Blueprint
As filed with the U.S. Securities and Exchange Commission on
November 21, 2017
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Old Line Bancshares, Inc.
(Exact name of registrant as specified in its charter)
|
|
|
|
|
Maryland
|
|
6022
|
|
20-0154352
|
(State or other jurisdiction of
incorporation or organization)
|
|
(Primary Standard Industrial
Classification Code Number)
|
|
(I.R.S. Employer
Identification Number)
|
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:
|
|
|
|
|
Frank C. Bonaventure, Jr., Esq.
Baker Donelson, Bearman, Caldwell & Berkowitz, PC
100 Light Street
Baltimore, Maryland 21202
(410) 685-1120
|
|
Joseph J. Thomas
President and Chief Executive Officer
Bay Bancorp, Inc.
7151 Columbia Gateway Drive Suite A
Columbia, Maryland 21046
(410) 494-2580
|
|
Andrew D. Bulgin, Esquire
Gordon Feinblatt LLC
233 East Redwood Street
Baltimore, MD 21202
(410) 576-4280
|
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 joint 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, 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.
Large accelerated filer ☐
|
Accelerated
filer
☒
|
Non-accelerated filer ☐ (Do not check if a smaller reporting
company)
|
Smaller reporting company ☐
|
|
Emerging growth company ☐
|
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.
CALCULATION OF REGISTRATION FEE
|
Title of each class of
securities to be registered
|
Amount to be
registered
|
Proposed
maximum
offering price
per share
|
Proposed
maximum
aggregate
offering price
|
Amount of
registration fee
|
Common
Stock, par value $0.01 per share
|
5,000,000(1)
|
N/A
|
$128,127,087.75(2)
|
$15,951.83
|
|
(1)
|
Represents
the estimated maximum number of shares of Old Line Bancshares, Inc.
common stock to be issuable upon the completion of the merger
described herein. In accordance with Rule 416 under the Securities
Act of 1933, this Registration Statement shall also register any
additional shares of the Registrant’s common stock that may
become issuable pursuant to dilution resulting from stock splits,
stock dividends, and similar transactions.
|
(2)
|
Pursuant
to Rules 457(f) and 457(c) under the Securities Act of 1933, as
amended, and solely for the purpose of calculating the registration
fee, the proposed maximum aggregate offering price is based on the
product of (A) the average of the high and low prices of Bay
Bancorp, Inc. common stock on November 20, 2017 ($11.75) as
reported on the Nasdaq Capital Market and (B) 10,904,433, the
estimated maximum number of shares of Bay Bancorp, Inc. common
stock to be received by Old Line Bancshares, Inc. in the
merger.
|
The information in this joint proxy statement/prospectus is not
complete and may be changed. We may not sell the securities offered
by this joint proxy statement/prospectus until the registration
statement filed with the Securities and Exchange Commission is
effective. This joint 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 NOVEMBER 21,
2017
OLD
LINE BANCSHARES,
INC.
BAY
BANCORP, INC.
Joint
Proxy Statement/Prospectus
Merger
Proposal – Your Vote is Very Important
The
boards of directors of Old Line Bancshares, Inc. (“Old Line
Bancshares”) and Bay Bancorp, Inc. (“Bay
Bancorp”) have agreed to a strategic combination of the two
companies under the terms of an Agreement and Plan of Merger, dated
as of September 27, 2017. Under the terms of the merger agreement,
Bay Bancorp will be merged with and into Old Line Bancshares, with
Old Line Bancshares surviving the merger.
If
the merger is completed, Bay Bancorp stockholders will have the
right to receive, for each share of Bay Bancorp common stock they
own, between approximately 0.4047 and 0.4600 shares of Old Line
Bancshares common stock, subject to adjustment as described in this
joint proxy statement/prospectus. Cash will be paid in lieu of any
fractional shares, and options to purchase Bay Bancorp common stock
that are outstanding at the effective date of the merger will be
converted into the right to receive cash.
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 and the applicability and extent of
any adjustments. Assuming no adjustments to the merger
consideration under the terms of the merger agreement and no
changes in the number of shares of common stock of Bay Bancorp
outstanding, if the merger is completed Old Line Bancshares will
issue between approximately 4,337,529 and 4,930,228 shares of Old
Line Bancshares common stock (not including cash in lieu of
fractional shares and in exchange for outstanding options). Based
on anticipated adjustments as of the date of this joint proxy
statement/prospectus, we expect that the value of the per share
merger consideration will be increased by approximately $0.14; the
impact of these adjustments on the number of Old Line Bancshares
common stock issued for each share of Bay Bancorp common stock will
vary based on recent trading prices of Old Line Bancshares common
stock as of the effective date of the merger, but based on recent
trading prices, if the merger was effective on the date of this
joint proxy statement/prospectus, each share of Bay Bancorp common
stock would have been exchanged for 0.4096 shares of Old Line
Bancshares common stock, or an aggregate of approximately 4,390,047
shares.
After
the merger, Old Line Bancshares stockholders will continue to own
their existing shares of Old Line Bancshares common stock. Old Line
Bancshares common stock is 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
September 27, 2017, immediately prior to the public announcement of
the merger, and on November 21, 2017 (the date of this joint proxy
statement/prospectus), was $29.31 and $29.34 respectively.
Stockholders of Old
Line Bancshares will be asked to vote on the approval of the merger
at the Old Line Bancshares special meeting and stockholders of Bay
Bancorp will be asked to vote on the approval of the merger at the
Bay Bancorp special meeting. We cannot complete the merger unless
we obtain the required approval of the stockholders of each of Old
Line Bancshares and Bay Bancorp. The merger must be approved by the
affirmative vote of holders of a majority of the outstanding shares
of common stock of Old Line Bancshares and the holders of
two-thirds of the outstanding shares of common stock of Bay
Bancorp.
The
boards of directors of each of Old Line Bancshares and Bay Bancorp
recommend that you vote “FOR” approval of the
merger.
You should read this joint 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 joint proxy statement/ prospectus.
This joint proxy statement/prospectus incorporates important
business and financial information about Old Line Bancshares and
Bay Bancorp from reports they have 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. Old Line Bancshares information is also
available upon written request to Old
Line Bancshares, Inc., Attn: Secretary, 1525 Pointer Ridge Place,
Bowie, MD 20716, or oral request at (301) 430-2500. Bay Bancorp
information is available upon written request to Bay Bancorp, Inc.,
Attn: Corporate Secretary, 7151 Columbia Gateway Drive Suite A,
Columbia, MD 21046, or oral request at (410) 312-5400. In order to
ensure timely delivery, you must request Old Line Bancshares
information no later than five business days prior to the date of
the Old Line Bancshares special meeting, or [___________], and you
must request Bay Bancorp information no later than five business
days prior to the date of the Bay Bancorp special meeting, or
[__________].
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 joint
proxy statement/prospectus. Any representation to the contrary is a
criminal offense. The securities offered through this joint 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 joint proxy statement/prospectus is dated [__________] and is
first being mailed to Old Line Bancshares stockholders and Bay
Bancorp stockholders on or about [__________].
OLD
LINE BANCSHARES, INC.
1525
Pointer Ridge Place
Bowie,
Maryland 20716
NOTICE
OF SPECIAL MEETING OF STOCKHOLDERS
TO
BE HELD ON [___________] AT [______]
A
Special Meeting of Stockholders of Old Line Bancshares, Inc., a
Maryland corporation, will be held on [____________], at [______],
local time, at Old Line Bancshares, Inc.’s office located at
1525 Pointer Ridge Place, Bowie, Maryland for the purpose of
considering and voting upon the following:
1.
A proposal to
approve the merger of Bay Bancorp, Inc. with and into Old Line
Bancshares, Inc., with Old Line Bancshares, Inc. as the surviving
entity, pursuant to the Agreement and Plan of Merger dated as of
September 27, 2017, as the agreement may be amended from time to
time, by and between Old Line Bancshares, Inc. and Bay Bancorp,
Inc., as more fully described in the accompanying joint 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, as more fully described in the accompanying
joint proxy statement/prospectus.
3.
Any other matter
that may properly come before the special meeting or any
adjournment or postponement thereof.
Only
stockholders of record at the close of business on [___________]
will be entitled to notice of and to vote at the special meeting or
any adjournment or postponement thereof.
Whether
or not you plan to attend the special meeting, we urge you submit
your proxy as soon as possible so that your shares can be voted at
the meeting in accordance with your instructions. To complete the
merger, the merger must be approved by the holders of a majority of
the issued and outstanding shares of common stock of Old Line
Bancshares, Inc. Abstentions, the failure to vote and shares that
you have not authorized your broker to vote (or “broker
non-votes”) will have the same effect as votes against
approval of the merger. Whether or not you intend to attend the
special meeting, please vote as promptly as possible by signing, dating and mailing the proxy card,
by telephone by calling 1-800-690-6903 and following the voice mail
prompts or over the Internet by following the instructions at
www.proxyvote.com. You will need information from your proxy card
to submit your proxy by phone or over the
Internet.
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 Old Line 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 special 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.
You are
cordially invited to attend the meeting in person.
By
Order of the Board of Directors,
/s/ Mark A
Semanie
Mark A.
Semanie, Secretary
Bowie,
Maryland
[______________]
BAY
BANCORP, INC.
7151
Columbia Gateway Drive Suite A
Columbia,
Maryland 21046
NOTICE
OF SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON [___________] AT
[______]
A
special meeting of stockholders of Bay Bancorp, Inc., a Maryland
corporation, will be held at its office located at 7151 Columbia
Gateway Drive, Suite A, Columbia, Maryland 21046, on [_______], at
[______], prevailing local time, for the following
purposes:
1.
To approve the
merger of Bay Bancorp, Inc. with and into Old Line Bancshares,
Inc., with Old Line Bancshares, Inc. as the surviving entity,
pursuant to the Agreement and Plan of Merger dated as of September
27, 2017, as the agreement may be amended from time to time, by and
between Old Line Bancshares, Inc. and Bay Bancorp, Inc., as more
fully described in the accompanying joint proxy
statement/prospectus.
2.
To adopt a
nonbinding advisory resolutions approving “golden parachute
compensation” payable under existing agreements or
arrangements that certain Bay Bancorp, Inc. executive officers may
receive in connection with the merger.
3.
To approve the
adjournment of 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, as more fully described in the accompanying
joint proxy statement/prospectus.
4.
To transact such
other business that may properly come before the special meeting or
any adjournment or postponement thereof.
Bay
Bancorp’s board of directors has fixed the close of business
on [__________] as the record date for determining stockholders who
are entitled to receive notice of and to vote at the special
meeting or any adjournment or postponement thereof.
