals, the requirement for approval of the DCB
Bancshares stockholders or the requirement that no order, decree or
injunction preventing the transactions contemplated by the merger
agreement has been issued.
DCB Bancshares Must Pay a termination fee to Old Line Bancshares if
the Merger Agreement is Terminated Under Certain Circumstances (see
page 61)
DCB Bancshares must
pay Old Line Bancshares a termination fee if the merger agreement
is terminated in certain circumstances. The amount of such
termination fee (the “Termination Fee”) will be equal
to 3.25% of the total deal value, which is 160% of DCB
Bancshares’ total stockholders’ equity less its
intangible assets, if any, at December 31, 2016 (the “DCB
Tangible Equity”), and will be determined by multiplying
0.052 by the DCB Tangible Equity. Based on preliminary calculations
of the DCB Tangible Equity, we expect the Termination Fee would be
approximately $1.3 million. DCB will be required to pay the
Termination Fee to Old Line Bancshares if the merger agreement is
terminated because:
●
DCB Bancshares has
materially breached the merger agreement or any representation,
warranty, covenant or other agreement contained therein (provided
that Old Line Bancshares is not then in material breach of any
representation, warranty, covenant or other agreement contained in
the merger agreement);
●
The merger failed
to close by October 31, 2017 or, if due solely to the need to
obtain a regulatory approval or consent, November 30, 2017, or the
parties failed to receive all regulatory approvals and consents
required for the merger, and such failure resulted from the
knowing, willful and intentional actions or inactions of DCB
Bancshares or Damascus Community Bank (provided that Old Line
Bancshares is not then in material breach of any representation,
warranty, covenant or other agreement contained in the merger
agreement);
●
DCB Bancshares or
any DCB Bancshares subsidiary has (i) received a proposal for a
superior DCB Bancshares transaction (with respect to termination by
DCB Bancshares) or (ii) entered into, approved or resolved to
approve an agreement, agreement in principle, letter of intent or
similar instrument with respect to a superior DCB Bancshares
transaction (with respect to termination by Old Line Bancshares);
or
●
The board of
directors of DCB Bancshares has withdrawn, changed or modified its
recommendation to the stockholders of DCB Bancshares to approve the
merger agreement and the merger in a manner adverse to Old Line
Bancshares or authorizes, recommends or publicly proposes, or
publicly announces an intention to authorize, recommend or propose,
an agreement to enter into a superior DCB Bancshares transaction
(provided that Old Line Bancshares is not then in material breach
of any representation, warranty, covenant or other agreement
contained in the merger agreement).
Old Line Bancshares Must Pay the Termination Fee to DCB Bancshares
if the Merger Agreement is Terminated Under Certain Circumstances
(see page 62)
Old Line Bancshares
has agreed to pay the Termination Fee to DCB Bancshares if DCB
Bancshares terminates the merger agreement because:
●
Old Line Bancshares
has materially breached the merger agreement or any representation,
warranty, covenant or other agreement contained therein (provided
that DCB Bancshares is not then in material breach of any
representation, warranty, covenant or other agreement contained in
the merger agreement); or
●
The merger failed
to close by October 31, 2017 or, if due solely to the need to
obtain a regulatory approval or consent, November 30, 2017, or the
parties failed to receive all regulatory approvals and consents
required for the merger, and such failure resulted from the
knowing, willful and intentional actions or inactions of Old Line
Bancshares or Old Line Bank (provided that DCB Bancshares is not
then in material breach of any material representation, warranty,
covenant or other agreement contained in the merger
agreement).
Rights of Old Line Bancshares Stockholders Differ from those of DCB
Bancshares Stockholders (see page 74)
When the merger is
completed, DCB Bancshares stockholders will become Old Line
Bancshares stockholders. The rights of Old Line Bancshares
stockholders differ from the rights of DCB Bancshares stockholders
in certain important ways. These differences have to do with
provisions in Old Line Bancshares’ articles of incorporation
and bylaws that differ from the provisions in DCB Bancshares’
articles of incorporation and bylaws.
DCB Bancshares Stockholders have Appraisal Rights in Connection
with the Merger (see page 71)
DCB Bancshares
stockholders are entitled to exercise appraisal rights with respect
to the merger and, if the merger is completed and they perfect
their appraisal rights, to receive payment in cash for the fair
value of their shares of DCB Bancshares common stock instead of
their share of the aggregate merger consideration. In general, to
preserve their appraisal rights, DCB Bancshares stockholders who
wish to exercise these rights must:
●
Deliver a written
objection to the merger to DCB Bancshares at or before DCB
Bancshares’ annual meeting of stockholders;
●
Not vote their
shares for approval of the merger agreement and the
merger;
●
Within 20 days
after the merger is consummated, deliver a written demand to Old
Line Bancshares stating the number of shares of DCB Bancshares
common stock for which they demand payment; and
●
Comply with the
other procedures set forth in Sections 3-201 through 3-213 of the
MGCL.
The text of
Sections 3-201 through 3-213 of the MGCL governing appraisal rights
is included with this proxy statement/prospectus as Annex C.
Failure to comply with the procedures described in Annex C will
result in the loss of appraisal rights under the MGCL. We urge you
to carefully read the text of Sections 3-201 through 3-213 of the
MGCL governing appraisal rights.
RISK
FACTORS
In addition to the
other information contained in this proxy statement/prospectus,
including the matters addressed under the caption “Caution
Regarding Forward-Looking Statements,” you should carefully
consider the following risk factors in deciding whether to vote for
approval of the merger agreement and the merger.
Risk Factors Related to the Merger in General
Old Line Bancshares may
fail to realize all of the anticipated benefits of the
merger. The success of the merger will depend, in part, on
Old Line Bancshares’ ability to realize the anticipated
benefits and cost savings from combining the businesses of Old Line
Bancshares and DCB Bancshares. To realize these anticipated
benefits and cost savings, however, Old Line Bancshares must
successfully combine the businesses of Old Line Bancshares and DCB
Bancshares. If Old Line Bancshares is unable to successfully
combine the businesses of Old Line Bancshares and DCB Bancshares,
the anticipated benefits and cost savings of the merger may not be
realized fully or at all or may take longer to realize than
expected.
Old Line Bancshares
and DCB Bancshares have operated and, until the completion of the
merger, will continue to operate, independently. It is possible
that the integration process could result in the loss of key
employees, the loss of key depositors or other bank customers and
the disruption of DCB Bancshares’ ongoing business, as well
as or inconsistencies in standards, controls, procedures and
policies that adversely affect DCB Bancshares’ ability to
maintain its relationships with its clients, customers, depositors
and employees, which could have a negative impact on Old Line
Bancshares’ ability to achieve the anticipated benefits of
the merger. Integration efforts between the two companies may, to
some extent, also divert management’s attention and
resources. These integration matters could have an adverse effect
on each of Old Line Bancshares and DCB Bancshares during such
transition period.
The opinion of DCB
Bancshares’ financial advisor to its board of directors does
not reflect changes in circumstances since the date of such
opinion. The board of directors of DCB Bancshares received
an opinion from RP Financial, its financial advisor, regarding the
fairness of the merger consideration from a financial point of
view, but this opinion is dated as of, and speaks only as of, the
date of the merger agreement. Changes in the operations and
prospects of Old Line Bancshares and DCB Bancshares, general market
and economic conditions and other factors that may be beyond the
control of Old Line Bancshares or DCB Bancshares may significantly
alter the prices of the shares of Old Line Bancshares common stock
or DCB Bancshares common stock by the time the merger is completed.
RP Financial’s 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. Because DCB Bancshares does not currently anticipate
asking RP Financial to update its opinion, the opinion will not
address the fairness of the merger consideration from a financial
point of view at the time the merger is completed. The
recommendation of DCB Bancshares’ board of directors that DCB
Bancshares stockholders vote “FOR” the approval of the merger
agreement and the merger, however, is made as of the date of this
proxy statement/prospectus. For a description of the RP Financial
opinion, refer to the section of this proxy statement/prospectus
entitled “The Merger Agreement and the Merger – Opinion
of DCB Bancshares’ Financial Advisor.”
Because the market price of
Old Line Bancshares common stock will fluctuate, DCB Bancshares
stockholders cannot be sure of the value of the merger
consideration they may receive. Upon completion of the
merger, the outstanding shares of DCB Bancshares common stock will
be converted into the right to receive shares of Old Line
Bancshares common stock. The value of the shares of Old Line
Bancshares common stock received in the merger approximates $25.22
per share as of the date of the merger agreement based on
then-recent trading prices. Trading prices of Old Line Bancshares
common stock may, however, vary from the trading prices of Old Line
Bancshares common stock on the date of the merger agreement, the
trading date following the date we announced the merger, the date
this proxy statement/prospectus was mailed to DCB Bancshares
stockholders and the date of the annual meeting of the DCB
Bancshares stockholders. Any change in the market price of shares
of Old Line Bancshares common stock may affect the value of the
merger consideration that DCB Bancshares stockholders will receive
upon completion of the merger. Stock price changes may result from
a variety of factors, including general market and economic
conditions, changes in our respective businesses, operations and
prospects and regulatory considerations. Many of these factors are
beyond our control. You should obtain current market quotations for
shares of Old Line Bancshares common stock.
The market price of Old
Line Bancshares common stock after the merger may be affected by
factors different from those affecting the shares of Old Line
Bancshares or DCB Bancshares currently. The businesses of
Old Line Bancshares and DCB Bancshares differ and, accordingly, the
results of operations of the combined company and the market price
of the combined company’s shares of common stock may be
affected by factors different from those currently affecting the
independent results of operations and market prices of common stock
of each of Old Line Bancshares and DCB Bancshares.
Old Line Bancshares and DCB
Bancshares will be subject to business uncertainties and
contractual restrictions while the merger is pending.
Uncertainty about the effect of the merger on employees, customers,
suppliers and vendors may have an adverse effect on the business,
financial condition and results of operations of Old Line
Bancshares and DCB Bancshares. These uncertainties may impair Old
Line Bancshares’ and DCB Bancshares’ ability to
attract, retain and motivate key personnel, depositors and
borrowers pending the consummation of the merger, as such
personnel, depositors and borrowers may experience uncertainty
about their future roles following the consummation of the merger.
Additionally, these uncertainties could cause customers (including
depositors and borrowers), suppliers, vendors and others who deal
with Old Line Bancshares or DCB Bancshares to seek to change
existing business relationships with Old Line Bancshares or DCB
Bancshares or fail to extend an existing relationship. In addition,
competitors may target each party’s existing customers by
highlighting potential uncertainties and integration difficulties
that may result from the merger.
Further, the
pursuit of the merger and the preparation for the integration in
connection therewith may place a burden on each of Old Line
Bancshares’ and DCB Bancshares’ management and internal
resources. Any significant diversion of management attention away
from ongoing business concerns and any difficulties encountered in
the transition and integration process could have a material
adverse effect on each company’s business, financial
condition and results of operations.
In addition, the
merger agreement restricts DCB Bancshares from taking certain
actions without Old Line Bancshares’ consent while the merger
is pending. These restrictions may, among other matters, prevent
DCB Bancshares from pursuing otherwise attractive business
opportunities, selling assets, incurring indebtedness, engaging in
significant capital expenditures in excess of certain limits set
forth in the merger agreement, entering into other transactions or
making other changes to DCB Bancshares’ business prior to
consummation of the merger or termination of the merger agreement.
These restrictions could have a material adverse effect on DCB
Bancshares’ business, financial condition and results of
operations. Please see “The Merger Agreement and the Merger
– Terms of the Merger – Conduct of Business Pending the
Merger” for a description of these restrictions.
If the merger is not
completed, Old Line Bancshares and DCB Bancshares will have
incurred substantial expenses without realizing the expected
benefits. Old Line Bancshares and DCB Bancshares have
incurred substantial expenses in connection with the execution of
the merger agreement and the merger. The completion of the merger
depends on the satisfaction of specified conditions, including
regulatory approvals and the requisite approval of the stockholders
of DCB Bancshares. There is no guarantee that these conditions will
be met. If the merger is not completed, these expenses could have a
material adverse impact on the financial condition of Old Line
Bancshares and/or DCB Bancshares because they would not have
realized the expected benefits for which these expenses were
incurred.
Regulatory approvals may
not be received, may take longer than expected or impose conditions
that are not presently anticipated. Before the merger may be
completed, various approvals must be obtained from the FRB, the
FDIC and the Maryland Commissioner. These regulatory approvals may
not be received at all, may not be received in a timely fashion,
and may contain conditions on the completion of the merger or
require changes to the terms of the merger that are not anticipated
or that have a material adverse effect. Although Old Line
Bancshares and DCB Bancshares do not currently expect that any such
conditions or changes would be imposed, there can be no assurance
that they will not be, and such conditions or changes could have
the effect of delaying completion of the merger or imposing
additional costs on or limiting the revenues of Old Line Bancshares
following the merger, any of which might have a material adverse
effect on Old Line Bancshares following the merger. If the
consummation of the merger is delayed, including by a delay in
receipt of necessary governmental approvals, the business,
financial condition and results of operations of each of Old Line
Bancshares or DCB Bancshares may also be materially adversely
affected. Further, Old Line Bancshares is not obligated to complete
the merger if the regulatory approvals received in connection with
the completion of the merger include any conditions or requirements
that, in the reasonable opinion of its board of directors, would
(i) so materially and adversely impact the economic or business
benefits to Old Line Bancshares following the merger as to render
consummation of the merger inadvisable, or (ii) materially impair
the value of DCB Bancshares to Old Line Bancshares, although Old
Line Bancshares could choose to waive this condition.
Failure to complete the
merger could negatively impact the stock prices and future
businesses and financial results of Old Line Bancshares and DCB
Bancshares. If the merger is not completed, the ongoing
businesses of Old Line Bancshares and DCB Bancshares may be
adversely affected and Old Line Bancshares and DCB Bancshares will
be subject to several risks, including the following:
●
DCB Bancshares may
be required, under certain circumstances, to pay Old Line
Bancshares the Termination Fee under the merger
agreement;
●
Old Line Bancshares
may be required, under certain circumstances, to pay DCB Bancshares
the Termination Fee under the merger agreement;
●
Old Line Bancshares
and DCB Bancshares will be required to pay certain costs relating
to the merger, whether or not the merger is completed, such as
legal, accounting, financial advisor and printing
fees;
●
Under the merger
agreement, DCB Bancshares 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; and
●
Matters relating to
the merger may require substantial commitments of time and
resources by Old Line Bancshares and DCB Bancshares management that
could otherwise have been devoted to other opportunities that may
have been beneficial to Old Line Bancshares or DCB Bancshares as
independent companies, as the case may be.
In addition, if the
merger is not completed, Old Line Bancshares and/or DCB Bancshares
may experience negative reactions from the financial markets and
from their respective stockholders, customers and employees. Old
Line Bancshares and/or DCB Bancshares also could be subject to
litigation related to any failure to complete the merger or to
enforcement proceedings commenced against Old Line Bancshares or
DCB Bancshares to perform their respective obligations under the
merger agreement. If the merger is not completed, Old Line
Bancshares and DCB Bancshares cannot assure their stockholders that
the risks described above will not materialize and will not
materially affect the business, financial results and stock prices
of Old Line Bancshares and/or DCB Bancshares.
Old Line Bancshares and DCB
Bancshares may choose not to proceed with the merger if it is not
completed by October 31, 2017 or, if due to the lack of a required
regulatory approval, November 30, 2017.Either Old Line
Bancshares or DCB Bancshares may terminate the merger agreement if
the merger has not been completed by October 31, 2017 or, if due to
the lack of a required regulatory approval, November 30, 2017. See
“The Merger Agreement and the Merger – Terms of the
Merger – Termination.” There can be no assurance that
all conditions to the merger will have been satisfied by the
required date(s). See “The Merger Agreement and the Merger
– Terms of the Merger – Conditions to the
Merger.”
Risk Factors Relating to Old Line Bancshares’ Business and
Its Common Stock
This section
discusses risks relating to Old Line Bancshares’ business and
includes risks it will continue to face after the merger.
References to “Old Line Bancshares” include its
subsidiary Old Line Bank as the context requires.
System failure or
cybersecurity breaches of Old Line Bancshares’ network
security could subject it to increased operating costs as well as
litigation and other potential losses. Old Line Bancshares
relies heavily on communications and information systems to conduct
its business. The computer systems and network infrastructure it
uses could be vulnerable to unforeseen hardware and cybersecurity
issues. Old Line Bancshares’ operations are dependent upon
its ability to protect its computer equipment against damage from
fire, power loss, telecommunications failure or a similar
catastrophic event. Any damage or failure that causes an
interruption in Old Line Bancshares’ operations could have an
adverse effect on its financial condition and results of
operations. In addition, Old Line Bancshares’ operations are
dependent upon its ability to protect the computer systems and
network infrastructure it uses, including its Internet banking
activities, against damage from physical break-ins, cybersecurity
breaches and other disruptive problems caused by Internet problems,
other users or unrelated third parties. Such computer break-ins and
other disruptions would jeopardize the security of information
stored in and transmitted through Old Line Bancshares’
computer systems and network infrastructure, which may result in
significant liability to Old Line Bancshares, subject it to
additional regulatory scrutiny, damage its reputation, result in a
loss of customers, and inhibit current and potential customers from
using its Internet banking services, any or all of which could have
a material adverse effect on Old Line Bancshares’ results of
operations and financial condition. Old Line Bancshares
periodically reviews its security protocols and, as necessary, adds
additional security measures to its computer systems and network
infrastructure to mitigate the possibility of cybersecurity
breaches, including firewalls and penetration testing. These
precautions may not, however, be effective in preventing such
breaches, damage or failures. Old Line Bancshares continues to
monitor developments in this area and consider whether additional
protective measures are necessary or appropriate, and has obtained
insurance protection intended to cover losses due to network
security breaches; there is no guarantee, however, that such
insurance would cover all costs associated with any breach, damage
or failure of Old Line Bancshares’ computer systems and
network infrastructure.
Old Line Bancshares relies
on certain external vendors. Old Line Bancshares’
business is dependent on the use of outside service providers that
support its day-to-day operations including data processing and
electronic communications. Old Line Bancshares’ operations
are exposed to the risk that a service provider may not perform in
accordance with established performance standards required in their
agreements with Old Line Bancshares for any number of reasons
including equipment or network failure, a change in their senior
management, their financial condition, their product line or mix
and how they support existing customers, or a simple change in
their strategic focus. While Old Line Bancshares has comprehensive
policies and procedures in place to mitigate risk at all phases of
service provider management from selection to performance
monitoring and renewals, the failure of a service provider to
perform in accordance with contractual agreements could be
disruptive to its business, which could have a material adverse
effect on its financial condition and results of its
operations.
A worsening of economic
conditions could adversely affect Old Line Bancshares’
results of operations and financial condition. Changes in
prevailing economic conditions, including declining real estate
values, changes in interest rates that may cause a decrease in
interest rate spreads, adverse employment conditions, the monetary
and fiscal policies of the federal government and other significant
external events may adversely affect Old Line Bancshares’
financial results. Old Line Bancshares continues to operate in a
challenging and uncertain economic environment. Economic growth
continues to be slow and uneven. A return to recessionary
conditions or prolonged stagnant or deteriorating economic
conditions could significantly affect the markets in which Old Line
Bancshares does business, the demand for its products and services,
the value of its loans and investments, and its ongoing operations,
costs and profitability. In any case, Old Line Bancshares expects
that the business environment in the State of Maryland and the
entire United States will continue to present challenges for the
foreseeable future. Further continuing economic uncertainty,
including regarding concerns about U.S. debt levels and related
governmental actions, potential tariffs on imports into the United
States and cuts in government spending, may negatively impact
economic conditions going forward. In addition, an increase in
unemployment levels may result in higher than expected loan
delinquencies, increases in Old Line Bancshares’
nonperforming and criticized classified assets and a decline in
demand for its products and services. These events may cause Old
Line Bancshares to incur losses and may adversely affect its
financial condition and results of operations.
Although the
adverse economic climate during the past several years has not
severely impacted Old Line Bancshares due to its strict
underwriting standards, any adverse changes in the economy going
forward, including decreases in current real estate values,
increased unemployment or the economy moving back into a recession,
could have a negative effect on the ability its borrowers to make
timely repayments of their loans, which would have an adverse
impact on Old Line Bancshares’ earnings.
Furthermore, the
FRB, in an attempt to help the overall economy, has among other
things kept interest rates low through its targeted federal funds
rate and the purchase of U.S. Treasury and mortgage-backed
securities. If the FRB continues to increase the federal funds rate
in the near term, as is expected, overall interest rates will
likely rise, which may negatively impact the housing markets and
the U.S. economic growth. In addition, deflationary pressures,
while possibly lowering Old Line Bancshares’ operating costs,
could have a negative impact on its borrowers, especially its
business borrowers, and the values of collateral securing its
loans, which could negatively affect its financial
performance.
A worsening of credit
markets and economic conditions could adversely affect Old Line
Bancshares’ liquidity. Old Line Bank must maintain
sufficient liquidity to ensure cash flow is available to satisfy
current and future financial obligations including demand for loans
and deposit withdrawals, funding of operating costs and other
corporate purposes. Old Line Bancshares obtains funding through
deposits and various short term and long term wholesale borrowings,
including federal funds purchased, unsecured borrowings, brokered
certificates of deposits and borrowings from the Federal Home Loan
Bank of Atlanta and others. Economic uncertainty and disruptions in
the financial system may adversely affect Old Line
Bancshares’ liquidity. Dramatic declines in the housing
market and falling real estate prices coupled with increased
foreclosures and unemployment, resulted in significant asset value
write downs by financial institutions during and after the last
U.S. recession, including government sponsored entities and
investment banks. These investment write downs caused financial
institutions to seek additional capital. Should Old Line Bancshares
experience a substantial deterioration in its financial condition
or should disruptions in the financial markets restrict its
funding, it would negatively impact Old Line Bancshares’
liquidity. To mitigate this risk, Old Line Bancshares closely
monitors its liquidity, maintains a line of credit with the Federal
Home Loan Bank and has received approval to borrow from the Federal
Reserve Bank of Richmond.
Old Line Bancshares’
concentrations of loans in various categories may also increase the
risk of credit losses. Old Line Bancshares currently invests
more than 25% of its capital in various loan types and industry
segments, including commercial real estate loans and loans to the
hospitality industry (hotels/motels). While declines in the local
commercial real estate market following the last recession have not
caused the collateral securing Old Line Bancshares’ loans to
exceed acceptable loan to value ratios, a deterioration in the
commercial real estate market could cause deterioration in the
collateral securing these loans and/or a decline in its
customers’ earning capacity. This could negatively impact Old
Line Bancshares. Although Old Line Bancshares has made a large
portion of its hospitality loans to long-term, well-established
operators in strategic locations, a decline in the occupancy rate
in these facilities could negatively impact their earnings. This
could adversely impact the operators’ ability to repay their
loans, which would adversely impact Old Line Bancshares’ net
income.
Old Line Bancshares’
need to comply with extensive and complex governmental regulation
could have an adverse effect on its business and growth strategy,
and it may be adversely affected by changes in laws and
regulations. The banking industry is subject to extensive
regulation by state and federal banking authorities. Many of these
regulations are intended to protect depositors, the public or the
FDIC insurance funds, not stockholders. Regulatory requirements
affect Old Line Bancshares’ lending practices, capital
structure, investment practices, dividend policy, ability to
attract and retain personnel and many other aspects of its
business. These requirements may constrain Old Line
Bancshares’ rate of growth and changes in regulations could
adversely affect it. The cost of compliance with regulatory
requirements could adversely affect Old Line Bancshares’
ability to operate profitably. Further, if Old Line Bancshares is
not in compliance with such requirements, it could be subject to
fines or other regulatory action that could restrict its ability to
operate or otherwise have a material adverse effect on its business
and financial condition. Although Old Line Bancshares believes it
is in material compliance with all applicable regulations, it is
possible there are violations of which it is unaware that could be
discovered by its regulators in the course of an examination or
otherwise, which could trigger such fines or other adverse
consequences.
In addition,
because regulation of financial institutions changes regularly and
is the subject of constant legislative debate, Old Line Bancshares
cannot forecast how federal or state regulation of financial
institutions may change in the future and impact its operations. In
light of the performance of and government intervention in the
financial sector, there may be significant changes to the banking
and financial institutions’ regulatory agencies in the
future. Changes in regulation and oversight, including in the form
of changes to statutes, regulations or regulatory policies or
changes in interpretation or implementation of statutes,
regulations or policies, could affect the services and products Old
Line Bancshares offers, increase its operating expenses, increase
compliance challenges and otherwise adversely impact its financial
performance and condition. In addition, the burden imposed by these
federal and state regulations may place banks in general, and Old
Line Bank specifically, at a competitive disadvantage compared to
less regulated competitors.
Non-Compliance with the USA
PATRIOT Act, the Bank Secrecy Act or other laws and regulations
could result in fines or sanctions. Financial institutions
are required under the USA PATRIOT and Bank Secrecy Acts to develop
programs to prevent financial institutions from being used for
money-laundering and terrorist activities. Financial institutions
are also obligated to file suspicious activity reports with the
U.S. Treasury Department’s Office of Financial Crimes
Enforcement Network if such activities are detected. These rules
also require financial institutions to establish procedures for
identifying and verifying the identity of customers seeking to open
new financial accounts. Failure or the inability to comply with
these regulations could result in fines or penalties, curtailment
of expansion opportunities, intervention or sanctions by regulators
and costly litigation or expensive additional controls and systems.
During the last few years, several banking institutions have
received large fines for non-compliance with these laws and
regulations. In addition, the U.S. Government has previously
imposed laws and regulations relating to residential and consumer
lending activities that create significant new compliance burdens
and financial risks. While Old Line Bancshares has developed
policies and procedures designed to assist in compliance with these
laws and regulations, no assurance can be given that these policies
and procedures will be effective in preventing violations of these
laws and regulations.
Requirements to hold more
capital could have a material adverse impact on us. The
impact of the revised capital rules on our financial condition and
operations is uncertain but could be materially adverse. In July
2013, the Federal Reserve Board adopted a final rule for the Basel
III capital framework. These rules substantially amended the
regulatory risk-based capital rules applicable to us and increased
the minimum levels of capital we are required to hold, as discussed
in “Item 1. Business – Supervision and Regulation
– Capital Adequacy Guidelines.” The rules apply to Old
Line Bancshares as well as to the Bank. These rules include a
capital conservation buffer that phases in over a period of years
that began in 2016 and will become fully effective in 2019. Failure
to satisfy the additional capital requirements of the capital
conservation buffer will result in limits on paying dividends,
engaging in share repurchases and paying discretionary bonuses. The
rules establish a maximum percentage of eligible retained income
that may be utilized for such actions if the capital requirements
of the buffer are not fully satisfied. Beginning January 1, 2017,
our capital requirements with the applicable capital conservation
buffer are (i) a common equity Tier 1 risk-based capital ratio of
5.75%, (ii) a Tier 1 risk-based capital (common Tier 1 capital plus
Additional Tier 1 capital) ratio of 7.25% and (iii) a total
risk-based capital ratio of 9.25%. The capital conservation buffer
does not apply to our leverage ratio requirement, which will remain
at 4.0%. Once the capital conservation buffer is fully phased in,
the resulting requirements will be a common equity Tier 1
risk-based capital ratio of 7%, a Tier 1 risk-based capital ratio
of 8.5%, and a total risk-based capital ratio of 10.5%. These
increased capital requirements may have a material adverse impact
on our liquidity and results of operations, or the failure to
satisfy such requirements may result in our inability to pay
dividends on or repurchase shares of our common stock, which could
also negatively impact the market price for our stock, and may
negatively impact our ability to retain personnel if our ability to
pay retention bonuses is compromised.
Old Line Bancshares’
internal controls and procedures may fail or be
circumvented. Old Line Bancshares’ management
regularly reviews and updates its internal controls, disclosure
controls and procedures and corporate governance policies and
procedures. Any system of controls, however well-designed and
operated, is based in part on certain assumptions and can provide
only reasonable assurances that the objectives of the system are
met. Any (i) failure or circumvention of Old Line
Bancshares’ controls and procedures, (ii) failure by Old
Line Bancshares to adequately address any internal control
deficiencies, or (iii) failure by Old Line Bancshares to
comply with regulations related to controls and procedures could
have a material effect on Old Line Bancshares’ business,
consolidated financial condition and results of
operations.
Old Line Bancshares’
business may be adversely affected by increasing prevalence of
fraud and other financial crimes. As a financial
institution, Old Line Bancshares is subject to risk of loss due to
fraud and other financial crimes. Nationally, reported incidents of
fraud and other financial crimes have increased. Old Line
Bancshares believes it has controls in place to detect and prevent
such losses, but in some cases multi-party collusion or other
sophisticated methods of hiding fraud may not be readily detected
or detectable, and could result in losses that affect its financial
condition and results of Old Line Bancshares’
operations.
Financial crime is
not limited to the financial services industry. Old Line
Bancshares’ customers could experience fraud in their
businesses, which could materially impact their ability to repay
their loans, and deposit customers in all financial institutions
are constantly and unwittingly solicited by others in fraud schemes
that vary from easily detectable and obvious attempts to high-level
and very complex international schemes that could drain an account
of millions of dollars and require detailed financial forensics to
unravel. While Old Line Bancshares has controls in place,
contractual agreements with its customers partitioning liability,
and insurance to help mitigate the risk, none of these are
guarantees that it will not experience a loss, potentially a loss
that could have a material adverse effect on its financial
condition, reputation and results of its operations.
The level of Old Line
Bancshares’ commercial real estate loan portfolio may subject
it to additional regulatory scrutiny. The FDIC, the FRB and
the Office of the Comptroller of the Currency have promulgated
joint guidance on sound risk management practices for financial
institutions with concentrations in commercial real estate lending.
Under this guidance, a financial institution that, like Old Line
Bancshares, is actively involved in commercial real estate lending
should perform a risk assessment to identify concentrations. A
financial institution may have a concentration in commercial real
estate lending if, among other factors (i) total reported loans for
construction, land development and other land represent 100% or
more of total capital, or (ii) total reported loans secured by
multi-family and non-farm non-residential properties, loans for
construction, land development and other land, and loans otherwise
sensitive to the general commercial real estate market, including
loans to commercial real estate related entities, represent 300% or
more of total capital. The particular focus of the guidance is on
exposure to commercial real estate loans that are dependent on the
cash flow from the real estate held as collateral and that are
likely to be at greater risk to conditions in the commercial real
estate market (as opposed to real estate collateral held as a
secondary source of repayment or as an abundance of caution). The
purpose of the guidance is to guide banks in developing risk
management practices and capital levels commensurate with the level
and nature of real estate concentrations. The guidance states that
management should employ heightened risk management practices
including board and management oversight and strategic planning,
development of underwriting standards, risk assessment and
monitoring through market analysis and stress testing. Old Line
Bancshares has concluded that it has a concentration in commercial
real estate lending under the foregoing standards because its
balance in commercial real estate loans at December 31, 2016
represents more than 300% of total capital. While Old Line
Bancshares believes that it has implemented policies and procedures
with respect to its commercial real estate loan portfolio
consistent with this guidance, bank regulators could require it to
implement additional policies and procedures consistent with their
interpretation of the guidance that may result in additional costs
to Old Line Bancshares.
Old Line Bancshares depends
on the accuracy and completeness of information about its clients
and counterparties and its financial condition could be adversely
affected if it relies on misleading information. In deciding
whether to extend credit or to enter into other transactions with
clients and counterparties, Old Line Bancshares may rely on
information furnished to it by or on behalf of clients and
counterparties, including financial statements and other financial
information, which it does not independently verify as a matter of
course. Old Line Bancshares also may rely on representations of
clients and counterparties as to the accuracy and completeness of
that information and, with respect to financial statements, on
reports of independent auditors. For example, in deciding whether
to extend credit to customers, Old Line Bancshares may assume that
a customer’s audited financial statements conform with
accounting principles generally accepted in the United States
(“GAAP”) and present fairly, in all material respects,
the financial condition, results of operations and cash flows of
the customer. Old Line Bancshares’ financial condition and
results of operations could be negatively impacted to the extent it
relies on financial statements that do not comply with GAAP or are
materially misleading.
Old Line Bancshares
may be
adversely affected by the soundness of other financial
institutions. Financial services institutions are
interrelated as a result of trading, clearing, counterparty or
other relationships. Old Line Bancshares has exposure to many
different industries and counterparties and routinely executes
transactions with counterparties in the financial services
industry, including commercial banks, brokers and dealers,
investment banks and other institutional clients. Many of these
transactions expose Old Line Bancshares to credit risk in the event
of a default by a counterparty or client. In addition, Old Line
Bancshares’ credit risk may be exacerbated when the
collateral held by Old Line Bank cannot be realized upon or is
liquidated at prices not sufficient to recover the full amount of
the credit or derivative exposure due to Old Line Bank. Any such
losses could have a material adverse effect on Old Line
Bancshares’ financial condition and results of
operations.
Regulations pursuant to the
Dodd-Frank Act may adversely impact Old Line Bancshares’
results of operations, liquidity or financial condition. The
Dodd-Frank Wall Street Reform and Consumer Protection Act (the
“Dodd-Frank Act”) represents a comprehensive overhaul
of the U.S. financial services industry. The Dodd-Frank Act
required the Consumer Financial Protection Bureau (the
“CFPB”) and other federal agencies to issue many new
and significant rules and regulations to implement its various
provisions. There are a number of regulations under the Dodd-Frank
Act that have not yet been fully adopted and implemented and Old
Line Bancshares will not know the full impact of the Dodd-Frank Act
on its business until such regulations are fully implemented. As a
result, Old Line Bancshares cannot predict the full extent to which
the Dodd-Frank Act will impact its business, operations or
financial condition. However, compliance with these laws and
regulations may require Old Line Bancshares to make changes to its
business and operations and will likely result in additional costs
and a diversion of management’s time from other business
activities, any of which may adversely impact its results of
operations, liquidity or financial condition.
Because Old Line Bancshares
serves a limited market area in Maryland, an economic downturn in
its market area could more adversely affect Old Line Bancshares
than it affects its larger competitors that are more geographically
diverse. Old Line Bancshares’ current market area
consists of the suburban Maryland counties of Anne Arundel,
Baltimore, Calvert, Carroll, Charles, Montgomery, Prince
George’s and St. Mary’s. If the merger is
consummated this market area will expand into Frederick County,
Maryland, and Old Line Bancshares may expand in contiguous northern
and western Counties, such as Howard County, Maryland. Broad
geographic diversification, however, is not currently part of Old
Line Bancshares’ community bank focus. Overall, during and
following the most recent recession, the business environment has
negatively impacted many businesses and households in the United
States and worldwide. Although the economic decline has not
impacted the suburban Maryland and Washington D.C. suburbs as
adversely as other areas of the United States, it has caused an
increase in unemployment and business failures and a decline in
property values. As a result, if Old Line Bancshares’ market
area should suffer another economic downturn, it may more severely
affect its business and financial condition than it affects larger
bank competitors. In particular, due to the proximity of its market
area to Washington, D.C., decreases in spending by the Federal
government or threatened cuts to Federal government employment
could impact Old Line Bancshares to a greater degree than banking
companies that serve a larger or a different geographical area. Old
Line Bancshares’ larger competitors, for example, serve more
geographically diverse market areas, parts of which may not be
affected by the same economic conditions that may exist in Old Line
Bancshares’ market area. Further, unexpected changes in the
national and local economy may adversely affect Old Line
Bancshares’ ability to attract deposits and to make loans.
Such risks are beyond Old Line Bancshares’ control and may
have a material adverse effect on its financial condition and
results of operations and, in turn, the value of its common
stock.
Old Line Bancshares
originates and retains in its portfolio residential mortgage loans.
A downturn in the local real estate market and economy could
adversely affect its earnings. Old Line Bancshares’
loan portfolio includes residential mortgage loans that it
originates. Although the local real estate market and economy in
Old Line Bancshares’ market areas have performed better than
many other markets during the past few years, a downturn could
cause higher unemployment and more delinquencies, and could
adversely affect the value of properties securing its loans. In
addition, the real estate market may take longer to recover or not
recover to previous levels. These risks increase the probability of
an adverse impact on Old Line Bancshares’ financial results
as fewer borrowers would be eligible to borrow and property values
could be below necessary levels required for adequate coverage on
the requested loan.
Old Line Bancshares depends
on the services of key personnel. The loss of any of these
personnel could disrupt its operations and its business could
suffer. Old Line Bancshares’ success depends
substantially on the skills and abilities of its executive
management team, including James W. Cornelsen, its President and
Chief Executive Officer, Joseph E. Burnett, its Executive Vice
President and Chief Lending Officer, John Miller, its Executive
Vice President and Chief Credit Officer, Mark A. Semanie, its
Executive Vice President and Chief Operating Officer, and Elise M.
Hubbard, its Senior Vice President and Chief Financial Officer.
Although Old Line Bank has entered into employment agreements with
Messrs. Cornelsen, Burnett, Miller and Semanie, the existence
of such agreements does not assure that Old Line Bancshares and Old
Line Bank will retain their services. Further, neither Old Line
Bancshares nor Old Line Bank has entered into an employment
agreement with Ms. Hubbard, and therefore she can terminate her
employment at any time and for any reason. These executives provide
valuable services to Old Line Bancshares and Old Line Bank and
would be difficult to replace.
Also, Old Line
Bancshares’ growth and success and its anticipated future
growth and success, in a large part, is due and will continue to be
due to the relationships maintained by its banking executives with
its customers. The loss of services of one or more of these
executives or of other key employees could have a material adverse
effect on Old Line Bancshares’ operations and its business
could suffer. The experienced commercial lenders that Old Line Bank
has hired are not a party to any employment agreement with Old Line
Bancshares or Old Line Bank and they could terminate their
employment at any time and for any reason.
Old Line Bancshares’
growth and expansion strategy may not be successful. Old
Line Bancshares’ ability to grow depends upon its ability to
attract new deposits, identify loan and investment opportunities
and maintain adequate capital levels. Old Line Bancshares may also
grow through acquisitions of existing financial institutions or
branches thereof, as it is doing through the proposed merger with
DCB Bancshares. There are no guarantees that Old Line
Bancshares’ expansion strategies will be successful. Also, in
order to effectively manage its anticipated and/or actual loan
growth Old Line Bancshares has made and may continue to make
additional investments in equipment and personnel, which could
increase its non-interest expense. If Old Line Bancshares grows too
quickly and is not able to control costs and maintain asset
quality, such growth could materially and adversely affect its
financial performance.
If Old Line
Bancshares’ allowance for loan losses is not sufficient to
cover actual loan losses, its earnings will decrease. Old
Line Bancshares maintains an allowance for loan losses that it
believes is adequate for absorbing any potential losses in its loan
portfolio. Old Line Bancshares’ management, through a
periodic review and consideration of the loan portfolio, determines
the amount of the allowance for loan losses. Although Old Line
Bancshares believes that its allowance for loan losses is adequate
to absorb probable losses in its loan portfolio, even under normal
economic conditions it cannot predict such losses with certainty.
The unprecedented volatility experienced in the financial and
capital markets during the last several years makes this
determination even more difficult as processes Old Line Bancshares
uses to estimate the allowance for loan losses may no longer be
dependable because they rely on complex judgments, including
forecasts of economic conditions that may not be accurate. As a
result, Old Line Bancshares cannot be sure that its allowance is or
will be adequate in the future. If management’s assumptions
and judgments prove to be incorrect and the allowance for loan
losses is inadequate to absorb future losses, Old Line
Bancshares’ earnings will suffer.
As of December 31,
2016, commercial and industrial and commercial real estate mortgage
loans comprise approximately 80.22% of Old Line Bancshares’
loan portfolio. These types of loans are generally viewed as having
more risk of default than residential real estate or consumer loans
and typically have larger balances than residential real estate
loans and consumer loans. A deterioration of one or a few of these
loans could cause a significant increase in Old Line
Bancshares’ non-performing loans. Such an increase could
result in a net loss of earnings from these loans, an increase in
the provision for loan losses and an increase in loan charge-offs,
all of which could have a material adverse effect on Old Line
Bancshares’ financial condition and results of
operations.
Old Line Bancshares’
profitability depends on interest rates and changes in monetary
policy may impact it. Old Line Bancshares’ results of
operations depend to a large extent on its “net interest
income,” which is the difference between the interest expense
incurred in connection with its interest bearing liabilities, such
as interest on deposit accounts, and the interest income received
from its interest earning assets, such as loans and investment
securities. Interest rates, because they are influenced by, among
other things, expectations about future events, including the level
of economic activity, federal monetary and fiscal policy, and
geopolitical stability, are not predictable or controllable.
Additionally, competitive factors heavily influence the interest
rates Old Line Bancshares can earn on its loan and investment
portfolios and the interest rates Old Line Bank pays on its
deposits. Community banks are often at a competitive disadvantage
in managing their cost of funds compared to the large regional,
super regional or national banks that have access to the national
and international capital markets. These factors influence Old Line
Bancshares’ ability to maintain a stable net interest
margin.
Old Line Bancshares
seeks to maintain a neutral position in terms of the volume of
assets and liabilities that mature or reprice during any period so
that it may reasonably predict its net interest margin. Interest
rate fluctuations, loan prepayments, loan production and deposit
flows, however, are constantly changing and influence Old Line
Bancshares’ ability to maintain this neutral position.
Generally speaking, Old Line Bancshares’ earnings are more
sensitive to fluctuations in interest rates the greater the
variance in the volume of assets and liabilities that mature and
reprice in any period. The extent and duration of the sensitivity
will depend on the cumulative variance over time, the velocity and
direction of interest rates, and whether Old Line Bancshares is
more asset than liability sensitive. Accordingly, Old Line
Bancshares may not be successful in maintaining this neutral
position and, as a result, its net interest margin may
suffer.
Old Line Bancshares faces
substantial competition that could adversely affect its growth and
operating results. Old Line Bancshares operates in a
competitive market for financial services and faces intense
competition from other financial institutions both in making loans
and in attracting deposits. Many of these financial institutions
have been in business for many years, are significantly larger and
have established customer bases and greater financial resources and
lending limits than Old Line Bancshares does, and are able to offer
certain services that Old Line Bancshares is not able to offer.
There are also a number of smaller community-based banks that
pursue operating strategies similar to Old Line Bancshares’.
Competitive pressures will also likely continue to build as the
financial services industry continues to consolidate and as
additional non-bank investment and financial services options for
consumers become available and consumers become increasingly
comfortable using such alternatives. If Old Line Bancshares cannot
attract deposits and make loans at a sufficient level, its
operating results will suffer, as will its opportunities for
growth.
Consumers may decide not to
use banks to complete their financial transactions.
Technology and other changes are allowing consumers to complete
financial transactions through alternative methods that
historically have involved banks. For example, consumers can now
maintain funds that they have historically held as bank deposits in
brokerage accounts, mutual funds or general-purpose reloadable
prepaid cards. Consumers can also complete transactions such as
paying bills and transferring funds directly without the assistance
of banks. The process of eliminating banks as intermediaries, which
may increase as consumers become more comfortable with these new
technologies and offerings, could result in the loss of fee income,
as well as the loss of customer deposits and the related income
generated from those deposits. The loss of these revenue streams
and the lower cost of deposits as a source of funds could have a
material adverse effect on Old Line Bancshares’ financial
condition and results of operations.
Old Line Bancshares
continually encounters technological change. The financial
services industry is continually undergoing rapid technological
change with frequent introductions of new technology driven by new
or modified products and services. The effective use of technology
increases efficiency and enables financial institutions to better
serve customers and to reduce costs. Old Line Bancshares’
future success depends, in part, upon its ability to address the
needs of its customers by using technology to provide products and
services that will satisfy customer demands, as well as to create
additional efficiencies in its operations. Many of Old Line
Bancshares’ competitors have substantially greater resources
to invest in technological improvements. Old Line Bancshares may
not be able to effectively implement new technology-driven products
and services or be successful in marketing these products and
services to its customers. Failure to successfully keep pace with
technological change affecting the financial services industry
could have a material adverse effect on Old Line Bancshares’
business and, in turn, its financial condition and results of
operations.
The market value of Old
Line Bancshares’ investments could negatively impact
stockholders’ equity. Old Line Bancshares has
designated all of its investment securities portfolio (or 11.6% of
total assets) at December 31, 2016 as available for sale. Old Line
Bancshares “marks to market” temporary unrealized gains
and losses in the estimated value of the available for sale
portfolio and reflects this adjustment as a separate item in
stockholders’ equity, net of taxes. As of December 31, 2016,
Old Line Bancshares had temporary unrealized losses in its
available for sale portfolio of $5.0 million (net of taxes). As a
result of the last economic recession and the continued economic
slowdown, several municipalities continue to report budget
deficits. These budget deficits could cause temporary and other
than temporary impairment charges in Old Line Bancshares’
investment securities portfolio and cause it to report lower net
income and a decline in stockholders’ equity.
Old Line Bancshares may
issue shares of common stock in the future in connection with
acquisitions or otherwise, and any such issuances could be at
varying prices and dilute your ownership of Old Line
Bancshares. Old Line Bancshares may use its common stock to
acquire other companies or to make investments in banks and other
complementary businesses in the future. Old Line Bancshares may
also issue common stock, or securities convertible into common
stock, through public or private offerings, in order to raise
additional capital in connection with future acquisitions, to
satisfy regulatory capital requirements or for general corporate
purposes. It should be noted that Old Line Bancshares has an
effective shelf registration statement on Form S-3 on file with the
SEC pursuant to which Old Line Bancshares may, from time to time,
sell up to an aggregate of $100 million of its common stock,
preferred stock, warrants, units and debt securities. The existence
of such shelf registration statement allows Old Line Bancshares to
sell securities quickly from time to time as market conditions
warrant. The merger agreement does not prohibit Old Line Bancshares
from selling securities, including shares of its common stock,
through the shelf registration statement or otherwise or provide
for any adjustment to the merger consideration if Old Line
Bancshares were to do so. Further, if Old Line Bancshares were to
sell shares of common stock, it could do so at a price or prices
that are less than the price of Old Line Bancshares common stock
that will be used to calculate the exchange ratio in the merger,
which would provide the purchasers of those shares with more value
than the value of the shares of Old Line Bancshares common stock
that you will receive in the merger. Finally, any such common stock
issuances, or issuance of other securities under which shares of
common stock may be issued, could be dilutive to other stockholders
of Old Line Bancshares, including current stockholders of DCB
Bancshares who receive shares of Old Line Bancshares common stock
in the merger.
Old Line Bancshares’
future acquisitions, if any, may cause it to become more
susceptible to adverse economic events. While Old Line
Bancshares currently has no agreements to acquire additional
financial institutions, other than DCB Bancshares, it may do so in
the future if an attractive acquisition opportunity arises that is
consistent with its business plan. Any future business acquisitions
could be material to Old Line Bancshares, and the degree of success
achieved in acquiring and integrating these businesses into Old
Line Bancshares could have a material effect on the value of its
common stock. In addition, any acquisition could require Old Line
Bancshares to use substantial cash or other liquid assets or to
incur debt. In those events, Old Line Bancshares could become more
susceptible to future economic downturns and competitive
pressures.
Old Line Bank faces limits
on its ability to lend. The amount of Old Line Bank’s
capital limits the amount that it can loan to a single borrower.
Generally, under current law, Old Line Bank may lend up to 15% of
its unimpaired capital and surplus to any one borrower. As of
December 31, 2016, Old Line Bank was able to lend approximately
$25.6 million to any one borrower. This amount is
significantly less than that of many of its larger competitors and
may discourage potential borrowers who have credit needs in excess
of Old Line Bank’s legal lending limit from doing business
with Old Line Bank. Old Line Bank generally tries to accommodate
larger loans by selling participations in those loans to other
financial institutions, but this strategy is not always available.
Old Line Bank may not be able to attract or maintain customers
seeking larger loans and may not be able to sell participations in
such loans on terms it considers favorable.
Additional capital may not
be available when needed or required by regulatory
authorities. Federal and state regulatory authorities
require Old Line Bancshares to maintain adequate levels of capital
to support its operations. In addition, Old Line Bancshares may
elect to raise additional capital to support its business or to
finance future acquisitions, if any, or it may otherwise elect or
its regulators may require that it raise additional capital. Old
Line Bancshares’ ability to raise additional capital, if
needed, will depend on conditions in the capital markets, economic
conditions and a number of other factors, many of which are outside
its control. Conditions in the capital markets may be such that
traditional sources of capital may not be available to Old Line
Bancshares on reasonable terms if it needed to raise additional
capital. Accordingly, Old Line Bancshares may not be able to raise
additional capital if needed or on terms that are favorable or
otherwise not dilutive to its existing stockholders. If Old Line
Bancshares cannot raise additional capital when needed, or on
desirable terms, this may have a material adverse effect on its
financial condition, results of operations and
prospects.
Old Line Bancshares may not
have adequately assessed the fair value of acquired assets and
liabilities. Current accounting guidance requires that Old
Line Bancshares record assets and liabilities at their estimated
fair values on the purchase date. The determination of fair value
requires that Old Line Bancshares consider a number of factors
including the remaining life of the acquired loans and deposits,
estimated prepayments or withdrawals, estimated loss ratios,
estimated value of the underlying collateral, and the net present
value of expected cash flows. Actual deviations from these
predicted cash flows, maturities or repayments or the underlying
value of the collateral may mean that Old Line Bancshares’
present value determination is inaccurate. This may cause
fluctuations in interest income, non-interest income, provision
expense, interest expense and non-interest expense and negatively
impact Old Line Bancshares’ results of
operations.
The market price of Old Line Bancshares’ common stock can be
volatile. Stock
price volatility may make it more difficult for an investor to
resell our common stock when desired and at attractive prices. The
market price of Old Line Bancshares’ common stock can
fluctuate significantly in response to a variety of factors
including, among other things:
●
actual or anticipated
variations in Old Line Bancshares’ operating
results;
●
changes in expectations as to Old Line Bancshares’ future
financial performance, including financial estimates or
recommendations by securities analysts or others in the
industry;
●
changes in the regulatory or legal environment in which Old Line
Bancshares operates;
●
news reports or other publicity relating to Old Line Bancshares or
our competitors or relating to trends in its industry;
●
perceptions in the marketplace regarding Old Line Bancshares and/or
its competitors;
●
future sales of Old Line Bancshares’ common
stock;
●
the announcement of a significant acquisition or business
combination, strategic partnership, joint venture or capital
commitment by or involving Old Line Bancshares or its competitors;
and
●
geopolitical conditions such as acts or threats of terrorism or
military conflicts.
General market fluctuations, industry factors and general economic
and political conditions and events in the U.S. or globally, such
as economic slowdowns or recessions, interest rate changes or
credit loss trends, could also cause Old Line Bancshares’
stock price to decrease regardless of operating
results.
Shares of Old Line Bancshares common stock are equity interests and
therefore subordinate to its existing and future indebtedness and
preferred stock we may issue in the future. Shares of Old Line
Bancshares’ common stock are equity interests in Old Line
Bancshares and do not constitute indebtedness. As such, shares of
Old Line Bancshares’ common stock rank junior to all
indebtedness and other non-equity claims on it with respect to
assets available to satisfy claims, including upon its liquidation.
Holders of Old Line Bancshares’ common stock are also subject
to the prior dividend and liquidation rights of any holders of its
preferred stock that it may issue in the
future.
In addition, Old Line Bancshares’ right to participate in any
distribution of assets of any of its subsidiaries, including Old
Line Bank, upon the subsidiary’s liquidation or otherwise,
and thus your ability as a holder of Old Line Bancshares’
common stock to benefit indirectly from such distribution, will be
subject to the prior claims of creditors of that subsidiary, except
to the extent that any of Old Line Bancshares’ claims as a
creditor of such subsidiary may be recognized. As a result, shares
of Old Line Bancshares’ common stock are effectively
subordinated to all existing and future liabilities and obligations
of its subsidiaries.
Old Line
Bancshares’ ability to declare and pay dividends is limited
by law, and it may be unable to pay future dividends.
Old Line
Bancshares are a separate and
distinct legal entity from Old Line Bank, and it receives
substantially all of its revenue from dividends from Old Line Bank.
These dividends are the principal source of funds to pay dividends
on Old Line
Bancshares’ common stock
and interest and principal on debt. Various federal and/or state laws and
regulations limit the amount of dividends that Old Line Bank may
pay to Old Line
Bancshares. In the event Old
Line Bank is unable to pay dividends to Old Line
Bancshares, Old Line
Bancshares may not be able to
service debt, pay obligations or pay dividends on its common stock.
The inability to receive dividends from Old Line Bank could have a
material adverse effect on Old Line
Bancshares’ business,
financial condition and results of operations.
Old Line
Bancshares
may need to raise additional capital in the future. If
Old Line
Bancshares
is are unable to obtain such capital on favorable terms or at all,
it may not be able to execute on its business plans and its
business, financial condition and results of operations may be
adversely affected. Old Line Bancshares may
need to raise additional capital in the future to fund its growth
and acquisition activities. Any sale of additional equity or debt
securities may result in dilution to Old Line Bancshares’
stockholders. Public or private financing may not be available in
amounts or on terms acceptable to Old Line Bancshares, if at all.
If Old Line Bancshares is unable to obtain additional financing, it
may be required to delay, reduce the scope of, or eliminate its
growth and acquisition activities, which could adversely affect its
business, financial condition and operating
results.
Anti-takeover provisions could adversely affect our
stockholders. Maryland law and
provisions contained in Old Line Bancshares’ articles of
incorporation and bylaws could make it difficult for a third party
to acquire it, even if doing so might be beneficial to Old Line
Bancshares’ stockholders. For example, Old Line
Bancshares’ articles of incorporation authorizes its board of
directors to determine the designation, preferences, limitations
and relative rights of unissued preferred stock, without any vote
or action by Old Line Bancshares’ stockholders. As a result,
Old Line Bancshares’ board of directors could authorize and
issue shares of preferred stock with voting or conversion rights
that could adversely affect the voting or other rights of holders
of its common stock or with other terms that could impede the
completion of a merger, tender offer or other takeover attempt. In
addition, certain provisions of Maryland law, including a provision
that restricts certain business combinations between a Maryland
corporation and certain interested stockholders, may delay,
discourage or prevent an attempted acquisition or change in control
of Old Line Bancshares that some or all of its stockholders might
consider to be desirable. As a result, efforts by Old Line
Bancshares’ stockholders to change its direction or
management may be unsuccessful.
The ability of a third party to acquire Old Line Bancshares is also
limited under applicable banking regulations. With certain limited
exceptions, federal regulations prohibit a person, a company or a
group of persons deemed to be “acting in concert” from,
directly or indirectly, acquiring more than 10% (5% if the acquirer
is a bank holding company) of any class of Old Line
Bancshares’ voting stock or obtaining the ability to control
in any manner the election of a majority of its directors or
otherwise direct its management or policies without prior notice or
application to and the approval of the FRB. Companies investing in
banks and bank holding companies receive additional review and may
be required to become bank holding companies, subject to regulatory
supervision. Accordingly, prospective investors must be aware of
and comply with these requirements, if applicable, in connection
with any purchase of shares of Old Line Bancshares’ common
stock. These provisions effectively inhibit certain mergers or
other business combinations, which, in turn, could adversely affect
the market price of Old Line Bancshares’ common
stock.
Risk Factors as they Relate to DCB Bancshares’ Stockholders
in Connection with the Merger
DCB Bancshares’
directors and executive officers have financial interests in the
merger that are different from, or in addition to, the interests of
DCB Bancshares stockholders. In considering the information
contained in this proxy statement/prospectus, you should be aware
that directors and certain executive officers of DCB Bancshares
have financial interests in the merger that are different from, or
in addition to, the interests of DCB Bancshares stockholders. The
directors and certain executive officers if DCB Bancshares who
collectively hold approximately 12.9% of the outstanding shares of
DCB Bancshares common stock have agreed to vote in favor of the
merger proposal. These voting agreements may have the effect of
discouraging persons from making a proposal to acquire DCB
Bancshares. Further, certain executive officers of DCB Bancshares
may be entitled to payments in connection with the merger under
existing arrangements. Finally, Old Line Bancshares and Old Line
Bank have also agreed to elect Stephen J. Deadrick, DCB
Bancshares’ Chairman of the Board, and James R. Clifford,
Sr., a current director of DCB Bancshares, to the boards of
directors of Old Line Bancshares and Old Line Bank, who will be
compensated for their service on the board of directors of Old Line
Bank. These and certain other additional interests of DCB
Bancshares’ directors and executive officers are described in
detail in “The Merger Agreement and the Merger –
Interests of Directors and Officers in the Merger.” These
circumstances may cause some of DCB Bancshares directors and
executive officers to view the proposed transaction differently
than you view it.
The provisions of the
merger agreement limiting DCB Bancshares’ ability to pursue
alternative transactions to the merger and requiring DCB Bancshares
to pay the Termination Fee if it does may discourage others from
trying to acquire DCB Bancshares. The merger agreement
prohibits DCB Bancshares and its directors, officers, employees and
other representatives, subject to narrow exceptions, from
initiating, encouraging, soliciting or entering into discussions
with any third party regarding alternative acquisition proposals.
The prohibition limits DCB Bancshares’ ability to pursue
offers from other possible acquirers that may be superior from a
financial point of view. If DCB Bancshares receives an unsolicited
proposal from a third party that is superior from a financial point
of view to that made by Old Line Bancshares and the merger
agreement is terminated, DCB Bancshares would be required to pay
the Termination Fee to Old Line Bancshares. This fee makes it less
likely that a third party will make an alternative acquisition
proposal.
If the merger fails to
qualify as a “reorganization” within the meaning of
Section 368(a) of the Internal Revenue Code, DCB Bancshares
stockholders may be required to recognize additional gain or
recognize loss on the exchange of their shares of DCB Bancshares
common stock in the merger for U.S. federal income tax
purposes. The merger is intended to qualify as a
“reorganization” within the meaning of Section 368(a)
of the Internal Revenue Code, and it is a condition to the
respective obligations of DCB Bancshares and Old Line Bancshares to
complete the merger that each of DCB Bancshares and Old Line
Bancshares receives a legal opinion to that effect. Neither of
these opinions will be binding on the Internal Revenue Service. DCB
Bancshares and Old Line Bancshares have not sought and will not
seek any ruling from the Internal Revenue Service regarding any
matters relating to the merger, and as a result, there can be no
assurance that the Internal Revenue Service will not assert, or
that a court would not sustain, a contrary position. If the merger
fails to qualify as a “reorganization” within the
meaning of Section 368(a) of the Internal Revenue Code, DCB
Bancshares stockholders may be required to recognize gain or loss
on the exchange of their shares of DCB Bancshares common stock in
the merger for U.S. federal income tax purposes. In addition, DCB
Bancshares will be treated as having sold all of its assets to Old
Line Bancshares in a taxable transaction, and will recognize
taxable gain to the extent the sum of the total consideration paid
by Old Line Bancshares to the DCB Bancshares stockholders, plus the
liabilities of DCB Bancshares, exceeds the tax basis of DCB
Bancshares in its assets, including its tax basis in its bank and
other subsidiaries. Old Line Bancshares would succeed to and become
liable for any such DCB Bancshares corporate tax as a consequence
of the merger. For further information, see “The Merger
Agreement and the Merger – Certain Federal Income Tax
Consequences.”
After the merger is
completed, DCB Bancshares stockholders will become Old Line
Bancshares stockholders and will have different rights that may be
less advantageous than their current rights. Upon completion
of the merger, DCB Bancshares stockholders will receive Old Line
Bancshares common stock for their shares of DCB Bancshares common
stock and become Old Line Bancshares stockholders. Differences in
DCB Bancshares’ articles of incorporation and bylaws and Old
Line Bancshares’ articles of incorporation and bylaws will
result in changes to the rights of DCB Bancshares stockholders when
they become Old Line Bancshares stockholders. For more information,
see “Comparison of Stockholder Rights.” A stockholder
of DCB Bancshares may conclude that his, her or its current rights
under DCB Bancshares’ articles of incorporation and bylaws
are more advantageous than the rights they may have as an Old Line
Bancshares stockholder under Old Line Bancshares’ articles of
incorporation and bylaws.
DCB Bancshares’
stockholders will have less influence as stockholders of Old Line
Bancshares than as stockholders of DCB Bancshares. DCB
Bancshares stockholders currently have the right to vote in the
election of the board of directors of DCB Bancshares and on other
matters affecting DCB Bancshares. The stockholders of DCB
Bancshares as a group will own approximately [__]% to [__]% of the
combined organization (Old Line Bancshares and DCB Bancshares),
assuming Old Line Bancshares does not exercise its option to
increase the merger consideration to avoid termination of the
merger agreement based on recent trading prices of Old Line
Bancshares common stock prior to the merger. When the merger
occurs, each former DCB Bancshares stockholder will become a
stockholder of Old Line Bancshares with a percentage ownership of
the combined organization much smaller than such
stockholder’s percentage ownership of DCB Bancshares. Because
of this, stockholders of DCB Bancshares will have less influence on
the management and policies of Old Line Bancshares than they now
have on the management and policies of DCB Bancshares.
Old Line Bancshares and DCB
Bancshares may waive one or more of the conditions to the merger
without re-soliciting DCB Bancshares’ stockholder
approval. Each of the conditions to the obligations of Old
Line Bancshares and DCB Bancshares to complete the merger may be
waived, in whole or in part, to the extent permitted by applicable
law, by agreement of Old Line Bancshares and DCB Bancshares, if the
condition is a condition to both parties’ obligation to
complete the merger, or by the party for which such condition is a
condition of its obligation to complete the merger. The boards of
directors of Old Line Bancshares and DCB Bancshares may evaluate
the materiality of any such waiver to determine whether amendment
of this proxy statement/prospectus and re-solicitation of proxies
is necessary. Old Line Bancshares and DCB Bancshares, however,
generally do not expect any such waiver to be significant enough to
require re-solicitation of DCB Bancshares’ stockholders. In
the event that any such waiver is not determined to be significant
enough to require re-solicitation of DCB Bancshares’
stockholders, the companies will have the discretion to complete
the merger without seeking further stockholder
approval.
SELECTED
FINANCIAL DATA OF OLD LINE BANCSHARES
The following table
summarizes Old Line Bancshares’ selected financial
information and other financial data. The selected balance sheet
and statement of income data are derived from Old Line
Bancshares’ audited financial statements. You should read
this information together Old Line Bancshares’ financial
statements and the related notes and its “Management’s
Discussion and Analysis of Financial Condition and Results of
Operations” discussion in its Annual Report on Form 10-K for
the year ended December 31, 2016, incorporated by reference into
this proxy statement/prospectus. See “Incorporation of Certain Documents By
Reference” and “Where You Can Find More
Information.” Results for past periods are not
necessarily indicative of results that may be expected for any
future period.
December
31,
|
|
|
|
|
|
|
(Dollars in thousands except per share data)
|
Earnings
and dividends:
|
|
|
|
|
|
Interest
income
|
$60,465
|
$51,453
|
$45,603
|
$44,263
|
$38,222
|
Interest
expense
|
7,525
|
4,864
|
3,900
|
4,202
|
5,058
|
Net interest
income
|
52,940
|
46,589
|
41,703
|
40,061
|
33,164
|
Provision for loan
losses
|
1,585
|
1,311
|
2,827
|
1,504
|
1,525
|
Non-interest
income
|
8,256
|
6,845
|
5,957
|
8,870
|
3,708
|
Non-interest
expense
|
39,643
|
36,276
|
35,046
|
36,077
|
25,162
|
Income
taxes
|
6,813
|
5,382
|
2,694
|
3,602
|
2,720
|
Net
income
|
13,155
|
10,464
|
7,093
|
7,747
|
7,465
|
Less: Net loss
attributable to the non-controlling interest
|
—
|
(4)
|
(37)
|
(92)
|
(65)
|
Net income
available to common stockholders
|
13,155
|
10,468
|
7,130
|
7,839
|
7,530
|
Per
common share data:
|
|
|
|
|
|
Basic
earnings
|
$1.21
|
$0.98
|
$0.66
|
$0.87
|
$1.10
|
Diluted
earnings
|
1.20
|
0.97
|
0.65
|
0.86
|
1.09
|
Dividends
paid
|
0.24
|
0.21
|
0.18
|
0.16
|
0.16
|
Common stockholders
book value, period end
|
13.81
|
13.31
|
12.51
|
11.71
|
10.94
|
Common stockholders
tangible book value, period end
|
12.59
|
12.00
|
11.38
|
10.50
|
10.30
|
Average common
shares outstanding
|
|
|
|
|
|
Basic
|
10,837,939
|
10,647,986
|
10,786,017
|
9,044,844
|
6,828,512
|
Diluted
|
10,997,485
|
10,784,323
|
10,935,182
|
9,149,200
|
6,893,645
|
Common shares
outstanding, period end
|
10,910,915
|
10,802,560
|
10,810,930
|
10,777,113
|
6,845,432
|
Balance
Sheet Data:
|
|
|
|
|
|
Total
assets
|
$1,709,020
|
$1,510,089
|
$1,227,519
|
$1,167,223
|
$861,856
|
Total loans, less
allowance for loan losses
|
1,369,594
|
1,155,147
|
931,121
|
849,263
|
595,145
|
Total investment
securities
|
199,505
|
194,706
|
161,680
|
172,170
|
171,541
|
Total
deposits
|
1,325,881
|
1,235,880
|
1,015,739
|
974,359
|
735,458
|
Stockholders’
equity
|
150,667
|
143,989
|
135,264
|
126,249
|
74,862
|
Performance
Ratios:
|
|
|
|
|
|
Return on average
assets
|
0.83%
|
0.79%
|
0.60%
|
0.74%
|
0.90%
|
Return on average
stockholders’ equity
|
8.83%
|
7.54%
|
5.45%
|
7.80%
|
11.17%
|
Total ending equity
to total ending assets
|
8.82%
|
9.54%
|
11.02%
|
10.82%
|
8.69%
|
Net interest
margin(1)
|
3.79%
|
4.08%
|
4.15%
|
4.53%
|
4.65%
|
Dividend payout
ratio for period
|
19.79%
|
21.47%
|
27.23%
|
19.02%
|
14.51%
|
Asset
Quality Ratios:
|
|
|
|
|
|
Allowance to
period-end loans
|
0.45%
|
0.43%
|
0.46%
|
0.58%
|
0.66%
|
Non-performing
assets to total assets
|
0.59%
|
0.56%
|
0.65%
|
1.27%
|
1.12%
|
Non-performing
loans to allowance for loan losses
|
103.04%
|
120.04%
|
121.61%
|
178.91%
|
149.04%
|
Capital
Ratios:
|
|
|
|
|
|
Tier 1
risk-based capital
|
9.5%
|
10.7%
|
12.3%
|
12.0%
|
10.8%
|
Total risk-based
capital
|
12.3%
|
11.1%
|
12.7%
|
12.5%
|
11.4%
|
Leverage capital
ratio
|
8.6%
|
9.1%
|
9.9%
|
9.3%
|
7.9%
|
Common Equity Tier
1
|
9.2%
|
10.7%
|
n/a
|
n/a
|
n/a
|
(1)
See
“Management’s Discussion and Analysis of Financial
Condition and Results of Operating—Reconciliation of Non-GAAP
Measures” in Old Line Bancshares’ Annual Report on Form
10-K for the year ended December 31, 2016. See “Incorporation
of Certain Documents by Reference.”
COMPARATIVE
PER-SHARE MARKET PRICE
The
following table sets forth the market value per share of Old Line
Bancshares common stock, the market value per share of DCB
Bancshares common stock and the equivalent market value per share
of DCB Bancshares common stock on January 31, 2017 (the last
trading day preceding public announcement of the merger, which was
announced after market close on February 1, 2017, on which shares
of each of Old Line Bancshares common stock and DCB Bancshares
common stock were traded on the NASDAQ Capital Market and the OTC
Markets, respectively) and April 20, 2017 (the latest practicable
trading day before the date of this proxy statement/prospectus on
which shares of each of Old Line Bancshares common stock and DCB
Bancshares common stock were traded on the NASDAQ Capital Market
and the OTC Markets, respectively). The equivalent market value per
share of DCB Bancshares common stock indicated in the table is
derived from assumed exchange ratios based on the volume weighted
average closing price of Old Line Bancshares common stock for the
ten trading days ending two trading days before the applicable date
($27.26 on January 31, 2017 and $27.63 on April 20, 2017)
multiplied by the closing sales price of Old Line Bancshares common
stock on such date. For more information, see the section entitled
“The Merger Agreement and The Merger – Terms of the
Merger – What DCB Bancshares Stockholders Will Receive in the
Merger.”
The historical
market values per share of Old Line Bancshares common stock and DCB
Bancshares common stock and the historical market value of Old Line
Bancshares common stock used to determine the equivalent market
value per share of DCB Bancshares common stock are the per share
closing sales prices January 31, 2017 and March 17, 2017,
respectively, as reported on the OTC Markets with respect to DCB
Bancshares common stock and on the NASDAQ Capital Market with
respect to Old Line Bancshares common stock.
|
Old
Line Bancshares Historical
|
DCB
Bancshares Historical
|
Equivalent
Market Value Per Share of DCB Bancshares
|
January 31,
2017
|
$26.81
|
$12.50
|
$24.85
|
April 20,
2017
|
$27.23
|
$25.10
|
$25.24
|
CAUTION
REGARDING FORWARD-LOOKING STATEMENTS
This proxy
statement/prospectus, including the information incorporated by
reference into this proxy statement/prospectus, contains
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended (the “Securities
Act”), and Section 21E of the Securities Exchange Act of
1934, as amended (the “Exchange Act”). Such
forward-looking statements include statements regarding the
financial condition, results of operations, earnings outlook,
businesses and prospects of Old Line Bancshares and DCB Bancshares,
and the potential combined company, as well as statements
applicable to the period following the completion of the merger and
includes those items listed below:
(1) The anticipated
effects and benefits of the merger, including (a) the expected
consummation of the merger including the timing thereof, and (b)
the expected financial effects and benefits of the merger,
including that Old Line Bancshares’ expectation that the
merger will be immediately accretive to its tangible book value and
earnings, excluding merger expenses.
(2) With respect to
Old Line Bancshares, statements regarding (a) its growth strategy,
including potential future acquisitions, (b) additional investment
in equipment and personnel, and potential increases in non-interest
expenses, and (c) the statement with respect to the adequacy of its
allowance for loan losses. Forward-looking statements are also
included in documents incorporated by reference into this proxy
statement/prospectus, and are or will be identified in such
documents.
(3) With respect to
DCB Bancshares, statements regarding the explanation of the
reasoning of DCB Bancshares’ board of directors for
recommending the merger and the other potential benefits of the
merger as discussed in “The Merger Agreement and the Merger
– DCB Bancshares’ Reasons for the Merger and
Recommendation of the Board of Directors.”
You can identify
forward-looking statements because they are not historical facts
and often include the use of forward-looking terminology such as
“believes,” “expects,”
“intends,” “may,” “will,”
“should,” “anticipates,”
“plans” or similar terminology. Such statements are
subject to risks and uncertainties that could cause actual results
to differ materially from future results expressed or implied by
such forward-looking statements. Actual results could differ
materially from those currently anticipated due to a number of
factors, including, but not limited to:
●
the businesses of
DCB Bancshares may not be integrated into Old Line Bancshares
successfully or such integration may be more difficult,
time-consuming or costly than expected;
●
expected revenue
synergies and cost savings from the merger may not be fully
realized, or realized within the expected timeframe;
●
disruption in DCB
Bancshares’ business as a result of the announcement and
pendency of the merger;
●
revenues following
the merger may be lower than expected;
●
customer and
employee relationships and business operations of DCB Bancshares
may be disrupted by the merger;
●
the ability to
obtain required approval of DCB Bancshares’
stockholders;
●
the ability to
complete the merger in the expected timeframe may be more
difficult, time-consuming or costly than expected, or the merger
may not be completed at all;
●
changes in loan
default and charge-off rates;
●
changes in demand
for loan products or other financial services;
●
reductions in
deposit levels necessitating increased borrowings to fund loans and
investments;
●
general economic
conditions, either nationally or in Old Line Bancshares’
market area, that are worse than expected;
●
sustained elevation
in the unemployment rate in Old Line Bank’s and Damascus
Community Bank’s target markets;
●
inflation and
changes in interest rates and monetary policy that could adversely
affect Old Line Bancshares and/or DCB Bancshares;
●
changes in laws or
government regulations or policies affecting financial
institutions, including changes in regulatory fees and capital
requirements;
●
the ability to
retain key Damascus Community Bank personnel;
●
the ability of Old
Line Bancshares and Old Line Bank to enter new markets successfully
and capitalize on growth opportunities, and to otherwise implement
its growth strategy;
●
the risk of loan
losses and that the allowance for loan losses may be
insufficient;
●
changes in
competitive, governmental, regulatory, technological and other
factors that may affect Old Line Bancshares or DCB Bancshares
specifically or the banking industry generally;
●
that the market
value of investments could negatively impact stockholders’
equity;
●
changes in consumer
spending, borrowing and savings habits;
●
changes in
accounting policies and practices, as may be adopted by the bank
regulatory agencies, the Financial Accounting Standards Board, the
SEC and the Public Company Accounting Oversight Board;
●
the other risks
discussed in this proxy statement/prospectus, in particular in the
“Risk Factors” section of this proxy
statement/prospectus;
●
those risks
identified in connection with the forward-looking statements made
in the documents incorporated by reference into this proxy
statement/prospectus; and
●
other risk factors
detailed from time to time in filings made by Old Line Bancshares
with the SEC.
Forward-looking
statements speak only as of the date they are made. You should not
place undue reliance on any forward-looking statements. Old Line
Bancshares undertakes no obligation to update or clarify these
forward-looking statements to reflect factual assumptions,
circumstances or events that have changed after such a
forward-looking statement was made.
THE
DCB BANCSHARES ANNUAL MEETING
Date, Time and Place
DCB
Bancshares will hold its annual meeting of stockholders at The
Damascus Volunteer Fire Department Activities Center located at
10211 Lewis Drive, Damascus, Maryland 20872, at 3:00 p.m. on
[__________ __], 2017.
Purpose of the Annual meeting
At the annual
meeting, DCB Bancshares’ stockholders will be asked to
consider and vote upon proposals to:
●
Approve the
Agreement and Plan of Merger, dated as of February 1, 2017, by and
between Old Line Bancshares and DCB Bancshares, as the agreement
may be amended from time to time, and the merger of DCB Bancshares
with and into Old Line Bancshares pursuant to the merger
agreement;
●
Adjourn the annual
meeting if more time is needed to solicit additional
proxies;
●
Elect the ten
director nominees named in this proxy statement/prospectus and on
the proxy card to the board of directors of DCB Bancshares for the
ensuing year; and
●
Transact any other
business that may properly be brought before the annual
meeting.