Whether
or not you plan to attend the meeting in person, you are urged to
promptly vote your shares by signing, dating and mailing the
enclosed proxy card. No postage is necessary if mailed in the
U.S.A. or Canada. You may also vote by telephone by calling
1-800-690-6903 and following the voice mail prompts, or over the
Internet by following the instructions at www.proxyvote.com. You
will need information from your proxy card to submit your proxy by
phone or over the Internet.
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 Bay Bancorp, Inc., by executing a proxy bearing a later
date, or by attending the meeting and voting in person. If you wish
to attend the special 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 joint 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 special meeting. It also contains information about Old Line
Bancshares, Inc. and Bay Bancorp, Inc. and related matters. We urge
you to read the entire joint 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/Lori J.
Mueller
Lori J.
Mueller
|
Corporate
Secretary
|
Columbia,
Maryland
|
[_________]
|
|
TABLE
OF CONTENTS
Page
QUESTIONS
AND ANSWERS ABOUT THE SPECIAL MEETINGS
|
1
|
SUMMARY
|
5
|
RISK
FACTORS
|
12
|
SELECTED
FINANCIAL DATA OF OLD LINE BANCSHARES
|
25
|
UNAUDITED
PRO FORMA COMBINED CONDENSED CONSOLIDATED FINANCIAL
DATA
|
27
|
COMPARATIVE
PER SHARE MARKET PRICE
|
29
|
COMPARATIVE
HISTORICAL AND PRO FORMA PER SHARE DATA
|
29
|
CAUTION
REGARDING FORWARD-LOOKING STATEMENTS
|
31
|
THE
OLD LINE BANCSHARES SPECIAL MEETING
|
33
|
THE
BAY BANCORP SPECIAL MEETING
|
36
|
OWNERSHIP
OF OLD LINE BANCSHARES COMMON STOCK
|
38
|
OWNERSHIP
OF BAY BANCORP COMMON STOCK
|
41
|
THE
MERGER AGREEMENT AND THE MERGER
|
42
|
General
|
42
|
Background
of the Merger
|
43
|
Old
Line Bancshares’ Reasons for the Merger
|
47
|
Bay
Bancorp’s Reasons for the Merger and Recommendation of the
Board of Directors
|
48
|
Opinion
of Old Line Bancshares’ Financial Advisor
|
50
|
Opinion
of RP Financial - Bay Bancorp’s Financial
Advisor
|
60
|
Opinion
of Hovde Group - Bay Bancorp’s Financial Advisor
|
67
|
Terms
of the Merger
|
77
|
Interests
of Directors and Officers in the Merger
|
97
|
Accounting
Treatment
|
101
|
Certain
Federal Income Tax Consequences
|
101
|
Restrictions
on Sales of Shares by Certain Affiliates
|
101
|
Stock
Exchange Listing
|
104
|
No
Appraisal Rights
|
104
|
BAY
BANCORP – INFORMATION ABOUT DIRECTORS TO BE ELECTED TO OLD
LINE BANCSHARES’ BOARD OF DIRECTORS
|
104
|
COMPARISON
OF STOCKHOLDER RIGHTS
|
104
|
EXPERTS
|
106
|
LEGAL
MATTERS
|
111
|
OTHER
MATTERS
|
112
|
INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
|
112
|
2018
ANNUAL MEETINGS
|
114
|
WHERE
YOU CAN FIND MORE INFORMATION
|
115
|
|
|
UNAUDITED
PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS
|
F-1
|
ANNEX
A AGREEMENT AND PLAN OF MERGER
|
A-1
|
ANNEX
B OPINION OF FIG PARTNERS, LLC
|
B-1
|
ANNEX
C OPINION OF RP FINANCIAL, LC
|
C-1
|
ANNEX
D OPINION OF HOVDE GROUP, LLC
|
D-1
|
QUESTIONS
AND ANSWERS ABOUT THE SPECIAL MEETINGS
The following are some questions that you, as a stockholder of Old
Line Bancshares or Bay Bancorp, may have regarding the merger
agreement, the merger and the other matters being considered at the
special meetings and the answers to those questions. Old Line
Bancshares and Bay Bancorp urge you to read carefully the remainder
of this joint 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 and the other matters
being considered at the special meetings. Additional important
information is also contained in the annexes to this joint proxy
statement/prospectus.
Q:
|
Why
am I receiving this joint proxy statement/prospectus?
|
A:
|
Old
Line Bancshares and Bay Bancorp have agreed to the merger of Bay
Bancorp 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 joint proxy statement/prospectus. A copy
of the merger agreement is attached to this joint proxy
statement/prospectus as Annex A. Each company will hold a special
meeting of stockholders for the purpose of voting on the merger and
certain related proposals. This document constitutes each
company’s proxy statement, and it also constitutes a
prospectus covering the shares of Old Line Bancshares common stock
that will be issued to stockholders of Bay Bancorp in the
merger.
In
order to complete the merger, Maryland law requires that the
stockholders of each of Old Line Bancshares and Bay Bancorp vote to
approve the merger. In addition, the rules of the Nasdaq Stock
Market LLC (“Nasdaq”) require that Old Line Bancshares
stockholders approve the merger since the shares it will issue to
Bay Bancorp stockholders in the merger will be in excess of 20% of
its current outstanding shares of common stock and voting
power.
In
addition, Bay Bancorp stockholders will be asked to adopt a
nonbinding advisory resolution approving certain “golden
parachute compensation” that Old Line Bancshares could be
required to pay to Joseph J. Thomas, Bay Bancorp’s President
and Chief Executive Officer, and Larry D. Pickett, Bay
Bancorp’s Executive Vice President - Chief Financial Officer,
in connection with the merger. Rules of the U.S. Securities and
Exchange Commission (the “SEC”), require Bay Bancorp to
seek a non-binding advisory vote with respect to certain
“golden parachute compensation” that Bay
Bancorp’s named executive officers may receive in connection
with the merger.
Finally, both Old
Line Bancshares and Bay Bancorp stockholders will be asked to vote
on a proposal to adjourn their special meetings 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
meetings to approve the matters to be considered by the
stockholders.
Old
Line Bancshares and Bay Bancorp will hold separate special meetings
to obtain these approvals. This joint proxy statement/prospectus
contains important information about the merger and the meetings of
the stockholders of Old Line Bancshares and Bay Bancorp, and you
should read it carefully. The enclosed voting materials allow you
to vote your shares without actually attending your respective
stockholder meeting.
Your
vote is important. We encourage you to vote as soon as
possible.
|
Q:
|
When
and where will the stockholder meetings be held?
|
A:
|
The Old
Line Bancshares special meeting will be held at its office located
at 1525 Pointer Ridge Place, Bowie, Maryland, on [__________] at
[______]. The Bay Bancorp special meeting will be held at its
office located at 7151 Columbia Gateway Drive, Suite A, Columbia,
Maryland 21046, on [__________] at [______].
|
Q:
|
How
do I vote?
|
A:
|
Old Line Bancshares. If you are a
stockholder of record of Old Line Bancshares as of the record date,
you may vote in person by attending the Old Line Bancshares special
meeting or by signing and returning the enclosed proxy card in the
postage-paid envelope provided. You may also vote by telephone by
calling 1-800-690-6903 and following the voice mail prompts or over
the Internet by following the instructions at
www.proxyvote.com.
Bay Bancorp. If you are a stockholder
of record of Bay Bancorp as of the record date, you may vote in
person by attending the special meeting or by signing and returning
the enclosed proxy card in the postage-paid envelope provided. You
may also vote by telephone by calling 1-800-690-6903 and following
the voice mail prompts or over the Internet by following the
instructions at www.proxyvote.com.
If you
hold shares of common stock of Old Line Bancshares or Bay Bancorp
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 your
stockholder meeting.
|
Q:
|
What
vote is required to approve each proposal?
|
A:
|
Old Line Bancshares. The proposal at
the Old Line Bancshares special meeting to approve the merger
requires the affirmative vote of holders of a majority of the
outstanding shares of Old Line 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.
As of
the record date for the Old Line Bancshares special meeting, there
were [__________] shares of Old Line Bancshares common stock issued
and outstanding and entitled to vote, and directors and executive
officers of Old Line Bancshares and their affiliates are entitled
to vote [__.__]% of those shares.
Bay Bancorp. The proposal at the Bay
Bancorp special meeting to approve the merger requires the
affirmative vote of holders of at least two-thirds of the
outstanding shares of Bay Bancorp 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.
Adoption of the
nonbinding advisory resolution approving the “golden
parachute compensation” that may be paid to Joseph J. Thomas,
Bay Bancorp’s President and Chief Executive Officer, and
Larry D. Pickett, Bay Bancorp’s Executive Vice President -
Chief Financial Officer, in connection with the merger requires the
affirmative vote of at least a majority of all votes cast on the
matter at the special meeting. Abstentions, the failure to vote and
broker non-votes are not included in calculating votes cast with
respect to this proposal and, therefore, will have no effect on
their outcome.
As of
the record date for the Bay Bancorp special meeting, there were
[___________] shares of Bay Bancorp common stock issued and
outstanding and entitled to vote, and directors, executive officers
and their affiliates were entitled to vote [____]% of such shares.
Directors of Bay Bancorp and H Bancorp LLC, who have all agreed, in
writing, to vote their shares of Bay Bancorp common stock in
support of the merger, are entitled to vote [___]% of the shares of
Bay Bancorp common stock that are issued and outstanding and
entitled to vote as of the record date.
Each of
the special meetings may be adjourned, if necessary, to solicit
additional proxies in the event there are not sufficient votes at
the time of the special meeting to approve the proposal. The
affirmative vote of the holders of a majority of the shares of
common stock cast on the matter at these special meetings is
required to adjourn such special meeting.
|
Q:
|
How
do the boards of directors of each of Old Line Bancshares and Bay
Bancorp recommend that I vote on the proposals?
|
A:
|
The
board of directors of Old Line Bancshares recommends that you vote
“FOR” approval of the merger.
The
board of directors of Bay Bancorp recommends that you vote
“FOR” approval of the merger and “FOR”
adoption of the nonbinding advisory resolution approving the
“golden parachute compensation” that may be paid to
Joseph J. Thomas, Bay Bancorp’s President and Chief Executive
Officer, and Larry D. Pickett, Bay Bancorp’s Executive Vice
President - Chief Financial Officer, in connection with the
merger.
|
Q:
|
How
many votes do I have?
|
A:
|
Old Line Bancshares. You are entitled
to one vote for each share of Old Line Bancshares common stock that
you owned as of the record date.
Bay Bancorp. You are entitled to one
vote for each share of Bay Bancorp common stock that you owned as
of the record date.
|
Q:
|
What
will happen if I fail to vote or I abstain from
voting?
|
A:
|
A
failure to vote, a failure to instruct your bank, broker or other
nominee to vote, and an abstention will all have the same effect as
a vote against the proposal to approve the merger.
Assuming a quorum
is present, an abstention or the failure to vote will have no
effect on the outcome of the proposal to approve the adjournment of
the stockholder meeting, if necessary, to solicit additional
proxies.
If you
are a Bay Bancorp stockholder, then assuming a quorum is present,
an abstention or the failure to vote will have no effect on the
outcome of the proposal to adopt the nonbinding advisory resolution
approving the “golden parachute compensation” that may
be paid to Joseph J. Thomas, Bay Bancorp’s President and
Chief Executive Officer, and Larry D. Pickett, Bay Bancorp’s
Executive Vice President - Chief Financial Officer, in connection
with the merger.
For
these purposes, a quorum will be present at the Old Line Bancshares
special meeting if holders of at least a majority of the
outstanding shares of Old Line Bancshares common stock as of the
record date are present, in person or by proxy, at that meeting,
and a quorum will be present at the Bay Bancorp special meeting if
holders of at least a majority of the outstanding shares of Bay
Bancorp common stock as of the record date are present, in person
or by proxy, at that meeting.
|
Q:
|
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?
|
A:
|
Generally not. If
you hold your shares in a stock brokerage account, your broker will
not vote your shares of Old Line Bancshares or Bay Bancorp common
stock unless you provide voting instructions to your broker. If
your shares of Old Line Bancshares or Bay Bancorp common stock 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 of Old Line Bancshares or Bay Bancorp
common stock on any matter at your stockholder 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
joint proxy statement/prospectus. Please note that you may not vote
shares of Old Line Bancshares or Bay Bancorp common stock held in
street name by returning a proxy card directly to Old Line
Bancshares or Bay Bancorp or by voting in person at the applicable
special meeting unless you provide a “legal proxy,”
which you must obtain from your bank, broker or
nominee.
|
Q:
|
What
will happen if I return my proxy card without indicating how to
vote?
|
A:
|
If you
sign and return your proxy card without indicating how to vote on
any particular proposal, the Old Line Bancshares common stock or
the Bay Bancorp common stock represented by your proxy will be
voted in favor of that proposal.
|
Q:
|
What
if I fail to submit my proxy card or to instruct my broker, bank or
other nominee to vote?
|
A:
|
If you
fail to properly submit your proxy card or fail to properly
instruct your broker, bank or other nominee to vote your shares of
Old Line Bancshares common stock or Bay Bancorp common stock and
you do not attend the applicable special meeting and vote your
shares in person, then 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, but will have no effect on the
proposal to adjourn the meeting if necessary to solicit additional
proxies or, with respect to Bay Bancorp, on the adoption of the
nonbinding advisory resolution approving the “golden
parachute” compensation.
|
Q:
|
If
I am a stockholder of record, can I change my vote after I have
returned a proxy or voting instruction card?
|
A:
|
Yes.
You can change your vote at any time before your proxy is voted at
your special 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 your special 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 Old Line
Bancshares or the Corporate Secretary of Bay Bancorp, as
appropriate, no later than the beginning of the applicable special
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.
|
Q:
|
What
will happen if stockholders of Bay Bancorp do not approve the
“golden parachute compensation” that may be paid to
Messrs. Thomas and Pickett in connection with the
merger?
|
A:
|
The
vote with respect to the “golden parachute
compensation” is an advisory vote and will not be binding on
Bay Bancorp or Old Line Bancshares. Approval of this compensation
is not a condition to completion of the merger. Therefore, if the
merger is approved and subsequently completed, the compensation
will still be paid to Joseph J. Thomas, Bay Bancorp’s
President and Chief Executive Officer, and Larry D. Pickett, Bay
Bancorp’s Executive Vice President - Chief Financial Officer,
assuming they are eligible to receive that compensation, whether or
not the stockholders of Bay Bancorp approve that compensation at
their special meeting.
|
Q:
|
Am
I entitled to appraisal rights or similar rights?
|
A:
|
No.
Neither the stockholders of Old Line Bancshares nor the
stockholders of Bay Bancorp have the right to demand the fair value
of their stock or seek an appraisal of such fair value in
connection with the merger.
|
Q:
|
What
are the material United States federal income tax consequences of
the merger to stockholders?
|
A:
|
In
general, for United States federal income tax purposes, Bay Bancorp
stockholders are not expected to recognize a gain or loss on the
exchange of their shares of Bay Bancorp common stock for shares of
Old Line Bancshares common stock. Bay Bancorp stockholders will
recognize a gain in connection with cash received in lieu of
fractional shares of Old Line Bancshares common stock.
Old
Line Bancshares stockholders will have no tax consequences as a
result of the merger.
Bay
Bancorp 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.”
|
Q:
|
When
do you expect the merger to be completed?
|
A:
|
Old
Line Bancshares and Bay Bancorp are working to complete the merger
as soon as is reasonably practicable, with a target date of
February 28, 2018. However, the merger is subject to various
federal and state regulatory approvals and other conditions, in
addition to approval by the stockholders of both companies, 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
respective Old Line Bancshares and Bay Bancorp special meetings and
the completion of the merger.
|
Q:
|
What
do I need to do now?
|
|
Carefully read and
consider the information contained in this joint 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 (you may also vote by phone or via the
Internet as otherwise instructed in this joint proxy
statement/prospectus), 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 Old Line Bancshares or
Bay Bancorp special meeting.
|
Q:
|
What
will I receive in the merger?
|
A:
|
Old Line Bancshares. You will continue
to hold your shares of common stock in Old Line Bancshares after
the merger.
Bay Bancorp. As more fully described in
this joint proxy statement/prospectus, you will receive shares of
Old Line Bancshares common stock in exchange for your shares of Bay
Bancorp common stock.
|
Q:
|
Do
I need to do anything with my shares of Bay Bancorp common stock
now?
|
A:
|
No.
Please do not send in any Bay Bancorp stock certificates with your
proxy card. If the merger is approved, then you will be sent a
letter of transmittal that includes instructions for sending in
your Bay Bancorp stock certificates or surrendering you book-entry
shares of Bay Bancorp common stock at a later date.
Each
outstanding share of common stock of Old Line Bancshares will
continue to remain outstanding as a share of Old Line Bancshares
common stock after the merger. As a result, if you are an Old Line
Bancshares stockholder, you are not required to take any action
with respect to your Old Line Bancshares common stock
certificates.
|
Q:
|
Whom
should I call if I have any questions?
|
A:
|
Stockholders of Old
Line Bancshares or Bay Bancorp who have questions about the merger
or the other matters to be voted on at the special stockholder
meetings or who desire additional copies of this joint proxy
statement/prospectus or additional proxy cards should
contact:
|
|
If you
are an Old Line Bancshares stockholder:
Mark A.
Semanie
Executive Vice
President & Chief Operating Officer
Old
Line Bancshares, Inc.
1525
Pointer Ridge Place
Bowie,
Maryland 20716
Phone:
(301) 430-2500
Fax:
(410) 312-5435
|
If you
are a Bay Bancorp Stockholder:
Joseph
J. Thomas
President and Chief
Executive Officer
Bay
Bancorp, Inc.
7151
Columbia Gateway Drive
Suite
A
Columbia, Maryland
21046
Phone:
(410) 737-7401
Fax:
(410) 312-5435
|
SUMMARY
This summary highlights selected information from this joint proxy
statement/prospectus, including information incorporated by
reference into this joint 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 joint proxy
statement/prospectus on which that subject is discussed in more
detail. Unless otherwise indicated in this joint proxy
statement/prospectus or the context otherwise requires, all
references in this joint proxy statement/ prospectus to “Old
Line Bancshares” refer to Old Line Bancshares, Inc., all
references to “Bay Bancorp” refer to Bay Bancorp, Inc.,
and all references to “Bay Bank” refer to Bay Bank,
FSB.
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 “BHC 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., on December 4, 2015, Old Line Bancshares acquired
Regal Bancorp, Inc., the parent
company of Regal Bank & Trust, and on July 28, 2017, Old
Line Bancshares acquired DCB Bancshares, Inc. (“DCB”),
the parent company of Damascus Community Bank. Following
our latest acquisition, we have assets of more than $2.0 billion
and 28 full service branches serving nine Maryland
counties.
In
addition, Old Line Bank owns 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
September 30, 2017, Old Line Bancshares had consolidated assets,
deposits and stockholders’ equity of approximately $2.1
billion, $1.7 billion and $203.3 million,
respectively.
Old
Line Bancshares’ common stock is listed and traded on the
Nasdaq Capital Market under the symbol
“OLBK.”
Bay Bancorp, Inc.
7151
Columbia Gateway Drive, Suite A
Columbia, Maryland
21046
Telephone:
301-253-1000
Bay
Bancorp, organized in 1990, is a savings and loan holding company
headquartered in Columbia, Maryland, that is the parent company of
Bay Bank, a federal savings bank, that is also headquartered in
Columbia, Maryland. Until November 1, 2013, Bay Bancorp operated
under the name Carrollton Bancorp. Effective November 1, 2013, its
name was changed to Bay Bancorp, Inc.
Bay
Bancorp is focused on providing superior financial and customer
service to small and medium-sized commercial and retail businesses,
owners of these businesses and their employees, to business
professionals and to individual consumers located in the central
Maryland region, through its network of 11 branch locations. Bay
Bank attracts deposit customers from the general public and uses
such funds, together with other borrowed funds, to make loans. Bay
Bank’s mortgage division is in the business of originating
residential mortgage loans. Mortgage banking products include
Federal Housing Administration and Federal Veterans Administration
loans, conventional and nonconforming first and second mortgages,
and construction and permanent financing. Loans originated by the
mortgage division are generally sold into the secondary market or
retained by us as part of our balance sheet strategy.
On July
8, 2016, Bay Bancorp completed its merger with Hopkins Bancorp,
Inc. (“Hopkins”), the parent company of Hopkins Federal
Savings Bank (“Hopkins Bank”), in which Hopkins was
merged into Bay Bancorp, with Bay Bancorp as the surviving
corporation. Immediately following that merger, Hopkins Bank was
merged into Bay Bank, with Bay Bank as the surviving federal
savings bank.