Recommendation of the Board of Directors of DCB
Bancshares
The DCB Bancshares
board of directors has unanimously approved the merger agreement
and the merger, has unanimously declared them to be advisable and
in the best interests of DCB Bancshares’ stockholders, and
unanimously recommends that DCB Bancshares’ stockholders vote
“FOR” the
approval of the merger agreement and the merger.
The DCB Bancshares
board of directors also unanimously recommends that DCB
Bancshares’ stockholders vote “FOR” the approval of the
adjournment of the annual meeting if necessary to solicit
additional proxies.
The DCB Bancshares
board of directors also unanimously recommends that DCB
Bancshares’ stockholders vote “FOR” the election
of each of the director nominees named in this proxy
statement/prospectus/ and on the proxy card to the board of
directors of DCB Bancshares.
Record Date; Stockholders Entitled to Vote
Stockholders of
record at the close of business on [_________ __], 2017, which the
DCB Bancshares board of directors has set as the record date, are
entitled to notice of and to vote at the annual meeting. As of the
close of business on that date, there were 1,613,180 shares of
common stock, $0.01 par value per share, outstanding and entitled
to vote, each of which is entitled to one vote.
Quorum
The presence, in
person or by proxy, of stockholders entitled to cast a majority of
all the votes entitled to be cast at the annual meeting (or
[_________] shares of DCB Bancshares common stock) will be
necessary to constitute a quorum for the transaction of business at
the annual meeting. Abstentions are counted for purposes of
determining the presence or absence of a quorum for the transaction
of business at the annual meeting.
Under Maryland law,
broker non-votes are also counted for purposes of determining the
presence or absence of a quorum for the transaction of business at
the annual meeting. If your shares are held in the name of a bank,
brokerage firm or other similar holder of record (referred to as
“in street name”), you will receive instructions from
the holder of record that you must follow for you to specify how
your shares will be voted. In general, under the rules of the
various national and regional securities exchanges, holders of
record have the authority to vote shares for which their customers
do not provide voting instructions on certain routine, uncontested
items, but not on non-routine proposals. In the case of non-routine
items for which specific voting instructions have not been
provided, the institution holding street name shares cannot vote
those shares. These are considered to be “broker
non-votes.”
Vote Required
The proposal at the
DCB Bancshares annual meeting to approve the merger agreement and
the merger requires the affirmative vote of holders of two-thirds
of all outstanding shares of DCB Bancshares common stock entitled
to vote on the proposal.
The approval of the
proposal to adjourn the annual meeting to solicit additional
proxies, if necessary, requires the affirmative vote of the
majority of shares present in person or represented by proxy at the
annual meeting and entitled to vote on the matter.
Directors and
executive officers of DCB Bancshares who beneficially own
approximately 12.9% of DCB Bancshares common stock as of the record
date have agreed in writing to vote for approval of the merger
agreement and the merger.
The election of the
ten director nominees to the board of directors of DCB Bancshares
requires the affirmative vote of the majority of shares cast on
that proposal.
Abstentions and Failure to Vote
Because approval of
the merger agreement and the merger requires the affirmative vote
of the holders of at least two-thirds of all outstanding shares of
DCB Bancshares common stock entitled to vote at the annual meeting,
an abstention, a failure to vote and a broker non-vote will have
the same effect as votes against this matter. In other words, if
you are a DCB Bancshares stockholder and fail to vote, fail to
instruct your broker or nominee to vote, or vote to abstain, it
will have the effect of a vote against the proposal to approve the
merger agreement and the merger. Accordingly, the DCB Bancshares
board of directors urges you to submit your proxy to vote as
instructed below.
As noted above,
approval of the proposal to adjourn the annual meeting to solicit
additional proxies, if necessary, and the election of the ten
director nominees to the DCB Bancshares board of directors each
requires the affirmative vote of at least a majority of all votes
cast on the matter at the annual meeting. Abstentions, the failure
to vote and broker non-votes are not included in calculating votes
cast with respect to these proposal and, therefore, will have no
effect on their outcome.
Voting of Proxies
The enclosed proxy
with respect to the DCB Bancshares annual meeting is solicited by
the board of directors of DCB Bancshares. The board of directors
has selected Stephen J. Deadrick and George C. Cramer, or either of
them, to act as proxies with full power of
substitution.
Whether or not you
plan to attend the annual meeting, you may submit a proxy to vote
your shares. To do so, mark your vote on the proxy card, sign your
name exactly as it appears on your proxy card, date your proxy card
and return it in the envelope provided.
All proxies will be
voted as directed by the stockholder on the proxy form. A proxy, if
executed and not revoked, will be voted in the following manner
(unless it contains instructions to the contrary, in which event it
will be voted in accordance with such instructions):
●
“FOR” the approval of the
merger agreement and the merger;
●
“FOR” approval of the
proposal to adjourn the annual meeting to solicit additional
proxies, if necessary; and
●
“FOR” the election of each
of the 10 director nominees named in this proxy
statement/prospectus and on the proxy card to the board of
directors of DCB Bancshares.
No other matters
are intended to be brought before the annual meeting by DCB
Bancshares, and DCB Bancshares is not aware of any other matters to
be brought before the annual meeting by others. If, however, any
matters not described in this proxy statement/prospectus are
properly presented at the annual meeting, the persons named in the
proxy card will vote your shares as directed by the DCB Bancshares
board of directors. If the annual meeting is postponed or
adjourned, your DCB Bancshares common stock may be voted by the
persons named in the proxy card on the new annual meeting date,
provided that the new meeting occurs within 90 days of the record
date for the annual meeting, unless you have not revoked your
proxy.
Your
vote is important. Accordingly, please sign and return the enclosed
proxy card as soon as possible whether or not you intend to attend
the DCB Bancshares annual meeting.
Shares Held in Street Name
If you hold your
shares in a stock brokerage account or if your shares are held by a
bank or other nominee (that is, in street name), you must provide
the record holder of your shares with instructions on how to vote
your shares if you wish them to be counted, unless your shares are
held of record by a bank or other nominee and you have an
arrangement with the nominee granting such nominee discretionary
authority to vote your shares. Please follow the voting
instructions provided by your bank, broker or other nominee. Please
note that you may not vote shares held in street name by returning
a proxy card directly to DCB Bancshares or by voting in person at
the meeting unless you provide a “legal proxy,” which
you must obtain from your bank, broker or other nominee. Further,
brokers who hold shares of DCB Bancshares common stock on behalf of
their customers may not give a proxy to DCB Bancshares to vote
those shares without specific instructions from their
customers.
If you are a DCB
Bancshares stockholder and you do not instruct your broker on how
to vote your shares, your broker may not vote your shares at the
annual meeting.
Your
vote is important. Accordingly, please sign and return your
broker’s instructions whether or not you plan to attend the
DCB Bancshares annual meeting in person.
Revocability of Proxies
You may revoke your
proxy at any time before the vote is taken at the meeting. Unless
so revoked, the shares represented by properly executed proxies
will be voted at the annual meeting and all adjournments thereof.
To revoke your proxy, you must send written notice to Terry
Hollinger, Secretary of DCB Bancshares, at 26500 Ridge Road,
Damascus, Maryland 20872, file a later-dated proxy before your
common stock has been voted at the annual meeting or attend the
annual meeting and vote in person. Attendance at the annual meeting
will not in itself constitute revocation of your
proxy.
Solicitation of Proxies
Your proxy is being
solicited by the board of directors of DCB Bancshares. DCB
Bancshares will pay the costs of soliciting proxies. These costs
may include reasonable out-of-pocket expenses in forwarding proxy
materials to beneficial owners. DCB Bancshares will reimburse
banks, brokers and other custodians, nominees and fiduciaries for
their reasonable expenses in sending proxy materials to beneficial
owners of the common stock of DCB Bancshares and obtaining their
proxies.
Directors, officers
and employees of DCB Bancshares may solicit proxies personally, by
telephone, facsimile or electronic mail. DCB Bancshares will not
specifically compensate these persons for soliciting such proxies,
but may reimburse them for reasonable out-of-pocket expenses, if
any.
OWNERSHIP
OF DCB BANCSHARES COMMON STOCK
The following table
sets forth information as of December 31, 2016 relating to the
beneficial ownership of DCB Bancshares’ common stock by: (i)
each person or group known by DCB Bancshares to beneficially own
more than 5.0% of its outstanding shares of common stock; (ii) each
of DCB Bancshares’ directors and “named executive
officers”; and (iii) all directors and executive officers of
DCB Bancshares as a group. Generally, a person “beneficially
owns” shares as of a given date if he or she has or shares
with others the right to vote those shares or to invest (or dispose
of) those shares, or if he or she has the right to acquire such
voting or investment rights, within 60 days of such date (such as
by exercising stock options or similar rights). The percentages
were calculated based on 1,613,180 issued and outstanding shares of
DCB Bancshares common stock as of December 31, 2016, plus, for each
named person, any shares that such person may acquire within 60
days of such date.
As used in this
table, the term “named executive officer” includes (i)
each person who served as DCB Bancshares’ principal executive
officer (the “PEO”) during 2016, (ii) DCB
Bancshares’ two most highly compensated executive officers
other than the PEO who were serving as such as of December 31, 2016
and whose total compensation (excluding above-market and
preferential earnings on nonqualified deferred compensation)
exceeded $100,000 during 2016, and (iii) up to two additional
individuals for whom disclosure would have been provided pursuant
to the foregoing item (ii) had they been serving as executive
officers of DCB Bancshares as of December 31, 2016. For this
purpose, the term “executive officer” includes any
executive officer of Damascus Community Bank who performs a
policy-making function for DCB Bancshares.
DCB Bancshares has
determined that, for purposes of this proxy statement/prospectus,
its named executive officers include: William L. Kincaid, Jr., who
served as the PEO until October 4, 2016; Robert L. Carpenter, Jr.,
who serves as Co-Chief Executive Officer and Executive Vice
President - Chief Financial Officer; William F. Lindlaw, who serves
as Co-Chief Executive Officer and Executive Vice President - Chief
Lending Officer; Rodney E. Reed, who serves as Senior Vice
President and Chief Credit Officer; and Christopher A. Sharer, who
serves as Senior Vice President and Chief Information
Officer.
|
Common
Stock Beneficially Owned
|
|
Percent
of Outstanding Common Stock
|
Directors,
Director Nominees and Named Executive Officers
|
|
|
|
Donald W.
Burdette
|
60,670
|
(1)
|
3.8%
|
Robert L.
Carpenter, Jr.
|
-
|
|
*
|
James R. Clifford,
Sr.
|
15,750
|
(2)
|
1.0%
|
George C.
Cramer
|
57,000
|
(3)
|
3.5%
|
Stephen J.
Deadrick
|
26,300
|
(4)
|
1.6%
|
William L. Kincaid,
Jr.
|
2,700
|
|
*
|
William F.
Lindlaw
|
-
|
|
*
|
Bernard L. Moxley,
Jr.
|
5,760
|
(5)
|
*
|
Rodney E.
Reed
|
250
|
|
*
|
Christopher A.
Sharer
|
-
|
|
*
|
Gary L. Smith,
Sr.
|
15,493
|
|
1.0%
|
Theresa J.
Tomasini
|
500
|
(6)
|
*
|
John E.
Tregoning
|
24,870
|
(7)
|
1.5%
|
William F. Willard,
Jr.
|
2,340
|
(8)
|
*
|
|
|
|
|
Directors
and Executive Officers as a group (14 persons)
|
211,633
|
|
13.1%
|
|
|
|
|
Notes:
* Less than 1.0%.
(1) Includes 30,380
shares held jointly with his spouse.
(2) Includes 4,000
shares held jointly with his spouse.
(3) Includes 54,800
shares held jointly with his spouse.
(4) Includes 26,200
shares held jointly with his spouse.
(5) Includes 1,000
shares held jointly with his spouse.
(6) Includes 500
shares held jointly with her spouse.
(7)
Includes 21,320
shares held by the Robert M. Tregoning Bypass Trust for which Mr.
Tregoning is trustee, and 550 shares held jointly with his
spouse.
(8) Includes 2,290
shares held jointly with his spouse.
THE
MERGER AGREEMENT AND THE MERGER
The following
information describes the material terms and provisions of the
merger agreement and the merger. This discussion is subject, and
qualified in its entirety by reference, to the merger agreement,
which is incorporated herein by reference.
The merger
agreement, attached as Annex A hereto, and the summary of its terms
in this proxy statement/prospectus have been included only to
provide you with information about the terms and conditions of the
merger agreement. The representations, warranties and covenants
contained in the merger agreement were made solely for the purposes
of such agreement and as of specific dates, and were qualified and
subject to certain limitations and exceptions agreed to by Old Line
Bancshares and DCB Bancshares in connection with negotiating the
terms of the merger agreement. In particular, in your review of the
representations and warranties contained in the merger agreement
and described herein, it is important to bear in mind that the
representations and warranties were made solely for the benefit of
the parties to the merger agreement and were negotiated for the
purpose of allocating contractual risk among the parties to the
merger agreement rather than to establish matters as facts. The
representations and warranties may also be subject to a contractual
standard of materiality or material adverse effect different from
those generally applicable to stockholders and reports and
documents filed with the SEC, and, in some cases, they may be
qualified by disclosures made by one party to the other, which are
not necessarily reflected in the merger agreement or other public
disclosures made by Old Line Bancshares or DCB Bancshares. The
representations and warranties contained in the merger agreement do
not survive the effective time of the merger. Moreover, information
concerning the subject matter of the representations, warranties
and covenants, which do not purport to be accurate as of the date
of this document, may have changed since the date of the merger
agreement, and subsequent developments or new information may not
be fully reflected in public disclosures of Old Line
Bancshares.
For the foregoing
reasons, the representations, warranties and covenants or any
descriptions of those provisions should not be read alone or relied
upon as characterizations of the actual state of facts or condition
of Old Line Bancshares or DCB Bancshares or any of their respective
subsidiaries or affiliates. Instead, such provisions or
descriptions should be read only in conjunction with the other
information provided elsewhere in this document or incorporated by
reference into this document. Please see the sections of this proxy
statement/prospectus entitled “Incorporation of Certain
Documents by Reference” and “Where You Can Find More
Information.” Old Line Bancshares will provide additional
disclosures in its public reports to the extent it becomes aware of
the existence of any material facts that are required to be
disclosed under federal securities laws and that might otherwise
contradict the terms and information contained in the merger
agreement and will update such disclosure as required by federal
securities laws.
General
The merger
agreement provides that:
●
DCB Bancshares will
merge with and into Old Line Bancshares with Old Line Bancshares as
the surviving corporation;
●
If you are a
stockholder of DCB Bancshares, you will receive, for each share of
DCB Bancshares common stock that you own, that number of shares of Old Line Bancshares
common stock determined by dividing $25.22 (160% of the tangible
book value of each share of DCB Bancshares common stock at December
31, 2016) by the Average Price, provided that if the Average Price
is $27.21 or more the exchange ratio will be fixed at 0.9269 and if
the average price is $20.85 or less the exchange ratio will be
fixed at 1.2096, and provided further that cash will be paid
in lieu of fractional shares of Old Line Bancshares common
stock;
●
Immediately after
the merger, pursuant to an Agreement and Plan of Merger, dated as
of February 1, 2017, by and between Old Line Bank and Damascus
Community Bank, Damascus Community Bank will be merged with and
into Old Line Bank, with Old Line Bank as the surviving bank, which
we refer to as the bank merger; and
●
Stephen J. Deadrick
and another current director of DCB Bancshares will be elected as
members of the Old Line Bancshares and Old Line Bank boards of
directors.
Assuming the
requisite approval of DCB Bancshares’ stockholders and the
satisfaction of other conditions to closing, we currently expect
the merger to close in the second quarter of 2017. The merger will
result in an institution with pro forma assets of more than $2.0
billion and 27 full-service banking offices serving nine counties.
Old Line Bancshares expects the merger to be immediately accretive
to its tangible book value and earnings, excluding merger
expenses.
Background of the Merger
Old Line Bancshares
regularly considers strategic acquisitions to the extent such
opportunities arise and the institutions in question have
businesses and cultures complimentary to Old Line Bancshares and
Old Line Bank. On April 22, 2010, Old Line Bancshares appointed a
special committee of its board of directors (later reconstituted as
a joint committee of Old Line Bancshares and Old Line Bank) to
review potential strategic opportunities in general (the
“Strategic Opportunities Committee”), which at that
time included consideration of the acquisition of Maryland Bankcorp
or Maryland Bank and Trust Company, N.A. Since its formation, the
Strategic Opportunities Committee has considered potential
acquisitions on an ongoing basis.
From time to time
over the past several years, the board of directors of Damascus
Community Bank and, after the Reorganization (as defined below), of
DCB Bancshares, has considered various strategic alternatives as
part of their continuing efforts to enhance the community banking
franchise and to maximize stockholder value. These strategic
alternatives included continuing as an independent institution,
opening branch offices, establishing related lines of business, and
entering into a strategic transaction, such as a merger, with one
or more depository institutions. In fact, the board of directors of
Damascus Community Bank approved and authorized the reorganization
and share exchange transaction with DCB Bancshares (the
“Reorganization”) in large part to position Damascus
Community Bank for various growth opportunities that might be
easier or more effective to achieve as a bank holding company. The
Reorganization was effective on September 1, 2016. As used in this
section, the term “DCB Bancshares” means both DCB
Bancshares and, for periods ending prior to September 1, 2016,
Damascus Community Bank.
During the second
half of 2015, Damascus Community Bank’s board and management
team devoted considerable effort toward developing both short-term
and long-term goals consistent with a newly defined strategic
vision. These efforts culminated in the adoption of a new Strategic
Plan (the “DCB Plan”) by the board on December 22,
2015. The DCB Plan called for a combination of organic and
inorganic growth to reach an asset size whereby the board felt that
Damascus Community Bank could create the necessary operational
efficiencies of scale that would allow it to sustain continued
growth and enhance stockholder value.
As the management
team commenced implementation of the DCB Plan in early 2016, it did
so knowing that organic growth alone was unlikely to achieve either
the board’s profitability growth objective or its asset
growth objective. Consequently, and in support of the concept of
inorganic growth, Stephen J. Deadrick, Chairman of the Board of DCB
Bancshares, and William L. Kincaid, Sr., who at the time was
serving as President and Chief Executive Officer (the
“CEO”) and a director of DCB Bancshares, held a series
of exploratory discussions with similarly-sized potential strategic
partners. The board of directors of DCB Bancshares determined that
none of those discussions presented the kinds of opportunities that
would achieve the objectives outlined in the DCB Plan.
In mid-2016, in
anticipation of the Reorganization, the board of directors of DCB
Bancshares began to explore the feasibility of a capital raise that
would provide Damascus Community Bank with the capital necessary to
not only grow but also meet the increased regulatory capital
standards imposed under the “Basel III” regulatory
capital reforms and changes required by the Dodd-Frank Act.
Simultaneously, the board began to explore in more detail the
feasibility of inorganic growth strategies.
As part of its
exploration efforts, the board invited David Danielson of
Ambassador Financial Group (“Ambassador”) to make a
presentation on the current state of community banking, both
locally and nationally, including industry banking updates, trends
in bank stock pricing, M&A trends and benefits associated with
various enterprise strategies at the regular board meeting held on
May 25, 2016. Mr. Danielson, together with Jay Shah, also of
Ambassador, made a follow-up presentation on Ambassador’s
analysis of potential merger and acquisition opportunities at the
regular DCB Bancshares board meeting held on July 27, 2016. Mr.
Danielson then made a presentation regarding a possible
subordinated debt offering at the regular DCB Bancshares board
meeting held on August 24, 2016. Ambassador gave these
presentations free of charge to market its services and not
pursuant to any engagement by DCB Bancshares or its
board.
On September 1,
2016, Mr. Danielson met by conference call with Mr. Deadrick,
Robert L. Carpenter, Jr., then serving as the Executive Vice
President - Chief Financial Officer of DCB Bancshares and Damascus
Community Bank, and William F. Lindlaw, then serving as the
Executive Vice President - Chief Lending Officer of DCB Bancshares
and Damascus Community Bank, to discuss strategic options and
issues regarding a potential capital raise.
On September 26,
2016, Mr. Deadrick received a message from the chief executive
officer of a similarly-sized commercial bank (the “First
Contact”) in which it was suggested that the two meet to
discuss potential synergies. Mr. Deadrick returned this message on
October 7, 2016 and scheduled a meeting for October 11,
2016.
On October 4, 2016,
Mr. Kincaid resigned as the CEO. DCB Bancshares’ board of
directors met of October 5, 2016 to discuss the leadership void
created by Mr. Kincaid’s departure. During that meeting,
Messrs. Carpenter and Lindlaw were appointed as interim co-CEOs,
and an Executive Search Committee was formed to facilitate the
recruitment of a permanent CEO. Based on the concern that the CEO
vacancy would likely make a subordinated debt offering both more
difficult and more expensive to complete, the DCB Bancshares board
decided to suspend its exploration of a subordinated debt offering
until a permanent CEO was hired. In addition, the board discussed
and prepared for the possibility that the CEO vacancy might result
in unsolicited inquiries from potential acquirers.
Between October 6
and October 8, 2016, in anticipation of his upcoming meeting with
the First Contact, Mr. Deadrick held discussions with Mr. Danielson
regarding the feasibility of a merger with the First Contact and
how such a transaction might be structured in light of the
objectives outlined in the DCB Plan. The idea of a merger between
DCB Bancshares and the First Contact was discussed at the October
11, 2016 meeting. Following that meeting, Mr. Deadrick consulted
with Messrs. Carpenter, Lindlaw and Danielson regarding the
potential opportunity. Based on those discussions and after
considering several factors relevant to the objectives outlined in
the DCB Plan, Mr. Deadrick concluded that a merger with the First
Contact was not advisable. Mr. Deadrick informally discussed his
conclusion with the other DCB Bancshares board members, who
concurred. Around October 15, 2016, Mr. Deadrick notified the First
Contact that DCB Bancshares was not interested in further
discussing the matter.
During a phone
conversation on October 8, 2016, Mr. Danielson mentioned to Mr.
Deadrick that DCB Bancshares should also have an exit strategy in
the event that an acceptable permanent CEO could not be hired.
Their discussion led Mr. Danielson to ask Mr. Deadrick whether he
would meet with James W. Cornelsen, President and Chief Executive
Officer of both Old Line Bancshares and Old Line Bank. Mr. Deadrick
advised Mr. Danielson that he would be receptive to meeting with
Mr. Cornelsen regarding a potential strategic partnership. On
October 11, 2016, Mr. Danielson sent an e-mail to Messrs. Deadrick
and Cornelsen, introducing them to each other and suggesting they
meet.
In the meantime, on
October 13, 2016, Mr. Danielson met with Mr. Deadrick, some other
DCB Bancshares directors and Mr. Carpenter by conference call to
discuss the possibility of a small subordinated debt raise in light
of the CEO vacancy. The parties determined to continue exploring
this possibility but that they should wait until after Mr.
Deadrick’s meeting with Mr. Cornelsen before spending
additional time or effort. Ultimately, DCB Bancshares did not move
forward believing that a small raise would not provide the capital
needed to fund potential growth in the market and that the
potential rate for a larger offering would likely be
unfavorable.
Messrs. Deadrick
and Cornelsen met on October 20, 2016. During that meeting, Mr.
Cornelsen expressed his interest in a strategic partnership between
Old Line Bancshares and DCB Bancshares. At the conclusion of this
meeting, Mr. Cornelsen extended an invitation to Mr. Deadrick and
two other DCB Bancshares directors selected by Mr. Deadrick to
visit him at Old Line Bancshares’ headquarters in the near
future.
After this meeting,
Mr. Deadrick contacted Mr. Danielson and recapped his discussions
with Mr. Cornelsen. Mr. Danielson asked Mr. Deadrick to discuss the
possibility of a transaction with Old Line Bancshares with the
other DCB Bancshares directors and determine whether the DCB
Bancshares board would be receptive to engaging in more formal
discussions with Old Line Bancshares.
On October 24,
2016, Mr. Cornelsen called Mr. Deadrick to inquire on the status of
a visit to Old Line Bancshares. Mr. Deadrick indicated that he had
not yet discussed their meeting with the DCB Bancshares board but
would do so soon.
During the October
26, 2016 DCB Bancshares regular board meeting, Mr. Deadrick advised
the board of his meeting with Mr. Cornelsen and the board
authorized Mr. Deadrick to continue discussions with Mr. Cornelsen.
At this meeting, it was agreed that Mr. Deadrick and fellow
directors James R. Clifford, Sr. and George C. Cramer would meet
with Mr. Cornelsen at Old Line Bancshares, and a meeting was
scheduled for October 31, 2016.
On October 31,
2016, Mr. Deadrick contacted Andrew Bulgin of Gordon Feinblatt LLC
(“Gordon Feinblatt”), who serves as outside counsel to
DCB Bancshares, to inform him of the discussions held with Old Line
Bancshares and to engage Gordon Feinblatt for advice and
representation regarding a potential business combination with Old
Line Bancshares. Mr. Bulgin advised Mr. Deadrick that DCB
Bancshares and Old Line Bancshares should enter into a
confidentiality agreement before sharing any detailed business
information with each other. On that same date, Mr. Deadrick sent a
draft confidentiality agreement prepared by Baker, Donelson,
Bearman, Caldwell & Berkowitz, PC (“Baker,
Donelson”), outside counsel to Old Line Bancshares, to Mr.
Bulgin for review.
Between October 31,
2016 and November 3, 2016, Mr. Bulgin and Frank C. Bonaventure, Jr.
of Baker, Donelson negotiated the confidentiality agreement on
behalf of their respective clients.
On November 2,
2016, Mr. Deadrick informed Messrs. Carpenter and Lindlaw of the
discussions with Old Line Bancshares. On the same day, Mr. Deadrick
met with the chairman of the board of another local commercial bank
(the “Third Contact”). During this meeting, the
chairman of the Third Contact expressed interest in a possible
acquisition of DCB Bancshares. On December 12, 2016, after
considering the potential synergies of a transaction, the potential
benefit of a transaction to DCB Bancshares’ stockholders and
the fact that the potential benefits of a transaction with Old Line
Bancshares were more closely aligned with the objectives in the DCB
Plan, Mr. Deadrick informed the chairman of the Third Contact that
DCB Bancshares was not interested in exploring a transaction at
that time.
On November 3,
2016, Old Line Bancshares and DCB Bancshares entered into a
confidentiality agreement pursuant to which, among other things,
they agreed to conduct initial due diligence on each other to
explore the feasibility of a merger transaction.
On November 4,
2016, Mr. Deadrick received an email message from the chairman and
CEO of another local community bank (the “Fourth
Contact”), who expressed an interest in meeting Mr. Deadrick
to discuss the possibility of a strategic partnership. After
considering whether a transaction with the Fourth Contact would be
consistent with the objectives outlined in the DCB Plan, and in
light of the ongoing discussions with Old Line Bancshares, the
potential benefits that Mr. Deadrick believed were possible from a
merger transaction with Old Line Bancshares and the fact that DCB
Bancshares and Old Line Bancshares had recently entered into a
confidentiality agreement and would spend considerable time and
effort conducting initial due diligence, Mr. Deadrick declined the
Fourth Contact’s invitation.
On November 4,
2016, Mr. Cornelsen informed Mr. Deadrick that Old Line Bancshares
intended to engage Ambassador to provide investment banking advice
with respect to the potential merger with DCB Bancshares. Later
that day, Mr. Danielson verbally discussed Old Line
Bancshares’ initial due diligence information request with
Mr. Carpenter.
On November 7,
2016, Mr. Danielson provided Messrs. Deadrick and Carpenter with a
formal initial due diligence request list. Between November 7, 2016
and November 11, 2016, Messrs. Carpenter and Lindlaw provided the
requested initial due diligence information to Mr.
Danielson.
On November 9,
2016, the Risk Committee of the DCB Bancshares board of directors
held a special meeting at which Mr. Danielson discussed his views
on the benefits to DCB Bancshares of a merger transaction with Old
Line Bancshares as compared to other potential local merger
partners.
On November 14,
2016, Mr. Cornelsen, Mark A. Semanie, Executive Vice President and
Chief Operating Officer of Old Line Bancshares and Old Line Bank,
and Joseph E. Burnett, Executive Vice President and Chief Lending
Officer of Old Line Bancshares and Old Line Bank, met with Messrs.
Deadrick, Carpenter and Lindlaw at Ambassador’s office. Mr.
Danielson was also present at this meeting, where the discussion
focused on questions arising from Old Line Bancshares’ review
of the initial due diligence materials provided by DCB
Bancshares.
On November 21,
2016 and December 15, 2016, Mr. Danielson presented reports about a
potential DCB Bancshares/Old Line Bancshares merger to the Old Line
Bancshares Strategic Opportunities Committee. At both meetings, the
Strategic Opportunities Committee determined to continue moving
forward with an acquisition of DCB Bancshares.
On November 21,
2016, Mr. Cornelsen, on behalf of Old Line Bancshares, sent DCB
Bancshares a preliminary written indication of interest to Mr.
Deadrick with respect to a proposed merger of DCB Bancshares and
Damascus Community Bank with Old Line Bancshares and Old Line Bank,
respectively. In its letter, Old Line Bancshares proposed a
transaction with an aggregate deal value (i.e. consideration) of
160% of DCB Bancshares tangible equity as of December 31, 2016,
payable in shares of Old Line Bancshares common stock. Old Line
Bancshares also proposed a termination fee equal to 3.25% of the
deal’s transaction value and to invite one member of DCB
Bancshares’ board of directors to join Old Line
Bancshares’ and Old Line Bank’s board of directors, and
indicated it was open to discussions about a second board
seat.
At a special
meeting of the DCB Bancshares board of directors on November 29,
2016, also attended by Messrs. Carpenter and Bulgin, the letter of
interest from Old Line Bancshares was presented and discussed in
detail. The DCB Bancshares board concluded that the terms described
in the letter of interest seemed to present a very good opportunity
for DCB Bancshares to achieve many of the objectives outlined in
the DCB Plan at a very attractive price for stockholders, but that
DCB Bancshares needed to seek advice from a qualified investment
banking firm regarding the current merger market and the terms and
conditions contained in Old Line Bancshares’ letter of
interest, including the price being offered. The DCB Bancshares
board then authorized Mr. Deadrick to conduct further negotiations
with Old Line Bancshares, while at the same time identifying and
arranging for the interview of investment banking firms to
represent DCB Bancshares.
Between November
23, 2016 and November 30, 2016, Mr. Deadrick received a call from
representatives of another community bank (the “Fifth
Contact”), who expressed interest in discussing a possible
strategic partnership. Mr. Deadrick indicated that he would follow
up with the Fifth Contact if interested in having further
discussions, as at that time Mr. Deadrick believed that Old Line
Bancshares’ letter of interest was compelling and needed to
be vetted. There was no further discussion with the Fifth
Contact.
On December 1,
2016, the Risk Committee of the DCB Bancshares board of directors
held a special meeting at which it conducted comprehensive
interviews of three potential investment banking firms. Messrs.
Carpenter and Bulgin were also in attendance. On December 2, 2016,
formal proposals were received from all three potential firms. On
December 5, 2016, after reviewing and discussing in detail the
submitted proposals, the Risk Committee chose and approved the
engagement of RP Financial.
On December 6,
2016, DCB Bancshares formally engaged RP Financial as its financial
advisor with respect to the merger.
On December 8,
2016, Mr. Danielson provided a full due diligence request list from
Old Line Bancshares to Messrs. Deadrick, Carpenter and Bulgin, as
well as James P. Hennessey of RP Financial. Additional information
was requested throughout December 2016 and January
2017.
Between December 6,
2016 and December 15, 2016, with the advice and assistance of RP
Financial and Gordon Feinblatt, DCB Bancshares negotiated certain
revisions to Old Line Bancshares’ letter of
interest.
On December 15,
2016, in response to comments from Mr. Deadrick and RP Financial
based on the review by the DCB Bancshares board of directors, Old
Line Bancshares sent DCB Bancshares a revised indication of
interest that included downside protection for DCB Bancshares in
the form of a price collar. In this letter, among other things, Old
Line Bancshares clarified that the exchange ratio for determining
the number of shares of Old Line Bancshares common stock to be paid
to the holders of DCB common stock would be determined based on
DCB’s tangible equity as of December 31, 2016, and the most
recent ten-day (trading days) weighted average closing price of Old
Line Bancshares common stock immediately prior to signing a
definitive agreement. The indication of interest included added
downside price protection in the event that Old Line
Bancshares’ stock price were to decline between the merger
announcement date and the merger closing date.
On December 15,
2016 and December 16, 2016, DCB Bancshares and their
representatives proposed further revisions to the letter of
interest, which were accepted by Old Line Bancshares.
At a special
meeting of the DCB Bancshares board held on December 16, 2016,
which was also attended by Messrs. Carpenter, Lindlaw, Bulgin and
Hennessey, the revised letter of interest was presented and
discussed in detail. Mr. Hennessey presented his initial analysis
of Old Line Bancshares’ offer, which presentation included a
discussion of the price offered to DCB Bancshares’
stockholders as compared to recent transactions and the synergies
that could reasonably be expected from a merger with Old Line
Bancshares. Mr. Bulgin then discussed the revisions that had been
made to the original letter of interest. The DCB Bancshares board,
after a thorough discussion, authorized Mr. Deadrick to execute the
letter of interest once some final revisions were made, including a
clarification of the description of the downside price protection
mechanism and the provision of a minimum severance benefit for
displaced employees of Damascus Community Bank.
On December 16,
2016, in response to comments from Mr. Deadrick and RP Financial,
Old Line Bancshares submitted a second revised indication of
interest in which it indicated that the exchange ratio would be
based on the ten-day weighed average price of Old Line
Bancshares’ common stock immediately prior to the closing of
the merger instead of the signing of a definitive agreement, and
included a collar that provided the denominator in the exchange
ratio calculation would be no less than $20.85 and no more than the
ten-day weighted average closing price of the Old Line Bancshares
common stock immediately prior to signing a definitive agreement.
After confirming that it addressed the minimum severance benefit
discussed above, Mr. Deadrick executed this third indication of
interest on behalf of DCB Bancshares and returned it to Old Line
Bancshares on December 16, 2016.
On December 28 and
29, 2016, Old Line Bancshares and their representatives conducted
on-site due diligence of Damascus Community Bank’s loan
portfolio. Messrs. Carpenter and Lindlaw met with Mr. Burnett and
M. John Miller, Executive Vice President and Chief Credit Officer
of Old Line Bank, at the conclusion of this on-site loan due
diligence, during which representatives of the parties discussed
DCB Bancshares’ operations, loan portfolio and financial
condition.
On January 4, 2017,
Mr. Deadrick met with Mr. Cornelsen to discuss due diligence
progress. At that time, Mr. Cornelsen expressed Old Line
Bancshares’ interest in electing Mr. Deadrick to the boards
of Old Line Bancshares and Old Line Bank following the completion
of the merger so that DCB Bancshares’ stockholders would have
continued representation of the post-merger bank.
On January 8,
2017, Old Line Bancshares circulated an initial draft of the merger
agreement to DCB Bancshares for review. During the remainder
of January 2017, Old Line Bancshares and DCB Bancshares and their
respective advisers regotiated the terms of the merger agreement
and the ancillary documents appearing as exhibits to the merger
agreement. During this time, DCB Bancshares and Old Line
Bancshares also continued their due diligence investigations of
each other.
On January 9, 2016,
Mr. Deadrick confirmed that the DCB Bancshares board of directors
desired to have one additional director represent DCB
Bancshares’ stockholders on the board of the post-merger
bank, and he provided Mr. Cornelsen with a list of three DCB
Bancshares directors who were interested in being considered for
election to the boards of Old Line Bancshares and Old Line Bank
following the completion of the merger.
Also on January 9,
2016, Mr. Carpenter and Bethany S. Lord, Vice President of Human
Resources for Damascus Community Bank, met with Mr. Semanie and
David L. Seyler, Senior Vice President – Cash Management
Services of Old Line Bank, to discuss how the merger announcement
should be communicated to the public once the merger agreement was
signed.
On January 11,
2017, Messrs. Deadrick, Carpenter, Lindlaw, Bulgin and Hennessey
conducted on-site due diligence of Old Line Bancshares and Old Line
Bank. This review included a comprehensive review of financial,
corporate, legal, operations and other information as well as
discussions with various members of Old Line Bank’s
management team. Off-site due diligence of Old Line Bancshares and
Old Line Bank by Messrs. Carpenter and Lindlaw, Gordon Feinblatt
and RP Financial continued through January 29, 2017.
On January 13,
2017, the Risk Committee of the DCB Bancshares board held a special
meeting to discuss the results of due diligence performed to date.
Messrs. Carpenter, Lindlaw, Bulgin and Hennessey were also in
attendance. The consensus of the due diligence participants was
that Old Line Bank was a well-managed, strong bank whose branch
footprint, product and service lines and culture aligned well with
Damascus Community Bank and the objectives outlined in the DCB
Plan. The Risk Committee also reviewed in detail the initial draft
of the merger agreement. The Risk Committee directed Mr. Bulgin to
negotiate certain changes to this draft.
On January 18,
2017, Mr. Deadrick met with Mr. Cornelsen and Craig E. Clark,
chairman of the board of directors of Old Line Bancshares and Old
Line Bank, to discuss due diligence issues as well as progress on
finalizing the merger agreement.
At a special
meeting of the DCB Bancshares board on January 19, 2017, also
attended by Messrs. Carpenter, Lindlaw, Hennessey, and Bulgin, the
draft of the merger agreement was reviewed in detail. At the
outset, Mr. Bulgin explained the duties of care and loyalty with
which each director must comply when reviewing the terms of the
merger and deciding whether to declare it advisable. During the
course of this review, the directors of DCB Bancshares engaged in a
thorough discussion of the material terms of the merger agreement
and their implications to DCB Bancshares and its stockholders, and
asked several questions of Mr. Bulgin regarding the legal aspects
of the transaction. Mr. Bulgin was directed to negotiate several
revisions to address the board’s questions and comments.
Following this legal review, Mr. Hennessey made a presentation that
included an overview of the proposed merger transaction from a
financial point of view, a detailed analysis of the price
calculations and possible exchange ratios, and a detailed analysis
of how the terms of the proposed merger, including the pricing
terms, compared to other recent transactions among banking
institutions. Directors asked many detailed questions of Mr.
Hennessey concerning his analysis and a robust discussion
followed.
On January 20,
2017, Old Line Bancshares formally engaged Ambassador as its
financial advisor with respect to the merger.
On January 23,
2017, Mr. Deadrick contacted Mr. Cornelsen to discuss the status of
the merger agreement negotiations and the anticipated signing
date.
During the regular
meeting of the DCB Bancshares board of directors held on January
25, 2017, also attended by Messrs. Carpenter, Lindlaw, Bulgin and
Hennessey, the board was updated on continuing progress of
negotiations, the anticipated timing of a public announcement, and
when and how the merger should be communicated to employees,
stockholders and customers. Mr. Hennessey then presented RP
Financial’s preliminary fairness opinion, along with the
supporting analysis and methodology. At that time, Mr. Hennessey
stated that RP Financial believed that the merger would be fair to
DCB Bancshares’ stockholders from a financial point of
view.
The Risk Committee
of DCB Bancshares held a special meeting on January 30, 2017 to
review the current draft of the merger agreement, which included a
detailed review of the representations and warranties to be made by
DCB Bancshares to Old Line Bancshares, along with all supporting
disclosure schedules. Several minor revisions to the merger
agreement were agreed upon, along with a few final questions for
Mr. Bulgin.
On February 1,
2017, the DCB Bancshares board of directors held a special meeting
to consider the final terms of the merger agreement. Also in
attendance were Messrs. Carpenter, Lindlaw, Bulgin and Hennessey.
Mr. Hennessey presented RP Financial’s final fairness
opinion, which had been provided to all board members on January
31, 2017. His presentation included the supporting analysis and
methodology overview. Mr. Hennessey also answered several questions
posed by directors and concluded by stating RP Financial’s
opinion that the transaction would be fair from a financial point
of view to DCB Bancshares’ stockholders. Mr. Bulgin then
reviewed each term of the merger agreement with the board and
pointed out those provisions that had been changed since the last
review. Mr. Bulgin again reviewed with the directors their
fiduciary obligations when considering the merger and deciding
whether to declare it advisable. Following this discussion and,
after considering the opinion of RP Financial, the board of
directors of DCB Bancshares unanimously declared the merger and the
merger agreement to be advisable and in the best interests of DCB
Bancshares’ stockholders.
Also on February 1,
2017, Old Line Bancshares’ board of directors held a special
meeting at which it considered the definitive merger agreement and
ancillary documents, and at which representatives of Ambassador and
Mr. Bonaventure, were also present. Mr. Bonaventure presented the
board with an overview of the material terms of the merger
agreement, copies of which were provided to each director before
the meeting. Also at this meeting, Mr. Danielson of Ambassador
reviewed the financial aspects of the proposed merger. At the
conclusion of these presentations and discussion and deliberation,
and after considering all of the factors that it deemed relevant,
the Old Line Bancshares board of directors unanimously approved the
merger agreement and the transactions contemplated by the merger
agreement, up to and including the merger, approved the form of the
related support agreement, declared the merger advisable, and
authorized Old Line Bancshares’ President and Chief Executive
Officer to execute and deliver the definitive merger agreements and
the support agreements.
The parties
executed the merger agreement on February 1, 2017.
Following the close
of trading markets on February 1, 2017, DCB Bancshares and Old Line
Bancshares issued a joint press release announcing the approval,
adoption and execution of the merger agreement.
Old Line Bancshares’ Reasons for the Merger
In evaluating
acquisition opportunities, Old Line Bancshares looks for financial
institutions with business philosophies that are similar to those
of Old Line Bancshares and that operate in markets that
geographically complement its operations. In evaluating acquisition
opportunities, Old Line Bancshares also considers its long-range
strategies, including financial, customer and employee strategies.
Old Line Bancshares, from time to time, reviews its strategic plan
to analyze its geographic scope, financial performance and growth
opportunities. Since its acquisition of Maryland Bankcorp in 2011,
WSB in 2013 and Regal Bancorp in 2015, Old Line Bancshares has
considered a number of opportunities to expand its presence in its
primary market areas; however management and the Strategic
Opportunities Committee concluded that the acquisition of DCB
Bancshares was the best current opportunity to further this
business objective. In connection with its approval of the merger
with DCB Bancshares, Old Line Bancshares’ board of directors
reviewed the terms of the proposed acquisition and definitive
agreements and their potential impact to Old Line Bancshares’
constituencies. In reaching its decision to approve the merger
agreement and the merger, Old Line Bancshares’ board of
directors considered a number of factors, including the
following:
●
The acquisition of
DCB Bancshares and Damascus Community Bank represents an attractive
opportunity for Old Line Bank to enter and establish branches in
upper Montgomery County and Frederick County, Maryland, which
complements its current market area, while remaining a community
bank;
●
The results of due
diligence of DCB Bancshares and its business operations, including
asset quality;
●
The understanding
of the business operations, management, financial condition, asset
quality, product offerings and prospects of DCB Bancshares based
on, among other things, input from management and Old Line
Bancshares’ financial advisor;
●
The view that the
combined company will have the potential for a stronger competitive
position in a marketplace where relatively greater size and scale
may become increasingly more important factors for financial
performance and success;
●
The expectation
that the merger would be immediately accretive to book value and
earnings (excluding merger expenses) in light of the potential cost
savings and revenue enhancements;
●
DCB
Bancshares’ customer service-oriented emphasis with local
decision-making ability and a clear focus on the community and
local customers, which are consistent with Old Line
Bancshares’ business approach;
●
The financial
condition, operating results and future prospects of Old Line
Bancshares and DCB Bancshares;
●
A review of
comparable transactions, including a comparison of the price being
paid in the merger with the prices paid in other comparable
financial institution mergers from an earnings, deposit premium and
tangible book value perspective;
●
Management’s
view, based on, among other things, such comparable transactions
reviewed, that the consideration paid by Old Line Bancshares is
fair to Old Line Bancshares and its stockholders from a financial
point of view; and
●
The belief that DCB
Bancshares has a compatible business culture and shared approach to
customer service and increasing stockholder value.
All business
combinations, including the merger, also include certain risks and
disadvantages. The material potential risks and disadvantages to
Old Line Bancshares and its stockholders that Old Line
Bancshares’ board of directors and management identified and
the board of directors considered include the following material
matters, the order of which does not necessarily reflect their
relative significance:
●
The risk that DCB
Bancshares’ loans and other items were not discounted
properly or appropriately valued;
●
The risk that DCB
Bancshares’ deposit customers will choose to move their
business to a different bank;
●
The risk that
projected earnings, tangible book value increases and/or cost
savings will not materialize or will be less than
expected;
●
That Old Line
Bancshares might have to pass on other acquisitions in the near
term if proceeding with the merger with DCB Bancshares;
and
●
The risk that DCB
Bancshares terminates the merger by reason of a superior DCB
Bancshares transaction.
The discussion and
factors considered by Old Line Bancshares’ board of directors
is not intended to be exhaustive, but includes all material factors
considered. Old Line Bancshares’ board of directors
considered these factors as a whole, and considered them to be
favorable to, and supportive of, its determination. Old Line
Bancshares’ board of directors did not consider it practical,
nor did it attempt, to quantify, rank or otherwise assign relative
weights to the specific factors that it considered in reaching its
decision. In considering the factors described above, individual
members of Old Line Bancshares’ board of directors may have
given different weights or priority to different factors. Old Line
Bancshares’ board of directors realized there can be no
assurance about future results, including results expected or
considered in the factors listed above. The board of directors
concluded, however, that the potential positive factors outweighed
the potential risks of completing the merger.
After deliberating
with respect to the proposed merger with DCB Bancshares,
considering, among other things, the factors discussed above, the
Old Line Bancshares board of directors approved the merger
agreement and the merger with DCB Bancshares and declared the
merger advisable.
There can be no
certainty that the above benefits of the merger anticipated by the
Old Line Bancshares board of directors will occur. Actual results
may vary materially from those anticipated. For more information on
the factors that could affect actual results, see “Caution
Regarding Forward-Looking Statements” and “Risk
Factors.”
DCB
Bancshares’ Reasons for the Merger and Recommendation of the
Board of Directors
The DCB Bancshares
board of directors concluded that the merger offers DCB
Bancshares’ stockholders an attractive opportunity to achieve
the board’s strategic business objectives, including
increasing stockholder value, growing the size of the business and
enhancing liquidity for stockholders. In addition, the board
believes that both the customers and communities served by Damascus
Community Bank will enjoy significant benefits from the merger that
they might not otherwise enjoy if Damascus Community Bank were to
remain independent or merge with another bank.
In deciding to
approve the Merger, the DCB Bancshares board of directors consulted
with management, as well as its legal counsel and financial
adviser, and considered numerous factors, including the
following:
●
Information with
respect to the businesses, earnings, operations, financial
condition, prospects, capital levels and asset quality of Damascus
Community Bank and Old Line Bank, both individually and as a
combined company;
●
The perceived risks
and uncertainties attendant to Damascus Community Bank’s
operation as an independent banking organization, including the
risks and uncertainties related to the low interest rate
environment, competition in Damascus Community Bank’s market
area, and the increased regulatory costs and increased capital
requirements that will likely result from new and pending laws and
regulations;
●
The current and
prospective merger market and the board’s belief, based on,
among other information, RP Financial’s presentation, that
future merger opportunities for DCB Bancshares might not be as
favorable as the opportunity presented by Old Line
Bancshares’ offer;
●
The market values
of DCB Bancshares’ common stock and Old Line
Bancshares’ common stock prior to the execution of the merger
agreement and the immediate value of the merger to DCB
Bancshares’ stockholders given the merger
consideration’s significant premium over the then-current
trading price of the shares of DCB Bancshares’ common
stock;
●
The uncertainties
surrounding the CEO vacancy and the risks that such vacancy
presents to Damascus Community Bank’s growth and success,
and, in turn, future stockholder value;
●
The potential
long-term value to be realized by DCB Bancshares’
stockholders as a result of the merger as compared to stockholder
value projected for DCB Bancshares as an independent entity, and
the prospects for future appreciation of Old Line Bancshares’
common stock as a result of its strategic initiatives;
●
Old Line
Bancshares’ strategies to remain independent and to seek
profitable future expansion, which it expected to lead to continued
growth in overall stockholder value;
●
The enhanced
liquidity for stockholders of DCB Bancshares as a result of
receiving shares of Old Line Bancshares’ common stock given
the current trading market for Old Line Bancshares’ common
stock;
●
The culture and
business model of Old Line Bank, which the DCB Bancshares board of
directors believes are complimentary to Damascus Community
Bank’s culture and business model, and the perceived
competence, experience and community banking philosophy of Old Line
Bank’s management team, both of which the board believed
should increase the likelihood that Damascus Community Bank will be
successfully integrated with Old Line Bank;
●
Old Line
Bank’s commitment to retain as many employees of Damascus
Community Bank as practical, and its agreement to provide severance
benefits to terminated employees that is consistent with Damascus
Community Bank’s employee severance policy; and
●
Old Line
Bank’s successful acquisition track record and the belief
that the merger will be approved by the parties’ banking
regulators without undue burden and in a timely
manner.
The DCB Bancshares
board of directors also considered potential risks associated with
the merger when makings its decision to approve the merger
agreement, including:
●
The risk that the
terms of the merger agreement, including the provisions generally
prohibiting DCB Bancshares from soliciting, engaging in discussions
or providing information with respect to alternative transactions,
and those relating to the payment of a termination fee under
specified circumstances, which were required by Old Line Bancshares
as a condition to its willingness to enter into the transaction,
could have the effect of discouraging other parties that might be
interested in a transaction with DCB Bancshares from proposing such
a transaction;
●
The risk of an
all-stock transaction in the event that Old Line Bancshares’
stock price declines significantly after the merger is
completed;
●
The challenges of
combining the businesses of the two companies, which could affect
the post-merger success of the combined company, and the ability to
achieve anticipated cost savings and other potential benefits of
the merger;
●
The risk that the
merger would not be completed, leaving DCB Bancshares’
reputation severely damaged;
●
The risk that DCB
Bancshares’ stockholders and the community react negatively
to the loss of the local community bank; and
●
The risk that DCB
Bancshares’ stockholders, the community, and customers react
negatively to the job eliminations that will be required to achieve
the anticipated cost savings from the merger.
In the judgment of
the DCB Bancshares’ board of directors, the potential
benefits of the merger outweigh these potential risks.
The above
discussion of the information and factors considered by DCB
Bancshares’ board of directors is not intended to be
exhaustive, but it does include a description of all material
factors considered by the board. In view of the wide variety of
factors considered by the board of directors in connection with its
evaluation of the merger, the board did not consider it practical
to, nor did it attempt to, quantify, rank or otherwise assign
relative weights to the specific factors that it considered. In
considering these factors, individual directors may have given
differing weights to different factors. DCB Bancshares’ board
of directors made a collective determination with respect to the
Merger, based on the conclusion reached by its members and the
factors that each of them considered appropriate, that the merger
is in the best interests of the stockholders of DCB
Bancshares.
Opinion of DCB Bancshares’ Financial Advisor
DCB Bancshares
retained RP Financial on December 6, 2016, to render an opinion
regarding the fairness from a financial point of view with respect
to the merger consideration to be received by DCB Bancshares’
stockholders in the merger. In engaging RP Financial for its
fairness opinion, the DCB Bancshares board of directors did not
give any special instructions to RP Financial, nor did it impose
any limitations upon the scope of the investigation that RP
Financial wished to conduct to enable it to give its opinion. RP
Financial has delivered to DCB Bancshares its written opinion,
dated February 1, 2017, to the effect that, based upon and subject
to the matters set forth therein and other matters it considered
relevant, as of that date, the merger consideration to be received
in connection with the merger with Old Line Bancshares was fair to
the DCB Bancshares stockholders from a financial point of view. The
opinion of RP Financial is directed to the board of directors of
DCB Bancshares in its consideration of the merger agreement, and
does not constitute a recommendation to any stockholder of DCB
Bancshares as to any action that such stockholder should take in
connection with the merger agreement or otherwise. RP
Financial’s opinion is directed only to the fairness of the
merger consideration to the current stockholders of DCB Bancshares
from a financial point of view as of the date of the merger
agreement. A copy of the RP Financial opinion is set forth as Annex
B to this proxy statement/prospectus, and DCB Bancshares
stockholders should read it in its entirety. RP Financial has
consented to the inclusion and description of its written opinion
in this proxy statement/prospectus.
DCB
Bancshares selected RP Financial to act as its financial advisor
because of RP Financial’s expertise in the valuation of
businesses and their securities for a variety of purposes,
including its expertise in connection with mergers and acquisitions
of financial institutions, and entered into an engagement letter
with RP Financial on December 6, 2016. Pursuant to that engagement
letter, RP Financial is entitled to receive professional fees for
its services in connection with the merger and reimbursement of
certain out-of-pocket expenses. RP Financial estimates that it will
receive $100,000 as compensation for its professional services, of
which $80,000 has been paid to date and $20,000 is contingent on,
and payable upon, the closing of the merger. Of this amount,
$50,000 relates to RP Financial’s fairness opinion and was
paid at the time the merger agreement was executed.
In addition, DCB
Bancshares has agreed to indemnify and hold harmless RP Financial,
any affiliates of RP Financial, and the respective directors,
officers, agents and employees of RP Financial or their successors
and assigns who act for or on behalf of RP Financial in connection
with the services called for under DCB Bancshares’ engagement
letter with RP Financial, from and against any and all losses,
claims, damages and liabilities (including, but not limited to, all
losses and expenses in connection with claims under the federal
securities laws), actually incurred by RP Financial and
attributable to: (i) any untrue statement of a material fact
contained in the financial statements or other information
furnished or otherwise provided by an authorized officer of DCB
Bancshares to RP Financial; (ii) the omission of a material fact
from the financial statements or other information furnished or
otherwise made available by an authorized officer of DCB Bancshares
to RP Financial; or (iii) any action or omission to act by DCB
Bancshares, or DCB Bancshares’ respective officers,
directors, employees or agents, which action or omission is
willful. Notwithstanding the foregoing, DCB Bancshares will be
under no obligation to indemnify RP Financial hereunder if a court
determines that RP Financial was negligent or acted in bad faith or
willfully with respect to any actions or omissions of RP Financial
related to a matter for which indemnification is
sought.
In addition, if RP
Financial is entitled to indemnification from DCB Bancshares and in
connection therewith incurs legal expenses in defending any legal
action challenging the opinion of RP Financial where RP Financial
is not negligent or otherwise at fault or is found by a court of
law to be not negligent or otherwise at fault, DCB Bancshares will
indemnify RP Financial for all reasonable expenses.
In rendering its
opinion, RP Financial reviewed the following material and/or
conducted the following analyses with respect to the merger
agreement and DCB Bancshares:
●
the merger
agreement, as reviewed by the DCB Bancshares board of directors on
February 1, 2017, and certain exhibits;
●
the following
financial information for DCB Bancshares: (a) audited consolidated
financial statements, included in the annual reports for the fiscal
years ended December 31, 2012 through December 31, 2015; (b)
unaudited consolidated financial data, including stockholder
reports and financial statements through December 31, 2016; (c)
unaudited consolidated financial data through December 31, 2016;
(d) quarterly financial reports submitted to the FDIC by Damascus
Community Bank through September 30, 2016; (e) internal financial
and other reports provided to DCB Bancshares’ and Damascus
Community Bank’s board of directors from the beginning of
fiscal 2015 through December 31, 2016 with regard to balance sheet
and off-balance sheet composition, profitability and balance sheet
trends, certain risk factors and DCB Bancshares’ and Damascus
Community Bank’s operations; (f) historical
publicly-available financial information as published by SNL
Financial, Inc.; and (g) internally prepared budget
information;
●
the financial terms
of certain other recently completed and pending acquisitions of
banks headquartered in the Mid-Atlantic region of the United States
with comparable financial characteristics as DCB
Bancshares;
●
the financial terms
of certain other recently completed and pending acquisitions of
banks headquartered in the states of Maryland, Virginia and
Delaware as well as the District of Columbia with comparable
financial characteristics as DCB Bancshares;
●
the estimated pro
forma financial benefits of the merger to DCB Bancshares
stockholders; and
●
in person
interviews with senior executive officers of DCB
Bancshares.
In addition, RP
Financial reviewed or considered the following materials or
information for Old Line Bancshares and as further described below
certain peers of Old Line Bancshares:
●
the annual audited
financial statements for the fiscal years ended 2011 to 2015, as
presented in Old Line Bancshares’ Annual Report on Form 10-K
filings;
●
the quarterly
financial reports submitted to the FDIC by Old Line Bank from March
31, 2015 through December 31, 2016;
●
internally prepared
budget information for Old Line Bancshares for 2017;
●
stock price history
for Old Line Bancshares during past 12 months;
●
Old Line Bancshares
financial information versus a peer group of comparable
publicly-traded institutions; and
●
in person
interviews with senior executives of Old Line
Bancshares.
In rendering its
opinion, RP Financial relied, without independent verification, on
the accuracy and completeness of the information concerning DCB
Bancshares and Old Line Bancshares furnished by the respective
institutions to RP Financial for review for purposes of its
opinion, as well as publicly-available information regarding other
financial institutions and competitive, economic and demographic
data. RP Financial further relied on the assurances of management
of DCB Bancshares and Old Line Bancshares as included in the merger
agreement. RP Financial has not been asked to and has not
undertaken an independent verification of any of such information
and RP Financial does not assume any such responsibility or
liability for the accuracy or completeness thereof. DCB Bancshares
did not restrict RP Financial as to the material it was permitted
to review. RP Financial did not perform or obtain any independent
appraisals or evaluations of the assets and liabilities, the
collateral securing the assets or the liabilities (contingent or
otherwise) of DCB Bancshares or Old Line Bancshares or the
collectability of any such assets, nor has RP Financial been
furnished with any such evaluations or appraisals. RP Financial did
not make an independent evaluation of the adequacy of the allowance
for loan losses of DCB Bancshares or Old Line Bancshares nor did RP
Financial review any individual credit files relating to DCB
Bancshares or Old Line Bancshares.
RP Financial, with
DCB Bancshares’ consent, has relied upon the advice DCB
Bancshares has received from its legal, accounting and tax advisors
as to all legal, accounting and tax matters relating to the merger
agreement and other transactions contemplated by the merger
agreement. In rendering its opinion, RP Financial assumed that, in
the course of obtaining the necessary regulatory and governmental
approvals for the proposed merger, no restriction will be imposed
on Old Line Bancshares that would have a material adverse effect on
the ability of the merger to be consummated as set forth in the
merger agreement. RP Financial also assumed that there has been no
material change in DCB Bancshares’ or Old Line
Bancshares’ assets, financial condition, results of
operations, business or prospects since the date of the most recent
financial statement made available to us. RP Financial assumed, in
all respects material to its analyses, that all of the
representations and warranties contained in the merger agreement
and all related agreements are true and correct, that each party to
such agreements will perform all of the covenants required to be
performed by such party under such agreements and that the
conditions precedent in the merger agreement are not
waived.
RP
Financial’s opinion was based solely upon the information
available to it and the economic, market and other circumstances as
they existed as of February 1, 2017. Events occurring after
February 1, 2017, could materially affect the assumptions used in
preparing the opinion. In connection with rendering its opinion
dated February 1, 2017, RP Financial performed a variety of
financial analyses that are summarized below. Although the
evaluation of the fairness, from a financial point of view, of the
merger consideration was to some extent subjective based on the
experience and judgment of RP Financial and not merely the result
of mathematical analyses of financial data, RP Financial relied, in
part, on the financial analyses summarized below in its
determinations. The preparation of a fairness opinion is a complex
process and RP Financial believes its analyses must be considered
as a whole. Selecting portions of such analyses and factors
considered by RP Financial without considering all such analyses
and other factors could create an incomplete view of the process
underlying RP Financial’s opinion. In its analyses, RP
Financial took into account its assessment of general business,
market, monetary, financial and economic conditions, industry
performance and other matters, many of which are beyond the control
of DCB Bancshares and Old Line Bancshares, as well as RP
Financial’s experience in securities valuation, its knowledge
of financial institutions, its knowledge of the current operating
and merger and acquisition environments for financial institutions,
and its experience in similar transactions. With respect to the
comparable transactions and control premium analyses described
below, no public company utilized as a comparison is identical to
DCB Bancshares and such analyses necessarily involve complex
considerations and judgments concerning the differences in
financial and operating characteristics of the companies and other
factors that could affect the acquisition values of the companies
concerned. The analyses were prepared solely for purposes of RP
Financial providing its opinion as to the fairness of the merger
consideration, and they do not purport to be appraisals or
necessarily reflect the prices at which businesses or securities
actually may be sold. Any estimates contained in RP
Financial’s analyses are not necessarily indicative of future
results of values, which may be significantly more or less
favorable than such estimates.
Comparable Transactions Analysis.
RP Financial
compared the merger on the basis of the multiples or ratios of
reported earnings, tangible book value and tangible book premium to
core deposits reported in a selected comparable group of completed
and pending bank mergers and acquisitions. The Comparable
Transactions groups consisted of a sale of control transactions
where the acquired company had the following characteristics: (1)
based in the states of Maryland, Virginia and Delaware as well as
the District of Columbia announced during the period from January
1, 2015, to January 27, 2017, involving targets with total assets
between $150 million and $500 million at the announcement date (the
“Local Region Transactions”); and (2) all Mid-Atlantic
transactions announced during the period from January 1, 2015, to
January 27, 2017, involving targets with total assets between $100
million and $1 billion at the announcement date (the
“Mid-Atlantic Transactions”). The transactions
comprising the Local Region Transactions Group and the Mid-Atlantic
Transactions are set forth below.
Local Region
Transactions Group
Acquirer
|
Target
|
ACNB
Corp.
|
New Windsor Bancorp
Inc.
|
Bay Banks of
Virginia Inc.
|
Virginia BanCorp
Inc.
|
Dollar Bank
FSB
|
Bank
@LANTEC
|
First Citizens
BancShares Inc.
|
Cordia Bancorp
Inc.
|
Revere
Bank
|
Monument
Bank
|
Blue Ridge
Bankshares Inc.
|
River Bancorp
Inc.
|
Summit Financial
Group Inc.
|
Highland County
Bankshares Inc.
|
Hampton Roads
Bankshares Inc.
|
Xenith Bankshares
Inc.
|
Bay Bancorp
Inc.
|
Hopkins Bancorp
Inc.
|
Grayson Bankshares
Inc.
|
Cardinal Bankshares
Corp.
|
Southern BancShares
(NC)
|
Heritage Bankshares
Inc.
|
Revere
Bank
|
BlueRidge
Bank
|
Hamilton Bancorp
Inc.
|
Fraternity
Community Bancorp
|
Park Sterling
Corporation
|
First Capital
Bancorp Inc.
|
Old Line Bancshares
Inc.
|
Regal Bancorp
Inc.
|
Delmarva Bancshares
Inc.
|
Easton Bancorp
Inc.
|
Howard Bancorp
Inc.
|
Patapsco Bancorp
Inc.
|
Mid-Atlantic
Transactions Group
Acquirer
|
Target
|
ACNB
Corp.
|
New Windsor Bancorp
Inc.
|
Standard Financial
Corp
|
Allegheny Valley
Bancorp Inc.
|
Prudential Bancorp
Inc.
|
Polonia Bncp,
Inc.
|
DNB Financial
Corp.
|
East River
Bk
|
Norwood Financial
Corp.
|
Delaware Bancshares
Inc.
|
Lakeland
Bancorp
|
Harmony
Bank
|
Bay Bancorp
Inc.
|
Hopkins Bancorp
Inc.
|
Revere
Bank
|
BlueRidge
Bank
|
Hamilton Bancorp
Inc.
|
Fraternity
Community Bancorp
|
NexTier
Inc.
|
Eureka Financial
Corp
|
Northfield Bancorp
Inc.
|
Hopewell Valley
Cmnty Bank
|
Lakeland
Bancorp
|
Pascack Bancorp
Inc.
|
ESSA Bancorp
Inc.
|
Eagle National
Bancorp Inc.
|
Preferred
Bank
|
United
International Bk
|
Citizens Financial
Services
|
First National Bk
of Frederick
|
Howard Bancorp
Inc.
|
Patapsco Bancorp
Inc.
|
WSFS Financial
Corp.
|
Alliance Bancorp of
Penn
|
Cathay General
Bancorp
|
Asia Bancshares
Inc.
|
The average and
median selected financial data and acquisition pricing multiples or
ratios at announcement for the Regional Transaction Group and the
Mid-Atlantic Transaction Group relative to the DCB Bancshares
pricing multiples or ratios based on the merger consideration are
shown below:
|
Comparable
Transactions (1)
|
|
|
Mid-Atlantic
Trans. Group
|
|
|
|
|
|
|
|
Financial
Data and Ratios
|
|
|
|
|
|
Assets
($000)
|
$302,006
|
$239,659
|
$297,434
|
$291,411
|
$310,955
|
Tangible
Equity/Assets (%)
|
10.11%
|
8.95%
|
10.88%
|
9.93%
|
8.18%
|
Return
on Average Assets (%)
|
0.42
|
0.52
|
0.45
|
0.51
|
0.28
|
Return
on Average Equity (%)
|
4.68
|
5.16
|
4.58
|
4.56
|
3.46
|
Non-Performing
Assets/Assets (%)
|
1.36
|
1.51
|
1.38
|
1.36
|
0.92
|
|
|
|
|
|
|
Deal Value and Pricing Ratios (3)
|
|
|
|
|
|
Deal
Value ($ Millions)
|
$35.30
|
$26.90
|
$40.20
|
$32.30
|
$40.70
|
Price/Tangible
Book (%)
|
123.53%
|
121.05%
|
126.77%
|
124.46%
|
160.00%
|
Price/Earnings
(x)
|
20.46x
|
19.00x
|
24.65x
|
21.43x
|
46.3x
|
Tang.
Book Premium/Deposits(%)
|
2.97%
|
2.98%
|
5.22%
|
3.41%
|
6.04%
|
(1) Pricing ratios
at announcement.
(2) Reflects
financial data as of or for the trailing 12 months ended December
31, 2016.Earnings ratios and multiples reflect core earnings which
equals reported earnings net of a one-time recovery of $800,000 on
a non-performing loan and $136,000 of expense related to the former
CEO’s severance, all on a tax effected basis at an assumed
38% marginal tax rate.
(3) Deal value and
multiples for DCB Bancshares based on the Starting Price as defined
in the merger agreement.
The average and
median pricing multiples (Price/Tangible Book Value multiple,
Price/Earnings multiple and Core Deposit Premium multiple) of the
Local Region Transactions and Mid-Atlantic Transactions group were
applied to DCB Bancshares’ actual financial measures
(tangible book value, core earnings and core deposits) to derive a
valuation range before adjustments. A downward adjustment was then
made to account for DCB Bancshares’ lower return on assets
and return on equity as well as differences in the earnings
composition including DCB Bancshares’ reliance on income from
secondary market loan sales and indirect auto lending. The
resulting valuation range was $18.00 to $21.00 per share, which is
below the merger consideration of $25.22 per share as of February
1, 2017, while the value of the merger consideration at the lower
collar (assumes the Closing Market Price for Old Line Bancshares is
$16.68 per share) is $20.18, which falls within the estimated range
of value indicated by the Comparable Transactions
Approach.
Control Premium Analysis
The Control Premium
Analysis applies a multiple to the pre-announcement fair market
value or trading value of an acquisition target’s common
stock at various points in time (one-week and one -month prior to
announcement) to derive a sale of control value for a share of the
acquisition target’s stock. It is a two-step
process.
First the fair
market value of a minority share of DCB Bancshares common stock is
estimated based on a Peer Group of comparable publicly-traded
companies. Then a multiple is applied to the fair market value and
the trading value of DCB Bancshares’ stock based on control
premium multiples paid in comparable transactions. The resulting
valuation range is then compared to the offer price.
The fair market
value of DCB Bancshares’ stock was based on the trading
multiples of a group of comparable publicly-traded institutions
(the “Peer Group”). The Peer Group consisted of
publicly-traded (listed on the NASDAQ Stock Market, LLC or the New
York Stock Exchange) group of commercial banks, commercial bank
holding companies, thrifts or savings and loan holding companies
headquartered in the Mid-Atlantic region of the U.S., with total
assets of less than $700 million and return on average assets
measures of less than 0.75%. There were a total of 17 institutions
included in the Peer Group as follows:
Ticker
|
|
Headquarters
|
Symbol
|
Peer Group
Company
|
Location
|
BKJ
|
Bancorp of New
Jersey, Inc.
|
New
Jersey
|
BOTJ
|
Bank of the James
Financial Group, Inc.
|
Virginia
|
BYBK
|
Bay Bancorp,
Inc.
|
Maryland
|
CARV
|
Carver Bancorp,
Inc.
|
New
York
|
DNBF
|
DNB Financial
Corporation
|
Pennsylvania
|
EMCF
|
Emclaire Financial
Corp
|
Pennsylvania
|
FSBC
|
FSB Bancorp,
Inc.
|
New
York
|
GLBZ
|
Glen Burnie
Bancorp
|
Maryland
|
HBK
|
Hamilton Bancorp,
Inc.
|
Maryland
|
HMTA
|
HomeTown Bankshares
Corporation
|
Virginia
|
MSBF
|
MSB Financial
Corp.
|
New
Jersey
|
OPOF
|
Old Point Financial
Corporation
|
Virginia
|
PBHC
|
Pathfinder Bancorp,
Inc.
|
New
York
|
PBIP
|
Prudential Bancorp,
Inc.
|
Pennsylvania
|
SSFN
|
Stewardship
Financial Corporation
|
New
Jersey
|
SBBX
|
Sussex
Bancorp
|
New
Jersey
|
WVFC
|
WVS Financial
Corp.
|
Pennsylvania
|
RP Financial
compared the financial condition and recent performance of DCB
Bancshares to the median financial conditions and recent
performance measures of the Peer Group, as displayed in the table
on the following below.
|
|
|
|
|
|
Financial
Data and Ratios
|
|
|
|
Assets
($000)
|
$609,515
|
$606,336
|
$310,955
|
Tangible
Equity/Assets (%)
|
10.02%
|
9.11%
|
8.19
|
Return
on Average Assets (%)
|
0.41
|
0.48
|
0.28
|
Return
on Average Equity (%)
|
4.45
|
4.32
|
3.46
|
Non-Performing
Assets/Assets (%)
|
1.53
|
1.22
|
0.92
|
|
|
|
|
Market
Capitalization and Pricing Ratios (3)
|
|
|
|
Market
Capitalization ($ Millions)
|
$71.60
|
$58.70
|
$20.20
|
Price/Tangible
Book (%)
|
121.30%
|
116.94%
|
79.18%
|
Price/Earnings
(x)
|
19.07x
|
19.89x
|
22.94x
|
(1) Pricing ratios
at announcement.
(2) Reflects
financial data as of or for the trailing 12 months ended December
31, 2016.Earnings ratios and multiples reflect core earnings which
equals reported earnings net of a one-time recovery of $800,000 on
a non-performing loan and $136,000 of expense related to the former
CEO’s severance, all on a tax effected basis at an assumed
38% marginal tax rate.
(3) Market
capitalization and pricing ratios for DCB Bancshares are based on
the DCB Bancshares’ closing price of $12.50 per share in the
over-the-counter market as of January 27, 2017.
Relative to the
Peer Group, RP Financial made downward valuation adjustments for
DCB Bancshares’ smaller asset size lower earnings and
earnings composition that includes material contributions from
secondary market loan sales and indirect auto lending. Upward
valuation adjustments relative to the Peer Group were applied for
DCB Bancshares’ more leveraged equity position, lower ratio
of non-performing assets, and operations in the
Baltimore-Washington metropolitan area. RP Financial concluded with
a public equivalent value for DCB Bancshares equal to $15.00 per
share.
Then, a Control
Premium Analysis, which involved applying a control premium to the
fair market value of DCB Bancshares stock RP Financial derived as
well as to the actual trading value of DCB Bancshares stock as of
January 27, 2017 (DCB Bancshares’ stock traded on a limited
basis on the Pink marketplace of the OTC Markets Group) to arrive
at a range of sale of control values under this approach. The
control premium applied was the median of the 1-week and one-month
premiums paid over the trading value of the stock (i.e.,
acquisition price at announcement divided by price of target
one-week and one-month prior to announcement date involving selling
institutions with total assets between $100 million and $1 billion
that announced a transaction over the 12-month period ending
January 27, 2017).RP Financial applied a range of control premiums
from 35% to 50% to the range of trading values.
Applying this
premium to the fair market value of DCB Bancshares’ stock
that RP Financial derived and to the actual closing price of DCB
Bancshares’ stock as of February 1, 2017 resulted in a sale
of control valuation range of $17.00 to $22.50 per share, which was
below the merger consideration of $25.22 per share as of February
1, 2017, while the value of the merger consideration at the lower
collar (assumes the Closing Market Price for Old Line Bancshares is
$16.68 per share) is $20.18 and falls within the estimated range of
value indicated by the Control Premium Approach.
Discounted Cash Flow Analysis
RP Financial
evaluated the value per share of the current offer to the implied
value of DCB Bancshares’ current business plan. In this
regard, RP Financial measured the present value per share of future
dividends and the terminal value to DCB Bancshares’ current
stockholders utilizing DCB Bancshares’ preliminary 2017
budget data which covered the five year period from January 1,
2017, to December 31, 2021. The discounted cash flow analysis
reflected the preliminary 2017 budget assumptions as
follows:
●
Beginning balance
sheet as of December 31, 2016, was utilized for modeling
purposes;
●
Asset growth in the
range of 6% to 9% annually and loan growth in the range of 10%
annually;
●
The projected
return on average assets was projected to equal 0.50% in 2017
increasing gradually to equal 0.79% by 2021;
●
Regulatory capital
required to capitalize the growth targeted within the 2017 five
year budget was bolstered by an assumed issuance of subordinated
debt in the amount of $7 million in May 2017, the proceeds of which
were downstreamed as tier 1 capital to Damascus Community Bank;
and
●
Dividends to
stockholders was assumed to remain stable at $0.08 per share
annually, which is equal to DCB Bancshares’ current dividend
policy.