At
September 30, 2017, Bay Bancorp had consolidated assets, deposits
and stockholders’ equity of approximately $651.6 million,
$549.4 million and $71.8 million, respectively.
Bay
Bancorp’s common stock is listed on the Nasdaq Capital Market
under the symbol “BYBK.”
The Special Meetings
Date, Time and Place of Special Meetings (see pages 33 and
36)
Old
Line Bancshares will hold a special meeting of stockholders on
[________] at [_____], local time, at its office located at 1525
Pointer Ridge Place, Bowie, Maryland. The Old Line Bancshares board
of directors has set the close of business on [________] as the
record date for determining stockholders entitled to notice of, and
to vote at, the special meeting. On the record date, there were
[________] shares of Old Line Bancshares common stock
outstanding.
Bay
Bancorp will hold a special meeting of stockholders on [__________]
at [______], local time, at its office located at 7151 Columbia
Gateway Drive, Suite A, Columbia, Maryland 21046. The Bay Bancorp
board of directors has set the close of business on
[______________] as the record date for determining stockholders
entitled to notice of, and to vote at, the special meeting. On the
record date, there were [_________] shares of Bay Bancorp common
stock outstanding.
Matters to be Considered at the Special Meetings (see pages 33 and
36)
If you
are a stockholder of Old Line Bancshares, you will be asked at the
Old Line Bancshares special meeting to vote on (i) a proposal to
approve the merger and (ii) a proposal to adjourn the special
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, and (iii) any other business that properly
arises during the special meeting or any adjournment or
postponement thereof.
If you
are a stockholder of Bay Bancorp, you will be asked at the Bay
Bancorp special meeting to vote (i) on a proposal to approve the
merger, (ii) on a proposal to adopt a nonbinding advisory
resolution approving the “golden parachute
compensation” that could be paid to Joseph J. Thomas, Bay
Bancorp’s President and Chief Executive Officer, and Larry D.
Pickett, Bay Bancorp’s Executive Vice President - Chief
Financial Officer, by Old Line Bancshares in connection with the
merger, (iii) on a proposal to adjourn the special 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, and (iv) on any other matter that may properly come before
the special meeting or any adjournment or postponement
thereof.
Under
the terms of the merger agreement, Old Line Bancshares will acquire
Bay Bancorp by merging Bay Bancorp with and into Old Line
Bancshares. Pursuant to a separate agreement, we anticipate that
immediately after the merger, Bay 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 joint proxy
statement/prospectus as Annex A.
Consideration to be Received in the Merger (see page 77)
If the merger is completed, each outstanding share
of common stock of Bay Bancorp will be converted into the right to
receive shares of Old Line Bancshares common stock. The number of shares of Old
Line Bancshares common stock
for which each share of Bay Bancorp common stock will be exchanged
in the merger, which we refer to as the “per share
consideration,” will be calculated by dividing $11.80 by the
volume-weighted average closing prices of Old Line Bancshares
common stock for the 20 trading days ending five trading days
before the closing date of the merger (which we refer to as the
“Average Price”), subject to a minimum Average Price of
$25.65 and a maximum average price of $29.16 and adjustments for
the after-tax income recognized by Bay Bancorp or Bay Bank from the
recent settlement of certain litigation and the resolution of
certain loans. We refer to the number resulting from such
calculation as the “exchange ratio.” As such, the per
share consideration before such adjustments may be as low as 0.4047
shares of Old Line Bancshares common stock if the Average Price is
$29.16 or more and as high as 0.4600 shares of Old Line Bancshares
common stock if the Average Price is $25.65 or less. The impact of
the adjustments will not be calculated until just prior to the
effective time of the merger, but based on current information
regarding these adjustments, if the merger had been effective on
November 21, 2017, the exchange ratio would have been increased by
0.0049.
In addition, the number of shares of Old Line
Bancshares common stock that will be exchanged for each outstanding
share of Bay Bancorp 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 Bay Bancorp
can Amend or Terminate the Merger
Agreement.”
The exchange ratio is also subject to customary
anti-dilution adjustments in the event of stock splits, stock
dividends, recapitalizations and similar transactions involving Old
Line Bancshares common
stock.
If the
exchange ratio is fixed based
on the formula described above (i.e. of the Average Price is above
$29.15 or below $25.66), then 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
(before adjustments) 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 Bay Bancorp
will receive as a result of the merger. For more information, see
“The Merger Agreement and the Merger – Terms of the
Merger – What Bay Bancorp Stockholders Will Receive in the
Merger.”
Surrender of Stock Certificates (see page 82)
No more
than five business days following the effective date of the merger,
a letter of transmittal will be sent to Bay Bancorp stockholders
containing instructions for use in surrendering their Bay Bancorp
stock certificates (or delivering an “agent’s
message” or other appropriate instructions with respect to
shares of Bay Bancorp common stock held in book-entry form) 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.
Treatment of Stock Options (see page 81)
Options
to purchase Bay Bancorp common stock that are outstanding at the
effective date of the merger, whether or not then exercisable, will
be converted into the right to receive cash in the amount
determined by multiplying (i) the number of shares of Bay Bancorp
common stock issuable upon the exercise of such option by (ii) the
difference between (a) the Average Price multiplied by the per
share consideration and (b) the exercise price per share of Bay
Bancorp common stock issuable upon the exercise of such
option.
Each of the Old Line
Bancshares Bay Bancorp Boards of Directors Recommends Stockholder
Approval (see page 33 and
36)
Each of
the Old Line Bancshares and the Bay Bancorp boards of directors
believes that the merger is in the best interests of Old Line
Bancshares and Bay Bancorp, respectively, and their respective
stockholders. Accordingly, the board of directors of Old Line
Bancshares recommends that stockholders of Old Line Bancshares vote
“FOR” approval
of the merger, and the board of directors of Bay Bancorp recommends
that stockholders of Bay Bancorp vote “FOR” approval of the
merger.
Opinion of Old Line Bancshares’ Financial Advisor (see page
50)
In
connection with the merger, Old Line Bancshares’ financial
advisor, FIG Partners, LLC (“FIG”), delivered a written
opinion, dated September 27, 2017, to the Old Line 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 Old Line
Bancshares common stock of the merger consideration to be paid by
Old Line Bancshares to the stockholders of Bay Bancorp 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 FIG in
preparing the opinion, is attached as Annex B to this joint proxy
statement/prospectus. The opinion
was for the information of, and was directed to, the Old Line
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 Old Line Bancshares to engage in the merger or enter
into the merger agreement or constitute a recommendation to the Old
Line Bancshares board in connection with the merger, and it does
not constitute a recommendation to any holder of Old Line
Bancshares common stock as to how to vote in connection with the
merger or any other matter.
Opinions of Bay Bancorp’s Financial Advisors (see page 60 and
67)
In
connection with the merger, each of Bay Bancorp’s financial
advisors, RP® Financial, LC. (“RP Financial”) and
Hovde Group, LLC (“Hovde Group”), delivered a written
opinion, dated September 27, 2017, to the Bay Bancorp 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 Bay Bancorp common
stock of the merger consideration in the proposed merger. The full
text of the opinions, which describe the procedures followed,
assumptions made, matters considered, and qualifications and
limitations on the review undertaken by RP Financial and Hovde
Group in preparing their opinions, are attached as Annexes C and D,
respectively, to this joint proxy statement/prospectus.
The opinions were for the
information of, and were directed to, the Bay Bancorp board of
directors (in its capacity as such) in connection with its
consideration of the financial terms of the merger. The opinions
did not address the underlying business decision of Bay Bancorp to
engage in the merger or enter into the merger agreement or
constitute a recommendation to the Bay Bancorp board in connection
with the merger, and they do not constitute a recommendation to any
holder of Bay Bancorp common stock as to how to vote in connection
with the merger or any other matter.
Vote Required by Old Line Bancshares Stockholders (see page
34)
The
approval of the merger by stockholders of Old Line Bancshares
requires the approval of the holders of a majority of the shares of
Old Line Bancshares common stock that are issued and outstanding as
of the record date of [_______]. Each holder of shares of Old Line
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 is a percentage of all outstanding shares of
Old Line 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.
The
affirmative vote by the holders of a majority of the shares of Old
Line Bancshares common stock present in person or represented by
proxy at the special meeting and entitled to vote is required to
approve the proposal to adjourn the meeting to a later date or
dates, if necessary, to permit further solicitation of proxies in
the event that there are no sufficient votes at the time of the
meeting to approve the merger. Therefore, an abstention, a failure
to vote and a broker non-vote will each have no effect on the
outcome of this proposal.
Vote Required by Bay Bancorp Stockholders (see page 37)
The
approval of the merger by stockholders of Bay Bancorp requires the
affirmative vote of the holders of at least two-thirds of the
shares of Bay Bancorp common stock that are issued and outstanding
as of the record date of [_______]. Each holder of shares of Bay
Bancorp 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 is a percentage of all outstanding shares of
Bay Bancorp 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.
The
affirmative vote by the holders of a majority of the shares of Bay
Bancorp common stock present in person or represented by proxy at
the special meeting and entitled to vote is required to adopt the
nonbinding advisory resolution approving the “golden
parachute compensation” that could be paid to Joseph J.
Thomas, Bay Bancorp’s President and Chief Executive Officer,
and Larry D. Pickett, Bay Bancorp’s Executive Vice President
- Chief Financial Officer, in connection with the merger.
Therefore, an abstention, a failure to vote and a broker non-vote
will each have no effect on the outcome of this
proposal.
The
affirmative vote by the holders of a majority of the shares of Bay
Bancorp common stock present in person or represented by proxy at
the special meeting and entitled to vote is required to approve the
proposal to adjourn the meeting to a later date or dates, if
necessary, to permit further solicitation of proxies in the event
that there are no sufficient votes at the time of the meeting to
approve the merger. Therefore, an abstention, a failure to vote and
a broker non-vote will each have no effect on the outcome of this
proposal.
Old Line Bancshares’ Directors have Approved the Merger and
are Expected to Vote in Favor of the Merger (see page
34)
The
directors of Old Line Bancshares have approved the merger agreement
and the merger and are expected to vote for approval of the merger.
Directors of Old Line Bancshares have sole or shared voting power
over [_______] shares of Old Line Bancshares common stock, or
approximately [____]% of the shares of Old Line Bancshares common
stock outstanding as of the record date.
Bay Bancorp’s Directors have Agreed to Vote in Favor of the
Merger (see pages 37
and 100)
As of
the record date for the Bay Bancorp special meeting, there were
[_______] shares of Bay Bancorp common stock issued and outstanding
and entitled to vote. The directors and largest stockholder of Bay
Bancorp have agreed, in writing, to vote all shares of Bay Bancorp
common stock for which they are the record or beneficial owner
“FOR” the
approval of the merger. As of the record date, such directors and
executive officers are entitled to vote [____]% of the issued and
outstanding shares of Bay Bancorp common stock.
Bay Bancorp’s Directors and Management may have Interests in
the Merger that Differ from Your Interests (see page
97)
The
directors and executive officers of Bay Bancorp have interests in
the merger as directors and employees that are different from your
interests as a Bay Bancorp 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 Bay Bancorp’s President and Chief Executive Officer and
Executive Vice President - Chief Financial Officer pursuant to
their existing employment agreements, as well as indemnification
and insurance provisions included in the merger agreement. In
addition, Steven D. Hovde, a director of Bay Bancorp and Bay Bank,
is also the President and Chief Financial Officer of Hovde Group,
which served as a financial advisor to Bay Bancorp and will receive
investment banking fees from Bay Bancorp in connection with the
merger.
Bay
Bancorp’s 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 95 and
90)
Old
Line Bancshares’ and Bay Bancorp’s 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, obtaining approval of the FDIC and the Maryland
Commissioner for the bank merger and providing notification to the
Office of the Comptroller of the Currency (the “OCC”)
for the bank merger (which are included in any references to
regulatory “approvals” in this joint 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 November 21, 2017. Bay Bank
filed the appropriate notice with the OCC on November 21, 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:
●
Old Line
Bancshares’ and Bay Bancorp’s stockholders must approve
the merger;
●
No more than 10% of
the outstanding shares of Bay Bancorp common stock have been
qualified for appraisal rights under Maryland law;
●
Each party must
receive an opinion from its counsel 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 Bay Bancorp, 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 any untrue or incorrect
representation or warranty 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 joint 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 Bay Bancorp can Amend or Terminate the
Merger Agreement (see page 91)
Bay
Bancorp 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 April 30, 2018 or, because of the failure
to obtain any required regulatory approval or consent by such date,
the merger is not completed by June 30, 2018, 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.
●
Any required
regulatory approval or consent is granted but contains or would
result in the imposition of a Burdensome Condition, as defined in
the merger agreement, and there is no meaningful possibility that
such consent or approval could be revised prior to June 30, 2018 so
as not to contain or result in a Burdensome Condition.
●
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.
●
The other
party’s board of directors withdraws its recommendation to
stockholders to approve the merger.
●
Old Line
Bancshares’ or Bay Bancorp’s stockholders vote on but
fail to approve the merger.
●
Any rule,
regulation, order, etc., permanently restraining, enjoining or
otherwise prohibiting the consummation of the transactions
contemplated by the merger agreement has become final and
nonappealable, provided that the party seeking to terminate the
merger agreement shall have used its reasonable best efforts to
contest, appeal and remove such rule, regulation, order,
etc.
In
addition, Bay Bancorp may terminate the merger agreement
if:
●
Bay Bancorp or any
Bay Bancorp subsidiary receives, at any time prior to the Bay
Bancorp special meeting, an acquisition proposal from a third
party, Bay Bancorp’s board of directors determines that the
transaction pursuant to such proposal is more favorable to the
stockholders of Bay Bancorp than the merger, which we refer to a
superior Bay Bancorp transaction, and Bay Bancorp complies with
certain conditions applicable to such termination right (see
“Terms of the Merger – No Solicitation of Other
Transactions” on page 94).
●
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 September 27,
2017 do not comprise the majority of the surviving entity’s
board of directors, with any person other than Bay Bancorp, and the
Bay Bancorp board of directors determines, after considering the
advice of counsel and its financial advisors, that such transaction
is not in the best interests of Bay Bancorp’s
stockholders.
●
If at any time
during the five trading days before the effective date of the
merger, the volume-weighted average closing price of Old Line
Bancshares common stock during the 20 prior trading days is less
than 90% of $27.00, and the decrease in such price is more than 15%
lower than the change in the average of Nasdaq Bank Index prices
for the 20 consecutive trading days ending on the trading day prior
to the determination date (the “Final Index Price”)
relative to the Nasdaq Bank Index closing price as of September 27,
2017, provided, however, that Old Line Bancshares would then have
the option to increase the per share consideration (by increasing
the exchange ratio, making a cash payment or a combination of both)
so that the per share consideration is an amount that equals the
lesser of (i) the product of $27.00, 90% and the exchange ratio
(which at that point would be 0.4600) or (ii) (a) the Final Index
Price divided by the Nasdaq Bank Index closing price as of
September 27, 2017, multiplied by (b) 85%, the exchange ratio
(which at that point would be 0.4600) and the Old Line Bancshares
20 day volume-weighted average price, divided by (c) the quotient
of the Old Line Bancshares 20 day volume-weighted average price
divided by $27.00, in which case no termination will take place
(the “Walk-Away Cure Right”).
Finally, Old Line
Bancshares may terminate the merger agreement if:
●
Bay Bancorp or any
subsidiary of Bay Bancorp 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 Bay Bancorp
transaction.
●
Bay Bancorp’s
board of directors authorizes, recommends or publicly proposes, or
publicly announces an intention to authorize, recommend or propose
an agreement to enter into a superior Bay Bancorp
transaction.
Old
Line Bancshares and Bay Bancorp 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 requirements for
stockholder approval or the requirement that no law, order, decree
or injunction preventing the transactions contemplated by the
merger agreement has been enacted or issued.
Old Line Bancshares Must Pay a Termination Fee to Bay Bancorp if
the Merger Agreement is Terminated Under Certain Circumstances (see
page 93)
Old
Line Bancshares has agreed to pay a termination fee of $5,076,000
to Bay Bancorp if Bay Bancorp terminates the merger agreement
because:
●
Old Line Bancshares
has materially breached the merger agreement or any representation,
warranty, covenant or other agreement contained
therein;
●
The merger failed
to close before April 30, 2018 or, if due solely to the need to
obtain a regulatory approval or consent, June 30, 2018, 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 Bay Bancorp is not then
in material breach of any material representation, warranty,
covenant or other agreement contained in the merger agreement);
or
●
The board of
directors of Old Line Bancshares has withdrawn, changed or modified
its recommendation to the stockholders of Old Line Bancshares to
approve the merger in a manner adverse to Bay Bancorp (provided
that Bay Bancorp is not then in material breach of any
representation, warranty, covenant or other agreement contained in
the merger agreement).
Bay Bancorp Must Pay a Termination Fee to Old Line Bancshares if
the Merger Agreement is Terminated Under Certain Circumstances (see
page 93)
Bay
Bancorp must pay Old Line Bancshares a termination fee equal to
$5,076,000 if the merger agreement is terminated
because:
●
Bay Bancorp has
materially breached the merger agreement or any representation,
warranty, covenant or other agreement contained therein, including
the negative covenants with respect to soliciting, entertaining or
pursuing an acquisition proposal;
●
The merger failed
to close before April 30, 2018 or, if due solely to the need to
obtain a regulatory approval or consent, June 30, 2018, 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 Bay
Bancorp or Bay 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);
●
Bay Bancorp or any
Bay Bancorp subsidiary has received an acquisition proposal that
constitutes a superior Bay Bancorp transaction; or
●
The board of
directors of Bay Bancorp has withdrawn, changed or modified its
recommendation to the stockholders of Bay Bancorp to approve 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 Bay Bancorp 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).
Rights of Old Line Bancshares Stockholders Differ from those of Bay
Bancorp Stockholders (see page 106)
When
the merger is completed, Bay Bancorp stockholders will become Old
Line Bancshares stockholders. The rights of Old Line Bancshares
stockholders differ from the rights of Bay Bancorp 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 Bay Bancorp’s
articles of incorporation and bylaws.
Stockholders do not have Appraisal Rights in Connection with the
Merger (see page 104)
The
merger will not entitle a stockholder of Old Line Bancshares or of
Bay Bancorp who objects to the merger to demand and receive the
fair value of his or her stock or seek an appraisal to determine
such fair value.
RISK
FACTORS
In
addition to the other information contained in this joint 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.
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 Bay Bancorp. To realize these anticipated benefits
and cost savings, however, Old Line Bancshares must successfully
combine the businesses of Old Line Bancshares and Bay Bancorp. If
Old Line Bancshares is unable to successfully combine the
businesses of Old Line Bancshares and Bay Bancorp, 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 Bay Bancorp 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 each company’s ongoing
business, or inconsistencies in standards, controls, procedures and
policies that adversely affect Old Line Bancshares’ and Bay
Bancorp’s ability to maintain their relationships with their
respective 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 Bay Bancorp during such transition period.
The opinions of Old Line
Bancshares’ and Bay Bancorp’s financial advisors will
not reflect changes in circumstances between the signing of the
merger agreement and the completion of the merger. Old Line
Bancshares and Bay Bancorp obtained opinions from their respective
financial advisors regarding the fairness of the merger
consideration from a financial point of view, but these opinions
are dated as of, and speak only as of, the date of the merger
agreement. Old Line Bancshares and Bay Bancorp have not obtained
updated opinions from their respective financial advisors as of the
date of this joint proxy statement/prospectus. Changes in the
operations and prospects of Old Line Bancshares and Bay Bancorp,
general market and economic conditions and other factors that may
be beyond the control of Old Line Bancshares or Bay Bancorp, and on
which the opinions of Old Line Bancshares’ and Bay
Bancorp’s financial advisors were based, may significantly
alter the value of Bay Bancorp or the prices of the shares of Old
Line Bancshares common stock or Bay Bancorp common stock by the
time the merger is completed. The opinions do not speak as of the
time the merger will be completed or as of any date other than the
date of such opinions. Because Old Line Bancshares and Bay Bancorp
do not currently anticipate asking their respective financial
advisors to update their opinions, the opinions 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 Old
Line Bancshares’ board of directors that Old Line Bancshares
stockholders vote “FOR” approval of the merger and the
recommendation of Bay Bancorp’s board of directors that Bay
Bancorp stockholders vote “FOR” approval of the merger,
however, are made as of the date of this joint proxy
statement/prospectus. For a description of the opinions that Old
Line Bancshares and Bay Bancorp received from their respective
financial advisors, refer to the section of this joint proxy
statement/prospectus entitled “The Merger Agreement and the
Merger” under the headings “Opinion of Old Line
Bancshares’ Financial Advisor,” “Opinion of RP
Financial - Bay Bancorp’s Financial Advisor” and
“Opinion of Hovde Group - Bay Bancorp’s Financial
Advisor.”