The discounted cash
flow analysis reflected the following valuation
assumptions:
●
Fifth year terminal
value multipliers for earnings per share were in a range of 21 to
25 times earnings per share while the fifth year terminal value
multipliers for tangible book value per share were in a range of
1.15 times to 1.45 times tangible book value per share;
and
●
The cash flows were
then discounted to present value using two discount rates, a low of
13.0% and a high of 15.0%.
The present per
share value generated by the discounted cash flow under these
assumptions ranged from $18.00 per share to $23.50 per share. The
indicated range of value pursuant to the discounted cash flow
approach was below the merger consideration of $25.22 per share as
of February 1, 2017, while the value of the merger consideration at
the lower collar (assumes the Closing Market Price for Old Line
Bancshares is $16.68 per share) is $20.18 and falls within the
estimated range of value indicated by the Discounted Cash Flow
Approach.
Pro Forma Impact Analysis
Since the merger
consideration consists solely of Old Line Bancshares’ common
stock, RP Financial considered the estimated pro forma impact of
the merger on Old Line Bancshares’ financial condition,
operating results and stock pricing ratios. Specifically, RP
Financial considered that the merger is anticipated to be
immediately accretive to Old Line Bancshares’ tangible book
value per share and will be accretive to Old Line Bancshares’
pro forma earnings per share within the first year of completing
the merger, assuming incorporation of certain anticipated merger
synergies and core earnings estimates for DCB Bancshares, and will
increase Old Line Bancshares’ market capitalization and
shares outstanding. Furthermore, RP Financial considered the
increased asset size, competitive profile and geographic footprint
of Old Line Bancshares on a pro forma basis. RP Financial
considered the pro forma impact of the merger on Old Line
Bancshares’ per share data and pricing ratios based on Old
Line Bancshares’ pre-announcement trading price. RP Financial
also considered other benefits of the merger to DCB
Bancshares’ stockholders, including the potential for
increased liquidity of the stock for DCB Bancshares’
stockholders given Old Line Bancshares’ larger size, greater
market capitalization and greater number of shares outstanding, and
listing on the NASDAQ Capital Market, whereas the trading market
for DCB Bancshares’ common stock has been historically been
limited as DCB Bancshares trades on the Pink marketplace of the OTC
Markets Group. Moreover, RP Financial considered the enhanced
ability to pursue growth within the expanded market area and
expanded management team. In comparing the pro forma impact of the
merger, RP Financial also took into consideration that following
the merger, DCB Bancshares’ stockholders will own
approximately 12% to 15% of the common stock in Old Line
Bancshares, with the ownership level dependent upon the closing
market prices of Old Line Bancshares common stock prior to the
effective date of the merger, and that two directors of DCB
Bancshares will serve on the Old Line Bancshares’ board of
directors following the closing of the merger.
In addition to the
above analyses, RP Financial considered and evaluated the operating
history of DCB Bancshares, the historical trading activity and
trading price of the DCB Bancshares common stock, the national,
regional and local risks that could negatively impact future
operations on a stand-alone basis. RP Financial’s opinion and
presentation to the DCB Bancshares board of directors was one of
many factors taken into consideration by the DCB Bancshares board
of directors in making its determination to approve the merger
agreement. Although the foregoing summary describes the material
components of the analyses presented by RP Financial to the DCB
Bancshares board of directors in anticipation of issuing the
February 1. 2017, opinion, it does not purport to be a complete
description of all the analyses performed by RP Financial and is
qualified by reference to the written opinion of RP Financial set
forth as Annex B, which common stockholders of DCB Bancshares are
urged to read in its entirety.
RP Financial Background and Experience
RP Financial, as
part of its financial institution valuation and financial advisory
practice, is regularly engaged in the valuation of
federally-insured depository institution securities in connection
with mergers and acquisitions, initial and secondary stock
offerings, and business valuations for financial institutions for
other purposes. As specialists in the valuation of securities and
providing financial advisory services to insured financial
institutions, RP Financial has experience in, and knowledge of, the
markets for the securities of such institutions
nationwide.
Terms of the Merger
Effects of the Merger
Upon completion of
the merger, DCB Bancshares will be merged with and into Old Line
Bancshares and the separate legal existence of DCB Bancshares will
cease. All property, rights, powers, duties, obligations and
liabilities of DCB Bancshares will automatically be deemed
transferred to Old Line Bancshares, as the surviving corporation in
the merger. Old Line Bancshares will continue to be governed by its
articles of incorporation and bylaws as in effect immediately prior
to the merger.
The merger
agreement provides that, pursuant to an Agreement and Plan of
Merger by and between Old Line Bank and Damascus Community Bank,
dated as of February 1, 2017, immediately after the merger Damascus
Community Bank will be merged with and into Old Line Bank, with Old
Line Bank as the surviving bank in the bank merger. Old Line Bank
will continue to be governed by its articles of incorporation and
bylaws in effect immediately prior to the bank merger.
Consideration to be Paid in the Merger
Pursuant to the
terms of the merger agreement, Old Line Bancshares will acquire DCB
Bancshares for consideration of shares of its common stock worth
160% of DCB Bancshares total stockholders’ equity less
intangible assets, if any, at December 31, 2016 (the “DCB
Tangible Equity”). At December 31, 2016, the DCB Tangible
Equity was $25.4 million. Accordingly, the value of the shares of
Old Line Bancshares common stock to be issued in the merger is
approximately $40.7 million, and absent the exercise of the Walk
Away Cure Right, as defined and discussed below under
“– Termination,” Old Line Bancshares will issue
between approximately 1,495,256 and 1,951,302 shares of its common
stock in the merger (based on the Average Price of its common
stock), which we refer to as the aggregate merger
consideration.
Changes in the
Average Price below $20.85 or above $27.21 will not, however,
absent the exercise of the Walk Away Cure Right, impact the number
of shares of Old Line Bancshares common stock that will be issued
in exchange for a share of DCB Bancshares common stock in the
merger (i.e. the per-share consideration), since at such point the
exchange ratio will be fixed. Therefore, to the extent the Average
Price falls below $20.85, the value of the aggregate merger
consideration will be below $40.7 million, and to the extent the
Average Price increases above $27.21, the value of the aggregate
merger consideration will be above $40.7 million.
What DCB Bancshares Stockholders Will Receive in the
Merger
Pursuant to the
merger agreement, except with respect to shares of DCB Bancshares
common stock held by stockholders who perfect their appraisal
rights as discussed in “– Appraisal Rights,” upon
completion of the merger, each share of DCB Bancshares common stock
that you hold at the effective time of the merger will be
automatically converted into the right to receive that number of shares of Old Line Bancshares
common stock (which we sometimes refer to as the per-share
consideration) equal to the
“exchange ratio,” with the exchange ratio being the
number determined by dividing the Per Share Value by the Average
Price, where:
●
The
Per Share Value means the amount determined by multiplying DCB
Bancshares’ total stockholders’ equity, less intangible
assets, if any, at December 31, 2016 (the “DCB Tangible
Equity”) by 1.60 and dividing such product by the number of
shares of DCB Bancshares common stock issued and outstanding
immediately prior to the effective time of the merger (the Per
Share Value is $25.22 based on DCB Tangible Equity);
and
●
The
Average Price is the volume weighted average closing price of Old
Line Bancshares common stock for the ten trading days ending two
trading days before the closing of the merger;
provided that if the Average Price is $27.21 or
more or $20.85 or less, $27.21 or $20.85, respectively, will be
used as the Average Price, resulting in an exchange ratio of 0.9269
or 1.2096, respectively, subject to changes as a result of Old Line
Bancshares increasing the merger consideration as a result of
exercising the Walk Away Cure Right, discussed below under
“– DCB
Bancshares Price Termination Right.”
Examples of the
potential effects of fluctuations in the Average Price on the
merger consideration are illustrated in the following table, based
upon a range of hypothetical Average Prices. The Average Prices set
forth in the following table have been included for illustrative
purposes only. The Average Price may be less than $16.68 or more
than $29.93. We cannot assure you as to what the Average Price will
be or what the value of the Old Line Bancshares common stock to be
issued in the merger will be at the effective time of the merger,
and the Average Price at the effective time could be different than
at the time of the DCB Bancshares annual meeting.
|
|
|
|
DCB
|
|
|
|
|
|
|
Tang.
Equity
|
Per
Share Consideration
|
|
Type
of
|
|
Consideration
|
|
Per
Share
|
/DCB
|
Aggregate
|
Exchange
|
Average
|
Offered
Per
|
Exchange
|
as
of
|
Tang.
Book
|
Consideration
|
Ratio
|
Price
|
DCB
Share
|
Ratio
|
12/31/16
|
Per
Share
|
(in
thous.)
|
|
|
|
|
|
|
|
Fixed
Exch. Ratio
|
29.93
|
27.74
|
0.9269
|
15.76
|
176%
|
44,746
|
28.57
|
26.48
|
0.9269
|
15.76
|
168%
|
42,712
|
Floating Exchange
Ratio
|
27.21
|
25.22
|
0.9269
|
15.76
|
160%
|
40,678
|
25.85
|
25.22
|
0.9756
|
15.76
|
160%
|
40,678
|
24.49
|
25.22
|
1.0298
|
15.76
|
160%
|
40,678
|
23.13
|
25.22
|
1.0904
|
15.76
|
160%
|
40,678
|
21.77
|
25.22
|
1.1585
|
15.76
|
160%
|
40,678
|
20.85
|
25.22
|
1.2096
|
15.76
|
160%
|
40,678
|
Fixed
Exch. Ratio
|
20.41
|
24.69
|
1.2096
|
15.76
|
157%
|
39,839
|
19.05
|
23.04
|
1.2096
|
15.76
|
146%
|
37,169
|
16.68
|
20.18
|
1.2096
|
15.76
|
128%
|
32,542
|
Old Line Bancshares
will not issue fractional shares of Old Line Bancshares common
stock to DCB Bancshares stockholders. If you are otherwise entitled
to receive a fractional share of Old Line Bancshares common stock
under the exchange provisions described above, you will instead
receive cash for a fractional share of Old Line Bancshares common
stock you would otherwise be entitled to in an amount that is equal
to the product of (i) the fraction of a share that would otherwise
be due to you and (ii) the Average Price.
To
illustrate the calculation of the per-share merger consideration,
for example, assuming the Average Price was $27.63, which was the
volume weighted average closing price of Old Line Bancshares common
stock for the ten trading days ending two trading days before April
20, 2017, the most recent practical date prior to the date hereof,
a DCB Bancshares stockholder who owned 100 shares of DCB Bancshares
common stock immediately prior to the effective time of the merger
would receive in the merger 92 shares of Old Line Bancshares common
stock (which would have a value of $2,505.16 based on the closing
sales price for Old Line Bancshares common stock of $27.23 on April
20, 2017) and $19.06
of cash in lieu of a fractional share of Old Line Bancshares common
stock.
DCB Bancshares Price Termination Right
DCB Bancshares has
the option, but is not required, to terminate the merger agreement
if the volume weighted average closing price of Old Line Bancshares
common stock during the ten trading days ending five business days
before the effective date of the merger (the “Closing Market
Price”) is less than $16.68, and the ratio of the Closing
Market Price to $27.21 is more than 20% lower than any decrease in
the NASDAQ Bank Stock Index over such period, but, prior to such
termination being effective, Old Line Bancshares would then have
the option to increase the aggregate merger consideration (as a
practical matter, by increasing the exchange ratio) to an amount
calculated as if the Average Price was $16.68 per share, in which
case no termination will take place (the “Walk-Away Cure
Right”). DCB Bancshares cannot predict whether or not it
would exercise its right to terminate the merger agreement if these
conditions were met.
The merger
agreement does not provide for a resolicitation of DCB
Bancshares’ stockholders in the event that the conditions are
met and DCB Bancshares chooses to complete the merger. DCB
Bancshares’ board of directors has made no decision as to
whether it would exercise its right to terminate the merger under
these circumstances. In considering whether to exercise its right
to terminate the merger agreement, DCB Bancshares’ board of
directors would take into account all of the relevant facts and
circumstances that exist at the time and would consult with its
financial advisor and legal counsel
The fairness
opinion received by DCB Bancshares from RP Financial is dated as of
February 1, 2017, and is based on conditions in effect on that
date. Accordingly, the fairness opinion does not address the
possibilities presented if the termination provision relating to
the Closing Market Price is triggered, including the possibility
that DCB Bancshares’ board of directors might elect to
continue with the merger even if DCB Bancshares has the ability to
terminate the merger agreement under that provision. See
“– Opinion of DCB Bancshares’ Financial
Advisor.”
Approval of the
merger agreement and the merger by DCB Bancshares’
stockholders will confer on DCB Bancshares’ board of
directors the power to complete the merger even if the
price-related termination provision is triggered, without any
further action by or re-solicitation of the votes of DCB
Bancshares’ stockholders.
Exchange Procedures
If you are a record
holder of DCB Bancshares common stock, a letter of transmittal for
use in surrendering your certificates representing your shares of
DCB Bancshares common stock will be mailed to you no more than five
business days following the effective date of the merger. The
letter of transmittal will include instructions for submitting your
DCB Bancshares stock certificate(s) in exchange for the Old Line
Bancshares common stock you are entitled to as a result of the
merger. You must carefully follow the instructions on the letter of
transmittal and return a properly executed letter of transmittal
and your DCB Bancshares stock certificate(s) to the exchange agent
in order to receive the per-share merger consideration for your
shares. The DCB Bancshares stock certificate(s) must be in a form
that is acceptable for transfer (as explained in the letter of
transmittal).
Neither Old Line
Bancshares nor its exchange agent will be under any obligation to
notify any person of any defects in a letter of
transmittal.
Old Line
Bancshares’ exchange agent will mail to each former
stockholder of DCB Bancshares certificates representing shares of
Old Line Bancshares common stock and checks representing cash in
lieu of fractional share interests as soon as practicable after its
receipt of a properly completed and signed letter of transmittal
and all accompanying DCB Bancshares stock certificates representing
shares of DCB Bancshares common stock held by such former
stockholder. No interest will be paid on any cash
payment.
Certificates
representing shares of Old Line Bancshares common stock will be
dated the effective date of the merger and will entitle the holders
to dividends, distributions and all other rights and privileges of
an Old Line Bancshares stockholder from the effective date. Until
the certificates representing DCB Bancshares common stock are
surrendered for exchange, holders of such certificates will not
receive the merger consideration or dividends or distributions on
the Old Line Bancshares common stock into which such shares have
been converted. When the certificates are surrendered to the
exchange agent, any unpaid dividends or other distributions will be
paid without interest. Old Line Bancshares has the right to
withhold dividends or any other distributions on its shares until
the applicable DCB Bancshares stock certificates are surrendered
for exchange.
Until surrendered,
each DCB Bancshares stock certificate, following the effective date
of the merger, is evidence solely of the right to receive the
proportionate amount of the aggregate per-share merger
consideration. In no event will either Old Line Bancshares or DCB
Bancshares be liable to any former DCB Bancshares stockholder for
any amount paid in good faith to a public official or agency
pursuant to any applicable abandoned property, escheat or similar
law.
Under the merger
agreement, any shares of DCB Bancshares common stock outstanding
immediately prior to the effective time of the merger that are
evidenced by one or more certificates representing shares of common
stock of Damascus Community Bank, par value $3.00 per share
(“Bank Certificates”), that have not been surrendered
pursuant to Section 4(b) of the Plan of Reorganization and Share
Exchange dated as of April 27, 2016, by and between DCB Bancshares
and Damascus Community Bank, will be treated as outstanding shares
of DCB Bancshares common stock, and the Bank Certificates will be
treated as certificates evidencing shares DCB Bancshares common
stock, except that the holders thereof will be entitled to receive
the per-share consideration in exchange therefor only upon the
surrender of the Bank Certificates in accordance with the terms of
the merger agreement discussed above. Shares of DCB Bancshares
common stock evidenced by Bank Certificates will in all other
respects be subject to the same terms and conditions set forth in
the merger agreement that apply to shares of DCB Bancshares common
stock evidenced by stock certificates issued by DCB
Bancshares.
Old Line Bancshares
will not issue any fractions of a share of common stock. Rather,
Old Line Bancshares will pay cash for any fractional share interest
any DCB Bancshares stockholder would otherwise be entitled to
receive in the merger. For each fractional share that would
otherwise be issued, Old Line Bancshares will pay by check an
amount equal to the amount of such fractional share multiplied by
the Average Price.
Old Line Bancshares Common Stock
Each share of Old
Line Bancshares common stock outstanding immediately prior to
completion of the merger will remain outstanding after and be
unchanged by the merger.
Effective Date
The merger will
take effect when all conditions, including obtaining stockholder
and regulatory approval, have been fulfilled or waived, or as soon
as practicable thereafter as Old Line Bancshares and DCB Bancshares
may mutually select. By law, however, regulatory and stockholder
approval cannot be waived. We presently expect to close the merger
on or about June 30, 2017. See “– Conditions to the
Merger” and “– Regulatory
Approvals.”
Representations and Warranties
The merger
agreement contains customary representations and warranties
relating to, among other things:
●
Organization of Old
Line Bancshares and DCB Bancshares and their respective
subsidiaries;
●
Capital structures
of Old Line Bancshares and DCB Bancshares;
●
Authorization,
valid approval, valid execution and delivery, non-contravention and
enforceability of the merger agreement;
●
Consents, waivers
or approvals of regulatory authorities or third parties necessary
to complete the merger;
●
Consistency of
financial statements with GAAP;
●
Absence of material
adverse changes, since December 31, 2015, in assets, liabilities,
liquidity, net worth, property, financial condition and results of
operations, or any damage, destruction or loss;
●
Filing of tax
returns and payment of taxes;
●
Absence of
undisclosed material pending or threatened litigation, arbitration
or other proceedings, claims, actions or governmental
investigations or inquiries, and of facts that could be the basis
for any of the foregoing;
●
Compliance with
applicable laws and regulations;
●
Status of Old Line
Bancshares’ disclosure controls and procedures and internal
control over financial reporting, and DCB Bancshares’
internal accounting controls;
●
Absence of labor or
collective bargaining agreements, union organizing efforts, labor
strikes, labor disputes and similar matters, and absence of pending
or threatened arbitrations or proceedings with respect to labor
matters;
●
Retirement and
other employee benefit plans and matters relating to the Employee
Retirement Income Security Act of 1974;
●
Quality of title to
assets and properties;
●
Maintenance of
adequate insurance;
●
Absence of
undisclosed brokers’, finders’, investment bankers and
financial advisors’ fees or the retention of finders,
brokers, investment bankers or financial advisors;
●
Absence of material
environmental violations, actions or liabilities;
●
Accuracy of
information supplied by Old Line Bancshares and DCB Bancshares for
inclusion in the registration statement, filed under the Securities
Act, of which this proxy statement/prospectus is a part, and all
applications filed with regulatory authorities for approval of the
merger and the bank merger;
●
Intellectual
property used or owned;
●
Validity and
binding nature of loans reflected as assets in the financial
statements;
●
Disclosure of loans
and the extension of loans in compliance with applicable
regulations;
●
Disclosure of
material contracts;
●
Material compliance
with the Community Reinvestment Act of 1977 (the “CRA”)
and most recent CRA rating;
●
Material compliance
with the Bank Secrecy Act, USA PATRIOT Act, anti-money laundering
statutes, rules or regulations, and statutes, rules and regulations
relating to privacy of customer information;
●
Disclosure of any
event, circumstance or other occurrence that constitute a
“breach of a security system” under applicable
law;
●
Compliance with
laws related to securities activities by employees and
agents;
●
Disclosure of
related party transactions;
●
Establishment and
maintenance of the allowance for loan losses;
●
Investment
securities status;
●
Qualification of
the merger as a tax-free reorganization under Section 368(a) of the
Internal Revenue Code;
●
Accuracy and
completeness of corporate books and records and maintenance of
corporate books and records in accordance with applicable
law;
●
Absence of certain
enumerated changes with respect to DCB Bancshares;
●
Absence of
undisclosed liabilities;
●
With respect to DCB
Bancshares, disclosure of brokered deposits;
●
With respect to DCB
Bancshares, absence of option plans and convertible
securities;
●
With respect to DCB
Bancshares, representations with respect to its certain risk
management arrangements; and
●
With respect to DCB
Bancshares, that it does not have trust powers or act as trustee,
agent, custodian, personal representative, guardian, conservator or
investment adviser, does not originate, maintain or administer
credit card accounts, and has not provided merchant credit card
processing services.
Conduct of Business Pending the Merger
In the merger
agreement, DCB Bancshares agreed to conduct its business and to
engage in transactions only in the usual, regular and ordinary
course of business, consistent with past practice, except as
otherwise required by or contemplated in the merger agreement or
consented to by Old Line Bancshares. DCB Bancshares also agreed to
use its commercially reasonable good faith efforts to preserve its
business organization intact, to maintain good relationships with
employees, and to preserve the good will of its customers and
others with whom business relationships exist. Further, in the
merger agreement DCB Bancshares agreed that, except as permitted by
the merger agreement or required in writing by its regulators (and
with notice to Old Line Bancshares), through the effective time of
the merger it will not, and will not allow any subsidiary to,
without the written consent of Old Line Bancshares:
●
Change its articles
of incorporation, bylaws, charter documents, operating agreement
and/or other governing documents;
●
Change the number
of authorized or issued shares of its capital stock, repurchase,
redeem or otherwise acquire any shares of its capital stock, or
issue or grant options or similar rights with respect to its
capital stock or any securities convertible into its capital
stock;
●
Declare, set aside
or pay any dividend or other distribution in respect of its capital
stock, except for cash dividends declared and paid in the normal
course of business consistent with past practice and in an amount
not to exceed $0.02 per share quarterly;
●
Grant any
severance, retention or termination pay, except in accordance with
policies or agreements in effect on February 1, 2017;
●
Enter into or amend
any employment, consulting, severance, compensation,
“change-in-control” or termination contract or
arrangement;
●
Grant job
promotions or increase the rate of compensation of, or pay any
bonus to, any director, officer, employee, independent contractor,
agent or other person associated with it, except with respect to
officers and employees at the level of Vice President or below (i)
to the extent such promotion or increase is made in the normal
course of its business consistent with past practices, or (ii)
routine periodic pay increases, selective merit pay increases and
pay raises in the normal course of business and consistent with
past practices, provided, however, that such aggregate increases in
the rate of compensation may not be in excess of 3% and such
aggregate bonuses may not be in excess of 5% of the aggregate
salaries of all such employees;
●
Hire any new
employees or fill any job vacancies above the level of Vice
President, unless DCB Bancshares determines in good faith is
necessary to preserve its business, maintain relationships and
preserve good will as set forth above;
●
Except in the
ordinary course consistent with past practice, sell, lease, assign,
transfer, mortgage, encumber or otherwise dispose of its assets,
other than consistent with past practice and for full and fair
consideration actually received;
●
Modify in any
material manner the manner in which it has previously conducted its
business or enter into any new line of business;
●
Except for Federal
Home Loan Bank of Atlanta advances with a maturity of six months or
less and deposits taken in the ordinary course of business
consistent with past practice, incur any indebtedness for borrowed
money or incur, assume or become subject to any obligations or
liabilities of any other person or entity, except for the issuance
of letters of credit in the ordinary course of business and in
accordance with the restrictions otherwise set forth in the merger
agreement;
●
Sell or otherwise
dispose of any real property, except other real estate owned in a
reasonably acceptable commercial manner in the ordinary course of
business;
●
Take any action
that would result in any of the conditions necessary to close the
merger, as set forth in the merger agreement, not being
satisfied;
●
Waive, release,
grant or transfer any rights of material value, or modify or change
in any material respect any existing material agreement to which it
is a party;
●
Change any
accounting methods, principles or practices, except as may be
required by GAAP, applicable law, rule, regulation, order, decree,
judgment, injunction, writ, regulatory policy or directive
(“Law”) or by any applicable regulatory
authority;
●
Implement any new
employee benefit plan, or amend any plans except as required by
applicable Law or by its terms as a result of the merger agreement,
and provided that amendments to an employee benefit plan to modify
the available investment options will be permitted;
●
Implement or adopt
any material change in its: (i) guidelines and policies in
existence on February 1, 2017 with regard to underwriting and
making extensions of credit, the establishment of reserves with
respect to possible losses thereon, or the charge-off of losses
incurred thereon; (ii) investment policies and practices; or (iii)
other material banking policies, or otherwise fail to conduct its
banking activities in the ordinary course of business consistent
with past practice except as may be required by changes in
applicable Law, GAAP or the direction of a regulatory
authority;
●
Change its deposit
or loan rates other than in the ordinary course of business
consistent with past practice, or otherwise fail to conduct its
lending and deposit activities in the ordinary course of business
consistent with past practice;
●
Enter into, modify,
amend or renew any agreement under which it is obligated to pay
more than $50,000 and that is not terminable by it with 60
days’ notice or less without penalty, payment or other
conditions (other than the condition of notice), or enter into,
renew, extend or modify any transaction with any affiliate, other
than deposit and loan transactions in the ordinary course of
business and that comply with applicable Law;
●
Except as required
by applicable Law: (i) implement or adopt any material change in
its interest rate and other risk management policies, procedures or
practices; or (ii) fail to follow its existing policies or
practices with respect to managing its exposure to interest rate
and other risk;
●
Take any action
that would give rise to a right of payment to any person under any
employment agreement, except for contractually required
compensation;
●
Purchase or sell
any securities other than in the normal course of business
consistent with past practice (does not limit issuer
redemptions);
●
Except in the
ordinary course of business consistent with past practice and
involving an amount not in excess of $50,000 (exclusive of any
amounts paid directly or reimbursed to it under any insurance
policy maintained by DCB Bancshares or any subsidiary), settle any
material action, suit, claim, arbitration, investigation, inquiry,
grievance or other proceeding (or basis therefor) pending or, to
the knowledge of DCB Bancshares, threatened, against or affecting
DCB Bancshares or any subsidiary or any of their respective
properties or assets, provided that no settlement may be made if it
involves a precedent for other similar claims that, in the
aggregate, could reasonably be determined to be material to DCB
Bancshares and its subsidiaries, taken as a whole;
●
Foreclose upon or
otherwise take title to or possession or control of any real
property without first obtaining a Phase I environmental report
thereon, except (i) where, after using commercially reasonable
efforts, it is unable to gain access to the property, provided that
DCB Bancshares has provided notice to Old Line Bancshares that it
has been unable to gain such access and as a result intends to
foreclose without obtaining a Phase I environmental report thereon,
or (ii) with respect to one- to four-family, non-agricultural
residential properties of five acres or less for which it has no
reason to believe that such property contains hazardous substances
known or reasonably suspected to be in violation of, or require
remediation under, applicable environmental laws;
●
Except as permitted
by the merger agreement in connection with a superior DCB
Bancshares transaction, merge or consolidate with any other entity,
or sell or lease a substantial portion of its assets or
business;
●
Acquire all or any
substantial portion of the business or assets of any other entity,
other than in connection with the collection of loan and credit
arrangements;
●
Enter into a
purchase and assumption transaction with respect to deposits and
liabilities;
●
Permit the
revocation or surrender of its certificate or authority to
maintain, file an application for opening, closing or relocation
of, or open, close or relocate, any branch or automated banking
facility;
●
Make any capital
expenditure, individually or in the aggregate, of $50,000 or
more;
●
Sell or acquire any
loans (excluding originations) or loan participations, except in
the ordinary course of business consistent with past practice (but
in the case of a sale, after giving Old Line Bancshares or Old Line
Bank a first right of refusal to acquire such loan or
participation), or sell or acquire any loan servicing rights,
provided that neither DCB Bancshares nor any of its subsidiaries is
permitted to sell or acquire any loan or loan participation having
a principal balance in excess of $500,000;
●
Take any action, or
knowingly fail to take any action, that would preclude the
treatment of the merger as a tax-free reorganization under Section
368(a) of the Internal Revenue Code;
●
Make any charitable
or similar contributions, except in amounts not to exceed $5,000
individually and $10,000 in the aggregate;
●
Except as already
committed to on February 1, 2017, enter into, grant, approve,
renew, materially modify or extend any loan, lease, advance, credit
facility, credit enhancement, guarantee, commitment, line of credit
or letter of credit other than for an owner-occupied residence (a
“Non-Residential Credit Extension”) except in the
ordinary course of business consistent with past practice, provided
that in any case none of DCB Bancshares nor any subsidiary thereof
may make a Non-Residential Credit Extension in excess of $2,000,000
or, if to an existing customer, that increases the aggregate loan
exposure to such customer to more than $2,000,000;
●
Except as already
committed to on February 1, 2017, enter into, grant, approve,
modify or extend any loan, credit facility, line of credit or
letter of credit for an owner-occupied residence (a
“Residential Credit Extension”) that would result in
credit exposure in excess of (i) $1,000,000 through March 31, 2017,
or (ii) the then-applicable Federal Housing Finance Agency jumbo
loan limit after March 31, 2017, provided that any Residential
Credit Extension in excess of the then-applicable FHA limit made
before March 31, 2017, must be made in in the ordinary course of
business consistent with past practice;
●
Issue any
communication relating to the merger or other transactions
contemplated by the merger agreement to employees (including
general communications relating to benefits and compensation)
without prior consultation with Old Line Bancshares and, to the
extent relating to post-closing employment, benefit or compensation
information, without the prior consent of Old Line Bancshares, or
issue any communication of a general nature to customers without
the prior approval of Old Line Bancshares, except as required by
Law or for communications in the ordinary course of business
consistent with past practice that do not relate to the merger or
other transactions contemplated by the merger
agreement;
●
Enter into any
interest rate swap, floor or cap or similar commitment, agreement
or arrangement, except in the ordinary course of business
consistent with past practice; or
●
Agree to do any of
the foregoing.
DCB Bancshares also
agreed in the merger agreement, among other things,
to:
●
Permit Old Line
Bancshares, if Old Line Bancshares elects to do so at its own
expense, to conduct environmental assessments with respect to all
real property owned, leased or operated by DCB Bancshares and its
subsidiaries;
●
Submit the proposed
merger and the merger agreement to its stockholders for approval at
a stockholders’ meeting to be held as promptly as
practicable, with an approval recommendation by its board of
directors; and
●
Dissolve any
non-operating subsidiaries of DCB Bancshares and Damascus Community
Bank prior to the closing of the merger.
Old Line Bancshares
and DCB Bancshares jointly agreed in the merger agreement, among
other things:
●
To cooperate with
each other in connection with the preparation of the registration
statement of which this proxy statement/prospectus is a part, all
applications for required regulatory approvals, waivers or
consents, and other necessary filings;
●
That the
information each party provides for inclusion in the registration
statement of which this proxy statement/prospectus is a part and
any regulatory application will be materially accurate and
complete;
●
Subject to the
terms of the merger agreement, to use their reasonable best efforts
to take all actions and do all things necessary to complete the
transactions contemplated by the merger agreement;
●
To maintain
adequate insurance;
●
To maintain books
and records in accordance with GAAP and consistent with past
practice;
●
To file all tax
returns and pay all taxes when due;
●
To cooperate with
each other in the interests of an orderly, cost-effective
consolidation of operations;
●
To give the other
reasonable access to its business, properties, assets, books and
records and personnel;
●
To deliver or, the
case of Old Line Bancshares, make available, to each other updated
financial statements as provided in the merger
agreement;
●
To deliver to each
other all documents that may be filed with the SEC, the NASDAQ
Stock Market LLC, or with banking or other regulatory authorities;
and
●
To consult upon the
form and substance of any press release or public statement related
to the merger agreement or the merger, and to not issue any press
release or make any public statement regarding such matters without
the prior written consent of the other party.
In addition, Old
Line Bancshares also agreed in the merger agreement, among other
things, that it will elect Stephen J. Deadrick and another DCB
Bancshares director to the Old Line Bancshares and Old Line Bank
boards or directors and purchase extended period officers’
and directors’ liability insurance for the officers and
directors of DCB Bancshares and that it will not, and will not
allow any subsidiary to, except as permitted by the merger
agreement or as may be required by Law or in writing from any
regulatory authority, without the consent of DCB
Bancshares:
●
Take any action
that would result in any condition to closing of the merger from
being satisfied;
●
Take any action or
knowingly fail to take any action that would preclude the treatment
of the merger as a tax-free reorganization under Section 368(a) of
the Internal Revenue Code; or
●
Agree to do either
of the foregoing.
Conditions to the Merger
Each of Old Line
Bancshares’ and DCB Bancshares’ obligations to complete
the merger are subject to various conditions, including, among
other things, the following:
●
The merger and the
merger agreement shall have been approved by the stockholders of
DCB Bancshares;
●
All necessary
consents and approvals for the merger shall have been received, all
necessary filings and registrations by DCB Bancshares and Old Line
Bancshares shall have been accepted or declared effective, except
where the failure to obtain such consent or approval or for any
such filing or registration to be accepted or declared effective
would not reasonably be expected to have a material adverse effect
on Old Line Bancshares or Old Line Bank after the merger; all
waiting periods relating to any necessary consents, approvals,
filings and registration statements shall have expired; and no such
consent or approval shall have imposed any condition or requirement
that in the reasonable opinion of either DCB Bancshares’
board of directors or Old Line Bancshares’ board of directors
would: (i) (a) prohibit or materially limit the ownership or
operation by Old Line Bancshares or any of its subsidiaries of all
or any material portion of the business or assets of DCB Bancshares
or any of its subsidiaries, (b) compel Old Line Bancshares or DCB
Bancshares to dispose of all or a material potion of either
party’s business or assets, (c) impose a material compliance
burden, penalty or obligation on Old Line Bancshares or DCB
Bancshares, or (d) otherwise materially impair the value of DCB
Bancshares to Old Line Bancshares; or (ii) so materially and
adversely impact the economic or business benefits of the merger to
either Old Line Bancshares or DCB Bancshares, as applicable, such
as to render it inadvisable. See “– Terms of the Merger
– Regulatory Approvals;”
●
No temporary
restraining order, injunction, or other judgment, order or decree
preventing the completion of the transactions contemplated by the
merger agreement shall have been issued and remain in
effect;
●
Receipt of an
opinion of its counsel that the merger constitutes for federal
income tax purposes a tax-free “reorganization” within
the meaning of Section 368(a) of the Internal Revenue Code and,
with respect to the opinion received by DCB Bancshares, that any
gain realized in the merger will be recognized only to the extent
of cash or other property (other than Old Line Bancshares common
stock) received in the merger, including cash received in lieu of
fractional share interests. See “– Certain Federal
Income Tax Consequences”;
●
No material adverse
change shall have occurred in the business, property, assets,
liabilities, operations, business prospects, liquidity, income or
financial condition of the other party or any of its
subsidiaries;
●
The accuracy, as of
February 1, 2017, and as of the closing date of the merger, of the
representations and warranties of the other, except as to any
representation or warranty that specifically relates to an earlier
date and except as otherwise contemplated by the merger
agreement;
●
The other
party’s performance in all material respects of all
obligations required to be performed by it at or prior to the
closing date of the merger; and
●
Other conditions
that are customary for transactions of the type contemplated by the
merger agreement.
In addition, Old
Line Bancshares’ obligation to close the merger is also
contingent on:
●
Old Line Bancshares
being satisfied that the recognized environmental conditions of any
environmental assessments it conducted with respect to property of
DCB Bancshares or its subsidiaries will not have a material adverse
effect on DCB Bancshares;
●
Holders of no more
than 10% of the outstanding shares of DCB Bancshares common stock
as of the record date for the DCB Bancshares annual meeting
qualifying their shares for appraisal rights; and
●
Old Line Bancshares
having received all consents and authorizations of landlords and
other persons that are necessary to permit the transactions
contemplated by the merger agreement to be consummated without the
violation of any lease or other material agreement to which DCB
Bancshares or any of its subsidiaries is a party or by which any of
their properties are bound, except where failure to obtain such
consent or authorization would be reasonably expected not to have a
material adverse effect on Old Line Bancshares or Old Line Bank
after the merger.
Each party may
waive each of the conditions described above in the manner and to
the extent described in “– Terms of the Merger –
Amendment; Waiver” immediately below.
Amendment; Waiver
Subject to
applicable Law, at any time prior to the closing of the merger, Old
Line Bancshares and DCB Bancshares may:
●
Amend the merger
agreement;
●
Extend the time for
the performance of any of the obligations or other acts required in
the merger agreement;
●
Waive any term or
condition of the merger agreement, any inaccuracies in the
representations or warranties contained in the merger agreement or
in any document delivered pursuant thereto; or
●
Waive compliance
with any of the agreements or conditions contained in the merger
agreement.
By Law, however,
regulatory and stockholder approval cannot be waived.
Termination
The merger
agreement may be terminated at any time prior to the effective date
of the merger by the mutual consent of Old Line Bancshares and DCB
Bancshares.
The merger
agreement may also be terminated by either party if:
●
The merger is not
completed on or prior to October 31, 2017 or, because of the
failure to obtain any required regulatory approval or consent by
such date, the merger is not completed by November 30, 2017, if the
failure to complete the merger by that date is not due to a
material breach of the merger agreement by the party seeking to
terminate it.
●
There has been a
definitive written denial of a required regulatory approval or
consent, or the permanent withdrawal of an application for approval
or consent at the request of a regulatory authority.
●
The other party has
materially breached any representation, warranty, covenant or other
agreement in the merger agreement, and such breach either by its
nature cannot be cured prior to the closing of the merger or
remains uncured 30 days after receipt by such party of written
notice of such breach (provided that if such breach cannot
reasonably be cured within such 30-day period but may reasonably be
cured within 60 days and cure is being diligently pursued, then
termination can occur only after expiration of such 60-day period),
if the party terminating the merger agreement is not in material
breach.
●
DCB
Bancshares’ stockholders vote on but fail to approve the
merger agreement and the merger.
●
DCB Bancshares or
any DCB Bancshares subsidiary receives (with respect to DCB
Bancshares’ right to terminate) or enters into, approves or
resolves to approve (with respect to Old Line Bancshares’
right to terminate) an agreement, agreement in principle, letter of
intent or similar instrument with a view to being acquired, or more
than 50% of its assets or liabilities being acquired, by any person
other than Old Line Bancshares, or to sell 10% or more of its
outstanding equity securities, in a transaction the DCB Bancshares
board of directors determines is more favorable to the stockholders
of DCB Bancshares.
In addition, DCB
Bancshares may terminate the merger agreement if:
●
Old Line Bancshares
or any Old Line Bancshares subsidiary enters into a definitive term
sheet, letter of intent, agreement or similar agreement to merge,
as a result of which Old Line Bancshares is not the surviving
entity or Old Line Bancshares’ directors as of February 1,
2017 do not comprise the majority of the surviving entity’s
board of directors, with any person other than DCB Bancshares, and
the DCB Bancshares board of directors determines, after considering
the advice of counsel and its financial advisor, that such
transaction is not in the best interests of DCB Bancshares’
stockholders.
●
The volume weighted
average closing price of Old Line Bancshares common stock during
the ten trading days ending five trading days before the effective
date of the merger (the “Closing Market Price”) is less
than $16.68, and the ratio of the Closing Market Price to $27.21 is
more than 20% lower than any decrease in the NASDAQ Bank Stock
Index over such period, provided, however, that Old Line Bancshares
would then have the option to increase the aggregate merger
consideration (as a practical matter, by increasing the exchange
ratio) to an amount calculated as if the Average Price was $16.68
per share, in which case no termination will take place (the
“Walk-Away Cure Right”). If Old Line Bancshares were to
exercise its option to increase the merger consideration under
these circumstances, the number of shares of Old Line Bancshares
common stock that is issued in exchange for each share of DCB
Bancshares common stock, and the total number of shares of common
stock that Old Line Bancshares issues in the merger, would
increase.
Finally, Old Line
Bancshares may terminate the merger agreement if DCB
Bancshares’ board of directors withdraws, changes or modifies
its recommendation to stockholders to approve the merger agreement
and the merger, or authorizes, recommends or publicly proposes, or
publicly announces an intention to authorize, recommend or propose,
an agreement to enter into a superior DCB Bancshares
transaction.
DCB Bancshares Termination Fee
DCB Bancshares must
pay the Termination Fee to Old Line Bancshares if the merger
agreement is terminated in certain circumstances. The amount of the
Termination Fee will be equal to approximately $1.3 million, which
was calculated as 3.25% of the total deal value of approximately
$40.7 million (i.e., 160% of the DCB Tangible Equity). DCB will be
required to pay the Termination Fee to Old Line Bancshares if the
merger agreement is terminated because:
●
DCB Bancshares has
materially breached the merger agreement or any representation,
warranty, covenant or other agreement contained therein (provided
that Old Line Bancshares is not then in material breach of any
representation, warranty, covenant or other agreement contained in
the merger agreement);
●
The merger failed
to close by October 31, 2017 or, if due solely to the need to
obtain a regulatory approval or consent, November 30, 2017, or the
parties failed to receive all regulatory approvals and consents
required for the merger, and such failure resulted from the
knowing, willful and intentional actions or inactions of DCB
Bancshares or Damascus Community Bank (provided that Old Line
Bancshares is not then in material breach of any representation,
warranty, covenant or other agreement contained in the merger
agreement);
●
DCB Bancshares or
any DCB Bancshares subsidiary has (i) received a proposal for a
superior DCB Bancshares transaction (with respect to termination by
DCB Bancshares) or (ii) entered into, approved or resolved to
approve an agreement, agreement in principle, letter of intent or
similar instrument with respect to a superior DCB Bancshares
transaction (with respect to termination by Old Line Bancshares);
or
●
The board of
directors of DCB Bancshares has withdrawn, changed or modified its
recommendation to the stockholders of DCB Bancshares to approve the
merger agreement and the merger in a manner adverse to Old Line
Bancshares or authorizes, recommends or publicly proposes, or
publicly announces an intention to authorize, recommend or propose,
an agreement to enter into a superior DCB Bancshares transaction
(provided that Old Line Bancshares is not then in material breach
of any representation, warranty, covenant or other agreement
contained in the merger agreement).
Old Line Bancshares Termination Fee
Old Line Bancshares
has agreed to pay the Termination Fee to DCB Bancshares if DCB
Bancshares terminates the merger agreement because:
●
Old Line Bancshares
has materially breached the merger agreement or any representation,
warranty, covenant or other agreement contained therein (provided
that DCB Bancshares is not then in material breach of any
representation, warranty, covenant or other agreement contained in
the merger agreement); or
●
The merger failed
to close by October 31, 2017 or, if due solely to the need to
obtain a regulatory approval or consent, November 30, 2017, or the
parties failed to receive all regulatory approvals and consents
required for the merger, and such failure resulted from the
knowing, willful and intentional actions or inactions of Old Line
Bancshares or Old Line Bank (provided that DCB Bancshares is not
then in material breach of any material representation, warranty,
covenant or other agreement contained in the merger
agreement).
No Solicitation of Other Transactions
In the merger
agreement, DCB Bancshares agreed that it will not, and will not
allow its officers, directors, employees, investment bankers,
financial advisors, attorneys or other representatives or agents
to, directly or indirectly:
●
Initiate, solicit,
induce, encourage (including by way of furnishing information) or
take any other action to facilitate the making of any inquiry,
offer or proposal that constitutes, relates to or could reasonably
be expected to lead to (i) a merger or consolidation of, a share
exchange involving, or an acquisition of 50% or more of the assets
or liabilities of, DCB Bancshares or any of its subsidiaries, or
any other business combination involving DCB Bancshares or any of
its subsidiaries, or (ii) a transaction that involves the transfer
of beneficial ownership of, the right to acquire beneficial
ownership of or to vote securities representing, 10% or more of the
then outstanding shares of DCB Bancshares common stock or the
outstanding equity securities any of its subsidiaries, each of
which we refer to as an acquisition proposal”;
●
Respond to any
inquiry relating to an acquisition proposal or participate in any
discussions or negotiations regarding any acquisition proposal or
furnish, or otherwise afford access, to any person or entity (other
than Old Line Bancshares) any information or data with respect to
DCB Bancshares or any subsidiary or otherwise relating to an
acquisition proposal;
●
Recommend or
endorse an acquisition proposal;
●
Release any person
or entity from, waive any provisions of, or fail to enforce any
confidentiality agreement or standstill agreement to which DCB
Bancshares or any subsidiary is a party; or
●
Enter into any
agreement, agreement in principle, letter of intent or similar
instrument with respect to any acquisition proposal or approve or
resolve to approve any acquisition proposal or any agreement,
agreement in principle, letter of intent or similar instrument,
including an exclusivity agreement, relating to an acquisition
proposal.
DCB Bancshares may,
however, respond to an inquiry, furnish nonpublic information
regarding DCB Bancshares and its subsidiaries to, or enter into
discussions with, any person in response to an unsolicited
acquisition proposal if (i) DCB Bancshares’ board of
directors determines in good faith, after consultation with and
having considered the advice of its outside legal counsel and RP
Financial, that such acquisition proposal constitutes or is
reasonably likely to lead to an acquisition proposal that is more
favorable to the stockholders of DCB Bancshares than the merger
(provided that such transaction is not conditioned on obtaining
financing and would result in the acquisition of more than all, but
not less than all, of the outstanding shares of DCB
Bancshares’ common stock or all or substantially all of the
assets of DCB Bancshares and its subsidiaries on a consolidated
basis), which we refer to as a superior proposal, (ii) DCB
Bancshares’ board of directors determines in good faith,
after consultation with and based upon the advice of its outside
legal counsel and RP Financial, that such action is required in
order for the board of directors to comply with its fiduciary
obligations under applicable Law, and (iii) at least two business
days prior to furnishing any nonpublic information to, or entering
into discussions with, such person or entity, DCB Bancshares
provides Old Line Bancshares with written notice of the identity of
such person or entity and of DCB Bancshares’ intention to
furnish nonpublic information to, or enter into discussions with,
such person or entity and DCB Bancshares receives from such person
or entity an executed confidentiality agreement on terms no more
favorable to such person or entity than the confidentiality
agreement between DCB Bancshares and Old Line Bancshares, which
confidentiality agreement shall not provide such person or entity
with any exclusive right to negotiate with DCB Bancshares. DCB
Bancshares has also agreed to promptly provide to Old Line
Bancshares any non-public information regarding DCB Bancshares or
any subsidiary provided to any other person or entity that was not
previously provided to Old Line Bancshares, such additional
information to be provided no later than the date of provision of
such information to such other person or entity.
The agreement also
provides that under certain circumstances as set forth therein the
DCB Bancshares board of directors can approve or recommend that DCB
Bancshares’ stockholders approve what they have determined in
good faith is a superior proposal and withdraw, qualify or modify
its recommendation in connection with the merger agreement and the
merger when the board of directors has in good faith determined
that failure to do so would be inconsistent with its fiduciary
duties after consultation with and having considered the advice of
its outside legal counsel and RP Financial.
DCB Bancshares has
also agreed to notify Old Line Bancshares promptly (and in any
event within 24 hours) if it receives any acquisition proposal or
request for information, negotiations or discussions with respect
to any acquisition proposal, and to keep Old Line Bancshares
informed of the status and terms of any such proposal, offer,
information request, negotiations or discussions. DCB Bancshares
has further agreed to provide Old Line Bancshares with the
opportunity to present its own proposal to DCB Bancshares’
board of directors in response to any such proposal or offer, and
to negotiate with Old Line Bancshares in good faith with respect to
any such proposal.
For a discussion of
circumstances under which certain actions relating to DCB
Bancshares or a subsidiary entering into an alternative transaction
could result in DCB Bancshares being required to pay the
Termination Fee, see “– DCB Bancshares Termination
Fee.”
Expenses
Each of Old Line
Bancshares and DCB Bancshares will pay all of the costs and
expenses that it incurs in connection with the transactions
contemplated by the merger agreement, including fees and expenses
of financial consultants, accountants and legal
counsel.
Regulatory Approvals
Completion of the
merger is subject to the prior receipt of all approvals and
consents of federal and state authorities required to complete the
merger of Old Line Bancshares and DCB Bancshares as well as the
merger of Old Line Bank and Damascus Community Bank.
Old Line Bancshares
and DCB Bancshares agreed to use their reasonable best efforts to
obtain all regulatory approvals required to complete the merger and
the bank merger. These approvals include, with respect to the
merger, approval from the FRB and the Maryland Commissioner and,
with respect to the bank merger, approval from the FDIC and the
Maryland Commissioner. The merger cannot proceed without these
required regulatory actions.
Regulatory Approvals Required for the Merger
Federal Reserve Board. The acquisition
by a bank holding company of another bank holding company requires
the prior approval of the FRB under the Bank Holding Company Act.
Under this law, the FRB generally may not approve any proposed
transaction:
●
That would result
in a monopoly or that would further a combination or conspiracy to
monopolize banking in the United States; or
●
That could
substantially lessen competition in any section of the country,
that would tend to create a monopoly in any section of the country,
or that would be in restraint of trade, unless the FRB finds that
the public interest in meeting the convenience and needs of the
communities served outweighs the anti-competitive effects of the
proposed transaction.
The FRB is also
required to consider the financial and managerial resources and
future prospects of the companies and their subsidiary banks and
the convenience and needs of the communities to be served. Under
the CRA, the FRB also must take into account the record of
performance of Old Line Bancshares and DCB Bancshares in meeting
the credit needs of their communities, including low- and
moderate-income neighborhoods. In addition, the FRB must take into
account the effectiveness of the companies in combating money
laundering activities. Among other things, the FRB will evaluate
the capital adequacy of the combined company after completion of
the merger. The FRB also will take into consideration the extent to
which a proposed acquisition, merger or consolidation would result
in greater or more concentrated risks to the stability of the U.S.
banking or financial system. In connection with its review, the FRB
will provide an opportunity for public comment on the application
for the merger, and is authorized to hold a public meeting or other
proceedings if it determines that would be appropriate. Any
transaction approved by the FRB generally may not be completed
until 30 days after such approval, during which time the U.S.
Department of Justice may challenge such transaction on antitrust
grounds and seek divestiture of certain assets and
liabilities.
Maryland Commissioner. The merger is
subject to the prior approval of the Maryland Commissioner under
Section 5-903 of the Financial Institutions Article of the Maryland
Annotated Code. In determining whether to approve the merger, the
Maryland Commissioner will consider:
●
Whether the merger
may be detrimental to the safety and soundness of Damascus
Community Bank or DCB Bancshares; and
●
Whether the merger
may result in an undue concentration of resources or a substantial
reduction of competition in the State of Maryland.
The Maryland
Commissioner will not approve any acquisition if upon consummation
the combined entity (including any of its bank subsidiaries) would
control 30% or more of the total amount of deposits of insured
depository institutions in the State of Maryland, although the
Maryland Commissioner may waive this limitation upon good cause
shown. Old Line Bank will not control 30% of the insured deposits
in Maryland after the merger.
Regulatory Approvals Required for the Bank Merger
Federal Deposit Insurance Corporation.
The bank merger is subject to the prior approval of the FDIC under
the Bank Merger Act. In evaluating an application filed under the
Bank Merger Act, the FDIC generally considers: (i) the competitive
impact of the transaction; (ii) financial and managerial resources
of each bank that is a party to the bank merger; (iii) each of the
banks’ effectiveness in combating money-laundering
activities; (iv) the convenience and needs of the communities in
which the banks serve; and (v) the extent to which the bank merger
would result in greater or more concentrated risks to the stability
of the U.S. banking or financial system. The FDIC also reviews the
performance records of the relevant depository institutions under
the CRA, including their CRA ratings. In connection with its review
under the Bank Merger Act, the FDIC will provide an opportunity for
public comment on the application for the bank merger, and is
authorized to hold a public meeting or other proceeding if it
determines that would be appropriate.
Maryland Commissioner. The bank merger
is subject to the prior approval of the Maryland Commissioner under
Section 3-703(c) of the Financial Institutions Article of the
Maryland Annotated Code. The Maryland Commissioner will approve the
bank merger if it determines that: (i) Old Line Bank meets all the
requirements of Maryland law for the formation of a new commercial
bank; (ii) the bank merger agreement provides an adequate capital
structure, including surplus, for Old Line Bank in relation to its
deposit liabilities and other activities; (iii) the bank merger is
fair; and (iv) the proposed bank merger is not against the public
interest.
Applications
Old Line Bancshares
intends to file an application with the FRB and the Maryland
Commissioner requesting approval of the merger of DCB Bancshares
with and into Old Line Bancshares, and Old Line Bank filed
applications with the FDIC and Maryland Commissioner requesting the
approval of the merger of Damascus Community Bank into Old Line
Bank, on March 17, 2017. In general, the applications will describe
the terms of the merger or bank merger, the parties involved and
the activities to be conducted by the combined entities following
consummation of the transaction, and contain certain related
financial and managerial information.
We are not aware of
any material governmental approvals or actions that are required to
complete the merger or bank merger, except as described above. If
any other approval or action is required, we will use our best
efforts to obtain such approval or action.
Management and Operations After the Merger
The
current officers and directors of Old Line Bancshares and Old Line
Bank, with the addition of Stephen J. Deadrick, Chairman of the
Board of DCB Bancshares and Damascus Community Bank, and James R.
Clifford, Sr., a current director of DCB Bancshares (or such
replacements as named in a schedule to the merger agreement if
either of Mr. Deadrick or Mr. Clifford become disqualified to serve
as directors pursuant to the merger agreement), to each
entity’s board of directors, will continue to be the officers
and directors of Old Line Bancshares and Old Line Bank,
respectively, after the merger.
Employment; Severance
Following the
merger, Old Line Bancshares is not obligated to continue the
employment of any employees of DCB Bancshares or its subsidiaries.
As a result of the merger, some DCB Bancshares positions will be
eliminated. Old Line Bancshares will, however, endeavor to continue
the employment of all employees (as of December 16, 2016) of DCB
Bancshares and its subsidiaries (each a “DCB
Employee”), including Damascus Community Bank, in positions
that will contribute to the successful performance of the combined
organization. If a DCB Employee (i) is not offered employment with
Old Line Bancshares or a subsidiary of Old Line Bancshares, (ii)
does not accept an offer of employment because the offer is not for
a comparable position (as defined in the Damascus Community Bank
Employee Change in Control Plan (the “Plan”)), or (iii)
accepts an offer of employment but is involuntarily terminated
without cause (as defined in the merger agreement) within 12 months
after the date that the merger is effective, then Old Line
Bancshares will cause Old Line Bank or the other applicable Old
Line Bancshares subsidiary to make a severance payment to such DCB
Employee in accordance with and as set forth in the Plan, provided,
however, that each such employee that is eligible for a severance
payment will receive at least four weeks of “Base
Compensation” as defined in the Plan. Based on the terms of
the Plan, a DCB Employee eligible for severance under the terms of
the merger agreement that has at least one year of service would
receive a severance payment equal to the product of (i) the DCB
Employee’s years of service (rounded to the nearest full
year) and (ii) an amount equal to two weeks of the DCB
Employee’s “Base Compensation,” subject to a
maximum payment equal to six months of Base Compensation, and
provided that DCB Employees whose compensation is determined in
whole or in part on commission would be eligible for severance
equal to four percent of their prior 12-month Base Compensation for
each year of service, up to an amount equal to six months of Base
Compensation. The Plan defines “Base Compensation” as
follows:
●
For salaried DCB
Employees, their annual base salary in effect as of his or her
termination date or, if greater, the effective date of the
merger;
●
For DCB Employees
whose compensation is based in whole or in part on commission
income, base salary at termination (or if greater, at the effective
date of the merger), if any, plus the commission earned in the 12
months preceding the termination date (or if greater, the 12 months
preceding the effective date of the merger); or
●
For hourly DCB
Employees, total hourly wages for the 12 months preceding his or
her termination date or, if greater, the effective date of the
merger.
DCB Employees who
are a party to any employment, severance or “change in
control” agreement or any other agreement or arrangement that
would provide for a payment triggered by the merger or the bank
merger, including as described under “– Interest of
Directors and Officers in the Merger – Change in Control
Payments to be Made to Damascus Community Bank Executive
Officers,” will not be eligible for such severance benefits
unless such person waives or relinquishes his or her right to such
change in control payment.
Any DCB Employee
whose employment with Old Line Bancshares or a subsidiary of Old
Line Bancshares is terminated without cause after 12 months from
the effective date of the merger will receive such severance
benefits from Old Line Bancshares or the Old Line Bancshares
subsidiary as is provided for in Old Line Bancshares’ or such
subsidiary’s general severance policy for such terminations
(with full credit being given for each year of service with DCB
Bancshares or any DCB Bancshares subsidiary).
All of the payments
described in this section are subject to the receipt of any
necessary regulatory non-objections or waivers.
Employee Benefits
The merger
agreement provides that as of the effective date of the merger,
each DCB Employee who accepts employment with Old Line Bancshares
or a subsidiary thereof will be entitled to full credit for each
year of service with DCB Bancshares or any subsidiary thereof for
purposes of determining eligibility for participation, vesting and
benefit accrual in Old Line Bancshares’, or as appropriate,
in the Old Line Bancshares subsidiary’s, employee benefit
plans, programs and policies, except as prohibited by Law. Old Line
Bancshares will use the original date of hire by DCB Bancshares or
a DCB Bancshares subsidiary in making such determinations. After
the effective date of the merger, Old Line Bancshares may
discontinue or amend, or convert to or merge with an Old Line
Bancshares benefit plan, any DCB Bancshares benefit plan, subject
to the plan’s provisions and applicable Law.
Interests of Directors and Officers in the Merger
Certain members of
management of DCB Bancshares and its board of directors may have
interests in the merger in addition to their interests as
stockholders of DCB Bancshares. The DCB Bancshares board of
directors was aware of these factors and considered them, among
other factors, in approving the merger agreement.
Change in Control Payments to be Made to DCB Bancshares’
Co-Chief Executive Officers
On January 14,
2016, prior to having any discussions with Old Line Bank or Old
Line Bancshares, Damascus Community Bank entered into change of
control severance agreements with each of Robert L. Carpenter, Jr.,
Co-Chief Executive Officer and Executive Vice President - Chief
Financial Officer of DCB Bancshares and Damascus Community Bank,
and William F. Lindlaw, Co-Chief Executive Officer and Executive
Vice President - Chief Lending Officer of DCB Bancshares and
Damascus Community Bank. Under such agreements, each of Messrs.
Carpenter and Lindlaw is entitled to a lump sum cash payment equal
to two times the amount of his base salary in effect immediately
prior to a change in control (subject to certain limitations as set
forth in the agreement) if his employment with Damascus Community
Bank is terminated involuntarily without cause, as defined in the
agreements, or voluntarily with good reason, as defined in the
agreements, in contemplation of or within 12 months after a change
in control of Damascus Community Bank. Under such circumstances,
each of Messrs. Carpenter and Lindlaw is entitled to continued life
and health insurance coverage substantially identical to the
coverage maintained for him by Damascus Community Bank prior to the
change in control, until the earlier of (i) his death, (ii) his
return to employment with Damascus Community Bank or another
employer that provides him with similar coverage, or (iii) 18
months after his termination. The merger and the bank merger
constitute a change in control for purposes of these
agreements.
The following table
describes the change in control payment and the value of the
continuation of life and health insurance each of Messrs. Lindlaw
and Carpenter will be entitled to under his change of control
severance agreement upon consummation of the merger and the bank
merger, assuming he is not offered employment with Old Line Bank or
is offered employment but then such employment is terminated
involuntarily without cause or voluntarily with good reasons within
12 months of the merger and the bank merger.
Name
|
Change
in Control Payment Amount
|
Value
of Continued Insurance Coverage (assumes provided for 18
months)
|
William F.
Lindlaw
|
$369,000
|
$2,266
|
Robert J.
Carpenter, Jr.
|
$369,000
|
$7,826
|
Indemnification and Insurance
Old Line Bancshares
has agreed that for six years and one day after the effective date
of the merger, it will indemnify and hold harmless each present and
former director and officer of DCB Bancshares or any of its
subsidiaries against any costs or expenses (including reasonable
attorneys’ fees), judgments, fines, losses, claims, damages
or liabilities and amounts paid in settlement incurred thereafter
in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or
investigative, arising out of matters existing or occurring at or
prior to the effective time of the merger, based or arising out of,
or pertaining to the fact that he or she was a director or officer
of DCB Bancshares or any of its subsidiaries or is or was serving
at the request of DCB Bancshares or any of its subsidiaries as a
director, officer, employee, trustee or other agent of any other
organization or in any capacity with respect to any employee
benefit plan of DCB Bancshares, including any matters arising in
connection with or related to the negotiation, execution and
performance of the merger agreement or the merger or the bank
merger, and will advance expenses to such persons in connection
therewith, to the fullest extent to which such officers and
directors would have been entitled to indemnification and
advancement of expenses under the articles of incorporation and
bylaws of DCB Bancshares in effect on February 1, 2017, as though
such persons were present or former officers of Old line
Bancshares, or were serving at the request of Old Line Bancshares
or any of its subsidiaries, or as a director, officer, employee,
trustee or other agent of any organization or in any capacity with
respect to any employee benefit plan of Old Line Bancshares, as of
the effective time of the merger.
Old Line Bancshares
has further agreed that for a minimum of six years and one day
after the merger’s effective date, Old Line Bancshares will,
at its expense, maintain directors’ and officers’
liability insurance for the former directors and officers of DCB
Bancshares and its subsidiaries with respect to matters occurring
at or prior to the merger’s effective time (a
“tail” policy), so long as the policy can be obtained
at a cost not in excess of an aggregate of 200% of the current
annual premium attributable to the applicable officers’ and
directors’ liability insurance coverage in DCB
Bancshares’ or Damascus Community Bank’s liability
insurance policy(ies) in effect on February 1, 2017. If Old Line
Bancshares is unable to purchase the tail policy at a cost not in
excess of such amount, Old Line Bancshares will obtain a
directors’ and officers’ liability insurance tail
policy with the maximum coverage reasonably available for a cost
that does not exceed such amount.
Board Positions and Compensation
Upon
completion of the merger and the subsequent bank merger, Stephen J.
Deadrick and James R. Clifford, Sr. will be elected to the boards
of directors of Old Line Bancshares and Old Line Bank and will be
entitled to compensation in such capacity on the same basis as
other Old Line Bancshares and Old Line Bank directors. Currently,
each non-employee director of Old Line Bank, other than the
Chairman of the Board and the Vice Chairman of the Board,
receive$700 for each attended meeting of the board of directors,
$300 for each attended meeting of the loan committee and $400 for
each attended meeting of the corporate governance committee, the
compensation committee, the audit committee, risk committee,
strategic opportunities committee and the asset and liability
committee of the board of directors. The Chairs of each of the
corporate governance, compensation, risk and audit committees also
receive an additional $300 for each attended meeting of their
respective committees. If a director attends any of these meetings
via teleconference in lieu of in person, the director receives $200
instead of the regular in-person payment. Each non-employee
director of Old Line Bank, other than the Chairman of the Board and
the Vice Chairman of the Board, also receive an $8,400 quarterly
retainer.
Deferred Compensation Plan
Damascus Community
Bank maintains a deferred compensation plan, which provides for a
lump-sum payment to participants within 60 days of termination of
employment other than pursuant to retirement. One executive officer
of Damascus Community Bank, Rodney E. Reed, Senior Vice President
and Chief Credit Officer, participates in the plan and will receive
a lump-sum payment of his deferred compensation if his employment
is terminated in connection with the merger.
Support Agreements
As a condition to
Old Line Bancshares entering into the merger agreement, all the
directors and certain executive officers of DCB Bancshares, who in
the aggregate have the power to vote 12.9% of shares outstanding on
the record date for DCB Bancshares’ annual meeting, entered
into an agreement with Old Line Bancshares, dated as of February 1,
2017, pursuant to which each such director or executive officer
agreed to vote all of their shares of DCB Bancshares common stock
in favor of the merger agreement and the merger. A form of support
agreement is filed as Exhibit 99.2 to Old Line Bancshares’
Current Report on Form 8-K filed on February 1, 2017. See
“Where You Can Find More Information.” The support
agreements may have the effect of discouraging persons from making
a proposal for an acquisition transaction involving DCB Bancshares.
The following is a brief summary of the material provisions of the
support agreements.
Pursuant to the
support agreements, each director and executive officer of DCB
Bancshares agreed, among other things:
●
To vote, or cause
to be voted, at any meeting of DCB Bancshares’ stockholders
or other circumstance in which the vote, consent or other approval
of stockholders is sought, all of the DCB Bancshares common stock
as to which he or she is the record or beneficial owner (a) for
approval of the merger and the execution and delivery by DCB
Bancshares of the merger agreement, (b) against any superior DCB
Bancshares transaction, and (c) against certain other actions or
proposals that are intended, or could reasonably be expected, to
impede, interfere with, delay, postpone or materially adversely
affect the merger, the merger agreement or the transactions
contemplated by the merger agreement.
●
To take all
reasonable actions to and assist in the consummation of the merger
and the other transactions contemplated by the merger agreement,
and to use his or her best efforts to cause DCB Bancshares and its
subsidiaries to take the actions set forth in the merger
agreement.
●
To continue to hold
his or her shares of DCB Bancshares common stock until the earlier
of the time the merger is effective or the date the DCB
stockholders approve the merger agreement.
●
Not to exercise his
or her appraisal rights.
●
Not to take any
action that could reasonably be expected to have the effect of
preventing or disabling him or her from performing his or her
obligations under the support agreement.
Accounting Treatment
The merger will be
accounted for using the acquisition method of accounting with Old
Line Bancshares treated as the acquirer. Under this method of
accounting, DCB Bancshares’ assets (including identifiable
intangible assets) and liabilities (including executory contracts
and other commitments) will be recorded by Old Line Bancshares at
their respective fair values as of the closing date of the merger
and added to those of Old Line Bancshares. Any excess of purchase
price over the net fair values of DCB Bancshares’ assets and
liabilities will be recorded as goodwill. Financial statements of
Old Line Bancshares issued after the merger will reflect these
values, but will not be restated retroactively to reflect the
historical financial position or results of operations of DCB
Bancshares prior to the merger. The results of operations of DCB
Bancshares will be included in the results of operations of Old
Line Bancshares beginning on the effective date of the
merger.
Certain Federal Income Tax Consequences
The closing of the
merger is conditioned upon (i) the receipt by Old Line Bancshares
of the opinion of Baker, Donelson, counsel to Old Line Bancshares,
and (ii) the receipt by DCB Bancshares of the opinion of Gordon
Feinblatt, counsel to DCB Bancshares, each dated as of the
effective date of the merger, to the effect that:
●
The merger
constitutes a tax-free reorganization under Section 368(a) of the
Internal Revenue Code; and
●
Only as to the
opinion to be received by DCB Bancshares, any gain realized in the
merger will be recognized only to the extent of cash or other
property (other than Old Line Bancshares common stock) received in
the merger, including cash received in lieu of fractional share
interests.
The tax opinions to
be delivered in connection with the merger are not binding on the
IRS or the courts, and neither DCB Bancshares nor Old Line
Bancshares intends to request a ruling from the IRS with respect to
the United States federal income tax consequences of the merger.
Consequently, no assurance can be given that the IRS will not
assert, or that a court would not sustain, a position contrary to
any of those set forth below. In addition, if any of the facts,
representations or assumptions upon which the opinions are based is
inconsistent with the actual facts, the United States federal
income tax consequences of the merger could be adversely
affected.
The
following discussion describes the anticipated material
U.S. federal income tax consequences of the merger to
U.S. holders (as defined below) of DCB Bancshares common
stock. The discussion is based upon the opinion of Gordon
Feinblatt, filed with the registration statement of which this
proxy statement/prospectus is a part, that the merger will qualify
as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code and that stockholders who receive Old Line
Bancshares common stock will not recognize a gain or loss with
respect to their receipt of the shares, except with respect to any
cash received in lieu of fractional shares. This discussion
addresses only those holders that hold their DCB Bancshares common
stock as a capital asset within the meaning of Section 1221 of
the Internal Revenue Code and does not address all the
U.S. federal income tax consequences that may be relevant to
particular holders in light of their individual circumstances or to
holders that are subject to special rules, such as:
●
financial
institutions;
●
individual
retirement and other tax-deferred accounts;
●
persons subject to
the alternative minimum tax provisions of the Internal Revenue
Code;
●
persons eligible
for tax treaty benefits;
●
entities treated as
partnerships or other flow-through entities for U.S. federal income
tax purposes;
●
foreign
corporations, foreign partnerships and other foreign
entities;
●
tax-exempt
organizations;
●
persons whose
functional currency is not the U.S. dollar;
●
traders in
securities that elect to use a mark-to-market method of
accounting;
●
persons who are not
citizens or residents of the United States;
●
persons that hold
DCB Bancshares common stock as part of a straddle, hedge,
constructive sale or conversion transaction; and
●
U.S. holders
who acquired their shares of DCB Bancshares common stock through
the exercise of an employee stock option or otherwise as
compensation.
The following is
based upon the Internal Revenue Code, its legislative history,
United States Department of the Treasury regulations promulgated
pursuant to the Internal Revenue Code and published rulings and
decisions, all as currently in effect as of the date of this proxy
statement/prospectus, and all of which are subject to change,
possibly with retroactive effect, and to differing interpretations.
Tax considerations under state, local and foreign laws, or federal
laws other than those pertaining to U.S. federal income tax, are
not addressed in this proxy statement/prospectus.
Holders of DCB
Bancshares common stock should consult with their own tax advisers
as to the U.S. federal income tax consequences of the merger as
well as the effect of state, local, foreign and other tax laws and
of proposed changes to applicable tax laws, in light of their
particular circumstances.
For purposes of
this discussion, the term “U.S. holder” means a
beneficial owner of DCB Bancshares common stock that
is:
●
a U.S. citizen
or resident, as determined for federal income tax
purposes;
●
a corporation, or
entity taxable as a corporation, created or organized in or under
the laws of the United States; or
●
otherwise subject
to U.S. federal income tax on a net income basis.
The
U.S. federal income tax consequences of a partner in a
partnership holding DCB Bancshares common stock generally will
depend on the status of the partner and the activities of the
partnership. We recommend that partners in such a partnership
consult their own tax advisers.
Tax Consequences of the Merger Generally
As a result of the
merger qualifying as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code, the following
material U.S. federal income tax consequences will
result:
Receipt of Old Line
Bancshares Common Stock. No gain or loss will be recognized
by a DCB Bancshares stockholder with respect to their receipt of
shares of Old Line Bancshares common stock (except for cash
received in lieu of fractional shares, as discussed below) in
exchange for his or her shares of DCB Bancshares common stock. The
tax basis of the shares of Old Line Bancshares common stock
received by a DCB Bancshares stockholder in such exchange will be
equal (except for the basis attributable to any fractional shares
of Old Line Bancshares common stock, as discussed below) to the
basis of the DCB Bancshares common stock surrendered in exchange
for the Old Line Bancshares common stock. The holding period of the
Old Line Bancshares common stock received will include the holding
period of shares of DCB Bancshares common stock surrendered in
exchange for the Old Line Bancshares common stock, provided that
such shares were held as capital assets of the DCB Bancshares
stockholder at the effective time of the merger.
Cash in Lieu of Fractional
Shares. A DCB
Bancshares stockholder who holds DCB Bancshares common stock as a
capital asset and who receives, in exchange for such stock, shares
of Old Line Bancshares common stock and cash in lieu of a
fractional share interest in Old Line Bancshares common stock will
be treated as having received such cash in full payment for such
fractional share of stock and as capital gain or loss.
Tax Treatment of the
Entities. No gain or loss will be recognized by Old Line
Bancshares or DCB Bancshares as a result of the
merger.
Reporting Requirements
DCB Bancshares
stockholders will be required to retain records pertaining to the
merger. Certain DCB Bancshares stockholders are subject to certain
reporting requirements with respect to the merger. In particular,
such stockholders will be required to attach a statement to their
tax returns for the year of the merger that contains the
information listed in Treasury Regulation Section 1.368-3(b).
Such statement must include the stockholder’s adjusted tax
basis in its DCB Bancshares common stock and other information
regarding the merger. DCB Bancshares stockholders are urged to
consult with their tax advisers with respect to these and other
reporting requirements applicable to the merger.
THE
PRECEDING DISCUSSION IS A SUMMARY OF THE MATERIAL U.S. FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER AND DOES NOT PURPORT TO BE A
COMPLETE ANALYSIS OR DISCUSSION OF ALL POTENTIAL TAX EFFECTS
RELEVANT THERETO. DCB BANCSHARES STOCKHOLDERS ARE URGED TO CONSULT
THEIR OWN TAX ADVISERS AS TO THE U.S. FEDERAL INCOME TAX
CONSEQUENCES TO THEM OF THE MERGER (INCLUDING, BUT NOT LIMITED TO,
TAX RETURN REPORTING REQUIREMENTS), AS WELL AS THE EFFECT OF STATE,
LOCAL, FOREIGN AND OTHER TAX LAWS AND ANY PROPOSED CHANGES TO
APPLICABLE TAX LAWS.
Restrictions on Sales of Shares by Certain Affiliates
The shares of Old
Line Bancshares common stock to be issued in the merger will be
freely transferable under the Securities Act, except for shares
issued to any stockholder who is an “affiliate” of Old
Line Bancshares as defined by Rule 144 under the Securities Act.
Affiliates consist of individuals or entities that control, are
controlled by or are under common control with Old Line Bancshares,
and include the executive officers and directors of Old Line
Bancshares and may include significant stockholders of Old Line
Bancshares following the merger.
Stock Exchange Listing
Following the
merger, the shares of Old Line Bancshares common stock will
continue to trade on the NASDAQ Capital Market under the symbol
“OLBK.”
Appraisal Rights
Under Sections
3-201 through 3-213 of the MGCL, DCB Bancshares stockholders have
the right to object to the merger and to demand and receive
“fair value” of their shares of DCB Bancshares common
stock, determined as of the date of the meeting at which the merger
is approved, without reference to any appreciation or depreciation
in value resulting from the merger or its proposal. These rights
are also known as appraisal rights.
Holders of Old Line
Bancshares common stock do not have the right to exercise appraisal
rights in connection with the merger.
Sections 3-201
through 3-213 of the MGCL, which set forth the procedures a
stockholder requesting payment for his, her or its shares must
follow, are reprinted in their entirety as Annex C to this proxy
statement/prospectus. The following discussion is not a complete
statement of the law relating to appraisal rights under Sections
3-201 through 3-213 of the MGCL. This discussion and Annex C should
be reviewed carefully by any DCB Bancshares stockholder who wishes
to exercise appraisal rights or who wishes to preserve the right to
do so, as failure to strictly comply with the procedures set forth
in Sections 3-201 through 3-213 of the MGCL will result in the loss
of appraisal rights.