Because the market price of
Old Line Bancshares common stock will fluctuate, Bay Bancorp
stockholders cannot be sure of the value of the merger
consideration they may receive. Upon completion of the
merger, the outstanding shares of Bay Bancorp 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 to be received in the merger approximates $11.80 per share,
prior to any adjustments, 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 joint proxy statement/prospectus was mailed
to Old Line Bancshares and Bay Bancorp stockholders and the date of
the special meetings of the Old Line Bancshares and Bay Bancorp
stockholders. Any change in the market price of shares of Old Line
Bancshares common stock may affect the value of the merger
consideration that Bay Bancorp 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.
Old Line Bancshares and Bay
Bancorp 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 Bay
Bancorp. These uncertainties may impair Old Line Bancshares’
and Bay Bancorp’s 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 Bay Bancorp to seek to change
existing business relationships with Old Line Bancshares or Bay
Bancorp or fail to extend an existing relationship. In addition,
competitors may target each company’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 Bay Bancorp’s 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 Bay Bancorp from taking
certain actions without Old Line Bancshares’ consent while
the merger is pending. These restrictions may, among other matters,
prevent Bay Bancorp 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 Bay Bancorp’s business prior to
consummation of the merger or termination of the merger agreement.
These restrictions could have a material adverse effect on Bay
Bancorp’s 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.
The market price of Old
Line Bancshares common stock may decline as a result of the
merger. The market price of Old Line Bancshares common stock
may decline as a result of the merger if Old Line Bancshares does
not achieve the perceived benefits of the merger or the effect of
the merger on Old Line Bancshares’ financial results is not
consistent with the expectations of financial or industry analysts.
In addition, upon completion of the merger, Old Line Bancshares and
Bay Bancorp stockholders will own interests in a combined company
operating an expanded business with a different mix of assets,
risks and liabilities. Existing Old Line Bancshares and Bay Bancorp
stockholders may not wish to continue to invest in the combined
company, or for other reasons may wish to dispose of some or all of
their shares of the combined company.
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 Bay Bancorp currently. The businesses of Old
Line Bancshares and Bay Bancorp 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 Bay Bancorp.
If the merger is not
completed, Old Line Bancshares and Bay Bancorp will have incurred
substantial expenses without realizing the expected
benefits. Old Line Bancshares and Bay Bancorp 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 the receipt of
required regulatory approvals and the requisite approval of the
stockholders of Old Line Bancshares and Bay Bancorp. 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 Bay Bancorp
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; in addition, the OCC must
receive notice of the bank merger. The required 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 Bay Bancorp 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 regulatory approvals, the business, financial
condition and results of operations of each of Old Line Bancshares
and Bay Bancorp 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 Bay Bancorp 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 Bay
Bancorp. If the merger is not completed, the ongoing
businesses of Old Line Bancshares and Bay Bancorp may be adversely
affected and Old Line Bancshares and Bay Bancorp will be subject to
several risks, including the following:
●
Old Line Bancshares
may be required, under certain circumstances, to pay Bay Bancorp a
termination fee of $5,076,000 under the merger
agreement;
●
Bay Bancorp may be
required, under certain circumstances, to pay Old Line Bancshares a
termination fee of $5,076,000 under the merger
agreement;
●
Old Line Bancshares
and Bay Bancorp 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, Bay Bancorp 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 Bay Bancorp management that
could otherwise have been devoted to other opportunities that may
have been beneficial to Old Line Bancshares or Bay Bancorp as
independent companies, as the case may be.
In
addition, if the merger is not completed, Old Line Bancshares
and/or Bay Bancorp may experience negative reactions from the
financial markets and from their respective stockholders, customers
and employees. Old Line Bancshares and/or Bay Bancorp also could be
subject to litigation related to any failure to complete the merger
or to enforcement proceedings commenced against Old Line Bancshares
or Bay Bancorp to perform their respective obligations under the
merger agreement. If the merger is not completed, Old Line
Bancshares and Bay Bancorp 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 Bay Bancorp.
Old Line Bancshares and Bay
Bancorp may choose not to proceed with the merger if it is not
completed before April 30, 2018 or, if due to the lack of a
required regulatory approval, June 30, 2018. Either Old Line
Bancshares or Bay Bancorp may terminate the merger agreement if the
merger has not been completed before April 30, 2018 or, if due to
the lack of a required regulatory approval, June 30, 2018. 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.”
Old Line Bancshares and Bay
Bancorp may waive one or more of the conditions to the merger
without re-soliciting stockholder approval. Each of the
conditions to the obligations of Old Line Bancshares and Bay
Bancorp 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 Bay Bancorp, 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 Bay Bancorp may evaluate the materiality of any such waiver to
determine whether amendment of this joint proxy
statement/prospectus and re-solicitation of proxies is necessary.
Old Line Bancshares and Bay Bancorp, however, generally do not
expect any such waiver to be significant enough to require
re-solicitation of Old Line Bancshares’ or Bay
Bancorp’s stockholders. In the event that any such waiver is
not determined to be significant enough to require re-solicitation
of Old Line Bancshares’ or Bay Bancorp’s stockholders,
the companies will have the discretion to complete the merger
without seeking further stockholder approval.
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, 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 (the “FHLB”) 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 Old Line 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 September 30, 2017
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 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
Bay Bancorp. 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
September 30, 2017, commercial and industrial and commercial real
estate mortgage loans comprise approximately 77.2% 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 10.4% of
total assets) at September 30, 2017 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 September 30, 2017,
Old Line Bancshares had temporary unrealized losses in its
available for sale portfolio of fair value of $2.2 million
(reflected as $1.3 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 Bay
Bancorp 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 Bay Bancorp, 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
September 30, 2017, Old Line Bank was able to lend approximately
$30.7 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.
Additional Risk Factors Associated
with Bay Bancorp
Bay Bancorp’s loan portfolio is concentrated in commercial
and real estate and in certain geographic areas.
Bay
Bancorp’s commercial loans, including commercial real estate
loans and commercial and industrial loans, totaled $312 million as
of September 30, 2017, or 59% of its loan portfolio, while its
residential real estate loans totaled $145 million, or 28% of its
loan portfolio. Additionally, its construction loans totaled $29
million as of September 30, 2017, or 6% of its loan portfolio.
Approximately 98% of Bay Bancorp’s loans were originated in
Maryland. Commercial lending generally carries a higher degree of
credit risk than do residential mortgage loans because of several
factors including larger loan balances, dependence on the
successful operation of a business or a project for repayment, or
loan terms with a balloon payment rather than full amortization
over the loan term. Further, any weakness in the real estate market
could adversely affect Bay Bank’s customers, which in turn
could adversely impact its loan portfolio.
An increase in non-performing loans could result in a loss of
earnings from these loans, an increase in the provision for loan
losses and an increase in charge-offs, all of which could have a
material adverse effect on the financial condition and results of
operations of Bay Bancorp, and, upon consummation of the merger, of
Old Line Bancshares.
Risk Factors as they Relate to Bay Bancorp’s Stockholders in
Connection with the Merger
Bay Bancorp’s
directors and executive officers have financial interests in the
merger that are different from, or in addition to, the interests of
Bay Bancorp stockholders. In considering the information
contained in this joint proxy statement/prospectus, you should be
aware that the directors and certain executive officers of Bay
Bancorp have financial interests in the merger that are different
from, or in addition to, the interests of Bay Bancorp stockholders.
The directors of Bay Bancorp who collectively hold or have the
right to vote or director the vote of approximately [____]% of the
outstanding shares of Bay Bancorp 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 Bay Bancorp. Further, certain executive officers of Bay
Bancorp may be entitled to change-in-control or other severance
payments in connection with the merger under existing arrangements.
Old Line Bancshares and Old Line Bank have agreed to elect Joseph
J. Thomas, Bay Bancorp’s President and Chief Executive
Officer, Eric D. Hovde, who serves as Chairman of the boards of
directors of both Bay Bancorp and Bay Bank, and another current
director of Bay Bancorp, 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. Finally, Steven
D. Hovde, a director of Bay Bancorp and Bay Bank, is also the
President and Chief Executive Officer of Hovde Group, which served
as a financial advisor to Bay Bancorp and will receive investment
banking fees in connection with the merger. These and certain other
additional interests of Bay Bancorp’s 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 Bay Bancorp
directors and executive officers to view the proposed transaction
differently than you view it.
Because the merger
consideration is subject to adjustment, Bay Bancorp stockholders
will not know until the effective time of the merger the value of
the consideration they will receive in the merger. Upon
completion of the merger, each share of Bay Bancorp common stock
will be converted into the right to receive merger consideration
consisting of shares of Old Line Bancshares common stock pursuant
to the terms of the merger agreement. As discussed above, the
exchange ratio will be fixed if the Average Price is above $29.15
or below $25.66. If the exchange ratio is fixed, 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 Bay Bancorp
will receive as a result of the merger. Further, the exchange
ratio, and as a result the value of the merger consideration to be
received by Bay Bancorp stockholders, will be adjusted as provided
in the merger agreement for the
after-tax income recognized by Bay Bancorp or Bay Bank from the
recent settlement of certain litigation and the resolution of
certain loans. Assuming Bay Bank recognizes after-tax income
of $984,750 in connection with the resolution of the litigation and
$587,214 from the resolution of loans, the exchange ratio, based on
the closing price of Old Line Bancshares common stock for the 20
trading days ending five trading days before the date of this joint
proxy statement/prospectus, would be 0.4096. Final calculations
regarding the exchange ratio, however, will not be completed until
the closing of the merger or shortly before closing.
Further, the
exchange ratio will not be adjusted if the Average Price falls
below $25.65, although as discussed below Bay Bancorp can terminate
the merger agreement in certain circumstances based if the
volume-weighted average closing price of Old Line Bancshares common
stock during any 20 trading day period during the five-day period
commencing with the fifth trading day immediately preceding the
effective date of the merger falls below the thresholds set forth
in the merger agreement and Old Line Bancshares does not increase
the merger consideration. As a result, the value of shares of Old
Line Bancshares common stock that a Bay Bancorp stockholder
receives in the merger will decline correspondingly with declines
in the Average Price below $25.65 prior to and as of the date the
merger consideration is received.
Accordingly, at the
time of the special meeting of Bay Bancorp stockholders, Bay
Bancorp stockholders will not know or be able to calculate the
amount or the value of the number of shares of Old Line Bancshares
common stock that they would receive upon completion of the merger.
Stock price changes may result from a variety of factors, including
general market and economic conditions, changes in the businesses,
operations and prospects of Old Line Bancshares and regulatory
considerations. Many of these factors are beyond Old Line
Bancshares’ control. You should obtain current market
quotations for shares of Old Line Bancshares common
stock.