General
Requirements. Sections 3-201 through 3-213 of the MGCL
generally require the following:
●
Written Objection to the Proposed
Transaction. DCB Bancshares stockholders who desire to
exercise their appraisal rights must file with DCB Bancshares, at
or before the DCB Bancshares annual meeting to vote on the merger
agreement and the merger, a written objection to the proposed
transaction. A vote against the merger agreement and the merger
will not satisfy such objection requirement. The written objection
should be delivered or addressed to DCB Bancshares, Inc., 26500
Ridge Road, Damascus, Maryland 20872, Attention: Robert L.
Carpenter, Jr., Co-Chief Executive Officer and Executive Vice
President - Chief Financial Officer.
●
Refrain From Voting For or Consenting to the
Merger Proposal. If you wish to exercise your appraisal
rights, you must not vote in favor of the proposal to approve the
merger agreement and the merger. If you return a properly executed
proxy that does not instruct the proxy holder to vote against or to
abstain on the proposal to approve the merger agreement and the
merger, or otherwise vote in favor of the merger agreement and the
merger, your appraisal rights will terminate, even if you
previously filed a written notice of intent to demand payment. You
do not have to vote against the merger in order to preserve your
appraisal rights.
●
Written Demand for Payment. Within 20
days after acceptance of the articles of merger by the Maryland
State Department of Assessments and Taxation, you must make a
written demand on Old Line Bancshares for payment of your stock
that states the number and class of shares for which payment is
demanded. All written demands for payment of the fair value of DCB
Bancshares common stock should be delivered or addressed to Old
Line Bancshares, Inc., 1525 Pointer Ridge Place, Bowie, Maryland
20716, Attention: Mark A. Semanie.
An objection to the
merger, demand for payment of the fair value and a petition for
appraisal, discussed below, must be executed by or on behalf of the
holder of record, fully and correctly, as the holder’s name
appears on the holder’s stock certificates. Therefore, if
your DCB Bancshares common stock is owned of record in a fiduciary
capacity, such as by a broker, trustee, guardian or custodian,
execution of the demand should be made in that
capacity.
Old Line Bancshares Written
Notice. Under
Section 3-207 of the MGCL, Old Line Bancshares, as the successor to
DCB Bancshares, will promptly notify each objecting stockholder in
writing of the date the articles of merger were accepted for record
by the Maryland State Department of Assessments and Taxation. Old
Line Bancshares may also send a written offer to pay the objecting
holders of DCB Bancshares common stock what it considers to be the
fair value of the stock. If Old Line Bancshares chooses to do this,
it will provide each objecting stockholder of DCB Bancshares with:
(i) a balance sheet as of a date not more than six months before
the date of the offer; (ii) a profit and loss statement for the 12
months ending on the date of that balance sheet; and (iii) any
other information Old Line Bancshares considers
pertinent.
Any stockholder who
files a notice of objection, but fails to file a written demand for
the payment of fair value in a timely manner, will be bound by the
vote of the DCB Bancshares stockholders and will not be entitled to
receive payment in cash as an objecting stockholder.
If you demand
payment for your DCB Bancshares common stock, you have no right to
the Old Line Bancshares common stock into which your DCB Bancshares
common stock would be converted after the merger is approved,
except the payment of fair value. If you demand payment for your
DCB Bancshares common stock, your rights as a DCB Bancshares
stockholder will be restored if the demand for payment is
withdrawn, a petition of appraisal is not filed within the time
required, a court determines that you are not entitled to relief,
or the merger is abandoned or rescinded. A demand for payment may
be withdrawn only with DCB Bancshares’ consent.
Petition for
Appraisal. Within 50
days after the date the articles of merger are accepted by the
Maryland State Department of Assessments and Taxation, Old Line
Bancshares or any holder of DCB Bancshares common stock who has
complied with the statutory requirements summarized above may file
a petition with a court of equity in Prince George’s County,
Maryland, for an appraisal to determine the fair value of DCB
Bancshares common stock (an “appraisal”). Old Line
Bancshares is not obligated to, and has no present intention to,
file a petition with respect to an appraisal of the fair value of
DCB Bancshares common stock. Accordingly, it is the obligation of
objecting holders of DCB Bancshares common stock to initiate all
necessary action to perfect their appraisal rights within the time
period prescribed by Section 3-208 of the MGCL.
If a petition for
an appraisal is timely filed, after a hearing on the petition, the
court will determine the holders of DCB Bancshares common stock
that are entitled to appraisal rights and will appoint three
disinterested appraisers to determine the fair value of the DCB
Bancshares common stock on terms and conditions the court considers
proper. Within 60 days after appointment (or such longer period as
the court may direct), the appraisers will file with the court and
mail to each party to the proceeding their report stating their
conclusion as to the fair value of the stock. Within 15 days after
the filing of this report, any party may object to such report and
request a hearing. The court shall, upon motion of any party, enter
an order confirming, modifying or rejecting such report and, if
confirmed or modified, enter judgment directing the time within
which payment for the fair value shall be made by Old Line
Bancshares. If the appraisers’ report is rejected, the court
may determine the fair value of the stock of the objecting
stockholders or may remit the proceeding to the same or other
appraisers. Any judgment entered pursuant to a court proceeding
shall include interest from the date of the DCB Bancshares
stockholders’ vote on the merger. The cost of the appraisal
proceedings, including compensation and expenses of the appraisers,
will be Old Line Bancshares’ responsibility, except that all
or any part of the expenses may be assessed against any and all of
the objecting stockholders to whom an offer to pay for common stock
has been made, if the court finds the failure to accept the offer
was arbitrary and vexatious or not in good faith. Costs of the
proceedings will not include fees and expenses of counsel. Costs of
the proceedings may include fees and expenses of experts only if
Old Line Bancshares did not make an offer of payment for your
common stock or if the value of the common stock as determined in
the appraisal proceeding materially exceeds the amount offered by
Old Line Bancshares. The court’s judgment is final and
conclusive on all parties and has the same force and effect as
other decrees in equity.
Fair
Value. You should be
aware that the fair value of your DCB Bancshares common stock as
determined under Sections 3-201 through 3-213 of the MGCL could be
more than, the same as or less than the value of the Old Line
Bancshares stock you would receive in the merger if you did not
seek appraisal of your DCB Bancshares common stock. You should
further be aware that, if you have duly demanded the payment of the
fair value of your DCB Bancshares common stock in compliance with
Section 3-203 of the MGCL, you will not, after making such demand,
be entitled to vote the DCB Bancshares common stock subject to the
demand for any purpose or be entitled to, with respect to such
shares of stock, the payment of dividends or other distributions
payable to holders of record on a record date occurring after the
close of business on the date the stockholders approved the merger
agreement and the merger. Fair value may not include any
appreciation or depreciation that directly or indirectly results
from the transaction objected to or from its proposal.
If you fail to
comply strictly with these procedures you will lose your appraisal
rights. Consequently, if you wish to exercise your appraisal
rights, we strongly urge you to consult a legal advisor before
attempting to exercise your appraisal rights.
DCB
BANCSHARES – INFORMATION ABOUT DIRECTORS TO BE ELECTED TO OLD
LINE BANCSHARES’ BOARD OF DIRECTORS
As
discussed elsewhere in this proxy statement/prospectus, the merger
agreement provides that Stephen J. Deadrick and one other current
director of DCB Bancshares on which DCB Bancshares and Old Line
Bancshares agree will be elected to the board of directors of Old
Line Bancshares at the effective time of the Merger (the
“Continuing Directors”). The parties have agreed that
James R. Clifford, Sr., a current director of DCB Bancshares and
Damascus Community Bank, will be elected to serve on the boards of
Old Line Bancshares and Old Line Bank following the merger. The
following discussion provides certain information about each of the
Continuing Directors and sets forth the specific experience,
qualifications, attributes or skills of each Continuing Director
that led to the decision by the Old Line Bancshares board of
directors that he should serve as a director of Old Line Bancshares
and Old Line Bank.
Stephen J. Deadrick,
CLU, CIC, age 63, has owned Day, Deadrick, & Marshall, Inc., an
independent insurance agency that employs 20 people in Beltsville,
Maryland, since 1991. Mr. Deadrick has worked in the insurance
industry as an independent agent for 39 years. Mr. Deadrick also
owns DDM Real Estate Ventures, LLC. In 1999, Mr. Deadrick was
elected to the board of directors of Damascus Community Bank. He
was elected to serve as Chairman of the Personnel/Compensation
Committee in 2003, where he continued to serve in that position
until 2015 when he was elected to be Chairman of the Board. In
2016, he was elected to serve as Chairman of the Board of DCB
Bancshares. Mr. Deadrick also serves as Chairman of the
board’s Governance Committee and serves on the board’s
Workforce and Risk Committees. Mr. Deadrick is currently a member
of the Board of Trustees of Damascus Community Church.
The
board of directors of Old Line Bancshares believes Mr.
Deadrick’s qualifications to serve on the board of directors
of Old Line Bancshares and Old Line Bank include his extensive
knowledge of Damascus Community Bank’s history, business and
operations, as well as the risks facing the industry, as a result
of his long tenure as a director of Damascus Community
Bank.
James R. Clifford,
Sr., 65, is a land use attorney focusing on development and
commercial projects in Montgomery County, Maryland. In this regard,
he advises property owners regarding the development potential of
their individual property and property assemblages, the possibility
of preservation easements, estate planning and contract
negotiations relating to property sales. He has been a partner in
the law firm of Clifford Debelius Boynton & Hyatt in
Gaithersburg, Maryland, since 1983, including 15 years as outside
counsel for Union Home Loan. He has been a director of DCB
Bancshares and Damascus Community Bank since 2007.
Mr.
Clifford is also a part-time farmer in Montgomery County and
previously served for six years on the Montgomery County
Agricultural Advisory Committee and is the former Chairman of the
Real Property Review Board for Montgomery County. He is also a
former Board Member and District Chair of the National Capital Area
Council Boy Scouts of America, former Scout Master and former Eagle
Advisor for local Boy Scout Troop 1094 in Darnestown,
Maryland.
The
board of directors of Old Line Bancshares believes Mr.
Clifford’s qualifications to serve on the board of directors
of Old Line Bancshares and Old Line Bank include his mortgage
lending knowledge as a result of his experience as outside counsel
to Union Home Loan, and his knowledge of the local real estate
market and his business and social contacts in Montgomery County,
into which Old Line Bank has been expanding, resulting from his
more than 30 years’ experience of a land use attorney in the
County and his community involvement. In addition, the board
believes that Mr. Clifford’s ten-year tenure as a director of
Damascus Community Bank and DCB Bancshares will afford the board
valuable insight regarding the business and operations of Damascus
Community Bank and DCB Bancshares.
Director Compensation
The following table
provides information about the compensation earned during 2016 by
the Continuing Directors. Neither DCB Bancshares nor Damascus
Community Bank has granted equity-based compensation to
directors.
|
Name
|
Fees
earned or
paid
in cash
($)
|
All
other
compensation
($)
|
|
Stephen J.
Deadrick
|
20,725
|
-
|
20,725
|
James R.
Clifford
|
18,975
|
-
|
18,975
|
Although directors
serve as directors of both DCB Bancshares and Damascus Community
Bank, they are compensated only for their service to Damascus
Community Bank. Director compensation is set by the entire board of
directors of Damascus Community Bank, based upon the recommendation
of the board’s Workforce Committee. In evaluating director
compensation, the board of directors considers the legal
responsibilities that directors owe to Damascus Community Bank in
connection with their service on the board and/or a committee of
the board, and the risks to the directors associated with their
service, and reviews the fees and benefits paid to directors of
similar institutions in and around Damascus Community Bank’s
market areas.
For 2016, each
director of Damascus Community Bank received an annual cash
compensation of $13,000, paid in equal monthly installments, and,
for each committee meeting attended, a cash meeting fee of (i) $100
for the first hour or partial hour of the meeting, paid in 15
minutes increments, and (ii) $25 for each subsequent hour or
partial hour.
Certain Relationships and Related Person Transactions
The following
paragraphs discuss related party transactions that occurred thus
far in 2017 and during 2016 and 2015 and related party transactions
that are contemplated during the remainder of 2017 (other than
compensation paid or awarded to DCB Bancshares’ directors and
executive officers). For this purpose, the term “related
party transaction” is generally defined as any transaction
(or series of related transactions) in which (i) DCB Bancshares or
any of its subsidiaries is a participant, (ii) the amount involved
exceeds the lesser of (a) $120,000 or (b) 1.0% of DCB
Bancshares’ average total assets at year-end for the last two
completed fiscal years, and (iii) any director, director nominee or
executive officer of DCB Bancshares or any person who beneficially
owns more than 5% of the outstanding shares of DCB
Bancshares’ common stock (and the immediate family members
and affiliates of the foregoing) has a direct or indirect interest.
The term includes most financial transactions and arrangements,
such as loans, guarantees and sales of property, and remuneration
for services rendered (as an employee, consultant or otherwise) to
DCB Bancshares and its subsidiaries.
DCB Bancshares,
through Damascus Community Bank, had banking transactions in the
ordinary course of its business with DCB Bancshares’
directors, executive officers and immediate family members and
affiliates of the foregoing. All of these transactions were
substantially the same terms, including interest rates, collateral,
and repayment terms on loans, as those prevailing at the same time
for comparable transactions with persons unrelated to DCB
Bancshares and its subsidiaries. When made, the extensions of
credit to these persons by Damascus Community Bank did not involve
more than the normal risk of collectability or present other
unfavorable features.
DCB Bancshares and
Damascus Community Bank have policies and procedures in place to
help ensure that they comply with the legal requirements applicable
to related party transactions. Among other things, the board of
directors of Damascus Community Bank (i) has adopted a policy under
which credit transactions with directors, executive officers and/or
their respective related interests are reviewed to ensure
compliance with Regulation O, and (ii) complies with Section 5-512
of the Financial Institutions Article of the Annotated Code of
Maryland, which limits, and requires periodic review and approval
of, extensions of credit to directors and executive
officers.
There
have been no transactions between Old Line Bancshares or Old Line
Bank and Mr. Deadrick or Mr. Clifford.
Director Independence
Old Line
Bancshares’ board of directors has determined that each of
the Continuing Directors is an “independent director”
as that term is defined by Rule 4200(a)(15) of the NASDAQ Stock
Market Rules. In determining director independence, the board
considered Damascus Community Bank’s purchase of health, life
and disability insurance in 2015 and 2016 from insurance companies
for which Mr. Deadrick’s insurance agency acts as an
agent.
COMPARISON
OF STOCKHOLDER RIGHTS
Upon completion of
the merger, stockholders of DCB Bancshares will become stockholders
of Old Line Bancshares. Accordingly, their rights as stockholders
will be governed by Old Line Bancshares’ articles of
incorporation and bylaws, as well as by the MGCL. Certain
differences in the rights of stockholders arise from differences
between Old Line Bancshares’ and DCB Bancshares’
articles of incorporation and bylaws.
The following is a
summary of material differences in the rights of Old Line
Bancshares stockholders and DCB Bancshares stockholders. This
discussion is not a complete statement of all differences affecting
the rights of stockholders. We qualify this discussion in its
entirety by reference to the MGCL and the respective articles of
incorporation and bylaws of Old Line Bancshares and DCB
Bancshares.
Capitalization
DCB Bancshares. The authorized capital
stock of DCB Bancshares consists of 5,000,000 shares of common
stock, $0.01 par value per share.
Old Line Bancshares. The authorized
capital stock of Old Line Bancshares consists of:
●
25,000,000 shares
of common stock, $0.01 par value per share; and
●
1,000,000 shares of
preferred stock, $0.01 par value per share.
Voting Rights Generally
DCB Bancshares. DCB Bancshares’
bylaws provide that holders of its common stock are entitled to one
vote for each share of common stock held. Holders of common stock
do not have cumulative voting rights in the election of
directors.
Old Line Bancshares. Old Line
Bancshares’ articles of incorporation provide that holders of
its common stock have the right to one vote for each share of
common stock held. Holders of common stock do not have cumulative
voting rights.
Old Line
Bancshares’ articles of incorporation provide that any
“business combination” involving the company,
including: (i) a merger or consolidation with an “interested
stockholder;” (ii) the sale, lease, license, exchange,
mortgage, pledge, transfer or other disposition of any asset
exceeding 10% of the company’s assets to any one or more
interested stockholders; (iii) the issuance by Old Line Bancshares
or any subsidiary of any securities to any “interested
stockholder” having an aggregate fair market value equal to
or greater than 10% of the combined assets of Old Line Bancshares
and its subsidiaries, except pursuant to an employee benefit plan;
(iv) reclassifications, recapitalizations, mergers or
consolidations that increase the amount of Old Line Bancshares
securities owned by an interested stockholder; and (v) the adoption
of any plan of liquidation or dissolution, must be approved by the
holders of at least 80% of the outstanding voting power, unless
approved by a majority of the disinterested directors or the
transaction complies with certain price and procedural requirements
set forth in the articles of incorporation.
In addition, Old
Line Bancshares’ articles of incorporation provide that the
sale, lease or exchange of all or substantially all of its assets
or a merger or consolidation of Old Line Bancshares with or into
another corporation requires the approval of holders of only a
majority of the shares of each class of its stock outstanding and
entitled to vote if such transaction is approved by a majority of
the board of directors. Without such a charter provision, the MGCL
provides that the required vote for such transactions is two-thirds
of each class of stock outstanding and entitled to
vote.
Evaluation of Business Combinations
DCB Bancshares. DCB Bancshares’
articles of incorporation provide that, when considering a
potential acquisition of control of DCB Bancshares, its board of
directors may consider the effect of such potential acquisition of
control on (i) its stockholders, employees, suppliers, customers
and creditors, and (ii) the communities in which its offices or
other establishments are located.
Old Line Bancshares. Neither Old Line
Bancshares’ articles of incorporation or bylaws contain any
similar provisions regarding the evaluation of potential
acquisitions of control.
Board of Directors
The MGCL provides
that a Maryland corporation’s board of directors must consist
of at least one director.
DCB Bancshares. DCB Bancshares’
articles of incorporation set the initial number of its directors
at ten, and provide that thereafter the number of directors shall
be as set forth in its bylaws. DCB Bancshares’ bylaws provide
that the number of its directors shall be not less than five nor
more than ten, with the exact number to be set from time to time by
a majority of its board of directors. DCB Bancshares’
directors are elected each year at its annual meeting of
stockholders. DCB Bancshares currently has nine
directors.
Pursuant to DCB
Bancshares’ bylaws, its directors are elected by majority of
all votes cast at a meeting of stockholders.
Under DCB
Bancshares’ bylaws, its board of directors has the authority
to fill vacancies that occur on the board by majority vote of the
remaining directors. Pursuant to its bylaws, the stockholders of
DCB Bancshares may remove a director for any or no reason at an
annual meeting of stockholders called for such
purpose.
DCB
Bancshares’ bylaws require any director who attains or will
attain the age of 70 before its next annual meeting to submit a
letter of resignation to its board of directors by the November
30th
preceding such annual meeting. The board of directors may accept or
reject such resignation, but rejection requires a two-thirds vote
of the members of the board. If the letter of resignation is
rejected, the resignation process must be repeated in each
subsequent year.
Old Line Bancshares. Old Line
Bancshares’ articles of incorporation and bylaws provide that
its board of directors must be between five and 25 members, with
the board having the power to set the number of directors within
those limits. Pursuant to the bylaws, the directors are divided
into three classes, as even in number as possible, with the terms
of the classes scheduled to expire in successive years. At each
annual meeting, Old Line Bancshares’ stockholders elect the
members of a single class of directors who are elected to
three-year terms. Directors are elected by a plurality of the votes
cast. Old Line Bancshares currently has 15 directors.
Under Old Line
Bancshares’ articles of incorporation, its board of directors
has the authority to fill vacancies that occur on the board,
including vacancies caused by an increase in the number of
directors, subject to the rights of holders of any preferred stock
then outstanding. Pursuant to Old Line Bancshares’ articles
of incorporation, directors may be removed only for cause and only
by the affirmative vote of holders of at least 80% of the
outstanding shares entitled to vote in the election of directors,
and only after reasonable notice and opportunity for the director
to be heard before the body proposing to remove the
director.
Neither Old Line
Bancshares’ articles of incorporation or bylaws provide for
an age at which directors must retire or offer to resign from the
board of directors.
Nominations of Directors; Proposal of New Business
DCB Bancshares. DCB Bancshares’
articles of incorporation provide that nominations for the election
of directors and any proposals for new business to be taken up at
an annual or annual meeting of stockholders may be made by the
board of directors or a stockholder. In order for a stockholder to
bring business before an annual meeting, the stockholder must give
notice in writing to the President or Secretary of DCB Bancshares
and such notice must be delivered, or mailed and received at DCB
Bancshares’ principal executive offices, not less than 90
days prior to the anniversary date of the previous year’s
annual meeting. Such notice must set forth (i) a brief description
of the proposal and the reasons for considering such proposal at
the meeting, (ii) the name and address of the stockholder making
the proposal and the class and number of shares of DCB Bancshares
owned by such stockholder, and (iii) any material interest of such
stockholder in such proposal.
A stockholder
nomination of a director must be made in writing and delivered to
DCB Bancshares’ Secretary or President. With respect to
nominations at an annual meeting, the written notice must be
delivered at least 90 days prior to the anniversary date of the
previous annual meeting. Each notice of nomination must contain
certain information about the identity and educational and business
background of the proposed nominee, a certification that the
nominee has not been convicted of a felony, a signed acceptance by
the nominee, and a signed representation by the nominee to timely
provide any other information reasonably requested by DCB
Bancshares for the purpose of preparing its disclosures in regard
to the solicitation of proxies for the election of
directors.
Old Line Bancshares. Old Line
Bancshares’ bylaws provide that the board of directors or any
stockholder of record (at the time of giving the required notice)
entitled to vote for the election of directors may make nominations
for the election of directors.
Other than the
existing board of directors, stockholders of Old Line Bancshares
must make their nominations for director or proposals for an annual
meeting in writing to Old Line Bancshares’ Secretary.
Nominations and proposals must be submitted not less than 60 nor
more than 90 days before the first anniversary of the date of the
prior year’s annual meeting of stockholders, provided that if
the date of the annual meeting is more than 30 days before or 60
days after such anniversary date or no proxy statement was
delivered in connection with the previous year’s annual
meeting, the notice must be delivered no later than 70 days before
the date of the meeting or the 10th day following the
day on which public announcement of the date of the meeting is
made. Notices of nominations must contain certain information
regarding the identity, background and stock ownership of the
proposed nominee and the identity and stock ownership of the person
making the nomination. Notices of other proposals must contain a
brief description of the business desired to be brought before the
annual meeting and the reasons for conducting such business at the
meeting, and certain information about the proposing stockholder
including stock holdings in Old Line Bancshares and any material
interest of the stockholder in such business.
Amendments to the Articles of Incorporation
DCB Bancshares. Under the MGCL,
amendments to DCB Bancshares’ articles of incorporation
require the approval of its board of directors and holders of
two-thirds of all votes eligible to be cast on the
matter.
Old Line Bancshares. Old Line
Bancshares’ articles of incorporation generally may be
amended by affirmative vote of a majority of the board of directors
and the holders of at least two-thirds of the total votes eligible
to be cast on the matter, provided that amendments to Article
FOURTH with respect to the election and removal of directors and
article SEVENTH with respect to the vote required for certain
business combinations require the approval of 80% of the total
voting power of the company entitled to vote in the election of
directors.
Amendments to Bylaws
DCB Bancshares. DCB Bancshares’
board of directors may alter, amend and repeal the bylaws by a vote
of two-thirds of the board. Stockholders generally do not have the
right to amend the bylaws.
Old Line Bancshares. In general, Old
Line Bancshares’ board of directors has the power to alter,
amend or repair its bylaws by a majority vote of the board.
Stockholders generally do not have the right to amend the
bylaws.
Limited Liability
DCB Bancshares. DCB Bancshares’
articles of incorporation provide that its directors and officers
are not personally liable to DCB Bancshares or its stockholders for
money damages except:
●
To the extent it is
proved that such director or officer actually received an improper
benefit or profit in money, property or services, for the amount of
the benefit or profit in money, property or services actually
received;
●
To the extent that
a judgment or other final adjudication adverse to director or
officer is entered in a proceeding based on a finding in the
proceeding that such director’s or officer’s action, or
failure to act, was the result of active and deliberate dishonesty
and was material to the cause of action adjudicated in the
proceeding; or
●
As otherwise
expressly prohibited by federal or Maryland law.
Old Line Bancshares. Old Line
Bancshares’ articles of incorporation provide that its
officers and directors are not personally liable to Old Line
Bancshares or its stockholders for monetary damages for breach of
their fiduciary duties, provided that such provision does not
eliminate or limit personal liability of an officer or
director:
●
To the extent that
it is proved that the person actually received an improper benefit
or profit in money, property or services, for the amount of the
benefit or profit in money, property or services actually
received;
●
To the extent that
a judgment or other final adjudication adverse to the person is
entered in a proceeding based on a finding in the proceeding that
the person’s action, or failure to act, was the result of
active and deliberate dishonesty and was material to the cause of
action adjudicated in the proceeding; or
●
In an
administrative proceeding or action instituted by an appropriate
bank regulatory agency which proceeding or action results in a
final order requiring affirmative action by an individual or
individuals in the form of payments to the company.
Indemnification
DCB Bancshares. DCB Bancshares’
bylaws provide that it will indemnify its present and former
directors and officers, whether serving or having served DCB
Bancshares or at its request any other entity, to the full extent
permissible under Maryland law, including the advancement of
expenses.
The MGCL currently
provides that a Maryland corporation may not indemnify a director
or officer if it is established that:
●
The act or omission
of the director or officer was material to the matter giving rise
to the proceeding and was committed in bad faith or was the result
of active and deliberate dishonesty;
●
The director or
officer actually received an improper benefit in money, property or
services;
●
In the case of any
criminal proceeding, the director or officer had reasonable cause
to believe that the act or omission was unlawful; or
●
In the case of a
proceeding by or in the right of the company, the director or
officer is adjudged to be liable to the company, unless the court
in which the suit was brought determines that indemnification is
nevertheless proper, in which case indemnification is limited to
expenses.
Old Line Bancshares. Old Line
Bancshares’ articles of incorporation provide that, to the
fullest extent under the MGCL, it will indemnify its past, present
and future directors and officers against all expenses, liability
and losses reasonably incurred or suffered by such person in
connection with any threatened or pending action, suit or
proceeding, whether civil, criminal, administrative or
investigative, in which such officer or director is a party or
threatened to be made a party, by reason of his having been an
officer or director of the company or, at the company’s
request, any other entity, provided, however, that the company will
indemnify any such person in connection with a proceeding initiated
by such person only if such proceeding was authorized by the board
of directors, except for a proceeding to enforce such
person’s right to indemnification or advancement of
expenses.
Its articles of
incorporation provide that Old Line Bancshares cannot indemnify any
officer, director or employee against expenses, penalties or other
payments incurred in an administrative proceeding or action
instituted by an appropriate bank regulatory agency which
proceeding or action results in a final order assessing civil
monetary penalties or requiring affirmative action by an individual
or individuals in the form of payments to the company.
The articles of
incorporation also provide for the right to advancement of expenses
in connection with the indemnification rights set forth above,
provided such officer or director undertakes to reimburse such
amounts if it is determined by a court that such person is not
entitled to indemnification and advancement of expenses. The
articles of incorporation also permit Old Line Bancshares to
indemnify any employee or agent to the same extent as provided for
officers and directors.
Special Stockholders’ Meetings
DCB Bancshares. Annual meetings of DCB
Bancshares’ stockholders may be called at any time by its
president, a vice president or a majority of its board of
directors, and shall be called by its president, a vice president,
its secretary or any director upon the written request of the
holders of at least than 25% of the shares then outstanding and
entitled to vote on the business to be transacted at such meeting;
such request must state the purpose or purposes of the
meeting.
Old Line Bancshares. Annual meetings of
Old Line Bancshares’ stockholders may be called at any time
by its board of directors or the chairperson of the board of
directors, and must be called by the Secretary of the company upon
the written application of one or more stockholders entitled to
vote and who hold at least one-fifth of Old Line Bancshares’
capital stock entitled to vote at such meeting.
Appraisal Rights
DCB Bancshares. DCB Bancshares’
articles of incorporation reserves its right to amend the articles
of incorporation so that such amendment may alter the contract
rights of any outstanding stock, and that any objecting stockholder
whose rights are adversely affected thereby will not be entitled to
demand and receive payment of the fair value of his stock.
Otherwise, under the MGCL DCB Bancshares stockholders are generally
entitled to dissent from, and demand payment of the fair value of
their shares in connection with, a merger, consolidation, share
exchange, asset transfer or business combination that substantially
adversely alters the stockholder’s rights, as described in
more detail under “The Merger Agreement and the Merger
– Appraisal Rights.”
Old Line Bancshares. Because Old Line
Bancshares’ common stock is listed on the NASDAQ Stock
Market, Old Line Bancshares’ stockholders generally do not
have appraisal or dissenters rights in connection with
extraordinary transactions or otherwise. There are some exceptions,
however, such as for a merger, consolidation or share exchange in
which the holders would receive something besides stock, depositary
receipts, cash in lieu of fractional shares or any combination
thereof, or if the company’s directors and executive officers
owned 5% or more of the company’s outstanding voting stock
any time in the past year.
EXPERTS
The consolidated
financial statements of Old Line Bancshares, Inc. appearing in its
Annual Report on Form 10-K as of December 31, 2016, and for the
three year period ended December 31, 2016, and the effectiveness of
its internal control over financial reporting as of December 31,
2016, have been audited by Dixon Hughes Goodman LLP, independent
registered public accounting firm, as set forth in its reports
thereon, included therein, and incorporated herein by reference.
Such consolidated financial statements are incorporated herein by
reference in reliance upon such reports given on the authority of
such firm as experts in accounting and auditing.
LEGAL
MATTERS
The validity of the
Old Line Bancshares common stock to be issued in the merger and
certain other legal matters relating to the merger are being passed
upon for Old Line Bancshares by the law firm of Baker, Donelson,
Bearman, Caldwell & Berkowitz, PC, Baltimore,
Maryland.
Certain legal
matters relating to the merger are being passed upon for DCB
Bancshares by the law firm of Gordon Feinblatt LLC, Baltimore,
Maryland.
Baker, Donelson and
Gordon Feinblatt will deliver opinions to Old Line Bancshares and
DCB Bancshares, respectively, as to certain federal income tax
consequences of the merger.
ELECTION
OF DCB BANCSHARES DIRECTORS (Proposal 3)
The number of
persons who shall serve on the DCB Bancshares board of directors is
currently set at ten. At the annual meeting, DCB Bancshares’
stockholders will be asked to elect the ten directors nominees
named below to serve on the board of directors of DCB Bancshares
until the 2018 annual meeting of stockholders and until their
successors have been elected and qualified. Each nominee has
indicated a willingness to serve if elected. However, if any
nominee becomes unable to serve, the proxies received in response
to this solicitation will be voted for a replacement nominee
selected in accordance with the best judgment of the proxy holders
named therein.
The names of the
director nominees are:
Donald W.
Burdette
|
Robert L.
Carpenter, Jr.
|
|
|
James R. Clifford,
Sr.
|
George C.
Cramer
|
|
|
Stephen J.
Deadrick
|
William F.
Lindlaw
|
|
|
Bernard L. Moxley,
Jr.
|
Gary L. Smith,
Sr.
|
|
|
John E.
Tregoning
|
William F. Willard,
Sr.
|
Each of the
nominees other than Messrs. Carpenter and Lindlaw is an incumbent
director and was elected by stockholders at the 2016 annual
meeting. One director vacancy exists on account of Mr.
Kincaid’s resignation, and Theresa J. Tomasini is not
standing for reelection at this year’s annual meeting. The
DCB Bancshares board of directors nominated Messrs. Carpenter and
Lindlaw to replace Mr. Kincaid and Ms. Tomasini.
Notwithstanding
their election at the annual meeting, the terms of all DCB
Bancshares directors will end upon the effective time of the
merger, although Messrs. Deadrick and Clifford will join the board
of directors of Old Line Bancshares and Old Line Bank at such time,
as discussed above.
The
board of directors of DCB Bancshares recommends that stockholders
vote “FOR” each of the nominees named
above
Members of the
board of directors and certain executive officers of DCB Bancshares
having the power to vote or direct the voting of approximately
208,683 shares of DCB Bancshares common stock, or approximately
12.9% of the shares of DCB Bancshares common stock outstanding as
of the record date for the annual meeting, have indicated their
intention to vote “FOR” each of the nominees
named above.
OTHER
MATTERS
As of the date of
this document, the DCB Bancshares board of directors does not know
of any matters that will be presented for consideration at its
annual meeting other than as described in this document. If any
other matter shall properly come before the DCB Bancshares annual
meeting or any adjournment or postponement thereof, however, and
shall be voted upon, the proposed proxies will be deemed to confer
authority to the individuals named as authorized therein to vote
the shares represented by the proxy as to any matters that fall
within the purposes set forth in the notice of annual
meeting.
INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows Old
Line Bancshares to incorporate certain information into this
document by reference to other information that has been filed with
the SEC. The information incorporated by reference is deemed to be
part of this document, except for any information that is
superseded by information in this document. The documents that are
incorporated by reference contain important information about Old
Line Bancshares and you should read this document together with any
other documents incorporated by reference in this
document.
This document
incorporates by reference the following documents that have
previously been filed with the SEC by Old Line Bancshares (File
No. 001-33037):
●
Annual Report on
Form 10-K for the year ended December 31, 2016;
●
Those portions of
Old Line Bancshares’ Definitive Proxy Statement deemed
incorporated into Old Line Bancshares’ Annual Report on Form
10-K for the year ended December 31, 2016;
●
Current Reports on
Form 8-K filed on February 1, 2017 (as
amended, other than the portions of such Form 8-K not deemed to be
filed) and February 27, 2017; and
●
The description of
Old Line Bancshares’ common stock contained in its
Registration Statement on Form 10-SB originally filed on July 16,
2003 and amended on August 25, 2003 and September 11,
2003.
In addition, Old
Line Bancshares is incorporating by reference any documents it may
file under Section 13(a), 13(c), 14 or 15(d) of the Exchange
Act (i) after the date of the initial registration statement of
which this proxy statement/prospectus is a part and prior to
effectiveness of the registration statement and (ii) after the
effectiveness of such registration statement and prior to the date
of the DCB Bancshares annual meeting of stockholders, provided,
however, that Old Line Bancshares is not incorporating by reference
any information furnished (but not filed), except as otherwise
specified herein.
WHERE
YOU CAN FIND MORE INFORMATION
Old Line Bancshares
files annual, quarterly and current reports, proxy statements and
other information with the SEC. You may read and copy any reports,
statements or other information on file with the SEC at the
SEC’s public reference room located at 100 F Street, N.E.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference room. The SEC maintains
an Internet Web site that contains reports, proxy and information
statements, and other information that issuers file with the SEC at
http://www.sec.gov,
and Old Line Bancshares SEC filings
may be accessed there as well. Further, Old Line Bancshares
makes available, free of charge through its website,
www.oldlinebank.com ,its reports on Forms 10-K, 10-Q and 8-K, and
amendments to those reports, as soon as reasonably practicable
after such reports are filed with or furnished to the
SEC.
Old Line Bancshares
has filed a registration statement on Form S-4 to register with the
SEC the shares of Old Line Bancshares common stock that DCB
Bancshares stockholders will receive in the merger. This proxy
statement/prospectus is part of the registration statement of Old
Line Bancshares on Form S-4 and is a prospectus of Old Line
Bancshares and a proxy statement of DCB Bancshares for the DCB
Bancshares annual meeting.
Neither Old Line
Bancshares nor DCB Bancshares has authorized anyone to give any
information or make any representation about the merger or the
annual meeting that is different from, or in addition to, that
contained in this proxy statement/prospectus or in any of the
materials that are incorporated by reference into this proxy
statement/prospectus. Therefore, if anyone does give you
information of this sort, you should not rely on it. This proxy
statement/prospectus does not constitute an offer to sell, or a
solicitation of an offer to purchase, the securities offered by
this proxy statement/prospectus, or the solicitation of a proxy, in
any jurisdiction to or from any person to whom or from whom it is
unlawful to make such offer, solicitation of an offer or proxy
solicitation in such jurisdiction. Neither the delivery of this
proxy statement/prospectus nor any distribution of securities
pursuant to this proxy statement/prospectus shall, under any
circumstances, create any implication that there has been no change
in the information set forth or incorporated into this proxy
statement/prospectus by reference or in our affairs since the date
of this proxy statement/prospectus. The information contained in
this proxy statement/prospectus with respect to Old Line Bancshares
was provided by Old Line Bancshares, and the information contained
in this proxy statement/prospectus with respect to DCB Bancshares
was provided by DCB Bancshares. The information contained in this
proxy statement/prospectus speaks only as of the date of this proxy
statement/prospectus unless the information specifically indicates
that another date applies.
ANNEX
A
AGREEMENT AND PLAN
OF MERGER
By and
between
OLD LINE
BANCSHARES, INC.
And
DCB BANCSHARES,
INC.
Dated as of
February 1, 2017
TABLE
OF CONTENTS
|
|
Page
|
|
|
|
BACKGROUND
|
6
|
AGREEMENT
|
6
|
ARTICLE
I. GENERAL
|
6
|
Section
1.1
|
Background.
|
6
|
Section
1.2
|
Definitions.
|
6
|
Section
1.3
|
The
Merger and Related Transactions.
|
14
|
Section
1.4
|
[Intentionally
Omitted].
|
14
|
Section
1.5
|
Additional
Actions.
|
15
|
Section
1.6
|
The
Bank Merger.
|
15
|
ARTICLE
II. CONSIDERATION; ELECTION AND EXCHANGE PROCEDURES
15
|
|
Section
2.1
|
Merger
Consideration.
|
15
|
Section
2.2
|
OLB
Common Stock.
|
16
|
Section
2.3
|
Fractional
Shares.
|
16
|
Section
2.4
|
Objecting
DCB Common Stockholders.
|
16
|
Section
2.5
|
Exchange
Fund; Exchange of DCB Certificates.
|
16
|
Section
2.6
|
Anti-Dilution
Provisions.
|
18
|
Section
2.7
|
Other
Matters.
|
18
|
ARTICLE
III. REPRESENTATIONS AND WARRANTIES OF DCB 18
|
|
Section
3.1
|
Organization.
|
19
|
Section
3.2
|
Capitalization.
|
20
|
Section
3.3
|
Authority;
No Violation.
|
21
|
Section
3.4
|
Consents;
Regulatory Approvals.
|
22
|
Section
3.5
|
Financial
Statements.
|
22
|
Section
3.6
|
No
Material Adverse Effect.
|
23
|
Section
3.7
|
Taxes.
|
23
|
Section
3.8
|
Contracts;
Certain Changes.
|
24
|
Section
3.9
|
Ownership
of Personal Property; Insurance Coverage.
|
26
|
Section
3.10
|
Litigation
and Other Proceedings.
|
28
|
Section
3.11
|
Compliance
with Applicable Law.
|
28
|
Section
3.12
|
Labor
Matters.
|
29
|
Section
3.13
|
ERISA.
|
30
|
Section
3.14
|
Brokers
and Finders.
|
32
|
Section
3.15
|
Real
Property and Leases.
|
32
|
Section
3.16
|
Environmental
Matters.
|
33
|
Section
3.17
|
Intellectual
Property.
|
33
|
Section
3.18
|
Information
to be Supplied.
|
34
|
Section
3.19
|
Related
Party Transactions.
|
34
|
Section
3.20
|
Loans.
|
34
|
Section
3.21
|
Allowance
for Loan Losses.
|
35
|
Section
3.22
|
Community
Reinvestment Act.
|
36
|
Section
3.23
|
Anti-Money
Laundering, OFAC and Information Security.
|
36
|
Section
3.24
|
Securities
Activities of Employees.
|
36
|
Section
3.25
|
Books
and Records.
|
37
|
Section
3.26
|
Investment
Securities.
|
37
|
Section
3.27
|
Reorganization.
|
37
|
Section
3.28
|
Fairness
Opinion.
|
37
|
Section
3.29
|
Materials
Provided to Stockholders.
|
38
|
Section
3.30
|
Absence
of Certain Changes.
|
38
|
Section
3.31
|
Absence
of Undisclosed Liabilities.
|
39
|
Section
3.32
|
No
Option Plans or Convertible Securities.
|
39
|
Section
3.33
|
Deposits.
|
39
|
Section
3.34
|
Risk
Management Instruments.
|
39
|
Section
3.35
|
Fiduciary
Accounts.
|
39
|
Section
3.36
|
Credit
Card Accounts and Merchant Processing.
|
39
|
Section
3.37
|
Anti-takeover
Laws.
|
39
|
Section
3.38
|
Stockholders’
List.
|
40
|
Section
3.39
|
Bank
Certificates.
|
40
|
Section
3.40
|
Disclosure.
|
40
|
ARTICLE
IV. REPRESENTATIONS AND WARRANTIES OF OLB
|
40
|
Section
4.1
|
Organization.
|
40
|
Section
4.2
|
Capitalization.
|
41
|
Section
4.3
|
Authority;
No Violation.
|
42
|
Section
4.4
|
Consents;
Regulatory Approvals.
|
43
|
Section
4.5
|
Financial
Statements.
|
43
|
Section
4.6
|
No
Material Adverse Effect.
|
43
|
Section
4.7
|
Taxes.
|
44
|
Section
4.8
|
Contracts;
Certain Changes.
|
44
|
Section
4.9
|
Ownership
of Personal Property; Insurance Coverage.
|
45
|
Section
4.10
|
Litigation
and Other Proceedings.
|
46
|
Section
4.11
|
Compliance
with Applicable Law.
|
46
|
Section
4.12
|
Labor
Matters.
|
48
|
Section
4.13
|
ERISA.
|
48
|
Section
4.14
|
Brokers
and Finders.
|
50
|
Section
4.15
|
Real
Property and Leases.
|
50
|
Section
4.16
|
Environmental
Matters.
|
51
|
Section
4.17
|
Information
to be Supplied.
|
51
|
Section
4.18
|
Related
Party Transactions.
|
52
|
Section
4.19
|
Loans.
|
52
|
Section
4.20
|
Allowance
for Loan Losses.
|
52
|
Section
4.21
|
Community
Reinvestment Act.
|
53
|
Section
4.22
|
Securities
Activities of Employees.
|
53
|
Section
4.23
|
Books
and Records.
|
53
|
Section
4.24
|
Investment
Securities.
|
54
|
Section
4.25
|
Reorganization.
|
54
|
Section
4.26
|
Fairness
Opinion.
|
54
|
Section
4.27
|
Materials
Provided to Stockholders.
|
54
|
Section
4.28
|
Absence
of Undisclosed Liabilities.
|
54
|
Section
4.29
|
Anti-Money
Laundering, OFAC and Information Security.
|
55
|
Section
4.30
|
Intellectual
Property.
|
55
|
Section
4.31
|
Disclosure.
|
56
|
Section
4.32
|
Business.
|
56
|
ARTICLE
V. COVENANTS OF THE PARTIES 55
|
56
|
Section
5.1
|
Conduct
of DCB’s Business.
|
56
|
Section
5.2
|
Conduct
of OLB’s Business.
|
59
|
Section
5.3
|
Access;
Confidentiality.
|
59
|
Section
5.4
|
Regulatory
Matters.
|
60
|
Section
5.5
|
Taking
of Necessary Actions.
|
60
|
Section
5.6
|
Duty
to Advise; Duty to Update of Disclosure Schedules.
|
60
|
Section
5.7
|
Other
Undertakings by OLB and DCB.
|
61
|
Section
5.8
|
Accuracy
of the Registration Statement.
|
66
|
ARTICLE
VI. CONDITIONS
|
67
|
Section
6.1
|
Conditions
to DCB’s Obligations under this Agreement.
|
67
|
Section
6.2
|
Conditions
to OLB’s Obligations under this Agreement.
|
60
|
ARTICLE
VII. TERMINATION
|
70
|
Section
7.1
|
Termination.
|
70
|
Section
7.2
|
Effect
of Termination.
|
72
|
ARTICLE
VIII. MISCELLANEOUS 71
|
72
|
Section
8.1
|
Expenses
and Other Fees.
|
72
|
Section
8.2
|
Non-Survival.
|
73
|
Section
8.3
|
Amendment,
Extension and Waiver.
|
73
|
Section
8.4
|
Entire
Agreement.
|
74
|
Section
8.5
|
Binding
Agreement.
|
74
|
Section
8.6
|
Notices.
|
74
|
Section
8.7
|
Disclosure
Schedules.
|
75
|
Section
8.8
|
Tax
Disclosure.
|
75
|
Section
8.9
|
No
Assignment.
|
75
|
Section
8.10
|
Captions;
Interpretation.
|
75
|
Section
8.11
|
Counterparts;
Electronic Signatures.
|
76
|
Section
8.12
|
Severability.
|
76
|
Section
8.13
|
Governing
Law; Venue; No Jury Trial.
|
76
|
Section
8.14
|
Time
of Essence.
|
76
|
|
|
|
Exhibit A
– List of Stockholders to Execute
Support Agreements
|
|
Exhibit B
– Support
Agreement
|
|
Exhibit C
– Bank Merger
Agreement
|
|
Exhibit D
– Spreadsheet
|
|
Exhibit E
– Damascus Community Bank Employee
Change in Control Plan
|
|
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER
(“Agreement”), dated as of
February 1, 2017, is made by and between Old Line Bancshares, Inc.,
a Maryland corporation (“OLB”), and DCB
Bancshares, Inc., a Maryland corporation (“DCB”).
BACKGROUND
1.
DCB owns directly
all of the outstanding capital stock of Damascus Community Bank, a
Maryland-chartered commercial bank (“Damascus”).
2.
OLB owns directly
all of the outstanding capital stock of Old Line Bank, a trust
company with commercial banking powers chartered under the laws of
the State of Maryland (“Old Line”).
3.
OLB and DCB desire
for DCB to merge with and into OLB, with OLB surviving the Merger,
in accordance with the applicable laws of the State of Maryland and
this Agreement.
4.
As an additional
condition and inducement to OLB to enter into this Agreement, each
of the individuals listed on Exhibit A has executed a Support
Agreement in the form attached as Exhibit B.
5.
Each of the
parties, by signing this Agreement, adopts it as a plan of
reorganization as defined in IRC Section 368(a) and intends the
Merger to be a reorganization as defined in IRC
Section 368(a).
6.
OLB and DCB desire
to provide for certain undertakings, conditions, representations,
warranties, and covenants in connection with the transactions
contemplated hereby and governing the transactions contemplated
herein.
AGREEMENT
NOW THEREFORE, in consideration of the
mutual covenants, agreements, representations and warranties herein
contained, the parties, intending to be legally bound hereby, agree
as follows:
ARTICLE
I.
GENERAL
Section
1.1 Background.
The Background
information is a substantive part of this Agreement and is
incorporated herein and made a part hereof by
reference.
Section
1.2 Definitions.
As used in this
Agreement, the following terms shall have the indicated meanings
(such meanings to be equally applicable to both the singular and
plural forms of the terms defined):
Acquisition Proposal means a
bona fide written proposal
by a Person other than OLB for: (a) a merger or consolidation of, a
share exchange involving, or an acquisition of 50% or more of the
assets or liabilities of, DCB or any DCB Subsidiary, or any other
business combination involving DCB or any DCB Subsidiary, in a
single transaction or series of related transactions; or (b) a
transaction that involves the transfer of beneficial ownership of
securities representing, or the right to acquire beneficial
ownership of or to vote securities representing, 10% or more of the
then outstanding shares of DCB Common Stock or the then outstanding
equity securities of any DCB Subsidiary.
Affiliate means, with respect to any
Entity, any Person that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common
control with, the Entity and, without limiting the generality of
the foregoing, includes any executive officer, director, manager or
Person who beneficially owns more than ten percent of the equity or
voting securities of the Entity.
AFTAP means adjusted funding target
attainment percentage.
Agreement means this Agreement and Plan
of Merger, including the exhibits and schedules hereto and any
amendment or supplement hereto.
Application means an application for
regulatory approval that is required to consummate the Contemplated
Transactions.
Article III Standard has the meaning
given to the term in Article III of this Agreement.
Article IV Standard has the meaning
given to the term in Article IV of this Agreement.
Articles of Merger means the articles
of merger to be executed by OLB and DCB and filed with SDAT in
accordance with the MGCL.
Average NASDAQ Bank Stock Index Value For The
Price Determination Period has the meaning given to the term
in Section 7.1(j) of this Agreement.
Average Price has the meaning given to
the term in Section
2.1(b) of this Agreement.
Bank Certificates has the meaning given
to the term in Section 2.5(e) of this Agreement.
Bank Merger has the meaning given to
the term in Section 1.6 of this
Agreement.
Bank Merger Agreement has the meaning
given to the term in Section 1.6 of this
Agreement.
BHC Act means the Bank Holding Company
Act of 1956, as amended.
Burdensome Condition has the meaning
given to the term in Section 5.4(a) of this Agreement.
Business Day(s) means any day or days
other than (i) Saturday, (ii) Sunday or (iii) a day on which
Damascus or Old Line is authorized or obligated by applicable law
or executive order to close.
Calculation Date has the meaning given
to the term in Section 2.2(a) of this Agreement.
Cause means: (a) any act or failure to
act that constitutes fraud, incompetence, willful misconduct,
dishonesty, breach of fiduciary duty, intentional failure to
adequately perform his or her duties as an officer or employee of
the employer, or violation of any Law (other than a traffic
violation or similar offense) or any final regulatory order or
agreement with the employer; (b) the conviction of the employee of
a felony or crime involving moral turpitude; (c) the
employee’s entering into any employment or similar
relationship with a Person other than DCB or a DCB Subsidiary; (d)
the employee’s diversion of any business opportunity from
employer (other than on behalf of employer or with the prior
written consent of employer’s board of directors); or (e)
conduct by employee that results in removal or suspension of
employee as an officer or employee of employer pursuant to a
written order by any Regulatory Authority with authority or
jurisdiction over employer.
CERCLA means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended, 42 U.S.C. §§ 9601, et seq.
CFPB means the Consumer Financial
Protection Bureau.
CIC Agreement has the meaning given to
the term in Section 5.7(c)(ii)(C) of this
Agreement.
CIC Payment has the meaning given to
the term in Section 5.7(c)(ii)(C) of this
Agreement.
Closing has the meaning given to the
term in Section 1.3(a) of this Agreement.
Closing Date has the meaning given to
the term in Section 1.3(a) of this Agreement.
Closing Market Price has the meaning given to the term in Section
7.1(j) of this Agreement.
Commercial Law Article has the meaning
given the term in Section 3.23(b) of this Agreement.
Commissioner means the Maryland Office
of the Commissioner of Financial Regulation.
Confidentiality Agreement means that
certain Confidentiality Agreement, dated as of November 3, 2016, by
and between OLB and DCB.
Contemplated Transactions means all of
the transactions contemplated by this Agreement, including the (a)
Merger, (b) Bank Merger, and (c) performance by OLB and DCB of
their respective covenants and obligations under this
Agreement.
CRA has the meaning given to the term
in Section 3.22 of this Agreement.
Credit Extension means any loan, lease,
advance, credit facility, credit enhancement, guarantee,
commitment, line of credit or letter of credit.
Damascus has the meaning given to the
term in the Background section of this Agreement.
DCB has the meaning given to the term
in the Background section of this Agreement.
DCB Benefit Plans means all employee
pension benefit plans within the meaning of ERISA
Section 3(2), profit sharing plans, stock purchase plans,
deferred compensation and supplemental income plans, supplemental
executive retirement plans, annual incentive plans, group insurance
plans, and all other employee welfare benefit plans within the
meaning of ERISA Section 3(1) (including vacation pay, sick
leave, short-term disability, long-term disability, and medical
plans) and all other employee benefit plans, policies, agreements
and arrangements currently maintained or contributed to for the
benefit of the employees or former employees (including retired
employees) and any beneficiaries thereof or directors or former
directors of DCB or any other Entity that, together with DCB, is
treated as a single employer under IRC Sections 414(b), (c), (m) or
(o).
DCB Certificate means a certificate that immediately
prior to the Effective Time represents issued and outstanding
shares of DCB Common Stock.
DCB Common Stock has the meaning given
to the term in Section 3.2(a) of this Agreement.
DCB Common Stockholder is any holder of
record of DCB Common Stock immediately prior to the Effective
Time.
DCB Common Stockholders’ Meeting
means the meeting of the holders of DCB Common Stock to consider
and vote on the Agreement and the Merger, and any postponement or
adjournment thereof.
DCB Companies means DCB, Damascus and
any other DCB Subsidiary, collectively.
DCB Disclosure Schedule means,
collectively, the disclosure schedules delivered by DCB to OLB at
or prior to the execution and delivery of this Agreement, as may be
updated pursuant to Section 5.6 of this
Agreement.
DCB Employee has the meaning given to
the term in Section 5.7(c)(ii)(A) of this
Agreement.
DCB ERISA Affiliate means any Entity
that, together with DCB, is treated as a single employer under IRC
Sections 414(b), (c), (m) or (o).
DCB Financials means (a) the
consolidated balance sheets of DCB at December 31, 2015 and 2014
and the consolidated statements of income, statements of
stockholders’ equity and consolidated statements of cash
flows for DCB for the years ended December 31, 2015, 2014 and 2013,
and the notes thereto, as audited by Smith Elliott Kearns &
Company, LLC, (b) the unaudited interim financial statements of DCB
and the notes thereto for the calendar quarter ending September 30,
2016, (c) the consolidated balance sheet of DCB at December 31,
2016 and 2015 and the consolidated statements of income, statements
of stockholders’ equity and consolidated statements of cash
flows for DCB for the years ended December 31 2016, 2015 and 2014,
and the notes thereto, as audited by Smith Elliott Kearns &
Company, LLC, and to be delivered within 120 days of December 31,
2016, (d) the unaudited consolidated financial statements of DCB
and the notes thereto for each calendar quarter commencing with the
calendar quarter ending March 31, 2107, to be delivered within 45
days after the end of the respective quarter, (e) unaudited,
internally-prepared consolidated financial statements for each of
October 31, 2016, November 30, 2016 and December 31, 2016, and (f)
unaudited, internally-prepared consolidated financial statements
for each month commencing with the month ended January 31, 2017, to
be delivered within 20 days after the end of the respective month
(the financial statements described in items (e) and (f) are
collectively referred to herein as the “Internal DCB
Financials”).
DCB Governing Documents has the meaning
given to the term in Section 3.1(f) of this
Agreement.
DCB Intellectual Property has the
meaning given to the term in Section 3.17 of this
Agreement.
DCB IT Assets has the meaning given to
the term in Section 3.17 of this Agreement.
DCB Nominees has the meaning given to
the term in Section 1.3(d) of this Agreement.
DCB Real Property has the meaning given
to the term in Section 3.15(a) of this Agreement.
DCB Regulatory Agreement has the
meaning given to the term in Section 3.11(e)(iii) of this
Agreement.
DCB Returns has the meaning given to
the term in Section 3.7(e) of this Agreement.
DCB Subsidiaries means the subsidiaries
of DCB and Damascus as set forth in DCB Disclosure Schedule
3.1(d).
DCB Tangible Equity has the meaning
given to the term in Section2.1(a) of this
Agreement.
DCB Taxes has the meaning given to the
term in Section 3.7(e) of this Agreement.
DCB Termination Fee has the meaning
given to the term in Section 8.1(b) of this Agreement.
Effective Date means the date that
includes the Effective Time, which shall be as soon as practicable
after the Closing Date.
Effective Time means the time at which
the Articles of Merger are filed with SDAT and become effective in
accordance with the MGCL.
Entity means any corporation, limited
liability company, partnership, sole proprietorship, trust, joint
venture, or other form of organization.
Environmental Assessment means an
environmental assessment that is consistent with ASTM 1527-05 or 40
C.F.R. Part 312 and that may include an assessment of the (a)
presence of hazardous, toxic, radioactive, or dangerous materials
or other materials regulated under Environmental Laws, or (b)
presence, amount, physical condition and location of
asbestos-containing materials and lead-based paint or an assessment
of indoor environmental issues.
Environmental Laws means any applicable
federal, state or local Law, statute, ordinance, rule, regulation,
code, license, permit, authorization, common law, agency
requirement, approval, consent, order, judgment, decree, injunction
or agreement with any governmental entity relating to (a) the
protection, preservation or restoration of the environment
(including, without limitation, air, water vapor, surface water,
groundwater, drinking water supply, surface soil, subsurface soil,
plant and animal life or any other natural resource), health and
safety as it relates to Hazardous Materials or natural resource
damages, (b) the use, presence, storage, recycling, treatment,
generation, transportation, processing, handling, labeling,
production, release or threatened release or disposal of Hazardous
Materials, and/or (c) noise, odor, wetlands, indoor air, pollution,
contamination or any injury to persons or property from exposure to
Hazardous Materials. Environmental Laws include without limitation:
(i) CERCLA; the Resource Conservation and Recovery Act, as amended,
42 U.S.C. §6901, et
seq; the Clean Air Act, as amended, 42 U.S.C. §7401,
et seq; the Federal Water
Pollution Control Act, as amended, 33 U.S.C. §1251,
et seq; the Toxic
Substances Control Act, as amended, 15 U.S.C. §2601,
et seq; the Emergency
Planning and Community Right to Know Act, 42 U.S.C. §11001,
et seq; the Safe Drinking
Water Act, 42 U.S.C. §300f, et seq; and all comparable state and
local Laws; and (ii) any common law (including without limitation
common law that may impose strict liability) that may impose
liability or obligations for injuries or damages due to the
presence of or exposure to any Hazardous Materials.
ERISA means the Employee Retirement
Income Security Act of 1974, as amended, and the regulations
promulgated thereunder.
Exchange Act means the Securities
Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
Exchange Agent means American Stock
Transfer & Trust Company, or such other agent as shall be
designated by OLB to act as the exchange agent for purposes of
conducting the exchange procedure described in Section 2.5 of
this Agreement.
Exchange Fund has the meaning given to
the term in Section 2.5(a) of this Agreement.
Exchange Ratio has the meaning given to
the term in Section
2.1(b) of this Agreement.
FDIC means the Federal Deposit
Insurance Corporation.
FHA means the Federal Housing
Administration.
FHLB means the Federal Home Loan Bank
of Atlanta.
FRB means the Board of Governors of the
Federal Reserve System.
GAAP means U.S. generally accepted
accounting principles.
Hazardous Materials means: (a) any
petroleum or petroleum products, natural gas, or natural gas
products, radioactive materials, asbestos, urea formaldehyde foam
insulation, transformers or other equipment that contains
dielectric fluid containing levels of polychlorinated biphenyls
(PCBs), and radon gas; (b) any chemicals, materials, waste or
substances defined as or included in the definition of
“hazardous substances,” “hazardous wastes,”
“hazardous materials,” “extremely hazardous
wastes,” “restricted hazardous wastes,”
“toxic substances,” “toxic pollutants,”
“contaminants,” or “pollutants,” or words
of similar import, under any Environmental Laws; and (c) any other
chemical, material, waste or substance that is in any way regulated
for the protection of human health or environment by any Regulatory
Authorities, including mixtures thereof with other materials, and
including any regulated building materials such as asbestos and
lead.
Indemnified Parties has the meaning
given to the term in Section 5.7(c)(iv) of this
Agreement.
Indemnifying Party has the meaning
given to the term in Section 5.7(c)(iv) of this
Agreement.
Index Ratio has the meaning given to
the term in Section 7.1(j) of this Agreement.
Insured Persons has the meaning given
to the term in Section 5.7(c)(vi) of this Agreement.
Internal DCB Financials has the meaning
given to the term in the definition of “DCB Financials”
set forth in this Section 1.2.
IRC means the Internal Revenue Code of
1986, as amended, and the regulations promulgated
thereunder.
IRS means the Internal Revenue
Service.
Knowledge of DCB means the actual
knowledge of DCB’s and Damascus’ Chairman of the Board
of Directors, Chief Executive Officer, Executive Vice President and
Chief Lending Officer, Executive Vice President and Chief Financial
Officer, Chief Credit Officer and, with respect to Section 3.13
only, Damascus’ Vice President – Human Resources, or,
if no individual is named to any of such positions, the individual
or individuals who perform a similar function for DCB or Damascus,
as applicable, and includes any facts, matters or circumstances set
forth in any written notice or other correspondence from any
Regulatory Authority or any other written notice received by that
Person.
Knowledge of OLB means the actual
knowledge of OLB’s Chairman of the Board, President and Chief
Executive Officer, Chief Financial Officer and Chief Operating
Officer, and Old Line’s Chairman of the Board, President and
Chief Executive Officer, Chief Financial Officer, Chief Operating
Officer, Chief Credit Officer and Chief Lending Officer and, with
respect to Section 4.13 only, OLB’s and Old Line’s
Director of Human Resources, or, if no individual is named to any
of such positions, the individual or individuals who perform a
similar function for OLB or Old Line, as applicable, and includes
any facts, matters or circumstances set forth in any written notice
or other correspondence from any Regulatory Authority or any other
written notice received by that Person.
Law means any and all foreign, federal,
state and local laws, statutes, ordinances, rules, regulations,
codes, and rules of common law, in each case as amended to date,
and any and all judicial and administrative interpretations
thereof, any judicial and administrative orders, decrees,
judgments, injunctions and writs, any and all policies and
directives (including, without limitation, any directive relating
to minimum capital levels) issued by any Regulatory Authority, and
any and all written legally permissible waivers or exceptions
granted by any Regulatory Authorities with respect to compliance
with any of the foregoing.
Letter of Transmittal has the meaning
given to the term in Section 2.5(b) of this
Agreement.
Liens means all liens, pledges,
charges, security interests, mortgages, claims, or other
encumbrances of any kind.
Material Adverse Effect means, with
respect to OLB or DCB, respectively, any effect change,
circumstance, development or occurrence that individually, or taken
in the aggregate together with all other effects, changes,
circumstances, developments or occurrences, that (a) is or is
reasonably likely to be material and adverse to the financial
condition, results of operations or business of OLB and the OLB
Subsidiaries taken as a whole, or DCB and the DCB Subsidiaries
taken as a whole, respectively, or (b) materially impairs the
ability of either OLB, on the one hand, or DCB, on the other hand,
to perform its obligations under this Agreement or otherwise
materially threatens or materially impedes or delays the
consummation of the Contemplated Transactions, other than, in each
case, any change, circumstance, development, occurrence or effect
relating to (i) any change in the value of the respective loan or
investment portfolios of the OLB Companies or the DCB Companies
resulting from a change in interest rates generally, (ii) any
change occurring after the date hereof in any Law or
interpretations thereof by Regulatory Authorities or in GAAP or
applicable regulatory accounting principles, which change affects
banking institutions generally, including any change affecting the
Deposit Insurance Fund, (iii) changes in general economic (except
in the context of determining a Material Adverse Effect for
purposes of asset quality), capital market (except in the context
of determining a Material Adverse Effect for purposes of asset
quality), legal, regulatory or political conditions affecting
banking institutions generally, (iv) the effects of compliance with
this Agreement on the operating performance of OLB or DCB, as the
case may be, including the reasonable expenses incurred in
connection with this Agreement and the Contemplated Transactions,
(v) actions or omissions of a party (or any of its Subsidiaries)
taken pursuant to the terms of this Agreement in contemplation of
the Contemplated Transactions, (vi) any effect with respect to a
party hereto caused, in whole or in substantial part, by the other
party, (vii) any change resulting from any natural disaster or any
acts of terrorism, sabotage, military action or war (whether or not
declared) or any escalation or worsening thereof, (viii) the impact
of the Agreement and the Contemplated Transactions on relationships
with customers or employees (including the loss of personnel
subsequent to the date of this Agreement), and (ix) the public
disclosure of this Agreement or the Contemplated Transactions;
except, in any such case, to the extent any such change, effect,
development, occurrence or circumstance has or would have a
disproportionate effect on the business of DCB or OLB, as the case
may be, relative to other similarly-situated Entities.
Maximum Premium has the meaning given
to the term in Section 5.7(c)(vi) of this Agreement.
Merger has the meaning given to the
term in Section 1.3(b)(v) of this Agreement.
Merger Consideration has the meaning
given to the term in Section 2.1(b) of this Agreement.
MGCL means the Maryland General
Corporation Law, as amended.
NASDAQ means the NASDAQ Stock Market
LLC.
NASDAQ Bank Index has the meaning given
the term in Section 7.1(j) of this Agreement.
Non-Operational Subsidiaries has the
meaning given to the term in Section 3.1(g) of this
Agreement.
Non-Residential Credit Extension means
a Credit Extension other than for an owner-occupied
residence.
Notice of Superior Proposal has the
meaning given to the term in Section 5.7(a)(ii) of this
Agreement.
Objecting DCB Shares means any shares
of DCB Common Stock issued and outstanding immediately prior to the
Closing Date, the holder of which has not voted in favor of the
Merger and who has properly followed the procedures set forth in
Section 3-203 of the MGCL.
OLB has the meaning given to the term
in the Background section of this Agreement.
OLB Benefit Plans means all employee
pension benefit plans within the meaning of ERISA Section 3(2),
profit sharing plans, stock purchase plans, deferred compensation
and supplemental income plans, supplemental executive retirement
plans, annual incentive plans, group insurance plans, and all other
employee welfare benefit plans within the meaning of ERISA
Section 3(1) (including vacation pay, sick leave, short-term
disability, long-term disability, and medical plans) and all other
material employee benefit plans, policies, agreements and
arrangements currently maintained or contributed to for the benefit
of the employees or former employees (including retired employees)
and any beneficiaries thereof or directors or former directors of
OLB or any other Entity that, together with OLB, is treated as a
single employer under IRC Sections 414(b), (c), (m) or
(o).
OLB Common Stock has the meaning given
to the term in Section 4.2(a) of this Agreement.
OLB Companies means OLB, Old Line, and
any other OLB Subsidiary, collectively.
OLB Disclosure Schedule means,
collectively, the disclosure schedules delivered by OLB to DCB at
or prior to the execution and delivery of this Agreement, as may be
updated pursuant to Section 5.6 of this
Agreement.
OLB ERISA Affiliate means any Entity
that, together with OLB, is treated as a single employer under IRC
Sections 414(b), (c), (m) or (o).
OLB Financials means (a) the
consolidated balance sheets of OLB at December 31, 2015 and 2014
and the consolidated statements of income, statements of
comprehensive income, statements of changes in stockholders’
equity and consolidated statements of cash flows for OLB for the
years ended December 31, 2015, 2014 and 2013, and the notes
thereto, as audited by Dixon Hughes Goodman LLP and as set forth in
OLB’s Annual Report on Form 10-K for the year ended December
31, 2015, (b) the consolidated balance sheet of OLB at December 31,
2016 and 2015 and the consolidated statements of income, statements
of comprehensive income, statements of changes in
stockholders’ equity and consolidated statements of cash
flows for OLB for the years ended December 31, 2016, 2015 and 2014,
and the notes thereto, as audited by Dixon Hughes Goodman LLP and
as will be set forth in OLB’s Annual Report on Form 10-K for
the year ended December 31, 2016, to be delivered or made available
within 90 days of December 31, 2016, (c) the unaudited interim
consolidated financial statements and notes thereto included in
OLB’s Quarterly Report on Form 10-Q for the quarter ended
September 30, 2016, and (d) the unaudited interim consolidated
financial statements and notes thereto included in OLB’s
Quarterly Reports on Form 10-Q for each calendar quarter commencing
with the quarter ended March 31, 2017, to be delivered or made
available within 45 days after the end of the respective
quarter.
OLB Governing Documents has the meaning
given to the term in Section 4.1(f) of this Agreement.
OLB Intellectual Property has the
meaning given to the term in Section 4.30 of this
Agreement.
OLB IT Assets has the meaning given to
the term in Section 4.30 of this Agreement.
OLB Preferred Stock has the meaning
given to the term in Section 4.2 of this Agreement.
OLB Price Ratio has the meaning given
to the term in Section 7.1(j) of this Agreement.
OLB Real Property has the meaning given
to the term in Section 4.15(a) of this Agreement.
OLB Regulatory Agreement has the meaning
given to the term in Section 4.11(e)(iii) of this
Agreement.
OLB Reports has the meaning given to
the term in Section 4.11 of this Agreement.
OLB Returns has the meaning given to
the term in Section 4.7(c) of this Agreement.
OLB Subsidiaries means the subsidiaries
of OLB and Old Line as set forth in OLB Disclosure Schedule
4.1(d).
OLB Taxes has the meaning given to the
term in Section 4.7(c) of this Agreement.
OLB Termination Fee has the meaning
given to the term in Section 8.1(c) of this Agreement.
Old Line has the meaning given to the
term in the Background section of this Agreement.
PBGC has the meaning given to the term
in Section 3.13(b) of this Agreement.
Per Share Consideration has the meaning
given to the term in Section 2.1(b) of this Agreement.
Per Share Value has the meaning given
to the term in Section
2.1(b)(ii) of this Agreement.
Permitted Employees means officers and
employees of any of the DCB Companies at the level of Vice
President or below.
Person means an individual, an Entity
and any Regulatory Authority; provided, however, that if any
provision of this Agreement in which the term “person”
is used specifies a particular definition of “person”
for purpose of that provision, then the term shall have the meaning
so defined.
Plan of Reorganization has the meaning
given to the term in Section 2.5(e) of this Agreement
Pre-Closing Period means the period
commencing on the date of execution of this Agreement through the
earlier of (a) the Closing Date, and (b) the date this Agreement is
terminated pursuant to Article VII herein.
Price Determination Period has the
meaning given to the term in Section 7.1(j) of this
Agreement.
Prospectus/Proxy Statement means the
prospectus/proxy statement, together with any supplements thereto,
to be sent to holders of DCB Common Stock in connection with the
Merger and the DCB Common Stockholders’ Meeting.
Registration Statement means the
registration statement on Form S-4, including any pre-effective or
post-effective amendments or supplements thereto, as filed by OLB
with the SEC under the Securities Act with respect to the OLB
Common Stock to be issued to the DCB Common Stockholders in
connection with the Merger.
Regulatory Authority means any federal,
state or local governmental authority, agency or instrumentality,
or any self-regulatory organization, including, without limitation,
the SEC, the Commissioner, the FRB, the FDIC, NASDAQ, and the
respective staffs thereof.
REO means, with respect to the DCB
Companies and the OLB Companies, real property that the DCB
Companies or the OLB Companies, as the case may be, classify as
other real estate owned for financial statement reporting and
regulatory purposes.
Replacement Nominee has the meaning
given to the term in Section 5.7(c)(i) of this
Agreement.
Representatives means, with respect to
an Entity, such Entity’s officers, directors, or employees,
or any investment bankers, financial advisors, attorneys,
accountants, consultants, agents or other representative retained
by any of them.
Residential Credit Extension has the
meaning given to the term in Section 5.1(aa) of this
Agreement.
Retained Employees has the meaning
given to the term in Section 5.7(c)(ii)(A) of this
Agreement.
Rights means warrants, options, rights,
convertible securities, stock appreciation rights, other capital
stock equivalents and other arrangements or commitments that
obligate an Entity to issue or dispose of any of its capital stock
or other ownership interests or that provide for compensation based
on the equity appreciation of its securities.
SDAT means the Maryland State
Department of Assessments and Taxation.
SEC means the U.S. Securities and
Exchange Commission.
SEC Reports has the meaning given to
the term in 4.11(c) of this Agreement.
Securities Act means the Securities Act
of 1933, as amended, and the rules and regulations promulgated
thereunder.
Securities Laws means the Securities
Act, the Exchange Act, and any applicable state blue sky laws,
collectively.
Starting Price has the meaning given to
the term in Section 7.1(j) of this Agreement.
Subsidiary means any Entity, 50% or
more of the equity or other ownership interest of which is owned,
either directly or indirectly, by another Entity, except any Entity
the interest in which is held in the ordinary course of the lending
or fiduciary activities of a bank.
Superior Proposal has the meaning given
to the term in Section 5.7(a)(ii) of this Agreement.
Support Agreement means the Agreement
as set forth in Exhibit B hereto to be signed by the persons set
forth on Exhibit A hereto.
Tail Policy has the meaning given to
the term in Section 5.7(c)(vi) of this Agreement.
Taxing Authority means any federal,
state, local or foreign government, any subdivision, agency,
commission or authority thereof, or any quasi-governmental body
exercising tax regulatory authority.
Trading Days means the days on which
NASDAQ is open for trading.
Section
1.3 The Merger and
Related Transactions.
(a) Closing. Unless the parties
hereto agree otherwise, the closing of the Contemplated
Transactions (the “Closing”) will take place
at the offices of Baker, Donelson, Bearman, Caldwell &
Berkowitz, PC, located at 100 Light Street, Baltimore, Maryland, at
a time and date to be reasonably selected by OLB after consultation
with DCB and after all conditions to Closing set forth in Article
VI of this Agreement (other than the delivery of certificates,
opinions, and other instruments and documents to be delivered at
the Closing) have been satisfied or waived (the “Closing Date”); provided,
however, that any certificate, opinion, instrument or other
document to be delivered at the Closing may be delivered
electronically. Unless expressly provided otherwise, all
certificates, instruments and other documents to be delivered at
the Closing shall be dated on or as of the Closing Date. The
parties agree to use reasonable efforts to accomplish the Closing
on or before July 7, 2017.
(b) The Merger. Subject to the
terms and conditions of this Agreement and in accordance with the
applicable laws of the State of Maryland, at the Effective
Time:
(i) DCB shall merge
with and into OLB;
(ii) The separate
existence of DCB shall cease;
(iii) OLB shall be the
surviving corporation;
(iv) Each share of DCB
Common Stock issued and outstanding immediately prior to the
Effective Time shall be converted into the right to receive the Per
Share Consideration as provided in Article II of this Agreement;
and
(v) All of the property
(real, personal and mixed), rights, powers, duties, obligations and
liabilities of DCB shall be taken and deemed to be transferred to
and vested in OLB, as the surviving corporation, without further
act or deed (the transactions described in the foregoing items (i)
through (v) are collectively referred to herein as the
“Merger”).
At and after the
Effective Time, the Merger shall have the effects set forth in
Section 3-114 of the MGCL.
(c) OLB’s Articles of Incorporation
and Bylaws. On and after the Effective Time, the articles of
incorporation and bylaws of OLB, as in effect immediately prior to
the Effective Time, shall automatically be and remain the articles
of incorporation and bylaws of OLB, as the surviving corporation in
the Merger, until thereafter altered, amended or
repealed.
(d) OLB’s and Old Line’s
Boards of Directors and Officers.
(i) Subsequent to the
date of this Agreement and in accordance with Section 5.7(c)(i),
OLB shall take such actions as may be necessary to, as of the
Effective Time, elect Stephen J. Deadrick and another individual
currently serving on DCB’s Board of directors as the parties
mutually agree to at a later date (the “DCB Nominees”) or, if
applicable, a Replacement Nominee listed on DCB Disclosure Schedule 1.3(d),
to the OLB and Old Line boards of directors.
(ii) At the Effective
Time, the officers of OLB duly elected and holding office
immediately prior to the Effective Time shall be the officers of
OLB, as the surviving corporation in the Merger.
Section
1.4 [Intentionally
Omitted].
Section
1.5 Additional
Actions.
If, at any time
after the Effective Time, OLB shall consider or be advised that any
further deeds, assignments or assurances in law or any other acts
are necessary or desirable to (a) vest, perfect or confirm, of
record or otherwise, in OLB its right, title or interest in, to or
under any of the rights, properties or assets of DCB or Damascus,
or (b) otherwise carry out the purposes of this Agreement, DCB,
Damascus and their officers and directors shall be deemed to have
granted to OLB and Old Line an irrevocable power of attorney to
execute and deliver all such deeds, assignments or assurances in
law or any other acts as are necessary or desirable to (i) vest,
perfect or confirm, of record or otherwise, in OLB or Old Line its
right, title or interest in, to or under any of the rights,
properties or assets of DCB or (ii) otherwise carry out the
purposes of this Agreement, and the officers and directors of OLB
and Old Line are authorized in the name of DCB, Damascus or
otherwise to take any and all such action.
Section
1.6 The Bank
Merger.
Subject to the
terms and conditions of the Agreement and Plan of Merger attached
hereto as Exhibit C (the “Bank Merger Agreement”)
and in accordance with Title 3, Subtitle 7 of the Financial
Institutions Article of the Annotated Code of Maryland and
applicable federal law, immediately after the Merger, Damascus
shall be merged with and into Old Line and the separate existence
of Damascus shall cease (the “Bank Merger”). Old Line
shall be the surviving Entity in the Bank Merger and shall continue
its existence as a trust company with commercial banking powers
under the laws of the State of Maryland, and as a wholly-owned
operating subsidiary of OLB, subject to the provisions of this
Section 1.6.
ARTICLE
II.
CONSIDERATION; ELECTION AND EXCHANGE
PROCEDURES
Section
2.1 Merger
Consideration.
(a) Calculation of DCB Tangible
Equity. Within three Business Days following the date on
which the consolidated financial statements of DCB for the year
ended December 31, 2016 have been audited and finalized (the
“Calculation
Date”), DCB shall calculate the “DCB Tangible Equity”,
which shall be DCB’s total stockholders’ equity at
December 31, 2016 less its intangible assets, if any, at December
31, 2016, as such amounts are set forth in DCB’s audited
consolidated balance sheet at the December 31, 2016. Within five
Business Days after the Calculation Date, DCB shall provide OLB
with its calculation of the DCB Tangible Equity and any supporting
documentation necessary for OLB to review such
calculation.
(b) Per Share Consideration.
Subject to Section 2.3 and Section 2.4 hereof, each share of DCB
Common Stock that is issued and outstanding immediately prior to
the Effective Time shall, at the Effective Time, by reason of the
Merger and without any action on the part of the holder thereof,
cease to be outstanding and be automatically cancelled, and shall
be converted into the right to receive that number of shares of OLB
Common Stock (the “Per Share Consideration”)
equal to the exchange ratio (the “Exchange Ratio”)
calculated in accordance with the following:
(i) The Exchange Ratio
shall be the number determined by dividing the Per Share Value
(defined below) by the Average Price (defined below), rounded to
the nearest ten-thousandth.
(ii) The term
“Per Share
Value” shall mean the amount determined by (a)
multiplying the DCB Tangible Equity by 1.60 and (b) dividing such
product by the number of shares of DCB Common Stock that are issued
and outstanding immediately prior to the Effective
Time.
(iii) The term
“Average
Price” shall mean the amount equal to the volume
weighted average of the closing prices of OLB Common Stock for the
ten Trading Days ending two Trading Days prior to the Closing Date;
provided, however, that, except as provided in Section 7.1(j) of
this Agreement, in no event will the Average Price be less than
$20.85 nor greater than the Starting Price.
Example: Assume that the DCB Tangible
Equity is $25,332,000, that 1,613,180 shares of DCB Common Stock
are issued and outstanding immediately prior to the Effective Time,
and the Average Price is $25.09. In such case, the Per Share Value
would be $25.13
(i.e., ($25,332,000 x 1.6)
/ 1,613,180), the Exchange Ratio would be 1.0016 (i.e., $25.13 / $25.09) and, thus, the
Per Share Consideration would be 1.0016 shares of OLB Common
Stock.
Exhibit D hereto is
an example of how the Exchange Ratio and Per Share Consideration
could be calculated under various Average Price scenarios. One day
prior to the Closing Date, OLB shall provide DCB with its
calculation of the Exchange Ratio and any supporting documentation
necessary for DCB to review such calculation.
The aggregate Per
Share Consideration is sometimes referred to herein as the
“Merger
Consideration.”
Section
2.2
OLB Common
Stock.
Each share of OLB
Common Stock issued and outstanding immediately prior to the
Effective Date shall, on and after the Effective Date, continue to
be issued and outstanding.
Section
2.3
Fractional
Shares.
Notwithstanding
anything to the contrary contained herein, no fractional shares of
OLB Common Stock and no scrip or certificates therefor shall be
issued in connection with the Merger, no dividend or distribution
with respect to OLB Common Stock shall be payable on or with
respect to any fractional share interest, and such fractional share
interests shall not entitle the owner thereof to vote or to any
other rights of a stockholder of OLB. In lieu of the issuance of
any such fractional share, OLB shall pay to each former holder of
DCB Common Stock who otherwise would be entitled to receive a
fractional share of OLB Common Stock an amount in cash, rounded to
the nearest whole cent and without interest, equal to the product
of (a) the fraction of a share of OLB Common Stock to which such
holder would otherwise have been entitled and (b) the Average
Price. For purposes of determining any fractional share interest,
all shares of DCB Common Stock owned by a DCB Common Stockholder
shall be combined so as to calculate the maximum number of whole
shares of OLB Common Stock issuable to such DCB Common
Stockholder.
Section
2.4
Objecting DCB
Common Stockholders.
(a) The Objecting DCB
Shares will not be converted into or represent a right to receive
the Merger Consideration under this Agreement, and the holder
thereof shall be entitled only to such rights as are granted by
Section 3-202 of the MGCL.
(b) If any holder of
Objecting DCB Shares shall have failed to comply with Section 3-203
of the MGCL, or shall have effectively withdrawn or lost the right
granted thereunder, the Objecting DCB Shares held by such holder
shall be converted into a right to receive the Per Share
Consideration in accordance with the applicable provisions of this
Agreement.
(c) All payments in
respect of Objecting DCB Shares, if any, will be made by
OLB.
Section
2.5
Exchange Fund;
Exchange of DCB Certificates.
(a) Subject to the
other provisions of this Article II, on or immediately prior to the
Closing Date, OLB shall deposit in trust with or otherwise make
available to the Exchange Agent for the benefit of the DCB Common
Stockholders, for exchange in accordance with this Agreement,
through the Exchange Agent, (i) certificates representing the
Merger Consideration and (ii)
cash sufficient to pay holders of what would have been fractional
shares of OLB Common Stock pursuant to Section 2.3 of this
Agreement (such certificates for shares of OLB Common Stock and
cash being hereinafter referred to as the “Exchange
Fund”).
(b) As a condition to
receiving the Per Share Consideration for each share of DCB Common
Stock held, each DCB Common Stockholder shall be required to duly
execute and deliver to the Exchange Agent a letter of transmittal
(each, a “Letter of
Transmittal”). As promptly as practicable, but in any
event no later than five Business Days following the Effective
Time, and provided that DCB has delivered, or caused to be
delivered, to the Exchange Agent all information that is necessary
for the Exchange Agent to perform its obligations as specified
herein, the Exchange Agent shall mail to each holder of record of a
DCB Certificate a Letter of Transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the DCB
Certificate shall pass, only upon delivery of the DCB Certificate
to the Exchange Agent) and instructions for use in effecting the
surrender of the DCB Certificates in exchange for the Merger
Consideration as provided for in this Agreement. Each DCB Common
Stockholder, upon proper surrender of DCB Certificates to the
Exchange Agent, accompanied by duly executed Letters of
Transmittal, shall be entitled to receive in exchange therefor (i)
a certificate representing the number of whole shares of OLB Common
Stock to which such DCB Common Stockholder shall have become
entitled pursuant to the provisions of Section 2.1, and/or
(ii) a check representing the amount of cash in lieu of fractional
shares that such holder has the right to receive hereunder. Each
DCB Certificate so surrendered shall be cancelled. Until so
surrendered, each DCB Certificate will be deemed for all purposes
after the Effective Time to represent and evidence solely the right
to receive the Merger Consideration to be paid therefor pursuant to
this Agreement. Except as required by Law, no interest shall be
payable with respect to the cash payable for fractional shares or
the cash payable for Objecting Shares. If any DCB Common
Stockholder is unable to locate any DCB Certificate(s) to be
surrendered for exchange, the Exchange Agent shall deliver the
corresponding share of the Merger Consideration to the registered
stockholder thereof upon receipt of a lost certificate affidavit
and an indemnity agreement in a form acceptable to the Exchange
Agent and OLB.
(c) The delivery of the
Merger Consideration following the Closing by the Exchange Agent
shall be as soon as practicable following the Exchange
Agent’s receipt of the applicable DCB Certificate(s) and duly
executed Letters of Transmittal.
(d) No dividends or
other distributions declared with respect to OLB Common Stock shall
be paid to the holder of any unsurrendered DCB Certificate until
the holder thereof shall surrender such DCB Certificate(s) in
accordance with this Section 2.5. Pending such surrender, any
dividend or distribution payable in respect of such shares shall be
delivered to the Exchange Agent to be held as part of the Exchange
Fund. After the surrender of a DCB Certificate in accordance with
this Section 2.5, the record holder thereof shall be entitled to
receive any such dividends or other distributions, without any
interest thereon, which theretofore had become payable with respect
to shares of OLB Common Stock represented by such DCB
Certificate.
(e) To the extent that
shares of DCB Common Stock outstanding immediately prior to the
Effective Time are evidenced by one or more certificates
representing shares of common stock of Damascus, par value $3.00
per share (“Bank
Certificates”), that have not been surrendered
pursuant to Section 4(b) of that certain Plan of Reorganization and
Share Exchange, dated as of April 27, 2016, by and between DCB and
Damascus (the “Plan
of Reorganization”), such shares shall be treated as
outstanding shares of DCB Common Stock, and the Bank Certificates
shall be treated as certificates evidencing shares of DCB Common
Stock, for purposes of this Agreement, except that the holders
thereof shall be entitled to receive the Per Share Consideration in
respect thereof only upon the surrender of the Bank Certificates in
accordance with Section 2.5(b). Shares evidenced by Bank
Certificates shall in all other respects be subject to the same
terms and conditions that apply to shares of DCB Common Stock
evidenced by DCB Certificates under this Section 2.5, including,
without limitation, Section 2.5(d).
(f) If the Person
surrendering a DCB Certificate and signing the accompanying Letter
of Transmittal is not the record holder thereof, or if any
certificate representing shares of OLB Common Stock is to be issued
in a name other than that in which a DCB Certificate surrendered in
exchange therefor is registered, it shall be a condition of the
payment of the Merger Consideration that: (i) such DCB Certificate
is properly endorsed to such Person or is otherwise in the proper
form for transfer, in either case signed exactly as the name of the
record holder appears on such DCB Certificate, and is otherwise in
proper form for transfer, or is accompanied by appropriate evidence
of the authority of the Person surrendering such Certificate and
signing the letter of transmittal to do so on behalf of the record
holder; and (ii) the Person requesting such exchange shall pay to
the Exchange Agent in advance any transfer or other taxes required
by reason of the payment to a Person other than the registered
holder of the DCB Certificate surrendered, or required for any
other reason, or shall establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not
payable.
(g) From and after the
Effective Time, there shall be no transfers on the stock transfer
books of DCB of the shares of DCB Common Stock that were issued and
outstanding immediately prior to the Effective Time. If, after the
Effective Time, DCB Certificates are presented for transfer, they
shall be cancelled and exchanged for the Merger Consideration as
provided in this Article II.
(h) The Exchange Agent
will be entitled to deduct and withhold from the cash portion of
the Exchange Fund otherwise payable pursuant to this Agreement or
the Contemplated Transactions hereby to any holder of DCB Common
Stock such amounts as the Exchange Agent is required to deduct and
withhold with respect to the making of such payment under the IRC,
or any applicable provision of U.S. federal, state, local or
non-U.S. tax law. To the extent that such amounts are properly
withheld by the Exchange Agent, such withheld amounts will be
treated for all purposes of this Agreement as having been paid to
the holder of the DCB Common Stock in respect of whom such
deduction and withholding were made by the Exchange
Agent.
(i) Any portion of the
Exchange Fund that remains unclaimed by the DCB Common Stockholders
for six months after the Effective Time shall be delivered by the
Exchange Agent to OLB. Any DCB Common Stockholder who has not
theretofore complied with this Section 2.5 shall thereafter be
entitled to look only to OLB for payment of the DCB Common
Stockholder’s share of the Merger Consideration deliverable
in respect of each share of DCB Common Stock such DCB Common
Stockholder holds as determined pursuant to this Agreement, without
any interest thereon.
(j) No Liability. None of OLB, DCB
or the Exchange Agent shall be liable to any Person in respect of
any distributions from the Exchange Fund properly delivered to a
public official pursuant to any applicable abandoned property,
escheat or similar Law. If any DCB Certificate shall not have been
surrendered prior to five years after the Effective Time (or
immediately prior to such earlier date on which any Merger
Consideration would otherwise escheat to or become the property of
any Regulatory Authority), any such Merger Consideration shall, to
the extent permitted by applicable Law, become the property of OLB,
free and clear of all claims or interest of any Person previously
entitled thereto.
Section
2.6
Anti-Dilution
Provisions.
In the event OLB
changes (or establishes a record date for changing) the number of,
or provides for the exchange of, shares of OLB Common Stock issued
and outstanding prior to the Effective Time as a result of a stock
split, reverse stock split, stock dividend, reclassification, or
similar transaction with respect to the outstanding OLB Common
Stock, an appropriate adjustment shall be made to the Exchange
Ratio so as to provide the holders of the DCB Common Stock the same
economic benefit as contemplated by this Agreement prior to such
event; provided that, for the avoidance of doubt, no such
adjustment shall be made with regard to the Exchange Ratio if (a)
OLB issues additional shares of OLB Common Stock and receives
consideration for such shares in a bona fide third party
transaction, (b) OLB issues employee or director stock grants or
similar equity awards in the ordinary course of business consistent
with past practice, or (c) shares of OLB Common Stock are
repurchased by or on behalf of OLB.
Section
2.7
Other
Matters.
Nothing set forth
in this Agreement or any exhibit or schedule to this Agreement
shall be construed to:
(a) Preclude any of the
OLB Companies from acquiring or assuming, or to limit in any way
the right of any of the OLB Companies to acquire or assume, prior
to or following the Effective Date, the stock, assets or
liabilities of any financial services institution or Entity other
than DCB or Damascus, whether for cash or by issuance or exchange
of OLB Common Stock or any securities convertible into shares of
OLB Common Stock, unless such transaction would result in a
Material Adverse Effect on OLB;
(b) Preclude OLB from
issuing, or to limit in any way the right of OLB to issue, OLB
Common Stock or other securities in a transaction(s) other than the
Contemplated Transactions;
(c) Preclude OLB from
granting employee, director, or compensatory options at any time
with respect to OLB Common Stock or other securities in the
ordinary course of business consistent with past
practices;
(d) Preclude option
holders or equity compensation plan participants of OLB from
exercising options at any time with respect to OLB Common Stock or
other securities; or
(e) Preclude any of the
OLB Companies from taking, or to limit in any way the right of any
of them to take, any other action not expressly and specifically
prohibited by the terms of this Agreement;
provided, however,
that no action taken by OLB pursuant to this Section 2.7 may impair
the ability of OLB to perform its obligations under this
Agreement.
ARTICLE
III.
REPRESENTATIONS AND
WARRANTIES OF DCB
DCB represents and
warrants to OLB, for itself and with respect to and on behalf of
each of the DCB Subsidiaries (to the extent applicable), that the
statements contained in this Article III (and as reflected on the
DCB Disclosure Schedules) are true and correct as of the date of
this Agreement and will be true and correct as of the Closing Date
(as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Article
III, except that those representations and warranties that by their
terms speak as of the date of this Agreement or some other date
shall be true and correct as of such date); provided, however, that
no representation or warranty contained in this Article III shall
be deemed untrue or incorrect, and DCB shall not be deemed to have
breached a representation or warranty, as a consequence of the
existence of any fact, circumstance or event unless such fact,
circumstance or event, individually or taken together with all
other facts, circumstances or events inconsistent with any
paragraph of Article III, has had or is reasonably expected to have
a Material Adverse Effect on DCB, disregarding for these purposes
(i) any qualification or exception for, or reference to,
materiality in any such representation or warranty and (ii) any use
of the terms “material,” “materially,”
“in all material respects,” “Material Adverse
Effect” or similar terms or phrases in any such
representation or warranty; provided, however, that the foregoing
standard shall not apply to representations and warranties
contained in Sections 3.1, 3.2, 3.3, 3.6, 3.14, 3.18, 3.27, 3.32
and 3.38, which shall be deemed untrue, incorrect and breached if
they are not true and correct in all material respects (the
“Article III
Standard”).
DCB has made a good
faith effort to ensure that the disclosure on each schedule of the
DCB Disclosure Schedules corresponds to the section referenced
herein. For purposes of the DCB Disclosure Schedules, however, any
item disclosed on any schedule therein is deemed to be fully
disclosed with respect to all schedules under which such item may
be relevant as and to the extent that it is reasonably clear on the
face of such schedule that such item applies to such other
schedule.
Section
3.1
Organization.
(a) DCB is a
corporation duly incorporated, validly existing, and in good
standing under the laws of the State of Maryland. DCB is a bank
holding company duly registered under the BHC Act. DCB has the full
corporate power and lawful authority to carry on its business and
operations as now being conducted and to own or lease all of its
properties and assets as presently owned or leased. DCB is duly
licensed, registered or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or
the character or location of the properties and assets owned or
leased by it makes such licensing, registration or qualification
necessary, except where the failure to be so licensed, registered
or qualified would not have a Material Adverse Effect on DCB, and
all such licenses, registrations and qualifications are in full
force and effect in all material respects. DCB engages in
activities and holds properties only of the types permitted to bank
holding companies by the BHC Act and the rules and regulations
promulgated thereunder.
(b) Damascus is a
Maryland-state chartered bank duly organized, validly existing and
in good standing under the laws of the State of Maryland. Damascus
has the full corporate power and lawful authority to carry on its
business and operations as now being conducted and to own or lease
all of its properties and assets as presently owned or leased.
Damascus is duly licensed, registered or qualified to do business
in each jurisdiction in which the nature of the business conducted
by it or the character or location of the properties and assets
owned or leased by it makes such licensing, registration or
qualification necessary, except where the failure to be so
licensed, registered or qualified would not have a Material Adverse
Effect on DCB, and all such licenses, registrations and
qualifications are in full force and effect in all material
respects.
(c) The deposits of
Damascus are insured by the FDIC to the extent provided in the
Federal Deposit Insurance Act and all premiums and assessments
required to be paid in connection therewith have been paid when
due.
(d) DCB Disclosure Schedule 3.1(d)
contains a complete and accurate list of all DCB Subsidiaries. Each
DCB Subsidiary is duly organized, validly existing and in good
standing under the laws of the state of its organization and has
the full corporate power and lawful authority to carry on its
business and operations as now being conducted and to own or lease
all of its properties and assets as presently owned or leased. Each
DCB Subsidiary is duly licensed, registered or qualified to do
business in each jurisdiction in which the nature of the business
conducted by it or the character or location of the properties and
assets owned or leased by it makes such licensing, registration or
qualification necessary, except where the failure to be so
licensed, registered or qualified would not have a Material Adverse
Effect on DCB, and all such licenses, registrations and
qualifications are in full force and effect in all material
respects. Other than shares of capital stock of the DCB
Subsidiaries listed on DCB
Disclosure Schedule 3.1(d), DCB does not own or control,
directly or indirectly, or have the right to acquire directly or
indirectly, an equity interest in any Entity.
(e) The respective
minute books of DCB and each DCB Subsidiary accurately reflect, in
all material respects, all material actions of their respective
owners and governing bodies, including committees, in each case in
accordance with the ordinary business practice of DCB or the
applicable DCB Subsidiary.
(f) Prior to the date
of this Agreement, DCB has delivered to OLB true and correct copies
of the articles of incorporation and bylaws of DCB, and the charter
documents and bylaws, operating agreement and/or other governing
instrument of each DCB Subsidiary and each as in effect on the date
hereof (collectively, the “DCB Governing
Documents”).
(g) DCB Disclosure Schedule 3.1(g)
contains a complete and accurate list of all DCB Subsidiaries that
are no longer operational or provide any business function for or
on behalf of DCB or Damascus (the “Non-Operational
Subsidiaries”).
Section
3.2
Capitalization.
(a) The authorized
capital stock of DCB consists of 5,000,000 shares of common stock,
$0.01 par value per
share (“DCB Common
Stock”), of which, as of the date of this Agreement,
1,613,180 (which number includes 209,450 shares represented by Bank
Certificates) shares are duly authorized, validly issued and
outstanding. Except as provided in DCB Disclosure Schedule 3.2(a),
as of the date of this Agreement, there are no bonds, debentures,
notes or other indebtedness of DCB or any DCB Subsidiary having the
right to vote on any matters on which stockholders of DCB may vote,
nor are any trust preferred or subordinated debt securities of DCB
or any DCB Company issued or outstanding. All of the issued and
outstanding shares of DCB Common Stock are fully paid and
nonassessable, free of preemptive rights, except as may be defined
in DCB’s articles of incorporation, and were not issued in
violation of the preemptive rights of any Person or in violation of
any applicable Laws. Except as set forth in DCB Disclosure Schedule 3.2(a),
DCB has not issued nor is DCB or any DCB Subsidiary bound by any
subscription, call, commitment, agreement or other Right of any
character relating to the purchase, sale or issuance of, or right
to receive dividends or other distributions on, any shares of DCB
Common Stock or any other security of DCB or any securities
representing the right to vote, purchase or otherwise receive any
shares of DCB Common Stock or any other security of DCB.
Accordingly, the only securities of DCB to be outstanding
immediately prior to the Effective Time will be 1,613,180 shares of
DCB Common Stock.
(b) Except as disclosed
in DCB Disclosure Schedule
3.2(b), DCB owns, directly or indirectly, all of the capital
stock or other equity ownership interests of the DCB Subsidiaries,
free and clear of any Liens, agreements and restrictions of any
kind or nature, and all of such shares or equity ownership
interests are duly authorized and validly issued and are fully
paid, nonassessable and free of preemptive rights, with no personal
liability attaching to the ownership thereof.
(c) Except as set forth
on DCB Disclosure Schedule
3.2(c), to the Knowledge of DCB no person or group is the
beneficial owner of five percent or more of the outstanding shares
of DCB Common Stock (the terms “person,”
“group” and “beneficial owner” are as
defined in Section 13(d) of the Exchange Act, and the rules
and regulations thereunder).
(d) DCB does not have a
dividend reinvestment plan or any stockholders’ rights
plan.
Section
3.3
Authority; No
Violation.
(a) DCB has full
corporate power and authority to execute and deliver this Agreement
and, subject to the receipt of all consents, waivers and approvals
described in DCB
Disclosure Schedule 3.4 and approval of the Agreement and
the Merger by the holders of DCB Common Stock as required by
DCB’s articles of incorporation and bylaws and the MGCL, to
consummate the Contemplated Transactions and to otherwise comply
with its obligations under this Agreement. The execution and
delivery of this Agreement by DCB and the consummation by DCB of
the Contemplated Transactions, up to and including the Merger, have
been duly and validly authorized by the board of directors of DCB
and, except for approval by the holders of DCB Common Stock as
required by DCB’s articles of incorporation and bylaws and
the MGCL, no other corporate proceedings on the part of DCB are
necessary to consummate the Contemplated Transactions. This
Agreement has been duly and validly executed and delivered by DCB
and, assuming the due authorization, execution and delivery of this
Agreement by OLB, constitutes the valid and binding obligation of
DCB, enforceable against DCB in accordance with its terms, subject
to applicable bankruptcy, insolvency and similar laws affecting
creditors’ rights generally and subject, as to
enforceability, to general principles of equity.
(b) The execution and
delivery of this Agreement by DCB, the consummation of the
Contemplated Transactions, and the compliance by DCB with any of
the terms or provisions hereof, subject to the receipt of all
consents described in DCB
Disclosure Schedule 3.4, the approval of this Agreement and
the Merger by the holders of DCB Common Stock as required by
DCB’s articles of incorporation and bylaws and the MGCL,
DCB’s and OLB’s compliance with any conditions
contained in this Agreement, and compliance by DCB or any DCB
Subsidiary with any of the terms or provisions hereof, do not and
will not:
(i) Conflict with or
result in a breach of any provision of the DCB Governing
Documents;
(ii) Violate any Law
applicable to DCB or any DCB Subsidiary or any of their respective
properties or assets, except where such violation would not have a
Material Adverse Effect; or
(iii) Except as described
in DCB Disclosure Schedule
3.3(b) or pursuant to which consent or notification is
required as set forth in DCB Disclosure Schedule 3.4,
violate, conflict with, result in a breach of any provisions of,
constitute a default (or an event that, with notice or lapse of
time, or both, would constitute a default) under, result in the
termination of, or acceleration of, the performance required by, or
result in a right of termination or acceleration or the creation of
any Lien upon any of the properties or assets of DCB or any DCB
Subsidiary under any of the terms or conditions of any note, bond,
mortgage, indenture, license, lease, agreement, commitment or other
instrument or obligation to which DCB or any DCB Subsidiary is a
party, or by which they or any of their respective properties or
assets may be bound or affected, except where such termination,
acceleration or creation would not have a Material Adverse Effect
on DCB.
(c) Damascus has all
requisite corporate power and authority to execute and deliver the
Bank Merger Agreement and, subject to the receipt of all consents
described in DCB
Disclosure Schedule 3.4, to consummate the transactions
contemplated thereby. The execution and delivery of the Bank Merger
Agreement and the consummation of the transactions contemplated
thereby have been duly and validly authorized by the board of
directors of Damascus and, other than the approval of the Bank
Merger Agreement by DCB as the sole stockholder of Damascus as
required by Law, no further corporate proceedings of Damascus are
needed to execute and deliver the Bank Merger Agreement and
consummate the transactions contemplated thereby. DCB, as the sole
stockholder of Damascus, shall promptly hereafter approve the Bank
Merger Agreement, and the Bank Merger Agreement will be duly
executed by Damascus on the date of this Agreement. The Bank Merger
Agreement has been duly authorized and, upon due authorization,
execution and delivery by Damascus, will be a legal, valid and
binding agreement of Damascus enforceable in accordance with its
terms, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to
creditors’ rights generally and general equitable principles.
At the Closing, all other agreements, documents and instruments to
be executed and delivered by Damascus that are referred to in the
Bank Merger Agreement, if any, will have been duly executed and
delivered by Damascus and, assuming due authorization, execution
and delivery by the counterparties thereto, will constitute the
legal, valid and binding obligations of Damascus, enforceable
against Damascus in accordance with their respective terms and
conditions, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to
creditors’ rights generally and by general equitable
principles.
(d) The approval of the
Agreement and the Merger by the holders of DCB Common Stock is the
only vote of holders of any class of DCB capital stock necessary to
adopt and approve this Agreement and the Contemplated Transactions.
The affirmative vote of Persons holding at least two-thirds of the
issued and outstanding shares of DCB Common Stock as of the record
date for the DCB Common Stockholders’ Meeting is required to
approve the Agreement and the Merger under the MGCL and DCB’s
articles of incorporation and bylaws.
(e) DCB’s board
of directors, by resolution duly adopted by the unanimous vote of
the entire board of directors at a meeting duly called and held,
has (i) determined that this Agreement and the Contemplated
Transactions, including the Merger, are advisable and are in the
best interests of DCB and its stockholders, (ii) authorized and
approved this Agreement and the Contemplated Transactions, (iii)
directed that the Agreement and the Merger be submitted for
consideration at the DCB Common Stockholders’ Meeting, and
(iv) recommended that its stockholders approve this Agreement and
the Merger.
Section
3.4
Consents;
Regulatory Approvals.
Except as described
in Section 3.3(b) of this Agreement and as described in
DCB Disclosure Schedule
3.4, no consents, waivers or approvals of, or filings or
registrations with, any Regulatory Authorities or other third
parties are necessary in connection with the execution and delivery
of this Agreement by DCB or the consummation of the Contemplated
Transactions by DCB. DCB has no reason to believe that it will not
be able to obtain all requisite consents, waivers or approvals from
the Regulatory Authorities or any third party in order to
consummate the Contemplated Transactions on a timely basis. To the
Knowledge of DCB, no fact or circumstance exists, including any
possible other transaction pending or under consideration by DCB or
any DCB Company, that would (a) reasonably be expected to prevent
or delay in any material respect, any filings or registrations
with, or consents, waivers or approvals required from, any
Regulatory Authority, or (b) cause a Regulatory Authority acting
pursuant to applicable Law to seek to prohibit or materially delay
consummation of the Contemplated Transactions or impose a
Burdensome Condition.
Section
3.5
Financial
Statements.
(a) DCB has previously
delivered the DCB Financials to OLB, except those pertaining to
annual and quarterly periods commencing after September 30, 2016
and monthly periods commencing after December, 31, 2016, which it
will deliver by each respective delivery date as required by this
Agreement. The delivered DCB Financials fairly present, in all
material respects, the consolidated financial position, results of
operations, changes in stockholders’ equity and cash flows of
DCB as of and for the periods ended on the dates thereof. The
delivered DCB Financials comply in all material respects with
applicable accounting and regulatory requirements and, other than
the Internal DCB Financials, have been prepared in accordance with
GAAP consistently applied, except for (i) omission of the notes
from the financial statements, applicable to any interim period,
and (ii) with respect to any interim period, normal year-end
adjustments and notes thereto. Smith Elliott Kearns & Company,
LLC has not resigned (or informed DCB that it intends to resign) or
been dismissed as independent public accountants of DCB as a result
of or in connection with any disagreements with DCB on a matter of
accounting principles or practices, financial statement disclosure
or auditing scope or procedure.
(b) DCB did not, as of
the date of the DCB Financials or any subsequent date, have any
liabilities, obligations or loss contingencies of any nature,
whether absolute, accrued, contingent or otherwise, that are not
fully reflected or reserved against in the balance sheets included
in the DCB Financials at the date of such balance sheets that would
have been required to be reflected therein in accordance with GAAP
consistently applied or fully disclosed in a note thereto, except
for liabilities, obligations and loss contingencies that are not
material in the aggregate and that are incurred in the ordinary
course of business, consistent with past practice, and except for
liabilities, obligations and loss contingencies that are within the
subject matter of a specific representation and warranty herein or
that have not had a Material Adverse Effect and subject, in the
case of any unaudited statements, to normal recurring audit
adjustments and the absence of notes thereto.
Section
3.6 No Material Adverse
Effect.
Except as disclosed
on DCB Disclosure Schedule
3.6, neither DCB nor any DCB Subsidiary has suffered any
adverse change in its assets (including loan portfolio),
liabilities (whether absolute, accrued, contingent or otherwise),
liquidity, net worth, property, financial condition or results of
operations, or any damage, destruction or loss, whether or not
covered by insurance, since December 31, 2015, that in the
aggregate has had or is reasonably likely to have a Material
Adverse Effect on the DCB Companies taken as a whole.
(a) Except as disclosed
in DCB Disclosure Schedule
3.7(a), all DCB Returns required by applicable Law to have
been filed with any Taxing Authority by, or on behalf of, each of
the DCB Companies have been filed on a timely basis in accordance
with all applicable Laws, and such DCB Returns are true, complete
and correct in all material respects, or requests for extensions to
file the DCB Returns have been timely filed, granted and have not
expired, except to the extent that such failures to file, to be
complete or correct or to have extensions granted that remain in
effect individually or in the aggregate would not have a Material
Adverse Effect on DCB. All DCB Taxes shown to be due and payable on
the DCB Returns or on subsequent assessments with respect thereto
have been paid in full or adequate reserves have been established
in the DCB Financials for the payment of such DCB Taxes, except
where any such failure to pay or establish adequate reserves, in
the aggregate, has not had, and is not reasonably likely to have, a
Material Adverse Effect on the DCB Companies. Each of the DCB
Companies has timely withheld and paid over all DCB Taxes required
to have been withheld and paid over by it, and complied with all
information reporting and backup withholding requirements,
including maintenance of required records with respect thereto, in
connection with amounts paid or owing to any employee, creditor,
independent contractor or other third party. There are no Liens on
any of the assets of the DCB Companies with respect to DCB Taxes,
other than Liens for DCB Taxes not yet due and
payable.
(b) Except as disclosed
on DCB Disclosure Schedule
3.7(b), no deficiencies for DCB Taxes have been claimed,
proposed or assessed, with notice to any of the DCB Companies, by
any taxing or other governmental authority against the DCB
Companies that have not been settled, closed or reached a final
determination, or that have not been adequately reserved for in the
DCB Financials, except for deficiencies that, individually or in
the aggregate, have not had, and are not reasonably likely to have,
a Material Adverse Effect on DCB. There are no pending audits
relating to any DCB Tax liability of which any of the DCB Companies
has received written notice. Except as disclosed on DCB Disclosure Schedule 3.7(b),
none of the DCB Companies is a party to any action or proceeding
for assessment or collection of DCB Taxes, nor have such events
been asserted or, to the Knowledge of DCB, threatened against any
of the DCB Companies or any of their assets. No waiver or extension
of any statute of limitations relating to DCB Taxes is in effect
with respect to the DCB Companies. No power of attorney has been
executed by any of the DCB Companies with respect to any DCB Tax
matter that is currently in force.
(c) The DCB Companies
have disclosed on the federal income tax DCB Returns all positions
taken therein that could give rise to a substantial understatement
penalty within the meaning of Section 6662 of the IRC. None of
the DCB Companies has agreed to make, nor is it required to make,
any adjustment under IRC Section 481(a) by reason of a change
in accounting method or otherwise. None of the property of the DCB
Companies is subject to a safe-harbor lease (pursuant to
Section 168(f)(8) of the Internal Revenue Code of 1954 as in
effect after the Economic Recovery Tax Act of 1981 and before the
Tax Reform Act of 1986) or is “tax-exempt use property”
(within the meaning of Section 168(h) of IRC) or
“tax-exempt bond financed property” (within the meaning
of Section 168(g)(5) of IRC). Except as disclosed on
DCB Disclosure Schedule
3.7(c), none of the DCB Companies is a party to any tax
sharing agreement or has any continuing obligations under any prior
tax sharing agreement. None of the DCB Companies is, or has been, a
member of any affiliated group within the meaning of Section
1504(a) of the IRC or any similar group defined under a similar
provision of state, local, or non-U.S. law other than a group the
common parent of which was DCB.
(d) None of the DCB
Companies has been a party to any distribution occurring during the
last three years in which the parties to such distribution treated
the distribution as one to which Section 355 of the IRC (or
any similar provision of state, local or foreign law)
applied.
(e) As used in this
Agreement, the term “DCB Taxes” shall mean all
taxes, however denominated, including any interest, penalties or
other additions to tax that may become payable in respect thereof,
imposed by any federal, territorial, state, local or foreign
government or any agency or political subdivision of any such
government, which taxes shall include, without limiting the
generality of the foregoing, all income or profits taxes
(including, but not limited to, federal income taxes and state
income taxes), real property gains taxes, payroll and employee
withholding taxes, unemployment insurance taxes, social security
taxes, sales and use taxes, ad valorem taxes, excise taxes,
franchise taxes, gross receipts taxes, business license taxes,
occupation taxes, real and personal property taxes, stamp taxes,
environmental taxes, transfer taxes, and other obligations of the
same or of a similar nature to any of the foregoing, which any of
the DCB Companies is required to pay, withhold or collect. As used
in this Agreement, the term “DCB Returns” shall mean
all reports, estimates, declarations of estimated tax, information
statements and returns relating to, or required to be filed in
connection with, any DCB Taxes, including information returns or
reports with respect to backup withholding and other payments to
third parties.
(f) True and complete
copies of the federal income tax returns and any amendments thereto
of the DCB Companies as filed with the IRS for the years ended
December 31, 2014 and 2015 have been furnished to OLB, and, if the
Effective Date is later than the due dates therefor, true and
complete copies of the federal income tax returns of the DCB
Companies for the years ended on or after December 31, 2016 will be
furnished to OLB within five business days of filing.
(g) True and complete
copies of the state income tax returns of the DCB Companies as
filed with the State of Maryland for the years ended December 31,
2014 and 2015 have been furnished to OLB, and, if the Effective
Date is later than the due dates therefor, true and complete copies
of the state income tax returns of the DCB Companies for the years
ended on or after December 31, 2016 will be furnished to OLB within
five business days of filing.
Section
3.8
Contracts; Certain
Changes.
(a) Except as described
in DCB Disclosure Schedule
3.8(a), 3.11, 3.13(a), or 3.15(a), neither DCB nor any
DCB Subsidiary is a party to or subject to:
(i) Any employment,
consulting, severance, “change-in-control,”
indemnification or termination contract or arrangement with or for
any officer, director, employee, independent contractor, agent or
other Person;
(ii) Any plan,
arrangement or contract providing for bonuses, pensions, options,
deferred compensation, retirement payments, profit sharing, or
similar arrangements for or with any officer, director, employee,
independent contractor, agent, or other Person;
(iii) Except as provided
in the DCB Governing Documents, any agreement that provides for the
indemnification of any of its present or former directors, officers
or employees, or other persons who serve or served as a director,
officer or employee of another corporation, partnership or other
enterprise at the request of DCB and, to the Knowledge of DCB,
there are no claims for which any such person would be entitled to
indemnification under DCB Governing Documents, under any applicable
Law or under any indemnification agreement;
(iv) Any collective
bargaining agreement with any labor union relating to its
employees;
(v) Any agreement that
by its terms limits its payment of dividends;
(vi) Any material
instrument (A) evidencing or relating to indebtedness for borrowed
money, whether directly or indirectly, by way of purchase money
obligation, conditional sale, lease purchase, guaranty or
otherwise, in respect of which it is an obligor to any Person,
other than deposits, FHLB advances, repurchase agreements,
bankers’ acceptances and “treasury tax and loan”
accounts established in the ordinary course of business, and
transactions in “federal funds,” or (B) that contains
financial covenants or other restrictions, other than those
relating to the payment of principal and interest when due, that
would be applicable on or after the Effective Time;
(vii) Any contract, other
than this Agreement, that restricts or prohibits it from engaging
in any type of business permissible under applicable
Law;
(viii) Any contract, plan
or arrangement that provides for payments or benefits in certain
circumstances that, together with other payments or benefits
payable to any participant therein or party thereto, might render
any portion of any such payments or benefits subject to
disallowance of deduction therefor as a result of the application
of Section 280G of the IRC;
(ix) Any contract
involving Intellectual Property (other than contracts entered into
in the ordinary course with customers and off-the-shelf,
“shrink wrap” or force placed software
licenses);
(x) Any lease for real
property;
(xi) Any contract or
arrangement with any broker-dealer or investment
adviser;
(xii) Any investment
advisory contract with any investment company registered under the
Investment Company Act of 1940;
(xiii) Any contract or
arrangement with, or membership in, any local clearing house or
self-regulatory organization;
(xiv) any agreement
(other than this Agreement), contract, arrangement, commitment or
understanding (whether written or oral) that restricts or limits in
any material way the conduct of its business (it being understood
that any non-compete, non-solicitation or similar provision shall
be deemed material);
(xv) any agreement that
grants any right of first refusal, right of first offer or similar
right with respect to any of its material assets, rights or
properties;
(xvi) Any contract in
which it has liability or would incur a contract termination fee of
over $50,000; or
(xvii) Any contract or
arrangement not disclosed pursuant to the other items of this
paragraph (a) that would constitute a “material
contract” as defined in Item 601(b)(10) of Regulation S-K of
the SEC.
(b) True and correct
copies of the contracts, plans, arrangements and instruments listed
in DCB Disclosure Schedule
3.8(a), 3.11, 3.13(a), or 3.15(a) have been made
available to OLB on or before the date hereof and are in full force
and effect on the date hereof. None of the DCB Companies nor, to
the Knowledge of DCB, any other party to any such contract, plan,
arrangement or instrument, has breached any provision of, or is in
default under any term of, any such contract, plan, arrangement or
instrument and no party to any such contract, plan, arrangement or
instrument will have the right to terminate any or all of the
provisions thereof as a result of the Contemplated Transactions,
except where such breach, default or termination is not reasonably
likely to have, individually or in the aggregate, a Material
Adverse Effect.
(c) Except as described
in DCB Disclosure Schedule
3.8(c), since December 31, 2015, through and including the
date of this Agreement, none of the DCB Companies has (i) made any
material change in its credit policies or procedures, the effect of
which was or is to make any such policy or procedure less
restrictive in any material respect, (ii) made any material
acquisition or disposition of any assets or properties, or entered
into any contract for any such acquisition or disposition, other
than loans, loan commitments and the disposition of REO in the
ordinary course of business consistent with past practice, (iii)
entered into any lease of real or personal property requiring
annual payments in excess of $50,000, other than in connection with
foreclosed property or in the ordinary course of business
consistent with past practice, or (iv) changed any accounting
methods, principles or practices affecting its assets, liabilities
or businesses, including any reserving, renewal or residual method,
practice or policy.
(d) Except as disclosed
on DCB Disclosure Schedule
3.8(d), neither DCB nor any of the DCB Subsidiaries has
issued, or is obligated under, any letter of credit that is not
fully secured.
Section
3.9
Ownership of
Personal Property; Insurance Coverage.
(a) Except as disclosed
on DCB Disclosure Schedule
3.9(a), each of the DCB Companies has good and marketable
title to all material assets and properties owned by it in the
conduct of its businesses, whether such assets and properties are
real or personal, tangible or intangible, including assets and
property reflected in the balance sheets contained in the DCB
Financials or acquired subsequent thereto, subject to no Liens,
except:
(i) Those items that
secure liabilities for public or statutory obligations or any
discount with, borrowing from or other obligations to the FHLB,
inter-bank credit facilities or reverse repurchase agreements and
that are described in DCB
Disclosure Schedule 3.9(a) or permitted under Article V
hereof;
(ii) Mechanics liens and
similar liens for labor, materials, services or supplies provided
for such property and incurred in the ordinary course of business
for amounts not yet delinquent or that are being contested in good
faith;
(iii) Statutory Liens for
amounts not yet delinquent or that are being contested in good
faith;
(iv) Liens for current
DCB Taxes not yet due and payable;
(v) Pledges to secure
deposits and other Liens incurred in the ordinary course of the
business of banking;
(vi) Liens,
imperfections of title, easements and other defects of title that
are not reasonably likely to have a Material Adverse
Effect;
(vii) With respect to
personal property reflected in the balance sheets contained in the
DCB Financials, (A) dispositions and encumbrances for adequate
consideration in the ordinary course of business since the date of
such balance sheets and/or (B) dispositions of obsolete personal
property since the date of such balance sheets;
(viii) Those items that
are reflected as liabilities in the DCB Financials;
and
(ix) Items of personal
property that are held in any fiduciary or agency
capacity.
(b) With respect to
material items of real and personal property that are used in the
conduct of its business and leased from other Persons, each of the
DCB Companies has the right under valid and existing leases to use
such real and personal property in all material respects as
presently occupied and used.
(c) With respect to all
agreements pursuant to which any of the DCB Companies has purchased
securities subject to an agreement to resell, if any, it has a
valid, perfected first lien or security interest in the securities
or other collateral securing the repurchase agreement, and the
value of such collateral equals or exceeds the amount of the debt
secured thereby.
(d) Each of the DCB
Companies currently maintains insurance with reputable insurers
against such risks and in such amounts as the management of DCB has
determined to be prudent for such DCB Company’s operations,
and, to the Knowledge of DCB, such insurance is similar in scope
and coverage in all material respects to insurance maintained by
other similarly-situated businesses. Each of DCB and each DCB
Subsidiary is in compliance with its insurance policies, is not in
default under any of the terms thereof and has made accurate
statements on any insurance renewal application. Each such policy
is in full force and effect and, except for policies insuring
against potential liabilities of officers, directors and employees
of DCB and the DCB Subsidiaries, DCB or the relevant DCB Subsidiary
is the sole beneficiary of such policies. All premiums and other
payments due under any such policy have been paid, and all claims
thereunder have been filed in a due and timely
fashion.
(e) None of the DCB
Companies has received notice from any insurance carrier
that:
(i) The insurance will
be cancelled or that coverage thereunder will be reduced or
eliminated; or
(ii) Premium costs with
respect to such insurance will be substantially increased, except
as set forth in DCB
Disclosure Schedule 3.9(f).
(f) There are presently
no material claims pending under such policies of insurance and
none of the DCB Companies has received any notices under such
policies. All such insurance is valid and enforceable and in full
force and effect, and within the last three years, each of the DCB
Companies has received each type of insurance coverage for which it
has applied and during such periods it has not been denied
indemnification for any material claims submitted under any of its
insurance policies. DCB
Disclosure Schedule 3.9(f) identifies all policies of
insurance maintained by the DCB Companies as well as the other
matters required to be disclosed under Section 3.9(e)(ii) and this
Section 3.9(f).
Section
3.10
Litigation and
Other Proceedings.
Except as described
in DCB Disclosure Schedule
3.10, there are no legal, quasi-judicial, administrative,
suit, arbitration or other proceedings, claims (whether asserted or
unasserted), actions or governmental investigations or inquiries of
any kind or nature now pending or, to the Knowledge of DCB,
threatened, before any court, administrative, regulatory,
arbitration or similar body in any manner against any of the DCB
Companies or any of their properties, and to the Knowledge of DCB
there are no facts that reasonably could be expected to be the
basis for any such suit, arbitration, other proceeding, claim,
action, investigation or inquiry. To the Knowledge of DCB, no
pending or threatened suit, arbitration proceeding claim, action,
investigation or inquiry described in DCB Disclosure Schedule 3.10
could reasonably be expected to (a) have a Material Adverse Effect,
(b) question the validity of any action taken or to be taken in
connection with this Agreement or the Contemplated Transactions, or
(c) materially impair or delay the ability of the DCB Companies to
perform their obligations under this Agreement. Except as described
in DCB Disclosure Schedule
3.10, none of the DCB Companies is in default with respect
to any judgment, order, writ, injunction, decree, award, rule, or
regulation of any court, arbitrator or Regulatory
Authority.
Section
3.11
Compliance with
Applicable Law.
Except as disclosed
on DCB Disclosure Schedule
3.11:
(a) Each of the DCB
Companies conducts its business in compliance with all Laws
applicable to it, its properties, assets and deposits, its
business, and its conduct of business and its relationship with its
employees conducting such business, except where noncompliance
would not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect;
(b) Each of the DCB
Companies has all material permits, licenses, authorizations,
orders and approvals of all Regulatory Authorities that are
required in order to permit it to own or lease its properties and
carry on its business as it is presently conducted; all such
permits, licenses, authorizations, orders and approvals are in full
force and effect, and no suspension or cancellation of any of them
is, to the Knowledge of DCB, threatened, and to the Knowledge of
DCB no suspension or cancellation of any such permit, license,
certificate, order or approval is threatened or will result from
the consummation of the Contemplated Transactions, subject to
obtaining the receipt of all requisite approvals or consents from
the Regulatory Authorities in order to consummate the Contemplated
Transactions. None of the DCB Companies have been given notice or
been charged with any violation of any law, ordinance, regulation,
order, writ, rule, decree or condition to approval of any
Regulatory Authority that, individually or in the aggregate, would
reasonably be expected to have a Material Adverse
Effect;
(c) Since January 1,
2011, each of the DCB Companies has timely filed all reports,
forms, schedules, registrations, statements and other documents,
together with any amendments required to be made with respect
thereto, that it was required by Law to file with any Regulatory
Authority, and has paid all fees and assessments due and payable in
connection therewith, and each of such filings complied in all
material respects with all Laws under which it was filed (or was
amended so as to be in compliance promptly following discovery of
such noncompliance) and, to the extent such filings contain
financial information, have been prepared in all material respects
in accordance with applicable regulatory accounting principles and
practices throughout the periods covered by such filing, except to
the extent failure to timely file would not, individually or in the
aggregate, be expected to have a Material Adverse Effect; none of
the DCB Companies is required to file periodic reports pursuant to
Sections 13 or 15(d) of the Exchange Act;
(d) No Regulatory
Authority has initiated any proceeding or, to the Knowledge of DCB,
investigation into the business or operations of the DCB Companies
that has not been resolved;
(e) Since January 1,
2014, none of the DCB Companies has received any notification or
communication from any Regulatory Authority:
(i) Asserting that it
is not in substantial compliance with any Law that such Regulatory
Authority enforces, unless such assertion has been waived,
withdrawn or otherwise resolved;
(ii) Threatening to
revoke any license, franchise, permit or governmental authorization
that is material to it; or
(iii) Requiring or
threatening to require it, or indicating that it may be required,
to enter into a cease and desist order, consent agreement, other
agreement or memorandum of understanding, or any other agreement
directing, restricting or limiting, or purporting to direct,
restrict or limit, in any manner its operations, including without
limitation any restriction on the payment of dividends (any such
notice, communication, memorandum, agreement or order described in
this Section 3.11(e)(iii) and addressed specifically to a DCB
Company herein referred to as a “DCB Regulatory
Agreement”);
(f) None of the DCB
Companies has received, consented to or entered into any DCB
Regulatory Agreement that is currently in effect, nor has any DCB
Company been advised since January 1, 2013 by any Regulatory
Authority that it is considering issuing, initiating, ordering or
requesting any DCB Regulatory Agreement that has not already been
issued, initiated, ordered or requested;
(g) There is no
injunction, order, award, judgment, settlement, decree or
regulatory restriction imposed upon or entered into by any of the
DCB Companies or upon any of their assets; and
(h) Since January 1,
2013, (i) none of the DCB Companies nor, to the Knowledge of DCB,
any director, officer, employee, auditor, accountant or other
Representative of DCB or any DCB Subsidiary, has received or
otherwise had or obtained knowledge of any material complaint,
allegation, assertion or claim, whether written or oral, regarding
its accounting or auditing practices, procedures, methodologies or
methods or its internal accounting controls, including any material
complaint, allegation, assertion or claim that it has engaged in
questionable accounting or auditing practices, and (ii) no attorney
representing it, whether or not employed by it, has reported
evidence of a material violation of Securities Laws, breach of
fiduciary duty or similar violation by it or any of its officers,
directors, employees or agents to its board of directors or any
committee thereof or to any director or officer.
Section
3.12
Labor
Matters.
There are no labor
or collective bargaining agreements to which any of the DCB
Companies is a party. There is no union organizing effort pending
or, to the Knowledge of DCB, threatened, against any of the DCB
Companies. There is no labor strike, labor dispute (other than
routine employee grievances that are not related to union
employees), work slowdown, stoppage or lockout pending or, to the
Knowledge of DCB, threatened, against any of the DCB Companies.
There are no organizational efforts with respect to the formation
of a collective bargaining unit presently being made or, to the
Knowledge of DCB, threatened, involving employees of any of the DCB
Companies. No arbitration or proceeding asserting that any of the
DCB Companies has committed an unfair labor practice (within the
meaning of the National Labor Relations Act of 1935) or seeking to
compel any of the DCB Companies to bargain with any labor
organization as to wages or conditions of employment is pending or,
to the Knowledge of DCB, threatened, with respect to any of the DCB
Companies before the National Labor Relations Board, the Equal
Employment Opportunity Commission or any other Regulatory Authority
(other than routine employee grievances that are not related to
union employees). Each of the DCB Companies is in compliance in all
material respects with all applicable Laws respecting employment
and employment practices, terms and conditions of employment and
wages and hours, and is not engaged in any unfair labor practice.
None of the DCB Companies has made any commitments to others
inconsistent with or in derogation of any of the foregoing. Except
as described in DCB
Disclosure Schedule 3.12, there are no pending or, to the
Knowledge of DCB, threatened, claims or suits against any of the
DCB Companies under any applicable labor or employment Law or
brought or made by a current or former employee or applicant for
employment.
(a) DCB has set forth
in DCB Disclosure Schedule
3.13(a) a complete and accurate list of the DCB Benefit
Plans and made available to OLB a copy of all available written
documents regarding such Benefit Plans including:
(i) A copy of each of
the DCB Benefit Plans and any related trust agreements or other
funding arrangements;
(ii) The most recent
actuarial reports (if any) and financial reports it has received
relating to the DCB Benefit Plans that constitute “qualified
pension plans” under IRC Section 401(a);
(iii) The most recently
filed Form 5500, together with schedules and attachments, as
required (if any) relating to the DCB Benefit Plans that have been
filed with the United States Department of Labor;
(iv) The most recent
favorable determination letters (or opinion letter for a prototype
plan) issued by the IRS that pertain to any of the DCB Benefit
Plans that are “qualified pension plans” under IRC
Section 401(a); and
(v) Summary plan
descriptions and any amendments or material modifications thereto
and any insurance, third party administrator or administrative
services only contracts related to the DCB Benefit Plans within the
meaning of ERISA Section 3(1) or 3(2).
(b) The DCB Companies
have paid in full any insurance premiums due to the Pension Benefit
Guaranty Corporation (“PBGC”) with respect to
any defined benefit pension plans for the six years prior to, and
through, the Effective Date. Except as disclosed in DCB Disclosure Schedule
3.13(b), no pension plan (within the meaning of ERISA
Section 3(2)) maintained or contributed to by any of the DCB
Companies has been terminated or is under notice from the PBGC of
any threat of termination under the procedures of the PBGC. To the
Knowledge of DCB, no circumstance has occurred for which any
reportable event under ERISA Section 4043(b) has been or would
be required that has not been reported or with respect to which the
notice requirement has not been waived. Except as set forth on
DCB Disclosure Schedule
3.13(b), no DCB Benefit Plan is subject to IRC Section 412
or Title IV of ERISA, and as of the Effective Date, to the
Knowledge of DCB, no condition exists that will present a material
risk to OLB of incurring any liability to the PBGC or on account of
the failure to comply with any such provisions in connection with
any such DCB Benefit Plan. Except as disclosed in DCB Disclosure Schedule
3.13(b), no DCB Benefit Plan provides, and none of the DCB
Companies has any obligation to provide, health or welfare benefits
to any individual following termination of such individual’s
employment or service with it or an Affiliate (other than as
required under the Consolidated Omnibus Budget Reconciliation Act
of 1986, as amended or any similar state law).
(c) To the Knowledge of
DCB, none of the DCB Companies has ever contributed to, or
otherwise incurred, any liability with respect to a multi-employer
plan (within the meaning of ERISA Section 3(37)).
(d) Each DCB Benefit
Plan complies in all material respects with the applicable
requirements of ERISA, the IRC, the Patient Protection and
Affordable Care Act of 2010, and any other applicable Laws
governing the DCB Benefit Plan, and each DCB Benefit Plan has at
all times been administered in all material respects in accordance
with all requirements of applicable Law and in accordance with its
terms. Each pension plan adopted by the DCB Companies that is
intended to be qualified under Section 401(a) of the IRC is so
qualified, and, to the Knowledge of DCB, each trust established by
each pension plan is exempt from federal income tax under Section
501(a) of the IRC. Each of the pension plans adopted by the DCB
Companies is, and from its establishment has been, exempt from
federal income tax under Section 501(a) of the IRC. Each of the
pension plans adopted by the DCB Companies has received, or is
entitled to rely upon, a favorable determination letter (or opinion
letter for a prototype plan) from the IRS, and to the Knowledge of
DCB there are no circumstances that will or could result in
revocation of, or inability to continue to rely upon, any such
favorable determination letter or opinion letter. No lawsuits,
claims (other than routine claims for benefits) or complaints to,
or by, any Person, governmental authority, regulatory body or
arbiter have been filed, are pending or, to the Knowledge of DCB,
are threatened, with respect to any DCB Benefit Plan and, to the
Knowledge of DCB, there is no fact or contemplated event that would
give rise to any lawsuit, claim (other than routine claims for
benefits) or complaint with respect to any DCB Benefit Plan.
Without limiting the foregoing, to the Knowledge of DCB, the
following are true:
(i) Each DCB Benefit
Plan that is a defined benefit pension plan subject to IRC Section
412 or Title IV of ERISA as of the most recent actuarial valuation
has an AFTAP determined under IRC Section 430 and 436 that exceeds
the AFTAP level that would impose any funding-based limit on such
plan under IRC Section 436;
(ii) Each DCB Benefit Plan that is a defined
contribution pension plan that is intended to be qualified
under IRC Section 401(a) has had all
contributions made to the plan trust in accordance with the terms
of the plan on a timely basis under the IRC and
ERISA;
(iii) With respect to
each DCB Benefit Plan, to the Knowledge of DCB, there is no
occurrence or contract that would constitute any “prohibited
transaction” within the meaning of Section 4975(c) of
the IRC or Section 406 of ERISA, which transaction is not
exempt under applicable Law, including Section 4975(d) of the
IRC or Section 408 of ERISA;
(iv) Except as disclosed
in DCB Disclosure Schedule
3.13(d)(iv), no DCB Benefit Plan is an Employee Stock
Ownership Plan as defined in Section 4975(e)(7) of the
IRC;
(v) No DCB Benefit Plan
is a Qualified Foreign Plan as the term is defined in
Section 404A of the IRC and no DCB Benefit Plan or any related
trust assets or agreements are subject to the laws of any
jurisdiction other than the United States of America or any state,
county or municipality of the United States;
(vi) None of the welfare
plans adopted by the DCB Companies is a Voluntary Employees’
Beneficiary Association as defined in Section 501(c)(9) of the
IRC;
(vii) All of the welfare
plans adopted by the DCB Companies and their related trusts comply
in all material respects with and have been administered in
substantial compliance with (A) Section 4980B of the IRC and
Sections 601 through 609 of ERISA and all U.S. Department of the
Treasury and U.S. Department of Labor regulations issued
thereunder, respectively, (B) the Health Insurance Portability and
Accountability Act of 1996, (C) the applicable provisions of the
Patient Protection and Affordable Care Act of 2010, and (D) the
U.S. Department of Labor regulations issued with respect to such
welfare benefit plans; and
(viii) With respect to
each DCB Benefit Plan, DCB or any DCB ERISA Affiliate has the
authority to amend or terminate such DCB Benefit Plan at any time,
subject to the applicable requirements of ERISA and the IRC and the
provisions of the DCB Benefit Plan.
(e) There is no
existing or, to the Knowledge of DCB, contemplated audit of any DCB
Benefit Plan by the IRS, the U.S. Department of Labor, the PBGC,
any Regulatory Authority or any other governmental authority. In
addition, there are no pending or, to the Knowledge of DCB,
threatened claims by, on behalf of or with respect to any DCB
Benefit Plan, or by or on behalf of any individual participant or
beneficiary of any DCB Benefit Plan, alleging any violation of
ERISA or any other applicable Laws, or claiming benefits (other
than claims for benefits made in the ordinary course of business),
nor, to the Knowledge of DCB, is there any basis likely to enable
such claim to prevail.
(f) Except as disclosed
on DCB Disclosure Schedule
3.13(f), (i) no payment contemplated or required by or under
any DCB Benefit Plan and employment-related agreement would in the
aggregate constitute excess parachute payments as defined in
Section 280G of the IRC (without regard to subsection (b)(4)
thereof), (ii) no DCB Benefit Plan provides for the gross-up or
reimbursement of taxes under Sections 280G, 4999 or 409A of the
IRC, and (iii) neither the execution and delivery of this Agreement
nor the consummation of Contemplated Transactions will (either
alone or in conjunction with any other event) result in, cause the
vesting, exercisability or delivery of, or increase the amount or
value of, any payment, right or other benefit to any current or
former employee, officer, director or other service provider of any
of the DCB Companies.
(g) Except as disclosed
on DCB Disclosure Schedule
3.13(g), no DCB Benefit Plan is a nonqualified deferred
compensation plan within the meaning of Section 409A of the IRC.
Each DCB Benefit Plan (including employment agreements or other
compensation arrangements) that constitutes a nonqualified deferred
compensation plan within the meaning of Section 409A of the IRC has
been written, executed and operated in compliance with Section 409A
of the IRC and the regulations thereunder or an applicable
exemption therefrom.
(h) None of the DCB
Companies is a record-keeper, administrator, custodian, fiduciary,
trustee or otherwise acts on behalf of any plan, program, or
arrangement subject to ERISA (other than any DCB Benefit
Plan).
Section
3.14
Brokers and
Finders.
Except as set forth
on DCB Disclosure Schedule
3.14, none of the DCB Companies and, to the Knowledge of
DCB, no officer, director, employee, independent contractor or
agent of any DCB Company on its behalf, has employed any broker,
finder, investment banker or financial advisor, or incurred any
liability for any fees or commissions to any broker, finder,
investment banker or financial advisor, in connection with the
Contemplated Transactions
Section
3.15
Real Property and
Leases.
(a) DCB Disclosure Schedule 3.15(a)
contains a true, correct and complete list of all real property
owned, leased or operated by the DCB Companies, including but not
limited to all REO (the “DCB Real Property”).
True, correct and complete copies of all deeds, surveys, title
insurance policies and leases for the properties listed on
DCB Disclosure Schedule
3.15(a), and of all mortgages, deeds of trust and security
agreements to which such properties are subject, have been made
available to OLB to the extent DCB possesses such deeds, surveys,
title insurance policies, leases, mortgages, deeds of trust and
security agreements.
(b) No lease with
respect to any DCB Real Property and no deed with respect to any
DCB Real Property contains any restrictive covenant that materially
restricts the use, transferability or value of such DCB Real
Property. Each lease with respect to any DCB Real Property is a
legal, valid and binding obligation of the parties thereto
enforceable in accordance with its terms (except as may be limited
by bankruptcy, insolvency, moratorium, reorganization or similar
laws affecting the rights of creditors generally and the
availability of equitable remedies), and is in full force and
effect. There are no existing defaults by the DCB Companies or, to
the Knowledge of DCB, the other party, under any lease with respect
to any DCB Real Property and, to the Knowledge of DCB, there are no
allegations or assertions of such defaults by any party under any
lease with respect to any DCB Real Property or any events that,
with notice or lapse of time or the happening or occurrence of any
other event, would constitute a default under any lease with
respect to any DCB Real Property, except where the existence of
such defaults, individually or in the aggregate, has not had, and
is not reasonably likely to have, a Material Adverse
Effect.
(c) To the Knowledge of
DCB, none of the buildings and structures located on any DCB Real
Property, nor any improvements or appurtenances thereto or
equipment therein, nor the operation or maintenance thereof,
violates in any material manner any land use Laws or restrictive
covenants, or encroaches on any property owned by others, nor does
any building or structure of third parties encroach upon any DCB
Real Property, except for those violations and encroachments that
in the aggregate could not reasonably be expected to have a
Material Adverse Effect. Except as disclosed on DCB Disclosure Schedule
3.15(c), no condemnation proceeding is pending or, to the
Knowledge of DCB, threatened, that would preclude or materially
impair the use of any DCB Real Property in the manner in which it
is currently being used.
(d) The DCB Companies
have a valid and enforceable leasehold interest in or, to the
Knowledge of DCB, based on title insurance owned by it, good and
marketable title to, all DCB Real Property and all improvements
thereon, subject to no Liens of any kind except (i) as noted in the
DCB Financials, (ii) statutory Liens not yet delinquent or that are
being contested in good faith, (iii) minor defects and
irregularities in title and encumbrances that do not materially
impair the use thereof for the purposes for which they are held,
(iv) mechanics liens not yet delinquent or that are being contested
in good faith, and (v) those assets and properties disposed of for
fair market value in the ordinary course of business since the date
of the DCB Financials. All DCB Real Property used in the business
of the DCB Companies is in adequate condition (ordinary wear and
tear excepted) and, to the Knowledge of DCB, is free from defects
that could materially interfere with the current or future use of
such facilities, provided such future use is substantially similar
to its current use.
(e) Except as listed on
DCB Disclosure Schedule
3.15(e), there are no contracts, agreements or arrangements
to sell, lease or otherwise dispose of any of the DCB Real
Property.
Section
3.16
Environmental
Matters.
With respect to DCB
and each DCB Subsidiary:
(a) Neither the
conduct nor operation of its business nor any condition of any
property currently or previously owned or operated by it (including
REO) results or resulted in a violation of any Environmental Laws
that is reasonably likely to impose a material liability (including
a material remediation obligation) upon DCB or any DCB Subsidiary.
To the Knowledge of DCB, no condition has existed or event has
occurred with respect to any of them or any such property that,
with notice or the passage of time, or both, is reasonably likely
to result in any material liability to DCB or any DCB Subsidiary by
reason of any Environmental Laws. Neither DCB nor any DCB
Subsidiary during the past five years has received any written
notice from any Person or Regulatory Authority that DCB or any DCB
Subsidiary or the operation or condition of any property ever owned
or operated (including Participation Facilities) by any of them are
currently in violation of or otherwise are alleged to have
liability under any Environmental Laws or relating to Hazardous
Materials (including, but not limited to, responsibility (or
potential responsibility) for the cleanup or other remediation of
any Hazardous Materials at, on, beneath, or originating from any
such property) for which a material liability is reasonably likely
to be imposed upon DCB or any DCB Subsidiary;
(b) There is no
suit, action, executive or administrative order, directive or
proceeding pending or, to the Knowledge of DCB threatened, before
any court, governmental agency or other forum against DCB or any
DCB Subsidiary (i) for alleged noncompliance (including by any
predecessor) with, or liability under, any Environmental Law or
(ii) relating to the presence of, or release (defined herein) into
the environment of, any Hazardous Materials on any DCB Real
Property;
(c) To the Knowledge of
DCB, except as disclosed in DCB Disclosure Schedule
3.16(c), (i) there are no underground storage tanks on, in
or under any DCB Real Property, and (ii) no underground storage
tanks have been closed or removed from any DCB Real Property except
in compliance with Environmental Laws in all material respects;
and
(d) To the
Knowledge of DCB, the DCB Real Properties (including, without
limitation, soil, groundwater or surface water on, or under the
properties, and buildings thereon) are not contaminated with and do
not otherwise contain any Hazardous Materials other than as
permitted under applicable Environmental Laws.
Section
3.17
Intellectual
Property.
(a) DCB Disclosure Schedule 3.17(a)
sets forth a complete and correct list of all trademarks, trade
dress, trade names, service marks, domain names, patents,
technology, inventions, trade secrets, know-how and copyrights and
works of authorship owned by or licensed to each of the DCB
Companies for use in its business, and all licenses or other
agreements relating thereto and all agreements relating to third
party intellectual property that it is licensed or authorized to
use in its business, including without limitation any software
licenses other than “shrink wrap” or force placed
software licenses (collectively, the “DCB Intellectual
Property”). Each of the DCB Companies owns or
possesses valid, binding and assignable licenses and other rights
to use without payment all DCB Intellectual Property that is used
in the conduct of its existing businesses free and clear of all
Liens and any claims of ownership by current or former employees or
contractors, other than royalties or payments with respect to
off-the-shelf software. With respect to each item of DCB
Intellectual Property that any of the DCB Companies is licensed or
authorized to use, the license, sublicense or agreement covering
such item is legal, valid, binding, enforceable and in full force
and effect. To the Knowledge of DCB, none of the DCB Companies is
infringing, diluting, misappropriating or violating the
intellectual property of any other Person, and none of the DCB
Companies has received any communications alleging that it has
infringed, diluted, misappropriated or violated any such
intellectual property. None of the DCB Companies has sent any
communications alleging that any Person has infringed, diluted,
misappropriated or violated any DCB Intellectual Property and, to
the Knowledge of DCB, no Person is infringing, diluting,
misappropriating or violating any of the DCB Intellectual Property.
Each of the DCB Companies has taken all commercially reasonable
actions to protect and maintain (a) all material DCB
Intellectual Property and (b) the security and integrity of
its software, databases, networks, systems, equipment and hardware
and to protect the same against unauthorized use, modification or
access thereto, or the introduction of any viruses or other
unauthorized or damaging or corrupting elements. To the Knowledge
of DCB, the computers, computer software, other information
technology equipment, information technology passwords and other
credentials, and all associated documents and records owned or
leased by the DCB Companies (the “DCB IT Assets”) operate
and perform in all material respects in accordance with their
documentation and functional specifications as required by them in
connection with their business, and none of the DCB IT Assets has
materially malfunctioned or failed to meet its requirements within
the past two years except for such malfunctions or failures that
have been remediated. To the Knowledge of DCB, no Person has gained
unauthorized access to the DCB IT Assets. The DCB Companies have
implemented commercially reasonable backup and disaster recovery
technology consistent with industry practices for institutions of
comparable size and complexity.
(b) DCB Disclosure Schedule 3.17(b)
sets forth a complete and correct list of all Persons, other than
directors, officers and employees of the DCB Companies, who have
access to any of the DCB IT Assets.
Section
3.18
Information to be
Supplied.
(a) The information
supplied by DCB for inclusion in the Registration Statement
(including the Prospectus/Proxy Statement), at the time the
Registration Statement is declared effective pursuant to the
Securities Act, and as of the date the Prospectus/Proxy Statement
is mailed to the holders of DCB Common Stock, and up to and
including the date of the DCB Common Stockholders’ Meeting,
(i) will not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances in which
they were made, not misleading, (ii) will disclose all facts that
the DCB board of directors deems material to a vote on the
Agreement and the Merger and to the exercise of appraisal rights
pursuant to Subtitle 2 of Title 3 of the MGCL, and (iii) will
comply in all material respects with the applicable requirements of
the Registration Statement as promulgated by the SEC.
(b) The information
supplied by DCB for inclusion in the Applications will, at the time
each such document is filed with any Regulatory Authority and up to
and including the dates of any required regulatory approvals or
consents, as such Applications may be amended by subsequent
filings, be accurate in all material respects.
(c) No document or
certificate delivered to OLB by or for DCB pursuant to a
requirement of this Agreement contains any untrue statement of a
material fact or omits to state a material fact necessary to make
the statement contained in such document or certificate in light of
the circumstances under which it was made not
misleading.
Section
3.19
Related Party
Transactions.
(a) Except as set forth
on DCB Disclosure Schedule
3.19, none of the DCB Companies is a party to any
transaction (including any loan or other credit accommodation but
excluding deposits in the ordinary course of business) with any of
DCB’s Affiliates, and all such transactions (i) were made in
the ordinary course of business, (ii) were made on substantially
the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with Persons who
are not related to or Affiliates of DCB, and (iii) did not involve
more than the normal risk of collectability or present other
unfavorable features.
(b) Except as set forth
in DCB Disclosure Schedule
3.19, as of the date hereof, no Credit Extension by any of
the DCB Companies to any DCB Subsidiary or Affiliate of DCB is
presently in material default or, during the three-year period
prior to the date of this Agreement, has been in material default
or has been restructured, modified or extended in order to avoid or
cure a default, except for rate modifications pursuant to its loan
modification policy that is applicable to all Persons. As of the
date hereof, to the Knowledge of DCB, principal and interest with
respect to any such Credit Extension will be paid when due and the
loan grade classification accorded such Credit Extension is
appropriate.
(a) Except as disclosed
on DCB Disclosure Schedule
3.20(a), all Credit Extensions reflected as assets in the
DCB Financials arose out of bona fide arm’s-length
transactions, were made for good and valuable consideration in the
ordinary course of business, and are being transferred to OLB
and/or Old Line with good and marketable title, free and clear of
any and all Liens and are evidenced by notes, agreements or other
evidences of indebtedness that are true, genuine, correct and what
they purport to be, and to the extent secured, are secured by valid
Liens that are legal, valid and binding obligations of the maker
thereof, enforceable in accordance with the respective terms
thereof, except as such enforcement may be limited by (i)
bankruptcy, insolvency, reorganization or other similar Laws or
equitable principles affecting the enforcement of creditors’
rights that have been perfected or (ii) the pledge of any Credit
Extension to the FHLB as collateral to secure the performance by
the DCB Companies of all obligations owed thereto. All Credit
Extensions reflected as assets in the DCB Financials were made in
accordance in all material respects with sound banking practices,
and, to the Knowledge of DCB, are not subject to any defenses,
setoffs or counterclaims, including without limitation any such as
are afforded by usury or truth in lending Laws, except as may be
provided by bankruptcy, insolvency or similar Laws or by general
principles of equity.
(b) To the Knowledge of
DCB, neither the terms of any Credit Extension by any of the DCB
Companies, any of the documentation for any such Credit Extension,
the manner in which any such Credit Extension has been administered
and serviced, nor the practices of approving or rejecting
applications for a Credit Extension by the DCB Companies, violate
in any material respect any Law applicable thereto, including,
without limitation, the Truth In Lending Act and the CFPB’s
Regulation Z, the CRA, the Equal Credit Opportunity Act, and any
Laws relating to consumer protection, installment sales and
usury.
(c) Except as disclosed
on DCB Disclosure Schedule
3.20(c), none of the agreements pursuant to which any of the
DCB Companies has sold Credit Extensions or pools of Credit
Extensions or participations in Credit Extensions or pools of
Credit Extensions contains any obligation to repurchase such Credit
Extensions or interests therein solely on account of a payment
default by the obligor on any such Credit Extension.
(d) DCB Disclosure Schedule 3.20(d)
sets forth a list of all Credit Extensions as of the date hereof by
DCB or Damascus to any directors, executive officers and principal
stockholders (as such terms are defined in the FRB’s
Regulation O) of any of the DCB Companies. There are no employee,
officer, director or other insider Credit Extensions by any of the
DCB Companies on which the borrower is paying a rate other than
that reflected in the note or other relevant credit or security
agreement or on which the borrower is paying a rate that was not in
compliance with Regulation O and all such Credit Extensions are and
were originated in compliance in all material respects with all
applicable laws.
(e) To the Knowledge of
DCB, no shares of DCB Common Stock were purchased with the proceeds
of a loan made by any of the DCB Companies.