Bay
Bancorp 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 any 20 trading day period
during the five-day period commencing with the fifth trading day
immediately preceding the effective date of the merger falls below
the thresholds set forth in the merger agreement, although Bay
Bancorp does not have this option if Old Line Bancshares, in its
sole discretion, increases the per share consideration as set forth
in the merger agreement. Bay Bancorp cannot predict at this time
whether or not its board of directors would exercise its right to
terminate the merger agreement if these conditions were met. The
merger agreement does not provide for a resolicitation of Bay
Bancorp stockholders in the event that the conditions are met and
the Bay Bancorp board nevertheless chooses to complete the
transaction. In considering whether to exercise its right to
terminate the merger agreement, Bay Bancorp’ board of
directors would take into account all the relevant facts and
circumstances that exist at the time and would consult with its
financial advisor and legal counsel.
The provisions of the
merger agreement limiting Bay Bancorp’s ability to pursue
alternative transactions to the merger and requiring Bay Bancorp to
pay a termination fee if it does may discourage others from trying
to acquire Bay Bancorp. The merger agreement prohibits Bay
Bancorp and its directors, officers, employees, advisors and other
representatives, subject to narrow exceptions, from initiating,
encouraging, soliciting or entering into discussions with any third
party regarding alternative acquisition proposals. This prohibition
limits Bay Bancorp’s ability to pursue offers from other
possible acquirers that may be superior from a financial point of
view. If Bay Bancorp 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, Bay
Bancorp would be required to pay a 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, Bay Bancorp
stockholders may be required to recognize additional gain or
recognize loss on the exchange of their shares of Bay Bancorp
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 Bay Bancorp and Old Line Bancshares to
complete the merger that each of Bay Bancorp and Old Line
Bancshares receives a legal opinion to that effect. Neither of
these opinions will be binding on the Internal Revenue Service. Bay
Bancorp 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, Bay Bancorp
stockholders may be required to recognize gain or loss on the
exchange of their shares of Bay Bancorp common stock in the merger
for U.S. federal income tax purposes. In addition, Bay Bancorp 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 Bay Bancorp stockholders, plus the liabilities of
Bay Bancorp, exceeds the tax basis of Bay Bancorp 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 Bay
Bancorp 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, Bay Bancorp 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, Bay Bancorp stockholders will receive Old Line
Bancshares common stock for their shares of Bay Bancorp common
stock and become Old Line Bancshares stockholders. Differences in
Bay Bancorp’s articles of incorporation and bylaws and Old
Line Bancshares’ articles of incorporation and bylaws will
result in changes to the rights of Bay Bancorp stockholders when
they become Old Line Bancshares stockholders. For more information,
see “Comparison of Stockholder Rights.” A stockholder
of Bay Bancorp may conclude that his, her or its current rights
under Bay Bancorp’s 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.
Bay Bancorp’s
stockholders will have less influence as stockholders of Old Line
Bancshares than as stockholders of Bay Bancorp. Bay Bancorp
stockholders currently have the right to vote in the election of
the board of directors of Bay Bancorp and on other matters
affecting Bay Bancorp. The stockholders of Bay Bancorp as a group
will own between approximately [____]% and [____]% of the combined
organization (Old Line Bancshares and Bay Bancorp), 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 Bay Bancorp
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 Bay Bancorp.
Because of this, stockholders of Bay Bancorp will have less
influence on the management and policies of Old Line Bancshares
than they now have on the management and policies of Bay
Bancorp.
SELECTED
FINANCIAL DATA OF OLD LINE BANCSHARES
The
following table summarizes Old Line Bancshares’ selected
financial information and other financial data as of and for the
periods indicated. The selected balance sheet and statement of
income data as of and for the years ended December 31, 2016, 2015,
2014, 2013 and 2012 are derived from Old Line Bancshares’
audited financial statements contained in Annual Reports on Form
10-K that Old Line Bancshares has previously filed with the SEC.
The financial data as of and for the nine months ended September
30, 2017 and 2016 has been derived from Old Line Bancshares’
unaudited consolidated financial statements contained in Quarterly
Reports on Form 10-Q that Old Line Bancshares has previously filed
with the SEC. The information as of and for the nine months ended
September 30, 2017 and 2016 is unaudited and reflects only normal
recurring adjustments that are, in the opinion of Old Line
Bancshares’ management, necessary for a fair presentation of
the result for the interim periods presented. The results of
operations for the nine months ended September 30, 2017 are not
necessarily indicative of the results to be achieved by Old Line
Bancshares for all of fiscal 2017 or for any other
period.
You
should read this information together with Old Line
Bancshares’ financial statements and the related notes and
its “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” discussion that are
included in its Annual Report on Form 10-K for the year ended
December 31, 2016 and its Form 10-Q for the quarter ended September
30, 2017, incorporated by reference into this joint 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.
|
Nine Months Ended September
30,
|
Twelve Months Ended December
31,
|
|
|
|
|
|
|
|
|
2012
|
|
|
|
(Dollars in thousands except per share data)
|
|
|
Earnings and dividends:
|
|
|
|
|
|
|
|
Interest
income
|
$53,181
|
$44,111
|
$60,465
|
$51,453
|
$45,603
|
$44,263
|
$38,222
|
Interest
expense
|
8,294
|
5,184
|
7,525
|
4,864
|
3,900
|
4,202
|
5,058
|
Net
interest income
|
44,887
|
38,927
|
52,940
|
46,589
|
41,703
|
40,061
|
33,164
|
Provision
for loan losses
|
855
|
1,385
|
1,585
|
1,311
|
2,827
|
1,504
|
1,525
|
Non-interest
income
|
6,002
|
6,685
|
8,256
|
6,845
|
5,957
|
8,870
|
3,708
|
Non-interest
expense
|
34,102
|
30,975
|
39,643
|
36,276
|
35,046
|
36,077
|
25,162
|
Income
taxes
|
5,825
|
4,428
|
6,813
|
5,382
|
2,694
|
3,602
|
2,720
|
Net
income
|
10,106
|
8,825
|
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
|
10,106
|
8,825
|
13,155
|
10,468
|
7,130
|
7,839
|
7,530
|
Per common share data:
|
|
|
|
|
|
|
|
Basic
earnings
|
$0.90
|
$0.82
|
$1.21
|
$0.98
|
$0.66
|
$0.87
|
$1.10
|
Diluted
earnings
|
0.88
|
0.80
|
1.20
|
0.97
|
0.65
|
0.86
|
1.09
|
Dividends
paid
|
0.24
|
0.18
|
0.24
|
0.21
|
0.18
|
0.16
|
0.16
|
Common
stockholders book value, period end
|
16.31
|
13.98
|
13.81
|
13.31
|
12.51
|
11.71
|
10.94
|
Common
stockholders tangible book value, period end
|
13.77
|
12.72
|
12.59
|
12.00
|
11.38
|
10.50
|
10.30
|
Average
common shares outstanding
|
|
|
|
|
|
|
|
Basic
|
11,286,215
|
10,824,436
|
10,837,939
|
10,647,986
|
10,786,017
|
9,044,844
|
6,828,512
|
Diluted
|
11,496,659
|
10,998,150
|
10,997,485
|
10,784,323
|
10,935,182
|
9,149,200
|
6,893,645
|
Common
shares outstanding, period end
|
12,467,518
|
10,859,074
|
10,910,915
|
10,802,560
|
10,810,930
|
10,777,113
|
6,845,432
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
Total
assets
|
$2,061,239
|
$1,650,105
|
$1,709,020
|
$1,510,089
|
$1,227,519
|
$1,167,223
|
$861,856
|
Total
loans, less allowance for loan losses
|
1,669,234
|
1,300,010
|
1,369,594
|
1,155,147
|
931,121
|
849,263
|
595,145
|
Total
investment securities
|
213,664
|
201,831
|
199,505
|
194,706
|
161,680
|
172,170
|
171,541
|
Total
deposits
|
1,654,635
|
1,301,293
|
1,325,881
|
1,235,880
|
1,015,739
|
974,359
|
735,458
|
Stockholders’
equity
|
203,340
|
151,857
|
150,667
|
143,989
|
135,264
|
126,249
|
74,862
|
Performance Ratios:
|
|
|
|
|
|
|
|
Return
on average assets
|
0.73%
|
0.75%
|
0.83%
|
0.79%
|
0.60%
|
0.74%
|
0.90%
|
Return
on average stockholders’ equity
|
7.52%
|
8.02%
|
8.83%
|
7.54%
|
5.45%
|
7.80%
|
11.17%
|
Total
ending equity to total ending assets
|
9.86%
|
9.20%
|
8.82%
|
9.54%
|
11.02%
|
10.82%
|
8.69%
|
Net
interest margin(1)
|
3.68%
|
3.81%
|
3.79%
|
4.08%
|
4.15%
|
4.53%
|
4.65%
|
Dividend
payout ratio for period
|
27.21%
|
22.09%
|
19.79%
|
21.47%
|
27.23%
|
19.02%
|
14.51%
|
Asset Quality Ratios:
|
|
|
|
|
|
|
|
Allowance
to period-end loans
|
0.35%
|
0.49%
|
0.45%
|
0.43%
|
0.46%
|
0.58%
|
0.66%
|
Non-performing
assets to total assets
|
0.19%
|
0.63%
|
0.59%
|
0.56%
|
0.65%
|
1.27%
|
1.12%
|
Non-performing
loans to allowance for loan losses
|
32.67%
|
115.67%
|
103.04%
|
120.04%
|
121.61%
|
178.91%
|
149.04%
|
Capital Ratios:
|
|
|
|
|
|
|
|
Tier 1
risk-based capital
|
9.5%
|
9.7%
|
9.5%
|
10.7%
|
12.3%
|
12.0%
|
10.8%
|
Total
risk-based capital
|
11.7%
|
12.7%
|
12.3%
|
11.1%
|
12.7%
|
12.5%
|
11.4%
|
Leverage
capital ratio
|
8.8%
|
8.6%
|
8.6%
|
9.1%
|
9.9%
|
9.3%
|
7.9%
|
Common
Equity Tier 1
|
9.3%
|
9.5%
|
9.2%
|
10.7%
|
|
|
|
UNAUDITED
PRO FORMA COMBINED CONDENSED CONSOLIDATED FINANCIAL
DATA
The
Unaudited Pro Forma Combined Condensed Consolidated Financial
Information has been prepared using the acquisition method of
accounting, giving effect to the merger. The Unaudited Pro Forma
Combined Condensed Consolidated Statement of Financial Condition
combines the historical information of Old Line Bancshares and Bay
Bancorp as of September 30, 2017 and assumes that the merger was
completed on that date. The Unaudited Pro Forma Combined Condensed
Consolidated Statements of Income combines the historical financial
information of Old Line Bancshares and Bay Bancorp and give effect
to the merger as if it had been completed as of the beginning of
the periods presented. The Unaudited Pro Forma Combined Condensed
Consolidated Statements of Income for Old Line Bancshares also
combines the historical financial information of Old Line
Bancshares and DCB, which was acquired by Old Line Bancshares
effective July 28, 2017 and gives effect to that merger as if it
had been completed as of the beginning of the periods presented.