(f) DCB Disclosure Schedule 3.20(f)
sets forth the aggregate amount of all overdrafts that have
occurred during each calendar month since December 31,
2015.
Section
3.21
Allowance for Loan
Losses.
The allowance for
loan losses reflected in reports by the DCB Companies to each
Regulatory Authority has been and will be established in compliance
with the requirements of all regulatory criteria, and the allowance
for loan losses shown in the DCB Financials has been and will be
established and maintained in accordance with GAAP and applicable
Law and in a manner consistent with Damascus’ internal
policies. The allowance for loan losses reflected in such reports
and the allowance for loan losses shown in the DCB Financials, in
the opinion of management, was or will be adequate as of the dates
thereof. DCB has disclosed to OLB on DCB Disclosure Schedule 3.21
all Credit Extensions (including participations) by and all
interest-bearing assets of the DCB Companies (a) that have been
accelerated during the past 12 months, (b) that have been
terminated during the past 12 months by reason of a default or
adverse development in the condition of the borrower or other
events or circumstances affecting the credit of the borrower, (c)
pursuant to which a borrower, customer or other party has notified
any of the DCB Companies during the past 12 months of, or has
asserted against any of the DCB Companies, in each case in writing,
any “lender liability” or similar claim, and, to the
Knowledge of DCB, each borrower, customer or other party that has
given any of the DCB Companies any oral notification of, or orally
asserted to or against any of the DCB Companies, any such claim,
(d) that are contractually past due 90 days or more in the payment
of principal and/or interest, (e) that are on non-accrual status,
(f) that are classified as “Other Loans Specially
Mentioned,” “Special Mention,”
“Substandard,” “Doubtful,”
“Loss,” “Classified,”
“Criticized,” “Credit Risk Assets,”
“Concerned Loans,” “Watch List” or words of
similar import by any DCB Company or any Regulatory Authority, (g)
to the Knowledge of DCB, as to which a reasonable doubt exists as
to the timely future collectability of principal and/or interest,
whether or not interest is still accruing or the loans are less
than 90 days past due, (h) where, during the past three years, the
interest rate terms have been reduced and/or the maturity dates
have been extended subsequent to the agreement under which the loan
was originally created due to concerns regarding the
borrower’s ability to pay in accordance with such initial
terms, (i) where a specific reserve allocation exists in connection
therewith, (j) that are required to be accounted for as a troubled
debt restructuring in accordance with Statement of Financial
Accounting Standards No. 15, (k) that were made pursuant to an
exception to policy, and (l) that, to the extent not already
disclosed pursuant to the foregoing items (a) through (k), have
been charged-off at any time since January 1, 2014, together with
true, complete and materially correct copies of reports containing
the principal amount and accrued and unpaid interest of each such
Credit Extension and interest-bearing asset and the identity of the
obligor thereunder, and DCB shall provide an updated DCB Disclosure Schedule 3.21
promptly to OLB after the end of each month after the date hereof
and on the Business Day prior to the Closing Date. The REO and
in-substance foreclosures included in any of Damascus’
non-performing assets are carried at fair value based on current
independent appraisals or current management
appraisals.
Section
3.22
Community
Reinvestment Act.
Damascus is the
only DCB Company that is subject to the Community Reinvestment Act
(12 U.S.C. §§ 2901 et
seq.) (the “CRA”). To the Knowledge
of DCB, Damascus is in compliance in all material respects with the
CRA and all regulations promulgated thereunder. DCB has supplied
OLB with a copy of Damascus’ current CRA Statement, all
letters and written comments received by Damascus since January 1,
2016 pertaining thereto and any responses by Damascus to such
comments. Damascus has a rating of “satisfactory” or
better as of its most recent CRA compliance examination and DCB and
Damascus have received no communication from any Regulatory
Authority that would lead DCB to believe that Damascus will not
receive a rating of “satisfactory” or better pursuant
to its next CRA compliance examination or that any Regulatory
Authority would seek to restrain, delay or prohibit any of the
Contemplated Transactions as a result of any act or omission of
Damascus under the CRA.
Section
3.23
Anti-Money
Laundering, OFAC and Information Security.
(a) To the Knowledge of
DCB, there do not exist any facts or circumstances that would cause
any of the DCB Companies: (i) to be deemed to be operating in
violation in any material respect of the Bank Secrecy Act, the USA
PATRIOT Act, any order issued with respect to anti-money laundering
by the U.S. Department of the Treasury’s Financial Crimes
Enforcement Network or Office of Foreign Assets Control, or any
other applicable anti-money laundering Law, as well as the
provisions of the Bank Secrecy Act/anti-money laundering program
adopted by the DCB Companies; or (ii) to be deemed not to be in
satisfactory compliance in any material respect with the applicable
privacy of customer information requirements contained in any
federal and state privacy Laws, including without limitation, in
Title V of the Gramm-Leach-Bliley Act of 1999 and the regulations
promulgated thereunder, as well as the provisions of the
information security program adopted by the DCB Companies. To the
Knowledge of DCB, no non-public customer information has been
disclosed to or accessed by an unauthorized third party in a manner
that would cause any of the DCB Companies to undertake any remedial
action. The board of directors or other governing body of each DCB
Company that is subject to Section 326 of the USA PATRIOT Act and
the regulations thereunder has adopted, and each such DCB Company
has implemented, a Bank Secrecy Act/anti-money laundering program
that contains adequate and appropriate customer identification
verification procedures that comply with Section 326 of the USA
PATRIOT Act and the regulations thereunder and such Bank Secrecy
Act/anti-money laundering program meets the requirements in all
material respects of Section 352 of the USA PATRIOT Act and the
regulations thereunder, and it has not received written notice from
any Regulatory Authority that such program (A) does not contain
adequate and appropriate customer identification verification
procedures, or (B) has been deemed ineffective. Each of the DCB
Companies has complied in all material respects with any
requirements to file reports and other necessary documents as
required by the USA PATRIOT Act and the regulations
thereunder.
(b) DCB Disclosure Schedule 3.23(b)
describes any event, circumstance or other occurrence, and the
remedial steps taken by any of the DCB Companies with respect
thereto, since January 1, 2011, that constituted either (i) a
“breach of the security of a system,” as such phrase is
defined in Section 14-3504(a) of the Commercial Law Article of the
Annotated Code of Maryland (the “Commercial Law Article”)
with respect to personal information maintained by any of the DCB
Companies, without regard to the application of Section 14-3507(b)
of the Commercial Law Article, or (ii) any other data breach with
respect to, or other unauthorized access to, the electronic
information and records of any of the DCB Companies, including,
without limitation, communications, regulatory correspondence and
reports, documents and data, information relating to products and
services, activities, strategies and plans, IT Assets, other
financial data, and identities of and information regarding sales,
customers, prospects, vendors, suppliers and personnel, including,
without limitation, passwords and other information technology
credentials.
Section
3.24
Securities
Activities of Employees.
To the Knowledge of
DCB, the officers, employees and agents of the DCB Companies are
now, and at all times in the past have been, in compliance with all
applicable Laws that relate to securities activities conducted by
such officers, employees and agents, including Laws relating to
licenses and permits.
Section
3.25
Books and
Records.
(a) The minute books
and stock ledgers of the DCB Companies that have been made
available to OLB, its Representatives or its Affiliates constitute
all of the minute books and stock ledgers of the DCB Companies and
as of their dates contain a materially complete and accurate record
of all actions of their respective stockholders and boards of
directors (and any committees thereof) and have been maintained in
accordance with applicable Law. All personnel files, reports,
feasibility studies, environmental assessments and reports,
strategic planning documents, financial forecasts, deeds, leases,
lease files, land files, accounting and tax records and all other
records that relate to the business and properties of the DCB
Companies that have been requested by OLB have been made available
to OLB, its Representatives or its Affiliates, and are located at
the offices of the DCB Companies at 26500 Ridge Road, Damascus,
Maryland 20872.
(b) Each of the DCB
Companies makes and keeps books, records and accounts that, in
reasonable detail and in all material respects, accurately and
fairly reflect its transactions in and dispositions of its assets
and securities, and all such books, records and accounts have been
maintained in accordance with applicable Law and accounting
requirements. Each of the DCB Companies maintains a system of
internal accounting controls sufficient to provide reasonable
assurance that: (i) transactions are executed in accordance
with management’s general or specific authorizations;
(ii) transactions are recorded as necessary (A) to permit
the preparation of financial statements and reports filed with any
Regulatory Authority in conformity with GAAP consistently applied
and any other criteria applicable to such statements, and
(B) to maintain accountability for assets and liabilities;
(iii) access to its assets and incurrence of liabilities is
permitted only in accordance with management’s general or
specific authorizations; (iv) the recorded accountability for
assets and liabilities is compared with existing assets and
liabilities at reasonable intervals and appropriate action is taken
with respect to any differences; and (v) extensions of credit and
other receivables are recorded accurately, and proper and adequate
procedures are implemented to effect the collection thereof on a
current and timely basis. None of the systems, controls, data or
information of the DCB Companies are recorded, stored, maintained,
operated or otherwise wholly or partly dependent on or held by any
means (including any electronic, mechanical or photographic
process, whether computerized or not) that (including all means of
access thereto and therefrom) are not under the exclusive ownership
and control of the DCB Companies or their accountants, except as
would not reasonably be expected to have a Material Adverse Effect.
Except as disclosed on DCB
Disclosure Schedule 3.25(b), to the Knowledge of DCB there
are no significant deficiencies or material weaknesses in the
design or operation of such internal accounting controls that are
reasonably likely to adversely affect in any material respect
DCB’s ability to record, process, summarize and report
financial information. To the Knowledge of DCB, there has occurred
no fraud, whether or not material, that involves management or
other employees who have a significant role in DCB’s internal
accounting controls.
Section
3.26
Investment
Securities.
Each of the DCB
Companies has good and marketable title to all securities that it
owns. None of the investment securities reflected in the DCB
Financials under the headings “Securities Available for
Sale” and “Securities Held to Maturity” and,
except as described in DCB
Disclosure Schedule 3.26 or otherwise provided for by this
Agreement, none of the investment securities that any of the DCB
Companies acquired after September 30, 2016, are subject to any
restrictions, whether contractual or statutory, that materially
impair such DCB Company’s ability to freely dispose of such
investment securities at any time, and such DCB Company was
permitted by applicable Law to acquire such investment securities
at the time they were acquired.
Section
3.27
Reorganization.
As of the date
hereof, DCB does not have any reason to believe that the Merger
will fail to qualify as a tax-free reorganization within the
meaning of Section 368(a) of the IRC. None of the DCB
Companies will take any action that will cause, cause any action to
be taken that will cause, or fail to take any action or fail to
cause any action to be taken if such failure to act will have the
effect of causing, the Merger not to qualify as a tax-free
reorganization within the meaning of Section 368(a) of the
IRC, nor have any of the DCB Companies taken, caused, agreed to
take or cause, or failed to take or cause any such
action.
Section
3.28
Fairness
Opinion.
DCB’s board
of directors has received an opinion (which, if initially rendered
verbally, has been or will be confirmed by a written opinion, dated
no later than the date of this Agreement) from RP Financial, LC. to
the effect that, as of the date thereof, and subject to the terms,
conditions and qualifications set forth therein, the consideration
to be received by the stockholders of DCB pursuant to the terms of
this Agreement is fair, from a financial point of view, to the
stockholders of DCB. Such opinion has not been amended or rescinded
as of the date of this Agreement.
Section
3.29
Materials Provided
to Stockholders.
All proxy materials
used in connection with the meetings of DCB’s stockholders
held in 2014, 2015 and 2016, if any, along with any other form of
correspondence between DCB and its stockholders during those years,
including, without limitation, any annual or quarterly reports
provided to stockholders, have been made available to
OLB.
Section
3.30
Absence of Certain
Changes.
Except as disclosed
in DCB Disclosure Schedule
3.30 and provided for or contemplated in this Agreement,
since December 31, 2015:
(a) There has not been
any material transaction by any of the DCB Companies other than in
the ordinary course of business and in conformity with past
practices;
(b) There has not been
any acquisition or disposition by any of the DCB Companies of any
property or asset, whether real or personal, having a fair market
value, singularly or in the aggregate, in an amount greater than
$50,000, other than acquisitions or dispositions, including
acquisitions and dispositions of REO and investment securities,
made in the ordinary course of business;
(c) There has not been
any Lien on any of the properties or assets of the DCB Companies,
except to secure extensions of credit in the ordinary course of
business and in conformity with past practice (i.e., Liens on
assets to secure Federal Home Loan Bank, Federal Reserve Bank or
correspondent bank advances being deemed both in the ordinary
course of business and consistent with past
practices);
(d) There has not been
any increase in, or commitment to increase, the compensation
payable or to become payable to any of the officers, directors,
employees or agents of the DCB Companies, or any bonus payment,
other than routine increases made in the ordinary course or
business and consistent with past practice, or any stock option
award, restricted stock award or similar arrangement made to or
with any of such officers, directors, employees or
agents;
(e) None of the DCB
Companies has incurred, assumed or taken any property subject to
any liability in excess of $50,000, except for liabilities incurred
or assumed or property taken subsequent to December 31, 2015 in the
ordinary course of business and in conformity with past
practices;
(f) There has not been
any material alteration in the manner of keeping the books,
accounts, or records of the DCB Companies, or in the accounting
policies or practices therein reflected;
(g) There has not been
any elimination or addition of employee benefits;
(h) There has not been
any deferred routine maintenance of any DCB Real
Property;
(i) There has not been
any elimination of a reserve by any DCB Company where the liability
related to such reserve has remained;
(j) There has not been
any failure by a DCB Company to depreciate capital assets in
accordance with past practice or to eliminate capital assets that
are no longer used in its business; and
(k) There has not been
any extraordinary reduction or deferral by any of the DCB Companies
of ordinary or necessary expenses.
Section
3.31
Absence of
Undisclosed Liabilities.
None of the DCB
Companies has any obligation or liability that is material to its
financial condition or operations or that, when combined with all
similar obligations or liabilities, would be material to its
financial condition or operations except (a) as disclosed in the
DCB Financials delivered to OLB prior to the date of this
Agreement, or (b) as contemplated under this Agreement. Except as
disclosed on DCB
Disclosure Schedule 3.31, since December 31,
2015, none of the DCB
Companies has incurred or paid any obligation or liability that
would be material to its financial condition or operations, except
for obligations that are (a) fully reflected or reserved against on
the most recent balance sheet contained in the DCB Financials or
(b) paid in connection with transactions made in the ordinary
course of its business consistent with past practice and applicable
Law.
Section
3.32
No Option Plans or
Convertible Securities.
None of the DCB
Companies maintains any form of equity plan, including without
limitation, an equity compensation or other stock option plan, that
might entitle any Person to receive Rights from it, and no Rights
with respect to any equity plan of any DCB Company are
outstanding.
Except as described
in DCB Disclosure Schedule
3.33, none of Damascus’ deposits is a “brokered
deposit” as defined in 12 C.F.R. Section
337.6(a)(2).
Section
3.34
Risk Management
Instruments.
All interest rate
swaps, caps, floors, option agreements, futures and forward
contracts and other similar risk management arrangements, whether
entered into for DCB’s own account or for the account of one
or more of DCB’s Subsidiaries or their customers (all of
which are set forth in DCB
Disclosure Schedule 3.34), were in all material respects
entered into in compliance with all applicable Laws, and with
counterparties believed to be financially responsible at the time;
and to the Knowledge of DCB each of them constitutes the valid and
legally binding obligation of DCB or such DCB Subsidiary,
enforceable in accordance with its terms (except as enforceability
may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of
general applicability relating to or affecting creditors’
rights or by general equity principles), and is in full force and
effect. Neither DCB nor any DCB Subsidiary, nor, to the Knowledge
of DCB, any other party thereto, is in breach of any of its
obligations under any such agreement or arrangement in any material
respect.
Section
3.35
Fiduciary
Accounts.
Except as described
in DCB Disclosure Schedule
3.35, none of the DCB Companies has trust powers or acts as
a trustee, agent, custodian, personal representative, guardian,
conservator or investment adviser.
Section
3.36
Credit Card
Accounts and Merchant Processing.
None of the DCB
Companies originates, maintains or administers credit card
accounts. Except as described in DCB Disclosure Schedule 3.36,
none of the DCB Companies provides, or has provided, merchant
credit card processing services to any merchants.
Section
3.37
Anti-takeover
Laws.
The DCB Companies
have taken all actions required to exempt OLB, the Agreement, the
Bank Merger Agreement, the Contemplated Transactions and the Bank
Merger from any provisions of an anti-takeover nature contained in
the DCB Organizational Documents, and the provisions of any federal
or state “anti-takeover,” “fair price,”
“moratorium,” “control share acquisition”
or similar Laws.
Section
3.38
Stockholders’
List.
Attached hereto as
DCB Disclosure Schedule
3.38 is a list of holders of shares of the DCB Common Stock
complied and provided by Computershare, Inc., the registrar and
transfer agent in respect of the DCB Common Stock, containing their
names, addresses and number of shares held of record. To the
Knowledge of DCB, such stockholders’ list is complete and
accurate in all material respects.
Section 3.39
Bank
Certificates.
Each issued and
outstanding Bank Certificate that has not been surrendered pursuant
to Section 4(b) of the Plan of Reorganization constitutes and is
deemed for all corporate purposes as evidence and ownership of an
equal number of shares of DCB Common Stock. Each such Bank
Certificate has been cancelled by Damascus and does not entitle any
holder thereof to exercise any rights as a stockholder of
Damascus.
The schedules
delivered by DCB pursuant to this Article III and elsewhere in this
Agreement, which have been delivered concurrently with the
execution and delivery of this Agreement, are true and correct in
all material respects and contain no untrue statements of material
fact or omit any material fact necessary to make the statements
therein, in light of the circumstances under which they were made,
not misleading.
ARTICLE
IV.
REPRESENTATIONS AND
WARRANTIES OF OLB
OLB represents and
warrants to DCB, for itself and with respect to and on behalf of
each of the OLB Subsidiaries (to the extent applicable), that the
statements contained in this Article IV (and as reflected on the
OLB Disclosure Schedules) are true and correct as of the date of
this Agreement and will be true and correct as of the Closing Date
(as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Article
IV, except that those representations and warranties that by their
terms speak as of the date of this Agreement or some other date
shall be true and correct as of such date); provided, however, that
no representation or warranty of OLB contained in this Article IV
shall be deemed untrue or incorrect, and OLB shall not be deemed to
have breached a representation or warranty, as a consequence of the
existence of any fact, circumstance or event unless such fact,
circumstance or event, individually or taken together with all
other facts, circumstances or events inconsistent with any
paragraph of Article IV, has had or is reasonably expected to have
a Material Adverse Effect on OLB, disregarding for these purposes
(i) any qualification or exception for, or reference to,
materiality in any such representation or warranty and (ii) any use
of the terms “material,” “materially,”
“in all material respects,” “Material Adverse
Effect” or similar terms or phrases in any such
representation or warranty; provided, however, that the foregoing
standard shall not apply to representations and warranties
contained in Sections 4.1, 4.2, 4.3, 4.6, 4.14, 4.17 and 4.25,
which shall be deemed untrue, incorrect and breached if they are
not true and correct in all material respects (the
“Article IV
Standard”).
OLB has made a good
faith effort to ensure that the disclosure on each schedule of the
OLB Disclosure Schedules corresponds to the section referenced
herein. For purposes of the OLB Disclosure Schedules, however, any
item disclosed on any schedule therein is deemed to be fully
disclosed with respect to all schedules under which such item may
be relevant as and to the extent that it is reasonably clear on the
face of such schedule that such item applies to such other
schedule.
Section
4.1
Organization.
(a) OLB is a
corporation duly incorporated, validly existing, and in good
standing under the laws of the State of Maryland. OLB is a bank
holding company duly registered under the BHC Act. OLB has the full
corporate power and lawful authority to carry on its business and
operations as now being conducted and to own or lease all of its
properties and assets as presently owned or leased. OLB is duly
licensed, registered or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or
the character or location of the properties and assets owned or
leased by it makes such licensing, registration or qualification
necessary, except where the failure to be so licensed, registered
or qualified would not have a Material Adverse Effect on OLB, and
all such licenses, registrations and qualifications are in full
force and effect in all material respects. OLB engages in
activities and holds properties only of the types permitted to bank
holding companies by the BHC Act and the rules and regulations
promulgated thereunder.
(b) Old Line is a trust
company duly organized, validly existing and in good standing under
the laws of the State of Maryland. Old Line has the full corporate
power and lawful authority to carry on its business and operations
as now being conducted and to own or lease all of its properties
and assets as presently owned or leased. Old Line is duly licensed,
registered or qualified to do business in each jurisdiction in
which the nature of the business conducted by it or the character
or location of the properties and assets owned or leased by it
makes such licensing, registration or qualification necessary,
except where the failure to be so licensed, registered or qualified
would not have a Material Adverse Effect on OLB, and all such
licenses, registrations and qualifications are in full force and
effect in all material respects.
(c) The deposits of Old
Line are insured by the FDIC to the extent provided in the Federal
Deposit Insurance Act, and all premiums and assessments required to
be paid in connection therewith have been paid when
due.
(d) OLB Disclosure Schedule 4.1(d)
contains a complete and accurate list of all OLB Subsidiaries. Each
OLB Subsidiary is duly organized, validly existing and in good
standing under the laws of the state of its organization and has
the full corporate power and lawful authority to carry on its
business and operations as now being conducted and to own or lease
all of its properties and assets as presently owned or leased. Each
OLB Subsidiary is duly licensed, registered or qualified to do
business in each jurisdiction in which the nature of the business
conducted by it or the character or location of the properties and
assets owned or leased by it makes such licensing, registration or
qualification necessary, except where the failure to be so
licensed, registered or qualified would not have a Material Adverse
Effect on OLB, and all such licenses, registrations and
qualifications are in full force and effect in all material
respects. Other than shares of capital stock of the OLB
Subsidiaries listed on OLB
Disclosure Schedule 4.1(d), OLB does not own or control,
directly or indirectly, or have the right to acquire directly or
indirectly, an equity interest in any Entity.
(e) The respective
minute books of OLB and each OLB Subsidiary accurately reflect, in
all material respects, all material actions of their respective
owners and governing bodies, including committees, in each case in
accordance with the ordinary business practice of OLB or the
applicable OLB Subsidiary.
(f) Prior to the date
of this Agreement, OLB has delivered or made available to DCB true
and correct copies of the articles of incorporation and bylaws of
OLB, and the charter documents and bylaws, operating agreement
and/or other governing instrument of each OLB Subsidiary and each
as in effect on the date hereof (collectively, the
“OLB Governing
Documents”).
Section
4.2
Capitalization.
(a) The authorized
capital stock of OLB consists of (i) 25,000,000 shares of Common
Stock, par value $0.01 per share (“OLB Common Stock”), of
which 10,915,914.5 shares are duly authorized, validly issued and
outstanding, and (ii) 1,000,000 shares of preferred stock, par
value $0.01 per share (“OLB Preferred Stock”),
none of which are outstanding, in each case on the date hereof. As
of the date of this Agreement, there are no bonds, debentures,
notes or other indebtedness of OLB or any OLB Subsidiary having the
right to vote on any matters on which stockholders of OLB may vote.
All of the issued and outstanding shares of OLB Common Stock are
fully paid and nonassessable, free of preemptive rights, except as
may be defined in OLB’s articles of incorporation, and were
not issued in violation of the preemptive rights of any Person or
in violation of any applicable Laws. Except pursuant to this
Agreement or as set forth in OLB Disclosure Schedule 4.2(a),
OLB has not issued nor is OLB or any OLB Subsidiary bound by any
subscription, call, commitment, agreement or other Right of any
character relating to the purchase, sale or issuance of, or right
to receive dividends or other distributions on, any shares of OLB
Common Stock, OLB Preferred Stock or any other security of OLB or
any securities representing the right to vote, purchase or
otherwise receive any shares of OLB Common Stock, OLB Preferred
Stock or any other security of OLB. The shares of OLB Common Stock
to be issued pursuant to the Merger have been duly authorized and,
when issued and delivered in accordance with the terms of this
Agreement, will be validly issued, fully paid, nonassessable and
free of preemptive rights.
(b) OLB owns, directly
or indirectly, all of the capital stock or other equity ownership
interests of the OLB Subsidiaries, free and clear of any Liens,
agreements and restrictions of any kind or nature, except for those
Subsidiaries identified in OLB Disclosure Schedule 4.2(b),
and all of such shares or equity ownership interests are duly
authorized and validly issued and are fully paid, nonassessable and
free of preemptive rights, with no personal liability attaching to
the ownership thereof.
Section
4.3
Authority; No
Violation.
(a) OLB has full
corporate power and authority to execute and deliver this Agreement
and, subject to the receipt of all consents, waivers and approvals
described in OLB
Disclosure Schedule 4.4, to consummate the Contemplated
Transactions and to otherwise comply with its obligations under
this Agreement. The execution and delivery of this Agreement by OLB
and the consummation by OLB of the Contemplated Transactions, up to
and including the Merger, have been duly and validly authorized by
the board of directors of OLB and no other corporate proceedings on
the part of OLB are necessary to consummate the Contemplated
Transactions. This Agreement has been duly and validly executed and
delivered by OLB and, assuming the due authorization, execution and
delivery of this Agreement by DCB, constitutes the valid and
binding obligation of OLB, enforceable against OLB in accordance
with its terms, subject to applicable bankruptcy, insolvency and
similar laws affecting creditors’ rights generally and
subject, as to enforceability, to general principles of
equity.
(b) The execution and
delivery of this Agreement by OLB, the consummation of the
Contemplated Transactions and the compliance by OLB with any of the
terms or provisions hereof, subject to the receipt of all consents,
waivers and approvals described in OLB Disclosure Schedule 4.4,
OLB’s and DCB’s compliance with any conditions
contained herein, and compliance by OLB or any OLB Subsidiary with
any of the terms or provisions hereof, do not and will
not:
(i) Conflict with, or
result in a breach of, any provision of the OLB Governing
Documents;
(ii) Violate any Law
applicable to OLB or any OLB Subsidiary or any of their respective
properties or assets, except where such violation would not have a
Material Adverse Effect; or
(iii) Except as described
in OLB Disclosure Schedule
4.3(b) or pursuant to which consent or notification is
required as set forth in OLB Disclosure Schedule 4.4,
violate, conflict with, result in a breach of any provisions of,
constitute a default (or an event that, with notice or lapse of
time, or both, would constitute a default) under, result in the
termination of, or acceleration of, the performance required by, or
result in a right of termination or acceleration or the creation of
any Lien upon any of the properties or assets of OLB or any OLB
Subsidiary under any of the terms or conditions of any note, bond,
mortgage, indenture, license, lease, agreement, commitment or other
instrument or obligation to which OLB or any OLB Subsidiary is a
party, or by which they or any of their respective properties or
assets may be bound or affected, except where such termination,
acceleration or creation would not have a Material Adverse Effect
on OLB.
(c) Old Line has all
requisite corporate power and authority to execute and deliver the
Bank Merger Agreement, and, subject to the receipt of all consents
described in OLB
Disclosure Schedule 4.4, to consummate the transactions
contemplated thereby. The execution and delivery of the Bank Merger
Agreement and the consummation of the transactions contemplated
thereby have been duly and validly authorized by the board of
directors of Old Line and, other than the approval of the Bank
Merger Agreement by OLB as the sole stockholder of Old Line as
required by Law, no further corporate proceedings of Old Line are
needed to execute and deliver the Bank Merger Agreement and
consummate the transactions contemplated thereby. OLB, as the sole
stockholder of Old Line, shall promptly hereafter approve the Bank
Merger Agreement, and the Bank Merger Agreement will be duly
executed by Old Line on the date of this Agreement. The Bank Merger
Agreement has been duly authorized and, upon due authorization,
execution and delivery by Old Line, will be a legal, valid and
binding agreement of Old Line enforceable in accordance with its
terms, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to
creditors’ rights generally and general equitable principles.
At the Closing, all other agreements, documents and instruments to
be executed and delivered by Old Line that are referred to in the
Bank Merger Agreement, if any, will have been duly executed and
delivered by Old Line and, assuming due authorization, execution
and delivery by the counterparties thereto, will constitute the
legal, valid and binding obligations of Old Line, enforceable
against Old Line in accordance with their respective terms and
conditions, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to
creditors’ rights generally and by general equitable
principles.
Section
4.4
Consents;
Regulatory Approvals.
Except as described
in OLB Disclosure Schedule
4.4, no consents, waivers or approvals of, or filings or
registrations with, any Regulatory Authorities or other third
parties are necessary in connection with the execution and delivery
of this Agreement by OLB or the consummation of the Contemplated
Transactions by OLB. OLB has no reason to believe that it will not
be able to obtain all requisite consents, waivers or approvals from
the Regulatory Authorities or any third party in order to
consummate the Contemplated Transactions on a timely basis. To the
Knowledge of OLB, no fact or circumstance exists, including any
possible other transaction pending or under consideration by OLB or
any OLB Company, that would (a) reasonably be expected to prevent
or delay in any material respect, any filings or registrations
with, or consents, waivers or approvals required from, any
Regulatory Authority, or (b) cause a Regulatory Authority acting
pursuant to applicable Law to seek to prohibit or materially delay
consummation of the Contemplated Transactions or impose a
Burdensome Condition.
Section
4.5
Financial
Statements.
(a) OLB has previously
delivered or made available the OLB Financials to DCB, except those
pertaining to periods commencing after September 30, 2016, which it
will deliver or make available by each respective delivery date as
required by this Agreement. The delivered or made available OLB
Financials fairly present, in all material respects, the
consolidated financial position, results of operations, changes in
stockholders’ equity and cash flows of OLB as of and for the
periods ended on the dates thereof. The delivered or made available
OLB Financials comply in all material respects with applicable
accounting and regulatory requirements and have been prepared in
accordance with GAAP consistently applied, except for (i) omission
of the notes from the financial statements, applicable to any
interim period, and (ii) with respect to any interim period, normal
year-end adjustments and notes thereto. Dixon Hughes Goodman LLP
has not resigned (or informed OLB that it intends to resign) or
been dismissed as independent public accountants of OLB as a result
of or in connection with any disagreements with OLB on a matter of
accounting principles or practices, financial statement disclosure
or auditing scope or procedure.
(b) OLB did not, as of
the date of the OLB Financials or any subsequent date, have any
liabilities, obligations or loss contingencies of any nature,
whether absolute, accrued, contingent or otherwise, that are not
fully reflected or reserved against in the balance sheets included
in the OLB Financials at the date of such balance sheets that would
have been required to be reflected therein in accordance with GAAP
consistently applied or fully disclosed in a note thereto, except
for liabilities, obligations and loss contingencies that are not
material in the aggregate and that are incurred in the ordinary
course of business, consistent with past practice, and except for
liabilities, obligations and loss contingencies that are within the
subject matter of a specific representation and warranty herein or
that have not had a Material Adverse Effect and subject, in the
case of any unaudited statements, to normal recurring audit
adjustments and the absence of notes thereto.
Section
4.6
No Material Adverse
Effect.
Neither OLB nor any
OLB Subsidiary has suffered any adverse change in its assets
(including loan portfolio), liabilities (whether absolute, accrued,
contingent or otherwise), liquidity, net worth, property, financial
condition or results of operations, or any damage, destruction or
loss, whether or not covered by insurance, since December 31, 2015,
that in the aggregate has had or is reasonably likely to have a
Material Adverse Effect on the OLB Companies taken as a
whole.
(a) Except as disclosed
on OLB Disclosure Schedule
4.7(a), all OLB Returns required by applicable Law to have
been filed with any Taxing Authority by, or on behalf of, each of
the OLB Companies have been filed on a timely basis in accordance
with all applicable Laws, and such OLB Returns are true, complete
and correct in all material respects, or requests for extensions to
file the OLB Returns have been timely filed, granted and have not
expired, except to the extent that such failures to file, to be
complete or correct or to have extensions granted that remain in
effect individually or in the aggregate would not have a Material
Adverse Effect on OLB. All OLB Taxes shown to be due and payable on
the OLB Returns or on subsequent assessments with respect thereto
have been paid in full or adequate reserves have been established
in the OLB Financials for the payment of such OLB Taxes, except
where any such failure to pay or establish adequate reserves, in
the aggregate, has not had, and is not reasonably likely to have, a
Material Adverse Effect on the OLB Companies. Each of the OLB
Companies has timely withheld and paid over all OLB Taxes required
to have been withheld and paid over by it, and complied with all
information reporting and backup withholding requirements,
including maintenance of required records with respect thereto, in
connection with amounts paid or owing to any employee, creditor,
independent contractor or other third party. There are no Liens on
any of the assets of the OLB Companies with respect to OLB Taxes,
other than Liens for OLB Taxes not yet due and
payable.
(b) Except as disclosed
on OLB Disclosure Schedule
4.7(b), no deficiencies for OLB Taxes have been claimed,
proposed or assessed, with notice to any of the OLB Companies, by
any taxing or other governmental authority against the OLB
Companies that have not been settled, closed or reached a final
determination, or that have not been adequately reserved for in the
OLB Financials, except for deficiencies that, individually or in
the aggregate, have not had, and are not reasonably likely to have,
a Material Adverse Effect on OLB. There are no pending audits
relating to any OLB Tax liability of which any of the OLB Companies
has received written notice. Except as disclosed on OLB Disclosure Schedule 4.7(b),
none of the OLB Companies is a party to any action or proceeding
for assessment or collection of OLB Taxes, nor have such events
been asserted or, to the Knowledge of OLB, threatened against any
of the OLB Companies or any of their assets. No waiver or extension
of any statute of limitations relating to OLB Taxes is in effect
with respect to the OLB Companies. No power of attorney has been
executed by any of the OLB Companies with respect to any OLB Tax
matter that is currently in force.
(c) As used in this
Agreement, the term “OLB Taxes” shall mean all
taxes, however denominated, including any interest, penalties or
other additions to tax that may become payable in respect thereof,
imposed by any federal, territorial, state, local or foreign
government or any agency or political subdivision of any such
government, which taxes shall include, without limiting the
generality of the foregoing, all income or profits taxes
(including, but not limited to, federal income taxes and state
income taxes), real property gains taxes, payroll and employee
withholding taxes, unemployment insurance taxes, social security
taxes, sales and use taxes, ad valorem taxes, excise taxes,
franchise taxes, gross receipts taxes, business license taxes,
occupation taxes, real and personal property taxes, stamp taxes,
environmental taxes, transfer taxes, and other obligations of the
same or of a similar nature to any of the foregoing, which any of
the OLB Companies is required to pay, withhold or collect. As used
in this Agreement, the term “OLB Returns” shall mean
all reports, estimates, declarations of estimated tax, information
statements and returns relating to, or required to be filed in
connection with, any OLB Taxes, including information returns or
reports with respect to backup withholding and other payments to
third parties.
Section
4.8
Contracts; Certain
Changes.
Except as described
in OLB Disclosure Schedule
4.8 or in the SEC Reports, neither OLB nor any OLB
Subsidiary is a party to or subject to:
(a) Any collective
bargaining agreement with any labor union relating to its
employees;
(b) Any agreement that
by its terms limits its payment of dividends;
(c) Any contract, other
than this Agreement, that restricts or prohibits it from engaging
in any type of business permissible under applicable
Law;
(d) any agreement
(other than this Agreement), contract, arrangement, commitment or
understanding (whether written or oral) that restricts or limits in
any material way the conduct of its business (it being understood
that any non-compete, non-solicitation or similar provision shall
be deemed material);
(e) Any contract, the
terms of which will require, on account of this Agreement or any of
the Contemplated Transactions, the payment, individually or when
aggregated with all other similar contracts, of a material
financial fee or penalty by OLB or an Old Line Company;
and
(f) Any contract or
arrangement not disclosed pursuant to the other paragraphs of this
Section 4.8 that constitutes a “material contract” as
defined in Item 601(b)(10) of Regulation S-K of the
SEC.
Section
4.9
Ownership of
Personal Property; Insurance Coverage.
(a) Each of the OLB
Companies has good and marketable title to all material assets and
properties owned by it in the conduct of its businesses, whether
such assets and properties are real or personal, tangible or
intangible, including assets and property reflected in the balance
sheets contained in the OLB Financials or acquired subsequent
thereto, subject to no Liens, except:
(i) Those items that
secure liabilities for public or statutory obligations or any
discount with, borrowing from or other obligations to the FHLB,
inter-bank credit facilities or reverse repurchase agreements and
that are described in OLB
Disclosure Schedule 4.9(a) or permitted under Article V
hereof;
(ii) Mechanics liens and
similar liens for labor, materials, services or supplies provided
for such property and incurred in the ordinary course of business
for amounts not yet delinquent or that are being contested in good
faith;
(iii) Statutory Liens for
amounts not yet delinquent or that are being contested in good
faith;
(iv) Liens for current
OLB Taxes not yet due and payable;
(v) Pledges to secure
deposits and other Liens incurred in the ordinary course of the
business of banking;
(vi) Liens,
imperfections of title, easements and other defects of title that
are not reasonably likely to have a Material Adverse
Effect;
(vii) With respect to
personal property reflected in the balance sheets contained in the
OLB Financials, (A) dispositions and encumbrances for adequate
consideration in the ordinary course of business since the date of
such balance sheets and/or (B) dispositions of obsolete personal
property since the date of such balance sheets;
(viii) Those items that
are reflected as liabilities in the OLB Financials;
and
(ix) Items of personal
property that are held in any fiduciary or agency
capacity.
(b) With respect to
material items of real and personal property that are used in the
conduct of its business and leased from other Persons, each of the
OLB Companies has the right under valid and existing leases to use
such real and personal property in all material respects as
presently occupied and used.
(c) Each of the OLB
Companies currently maintains insurance with reputable insurers
against such risks and in such amounts as the management of OLB has
determined to be prudent for such OLB Company’s operations,
and, to the Knowledge of OLB, such insurance is similar in scope
and coverage in all material respects to insurance maintained by
other similarly-situated businesses. Each of OLB and each OLB
Subsidiary is in compliance with its insurance policies, is not in
default under any of the terms thereof and has made accurate
statements on any insurance renewal application. Each such policy
is in full force and effect and, except for policies insuring
against potential liabilities of officers, directors and employees
of OLB and the OLB Subsidiaries, OLB or the relevant OLB Subsidiary
is the sole beneficiary of such policies. All premiums and other
payments due under any such policy have been paid, and all claims
thereunder have been filed in a due and timely
fashion.
(d) None of the OLB
Companies has received notice from any insurance carrier
that:
(i) The insurance will
be cancelled or that coverage thereunder will be reduced or
eliminated; or
(ii) Premium costs with
respect to such insurance will be substantially
increased.
(e) The OLB Companies
maintain such fidelity bonds and errors and omissions insurance as
may be customary or required under applicable Laws.
Section
4.10
Litigation and
Other Proceedings.
Except as set forth
in OLB Disclosure Schedule
4.10, there are no legal, quasi-judicial, administrative,
arbitration or other proceedings, claims (whether asserted or
unasserted), actions or governmental investigations or inquiries of
any kind or nature now pending or, to the Knowledge of OLB,
threatened, before any court, administrative, regulatory,
arbitration or similar body in any manner against any of the OLB
Companies or any of their properties, and to the Knowledge of OLB
there are no facts that reasonably could be expected to be the
basis for any such suit, arbitration, other proceeding, claim,
action, investigation or inquiry. To the Knowledge of OLB, no
pending or threatened suit, arbitration, proceeding claim, action, investigation or inquiry
described in OLB
Disclosure Schedule 4.10 could reasonably be expected to (a)
have a Material Adverse Effect, (b) question the validity of any
action taken or to be taken in connection with this Agreement or
the Contemplated Transactions, or (c) materially impair or delay
the ability of the OLB Companies to perform their obligations under
this Agreement. Except as disclosed on OLB Disclosure Schedule 4.10,
none of the OLB Companies is in default with respect to any
judgment, order, writ, injunction, decree, award, rule, or
regulation of any court, arbitrator or Regulatory
Authority.
Section
4.11
Compliance with
Applicable Law.
Except as disclosed
on OLB Disclosure Schedule
4.11:
(a) Each of the OLB
Companies conducts its business in compliance with all Laws
applicable to it, its properties, assets and deposits, its
business, and its conduct of business and its relationship with its
employees conducting such business, except where noncompliance
would not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect;
(b) Each of the OLB
Companies has all material permits, licenses, authorizations,
orders and approvals of all Regulatory Authorities that are
required in order to permit it to own or lease its properties and
carry on its business as it is presently conducted; all such
permits, licenses, authorizations, orders and approvals are in full
force and effect, and no suspension or cancellation of any of them
is, to the Knowledge of OLB, threatened, and to the Knowledge of
OLB no suspension or cancellation of any such permit, license,
certificate, order or approval is threatened or will result from
the consummation of the Contemplated Transactions, subject to
obtaining the receipt of all requisite approvals or consents from
the Regulatory Authorities in order to consummate the Contemplated
Transactions. None of the OLB Companies have been given notice or
been charged with any violation of any law, ordinance, regulation,
order, writ, rule, decree or condition to approval of any
Regulatory Authority that, individually or in the aggregate, would
reasonably be expected to have a Material Adverse
Effect;
(c) ]Since January 1,
2011, each of the OLB Companies has timely filed all reports,
forms, schedules, registrations, statements and other documents,
together with any amendments required to be made with respect
thereto, that it was required by Law to file with any Regulatory
Authority (collectively, the “OLB Reports”), and has
paid all fees and assessments due and payable in connection
therewith, and each of such filings complied in all material
respects with all Laws under which it was filed (or was amended so
as to be in compliance promptly following discovery of such
noncompliance) and, to the extent such filings contain financial
information, have been prepared in all material respects in
accordance with applicable regulatory accounting principles and
practices and, in the case of SEC reports, GAAP, throughout the
periods covered by such filing, except to the extent failure to
timely file would not, individually or in the aggregate, be
expected to have a Material Adverse Effect; none of the OLB Reports
when filed with the SEC (the “SEC Reports”), and if
amended prior to the date hereof, as of the date of such amendment,
contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under
which they were made, not misleading, and there are no outstanding
comments from or unresolved issues raised by the SEC, as
applicable, with respect to any of the SEC Reports; none of the OLB
Subsidiaries is required to file periodic reports pursuant to
Sections 13 or 15(d) of the Exchange Act;
(d) No Regulatory
Authority has initiated any proceeding or, to the Knowledge of OLB,
investigation into the business or operations of the OLB Companies
that has not been resolved;
(e) Since January 1,
2014, none of the OLB Companies has received any notification or
communication from any Regulatory Authority:
(i) Asserting that it
is not in substantial compliance with any Law that such Regulatory
Authority enforces, unless such assertion has been waived,
withdrawn or otherwise resolved;
(ii) Threatening to
revoke any license, franchise, permit or governmental authorization
that is material to it; or
(iii) Requiring or
threatening to require it, or indicating that it may be required,
to enter into a cease and desist order, consent agreement, other
agreement or memorandum of understanding, or any other agreement
directing, restricting or limiting, or purporting to direct,
restrict or limit, in any manner its operations, including without
limitation any restriction on the payment of dividends (any such
notice, communication, memorandum, agreement or order described in
this Section 4.11(e)(iii) and addressed specifically to an OLB
Company herein referred to as an “OLB Regulatory
Agreement”);
(f) None of the OLB
Companies has received, consented to or entered into any OLB
Regulatory Agreement that is currently in effect, nor has any OLB
Company been advised, since January 1, 2013 by any Regulatory
Authority that it is considering issuing, initiating, ordering or
requesting any OLB Regulatory Agreement that has not already been
issued, initiated, ordered or requested;
(g) There is no
unresolved violation, criticism or exception by any Regulatory
Authority with respect to any OLB Regulatory Agreement, except to
the extent permitted by such OLB Regulatory Agreement;
(h) There is no
injunction, award, order, judgment, settlement, decree or
regulatory restriction imposed upon or entered into by any of the
OLB Companies or upon their assets;
(i) OLB has designed,
implemented and maintained disclosure controls and procedures
(within the meaning of Rules 13a-15(e) and 15d-15(e) of the
Exchange Act) to ensure that material information relating to the
OLB Companies is made known to the management of OLB by others
within those entities as appropriate to allow timely decisions
regarding required disclosure and to make the certifications
required by the Exchange Act with respect to the OLB Reports;
and
(j) Since January 1,
2013, (x) no OLB Company nor, to the Knowledge of OLB, any
director, officer, employee, auditor, accountant or other
Representative of any OLB Company, has received or otherwise had or
obtained knowledge of any material complaint, allegation, assertion
or claim, whether written or oral, regarding its accounting or
auditing practices, procedures, methodologies or methods or its
internal accounting controls, including any material complaint,
allegation, assertion or claim that it has engaged in questionable
accounting or auditing practices, and (y) no attorney representing
any OLB Company, whether or not employed by it, has reported
evidence of a material violation of Securities Laws, breach of
fiduciary duty or similar violation by it or any of officers,
directors, employees or agents to its board of directors or any
committee thereof or to any director or officer.
Section
4.12 Labor
Matters.
There are no labor
or collective bargaining agreements to which any of the OLB
Companies is a party. There is no union organizing effort pending
or, to the Knowledge of OLB, threatened, against any of the OLB
Companies. There is no labor strike, labor dispute (other than
routine employee grievances that are not related to union
employees), work slowdown, stoppage or lockout pending or, to the
Knowledge of OLB, threatened, against any of the OLB Companies.
There are no organizational efforts with respect to the formation
of a collective bargaining unit presently being made or, to the
Knowledge of OLB, threatened, involving employees of any of the OLB
Companies. No arbitration or proceeding asserting that any of the
OLB Companies has committed an unfair labor practice (within the
meaning of the National Labor Relations Act of 1935) or seeking to
compel any of the OLB Companies to bargain with any labor
organization as to wages or conditions of employment is pending or,
to the Knowledge of OLB, threatened, with respect to any of the OLB
Companies before the National Labor Relations Board, the Equal
Employment Opportunity Commission or any other Regulatory Authority
(other than routine employee grievances that are not related to
union employees). Each of the OLB Companies is in compliance in all
material respects with all applicable Laws respecting employment
and employment practices, terms and conditions of employment and
wages and hours, and is not engaged in any unfair labor practice.
None of the OLB Companies has made any commitments to others
inconsistent with or in derogation of any of the foregoing. Except
as described in OLB
Disclosure Schedule 4.12, there are no pending or, to the
Knowledge of OLB, threatened, claims or suits against any of the
OLB Companies under any applicable labor or employment Law or
brought or made by a current or former employee or applicant for
employment.
(a) OLB has set forth
in OLB Disclosure Schedule
4.13(a) a complete and accurate list of the OLB Benefit
Plans and made available to DCB a copy of all OLB Benefit
Plans.
(b) The OLB Companies
have paid in full any insurance premiums due to the PBGC with
respect to any defined benefit pension plans for the six years
prior to, and through, the Effective Date. Except as disclosed in
OLB Disclosure Schedule
4.13(b), no pension plan (within the meaning of ERISA
Section 3(2)) maintained or contributed to by the OLB
Companies has been terminated or is under notice from the PBGC of
any threat of termination under the procedures of the PBGC. To the
Knowledge of OLB, no circumstance has occurred for which any
reportable event under ERISA Section 4043(b) has been or would
be required that has not been reported or with respect to which the
notice requirement has not been waived. Except as set forth on
OLB Disclosure Schedule
4.13(b), no OLB Benefit Plan is subject to IRC Section 412
or Title IV of ERISA, and as of the Effective Date, to the
Knowledge of OLB, no condition exists that will result in any
liability to the PBGC or on account of the failure to comply with
any such provisions in connection with any such OLB Benefit
Plan.
(c) To the Knowledge of
OLB, none of the OLB Companies has ever contributed to or otherwise
incurred any liability with respect to a multi-employer plan
(within the meaning of ERISA Section 3(37)).
(d) Each OLB Benefit
Plan complies in all material respects with the applicable
requirements of ERISA, the IRC, the Patient Protection and
Affordable Care Act of 2010, and any other applicable Laws
governing the OLB Benefit Plan, and each OLB Benefit Plan has at
all times been administered substantially in all material respects
in accordance with all requirements of applicable law. To the
Knowledge of OLB, each of the pension plans adopted by the OLB
Companies that is intended to be qualified under
Section 401(a) of the IRC and, to the Knowledge of OLB, its
trust, is exempt from federal income tax under IRC Section 501(a)
has received, or is entitled to rely upon, a favorable
determination letter (or opinion letter for a prototype plan) from
the IRS, and to the Knowledge of OLB there are no circumstances
that will or could result in revocation of, or inability to
continue to rely upon, any such favorable determination letter or
opinion letter. Without limiting the foregoing, to the Knowledge of
OLB, the following are true:
(i) Each OLB Benefit
Plan that is a defined benefit pension plan subject to IRC Section
412 or Title IV of ERISA as of the most recent actuarial valuation
has an AFTAP determined under IRC Section 430 and 436 that exceeds
the AFTAP level that would impose any funding-based limit on such
plan under IRC Section 436;
(ii) Each OLB Benefit Plan that is a defined
contribution pension plan that is intended to be qualified
under IRC Section 401(a) has had all
contributions made to the plan trust in accordance with the terms
of the plan on a timely basis under the IRC and
ERISA;
(iii) With respect to
each OLB Benefit Plan, to the Knowledge of OLB there is no
occurrence or contract that would constitute any “prohibited
transaction” within the meaning of Section 4975(c) of
the IRC or Section 406 of ERISA, which transaction is not
exempt under applicable Law, including Section 4975(d) of the
IRC or Section 408 of ERISA;
(iv) Except as disclosed
in OLB Disclosure Schedule
4.13(d)(iv), no OLB Benefit Plan is an Employee Stock
Ownership Plan as defined in Section 4975(e)(7) of the
IRC;
(v) No OLB Benefit Plan
is a Qualified Foreign Plan as the term is defined in
Section 404A of the IRC and no OLB Benefit Plan or any related
trust assets or agreements are subject to the laws of any
jurisdiction other than the United States of America or any state,
county or municipality of the United States;
(vi) None of the welfare
plans adopted by the OLB Companies is a Voluntary Employees’
Beneficiary Association as defined in Section 501(c)(9) of the
IRC;
(vii) All of the welfare
plans adopted by the OLB Companies and their related trusts comply
in all material respects with and have been administered in
substantial compliance with (A) Section 4980B of the IRC and
Sections 601 through 609 of ERISA and all U.S. Department of the
Treasury and U.S. Department of Labor regulations issued
thereunder, respectively, (B) the Health Insurance Portability and
Accountability Act of 1996, (C) the applicable provisions of the
Patient Protection and Affordable Care Act of 2010, and (D) the
U.S. Department of Labor regulations issued with respect to such
welfare benefit plans; and
(viii) With respect to
each OLB Benefit Plan, OLB or any OLB ERISA Affiliate has the
authority to amend or terminate such OLB Benefit Plan at any time,
subject to the applicable requirements of ERISA and the IRC and the
provisions of the OLB Benefit Plan.
(e) There is no
existing or, to the Knowledge of OLB, contemplated, audit of any
OLB Benefit Plan by the IRS, the U.S. Department of Labor, the
PBGC, and Regulatory Authority or any other governmental authority.
In addition, there are no pending or, to the Knowledge of OLB,
threatened material claims by, on behalf of or with respect to any
OLB Benefit Plan, or by or on behalf of any individual participant
or beneficiary of any OLB Benefit Plan, alleging any violation of
ERISA or any other applicable Laws, or claiming benefits (other
than claims for benefits made in the ordinary course of business),
nor, to the Knowledge of OLB, is there any basis likely to enable
such claim to prevail.
(f) Except as disclosed
on OLB Disclosure Schedule
4.13(f), (i) no payment contemplated or required by or under
any OLB Benefit Plan and employment-related agreement would in the
aggregate constitute excess parachute payments as defined in
Section 280G of the IRC (without regard to subsection (b)(4)
thereof), (ii) no OLB Benefit Plan provides for the gross-up or
reimbursement of Taxes under Sections 280G, 4999 or 409A of the
IRC, and (iii) neither the execution and delivery of this Agreement
nor the consummation of Contemplated Transactions will (either
alone or in conjunction with any other event) result in, cause the
vesting, exercisability or delivery of, or increase the amount or
value of, any payment, right or other benefit to any current or
former employee, officer, director or other service provider of any
of the OLB Companies.
(g) None of the OLB
Companies is a record-keeper, administrator, custodian, fiduciary,
trustee or otherwise acts on behalf of any plan, program, or
arrangement subject to ERISA (other than any OLB Benefit Plan).
Each OLB Benefit Plan (including employment agreements or other
compensation arrangements) that constitutes a nonqualified deferred
compensation plan within the meaning of Section 409A of the IRC has
been written, executed and operated in compliance with Section 409A
of the IRC and the regulations thereunder or an applicable
exemption therefrom.
Section
4.14
Brokers and
Finders.
Other than
Ambassador Financial Group, Inc., none of the OLB Companies and, to
the Knowledge of OLB, no officer, director, employee, independent
contractor or agent of any OLB Company on its behalf, has employed
any broker, finder, investment banker or financial advisor, or
incurred any liability for any fees or commissions to any broker,
finder, investment banker or financial advisor, in connection with
the Contemplated Transactions.
Section
4.15
Real Property and
Leases.
(a) No deed or lease
with respect to any real property owned, leased or operated by the
OLB Companies, including but not limited to all REO (the
“OLB Real
Property”) contains any restrictive covenant that
materially restricts the use, transferability or value of such OLB
Real Property. Each lease with respect to any OLB Real Property is
a legal, valid and binding obligation of the parties thereto
enforceable in accordance with its terms (except as may be limited
by bankruptcy, insolvency, moratorium, reorganization or similar
laws affecting the rights of creditors generally and the
availability of equitable remedies), and is in full force and
effect. There are no existing defaults by the OLB Companies or, to
the Knowledge of OLB, the other party, under any lease with respect
to any OLB Real Property and, to the Knowledge of OLB, there are no
allegations or assertions of such defaults by any party under any
lease with respect to any OLB Real Property or any events that,
with notice or lapse of time or the happening or occurrence of any
other event, would constitute a default under any lease with
respect to any OLB Real Property, except where the existence of
such defaults, individually or in the aggregate, has not had, and
is not reasonably likely to have, a Material Adverse
Effect.
(b) To the Knowledge of
OLB, none of the buildings and structures located on any OLB Real
Property, nor any improvements or appurtenances thereto or
equipment therein, nor the operation or maintenance thereof,
violates in any material manner any land use Laws or restrictive
covenants, except for those violations and encroachments that in
the aggregate could not reasonably be expected to have a Material
Adverse Effect. No condemnation proceeding is pending or, to the
Knowledge of OLB, threatened, that would preclude or materially
impair the use of any OLB Real Property in the manner in which it
is currently being used.
(c) The OLB Companies
have a valid and enforceable leasehold interest in or, to the
Knowledge of OLB, based on title insurance owned by it, good and
marketable title to, all OLB Real Property and all improvements
thereon, subject to no Liens of any kind except (i) as noted in the
OLB Financials, (ii) statutory Liens not yet delinquent or that are
being contested in good faith, (iii) minor defects and
irregularities in title and encumbrances that do not materially
impair the use thereof for the purposes for which they are held,
(iv) mechanics liens not yet delinquent or that are being contested
in good faith, and (v) those assets and properties disposed of for
fair market value in the ordinary course of business since the date
of the OLB Financials. To the Knowledge of OLB, all OLB Real
Property used in the business of the OLB Companies is free from
defects that could materially interfere with the current or
intended future use of such facilities.
Section
4.16
Environmental
Matters.
With respect to OLB
and each OLB Subsidiary:
(a) Neither the
conduct nor operation of its business nor any condition of any
property currently or previously owned or operated by it (including
REO) results or resulted in a violation of any Environmental Laws
that is reasonably likely to impose a material liability (including
a material remediation obligation) upon OLB or any OLB Subsidiary.
To the Knowledge of OLB, no condition has existed or event has
occurred with respect to any of them or any such property that,
with notice or the passage of time, or both, is reasonably likely
to result in any material liability to OLB or any OLB Subsidiary by
reason of any Environmental Laws. Neither OLB nor any OLB
Subsidiary during the past five years has received any written
notice from any Person or Regulatory Authority that OLB or any OLB
Subsidiary or the operation or condition of any property ever owned
or operated (including Participation Facilities) by any of them are
currently in violation of or otherwise are alleged to have
liability under any Environmental Laws or relating to Hazardous
Materials (including, but not limited to, responsibility (or
potential responsibility) for the cleanup or other remediation of
any Hazardous Materials at, on, beneath, or originating from any
such property) for which a material liability is reasonably likely
to be imposed upon OLB or any OLB Subsidiary;
(b) There is no
suit, action, executive or administrative order, directive or
proceeding pending or, to the Knowledge of OLB threatened, before
any court, governmental agency or other forum against OLB or any
OLB Subsidiary (i) for alleged noncompliance (including by any
predecessor) with, or liability under, any Environmental Law or
(ii) relating to the presence of, or release (defined herein) into
the environment of, any Hazardous Materials on any OLB Real
Property;
(c) To the Knowledge of
OLB, (i) there are no underground storage tanks on, in or under any
OLB Real Properties, and (ii) no underground storage tanks have
been closed or removed from any OLB Real Properties except in
compliance with Environmental Laws in all material respects;
and
(d) To the Knowledge of
OLB, the OLB Real Properties (including, without limitation, soil,
groundwater or surface water on, or under the properties, and
buildings thereon) are not contaminated with and do not otherwise
contain any Hazardous Materials other than as permitted under
applicable Environmental Laws.
Section
4.17
Information to be
Supplied.
(a) The information
supplied by OLB for inclusion in the Registration Statement
(including the Prospectus/Proxy Statement), at the time the
Registration Statement is declared effective pursuant to the
Securities Act, and as of the date the Prospectus/Proxy Statement
is mailed to the holders of DCB Common Stock, and up to and
including the date of the DCB Common Stockholders’ Meeting,
(i) will not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances in which
they were made, not misleading, and (ii) will comply in all
material respects with the provisions of the Exchange
Act.
(b) The information
supplied by OLB for inclusion in the Applications will, at the time
each such document is filed with any Regulatory Authority and up to
and including the dates of any required regulatory approvals or
consents, as such Applications may be amended by subsequent
filings, be accurate in all material respects.
(c) No document or
certificate delivered to DCB by or for OLB pursuant to a
requirement of this Agreement contains any untrue statement of a
material fact or omits to state a material fact necessary to make
the statement contained in such document or certificate in light of
the circumstances under which it was made not
misleading.
Section
4.18 Related Party
Transactions.
Except as set forth
on OLB Disclosure Schedule
4.18, as is disclosed in the OLB Financials, and/or as
disclosed in the SEC Reports, neither OLB nor any OLB Subsidiary is
a party to any transaction (including any loan or other credit
accommodation but excluding deposits in the ordinary course of
business) with any Affiliate of OLB or any OLB Subsidiary, and all
such transactions were made on substantially the same terms,
including interest rates and collateral, as those prevailing at the
time for comparable transactions with persons who are not related
to or Affiliates of OLB or any OLB Subsidiary.
(a) Except as set forth
on the OLB Disclosure
Schedule 4.19, all Credit Extensions reflected as assets in
the OLB Financials arose out of bona fide arm’s-length
transactions, were made for good and valuable consideration in the
ordinary course of business, and are evidenced by notes, agreements
or other evidences of indebtedness that are true, genuine and
correct and are what they purport to be, and to the extent secured,
are secured by valid Liens that are legal, valid and binding
obligations of the maker thereof, enforceable in accordance with
the respective terms thereof, except as such enforcement may be
limited by (i) bankruptcy, insolvency, reorganization or other
similar Laws or equitable principles affecting the enforcement of
creditors’ rights that have been perfected or (ii) the pledge
of any Credit Extension to the FHLB as collateral to secure the
performance by the OLB Companies of all obligations owed thereto.
All Credit Extensions reflected as assets in the OLB Financials
were made in accordance in all material respects with sound banking
practices, and, to the Knowledge of OLB, are not subject to any
defenses, setoffs or counterclaims, including without limitation
any such as are afforded by usury or truth in lending Laws, except
as may be provided by bankruptcy, insolvency or similar Laws or by
general principles of equity.
(b) To the Knowledge of
OLB, neither the terms of any Credit Extension by any of the OLB
Companies, any of the documentation for any such Credit Extension,
the manner in which any such Credit Extension has been administered
and serviced, nor the practices of approving or rejecting
applications for a Credit Extension by the OLB Companies, violate
in any material respect any Law applicable thereto, including,
without limitation, the Truth In Lending Act and the CFPB’s
Regulation Z, the CRA, the Equal Credit Opportunity Act, and any
Laws relating to consumer protection, installment sales and
usury.
(c) There are no
executive officer or director (as such terms are defined in the
FRB’s Regulation O) Credit Extensions by any of the OLB
Companies on which the borrower is paying a rate other than that
reflected in the note or other relevant credit or security
agreement or on which the borrower is paying a rate that was not in
compliance with Regulation O and all such Credit Extensions are and
were originated in compliance in all material respects with all
applicable laws.
(d) To the Knowledge of
OLB, no shares of OLB Common Stock were purchased with the proceeds
of a loan made by any of the OLB Companies.
Section
4.20
Allowance for Loan
Losses.
The allowance for
loan losses reflected in reports by the OLB Companies to each
Regulatory Authority has been and will be established in compliance
with the requirements of all regulatory criteria, and the allowance
for loan losses shown in the OLB Financials has been and will be
established and maintained in accordance with GAAP and applicable
Law and in a manner consistent with Old Line’s internal
policies. The allowance for loan losses reflected in such reports
and the allowance for loan losses shown in the OLB Financials, in
the opinion of management, was or will be adequate as of the dates
thereof. The REO and in-substance foreclosures included in any of
Old Line’s non-performing assets are carried net of reserves
at the lower of cost or market value based on current independent
appraisals or current management appraisals. OLB has disclosed to
DCB on OLB Disclosure
Schedule 4.20 all Credit Extensions (including
participations) by and all interest-bearing assets of the OLB
Companies (a) that are in an amount of at least $1 million and have
been accelerated during the past 12 months, (b) that are in an
amount of at least $1 million and have been terminated during the
past 12 months by reason of a default or adverse development in the
condition of the borrower or other events or circumstances
affecting the credit of the borrower, and (c) pursuant to which a
borrower, customer or other party has notified any of the OLB
Companies during the past 12 months of, or has asserted against any
of the OLB Companies, in each case in writing, any “lender
liability” or similar claim, and, to the Knowledge of OLB,
each borrower, customer or other party that has given any of the
OLB Companies any oral notification of, or orally asserted to or
against any of the OLB Companies, any such claim, and OLB shall
provide an updated OLB
Disclosure Schedule 4.20 promptly to DCB after the end of
each month after the date hereof and on the Business Day prior to
the Closing Date.
Section
4.21
Community
Reinvestment Act.
Old Line is the
only OLB Company that is subject to the CRA. To the Knowledge of
OLB, OLB is in compliance in all material respects with the CRA and
all regulations promulgated thereunder. OLB has supplied DCB with a
copy of Old Line’s current CRA Statement, all letters and
written comments received by Old Line since July 8, 2013 pertaining
thereto and any responses by Old Line to such comments. Old Line
has a rating of “satisfactory” or better as of its most
recent CRA compliance examination and OLB and Old Line have
received no communication from any Regulatory Authority that would
lead OLB to believe that Old Line will not receive a rating of
“satisfactory” or better pursuant to its next CRA
compliance examination or that any Regulatory Authority would seek
to restrain, delay or prohibit any of the Contemplated Transactions
as a result of any act or omission of Old Line under the
CRA.
Section
4.22
Securities
Activities of Employees.
To the Knowledge of
OLB, the officers, employees and agents of the OLB Companies are
now, and at all times in the past have been, in compliance with all
applicable Laws that relate to securities activities conducted by
such officers, employees and agents, including Laws relating to
licenses and permits.
Section
4.23
Books and
Records.
(a) The minute books
and stock ledgers of the OLB Companies that have been made
available to DCB, its Representatives or its Affiliates constitute
all of the minute books and stock ledgers of the OLB Companies and
as of their dates contain a materially complete and accurate record
of all actions of their respective stockholders and boards of
directors (and any committees thereof) and have been maintained in
accordance with applicable Law. All personnel files, reports,
feasibility studies, environmental assessments and reports,
strategic planning documents, financial forecasts, deeds, leases,
lease files, land files, accounting and tax records and all other
records that relate to the business and properties of the OLB
Companies that have been requested by DCB have been made available
to DCB, its Representatives or its Affiliates, and are located at
the offices of the OLB Companies at 1525 Pointer Ridge Place,
Bowie, Maryland 20716.
(b) Each of the OLB
Companies makes and keeps books, records and accounts that, in
reasonable detail and in all material respects, accurately and
fairly reflect its transactions in and dispositions of its assets
and securities, and all such books, records and accounts have been
maintained in accordance with applicable Law and accounting
requirements. Each of the OLB Companies maintains a system of
internal control over financial reporting (within the meaning of
Rules 13a-15(f) and 15d-15(f) of the Exchange Act) sufficient to
provide reasonable assurance that: (i) transactions are
executed in accordance with management’s general or specific
authorizations; (ii) transactions are recorded as necessary
(A) to permit the preparation of financial statements and
reports filed with any Regulatory Authority in conformity with GAAP
consistently applied and any other criteria applicable to such
statements, and (B) to maintain accountability for assets and
liabilities; (iii) access to its assets and incurrence of
liabilities is permitted only in accordance with management’s
general or specific authorizations; (iv) the recorded
accountability for assets and liabilities is compared with existing
assets and liabilities at reasonable intervals and appropriate
action is taken with respect to any differences; and (v) extensions
of credit and other receivables are recorded accurately, and proper
and adequate procedures are implemented to effect the collection
thereof on a current and timely basis. None of the systems,
controls, data or information of the OLB Companies are recorded,
stored, maintained, operated or otherwise wholly or partly
dependent on or held by any means (including any electronic,
mechanical or photographic process, whether computerized or not)
that (including all means of access thereto and therefrom) are not
under the exclusive ownership and control of the OLB Companies or
their accountants, except as would not reasonably be expected to
have a Material Adverse Effect. Except as disclosed on OLB Disclosure Schedule 4.23(b)
or in the SEC Reports, to the Knowledge of OLB there are no
significant deficiencies or material weaknesses in the design or
operation of such internal control over financial reporting that
are reasonably likely to adversely affect in any material respect
OLB’s ability to record, process, summarize and report
financial information. To the Knowledge of OLB, there has occurred
no fraud, whether or not material, that involves management or
other employees who have a significant role in OLB’s internal
control over financial reporting.
Section
4.24
Investment
Securities.
Each of the OLB
Companies has good and marketable title to all securities that it
owns. None of the investment securities reflected in the OLB
Financials under the headings “investment securities
available for sale” and “investment securities held to
maturity” and, except as described in OLB Disclosure Schedule 4.24,
none of the investment securities acquired by the OLB Companies
since September 30, 2016, are subject to any restrictions, whether
contractual or statutory, that materially impair such OLB
Company’s ability to freely dispose of such investment
securities at any time, and such OLB Company was permitted by
applicable Law to acquire such investment securities at the time
they were acquired.
Section
4.25
Reorganization.
As of the date
hereof, OLB does not have any reason to believe that the Merger
will fail to qualify as a tax-free reorganization within the
meaning of Section 368(a) of the IRC. None of the OLB Companies
will take any action that will cause, cause any action to be taken
that will cause, or fail to take any action or fail to cause any
action to be taken if such failure to act will have the effect of
causing, the Merger not to qualify as a tax-free reorganization
within the meaning of Section 368(a) of the IRC, nor have any of
the OLB Companies taken, caused, agreed to take or cause, or failed
to take or cause any such action.
Section
4.26
Fairness
Opinion.
OLB’s board
of directors has received an opinion (which, if initially rendered
verbally, has been or will be confirmed by a written opinion, dated
no later than the date of this Agreement) from Ambassador Financial
Group, Inc. to the effect that, as of the date thereof, and subject
to the terms, conditions and qualifications set forth therein, the
consideration payable by OLB to stockholders of DCB pursuant to the
terms of this Agreement are fair, from a financial point of view,
to the stockholders of OLB. Such opinion has not been amended or
rescinded as of the date of this Agreement.
Section
4.27
Materials Provided
to Stockholders.
All proxy materials
used in connection with the meetings of OLB’s stockholders
held in 2014, 2015 and 2016, along with any other form of
correspondence between OLB and its stockholders during that time
period, either have been filed with the SEC and are publicly
available to DCB via the SEC’s Electronic Data Gathering and
Retrieval system or have been provided to DCB.
Section
4.28
Absence of
Undisclosed Liabilities.
None of the OLB
Companies has any obligation or liability that is material to its
financial condition or operations or that, when combined with all
similar obligations or liabilities, would be material to its
financial condition or operations except (a) as disclosed in the
OLB Financials delivered or made available to DCB prior to the date
of this Agreement, or (b) as contemplated under this
Agreement. Except as disclosed in OLB Disclosure Schedule 4.28,
since September 30, 2016, none of the OLB Companies has incurred or
paid any obligation or liability that would be material to its
financial condition or operations of, except for obligations paid
in connection with transactions made by them in the ordinary course
of its business consistent with past practice and applicable
Law.
Section
4.29
Anti-Money
Laundering, OFAC and Information Security.
(a) To the Knowledge of
OLB there do not exist any facts or circumstances that would cause
any of the OLB Companies: (i) to be deemed to be operating in
violation in any material respect of the Bank Secrecy Act, the USA
PATRIOT Act, any order issued with respect to anti-money laundering
by the U.S. Department of the Treasury’s Financial Crimes
Enforcement Network or Office of Foreign Assets Control, or any
other applicable anti-money laundering Law, as well as the
provisions of the Bank Secrecy Act/anti-money laundering program
adopted by the OLB Companies; or (ii) to be deemed not to be in
satisfactory compliance in any material respect with the applicable
privacy of customer information requirements contained in any
federal and state privacy Laws, including without limitation, in
Title V of the Gramm-Leach-Bliley Act of 1999 and the regulations
promulgated thereunder, as well as the provisions of the
information security program adopted by the OLB Companies. To the
Knowledge of OLB, no non-public customer information has been
disclosed to or accessed by an unauthorized third party in a manner
that would cause any of the OLB Companies to undertake any remedial
action. The board of directors or other governing body of each OLB
Company that is subject to Section 326 of the USA PATRIOT Act and
the regulations thereunder has adopted, and each such OLB Company
has implemented, a Bank Secrecy Act/anti-money laundering program
that contains adequate and appropriate customer identification
verification procedures that comply with Section 326 of the USA
PATRIOT Act and the regulations thereunder and such Bank Secrecy
Act/anti-money laundering program meets the requirements in all
material respects of Section 352 of the USA PATRIOT Act and the
regulations thereunder, and it has not received written notice from
any Regulatory Authority that such program (x) does not contain
adequate and appropriate customer identification verification
procedures, or (y) has been deemed ineffective. Each of the OLB
Companies has complied in all material respects with any
requirements to file reports and other necessary documents as
required by the USA PATRIOT Act and the regulations
thereunder.
(b) OLB Disclosure Schedule 4.29(b)
describes any event, circumstance or other occurrence, and the
remedial steps taken by any of the OLB Companies with respect
thereto, since January 1, 2011, that constituted either (i) a
“breach of the security of a system,” as such phrase is
defined in Section 14-3504(a) of the Commercial Law Article with
respect to personal information maintained by any of the OLB
Companies, without regard to the application of Section 14-3507(b)
of the Commercial Law Article, or (ii) any other data breach with
respect to, or other unauthorized access to, the electronic
information and records of any of the OLB Companies, including,
without limitation, communications, regulatory correspondence and
reports, documents and data, information relating to products and
services, activities, strategies and plans, the computers, computer
software, other information technology equipment, information
technology passwords and other credentials, and all associated
documents and records owned or leased by the OLB Companies, other
financial data, and identities of and information regarding sales,
customers, prospects, vendors, suppliers and personnel, including,
without limitation, passwords and other information technology
credentials.
Section
4.30
Intellectual
Property.
Each of the OLB
Companies owns or possesses valid, binding and assignable licenses
and other rights to use without payment all trademarks, trade
dress, trade names, service marks, domain names, patents,
technology, inventions, trade secrets, know-how and copyrights and
works of authorship owned by or licensed to each of the OLB
Companies for use in its business, and all licenses or other
agreements relating thereto and all agreements relating to third
party intellectual property that it is licensed or authorized to
use in its business, including without limitation any software
licenses other than “shrink wrap” or force placed
software licenses (collectively, the “OLB Intellectual
Property”), that is used in the conduct of its
existing businesses free and clear of all Liens and any claims of
ownership by current or former employees or contractors, other than
royalties or payments with respect to off-the-shelf software. With
respect to each item of OLB Intellectual Property that any of the
OLB Companies is licensed or authorized to use, the license,
sublicense or agreement covering such item is legal, valid,
binding, enforceable and in full force and effect. To the Knowledge
of OLB, none of the OLB Companies is infringing, diluting,
misappropriating or violating the intellectual property of any
other Person, and none of the OLB Companies has received any
communications alleging that it has infringed, diluted,
misappropriated or violated any such intellectual property. None of
the OLB Companies has sent any communications alleging that any
Person has infringed, diluted, misappropriated or violated any OLB
Intellectual Property and, to the Knowledge of OLB, no Person is
infringing, diluting, misappropriating or violating any of the OLB
Intellectual Property. Each of the OLB Companies has taken all
commercially reasonable actions to protect and maintain
(a) all material OLB Intellectual Property and (b) the
security and integrity of its software, databases, networks,
systems, equipment and hardware and to protect the same against
unauthorized use, modification or access thereto, or the
introduction of any viruses or other unauthorized or damaging or
corrupting elements. To the Knowledge of OLB, the computers,
computer software, other information technology equipment,
information technology passwords and other credentials, and all
associated documents and records owned or leased by the OLB
Companies (the “OLB
IT Assets”) operate and perform in all material
respects in accordance with their documentation and functional
specifications as required by them in connection with their
business, and none of the OLB IT Assets has materially
malfunctioned or failed to meet its requirements within the past
two years except for such malfunctions or failures that have been
remediated. To the Knowledge of OLB, no Person has gained
unauthorized access to the OLB IT Assets. The OLB Companies have
implemented commercially reasonable backup and disaster recovery
technology consistent with industry practices for institutions of
comparable size and complexity.
The schedules
delivered by OLB pursuant to this Article IV and elsewhere in this
Agreement, which have been delivered concurrently with the
execution and delivery of this Agreement, are true and correct in
all material respects and contain no untrue statements of material
fact or omit any material fact necessary to make the statements
therein, in light of the circumstances under which they were made,
not misleading.
OLB and the OLB
Subsidiaries are engaged in all material respects only in the
business described in the SEC Reports, and the SEC Reports contain
a complete and accurate description in all material respects of the
business of OLB and the OLB Subsidiaries, taken as a
whole.
ARTICLE
V.
COVENANTS OF THE PARTIES
Section
5.1
Conduct of
DCB’s Business.
Through the
Effective Time, DCB shall, and shall cause each DCB Subsidiary to,
in all material respects, conduct its businesses and engage in
transactions only in the usual, regular and ordinary course and
consistent with past practice, except as otherwise required or
contemplated by this Agreement or with the prior written consent of
OLB. DCB shall, and shall cause each DCB Subsidiary to, use its
commercially reasonable good faith efforts to preserve its business
organization intact, maintain good relationships with employees and
preserve the good will of its customers and others with whom
business relationships exist, provided that, other than in the case
of a Permitted Employee that DCB determines, in good faith, is
necessary to comply with the foregoing requirements, job vacancies
that occur prior to the Effective Date through attrition shall not
be filled and new officers and employees shall not be hired without
the prior written consent of OLB, which shall not be unreasonably
conditioned, withheld or delayed. Through the Effective Time,
without the consent in writing of OLB (such consent not to be
unreasonably withheld, conditioned or delayed), as permitted by
this Agreement or except as may be required, in writing, by any
Regulatory Authority (in which case DCB shall immediately provide
OLB with a copy of such written document), DCB shall not, and shall
not permit any DCB Subsidiary to:
(a) Change any
provision of the DCB Governing Documents;
(b) Change the number
of authorized or issued shares of its capital stock; repurchase,
redeem or otherwise acquire any shares of its capital stock; issue
or grant any call, commitment, subscription, Right or agreement of
any character relating to its authorized or issued capital stock or
any securities convertible into shares of capital stock; or
declare, set aside or pay any dividends (including any special
dividends) or other distribution in respect of capital stock except
for cash dividends declared and paid in the normal course of
business consistent with past practices in an amount not to exceed
$0.02 per share quarterly;
(c) Except as set forth
in DCB Disclosure Schedule
5.1(c) or for retention payments as OLB and DCB may mutually
agree upon for DCB or Damascus employees who remain employed
through the Effective Time, grant any severance, retention or
termination pay, other than pursuant to policies or agreements of
DCB or any DCB Subsidiary in effect on the date hereof for
employees, or enter into or amend any employment, consulting,
severance, compensation, “change-in-control” or
termination contract or arrangement with, any officer, director,
employee, independent contractor, agent or other Person associated
with DCB or any DCB Subsidiary;
(d) Grant job
promotions or increase the rate of compensation of, or pay any
bonus to, any director, officer, employee, independent contractor,
agent or other Person associated with DCB or any DCB Subsidiary,
except, with respect to a Permitted Employee, (i) to the extent
such promotion or increase is made by DCB or a DCB Subsidiary in
the normal course of its business and consistent with its past
practices, or (ii) routine periodic pay increases, selective merit
pay increases and pay-raises in the normal course of business and
consistent with past practices, provided, however, that such
aggregate increases in the rate of compensation shall not be in
excess of 3%, and such aggregate bonuses shall not be in excess of
5% of the aggregate salaries, for all Permitted
Employees;
(e) Except in the
ordinary course consistent with past practice, sell, lease, assign,
transfer, mortgage, encumber or otherwise dispose of or discontinue
any of its assets (excluding loans, which are governed by Section
5.1(w), and securities, which are governed by Section 5.1(q)),
deposits, business or properties or cancel or compromise any debt
or claim, or waive or release any right or claim, except in the
ordinary course of business consistent with past practice for full
and fair consideration actually received; or modify in any material
manner the manner in which it has heretofore conducted its business
or enter into any new line of business;
(f) Except for FHLB
advances with a maturity of six (6) months or less and deposits
taken in the ordinary course of business consistent with past
practice, incur any indebtedness for borrowed money; or incur,
assume or become subject to, whether directly or by way of any
guarantee or otherwise, any obligations or liabilities (absolute,
accrued, contingent or otherwise) of any other Person, other than
the issuance of letters of credit in the ordinary course of
business and in accordance with the restrictions set forth in
Sections 5.1(y) and (z);
(g) Sell or otherwise
dispose of any DCB Real Property except REO in a reasonably
acceptable commercial manner in the ordinary course of
business;
(h) Take any action
that would result in any of the conditions set forth in Article VI
hereof not being satisfied;
(i) Change any method,
practice, or principle of accounting, except as may be required
from time to time by Law or changes in GAAP or by any Regulatory
Authority;
(j) Waive, release,
grant or transfer any rights of material value or modify or change
in any material respect any existing material agreement to which it
is a party;
(k) Implement any
pension, retirement, profit-sharing, bonus, welfare or similar plan
or arrangement that was not in effect on the date of this
Agreement, or amend any existing pension, retirement,
profit-sharing, bonus, welfare or similar plan or arrangement
except to the extent (i) required by Law or (ii) required by its
terms as a result of this Agreement or in connection with the
Contemplated Transactions; provided, however, that amendments to a DCB Benefit
Plan to modify any of the investment options available thereunder
shall not constitute a breach of this Section 5.1(k);
(l) Implement or adopt
any material change in its: (i) guidelines and policies in
existence on the date hereof with regard to underwriting and making
extensions of credit, the establishment of reserves with respect to
possible losses thereon or the charge-off of losses incurred
thereon; (ii) investment policies and practices; or (iii) other
material banking policies, or otherwise fail to conduct its banking
activities in the ordinary course of business consistent with past
practice except as may be required by changes in Law, GAAP, or the
direction of a Regulatory Authority;
(m) Change deposit or
loan rates, or otherwise fail to conduct its lending and deposit
activities in the ordinary course of business consistent with past
practice;
(n) Enter into, modify,
amend or renew any agreement under which it is obligated to pay
more than $50,000 and that is not terminable by it with 60
days’ notice or less without penalty, payment or other
conditions (other than the condition of notice), or enter into,
renew, extend or modify any other transaction with any of its
Affiliates, other than deposit and loan transactions in the
ordinary course of business and that are in compliance with the
requirements of Law;
(o) Except as required
by Law or at the direction of a Regulatory Authority: (i) implement
or adopt any material change in its interest rate and other risk
management policies, procedures or practices; or (ii) fail to
follow its existing policies or practices with respect to managing
its exposure to interest rate and other risk;
(p) Take any action
that would give rise to a right of payment to any individual under
any employment agreement except for contractually required
compensation;
(q) Purchase or sell
any securities other than in the normal course of business
consistent with past practices other than pursuant to redemptions
by the issuer thereof;
(r) Except in the
ordinary course of business consistent with past practice and
involving an amount not in excess of $50,000 (exclusive of any
amounts paid directly or reimbursed to DCB or any DCB Subsidiary
under any insurance policy maintained by DCB or any DCB
Subsidiary), settle any material action, suit, claim, arbitration,
investigation, inquiry, grievance or other proceeding (or basis
therefor) pending or, to the Knowledge of DCB, threatened, against
or affecting DCB, any DCB Subsidiary or any of their respective
properties or assets. Notwithstanding the foregoing, no settlement
shall be made if it involves a precedent for other similar claims
that, in the aggregate, could reasonably be determined to be
material to DCB and the DCB Subsidiaries, taken as a
whole;
(s) Foreclose upon or
otherwise take title to or possession or control of any real
property without first obtaining a Phase I environmental report
thereon; provided, however, that neither DCB nor any DCB Subsidiary
shall be required to obtain such a report: (i) where, after using
commercially reasonable efforts, it is unable to gain access to the
property, provided that DCB has provided notice to OLB that it has
been unable to gain such access and as a result intends to
foreclose without obtaining a Phase I environmental report thereon;
or (ii) with respect to any one- to four-family, non-agricultural
residential property of five acres or less to be foreclosed upon
unless it has reason to believe that such property contains
hazardous substances known or reasonably suspected to be in
violation of, or require remediation under, Environmental
Laws;
(t) Except as permitted
by Section 5.7(a)(ii), merge or consolidate with any other Entity;
sell or lease all or any substantial portion of its assets or
business; make any acquisition of all or any substantial portion of
the business or assets of any other Person other than in connection
with the collection of any loan or credit arrangement; enter into a
purchase and assumption transaction with respect to deposits and
liabilities; permit the revocation or surrender of its certificate
of authority to maintain, file an application for the opening,
closing or relocation of, or open, close or relocate, any branch or
automated banking facility;
(u) Make any new
capital expenditure, individually or in the aggregate, of $50,000
or more;
(v) Sell or acquire any
loans (excluding originations) or loan participations, except in
the ordinary course of business consistent with past practice (but
in the case of a sale, after giving OLB or Old Line a first right
of refusal to acquire such loan or participation), or sell or
acquire any servicing rights; provided, however, that in no
event shall any of the DCB Companies sell or acquire any loan or
loan participation having a principal balance in excess of
$500,000;
(w) Take any action or
knowingly fail to take any action, which action or failure to act
would preclude the Merger from qualifying as a tax-free
reorganization within the meaning of Section 368(a) of the
IRC;
(x) Make any charitable
or similar contributions, except consistent with past practice and
in amounts not to exceed $5,000 individually and $10,000 in the
aggregate;
(y) Except for any
Non-Residential Credit Extension already committed to by DCB or a
DCB Subsidiary on the date of this Agreement and set forth on
DCB Schedule
5.1(y), enter into, grant, approve, modify or extend any
Non-Residential Credit Extension except in the ordinary course of
business consistent with past practice; provided, however, that none of the DCB Companies
may make a Non-Residential Credit Extension (i) in excess of
$2,000,000, or (ii) to an existing customer that increases the
aggregate loan exposure to such customer to more than
$2,000,000.
(z) Except for any
loan, credit facility, line of credit, or letter of credit for an
owner-occupied residence (collectively, a “Residential Credit
Extension”) already committed to by DCB or a DCB
Subsidiary and set forth on DCB Disclosure Schedule 5.1(z),
enter into, grant, approve, modify or extend any Residential Credit
Extension that would result in a credit exposure in excess of
$1,000,000; provided, however, that (i) after March 31, 2017 none
of the DCB Companies may make a Residential Credit Extension in a
principal amount that exceeds FHA jumbo limit in effect at such
time and (ii) all Residential Credit Extensions made between the
date of this Agreement and March 31, 2017 in a principal amount
that exceeds FHA jumbo limit in effect at such time shall be made
in the ordinary course of business and consistent with past
practice;
(aa) Issue any
communication relating to the Contemplated Transactions to
employees (including general communications relating to benefits
and compensation) without prior consultation with OLB and, to the
extent relating to post-Closing employment, benefit or compensation
information, without the prior consent of OLB (which shall not be
unreasonably withheld, conditioned or delayed) or issue any
communication of a general nature to customers without the prior
approval of OLB (which shall not be unreasonably withheld,
conditioned or delayed), except as required by Law. For
clarification, communications in the ordinary course of business
consistent with past practice that do not relate to the
Contemplated Transactions shall not be prohibited pursuant to this
Section 5.1(aa);
(bb) Change deposit or
loan rates other than in the ordinary course of business consistent
with past practice;
(cc) Enter into any
interest rate swap, floor or cap or similar commitment, agreement
or arrangement, except in the ordinary course of business
consistent with past practice; or
(dd) Agree to do any of
the foregoing.
Section
5.2
Conduct of
OLB’s Business.
Through the
Effective Time, except as otherwise consented to in writing by DCB
or as permitted by this Agreement, and except as may be required by
Law or, in writing, by any Regulatory Authority (in which case OLB
shall immediately provide DCB with a copy of such written
document), OLB shall not, and shall not permit any OLB Subsidiary
to:
(a) Take any action
that would result in any of the conditions set forth in Article VI
hereof not being satisfied;
(b) Take any action or
knowingly fail to take any action, which action or failure to act
would preclude the Merger from qualifying as a tax-free
reorganization within the meaning of Section 368(a) of the
IRC; or
(c) Agree to do either
of the foregoing.
Section
5.3
Access;
Confidentiality.
(a) Through the
Effective Time, each party hereto shall afford to the other,
including its authorized Representatives, reasonable access to its
and its Subsidiaries’ businesses, properties, assets, books
and records and personnel, at reasonable hours and after reasonable
notice; and the officers of each party shall furnish the other
party making such investigation, including its authorized
Representatives, with such financial and operating data and other
information with respect to such businesses, properties, assets,
books and records, and personnel as the party making such
investigation, or its authorized Representatives, shall from time
to time reasonably request. Each party hereto agrees that it, and
its authorized Representatives, will conduct such investigation and
discussions hereunder in a confidential manner and otherwise in a
manner so as not to interfere unreasonably with the other
party’s normal operations and customer and employee
relationships. Notwithstanding the foregoing, neither OLB nor DCB
shall be required to provide access to or to disclose information
where such access or disclosure would violate the rights of its
customers, jeopardize the attorney-client privilege of the entity
in possession or control of such information or contravene any Law
or binding agreement entered into prior to the date of this
Agreement. The parties hereto will make appropriate substitute
disclosure arrangements under circumstances in which the
restrictions of the previous sentence apply.
(b) DCB and OLB each
agree that it will not, and will cause their Representatives not
to, use any information obtained pursuant to this Section 5.3
(as well as any other information obtained prior to the date hereof
in connection with entering into this Agreement) for any purpose
unrelated to the consummation of the Contemplated Transactions. DCB
and OLB shall hold all information obtained pursuant to this
Section 5.3 (as well as any other information obtained prior
to the date hereof in connection with entering into this Agreement)
in confidence to the extent required by, and in accordance with,
the provisions of the Confidentiality Agreement, which is
incorporated herein by reference. The parties hereto agree that
such Confidentiality Agreement shall continue in accordance with
its terms, notwithstanding the termination of this
Agreement.
Section
5.4
Regulatory
Matters.
Through the
Effective Time:
(a) OLB and DCB shall
cooperate with one another in the preparation of the Registration
Statement (including the Prospectus/Proxy Statement) and all
Applications, which shall be prepared by OLB and OLB’s
counsel, to the extent such Applications are required to be filed
by an OLB Company, and by DCB and DCB’s counsel, to the
extent such Applications are required to be filed by a DCB Company,
and the making of all filings for, and shall use their reasonable
best efforts to obtain, as promptly as practicable, all necessary
permits, consents, approvals, waivers and authorizations of all
Regulatory Authorities necessary or advisable to consummate the
Contemplated Transactions; provided, however, that in no event
shall OLB or DCB be required to agree to any prohibition,
limitation or other requirement that would (a) prohibit or
materially limit the ownership or operation by OLB or any OLB
Subsidiary of all or any material portion of the business or assets
of DCB or any DCB Subsidiary, (b) compel OLB or DCB to dispose of
all or any material portion of either party’s business or
assets, (ii) impose a material compliance burden, penalty or
obligation on OLB or DCB, or (iii) otherwise materially impair the
value of DCB to OLB (any such requirement alone, or more than one
such requirement together, a “Burdensome
Condition”).
(b) DCB and OLB shall
each promptly furnish the other with copies of written
communications to, or received by them from, any Regulatory
Authority with respect to the Contemplated Transactions to the
extent permitted by Law.
(c) DCB and OLB shall
cooperate with each other in the foregoing matters and shall
furnish the other with all information concerning itself as may be
necessary or advisable in connection with any Application or
filing, including any report filed with the SEC, made by or on
behalf of such party to or with any Regulatory Authority in
connection with the Contemplated Transactions, and in each such
case, the information shall be accurate and complete in all
material respects. In connection therewith, DCB and OLB shall use
their reasonable good faith efforts to provide each other
certificates, “comfort” letters and other documents
reasonably requested by the other to the extent such disclosure is
permitted by Law. Each party hereto shall have the right to review
and approve in advance (such approval not to be unreasonably
withheld, conditioned or delayed) all characterizations of the
information relating to it and any of its subsidiaries that appear
in any filing made in connection with the Contemplated Transactions
with any Regulatory Authority. In addition, OLB and DCB shall each
give the other reasonable time to review the Registration Statement
and any Application to be filed by it prior to the time such
Application is filed with the relevant Regulatory Authority, and
each shall consult the other with respect to the substance and
status of such filings.
Section
5.5
Taking of Necessary
Actions.
Through the
Effective Time, in addition to the specific agreements contained
herein, each party hereto shall use their reasonable best efforts
to take, or cause to be taken by each of its Subsidiaries, all
actions, and to do, or cause to be done by each of its
Subsidiaries, all things necessary, proper or advisable under
applicable Law to consummate and make effective the Contemplated
Transactions as soon as practicable after the date hereof
including, if necessary, appealing any adverse ruling with respect
to any Application.
Section
5.6
Duty to Advise;
Duty to Update of Disclosure Schedules.
Through the closing
date, each of DCB and OLB shall promptly advise the other of any
change or event having or reasonably likely to have a Material
Adverse Effect or that it believes would or would be reasonably
likely to cause or constitute a material breach of any of its
representations, warranties or covenants set forth herein. Through
the Closing Date, DCB shall update the DCB Disclosure Schedules,
and OLB shall update the OLB Disclosure Schedules, as promptly as
practicable after the occurrence of any event that, if such event
had occurred prior to the date hereof, would have been disclosed on
such schedule. In addition, DCB shall update and deliver to OLB the
DCB Disclosure Schedule
3.20(a), and OLB shall update and deliver to DCB the
OLB Disclosure Schedule
4.20, promptly after the end of each calendar month during
the Pre-Closing Period and on the Business Day immediately
preceding the Closing Date. The delivery of such updated Disclosure
Schedules shall not relieve either party from liability for any
breach or violation of this Agreement and shall not have any effect
for the purposes of determining the satisfaction of the condition
set forth in Sections 6.1(b) or 6.2(b).
Section
5.7
Other Undertakings
by OLB and DCB.
(a) Undertakings of
DCB.
(i) Stockholder Approval. As
promptly as practicable after the Registration Statement becomes
effective under the Securities Act, in accordance with applicable
Law and this Agreement, DCB shall submit the Agreement and the
Merger to its stockholders for approval at the DCB Common
Stockholders’ Meeting with the recommendation that its
stockholders approve the Agreement and the Merger.
(ii) Acquisition Proposals. So long
as this Agreement remains in effect, except as otherwise expressly
permitted by this Agreement, DCB shall not, and it shall not
authorize, permit or cause any DCB Subsidiary and their respective
Representatives to, directly or indirectly: (A) initiate, solicit,
induce or encourage (including by way of furnishing information),
or take any action to facilitate the making of, any inquiry, offer
or proposal that constitutes, relates or could reasonably be
expected to lead to an Acquisition Proposal; (B) respond to any
inquiry relating to an Acquisition Proposal; (C) recommend or
endorse an Acquisition Proposal; (D) participate in any discussions
or negotiations regarding any Acquisition Proposal or furnish, or
otherwise afford access, to any Person (other than OLB) any
information or data with respect to DCB or any DCB Subsidiary or
otherwise relating to an Acquisition Proposal; (E) release any
Person from, waive any provisions of, or fail to enforce any
confidentiality agreement or standstill agreement to which DCB or
any DCB Subsidiary is a party; or (F) enter into any agreement,
agreement in principle, letter of intent or similar instrument,
including any exclusivity agreement, with respect to any
Acquisition Proposal or approve or resolve to approve any
Acquisition Proposal or any agreement, agreement in principle,
letter of intent or similar instrument relating to an Acquisition
Proposal. Any violation of the foregoing restrictions by DCB or any
of its Representatives, whether or not such Representative is so
authorized and whether or not such Representative is purporting to
act on behalf of DCB or otherwise, shall be deemed to be a breach
of this Agreement by DCB. DCB and each DCB Subsidiary shall, and
shall cause each of its Representatives to, immediately cease and
cause to be terminated any and all existing discussions,
negotiations, and communications with any Person with respect to
any existing or potential Acquisition Proposal.
Notwithstanding the
foregoing, prior to the approval of the Agreement and the Merger by
DCB’s stockholders at the DCB Common Stockholders’
Meeting, DCB may respond to an inquiry, furnish nonpublic
information regarding itself and the DCB Subsidiaries to, or enter
into discussions with, any Person in response to an unsolicited
Acquisition Proposal that is submitted to DCB by such Person (and
not withdrawn) if: (A) DCB’s board of directors determines in
good faith, after consultation with and having considered the
advice of its outside legal counsel and the advice of RP Financial,
LC., that such Acquisition Proposal constitutes or is reasonably
likely to lead to a Superior Proposal (as defined below); (B) DCB
has not violated any of the restrictions set forth in this Section
5.7(a)(ii); (C) DCB’s board of directors determines in good
faith, after consultation with and based upon the advice of its
outside legal counsel and the advice of RP Financial, LC., that
such action is required in order for the board of directors to
comply with its fiduciary obligations under applicable Law; and (D)
at least two Business Days prior to furnishing any nonpublic
information to, or entering into discussions with, such Person, DCB
provides OLB with written notice of the identity of such Person and
of DCB’s intention to furnish nonpublic information to, or
enter into discussions with, such Person and DCB receives from such
Person an executed confidentiality agreement on terms no more
favorable to such Person than the Confidentiality Agreement, which
confidentiality agreement shall not provide such Person with any
exclusive right to negotiate with DCB. DCB shall promptly provide
to OLB any non-public information regarding DCB or any DCB
Subsidiary provided to any other Person that was not previously
provided to OLB, such additional information to be provided no
later than the date of provision of such information to such other
Person.
DCB shall promptly
(and in any event within 24 hours) notify OLB in writing if any
proposals or offers are received by, any information is requested
from, or any negotiations or discussions are sought to be initiated
or continued with, DCB, any DCB Subsidiary or any of their
Representatives, in each case in connection with any Acquisition
Proposal, and such notice shall indicate the name of the Person
initiating such discussions or negotiations or making such
proposal, offer or information request and the material terms and
conditions of any proposals or offers (and, in the case of written
materials relating to such proposal, offer, information request,
negotiations or discussion, providing copies of such materials
(including e-mails or other electronic communications)). DCB agrees
that it shall keep OLB informed, on a current basis, of the status
and terms of any such proposal, offer, information request,
negotiations or discussions (including any amendments or
modifications to such proposal, offer or request). DCB further
agrees that it will provide OLB with the opportunity to present its
own proposal to the DCB board of directors in response to any such
proposal or offer and negotiate with OLB in good faith with respect
to any such proposal.
For purposes of
this Agreement, “Superior Proposal” means
any unsolicited, bona fide written proposal (or its most recently
amended or modified terms, if amended or modified) made by a third
party to consummate an Acquisition Proposal on terms that the DCB
board of directors determines in its good faith judgment, after
consultation with and having considered the advice of DCB’s
outside legal counsel and RP Financial, LC.: (A) would, if
consummated, result in consideration that is more favorable to the
stockholders of DCB than the Contemplated Transactions (taking into
account all legal, financial, regulatory and other aspects of the
Acquisition Proposal and the Person making the proposal); (B) is
not conditioned on obtaining financing (and with respect to which
DCB has reasonably assured itself of such Person’s ability to
fully finance its Acquisition Proposal); (C) would, if consummated,
result in the acquisition of all, but not less than all, of the
issued and outstanding shares of DCB Common Stock or all or
substantially all of the assets and liabilities of the DCB
Companies on a consolidated basis; and (D) is reasonably likely to
be completed on the terms proposed, in each case taking into
account all legal, financial, regulatory and other aspects of the
proposal.
Neither the DCB
board of directors nor any committee thereof shall: (A) withdraw,
qualify or modify, or propose to withdraw, qualify or modify, in a
manner adverse to OLB in connection with the Contemplated
Transactions (including the Merger), its recommendation to the
stockholders of DCB to approve the Agreement and the Merger, or
make any statement, filing or release, in connection with the DCB
Common Stockholders’ Meeting or otherwise, inconsistent with
the recommendation to the stockholders of DCB to approve the
Agreement and the Merger (it being understood that taking a neutral
position or no position with respect to an Acquisition Proposal
shall be considered an adverse modification of such
recommendation); (B) approve or recommend, or publicly propose to
approve or recommend, any Acquisition Proposal; or (C) enter into
(or cause DCB or any DCB Subsidiary to enter into) any letter of
intent, agreement in principle, acquisition agreement or other
agreement (1) related to any Acquisition Proposal or (2) requiring
DCB to abandon, terminate or fail to consummate any of the
Contemplated Transactions.
Notwithstanding the
foregoing, prior to the date of the DCB Common Stockholders’
Meeting, DCB’s board of directors may approve or recommend to
the stockholders of DCB a Superior Proposal and withdraw, qualify
or modify its recommendation in connection with the Agreement and
the Merger or take any of the other actions otherwise prohibited by
this Section 5.7(a)(ii) after the third Business Day following the
receipt by OLB of a notice (the “Notice of Superior
Proposal”) from DCB advising OLB that the DCB board of
directors has decided that a bona fide unsolicited written
Acquisition Proposal that it received (that did not result from a
breach of this Section 5.7(a)(ii)) constitutes a Superior Proposal
(it being understood that DCB shall be required to deliver a new
Notice of Superior Proposal in respect of any materially revised
Superior Proposal from such third party or its affiliates that DCB
proposes to accept and the subsequent notice period shall be three
Business Days) if, but only if, (A) the DCB board of directors has
reasonably determined in good faith, after consultation with and
having considered the advice of outside legal counsel and the
advice of RP Financial, LC., that the failure to take such actions
would be inconsistent with its fiduciary duties under applicable
law and (B) at the end of such three Business Day period, after
taking into account any adjusted, modified or amended terms as may
have been committed to in writing by OLB since OLB’s receipt
of such Notice of Superior Proposal (provided, however, that OLB
shall not have any obligation to propose any adjustments,
modifications or amendments to the terms and conditions of this
Agreement), the DCB board of directors has again in good faith made
the determination (1) in clause (A) of this paragraph, and (2) that
such Acquisition Proposal constitutes a Superior
Proposal.
(iii) Environmental
Assessments.
(A) OLB shall have the
express right, but not the obligation, to conduct, at its sole cost
and expense, Environmental Assessments of the DCB Companies’
assets, operations and secured interests, including, but not
limited to, the DCB Real Properties. For any DCB Real Property that
is not owned by a DCB Company, access to such DCB Real Property by
OLB shall be conditioned on approval by the property
owner.
(B) If OLB, in its sole
discretion, is unable to reasonably determine that the recognized
environmental conditions identified in the Environmental
Assessments will not result in a Material Adverse Effect, OLB shall
have the express right, but not the obligation, to further assess,
at its sole cost and expense, the recognized environmental
conditions as OLB deems appropriate subject to the following
provisions of this Section 5.7(a)(iii)(B). For any DCB Real
Property that is owned by a DCB Company, such further assessment
shall be subject to prior notice to DCB. For any DCB Real Property
that is not owned by a DCB Company, such further assessment by OLB
shall be conditioned on approval by the property
owner.
(C) OLB agrees to
notify DCB a reasonable time in advance of any Environmental
Assessments scheduled pursuant to this Section 5.7(a)(iii).
Upon receipt of such notice, DCB agrees to permit OLB and its
Representatives to (i) conduct such Environmental Assessments, (ii)
have access to the properties, facilities, environmental documents
and personnel of the DCB Companies, and (iii) conduct such
consultations with the Persons conducting such examinations, as OLB
shall deem necessary; provided, however, that OLB agrees that the
exercise of its rights under this Section 5.7(a)(iii) shall not
unreasonably disturb or interfere with the business activities or
operations of the DCB Companies. Upon request by DCB, OLB shall
provide copies of reports prepared by OLB or its Representatives
for the assessments conducted under this Section
5.7(a)(iii).
(iv) Dissolve Non-Operational
Subsidiaries. Prior to Closing, DCB shall cause the
liquidation and legal dissolution of any and all Non-Operational
Subsidiaries.
(b) Undertakings of OLB and
DCB.
(i) Public
Announcements. OLB and DCB shall consult upon the form and
substance of any press release or public statement related to this
Agreement and the Contemplated Transactions and shall not issue any
press release or make any public statement without the prior
consent of the other party, which shall not be unreasonably delayed
or withheld, but nothing contained herein shall prohibit either
party, following notification to the other party, from making any
disclosure that its counsel deems necessary under applicable
Law.
(ii) Maintenance
of Insurance. OLB and each OLB Subsidiary, and DCB and each
DCB Subsidiary, shall maintain insurance in such amounts as OLB and
DCB, respectively, believe are reasonable to cover such risks as
are customary in relation to the character and location of its and
their respective Subsidiaries’ properties and the nature of
its and their respective Subsidiaries’
businesses.
(iii) Maintenance
of Books and Records. OLB and each OLB Subsidiary, and DCB
and each DCB Subsidiary, shall maintain books of account and
records in accordance with GAAP and on a basis consistent with past
practice.
(iv) Taxes.
OLB and each OLB Subsidiary shall file all OLB Returns, and DCB and
each DCB Subsidiary shall file all DCB Returns, required to be
filed by them, respectively, on or before the date such returns are
due, including any extensions, and pay all taxes shown to be due on
such returns on or before the dates such payments are due, except
those being contested in good faith.
(v) In-House
Operations. OLB and DCB shall cooperate with each other in
the interest of an orderly, cost-effective consolidation of
operations.
(vi) Delivery
of Financial Statements. OLB and DCB shall each deliver, or
in the case of OLB, make available to the other, promptly upon
their completion, but in each case by each respective delivery
date, financial statements that fairly present, in all material
respects, its consolidated financial condition, results of
operations for the periods then ended in accordance with GAAP,
subject to year-end audit adjustments and notes
thereto.
(vii) Delivery
of Regulatory Filings and Documents. Except where prohibited
by Law or the regulations of any Regulatory Authority, OLB and DCB
shall each deliver to the other copies of all reports filed with
Regulatory Authorities promptly upon the filing
thereof.
(i) DCB Director Nominees. Subject
to the articles of incorporation and bylaws of OLB and Old Line,
the MGCL, any approvals and/or requirements of any Regulatory
Authority relating to OLB and the continuing fiduciary duties of
the OLB board of directors, the OLB board of directors shall take
such actions as may be necessary to (A) elect, as soon as is
practicable following the Effective Time, the DCB Nominees to serve
on the OLB board of directors until the next annual meeting of OLB
stockholders that occurs after the Effective Time, (B) cause the
DCB Nominees to be elected, as soon as is practicable following the
Effective Time, to serve on the Old Line board of directors until
the next annual meeting of Old Line’s stockholders that
occurs after the Effective Time, (C) nominate the DCB Nominees for
re-election to the OLB board of directors at the annual meeting of
OLB’s stockholders that follows the Effective Time, to serve
(1) in the case of Stephen J. Deadrick, for a term of at least two
years and (2) in the case of the other DCB Nominee, for a term of
at least one year, and (D) cause the DCB Nominees to be elected to
serve on the Old Line board of directors at the annual meeting of
Old Line’s stockholders that follows the Effective Time, to
serve for a term consistent with those set forth in subsection (C)
hereof; provided, however, that if the DCB Nominees shall be
subject to a Disqualification Event, OLB shall take such actions as
may be necessary to fill the vacancy so created with one of the
individuals set forth on DCB Disclosure Schedule 1.3(d),
or with such other individuals as DCB may propose (each a
“Replacement
Nominee”), with the selection being at OLB’s
discretion.
On and after the
Effective Time, (A) the directors of OLB duly elected and holding
office immediately prior to the Effective Time, and (B) provided
the DCB Nominees agree to serve as a director of OLB, the DCB
Nominees, shall be the directors of OLB, each to hold office until
his or her successor is elected and qualified or otherwise in
accordance with applicable Law and the articles of incorporation
and bylaws of OLB and Old Line, as applicable; further provided,
that in no event shall OLB’s obligations under this section
apply with respect to either of the DCB Nominees if such DCB
Nominee shall be subject to a Disqualification Event.
As used in this
Agreement, the term “Disqualification Event”
means, as to the DCB Nominees, the occurrence of any of the
following events: (i) such nominee shall be prohibited by Law or
otherwise from serving as a director of OLB; (ii) such nominee
shall have been charged with or convicted of any felony or a crime
of moral turpitude; (iii) such nominee shall file (or any Entity of
which such nominee shall have been an executive officer or
controlling person within the 90 days prior to filing shall file) a
voluntary petition under any applicable federal or state bankruptcy
or insolvency law, or such nominee shall become (or any Entity
indebted to OLB of which such nominee shall have been an executive
officer or controlling person within the 90 days prior to filing
shall become) the subject of an involuntary petition filed under
any such law that is not dismissed within 90 days; (iv) such
nominee shall be involved in any of the events or circumstances
enumerated in Item 401(f)(3)-(6) of Regulation S-K (or any
successor or substitute provision of similar import) promulgated by
the SEC, or similar provisions of state “blue sky”
laws; (v) the death, disability or other personal reasons beyond
the control of such nominee that prevents him from serving, as
determined by OLB in its sole discretion, as a nominee; or (vi)
such nominee shall violate any covenant or agreement contained in
the Support Agreement. OLB will (i) take such actions as are
necessary to cause Old Line, subject to the fiduciary duties of the
Old Line board of directors, Old Line’s articles of
incorporation and bylaws and the eligibility requirements of any
Regulatory Authority relating to Old Line, and provided that the
DCB Nominees are not subject to a Disqualification Event, to
nominate the DCB Nominees to serve as directors of Old Line during
any time, and for the same term, that the DCB Nominees serve as
directors of OLB, in compliance with Section 1.3(d), and (ii) will,
as the sole stockholder of Old Line, vote to elect the DCB Nominee
so nominated by Old Line.
(ii) Employees, Severance
Policy.
(A) Subject to
OLB’s or the applicable OLB Subsidiary’s personnel and
employment qualification policies and the provisions hereof, and
subject to OLB’s right to require, in its sole discretion and
as a condition of employment, such individuals to execute
confidentiality, non-competition and/or non-solicitation
agreements, OLB will endeavor to continue the employment of each
individual who was an employee of DCB or a DCB subsidiary as of
December 16, 2016 and was continuously an employee of DCB or a DCB
subsidiary through the Effective Time (a “DCB Employee”) in a
position that will contribute to the successful performance of the
combined organization as OLB deems appropriate, consistent with its
plans and strategies, for the efficient and effective operation of
the OLB Companies after the Effective Time. All such employees who
accept offers of employment from an OLB Company (the
“Retained
Employees”) will be employed on an at-will basis.
Notwithstanding anything to the contrary contained in this Section
5.7(c)(ii), no provision of this Agreement shall create any
obligation of OLB or an OLB Subsidiary to retain any DCB Employee
or create any third party benefit except for the Indemnified
Parties’ rights under Section 5.7(c)(iv), which are
expressly intended to be for the irrevocable benefit of, and shall
be enforceable by, each Indemnified Party and his or her heirs and
Representatives. If a DCB Employee (1) is not offered employment
with OLB or an OLB Company, (2) does not accept an offer of
employment because the offer is not for a “Comparable
Position” (as defined in the Damascus Community Bank Employee
Change in Control Plan attached as Exhibit E hereto (the
“Plan”)) or (3) accepts
employment and becomes a Retained Employee but is involuntarily
terminated without Cause within 12 months of the Effective Date,
then OLB will cause Old Line or the applicable OLB Subsidiary to
make a severance payment to the displaced DCB Employee in
accordance with and as set forth in the Plan; provided, however,
that each such DCB Employee eligible for a severance payment
hereunder will receive at least four weeks of “Base
Compensation,” as defined in the Plan.
(B) Any Retained
Employee whose employment with OLB or an OLB Subsidiary is
terminated without Cause after 12 months from the Effective Date
shall receive such severance benefit from OLB or such OLB
Subsidiary as is provided for in OLB’s or the applicable OLB
Subsidiary’s general severance policy for such terminations
(with full credit being given for each full year of service with
DCB or any DCB Subsidiary).
(C) Any DCB Employee
who has or is party to any employment agreement, severance
agreement, change in control agreement or any other agreement or
arrangement (a “CIC
Agreement”) that provides for any payment that would
be triggered by the Merger or the Bank Merger (“CIC Payment”) shall not
receive any severance benefits as provided in Sections
5.7(c)(ii)(A) and (B) but will receive the CIC Payment upon the
occurrence of a triggering event under the CIC Agreement. Any DCB
Employee who waives and relinquishes his or her right to a CIC
Payment will be eligible for a severance payment as provided in
Section 5.7(c)(ii)(A) or (B).
(D) OLB and any OLB
Subsidiary’s obligation hereunder to make payments as
provided in this Section 5.7(c)(ii) is expressly subject to OLB
obtaining a non-objection or waiver of any regulatory prohibition
or limitation on such payment, and OLB’s obligation hereunder
is limited to such amount as determined by the Regulatory
Authorities. DCB will obtain written acknowledgement of OLB’s
obligation hereunder from all DCB employees and officers who may be
eligible for such payments. OLB will use reasonable efforts to
obtain any required regulatory approval or non-objection and shall
file any required notice or application to obtain such approval or
non-objection no later than the later of (i) the date it files its
application for approval of the Bank Merger or (ii) it becomes
aware of the need to obtain any such approval or
non-objection.
(iii) Employee Benefits. As of the
Effective Time, each Retained Employee shall be entitled to full
credit for each year of service with DCB or any DCB Subsidiary for
purposes of determining eligibility for participation and vesting
and benefit accrual in OLB’s or, as appropriate, in the OLB
Subsidiary’s, employee benefit plans, programs and policies,
except as prohibited by Law. OLB shall use the original date of
hire by DCB or a DCB Subsidiary in making these
determinations.
(iv) Indemnification. From and after
the Effective Time, subject to applicable Law, OLB (the
“Indemnifying
Party”) shall indemnify and hold harmless each present
and former director and officer of DCB or a DCB Subsidiary, as
applicable, determined as of the Effective Time (the
“Indemnified
Parties”) against any costs or expenses (including
reasonable attorneys’ fees), judgments, fines, losses,
claims, damages or liabilities and amounts paid in settlement
incurred after the Effective Time in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of matters existing or
occurring at or prior to the Effective Time, whether asserted or
claimed prior to, at or after the Effective Time, based in whole or
in part, or arising in whole or in part out of, or pertaining to
the fact that he or she was a director or officer of DCB or a DCB
Subsidiary or is or was serving at the request of DCB or any DCB
Subsidiary as a director, officer, employee, trustee or other agent
of any other organization or in any capacity with respect to any
DCB Benefit Plan, including, without limitation, any matters
arising in connection with or related to the negotiation, execution
and performance of this Agreement or any of the Contemplated
Transactions, and will advance expenses to such Indemnified Party
in connection therewith, to the fullest extent to which such
Indemnified Parties would be entitled to the right to advancements
of expenses or to be indemnified under the articles of
incorporation and bylaws of DCB in effect on the date of this
Agreement as though the Indemnified Parties were present or former
directors or officers of OLB, or were serving at the request of OLB
or any OLB Subsidiary as a director, officer, employee, trustee or
other agent of any other organization or in any capacity with
respect to any OLB Benefit Plan, as of the Effective Time.
OLB’s obligations under this
Section 5.7(c)(iv) shall continue in full force and effect for a
period of six years and one day from the Effective Date; provided,
however, that all rights to indemnification in respect of any claim
asserted or made within such period shall continue until the final
disposition of such claim.
(v) NASDAQ Listing. To the extent
required, OLB agrees to timely file a
“Listing of Additional Shares Notification Form”
with NASDAQ with respect to the
shares of OLB Common Stock to be issued in the Merger, and to use
its best efforts to have the review of such form completed prior to
the Effective Time.
(vi) Directors’ and Officers’
Liability Insurance. Contemporaneously with the Closing, OLB
shall purchase an extended reporting period to DCB’s current
liability insurance policy(ies), for a period to last from the day
after the Effective Date until at least the date that is six years
and one day after the Effective Date, for purposes of covering
actions occurring prior to the Effective Time (the
“Tail
Policy”). Provided that the aggregate cost of the Tail
Policy will not exceed 200.0% of the current annual premium
attributable to the applicable officers’ and directors’
liability coverage in DCB’s and/or Damascus’ liability
insurance policy(ies) in effect as of the date of this Agreement
(the “Maximum
Premium”), the Tail Policy shall provide the same or
better coverage for the individuals who are presently covered by
DCB’s or Damascus’ officers’ and directors’
liability insurance policy(ies) and any other insurance policy(ies)
providing insurance coverage for DCB’s or Damascus’
executive officers and directors (all of such individuals, the
“Insured
Persons”), with respect to actions, omissions, events,
matters or circumstances occurring through the Effective Time. If
OLB is unable to purchase the Tail Policy having the coverage and
aggregate limits contemplated by the foregoing sentence at a cost
that does not exceed Maximum Premium, then the Tail Policy
purchased by OLB shall provide such coverage as may be reasonably
purchased for a cost that does not exceed the Maximum Premium. In
either event, OLB may not cancel, modify or take any action to
limit or terminate the Tail Policy purchased pursuant to this
Section 5.7(c)(iv) unless it replaces such Tail Policy with
coverage provided by insurers having the same or better rating,
coverage and aggregate limits as such Tail Policy; provided,
however, that OLB may, at
its option, replace at any time such policy with another policy
having the same coverage rate.
Section
5.8
Accuracy of the
Registration Statement.
The
Prospectus/Proxy Statement and the Registration Statement shall
comply as to form in all material respects with the applicable
provisions of the Securities Act and the Exchange Act and the rules
and regulations thereunder. DCB and OLB shall promptly notify the
other party if at any time it becomes aware that the
Prospectus/Proxy Statement or the Registration Statement contains
any untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make
the statements contained therein, in light of the circumstances
under which they were made, not misleading. In such event, DCB
shall cooperate with OLB in the preparation of a supplement or
amendment to such Prospectus/Proxy Statement or Registration
Statement that corrects such misstatement or omission, and OLB
shall file an amended Registration Statement or supplement to the
Registration Statement with the SEC, and DCB shall mail a
Prospectus/Proxy Statement and any required amendment or supplement
to holders of DCB Common Stock. OLB will provide DCB and its
counsel with a reasonable opportunity to review and comment on the
Registration Statement and the Prospectus/Proxy Statement and all
responses to requests for additional information by and replies to
comments of the SEC prior to filing such with, or sending such to,
the SEC, and will provide DCB and its counsel with a copy of all
such filings made with the SEC.
ARTICLE
VI.
CONDITIONS
Section
6.1
Conditions to
DCB’s Obligations under this Agreement.
The obligations of
DCB hereunder shall be subject to satisfaction at or prior to the
Closing Date of each of the following conditions, unless waived by
DCB pursuant to Section 8.3 hereof:
(a) Corporate Proceedings. All
action required to be taken by, or on the part of, OLB and Old Line
to authorize the execution, delivery and performance of this
Agreement, and the consummation of the Contemplated Transactions,
shall have been duly and validly taken by OLB and Old Line,
respectively, and DCB shall have received certified copies of the
resolutions evidencing such authorizations.
(b) Covenants; Representations. The
obligations of OLB and Old Line required by this Agreement to be
performed by OLB and Old Line at or prior to the Closing Date shall
have been duly performed and complied with in all material
respects; and the representations and warranties of OLB set forth
in this Agreement shall be true and correct as of the date of this
Agreement and as of the Closing Date as though made on and as of
the Closing Date, except as to any representation or warranty that
specifically relates to an earlier date, in each case in accordance
with the Article IV Standard.
(c) Consents. (i) DCB and Damascus
shall have received all consents and approvals described in
DCB Disclosure Schedule
3.4 and all filings and registrations by DCB and Damascus
described in DCB
Disclosure Schedule 3.4 shall have been accepted or declared
effective, except where the failure to obtain any such consent or
approval, or for any such filing or registration to be accepted or
declared effective, would not reasonably be expected to have a
Material Adverse Effect on OLB or Old Line subsequent to the
Effective Time; (ii) OLB and Old Line shall have received all
consents and approvals described in OLB Disclosure Schedule 4.4 and
all filings and registrations by OLB and Old Line described in
OLB Disclosure Schedule
4.4 shall have been accepted or declared effective, except
where the failure to obtain any such consent or approval, or for
any such filing or registration to be accepted or declared
effective, would not reasonably be expected to have a Material
Adverse Effect on OLB or Old Line subsequent to the Effective Time;
(iii) any statutory waiting period or periods relating to the
consents, approvals, filings and registrations identified in the
foregoing items (i) or (ii) shall have expired; and (iv) no consent
or approval identified in the foregoing items (i) or (ii) shall
have imposed any condition or requirement that, in the reasonable
opinion of the board of directors of DCB, would constitute a
Burdensome Condition or otherwise so materially and adversely
impact the economic or business benefits to DCB of the Contemplated
Transactions as to render consummation of the Merger
inadvisable.
(d) No Injunction or Restraints. No
temporary restraining order, preliminary or permanent injunction or
other judgment, order or decree issued by a Regulatory Authority of
competent jurisdiction located in the United States that enjoins or
prohibits the consummation of the Contemplated Transactions shall
have been issued and remain in effect.
(e) Officer’s Certificate.
OLB shall have delivered to DCB a certificate, dated the Closing
Date and signed, without personal liability, by its President and
Chief Executive Officer, to the effect that, to the best of his
knowledge, information and belief, the conditions set forth in
subsections (a), (b), (c)(ii) and (c)(iii) (but only with respect
to waiting periods applicable to OLB), (d), (f), (k) and (l) of
this Section 6.1 have been satisfied.
(f) Registration Statement. The
Registration Statement shall be effective under the Securities Act,
and no proceedings shall be pending or threatened by the SEC to
suspend the effectiveness of the Registration Statement; and all
approvals deemed necessary by OLB’s counsel from state
securities or “blue sky” authorities with respect to
the Contemplated Transactions shall have been
obtained.
(g) Tax Opinion. DCB shall have
received an opinion of Gordon Feinblatt LLC, counsel to DCB, dated
the Closing Date, to the effect that on the basis of the facts,
representations and assumptions set forth in such opinion (i) the
Merger constitutes a tax-free reorganization under
Section 368(a) of the IRC, and (ii) any gain realized in the
Merger will be recognized only to the extent of cash or other
property (other than OLB Common Stock) received in the Merger,
including cash received in lieu of fractional share interests; in
rendering their opinion, such counsel may require and rely upon
representations and reasonable assumptions, including those
contained in certificates of officers of DCB, OLB and
others.
(h) Approval by DCB’s
Stockholders. The Agreement and the Merger shall have been
approved by the stockholders of DCB by such vote as is required by
the MGCL and the articles of incorporation and bylaws of
DCB.
(i) Other Documents. DCB shall have
received such other certificates, documents or instruments from OLB
or its officers or others as DCB shall have reasonably requested in
connection with the accounting or income tax treatment of the
Contemplated Transactions, related Securities Laws compliance or to
evidence fulfillment of the conditions set forth in Section 6.1 as
DCB may reasonably request.
(j) Illegality. No Law shall have
been enacted, entered, promulgated or enforced by any Regulatory
Authority that prohibits, restricts or makes illegal the
consummation of the Contemplated Transactions.
(k) No Material Adverse Effect. No
change in the business, property, assets (including loan
portfolios), liabilities (whether absolute, contingent or
otherwise), operations, business prospects, liquidity, income, or
financial condition of OLB or any of the OLB Subsidiaries shall
have occurred since the date of this Agreement, and no information
shall have been provided solely in an updated OLB Disclosure
Schedule pursuant to Section 5.6 of this Agreement, that has had,
or would reasonably be likely to have, a Material Adverse Effect on
OLB.
(l) NASDAQ Listing. To the extent
required, NASDAQ shall have completed its review of the
“Listing of Additional Shares
Notification Form” filed by OLB with NASDAQ
with respect to the shares of OLB
Common Stock to be issued in the Merger.
Section
6.2
Conditions to
OLB’s Obligations under this Agreement.
The obligations of
OLB hereunder shall be subject to satisfaction at or prior to the
Closing Date of each of the following conditions, unless waived by
OLB pursuant to Section 8.3 hereof:
(a) Corporate Proceedings. All
action required to be taken by, or on the part of, DCB and Damascus
to authorize the execution, delivery and performance of this
Agreement, and the consummation of the Contemplated Transactions,
shall have been duly and validly taken by DCB and Damascus,
respectively, and OLB shall have received certified copies of the
resolutions evidencing such authorizations.
(b) Covenants; Representations. The
obligations of DCB and Damascus required by this Agreement to be
performed by DCB and Damascus at or prior to the Closing Date shall
have been duly performed and complied with in all material
respects; and the representations and warranties of DCB set forth
in this Agreement shall be true and correct as of the date of this
Agreement and as of the Closing Date as though made on and as of
the Closing Date, except as to any representation or warranty that
specifically relates to an earlier date, in each case in accordance
with the Article III Standard.
(c) Consents. (i) OLB and Old Line
shall have received all consents and approvals described in
OLB Disclosure Schedule
4.4 and all filings and registrations by OLB and Old Line
described in OLB
Disclosure Schedule 4.4 shall have been accepted or declared
effective, except where the failure to obtain any such consent or
approval, or for any such filing or registration to be accepted or
declared effective, would not reasonably be expected to have a
Material Adverse Effect on OLB or Old Line subsequent to the
Effective Time; (ii) DCB and Damascus shall have received all
consents and approvals described in DCB Disclosure Schedule 3.4 and
all filings and registrations by DCB and Damascus described in
DCB Disclosure Schedule
3.4 shall have been accepted or declared effective, except
where the failure to obtain any such consent or approval, or for
any such filing or registration to be accepted or declared
effective, would not reasonably be expected to have a Material
Adverse Effect on OLB or Old Line subsequent to the Effective Time;
(iii) any statutory waiting period or periods relating to the
consents, approvals, filings and registrations identified in the
foregoing items (i) or (ii) shall have expired; and (iv) no consent
or approval identified in the foregoing items (i) or (ii) shall
have imposed any condition or requirement that, in the reasonable
opinion of the board of directors of OLB, would constitute a
Burdensome Condition or otherwise so materially and adversely
impact the economic or business benefits to OLB of the Contemplated
Transactions as to render consummation of the Merger
inadvisable.
(d) No Injunction or Restraints. No
temporary restraining order, preliminary or permanent injunction or
other judgment, order or decree issued by a Regulatory Authority of
competent jurisdiction located in the United States that enjoins or
prohibits the consummation of the Contemplated Transactions shall
have been issued and remain in effect.
(e) Officer’s Certificate.
DCB shall have delivered to OLB a certificate, dated the Closing
Date and signed, without personal liability, by both of its
Co-Chief Executive Officers, to the effect that, to the best of
their knowledge, information and belief, the conditions set forth
in subsections (a), (b), (c)(ii) and (iii) (but only with respect
to waiting periods applicable to DCB), (d), (h) and (l) of this
Section 6.2 have been satisfied.
(f) Registration Statement. The
Registration Statement shall be effective under the Securities Act,
and no proceedings shall be pending or threatened by the SEC to
suspend the effectiveness of the Registration Statement; and all
approvals deemed necessary by OLB’s counsel from state
securities or “blue sky” authorities with respect to
the Contemplated Transactions shall have been
obtained.
(g) Tax Opinion. OLB shall have
received an opinion of Baker, Donelson, Bearman, Caldwell &
Berkowitz, PC, counsel to OLB dated the Closing Date, to the effect
that on the basis of the facts, representations and assumptions set
forth in such opinion the Merger constitutes a tax-free
reorganization under Section 368(a) of the IRC; in rendering
their opinion, such counsel may require and rely upon
representations and reasonable assumptions, including those
contained in certificates of officers of DCB, OLB and
others.
(h) Approval by DCB’s
Stockholders. The Agreement and the Merger shall have been
approved by the stockholders of DCB by such vote as is required by
the MGCL and the articles of incorporation and bylaws of
DCB.
(i) Limitation on
Objecting DCB Shares. As of the Effective Date, the holders of no more than ten percent of the shares
of DCB Common Stock that are
issued and outstanding as of the record date for the DCB Common
Stockholders’ Meeting shall have taken the actions required
by Section 3-203 of the MGCL to qualify their shares of DCB
Common Stock as Objecting DCB Shares.
(j) Other Documents. OLB shall have
received such other certificates, documents or instruments from DCB
or its officers or others as OLB shall have reasonably requested in
connection with the accounting or income tax treatment of the
Contemplated Transactions, related Securities Laws compliance or to
evidence fulfillment of the conditions set forth in Section 6.2 as
OLB may reasonably request.
(k) Environmental Assessment
Results. The recognized environmental conditions of any
Environmental Assessments conducted pursuant to
Section 5.7(a)(iii) hereof shall not result in a Material
Adverse Effect on DCB. OLB shall be fully satisfied, in its
reasonable discretion, with the findings of the Environmental
Assessments and any other environmental reports undertaken pursuant
to Section 5.7 of this Agreement.
(l) No Material Adverse Effect. No
change in the business, property, assets (including loan
portfolios), liabilities (whether absolute, contingent or
otherwise), operations, business prospects, liquidity, income, or
financial condition of DCB or any of the DCB Subsidiaries shall
have occurred since the date of this Agreement, and no information
shall have been provided in an updated DCB Disclosure Schedule
pursuant to Section 5.6 of this Agreement, that has had, or would
reasonably be likely to have, a Material Adverse Effect on
DCB.
(m) Third Party Consents. OLB shall
have received all consents and authorizations of landlords and
other persons that are necessary to permit the Contemplated
Transactions to be consummated without the violation of any lease
or other material agreement to which any of the DCB Companies is a
party or by which any of their properties are bound, except where
failure to obtain such consent or authorization would be reasonably
expected not to have a Material Adverse Effect subsequent to the
Merger.
(n) Illegality. No Law shall have
been enacted, entered, promulgated or enforced by any Regulatory
Authority that prohibits, restricts or makes illegal the
consummation of the Contemplated Transactions.
(o) Nasdaq Listing. To the extent
required, and provided that OLB has complied with its obligations
set forth in Section 5.7(c)(v) hereof, NASDAQ shall have completed
its review of the “Listing of
Additional Shares Notification Form” filed by OLB with
NASDAQ with respect to the shares of
OLB Common Stock to be issued in the Merger.
Section
6.3
Frustration of Closing Conditions.
Neither OLB nor DCB
may rely on the failure of any condition set forth in Section 6.1
or 6.2, as the case may be, to be satisfied if such failure was
caused by such party’s failure to use its commercially
reasonable best efforts to consummate and to make effective the
Contemplated Transactions, as required by and subject to Section
5.5.
ARTICLE
VII.
TERMINATION
Notwithstanding any
other provision of this Agreement, and notwithstanding receipt of
the approval by the stockholders of DCB of the Agreement and the
Merger, this Agreement may be terminated on or at any time prior to
the Closing Date:
(a) By the mutual
written agreement of DCB and OLB;
(b) By either DCB or
OLB (provided that the terminating party is not then in material
breach of any representation, warranty, covenant or other agreement
contained herein in a manner that would entitle the other party not
to consummate the Contemplated Transactions) in the event of a
material breach of any representation, warranty, covenant or other
agreement of the other party hereto contained in this Agreement
such that (i) with respect to a representation or warranty, the
condition set forth in the second clause of Section 6.1(b) or
Section 6.2(b), as the case may be, would not be satisfied, and
(ii) with respect to a covenant or other agreement, the condition
set forth in the first clause of Section 6.1(b) or Section 6.2(b),
as the case may be, would not be satisfied, and in each case such
breach cannot be, or shall not have been, remedied within 30 days
after receipt by such party of written notice specifying the nature
of such breach and requesting that it be remedied or which, by its
nature, cannot be cured prior to the Closing; provided, that if such breach cannot reasonably
be cured within such 30-day period but may reasonably be cured
within 60 days, and such cure is being diligently pursued, no such
termination shall occur prior to the expiration of such 60-day
period;
(c) By either DCB or
OLB if the Closing Date shall not have occurred prior to October
31, 2017 (except that if the Closing Date shall not have occurred
by October 31, 2017 because of a failure to obtain any required
approval or consent of a Regulatory Authority, such date shall be
November 30, 2017 unless the conditions of any such required
regulatory approval or consent cannot be satisfied by November 30,
2017), except that if the Closing Date shall not have occurred by
such date because of a material breach of this Agreement by a party
hereto, such breaching party shall not be entitled to terminate
this Agreement in accordance with this provision;
(d) By either DCB or
OLB in the event any Regulatory Authority whose approval or consent
is required for consummation of the Contemplated Transactions shall
issue a definitive written denial of such approval or consent and
any appeals and requests for reconsideration have also received a
definitive written denial or an application therefor has been
permanently withdrawn at the request of a Regulatory
Authority;
(e) By either DCB or
OLB if the stockholders of DCB vote, but fail to approve the
Agreement and the Merger at the DCB Common Stockholders’
Meeting;
(f) By OLB if DCB or
any DCB Subsidiary enters into any agreement, agreement in
principle, letter of intent or similar instrument with respect to
any Superior Proposal or approves or resolves to approve any
agreement, agreement in principle, letter of intent or similar
instrument with respect to a Superior Proposal;
(g) By DCB if at any
time after the date of this Agreement and prior to obtaining the
approval of the Agreement and the Merger by DCB’s
stockholders at the DCB Common Stockholders’ Meeting, DCB
receives a Superior Proposal; provided, however, that DCB shall not
terminate this Agreement pursuant to the foregoing clause
unless:
(i) DCB shall have
complied in all material respects with Section 5.7(a)(ii) of this
Agreement;
(ii) DCB concurrently
pays the DCB Termination Fee payable pursuant to Section 8.1(b);
and
(iii) the board of
directors of DCB concurrently approves, and DCB concurrently enters
into, a definitive agreement with respect to such Superior
Proposal;
(h) By DCB if OLB or
any OLB Subsidiary enters into any definitive term sheet, letter of
intent, agreement or similar type of agreement with a view to being
acquired by, or effecting a business combination, as a result of
which OLB is not the surviving Entity or OLB’s directors, as
of the date of this Agreement, do not comprise the majority of the
surviving Entity’s board of directors, with any person other
than DCB, and the DCB board of directors determines that, after
considering the advice of counsel and R.P. Financial LC., such
transaction is not in the best interests of the DCB Common
Stockholders; provided, however, that DCB must exercise the
termination option under this Section 7.1(h) within 30
calendar days after the date on which OLB is required to file a
Current Report on Form 8-K with the SEC regarding events triggering
the termination option;
(i) By OLB if the DCB
board of directors withdraws, changes or modifies its
recommendation to its stockholders in any manner adverse to OLB
regarding this Agreement or the Merger, or the DCB board of
directors authorizes, recommends or publicly proposes, or publicly
announces an intention to authorize, recommend or propose, an
agreement to enter into an Acquisition Proposal that constitutes a
Superior Proposal; or
(j) By DCB if (i) the
Closing Market Price is less than $16.68 and (ii) the OLB Price
Ratio is less than the Index Ratio by more than 20%.
If DCB elects to
exercise its termination right pursuant to this Section 7.1(j), it
shall give prompt (but in any case within 24 hours of such
determination) written notice thereof to OLB. During the five
Business Day period commencing with its receipt of such notice, OLB
may, at its option, increase the Merger Consideration to an amount
to be calculated as if the Average Price were equal to $16.68. If
OLB makes the election contemplated by the preceding sentence
within such five Business Day period, it shall give prompt written
notice to DCB of such election and the revised Per Share
Consideration, whereupon no termination shall have occurred
pursuant to this Section 7.1(j) and this Agreement shall remain in
effect in accordance with its terms (except as the Per Share Common
Stock Consideration shall have been so modified), and any
references in this Agreement to the Per Share Consideration and the
amount thereof shall thereafter be deemed to refer to the Per Share
Consideration and the amount thereof as adjusted pursuant to this
Section 7.1(j).
If the outstanding
shares of OLB Common Stock or any company belonging to the NASDAQ
Bank Stock Index shall be changed into a different number of shares
by reason of any stock dividend, reclassification, split-up,
combination, exchange of shares or similar transaction between the
date of the Agreement and the end of the Price Determination
Period, the Starting Price, the Closing Market Price and the other
amounts in this Section 7.1(j) shall be appropriately
adjusted.
For purposes of
this Section 7.1(j), the following terms shall have the meanings
set forth below:
“Starting Price” shall
mean $27.21, which was the volume weighted average of the closing
prices of OLB Common Stock for the ten Trading Days ending Two
Trading Days prior to the date of this Agreement.
“Closing Market Price”
shall be the volume weighted average of the closing prices of OLB
Common Stock, calculated to two decimal places, for the Price
Determination Period, as reported on the NASDAQ Capital
Market.
“OLB Price Ratio” shall
mean the quotient (multiplied by 100 to express such quotient as a
percentage) obtained by dividing the Closing Market Price by the
Starting Price, calculated to four decimal places.
“Index Ratio” shall mean
the quotient (multiplied by 100 to express such quotient as a
percentage) obtained by dividing the Average NASDAQ Bank Stock
Index Value For The Price Determination Period by $3,783.767, which
was the closing index value of the NASDAQ Bank Index on that date
that was two Trading Days prior to the date of this Agreement, as
quoted by NASDAQ, calculated to three decimal places.
“Average NASDAQ Bank Stock Index Value
For The Price Determination Period” shall mean the
average closing index value of the NASDAQ Bank Index for the Price
Determination Period, as quoted by NASDAQ.
“Price Determination
Period” means the ten consecutive Trading Days
immediately preceding the date that is five Trading Days before the
Closing Date.
“NASDAQ Bank
Index” shall mean the NASDAQ Market Index Sector, having the
trading symbol “IXBK,” for certain bank stocks grouped
by NASDAQ.
Section
7.2
Effect of
Termination.
If this Agreement
is terminated pursuant to Section 7.1 hereof or otherwise,
this Agreement shall forthwith become void, other than Sections
5.3(b), 5.7(b)(i), 8.1, 8.2, 8.4, 8.5, 8.6, 8.9, 8.10, 8.11, 8.12
and 8.13 hereof and this Section 7.2, which shall remain in full
force and effect, and there shall be no further liability on the
part of OLB or DCB to the other with respect to the Contemplated
Transactions, except for any liability of OLB or DCB under such
applicable sections of this Agreement.
ARTICLE
VIII.
MISCELLANEOUS
Section
8.1
Expenses and Other
Fees.
(a) General Expenses. Whether or
not the Contemplated Transactions are consummated, each party to
this Agreement will pay its respective expenses incurred in
connection with the preparation and performance of its obligations
under this Agreement. Each party agrees to indemnify the other
party against any cost, expense or liability (including reasonable
attorneys’ fees and including those costs of any
party’s enforcement of the rights afforded under this Section
8.1) in respect of any claim made by any party for a broker’s
or finder’s fee in connection with the Merger other than one
based on communications between the party and the claimant seeking
indemnification. OLB shall be responsible for and shall pay all
filing fees, trustee or exchange agent fees and expenses, and blue
sky fees and expenses, if any. The expenses of separate counsel to
any stockholder of DCB shall be borne by such stockholder and not
borne or reimbursed by the DCB Companies or OLB.
(b) DCB Termination Fee. In
recognition of the efforts, expenses and other opportunities
foregone by OLB while structuring and pursuing the Merger, DCB
shall pay to OLB by wire transfer of immediately available funds a
termination fee equal to the amount determined by multiplying 0.052
(i.e., 3.25% of 1.6) by the
DCB Tangible Equity (the “DCB Termination Fee”) as
follows:
(i) if
OLB terminates this Agreement pursuant to: (A) Section 7.1(b); (B)
Section 7.1(c) because the Closing failed to occur prior to
October, 31, 2017 or November 30, 2017, as applicable and such
failure resulted from the knowing, willful and intentional actions
or inactions of DCB or Damascus (provided that OLB is not then in
material breach of any representation, warranty, covenant, or other
agreement contained in this Agreement); (C) Section 7.1(d) because
a Regulatory Authority refused to issue a consent or approval
required for the consummation of any of the Contemplated
Transactions and such refusal resulted from the knowing, willful
and intentional actions or inactions of DCB or Damascus (provided
that OLB is not then in material breach of any representation,
warranty, covenant, or other agreement contained in this
Agreement); or (D) Section 7.1(i) (provided that OLB is not then in
material breach of any representation, warranty, covenant, or other
agreement contained in this Agreement), DCB shall pay the DCB
Termination Fee as promptly as practicable (but in any event within
three Business Days) after termination of the Agreement;
or
(ii) if
OLB or DCB terminates this Agreement pursuant to Sections 7.1(f) or
7.1(g), DCB shall pay the DCB Termination Fee at or prior to the
time of such termination.
If payment of the
DCB Termination Fee is timely made, then OLB will have no other
rights or claims against DCB and its officers, directors, attorneys
and financial advisors under this Agreement, it being agreed that
the acceptance of the DCB Termination Fee under this Section 8.1
will constitute the sole and exclusive remedy of OLB against DCB
and its officers, directors, attorneys and financial
advisors.
(c) OLB Termination Fee. In
recognition of the efforts, expenses and other opportunities
foregone by DCB while structuring and pursuing the Merger, OLB
shall pay to DCB by wire transfer of immediately available funds a
termination fee equal to the amount determined by multiplying 0.052
(i.e., 3.25% of 1.6) by the
DCB Tangible Equity (the “OLB Termination Fee”),
such OLB Termination Fee to be paid as promptly as practicable (but
in any event within three Business Days) after termination of the
Agreement, if this Agreement is terminated by DCB pursuant to: (i)
Section 7.1(b); (ii) Section 7.1(c) because the Closing failed to
occur prior to October 31, 2017 or November 30, 2017, as
applicable, and such failure resulted from the knowing, willful and
intentional actions or inactions of OLB or Old Line (provided that
DCB is not then in material breach of any representation, warranty,
covenant, or other agreement contained in this Agreement); or (iii)
Section 7.1(d) because a Regulatory Authority refused to issue a
consent or approval required for the consummation of any of the
Contemplated Transactions and such refusal resulted from the
knowing, willful and intentional actions or inactions of OLB or Old
Line (provided that DCB is not then in material breach of any
representation, warranty, covenant, or other agreement contained in
this Agreement).
If payment of the
OLB Termination Fee is timely made, then DCB will have no other
rights or claims against OLB and its officers, directors, attorneys
and financial advisors under this Agreement, it being agreed that
the acceptance of the OLB Termination Fee under this Section 8.1
will constitute the sole and exclusive remedy of DCB against OLB
and its officers, directors, attorneys and financial
advisors.
Section
8.2
Non-Survival.
All
representations, warranties and, except to the extent specifically
provided otherwise herein, agreements and covenants shall terminate
as of the Closing. Notwithstanding the foregoing, Sections 1.3(b),
1.3(c), 1.3(d), 1.5, 1.6, 2.5(b) through (i), 5.3(b) and 5.7(c)(i)
through (iv) and (vi) shall survive the Closing.
Section
8.3
Amendment,
Extension and Waiver.
(a) Subject to
applicable Law, at any time prior to the Closing, the parties
may:
(i) Amend
this Agreement;
(ii)
Extend the time for the performance of any of the obligations or
other acts of either party hereto;
(iii)
Waive any term or condition of this Agreement, any inaccuracies in
the representations and warranties contained herein or in any
document delivered pursuant hereto; or
(iv)
Waive compliance with any of the agreements or conditions contained
in Articles V and VI hereof or otherwise.
(b) This Agreement may
not be amended except by an instrument in writing signed, by
authorized officers, on behalf of the parties hereto. Any agreement
on the part of a party hereto to any extension or waiver shall be
valid only if set forth in an instrument in writing signed by a
duly authorized officer on behalf of such party, but such waiver or
failure to insist on strict compliance with such obligation,
covenant, agreement, or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other
failure.
Section
8.4
Entire
Agreement.
This Agreement, the
schedules and exhibits hereto, and any other documents to be
executed in connection herewith, including, without limitation, the
Bank Merger Agreement, and the Confidentiality Agreement, contain
the entire, complete, and integrated agreement between the parties
with respect to the subject matter hereof, and supersede any prior
or contemporaneous arrangements, agreements or understandings
between the parties, written or oral, express or implied, that may
have related to the subject matter hereof in any way other than the
Confidentiality Agreement.
Section
8.5 Binding
Agreement.
This Agreement
shall inure to the benefit of and be binding upon the parties
hereto and their successors; provided, however, that, except for
(a) the Indemnified Parties’ rights under Section 5.7(c)(iv),
and (b) the Insured Person’s rights with respect to the Tail
Policy under Section 5.7(c)(vi), which are expressly intended to be
for the irrevocable benefit of, and shall be enforceable by, each
Indemnified Party and Insured Person, respectively, and his or her
heirs and Representatives, nothing in this Agreement, expressed or
implied, is intended to confer upon any party, other than the
parties hereto and their respective successors, any rights,
remedies, obligations or liabilities.
All notices under
this Agreement shall be in writing and shall be deemed sufficient
and duly given: (a) when delivered personally to the recipient; (b)
upon confirmation of good transmission if sent by facsimile; or (c)
when delivered to the last known address of the recipient (i) one
Business Day after delivery to a reputable express courier service
for next-day delivery (charges prepaid), or (ii) three days after
being sent to the recipient by certified mail, return receipt
requested and postage prepaid, addressed as follows:
(a) If to OLB,
to:
James W.
Cornelsen
President and Chief
Executive Officer
Old Line
Bancshares, Inc.
1525 Pointer Ridge
Place
Bowie, MD
20716
Fax: (301)
430-2531
with a copy
to:
Frank C.
Bonaventure, Jr., Esquire
Baker, Donelson,
Bearman, Caldwell & Berkowitz, PC
100 Light
Street
Baltimore, Maryland
21202
Fax: (443)
263-7505
(b) If to DCB,
to:
Stephen J.
Deadrick
Chairman of the
Board
DCB Bancshares,
Inc.
26500 Ridge
Road
Damascus, Maryland
20872
E-mail:
steve@ddminsurance.com
with a copy
to:
Andrew D. Bulgin,
Esquire
Gordon Feinblatt
LLC
233 East Redwood
Street
Baltimore, MD
21202
Fax: (410)
576-4196
Section
8.7 Disclosure
Schedules.
Information
contained on either the DCB Disclosure Schedule or the OLB
Disclosure Schedule shall be deemed to cover the express disclosure
requirement contained in a representation or warranty of this
Agreement and any other representation or warranty of this
Agreement of such party where it is readily apparent it applies to
such provision. The mere inclusion of an item in a Disclosure
Schedule as an exception to a representation or warranty shall not
be deemed an admission by a party that such item represents a
material exception or fact, event or circumstance or that such item
is or could result in a Material Adverse Effect.
Section
8.8 Tax
Disclosure.
Notwithstanding
anything else in this Agreement to the contrary, each party hereto
(and its Representatives) may disclose to any and all Persons,
without limitation of any kind, the federal income tax treatment
and federal income tax structure of any and all Contemplated
Transactions and all materials of any kind (including opinions or
other tax analyses) that are or have been provided to any party (or
to any Representative of any party) relating to such tax treatment
or tax structure; provided,
however, that this authorization of disclosure shall not
apply to restrictions reasonably necessary to comply with
Securities Laws. This authorization of disclosure is not effective
until the earlier of (a) the date of the public announcement of
discussions relating to the Contemplated Transactions, (b) the date
of the public announcement of the Contemplated Transactions, or (c)
the date of execution of an agreement (with or without conditions)
to enter into the Contemplated Transactions.
Section
8.9 No
Assignment.
Neither party
hereto may assign any of its rights or obligations hereunder to any
other person, without the prior written consent of the other party
hereto.
Section
8.10
Captions;
Interpretation.
When a reference is
made in this Agreement to Sections or Exhibits, such reference
shall be to a Section of or Exhibit to this Agreement unless
otherwise indicated. The Background Section hereof constitutes an
integral part of this Agreement. References to Sections include
subsections, which are part of the related Section. The table of
contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words
“include,” “includes” or
“including” are used in this Agreement, they shall be
deemed to be followed by the words “without
limitation.” The phrases “the date of this
Agreement,” “the date hereof” and terms of
similar import, unless the context otherwise requires, shall be
deemed to refer to the date set forth in the Recitals to this
Agreement. All words used in this Agreement shall be construed to
be of such gender or number as the circumstances require. Unless
otherwise specifically noted, the words “herein,”
“hereof,” “hereby,” “hereunder”
and words of similar import refer to this Agreement as a whole and
not to any particular Section, subsection, paragraph, clause or
other subdivision of this Agreement. The parties have participated
jointly in the negotiation and drafting of this Agreement. In the
event an ambiguity or question of intent or interpretation arises,
this Agreement shall be construed as if drafted jointly by the
parties and no presumption or burden of proof shall arise favoring
or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement.
Section
8.11
Counterparts;
Electronic Signatures.
This Agreement may
be executed simultaneously in counterparts, each of which shall be
deemed to be an original copy of this Agreement and all of which
together will be deemed to constitute one and the same agreement.
The exchange of copies of this Agreement and of signature pages by
facsimile or other electronic transmission shall constitute
effective execution and delivery of this Agreement as to the
parties and may be used in lieu of the original Agreement for all
purposes. Signatures of the parties transmitted by facsimile or
other electronic transmission shall be deemed to be their original
signatures for all purposes.
Section
8.12
Severability.
The parties agree
that the provisions and covenants contained in each of the Sections
of this Agreement, and within the Sections themselves, are intended
to be separate and divisible provisions and covenants and if, for
any reason, any one or more of them shall be held to be invalid or
unenforceable, in whole or in part, by a court of competent
jurisdiction, then (a) the same shall not be held to affect the
validity of any other provision or covenant contained in this
Agreement and (b) the same shall be deemed to be modified to the
minimum extent necessary for it to be legally enforceable. The
parties hereby expressly request any court of competent
jurisdiction to enforce any such provision or covenant or to modify
any provision thereof so that it shall be enforced by such court to
the fullest extent permitted by applicable Law.
Section
8.13
Governing Law;
Venue; No Jury Trial.
(a) The laws of the
State of Maryland (without regard to any conflict of laws principle
that would apply the law of another jurisdiction) shall govern this
Agreement in all respects, whether as to its validity,
construction, capacity, performance or otherwise.
(b) The parties agree
that any judicial proceeding arising out of or relating to this
Agreement (including any declaratory judgments) shall be filed
exclusively in the State and Federal courts located in Prince
George’s County, Maryland or in Montgomery County, Maryland
and the District of Maryland, respectively, and each party hereby
consents to, and will submit to, the personal and subject matter
jurisdiction of such courts in any proceeding to enforce any of
their obligations under this Agreement and shall not contend that
any such court is an improper or inconvenient venue. The foregoing
shall not limit the right of any party to obtain execution of
judgment in any other jurisdiction. The prevailing party in any
judicial proceeding arising out of or relating to this Agreement
shall be entitled to recover all costs and attorneys’ fees
from the non-prevailing party.
(c) EACH OF THE PARTIES
HERETO EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OR RIGHT TO
DEMAND TRIAL BY JURY IN ANY ACTION BROUGHT TO ENFORCE THIS
AGREEMENT, OR ANY PROVISION HEREOF, OR FOR DAMAGES DUE AS A RESULT
OF AN ALLEGED BREACH OF THIS AGREEMENT.
Section
8.14
Time of
Essence.
With regard to all
dates and time periods set forth or referred to in this Agreement,
time is of the essence.
[Signatures appear on the following
page.]
IN WITNESS WHEREOF, the parties have
caused this Agreement to be executed by their duly authorized
officers as of the day and year first above written.
TEST:
|
OLD LINE
BANCSHARES, INC.
|
|
|
|
|
By:____________________________________
|
By:____________________________________
|
Name: Elise
Hubbard
|
Name: James W.
Cornelsen
|
Title: Assistant
Secretary
|
Title: President
and Chief Executive Officer
|
|
|
|
|
ATTEST:
|
DCB BANCSHARES,
INC.
|
|
|
|
|
By:____________________________________
|
By:____________________________________
|
Name: Terry
Hollinger
|
Name: Stephen J.
Deadrick
|
Title:
Secretary
|
Title: Chairman of
the Board
|
|
|
EXHIBIT INDEX
Exhibit A – List of
Stockholders to Execute Support Agreements
Exhibit B – Support
Agreement
Exhibit C – Bank Merger
Agreement
Exhibit D –
Spreadsheet
Exhibit A
List of
Stockholders to Execute Support Agreements
Robert
Carpenter
William
Lindlaw
Donald W.
Burdette
James R. Clifford,
Sr.
George C.
Cramer
Stephen J.
Deadrick
Bernard L. Moxley,
Jr.
Gary L. Smith,
Sr.
Theresa J.
Tomasini
John E.
Tregoning
William F. Willard,
Jr.
Exhibit B
Support
Agreement
[Attached]
SUPPORT AGREEMENT
This Support
Agreement, dated as of February ___, 2017 (this “Agreement”), is made and
entered into by and between Old Line Bancshares, Inc., a Maryland
corporation (“OLB”), and _________________ (the
“Stockholder”), as an
individual stockholder of DCB Bancshares, Inc. (“DCB”),
a Maryland corporation.
WHEREAS,
concurrently herewith, OLB and DCB are entering into an Agreement
and Plan of Merger (as such agreement may hereafter be amended and
supplemented from time to time, the “Merger Agreement”),
pursuant to which, among other things, DCB will be merged with and
into OLB, with OLB continuing as the surviving company (the
“Merger”);
and
WHEREAS, the
Stockholder is a member of the board of directors of DCB and its
subsidiary, Damascus Community Bank
(“DCBank”);
WHEREAS, as a
stockholder of DCB, the Stockholder will receive a significant
benefit from the transaction described in the Merger Agreement;
and
WHEREAS, to induce
OLB to enter into the Merger Agreement, and as a condition to the
transactions contemplated thereby, the Stockholder has agreed to
enter into this Agreement.
NOW, THEREFORE, in
consideration of the premises and mutual covenants, agreements,
representations and warranties contained herein, and other good and
valuable consideration, the receipt of which is hereby
acknowledged, the parties, intending to be legally bound, hereby
agree as follows:
1. Definitions. Capitalized terms
used but not defined herein and defined in the Merger Agreement
have the respective meanings ascribed to them in the Merger
Agreement. In addition, for purposes of this
Agreement:
(a) “Affiliate” of a specified Person
means a Person that directly or indirectly, through one or more
intermediaries, Controls, is Controlled by or is under common
Control with, such specified Person.
(b) “Beneficially Own” or
“Beneficial
Ownership” with respect to any securities shall mean
having “beneficial ownership” of such securities (as
determined pursuant to Rule 13d-3 under the Securities Exchange Act
of 1934, as amended (the “Exchange Act”)),
including pursuant to any agreement, arrangement or understanding,
whether or not in writing. Without duplicative counting of the same
securities by the same holder, securities Beneficially Owned by a
Person shall include securities Beneficially Owned by all other
Persons who together with such Person would constitute a
“group” within the meaning of Section 13(d)(3) of the
Exchange Act.
(c) “Control” and “Controlled,” as used within the definition of
Affiliate, shall mean the possession, direct or indirect, of the
power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting
securities or by contract.
(d) “Effective Time,” means the time
when the Merger becomes effective in accordance as defined with the
Merger Agreement.
(e) “knowledge” or “known” means, with respect to the
Stockholder, the actual knowledge of such Stockholder as to the
fact or other matter, however obtained; provided that no Stockholder who serves
as a director or officer of DCB or DCBank may deny having actual
knowledge of a fact or other matter if a reasonably prudent
individual possessing the knowledge and experience of the
Stockholder and serving in such capacity could be expected to
discover or otherwise become aware of such fact or other matter in
the ordinary course of performing his, her or its duties as a
director or officer. Without limiting the scope of the foregoing
proviso, no Stockholder who serves as a director or officer of DCB
or DCBank may deny having actual knowledge of a fact or other
matter by reason of such Stockholder having failed to review
information available to such Stockholder that such Stockholder
would normally review in the ordinary course of business in his,
her or its capacity as a director or officer of DCB or
DCBank.
(f) “OLB Applications” means
all applications, notices and filings that OLB is required to file
with any Regulatory Authority (as defined in the Merger Agreement)
in connection with the Merger.
(g) “Superior Proposal” shall
have the meaning set forth in the Merger Agreement.
(h) “DCB Companies” shall mean
collectively DCB and any subsidiaries thereof.
(i) “Person” shall mean an individual,
corporation, limited liability company, partnership, joint venture,
association, trust, unincorporated organization or other
entity.
(j) “Shares” shall mean shares
of the common stock, $0.01 par value per share, of
DCB.
(k) “Stockholder’s Shares” shall
mean all Shares held of record or Beneficially Owned by the
Stockholder, whether currently issued and outstanding or hereafter
acquired by purchase, or by exercise of any options, warrants or
other securities convertible into or exchangeable or exercisable
for Shares.
(l) “Termination Date” shall mean the
date that the Merger Agreement has been terminated in accordance
with its terms.
2. Voting of Shares.
(a) From and after the
date of this Agreement and ending as of the first to occur of the
Effective Time or the Termination Date, at any meeting of the
holders of Shares, however called, or in any other circumstance
upon which the vote, consent or other approval of holders of Shares
is sought, the Stockholder shall vote or cause to be voted
(including by written consent, if applicable) all of the
Stockholder’s Shares entitled to vote thereon, (i) in favor
of approval of the Merger and the execution and delivery by DCB of
the Merger Agreement (ii) against any action or agreement that
would result in a material breach of any covenant, representation
or warranty or any other obligation or agreement of DCB under the
Merger Agreement and (iii) against the following actions:
(A) any Superior Proposal; and (B) to the extent that such are
intended to, or could reasonably be expected to, impede, interfere
with, delay, postpone or materially adversely affect the Merger or
the transactions contemplated by the Merger Agreement, or implement
or lead to: (1) any change in a majority of the persons who
constitute the board of directors of DCB; (2) any change in the
present capitalization of DCB or any amendment of DCB’s
Articles of Incorporation or Bylaws; or (3) any other material
change in DCB’s corporate structure. In addition to the other
covenants and agreements of the Stockholder provided for elsewhere
in this Agreement, during the above-described period, the
Stockholder shall not enter into any agreement or understanding
with any Person or entity the effect of which would be inconsistent
with or violate the provisions and agreements contained in this
Section 2.
(b) It is understood
and hereby agreed that this Agreement relates solely to the
capacity of the Stockholder as a holder of the Shares and is not in
any way intended to affect the exercise of the Stockholder’s
responsibilities and fiduciary duties as a director or officer of
DCB or DCBank, including, without limitation, the exercise or
performance of any of the Stockholder’s rights or obligations
as a director with respect to any matter that comes before the
board of directors of DCB or DCBank.
(c) The Stockholder
hereby authorizes disclosure of his, her or its identity and
ownership of the Stockholder’s Shares and the nature of his,
her or its commitments, arrangements and understandings under this
Agreement in any proxy statement and regulatory filing of DCB, and
in any regulatory filing by OLB related to the Merger.
3. Representations and Warranties of the
Stockholder. The Stockholder hereby makes the following
representations and warranties to OLB, which are true and correct
as of the date hereof and shall be true and correct as of the
Effective Date:
(a) Ownership. As of the date of
this Agreement, the Shares set forth on Exhibit A hereto constitute all
of the Stockholder’s Shares owned of record or Beneficially
Owned by the Stockholder. Except for Shares with respect to which
the Stockholder shares investment or dispositive power or that are
owned together with others, the Stockholder has sole power of
disposition, sole power to demand appraisal rights and sole power
to vote upon and agree to all of the matters set forth in this
Agreement, in each case with respect to all of the Shares set forth
on Exhibit A
hereto, with no material limitations, qualifications or
restrictions on such rights, subject to applicable securities laws
and the terms of this Agreement.
(b) Power; Binding Agreement. The
Stockholder has the legal capacity, power and authority to enter
into and perform all of the Stockholder’s obligations under
this Agreement. This Agreement has been or will be duly and validly
executed and delivered by the Stockholder and (assuming the due
authorization, execution and delivery by the counterparties hereto
and thereto) constitutes or will constitute the legal, valid and
binding obligation of the Stockholder, enforceable against the
Stockholder in accordance with its terms, subject to the effect of
bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to creditors’ rights generally and general
equitable principles. There is no beneficiary or holder of a voting
trust certificate or other interest of any trust of which the
Stockholder is trustee whose consent is required for (i) the
execution and delivery of this Agreement or any other agreements,
documents or instruments contemplated hereby to which the
Stockholder is a party or (ii) the consummation by the Stockholder
of the transactions contemplated hereby. If the Stockholder is
married and the Stockholder’s Shares constitute community
property, this Agreement has been duly authorized, executed and
delivered by, and (assuming the due authorization, execution and
delivery by the Stockholder and Hopkins) constitutes a valid and
binding agreement of, the Stockholder’s spouse, enforceable
against such person in accordance with its terms, subject to the
effect of bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to creditors’ rights generally
and general equitable principles.
(c) No Conflicts. No filing with,
and no permit, authorization, consent or approval of, any state or
federal public body or authority or any Person is necessary for the
execution of this Agreement by the Stockholder and the consummation
by the Stockholder of the transactions contemplated hereby, and
none of the execution and delivery of this Agreement by the
Stockholder, the consummation by the Stockholder of the
transactions contemplated hereby or compliance by the Stockholder
with any of the provisions hereof shall (i) result in a violation
or breach of, or constitute (with or without notice or lapse of
time or both) a default (or give rise to any third party right of
termination, cancellation, material modification or acceleration)
under any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, license, contract, commitment, arrangement,
understanding, agreement or other instrument or obligation of any
kind to which the Stockholder is a party or by which the
Stockholder or any of his, her or its properties or assets may be
bound, or (ii) violate any order, writ, injunction, decree,
judgment, order, statute, rule or regulation applicable to the
Stockholder or any of his, her or its properties or assets, in each
such case except to the extent that any conflict, breach, default
or violation would not interfere in any material respect with the
ability of the Stockholder to perform his, her or its obligations
hereunder.
(d) Voting Agreements or
Arrangements. Stockholder is not a party to any voting
trusts, voting agreements, buy-sell agreements or other agreements
or arrangements affecting the Stockholder’s Shares, other
than this Agreement.
4. Covenants of the Stockholder.
The Stockholder hereby covenants and agrees with OLB as
follows:
(a) No Encumbrances. At all times
hereafter during the term hereof, all of the Stockholder’s
Shares will be held free and clear of all liens, claims, security
interests, proxies, voting trusts or agreements, understandings or
arrangements or any other encumbrances whatsoever, except for any
liens, claims, understandings or arrangements that do not limit or
impair in any material respect Stockholder’s ability to
perform his, her or its obligations under this Agreement, and
subject to applicable securities laws and the terms of this
Agreement.
(b) Actions; Information for
Applications.
(i) Subject to Section
2(b) of this Agreement, the Stockholder will take all reasonable
actions to and assist in the consummation of the Merger and the
transactions contemplated by the Merger Agreement, and will use
his, her or its best efforts to cause the DCB Companies to take the
actions that are described in the Merger Agreement.
(ii) The Stockholder
will furnish OLB with all information concerning the Stockholder
required for inclusion in the OLB Applications. All information
provided by the Stockholder about the Stockholder for inclusion in
the OLB Applications, at the time such information is provided,
shall be true and correct in all material respects and will not
omit any material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made,
not misleading.
(c) Confidentiality. The
Stockholder shall not disclose or use for his, her or its own
purpose or the benefit of others any information that the DCB
Companies are prohibited from disclosing or using for their own
purposes or for the benefit of others under Section 5.3 of the
Merger Agreement. The Stockholder shall use his, her or its
commercially reasonable best efforts to keep confidential all such
information, and shall not directly or indirectly use such
information for any competitive or other commercial purposes. The
obligation to keep such information confidential shall continue for
one year from the date of this Agreement, or the Termination Date
or the date such information becomes publically known other than as
a result of a breach of this Agreement, whichever is
earlier.
(i) No Solicitation. The
Stockholder shall not take any action that is described in
Section 5.1 of the Merger Agreement as an action of which the
DCB Companies are prohibited from authorizing or permitting their
respective officers, directors or employees to take.
(d) Press Releases. The Stockholder
will not, directly or indirectly, without the prior approval of
OLB, issue any press release or written statement for general
circulation relating to the Merger Agreement or the Merger except
as otherwise required by applicable law or regulation, and then
only after making reasonable efforts to notify OLB in
advance.
(e) Restriction on Transfer and Proxies;
Non-Interference. From and after the date of this Agreement
and ending as of the first to occur of the Effective Time or the
date DCB Stockholders approve the Merger Agreement, the Stockholder
shall not, and shall cause each of his, her or its Affiliates who
Beneficially Own any of the Stockholder’s Shares not to,
directly or indirectly, without the consent of OLB: (i) offer
for sale, sell, transfer, tender, pledge, encumber, assign or
otherwise dispose of, or enter into any contract, option or other
arrangement or understanding with respect to or consent to the
offer for sale, sale, transfer, tender, pledge, encumbrance,
assignment or other disposition of, any or all of the
Stockholder’s Shares, or any interest therein; (ii) grant any
proxies or powers of attorney, deposit any of Stockholder’s
Shares into a voting trust or enter into a voting agreement with
respect to any of Stockholder’s Shares; (iii) enter into
any agreement or arrangement providing for any of the actions
described in clause (i) or (ii) above; or (iv) take any action that
could reasonably be expected to have the effect of preventing or
disabling the Stockholder from performing the Stockholder’s
obligations under this Agreement.
(f) Waiver of and Agreement Not to Assert
Appraisal Rights. The Stockholder hereby confirms (i) his or
her knowledge of the availability of the rights of objecting
stockholders under Subtitle 2 of Title 3 of the Corporations and
Associations Article of the Annotated Code of Maryland (the
“Appraisal Statute”) with respect to the Merger, and
(ii) receipt of a copy of the provisions of the Appraisal Statute
related to the rights of objecting stockholders. The Stockholder
hereby waives and agrees not to assert, and shall cause any of his
or her Affiliates who hold of record any of the Stockholder’s
Shares to waive and not to assert, any appraisal rights with
respect to the Merger that the Stockholder or such Affiliate may
now or hereafter have with respect to any of the
Stockholder’s Shares (or any other shares of capital stock of
Hopkins that the Stockholder shall hold of record at the time that
the Stockholder may be entitled to assert appraisal rights with
respect to the Merger), whether pursuant to the Appraisal Statue or
otherwise.
(g) Further Assurances. From time
to time, at OLB’s request and without further consideration,
the Stockholder shall execute and deliver such additional documents
reasonably requested by OLB as may be necessary or desirable to
consummate and make effective, in the most expeditious manner
practicable, the transactions contemplated by this
Agreement.
5. Representations and Warranties of
OLB. OLB hereby represents and warrants to the Stockholder
that:
(a) Organization, Standing and Corporate
Power. OLB is a corporation duly organized, validly existing
and in good standing under the laws of the State of Maryland, with
full corporate power and authority to carry on its business as
proposed and currently conducted. Except as described in the Merger
Agreement, OLB has the corporate power and authority to enter into
and perform all of its obligations under this Agreement and to
consummate the transactions contemplated hereby.
(b) Execution, Delivery and Performance by
OLB. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by the Board of Directors of OLB.
Except as described in the Merger Agreement, OLB has taken all
actions required by law, its Articles of Incorporation, as amended,
and its Amended and Restated By-Laws to consummate the transactions
contemplated by this Agreement. This Agreement constitutes the
valid and binding obligation of OLB and is enforceable against OLB
in accordance with its terms, except as enforceability may be
subject to bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors’ rights
generally and general equitable principles.
6. Stop Transfer. From and after
the date of this Agreement and ending as of the first to occur of
the Effective Time or the Termination Date, the Stockholder will
not request that DCB register the transfer (book-entry or
otherwise) of any certificate or uncertificated interest
representing any of the Stockholder’s Shares.
7. Recapitalization. In the event
of a stock dividend or distribution, or any change in the Shares
(or any class thereof) by reason of any split-up, recapitalization,
combination, exchange of shares or the like, the term
“Shares” shall include, without limitation, all such
stock dividends and distributions and any shares into which or for
which any or all of the Shares (or any class thereof) may be
changed or exchanged as may be appropriate to reflect such
event.
8. Binding on Successors and Assigns;
Assignment. Except as contemplated by Section 10(g) hereof,
neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by operation of law or
otherwise, except that OLB may, without the approval of the
Stockholder, assign any or all of its rights, interests and
obligations hereunder to any wholly-owned subsidiary of OLB.
Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns. The Stockholder agrees
that this Agreement, and the obligations of the Stockholder
hereunder, shall attach to the Stockholder’s Shares and shall
be binding upon any Person to which legal or beneficial ownership
of such Shares shall pass, whether by operation of law or
otherwise, including, without limitation, the Stockholder’s
heirs, guardians, administrators or successors.
9. Termination. This Agreement
shall terminate without any further action on the part of any party
hereto upon to occur of (a) the termination of the Merger Agreement
pursuant to the terms thereof or (b) the Effective Time. Upon such
termination, this Agreement shall forthwith become void and of no
further force or effect. The representations and warranties of the
parties contained herein shall not survive the termination of this
Agreement.
10. Miscellaneous.
(a) Entire Agreement; Amendment.
This Agreement, along with any agreements referenced herein,
contains the entire, complete, and integrated agreement among the
parties with respect to the subject matter hereof, and supersedes
any prior or contemporaneous arrangements, agreements or
understandings among the parties, written or oral, express or
implied, that may have related to the subject matter hereof. This
Agreement may be amended only by a written instrument duly executed
by the parties.
(b) Governing Law. This Agreement
shall in all respects be interpreted, enforced, and governed under
the laws of the State of Maryland, without regard to
Maryland’s conflict-of-laws provisions. The parties hereby
submit to the jurisdiction and venue of the courts of Maryland, and
any legal or equitable action to enforce this or any related
agreements may only be brought in the circuit courts
therein.
(c) Captions. The headings of
Sections and subsections contained in this Agreement are provided
for convenience only. They form no part of this Agreement and shall
not affect its construction or interpretation. All references to
Sections, subsections, paragraphs, clauses or other subdivisions in
this Agreement refer to the corresponding Sections, subsections,
paragraphs, clauses or other subdivisions of this Agreement. All
words used in this Agreement shall be construed to be of such
gender or number as the circumstances require. Unless otherwise
specifically noted, the words “herein”,
“hereof”, “hereby”, “hereunder”
and words of similar import refer to this Agreement as a whole and
not to any particular Section, subsection, paragraph, clause or
other subdivision of this Agreement.
(d) Notices. All notices, claims,
certificates, requests, demands and other communications hereunder
shall be in writing and shall be deemed sufficient and duly given:
(i) when delivered personally to the recipient; (ii) email upon
confirmation of good transmission if sent by facsimile; or (iii)
when delivered to the last known address of the recipient (A) one
business day after delivery to a reputable express courier service
for next-day delivery (charges prepaid), or (B) three days after
being sent to the recipient by certified mail, return receipt
requested and postage prepaid, addressed as follows:
(1) If
to
OLB:
James W. Cornelsen
President and Chief
Executive Officer
Old Line
Bancshares, Inc.
1525 Pointer Ridge
Rd.
Bowie, Maryland
20716
with copy
to:
Baker, Donelson, Bearman, Caldwell
&
Berkowitz
A Professional
Corporation
100 Light
Street
Baltimore, Maryland
21202
Attn: Frank C.
Bonaventure, Jr., Esq.
(2)
If to the
Stockholder:
At the address(es) indicated on the
applicable
signature page hereto.
Addresses may be
changed by notice in writing signed by the addressee.
(e) Severability. Whenever
possible, each provision or portion of any provision of this
Agreement will be interpreted in such manner as to be effective and
valid under applicable law, but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in
any jurisdiction, then such invalidity, illegality or
unenforceability will not affect any other provision or portion of
any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision or portion of any
provision had never been contained herein.
(f) Remedies Cumulative. All
rights, powers and remedies provided under this Agreement or
otherwise available in respect hereof at law or in equity shall be
cumulative and not alternative, and the exercise of any such right,
power or remedy by any party shall not preclude the simultaneous or
later exercise of any other such right, power or remedy by such
party.
(g) No Third Party Beneficiaries.
This Agreement is not intended to be for the benefit of, and shall
not be enforceable by, any person or entity who or which is not a
party hereto; provided that
in the event of the Stockholder’s death, the obligations of
the Stockholder hereunder shall attach to the Stockholder’s
Shares and shall be binding upon any Person to which legal or
beneficial ownership of such Shares shall pass, whether by
operation of law or otherwise, including without limitation the
Stockholder’s heirs, guardians, administrators or
successors.
(h) Counterparts; Facsimile. This
Agreement may be executed simultaneously in several counterparts,
each of which shall be deemed to be an original copy of this
Agreement and all of which together will be deemed to constitute
one and the same agreement. The exchange of copies of this
Agreement and of signature pages by facsimile transmission shall
constitute effective execution and delivery of this Agreement as to
the parties and may be used in lieu of the original Agreement for
all purposes. Signatures of the parties transmitted by facsimile
shall be deemed to be their original signatures for all
purposes.
(i) Construction. This Agreement
has been prepared by all parties hereto, and the language used
herein shall not be construed in favor of or against any particular
party.
(j) No Waiver. The delay or failure
on the part of any party to (i) insist upon the strict
compliance with any of the terms of this Agreement or
(ii) exercise any rights or remedies hereunder shall not
operate as a waiver of, or estoppel with respect to, any subsequent
or other failure, nor shall any single or partial exercise of any
right or remedy hereunder preclude any subsequent exercise thereof
or the exercise of any other right or remedy at any later time or
times.
(k) WAIVER OF JURY TRIAL. EACH
PARTY HEREBY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO
WHICH IT MAY BE A PARTY, ARISING OUT OF OR IN ANY WAY PERTAINING TO
THIS AGREEMENT. IT IS AGREED AND UNDERSTOOD THAT THIS WAIVER
CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL
PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST
PARTIES WHO ARE NOT PARTIES HERETO. THIS WAIVER IS KNOWINGLY,
WILLINGLY AND VOLUNTARILY MADE BY EACH PARTY, AND EACH HEREBY
REPRESENTS THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN
MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO
IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. EACH PARTY FURTHER
REPRESENTS THAT IT HAS HAD THE OPPORTUNITY TO BE REPRESENTED IN THE
EXECUTION OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY
INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, AND THAT
IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH
COUNSEL.
[Signatures appear on the following
page.]
IN WITNESS WHEREOF,
the parties have caused this Agreement to be duly executed as of
the date first written above.
|
OLD LINE
BANCSHARES, INC.
|
|
|
|
|
|
|
By:
|
|
|
|
|
James W.
Cornelsen
|
|
|
|
President and Chief
Executive Officer
|
|
|
STOCKHOLDER:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Print Name:
_______________________________________
|
|
EXHIBIT
A
TO
SUPPORT
AGREEMENT
CLASS
OF
SHARES
|
CERTIFICATE
NO.
|
NUMBER
OF
SHARES
|
RECORD
OWNER
|
BENEFICIAL
OWNER
|
Common
Stock
|
|
|
|
|
Common
Stock
|
|
|
|
|
Exhibit C
Bank Merger
Agreement
Exhibit D
Spreadsheet
|
|
Change
|
|
|
DCB
|
Per
Share
|
|
|
|
from
|
|
|
Tang.
Equity
|
Consideration
|
|
Type
of
|
Average
|
Starting
|
Consideration
|
|
Per
Share
|
/DCB
|
Aggregate
|
Exchange
|
|
Price
of
|
Offered
Per
|
Exchange
|
as
of
|
Tang.
Book
|
Consideration
|
Ratio
|
Price
|
$27.21
|
DCB
Share
|
Ratio
|
12/31/16
|
Per
Share
|
(in
thous.)
|
|
|
|
|
|
|
|
|
Fixed
Exch. Ratio
|
29.93
|
10.00%
|
27.74
|
0.9269
|
15.76
|
176%
|
44,746
|
28.57
|
5.00%
|
26.48
|
0.9269
|
15.76
|
168%
|
42,712
|
Floating Exchange
Ratio
|
27.21
|
0.00%
|
25.22
|
0.9269
|
15.76
|
160%
|
40,678
|
25.85
|
-5.00%
|
25.22
|
0.9756
|
15.76
|
160%
|
40,678
|
24.49
|
-10.00%
|
25.22
|
1.0298
|
15.76
|
160%
|
40,678
|
23.13
|
-15.00%
|
25.22
|
1.0904
|
15.76
|
160%
|
40,678
|
21.77
|
-20.00%
|
25.22
|
1.1585
|
15.76
|
160%
|
40,678
|
20.85
|
-23.37%
|
25.22
|
1.2096
|
15.76
|
160%
|
40,678
|
Fixed
Exch. Ratio
|
20.41
|
-25.00%
|
24.69
|
1.2096
|
15.76
|
157%
|
39,839
|
19.05
|
-30.00%
|
23.04
|
1.2096
|
15.76
|
146%
|
37,169
|
16.68
|
-38.70%
|
20.18
|
1.2096
|
15.76
|
128%
|
32,542
|
Exhibit E
Damascus Community
Bank Employee Change in Control Plan
February 1,
2017
Board of
Directors
DCB Bancshares,
Inc.
26500
Ridge Road
Damascus,
Maryland 20872
Members of the
Board:
You have requested
RP®
Financial, LC. (“RP Financial”) to provide you with its
opinion as to the fairness from a financial point of view to the
shareholders of DCB Bancshares, Inc. (“DCB”), the
holding company for Damascus Community Bank
(“Damascus”), Damascus, Maryland of the consideration
pursuant to the Agreement and Plan of Merger (the
“Agreement”), dated February 1, 2017, by and between
DCB and Old Line Bancshares, Inc. (“OLB”), Bowie
Maryland. As detailed in the Agreement, DCB will merge with and
into OLB, and Damascus will merge with and into Old Line Bank, the
wholly-owned subsidiary of OLB. OLB and Old Line Bank will be the
surviving institutions (the “Merger”). The Agreement,
inclusive of exhibits, is incorporated herein by reference. Unless
otherwise defined, all capitalized terms incorporated herein have
the meanings ascribed to them in the Agreement.
Summary Description of Merger Consideration
Within three
business days following the date on which the consolidated
financial statements of DCB for the year ended December 31, 2016
have been audited and finalized (the “Calculation
Date”), DCB shall calculate the DCB Tangible Equity, which
shall be DCB’s total stockholders’ equity at December
31, 2016 less its intangible assets, if any, at December 31, 2016,
as such amounts are set forth in DCB’s audited consolidated
balance sheet at the December 31, 2016. Within five business days
after the Calculation Date, DCB shall provide OLB with its
calculation of the DCB Tangible Equity and any supporting
documentation necessary for OLB to review such
calculation.
Each share of DCB
Common Stock that is issued and outstanding immediately prior to
the Effective Time shall, at the Effective Time, by reason of the
Merger and without any action on the part of the holder thereof,
cease to be outstanding and be automatically cancelled, and shall
be converted into the right to receive that number of shares of OLB
Common Stock equal to the Exchange Ratio calculated in accordance
with the following:
The Exchange Ratio
shall be the number determined by dividing the Per Share Value by
the Average Price, rounded to the nearest
ten-thousandth.
The term “Per
Share Value” shall mean the amount determined by (a)
multiplying the DCB Tangible Equity by 1.60 and (b) dividing such
product by the number of shares of DCB Common Stock that are issued
and outstanding immediately prior to the Effective
Time.
The term
“Average Price” shall mean the amount equal to the
volume weighted average of the closing prices of OLB Common Stock
for the 10 Trading Days immediately prior to the Closing Date;
provided, however, that in no event will the Average Price be less
than $20.85 nor greater than the Starting Price.
RP Financial Background and Experience
RP Financial, as
part of its financial institution valuation and financial advisory
practice, is regularly engaged in the valuation of
federally-insured depository institution securities in connection
with mergers and acquisitions, initial and secondary stock
offerings, and business valuations for financial institutions for
other purposes. As specialists in the valuation of securities and
providing financial advisory services to insured financial
institutions, RP Financial has experience in, and knowledge of, the
markets for the securities of such institutions
nationwide.
Materials Reviewed
In rendering this
opinion, RP Financial reviewed or considered the following
materials or information: (1) the Agreement, as reviewed by the DCB
Board of Directors on February 1, 2017, including the exhibits; (2)
the following financial information for DCB – (a) audited
consolidated financial statements, included in the annual reports
for the fiscal years ended December 31, 2012 through December 31,
2015; (b) unaudited consolidated financial data, including
shareholder reports and financial statements through December 31,
2016, (c) unaudited consolidated financial data through December
31, 2016; (d) quarterly financial reports submitted to the FDIC by
the Bank through September 30, 2016; (e) internal financial and
other reports provided to DCB’s and Damascus’ Board of
Directors from the beginning of fiscal 2015 through December 31,
2016 with regard to balance sheet and off-balance sheet
composition, profitability and balance sheet trends, certain risk
factors and DCB’s and Damascus’ operations; (f)
historical publicly-available financial information as published by
SNL Financial, Inc.; and (g) internally prepared budget
information; (3) the financial terms of certain other recently
completed and pending acquisitions of banks headquartered in the
Mid-Atlantic region of the United States with comparable financial
characteristics as DCB; (4) the financial terms of certain other
recently completed and pending acquisitions of banks headquartered
in the states of Maryland, Virginia and Delaware as well as the
District of Columbia with comparable financial characteristics as
DCB; (5) the estimated pro forma financial benefits of the Merger
to DCB shareholders; and (6) in person interviews with senior
executive officers of DCB.
In addition, RP
Financial reviewed or considered the following materials or
information for OLB and as further described below certain peers of
OLB: (1) the annual audited financial statements for the fiscal
years ended 2011 to 2015, as presented in OLB’s 10K filings;
(2) the quarterly financial report submitted to the FDIC by Old
Line Bank from March 31, 2015 through December 31, 2016; (3)
internally prepared budget information for OLB for 2017; (4) stock
price history for OLB during past twelve months; (5) OLB financial
information versus a peer group of comparable publicly-traded
institutions; and (6) in person interviews with senior executives
of OLB.
In rendering its
opinion, RP Financial relied, without independent verification, on
the accuracy and completeness of the information concerning DCB and
OLB furnished by the respective institutions to RP Financial for
review for purposes of its opinion, as well as publicly-available
information regarding other financial institutions and competitive,
economic and demographic data. We have further relied on the
assurances of management of DCB and OLB as included in the
Agreement. We have not been asked to and have not undertaken an
independent verification of any of such information and we do not
assume any such responsibility or liability for the accuracy or
completeness thereof. DCB did not restrict RP Financial as to the
material it was permitted to review. RP Financial did not perform
or obtain any independent appraisals or evaluations of the assets
and liabilities, the collateral securing the assets or the
liabilities (contingent or otherwise) of DCB or OLB or the
collectability of any such assets, nor have we been furnished with
any such evaluations or appraisals. We did not make an independent
evaluation of the adequacy of the allowance for loan losses of DCB
or OLB nor have we reviewed any individual credit files relating to
DCB or OLB.
RP Financial, with
your consent, has relied upon the advice DCB has received from its
legal, accounting and tax advisors as to all legal, accounting and
tax matters relating to the Agreement and other transactions
contemplated by the Agreement. In rendering its opinion, RP
Financial assumed that, in the course of obtaining the necessary
regulatory and governmental approvals for the proposed Merger, no
restriction will be imposed on OLB that would have a material
adverse effect on the ability of the Merger to be consummated as
set forth in the Agreement. We have also assumed that there has
been no material change in DCB or OLB’s assets, financial
condition, results of operations, business or prospects since the
date of the most recent financial statement made available to us.
We have assumed, in all respects material to our analyses, that all
of the representations and warranties contained in the Agreement
and all related agreements are true and correct, that each party to
such agreements will perform all of the covenants required to be
performed by such party under such agreements and that the
conditions precedent in the Agreement are not waived.
Opinion
It is understood
that this letter is directed to the Board of Directors of DCB in
its consideration of the Agreement, and does not constitute a
recommendation to any shareholder of DCB as to any action that such
shareholder should take in connection with the Agreement, or
otherwise. Our opinion is directed only to the fairness of the
Merger Consideration to the current holders of DCB Common Stock
from a financial point of view as of the date of the
Agreement.
It is understood
that this opinion is based on market conditions and other
circumstances existing on the date hereof. Events occurring after
the date hereof could materially affect this opinion. We are
expressing no opinion herein as to the prices at which OLB Common
Stock may trade at any time.
We will receive a
fee for our fairness opinion services. DCB has agreed to indemnify
us against certain liabilities arising out of our
engagement.
It is understood
that this opinion may be included in its entirety in any
communication by DCB or its Board of Directors to the stockholders
of DCB. It is also understood that this opinion may be included in
its entirety in any regulatory filing by DCB, and that RP Financial
consents to the summary of this opinion in the proxy materials of
DCB, and any amendments thereto. Except as described above, this
opinion may not be summarized, excerpted from or otherwise publicly
referred to without RP Financial’s prior written
consent.
Based upon and
subject to the foregoing, and other such matters we consider
relevant, it is RP Financial’s opinion that, as of the date
hereof, the Merger Consideration to be received by the holders of
DCB Common Stock, as described in the Agreement, is fair to such
shareholders from a financial point of view.
|
Respectfully
submitted,
RP® FINANCIAL,
LC.
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ANNEX
C
SECTIONS
3-201 THROUGH 3-213
OF
THE MARYLAND GENERAL CORPORATION LAW
MARYLAND
CORPORATIONS AND ASSOCIATIONS Code Ann (2014)
§
3-201. Definitions.
(a) In
general. -- In this subtitle the following words have the meanings
indicated.
(b) Affiliate.
-- “Affiliate” has the meaning stated in § 3-601
of this title.
(c) Associate.
-- “Associate” has the meaning stated in § 3-601
of this title.
(d) Beneficial
owner. -- “Beneficial owner”, when used with respect to
any voting stock, means a person that:
(1) Individually
or with any of its affiliates or associates, beneficially owns
voting stock, directly or indirectly;
(2) Individually
or with any of its affiliates or associates, has:
(i) The
right to acquire voting stock (whether the right is exercisable
immediately or within 60 days after the date on which beneficial
ownership is determined), in accordance with any agreement,
arrangement, or understanding, on the exercise of conversion
rights, exchange rights, warrants, or options, or otherwise;
or
(ii) Except
solely by virtue of a revocable proxy, the right to vote voting
stock in accordance with any agreement, arrangement, or
understanding; or
(3) Except
solely by virtue of a revocable proxy, has any agreement,
arrangement, or understanding for the purpose of acquiring,
holding, voting, or disposing of voting stock with any other person
that beneficially owns, or the affiliates or associates of which
beneficially own, directly or indirectly, the voting
stock.
(e) Executive
officer. -- “Executive officer” means a
corporation’s president, any vice president in charge of a
principal business unit, division, or function, such as sales,
administration, or finance, any other person who performs a policy
making function for the corporation, or any executive officer of a
subsidiary of the corporation who performs a policy making function
for the corporation.
(f) Successor.
--
(1) ”Successor”,
except when used with respect to a share exchange, includes a
corporation which amends its charter in a way which alters the
contract rights, as expressly set forth in the charter, of any
outstanding stock, unless the right to do so is reserved by the
charter of the corporation.
(2) ”Successor”,
when used with respect to a share exchange, means the corporation
the stock of which was acquired in the share exchange.
(g) Voting
stock. -- “Voting stock” has the meaning stated in
§ 3-601 of this title.
§
3-202. Right to fair value of stock
(a) General
rule. -- Except as provided in subsection (c) of this section, a
stockholder of a Maryland corporation has the right to demand and
receive payment of the fair value of the stockholder’s stock
from the successor if:
(1) The
corporation consolidates or merges with another
corporation;
(2) The
stockholder’s stock is to be acquired in a share
exchange;
(3) The
corporation transfers its assets in a manner requiring action under
§ 3-105(e) of this title;
(4) The
corporation amends its charter in a way which alters the contract
rights, as expressly set forth in the charter, of any outstanding
stock and substantially adversely affects the stockholder’s
rights, unless the right to do so is reserved by the charter of the
corporation;
(5) The
transaction is governed by § 3-602 of this title or exempted
by § 3-603(b) of this title; or
(6) The
corporation is converted in accordance with § 3-901 of this
title.
(b) Basis
of fair value. --
(1) Fair
value is determined as of the close of business:
(i) With
respect to a merger under § 3-106 or § 3-106.1 of this
title, on the day notice is given or waived under § 3-106 or
§ 3-106.1 of this title; or
(ii) With
respect to any other transaction, on the day the stockholders voted
on the transaction objected to.
(2) Except
as provided in paragraph (3) of this subsection, fair value may not
include any appreciation or depreciation which directly or
indirectly results from the transaction objected to or from its
proposal.
(3) In
any transaction governed by § 3-602 of this title or exempted
by § 3-603(b) of this title, fair value shall be value
determined in accordance with the requirements of § 3-603(b)
of this title.
(c) When
right to fair value does not apply. -- Unless the transaction is
governed by § 3-602 of this title or is exempted by §
3-603(b) of this title, a stockholder may not demand the fair value
of the stockholder’s stock and is bound by the terms of the
transaction if:
(1) Except
as provided in subsection (d) of this section, any shares of the
class or series of the stock are listed on a national securities
exchange:
(i) With
respect to a merger under § 3-106 or § 3-106.1 of this
title, on the date notice is given or waived under § 3-106 or
§ 3-106.1 of this title; or
(ii) With
respect to any other transaction, on the record date for
determining stockholders entitled to vote on the transaction
objected to;
(2) The
stock is that of the successor in a merger, unless:
(i) The
merger alters the contract rights of the stock as expressly set
forth in the charter, and the charter does not reserve the right to
do so; or
(ii) The
stock is to be changed or converted in whole or in part in the
merger into something other than either stock in the successor or
cash, scrip, or other rights or interests arising out of provisions
for the treatment of fractional shares of stock in the
successor;
(3) The
stock is not entitled, other than solely because of § 3-106 or
§ 3-106.1 of this title, to be voted on the transaction or the
stockholder did not own the shares of stock on the record date for
determining stockholders entitled to vote on the
transaction;
(4) The
charter provides that the holders of the stock are not entitled to
exercise the rights of an objecting stockholder under this
subtitle; or
(5) The
stock is that of an open-end investment company registered with the
Securities and Exchange Commission under the Investment Company Act
of 1940 and the value placed on the stock in the transaction is its
net asset value.
(d) Merger,
consolidation, or share exchange. -- With respect to a merger,
consolidation, or share exchange, a stockholder of a Maryland
corporation who otherwise would be bound by the terms of the
transaction under subsection (c)(1) of this section may demand the
fair value of the stockholder’s stock if:
(1) In
the transaction, stock of the corporation is required to be
converted into or exchanged for anything of value
except:
(i) Stock
of the corporation surviving or resulting from the merger,
consolidation, or share exchange, stock of any other corporation,
or depositary receipts for any stock described in this
item;
(ii) Cash
in lieu of fractional shares of stock or fractional depositary
receipts described in item (i) of this item; or
(iii) Any
combination of the stock, depositary receipts, and cash in lieu of
fractional shares or fractional depositary receipts described in
items (i) and (ii) of this item;
(2) The
directors and executive officers of the corporation were the
beneficial owners, in the aggregate, of 5 percent or more of the
outstanding voting stock of the corporation at any time within the
1-year period ending on:
(i) The
day the stockholders voted on the transaction objected to;
or
(ii) With
respect to a merger under § 3-106 or § 3-106.1 of this
title, the effective date of the merger; and
(3) Unless
the stock is held in accordance with a compensatory plan or
arrangement approved by the board of directors of the corporation
and the treatment of the stock in the transaction is approved by
the board of directors of the corporation, any stock held by
persons described in item (2) of this subsection, as part of or in
connection with the transaction and within the 1-year period
described in item (2) of this subsection, will be or was converted
into or exchanged for stock of a person, or an affiliate of a
person, who is a party to the transaction on terms that are not
available to all holders of stock of the same class or
series.
(e) Beneficial
owners. -- If directors or executive officers of the corporation
are beneficial owners of stock in accordance with §
3-201(d)(2)(i) of this subtitle, the stock is considered
outstanding for purposes of determining beneficial ownership by a
person under subsection (d)(2) of this section.
§
3-203. Procedure by stockholder
(a) Specific
duties. -- A stockholder of a corporation who desires to receive
payment of the fair value of the stockholder’s stock under
this subtitle:
(1) Shall
file with the corporation a written objection to the proposed
transaction:
(i) With
respect to a merger under § 3-106 or § 3-106.1 of this
title, within 30 days after notice is given or waived under §
3-106 or § 3-106.1 of this title; or
(ii) With
respect to any other transaction, at or before the
stockholders’ meeting at which the transaction will be
considered or, in the case of action taken under § 2-505(b) of
this article, within 10 days after the corporation gives the notice
required by § 2-505(b) of this article;
(2) May
not vote in favor of the transaction; and
(3) Within
20 days after the Department accepts the articles for record, shall
make a written demand on the successor for payment for the
stockholder’s stock, stating the number and class of shares
for which the stockholder demands payment.
(b) Failure
to comply with section. -- A stockholder who fails to comply with
this section is bound by the terms of the consolidation, merger,
share exchange, transfer of assets, or charter
amendment.
§
3-204. Effect of demand on dividend and other rights
A
stockholder who demands payment for his stock under this
subtitle:
(1) Has
no right to receive any dividends or distributions payable to
holders of record of that stock on a record date after the close of
business on the day as at which fair value is to be determined
under § 3-202 of this subtitle; and
(2) Ceases
to have any rights of a stockholder with respect to that stock,
except the right to receive payment of its fair value.
§
3-205. Withdrawal of demand
A
demand for payment may be withdrawn only with the consent of the
successor.
§
3-206. Restoration of dividend and other rights
(a) When
rights restored. -- The rights of a stockholder who demands payment
are restored in full, if:
(1) The
demand for payment is withdrawn;
(2) A
petition for an appraisal is not filed within the time required by
this subtitle;
(3) A
court determines that the stockholder is not entitled to relief;
or
(4) The
transaction objected to is abandoned or rescinded.
(b) Effect
of restoration. -- The restoration of a stockholder’s rights
entitles him to receive the dividends, distributions, and other
rights he would have received if he had not demanded payment for
his stock. However, the restoration does not prejudice any
corporate proceedings taken before the restoration.
3-207.
Notice and offer to stockholders
(a) Duty
of successor. --
(1) The
successor promptly shall notify each objecting stockholder in
writing of the date the articles are accepted for record by the
Department.
(2) The
successor also may send a written offer to pay the objecting
stockholder what it considers to be the fair value of his stock.
Each offer shall be accompanied by the following information
relating to the corporation which issued the stock:
(i) A
balance sheet as of a date not more than six months before the date
of the offer;
(ii) A
profit and loss statement for the 12 months ending on the date of
the balance sheet; and
(iii) Any
other information the successor considers pertinent.
(b) Manner
of sending notice. -- The successor shall deliver the notice and
offer to each objecting stockholder personally or mail them to him
by certified mail, return receipt requested, bearing a postmark
from the United States Postal Service, at the address he gives the
successor in writing, or, if none, at his address as it appears on
the records of the corporation which issued the stock.
§
3-208. Petition for appraisal; consolidation of proceedings;
joinder of objectors
(a) Petition
for appraisal. -- Within 50 days after the Department accepts the
articles for record, the successor or an objecting stockholder who
has not received payment for his stock may petition a court of
equity in the county where the principal office of the successor is
located or, if it does not have a principal office in this State,
where the resident agent of the successor is located, for an
appraisal to determine the fair value of the stock.
(b) Consolidation
of suits; joinder of objectors. --
(1) If
more than one appraisal proceeding is instituted, the court shall
direct the consolidation of all the proceedings on terms and
conditions it considers proper.
(2) Two
or more objecting stockholders may join or be joined in an
appraisal proceeding.
§
3-209. Notation on stock certificate
(a) Submission
of certificate. -- At any time after a petition for appraisal is
filed, the court may require the objecting stockholders parties to
the proceeding to submit their stock certificates to the clerk of
the court for notation on them that the appraisal proceeding is
pending. If a stockholder fails to comply with the order, the court
may dismiss the proceeding as to him or grant other appropriate
relief.
(b) Transfer
of stock bearing notation. -- If any stock represented by a
certificate which bears a notation is subsequently transferred, the
new certificate issued for the stock shall bear a similar notation
and the name of the original objecting stockholder. The transferee
of this stock does not acquire rights of any character with respect
to the stock other than the rights of the original objecting
stockholder.
§
3-210. Appraisal of fair value
(a) Court
to appoint appraisers. -- If the court finds that the objecting
stockholder is entitled to an appraisal of his stock, it shall
appoint three disinterested appraisers to determine the fair value
of the stock on terms and conditions the court considers proper.
Each appraiser shall take an oath to discharge his duties honestly
and faithfully.
(b) Report
of appraisers -- Filing. -- Within 60 days after their appointment,
unless the court sets a longer time, the appraisers shall determine
the fair value of the stock as of the appropriate date and file a
report stating the conclusion of the majority as to the fair value
of the stock.
(c) Report
of appraisers -- Contents. -- The report shall state the reasons
for the conclusion and shall include a transcript of all testimony
and exhibits offered.
(d) Report
of appraisers -- Service; objection. --
(1) On
the same day that the report is filed, the appraisers shall mail a
copy of it to each party to the proceedings.
(2) Within
15 days after the report is filed, any party may object to it and
request a hearing.
§
3-211. Action by court on appraisers’ report
(a) Order
of court. -- The court shall consider the report and, on motion of
any party to the proceeding, enter an order which:
(1) Confirms,
modifies, or rejects it; and
(2) If
appropriate, sets the time for payment to the
stockholder.
(b) Procedure
after order. --
(1) If
the appraisers’ report is confirmed or modified by the order,
judgment shall be entered against the successor and in favor of
each objecting stockholder party to the proceeding for the
appraised fair value of his stock.
(2) If
the appraisers’ report is rejected, the court
may:
(i) Determine
the fair value of the stock and enter judgment for the stockholder;
or
(ii) Remit
the proceedings to the same or other appraisers on terms and
conditions it considers proper.
(c) Judgment
includes interest. --
(1) Except
as provided in paragraph (2) of this subsection, a judgment for the
stockholder shall award the value of the stock and interest from
the date as at which fair value is to be determined under §
3-202 of this subtitle.
§
3-212. Surrender of stock
The
successor is not required to pay for the stock of an objecting
stockholder or to pay a judgment rendered against it in a
proceeding for an appraisal unless, simultaneously with
payment:
(1) The
certificates representing the stock are surrendered to it, indorsed
in blank, and in proper form for transfer; or
(2) Satisfactory
evidence of the loss or destruction of the certificates and
sufficient indemnity bond are furnished.
§
3-213. Rights of successor with respect to stock
(a) General
rule. -- A successor which acquires the stock of an objecting
stockholder is entitled to any dividends or distributions payable
to holders of record of that stock on a record date after the close
of business on the day as at which fair value is to be determined
under § 3-202 of this subtitle.
(b) Successor
in transfer of assets. -- After acquiring the stock of an objecting
stockholder, a successor in a transfer of assets may exercise all
the rights of an owner of the stock.
(c) Successor
in consolidation, merger, or share exchange. -- Unless the articles
provide otherwise, stock in the successor of a consolidation,
merger, or share exchange otherwise deliverable in exchange for the
stock of an objecting stockholder has the status of authorized but
unissued stock of the successor. However, a proceeding for
reduction of the capital of the successor is not necessary to
retire the stock or to reduce the capital of the successor
represented by the stock.
PART
II – INFORMATION NOT REQUIRED IN PROSPECTUS
Item
20. Indemnification of Directors and Officers
Section 2-418 of
the Maryland General Corporation Law establishes provisions that a
corporation may (and, unless otherwise provided in the
corporation’s charter, if the party to be indemnified is
successful on the merits or otherwise, must) indemnify any director
or officer made party to any threatened, pending or completed
civil, criminal, administrative or investigative action, suit or
proceeding by reason of service in the capacity of a director or
officer, against judgments, penalties, fines, settlements and
reasonable expenses incurred in connection with such proceeding,
unless it is proved that (a) the act or omission for which the
director or officer seeks indemnification was material to the
matter giving rise to the action, suit or proceeding and either was
committed in bad faith or was the result of active and deliberate
dishonesty, (b) the director or officer actually received an
improper personal benefit in money, property or services or (c) in
the case of a criminal proceeding, the director or officer had
reasonable cause to believe that the act or omission was unlawful.
If the proceeding is a derivative suit in favor of the corporation,
indemnification may not be made in any proceeding in which the
director or officer is adjudged to be liable to the corporation.
The statute also provides for indemnification of directors and
officers by court order.
The
Registrant’s Articles of Amendment and Restatement (the
“Charter”) provide for indemnification and the
advancement of expenses for any person who is serving or has served
as a director or officer of the Registrant to the fullest extent
permitted under the Maryland General Corporation Law.
The rights of
indemnification provided in the Registrant’s Charter are not
exclusive of any other rights which may be available under any
insurance or other agreement, by resolution of stockholders or
disinterested directors or otherwise.
The Registrant
maintains officers’ and directors’ liability insurance
in the amount of $16 million.
Item
21. Exhibits
(a) Exhibits. The following
exhibits are filed or furnished herewith or incorporated by
reference:
Exhibit
No.
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Description
of Exhibits
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2.1
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Agreement and Plan
of Merger, dated as of February 1, 2017, by and between Old Line
Bancshares, Inc. and DCB Bancshares, Inc., and Amendment No. 1
thereto (the schedules and certain exhibits have been omitted
pursuant to Item 601(b)(2) of Regulation S-K. Old Line Bancshares
undertakes to furnish supplemental copies of any of the omitted
schedules or exhibits upon request by the Securities and Exchange
Commission.) (Attached as Annex A to the proxy statement/prospectus
that is part of this Registration Statement)
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2.2(V)
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Agreement and Plan
of Merger by and between Old Line Bancshares, Inc. and
Maryland Bankcorp, Inc., dated as of September 1, 2010,
and Amendment No. 1 thereto
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2.3(R)
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Agreement and Plan
of Merger by and between Old Line Bancshares, Inc. and WSB
Holdings, Inc., dated as of September 10, 2012, and
Amendment No. 1 thereto
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2.4(EE)
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Agreement and Plan
of Merger, dated as of August 5, 2015, by and between Old Line
Bancshares, Inc. and Regal Bancorp, Inc.
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3.1(A)
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Articles of
Amendment and Restatement of Old Line
Bancshares, Inc.
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3.1.1(L)
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Articles of
Amendment of Old Line Bancshares, Inc.
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3.1.2(L)
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Articles of
Amendment of Old Line Bancshares, Inc.
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3.1.3(AA)
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Articles of
Amendment of Old Line Bancshares, Inc.
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3.2(A)
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Amended and
Restated Bylaws of Old Line Bancshares, Inc.
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3.2.1(B)
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Amendment to the
Amended and Restated Bylaws of Old Line
Bancshares, Inc.
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3.2.2(C)
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Second Amendment to
the Amended and Restated Bylaws of Old Line
Bancshares, Inc.
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|
4(Y)
|
|
Specimen Stock
Certificate for Old Line Bancshares, Inc.
|
|
|
|
5.1#
|
|
Opinion of Baker,
Donelson, Bearman, Caldwell & Berkowitz, PC, as to the legality
of the Common Stock
|
|
|
|
8.1
|
|
Opinion of Gordon
Feinblatt LLC regarding certain U.S. tax consequences of the
merger
|
|
|
|
10.1(GG)*
|
|
Second Amended and
Restated Executive Employment Agreement between Old Line Bank and
James W. Cornelsen dated December 10, 2015
|
|
|
|
10.2(FF)*
|
|
Purchase Agreement
dated August 10, 2016, by and between Old Line Bancshares, Inc. and
Sandler O’Neill & Associates, L.P., as representative of
the Initial Purchasers
|
|
|
|
10.3(K)*
|
|
Salary Continuation
Agreement dated January 3, 2006 between Old Line Bank and
James W. Cornelsen
|
|
|
|
10.4(O)*
|
|
First Amendment
dated December 31, 2007 to the Salary Continuation Agreement
between Old Line Bank and James W. Cornelsen
|
|
|
|
10.5(K)*
|
|
Supplemental Life
Insurance Agreement dated January 3, 2006 between Old Line
Bank and James W. Cornelsen
|
|
|
|
10.6(O)*
|
|
First Amendment
dated December 31, 2007 to the Supplemental Life Insurance
Agreement between Old Line Bank and James W. Cornelsen
|
|
|
|
10.7(W)*
|
|
Amended and
Restated Executive Employment Agreement dated January 28, 2011
between Old Line Bank and Joseph Burnett
|
|
|
|
10.8(I)*
|
|
Second Amendment to
Amended and Restated Employment Agreement between Old Line Bank and
Joseph Burnett dated as of May 9, 2013
|
|
|
|
10.9(K)*
|
|
Salary Continuation
Agreement dated January 3, 2006 between Old Line Bank and
Joseph Burnett
|
|
|
|
10.10(O)*
|
|
First Amendment
dated December 31, 2007 to the Salary Continuation Agreement
between Old Line Bank and Joseph Burnett
|
|
|
|
10.11(K)*
|
|
Supplemental Life
Insurance Agreement dated January 3, 2006 between Old Line
Bank and Joseph Burnett
|
|
|
|
10.12(O)*
|
|
First Amendment
dated December 31, 2007 to the Supplemental Life Insurance
Agreement between Old Line Bank and Joseph Burnett
|
10.13(DD)*
|
|
Salary Continuation
Plan Agreement (2014) by and between Old Line Bank and Mark Semanie
dated as of March 27, 2014
|
|
|
|
10.18(O)*
|
|
First Amendment
dated December 31, 2007 to the Supplemental Life Insurance
Agreement between Old Line Bank and Christine Rush
|
|
|
|
10.19(E)*
|
|
2004 Equity
Incentive Plan
|
|
|
|
10.20(G)*
|
|
Form of Incentive
Stock Option Agreement for 2004 Equity Incentive Plan
|
|
|
|
10.21(X)*
|
|
Form of
Nonqualified Stock Option Agreement for 2004 Equity Incentive
Plan
|
|
|
|
10.22(U)*
|
|
Form of Restricted
Stock Agreement for the 2004 Equity Incentive Plan
|
|
|
|
10.23(G)*
|
|
Old Line
Bancshares, Inc. and Old Line Bank Director Compensation
Policy
|
|
|
|
10.24(F)
|
|
Operating Agreement
for Pointer Ridge Office Investment, LLC among J. Webb
Group, Inc., Michael M. Webb, Lucente Enterprises, Inc.,
Chesapeake Custom Homes, L.L.C. and Old Line Bancshares, Inc.,
all as Members and Chesapeake Pointer Ridge
Manager, LLC.
|
|
|
|
10.25(H)*
|
|
Incentive Plan
Model and Stock Option Model
|
|
|
|
10.26(N)
|
|
Deed of Trust note
dated November 3, 2005 between Pointer Ridge Office
Investment, LLC and Manufacturers and Traders Trust
Company
|
|
|
|
10.27(N)
|
|
Completion Guaranty
Agreement dated November 3, 2005 between Pointer Ridge Office
Investment, LLC and Manufacturers and Traders Trust
Company
|
|
|
|
10.28(L)
|
|
Indemnity Agreement
between Old Line Bancshares, Inc. and Prudential Mortgage
Capital Company, LLC dated August 25, 2006
|
|
|
|
10.29(S)
|
|
Third Amendment to
Operating Agreement For Pointer Ridge Office Investment, LLC
by and between Old Line Bancshares, Inc. J. Webb, Inc.,
Michael M. Webb Revocable Trust, and Lucente Enterprises, Inc.
dated as of November 1, 2008
|
|
|
|
10.30(BB)*
|
|
Old Line
Bancshares, Inc. 2010 Equity Incentive Plan
|
|
|
|
10.31(Z)*
|
|
Form of Restricted
Stock Agreement under 2010 Equity Incentive Plan
|
|
|
|
10.32(Z)*
|
|
Form of
Non-Qualified Stock Option Grant Agreement under 2010 Equity
Incentive Plan
|
|
|
|
10.33(Z)*
|
|
Form of Incentive
Stock Option Grant Agreement under 2010 Equity Incentive
Plan
|
|
|
|
10.34(W)*
|
|
Employment
Agreement dated January 28, 2011 between Old Line Bank and
Sandra F. Burnett
|
|
|
|
10.35(D)*
|
|
First Amendment to
Amended and Restated Employment Agreement between Old Line Bank and
Sandra F. Burnett dated as of January 1, 2012
|
10.36(W)*
|
|
Salary Continuation
Plan Agreement (2010 Plan) by and between Old Line Bank and Sandra
Burnett dated as of February 14, 2011
|
|
|
|
10.37(P)*
|
|
Non-Compete
Agreement by and between Old Line Bancshares, Inc. and G.
Thomas Daugherty dated April 11, 2011
|
|
|
|
10.38(J)
|
|
Agreement of Lease
by and between Pointer Ridge Office Investment, LLC, a
Maryland limited liability company (Landlord) and Old Line Bank
(Tenant) dated December 29, 2011 (Suite 101)
|
|
|
|
10.39(J)
|
|
Agreement of Lease
by and between Pointer Ridge Office Investment, LLC, a
Maryland limited liability company (Landlord) and Old Line Bank
(Tenant) dated December 29, 2011 (Suite 301)
|
|
|
|
10.40(M)*
|
|
Salary Continuation
Plan Agreement (2012-A Plan) by and between Old Line Bank and James
W. Cornelsen dated as of October 1, 2012, and form of Change
in Control Benefit Election Form thereunder
|
|
|
|
10.41(M)*
|
|
Salary Continuation
Plan Agreement (2012-B Plan) by and between Old Line Bank and James
W. Cornelsen dated as of October 1, 2012, and form of Change
in Control Benefit Election Form thereunder
|
|
|
|
10.42(T)*
|
|
Salary Continuation
Plan Agreement (2010 Plan) by and between Old Line Bank and James
W. Cornelsen dated as of February 26, 2010
|
|
|
|
10.43(T)*
|
|
Salary Continuation
Plan Agreement (2010 Plan) by and between Old Line Bank and Joseph
E.
Burnett dated as of
February 26, 2010
|
|
|
|
10.45(CC)*
|
|
Employment
Agreement between Old Line Bank and Mark A. Semanie dated as of
May 13, 2013
|
|
|
|
10.46(Q)*
|
|
Employment
Agreement between Old Line Bank and Martin John Miller dated as of
February 26, 2014
|
|
|
|
21(HH)
|
|
Subsidiaries of
Registrant
|
|
|
|
23.1#
|
|
Consent of Baker,
Donelson, Bearman, Caldwell & Berkowitz, PC (contained in the
opinion previously filed as Exhibit 5.1)
|
|
|
|
23.2
|
|
Consent of Dixon
Hughes Goodman LLP
|
|
|
|
23.3
|
|
Consent of Gordon
Feinblatt LLC (contained in the opinion filed as Exhibit
8.1)
|
|
|
|
24.1
|
|
Power of Attorney
(included on signature page of original filing)
|
|
|
|
99.1
|
|
Consent of RP
Financial Advisors, Inc.
|
|
|
|
99.2
|
|
Consent of Stephen
J. Deadrick to be named as a Continuing Director
|
|
|
|
99.3
|
|
Consent of James R.
Clifford, Sr. to be named as a Continuing
Director
|
|
|
|
99.4
|
|
Form of DCB
Bancshares, Inc. Proxy Card
|
|
|
|
99.3(A)
|
|
Agreement and Plan
of Reorganization between Old Line Bank and Old Line
Bancshares, Inc., including form of Articles of Share Exchange
attached as Exhibit A thereto
|
*
Management
compensatory plan, contract or arrangement.
(A)
Previously filed by
Old Line Bancshares, Inc. as a part of, and incorporated by
reference from, Old Line Bancshares, Inc.’s Registration
Statement on Form 10-SB, as amended, under the Securities
Exchange Act of 1934, as amended (File
Number 000-50345).
(B)
Previously filed by
Old Line Bancshares, Inc. as a part of, and incorporated by
reference from, Old Line Bancshares, Inc.’s Current
Report on Form 8-K filed on March 24, 2011.
(C)
Previously filed by
Old Line Bancshares, Inc. as a part of, and incorporated by
reference from, Old Line Bancshares, Inc.’s Quarterly
Report on Form 10-Q filed on August 10,
2012.
(D)
Previously filed by
Old Line Bancshares, Inc. as part of, and incorporated by
reference from, Old Line Bancshares, Inc.’s Annual
Report on Form 10-K for the year ended December 31, 2012,
filed on March 30, 2012.
(E)
Previously filed by
Old Line Bancshares, Inc. as a part of, and incorporated by
reference from, Old Line Bancshares, Inc.’s Registration
Statement on Form S-8, under the Securities Act of 1933, as
amended (File Number 333-116845).
(F)
Previously filed by
Old Line Bancshares, Inc. as a part of, and incorporated by
reference from, Old Line Bancshares, Inc.’s Quarterly
Report on Form 10-QSB filed on November 8,
2004.
(G)
Previously filed by
Old Line Bancshares, Inc. as a part of, and incorporated by
reference from, Old Line Bancshares, Inc.’s Current
Report on Form 8-K filed on January 5, 2005.
(H)
Previously filed by
Old Line Bancshares, Inc. as part of, and incorporated by
reference from Old Line Bancshares, Inc.’s Quarterly
Report on Form 10-QSB filed on August 10,
2005.
(I)
Previously filed by
Old Line Bancshares, Inc. as part of, and incorporated by
reference from, Old Line Bancshares, Inc.’s Quarterly
Report on Form 10-Q filed on August 14,
2013.
(J)
Previously filed by
Old Line Bancshares, Inc. as a part of, and incorporated by
reference from, Old Line Bancshares, Inc.’s Current
Report on Form 8-K filed on January 4, 2012.
(K)
Previously filed by
Old Line Bancshares, Inc. as part of, and incorporated by
reference from Old Line Bancshares, Inc.’s Current
Report on Form 8-K filed on January 6, 2006.
(L)
Previously filed by
Old Line Bancshares, Inc. as part of, and incorporated by
reference from Old Line Bancshares, Inc.’s Quarterly
Report on Form 10-QSB filed on November 9,
2006.
(M)
Previously filed by
Old Line Bancshares, Inc. as a part of, and incorporated by
reference from, Old Line Bancshares, Inc.’s Current
Report on Form 8-K filed on October 4, 2012.
(N)
Previously filed by
Old Line Bancshares, Inc. as part of, and incorporated by
reference from Old Line Bancshares, Inc.’s Annual Report
on Form 10-KSB filed on March 28, 2006.
(O)
Previously filed by
Old Line Bancshares, Inc. as part of, and incorporated by
reference from Old Line Bancshares, Inc.’s Current
Report on Form 8-K filed on January 7, 2008.
(P)
Previously filed by
Old Line Bancshares, Inc. as a part of, and incorporated by
reference from, Old Line Bancshares, Inc.’s Quarterly
Report on Form 10-Q filed on August 15,
2011.
(Q)
Previously filed by
Old Line Bancshares, Inc. as part of, and incorporated by
reference from Old Line Bancshares, Inc.’s Annual Report
on Form 10-K for the year ended December 31, 2014, filed
on March 11, 2015.
(R)
Previously filed by
Old Line Bancshares, Inc. as part of, and incorporated by
reference from, Annex A to Old Line
Bancshares, Inc.’s Registration Statement on
Form S-4 under the Securities Act of 1933, as amended (File
Number 333-184924).
(S)
Previously filed by
Old Line Bancshares, Inc. as part of, and incorporated by
reference from Old Line Bancshares, Inc.’s Current
Report on Form 8-K filed on November 19,
2008.
(T)
Previously filed by
Old Line Bancshares, Inc. as part of, and incorporated by
reference from Amendment No. 1 to Old Line
Bancshares, Inc.’s Registration Statement on
Form S-4 under the Securities Act of 1933, as amended (File
Number 333-184924).
(U)
Previously filed by
Old Line Bancshares, Inc. as part of, and incorporated by
reference from Old Line Bancshares, Inc.’s Current
Report on Form 8-K filed on January 28,
2010.
(V)
Previously filed by
Old Line Bancshares, Inc. as part of, and incorporated by
reference from Annex A to Old Line
Bancshares, Inc.’s Registration Statement on
Form S-4 under the Securities Act of 1933, as amended (File
Number 333-170464).
(W)
Previously filed by
Old Line Bancshares, Inc. as part of, and incorporated by
reference from Old Line Bancshares, Inc.’s Annual Report
on Form 10-K for the year ended December 31, 2010 filed
on March 30, 2011.
(X)
Previously filed by
Old Line Bancshares, Inc. as part of, and incorporated by
reference from Old Line Bancshares, Inc.’s Annual Report
on Form 10-K for the year ended December 31, 2009, filed
on March 27, 2010.
(Y)
Previously filed by
Old Line Bancshares, Inc. as part of, and incorporated by
reference from Old Line Bancshares, Inc.’s Pre-Effective
Amendment No. 1 on Form S-8 to Registration Statement on
Form S-4 (File Number 333-184924) filed on May 20,
2013.
(Z)
Previously filed by
Old Line Bancshares, Inc. as part of, and incorporated by
reference from Appendix A of Old Line
Bancshares, Inc.’s Proxy Statement on Schedule 14A,
filed with the Commission on April 19, 2010.
(AA)
Previously filed by
Old Line Bancshares, Inc. as part of, and incorporated by
reference from Old Line Bancshares, Inc.’s Quarterly
Report on Form 10-Q, filed with the Commission on
November 14, 2013.
(BB)
Previously filed by
Old Line Bancshares, Inc. as part of, and incorporated by
reference from Appendix B of Old Line
Bancshares, Inc.’s Proxy Statement on Schedule 14A,
filed with the Commission on July 12, 2013.
(CC)
Previously filed by
Old Line Bancshares, Inc. as part of, and incorporated by
reference from Old Line Bancshares, Inc.’s Current
Report on Form 8-K filed with the Commission on May 13,
2013.
(DD)
Previously filed by
Old Line Bancshares, Inc. as part of, and incorporated by reference
from Old Line Bancshares, Inc.’s Quarterly Report on Form
10-Q filed with the Commission on May 9, 2014.
(EE)
Previously filed by
Old Line Bancshares, Inc. as part of, and incorporated by
reference from Old Line Bancshares, Inc.’s Amendment No.
1 to Current Report on Form 8-K filed with the Commission on
August 5, 2015.
(FF)
Previously filed by
Old Line Bancshares, Inc. as part of, and incorporated by
reference from Old Line Bancshares, Inc.’s Current
Report on Form 8-K filed on August 15, 2016.
(GG)
Previously filed by
Old Line Bancshares, Inc. as a part of, and incorporated by
reference from, Old Line Bancshares, Inc.’s Annual
Report on Form 10-K for the year ended December 31, 2015,
filed on March 11, 2016.
(HH)
Previously filed by
Old Line Bancshares, Inc. as a part of, and incorporated by
reference from, Old Line Bancshares, Inc.’s Annual
Report on Form 10-K for the year ended December 31, 2016,
filed on March 15, 2017.
(b) Financial
Statement Schedules.
None.
(c) Reports,
Opinions and Appraisals.
Not
applicable.
Item
22. Undertakings
(a) The
undersigned registrant hereby undertakes:
1.
To file, during any
period in which offers or sales are being made, a post-effective
amendment to this registration statement:
(i)
To include any
prospectus required by section 10(a)(3) of the Securities Act of
1933.
(ii)
To reflect in the
prospectus any facts or events arising after the effective date of
the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more
than 20% change in the maximum aggregate offering price set forth
in the “Calculation of Registration Fee” table in the
effective registration statement.
(iii)
To include any
material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material
change to such information in the registration
statement.
2.
That, for the
purpose of determining any liability under the Securities Act of
1933, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
3.
To remove from
registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination
of the offering.
4.
That, for the
purpose of determining liability of the registrant under the
Securities Act of 1933 to any purchaser in the initial distribution
of the securities: The undersigned registrant undertakes that in a
primary offering of securities of the undersigned registrant
pursuant to this registration statement, regardless of the
underwriting method used to sell the securities to the purchaser,
if the securities are offered or sold to such purchaser by means of
any of the following communications, the undersigned registrant
will be a seller to the purchaser and will be considered to offer
or sell such securities to such purchaser:
(i)
Any preliminary
prospectus or prospectus of the undersigned registrant relating to
the offering required to be filed pursuant to Rule
424;
(ii)
Any free writing
prospectus relating to the offering prepared by or on behalf of the
undersigned registrant or used or referred to by the undersigned
registrant;
(iii)
The portion of any
other free writing prospectus relating to the offering containing
material information about the undersigned registrant or its
securities provided by or on behalf of the undersigned registrant;
and
(iv)
Any other
communication that is an offer in the offering made by the
undersigned registrant to the purchaser.
5.
That, for purposes
of determining any liability under the Securities Act of 1933, each
filing of the registrant’s annual report pursuant to section
13(a) or section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan’s
annual report pursuant to section 15(d) of the Securities Exchange
Act of 1934) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona
fide offering thereof.
6.
That prior to any
public reoffering of the securities registered hereunder through
use of a prospectus which is a part of this registration statement,
by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such
reoffering prospectus will contain the information called for by
the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable
form.
7.
The registrant
undertakes that every prospectus (i) that is filed pursuant to the
paragraph immediately preceding, or (ii) that purports to meet the
requirements of section 10(a)(3) of the Securities Act of 1933 and
is used in connection with an offering of securities subject to
Rule 415, will be filed as a part of an amendment to the
registration statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(b) The
undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus
pursuant to Item 4, 10(b), 11, or 13 of this Form, within one
business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt
means. This includes information contained in documents filed
subsequent to the effective date of the registration statement
through the date of responding to the request.
(c) The
undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction,
and the company being acquired involved therein, that was not the
subject of and included in the registration statement when it
became effective.
Insofar as
indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant
of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
SIGNATURES
Pursuant to the
requirements of the Securities Act, the registrant has duly caused
this amendment to the registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of
Bowie, State of Maryland, on April 21, 2017.
|
OLD
LINE BANCSHARES, INC.
|
|
|
|
|
|
|
By:
|
/s/
James
W. Cornelsen
|
|
|
|
James W.
Cornelsen
|
|
|
|
President and Chief
Executive Officer
|
|
Pursuant to the
requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the
capacities and on the date indicated.
Name
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ James W. Cornelsen
|
|
Director, President
and Chief Executive Officer (Principal
|
|
April 21,
2017
|
James W.
Cornelsen
|
|
Executive
Officer)
|
|
|
|
|
|
|
|
/s/ Elise M. Hubbard
|
|
Chief Financial
Officer (Principal Accounting and Financial
|
|
April 21,
2017
|
Elise M.
Hubbard
|
|
Officer)
|
|
|
|
|
|
|
|
*
|
|
Director and
Chairman of the Board
|
|
April 21,
2017
|
Craig E.
Clark
|
|
|
|
|
|
|
|
|
|
|
|
Director
|
|
|
G. Thomas
Daugherty
|
|
|
|
|
|
|
|
|
|
*
|
|
Director
|
|
April 21,
2017
|
James F.
Dent
|
|
|
|
|
|
|
|
|
|
*
|
|
Director
|
|
April 21,
2017
|
Andre’ J.
Gingles
|
|
|
|
|
|
|
|
|
|
*
|
|
Director
|
|
April 21,
2017
|
Thomas H.
Graham
|
|
|
|
|
|
|
|
|
|
|
|
Director
|
|
|
William J.
Harnett
|
|
|
|
|
|
|
|
|
|
*
|
|
Director
|
|
April 21,
2017
|
Frank Lucente,
Jr.
|
|
|
|
|
|
|
|
|
|
*
|
|
Director
|
|
April 21,
2017
|
Gail D.
Manuel
|
|
|
|
|
|
|
|
|
|
|
|
Director
|
|
April 21,
2017
|
Carla Hargrove
McGill
|
|
|
|
|
|
|
|
|
|
*
|
|
Director
|
|
April 21,
2017
|
Gregory S. Proctor,
Jr.
|
|
|
|
|
|
|
|
|
|
*
|
|
Director
|
|
April 21,
2017
|
Jeffrey A.
Rivest
|
|
|
|
|
|
|
|
|
|
*
|
|
Director
|
|
April 21,
2017
|
Suhas R.
Shah
|
|
|
|
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*
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Director
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April 21,
2017
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John M. Suit,
II
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*
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Director
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April 21,
2017
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Frank E.
Taylor
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By:
/s/ James W.
Cornelsen
James
W. Cornelsen pursuant to power of attorney
II-10