The Unaudited Pro Forma Combined Condensed Consolidated Financial
Information is presented for illustrative purposes only and is not
necessarily indicative of the results of income or financial
condition had the merger been completed on the date described
above, nor is it necessarily indicative of the results of income in
future periods or the future financial condition and results of
income of the combined entities. The financial information should
be read in conjunction with the accompanying notes to the Unaudited
Pro Forma Combined Condensed Consolidated Financial Information.
Certain reclassifications have been made to Bay Bancorp’s
historical financial information in order to conform to Old Line
Bancshares’ presentation of financial
information.
The
proposed merger is targeted for completion in the first quarter of
2018. There can be no assurance that the merger will be completed
as anticipated. For purposes of the Unaudited Pro Forma Combined
Condensed Consolidated Financial Information, the fair value of Old
Line Bancshares’ common stock to be issued in connection with
the merger was based on Old Line Bancshares’ closing stock
price of $28.00 on September 29, 2017.
The
Unaudited Pro Forma Combined Condensed Consolidated Financial
Information includes estimated adjustments, including adjustments
to record Bay Bancorp’s assets and liabilities at their
respective fair values, and represents Old Line Bancshares’
pro forma estimates based on available fair value information as of
the date of the merger agreement. In some cases, where noted, more
recent information has been used to support estimated adjustments
in the pro forma financial information.
The pro
forma adjustments are subject to change depending on changes in
interest rates and the components of assets and liabilities and as
additional information becomes available and additional analyses
are performed. The final allocation of the purchase price for the
merger will be determined after it is completed and after
completion of thorough analyses to determine the fair value of Bay
Bancorp’s tangible and identifiable intangible assets and
liabilities as of the date the merger is completed. Increases or
decreases in the estimated fair values of the net assets as
compared with the information shown in the Unaudited Pro Forma
Combined Condensed Consolidated Financial Information may change
the amount of the purchase price allocated to goodwill and other
assets and liabilities and may impact Old Line Bancshares’
statement of income due to adjustments in yield and/or amortization
of the adjusted assets or liabilities. Any changes to Bay
Bancorp’s stockholders’ equity, including results of
operations from September 30, 2017 through the date the merger is
completed, will also change the purchase price allocation, which
may include the recording of a lower or higher amount of goodwill.
The final adjustments may be materially different from the
unaudited pro forma adjustments presented herein.
We
anticipate that the merger will provide the combined company with
financial benefits that include reduced operating expenses. The
Unaudited Pro Forma Combined Condensed Consolidated Financial
Information, while helpful in illustrating the financial
characteristics of the combined company under one set of
assumptions, does not reflect the benefits of expected cost savings
or opportunities to earn additional revenue and, accordingly, does
not attempt to predict or suggest future results. It also does not
necessarily reflect what the historical results of the combined
company would have been had Old Line Bancshares and Bay Bancorp
been combined during these periods.
The
Unaudited Pro Forma Combined Condensed Consolidated Financial
Information has been derived from and should be read in conjunction
with the historical consolidated financial statements and the
related notes of Old Line Bancshares and Bay Bancorp, each of which
is incorporated herein by reference.
Selected Pro Forma Condensed Combined Financial Data
|
|
|
|
(Dollars in thousands except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings and dividends:
|
|
|
|
Interest
income
|
$80,167
|
|
$82,662
|
Interest
expense
|
10,408
|
|
9,375
|
Net
interest income
|
69,759
|
|
73,287
|
Provision
for loan losses
|
2,132
|
|
2,974
|
Non-interest
income
|
10,815
|
|
13,357
|
Non-interest
expense
|
56,398
|
|
61,311
|
Income
taxes
|
8,127
|
|
7,733
|
Net
income
|
13,916
|
|
14,991
|
Less:
Net loss attributable to the non-controlling interest
|
—
|
|
200
|
Net
income available to common stockholders
|
13,916
|
|
14,791
|
Per common share data:
|
|
|
|
Basic
earnings
|
$0.81
|
|
$0.87
|
Diluted
earnings
|
0.80
|
|
0.86
|
Dividends
paid
|
0.24
|
|
0.24
|
Common
stockholders book value, period end
|
19.45
|
|
13.81
|
Common
stockholders tangible book value, period end
|
14.12
|
|
12.59
|
Average
common shares outstanding
|
|
|
|
Basic
|
17,100,392
|
|
17,002,613
|
Diluted
|
17,310,836
|
|
17,162,159
|
Common
shares outstanding, period end
|
17,137,084
|
|
17,075,589
|
Balance Sheet Data:
|
|
|
|
Total
assets
|
$2,770,945
|
|
|
Total
loans, less allowance for loan losses
|
2,194,285
|
|
|
Total
investment securities
|
272,642
|
|
|
Total
deposits
|
2,203,990
|
|
|
Stockholders’
equity
|
333,272
|
|
|
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 Bay Bancorp
common stock and the equivalent market value per share of Bay
Bancorp common stock on September 27, 2017 (the last trading day
preceding public announcement of the merger, which was announced
after market close on September 27, 2017) and November 21, 2017
(the date of this joint proxy statement/prospectus). The equivalent
market value per share of Bay Bancorp 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 20 trading days ending five trading days before the
applicable date ($27.34 for September 27, 2017 and $29.56 for
November 21, 2017), in each case taking into account assumed
adjustments to the exchange ratio based on current information,
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 Bay Bancorp Stockholders Will Receive in the
Merger.”
The
historical market values per share of Old Line Bancshares common
stock and Bay Bancorp common stock (including the historical market
value of Old Line Bancshares common stock used to determine the
equivalent market value per share of Bay Bancorp common stock) are
the per share closing sales prices September 27, 2017 and November
21, 2017,
respectively, as reported on the Nasdaq Capital
Market.
|
Old
Line Bancshares Historical
|
|
Equivalent Market
Value Per Share of Bay Bancorp
|
September 27,
2017
|
$29.31
|
$7.95
|
$12.81
|
November 21,
2017
|
$29.34
|
$11.85
|
$12.02
|
COMPARATIVE
HISTORICAL AND PRO FORMA PER SHARE DATA
The Old
Line Bancshares and Bay Bancorp historical and the unaudited pro
forma combined Old Line Bancshares and Bay Bancorp equivalent per
share financial data as of and for the nine months ended September
30, 2017 and the year ended December 31, 2016 is presented below.
The information in set forth below is based on, and should be read
together with, the historical financial information that each of
Old Line Bancshares and Bay Bancorp has presented in its filings
with the SEC. This information should also be considered together
with the unaudited pro forma combined financial data included under
“Unaudited Pro Forma Condensed Combined Financial
Statements” found elsewhere in this joint proxy
statement/prospectus.
The
unaudited pro forma adjustments are based upon available
information and certain assumptions that Old Line Bancshares and
Bay Bancorp. The unaudited pro forma data, while helpful in
illustrating the financial characteristics of the combined company
under one set of assumptions, does not reflect the impact of
factors that may result as a consequence of the merger or consider
any potential impacts of current market conditions or the merger on
revenues, expense efficiencies or asset dispositions, among other
factors, nor the impact of possible business model changes. As a
result, unaudited pro forma data are presented for illustrative
purposes only and do not represent an attempt to predict or suggest
future results. Upon completion of the merger, the operating
results of Bay Bancorp will be reflected in the consolidated
financial statements of Old Line Bancshares on a prospective
basis.
Unaudited Pro Forma Comparative Per Share
Data
For The Nine Months Ended September 30, 2017
(Amounts in Thousands, except per share data)
|
|
|
|
|
Proforma
Equivalent
Bay Bancorp
Share1
|
|
|
|
|
|
For
the nine months ended September 30, 2017
|
|
|
Basic
earnings (loss) per common share
|
$0.88
|
$0.41
|
$0.81
|
$0.35
|
Diluted
earnings (loss) per common share
|
0.86
|
0.41
|
$0.80
|
0.35
|
|
|
|
|
|
Dividends Declared:
|
|
|
|
|
For the nine months ended September 30, 2017
|
$0.24
|
$-
|
$0.24
|
$0.10
|
|
|
|
|
|
Book Value:
|
|
|
|
|
As of September 30, 2017
|
$14.28
|
$6.73
|
$19.45
|
$8.47
|
1) Pro
forma equivalent per share amount is calculated by multiplying the
pro forma combined per share amount by an assumed exchange ratio of
0.4357 as outlined in Footnote 1 to the unaudited Unaudited Pro
Forma Combined Consolidated Financial Statements.
Unaudited Pro Forma Comparative Per Share
Data
For The Twelve Months Ended December 31, 2016
(Amounts in Thousands, except per share data)
|
|
|
|
|
Proforma
Equivalent
Bay Bancorp
Share1
|
|
|
|
|
|
For
the twelve months ended December 31, 2016
|
|
Basic
earnings (loss) per common share
|
$1.15
|
$0.16
|
$0.87
|
$0.38
|
Diluted
earnings (loss) per common share
|
1.13
|
0.16
|
$0.86
|
0.38
|
|
|
|
|
|
Dividends Declared:
|
|
|
|
|
For the year ended December 31, 2016
|
$0.24
|
$-
|
$0.24
|
$0.10
|
|
|
|
|
|
Book Value:
|
|
|
|
|
As of December 31, 2016
|
$13.81
|
$6.31
|
$17.61
|
$7.67
|
1) Pro
forma equivalent per share amount is calculated by multiplying the
pro forma combined per share amount by an assumed exchange ratio of
0.4357 as outlined in Footnote 1 to the Unaudited Pro Forma
Combined Consolidated Financial Statements.
30
CAUTION
REGARDING FORWARD-LOOKING STATEMENTS
This
joint proxy statement/prospectus, including the information
incorporated by reference into this joint 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 Bay
Bancorp, 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 and earnings, excluding
merger expenses; and
(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 joint proxy
statement/prospectus, and are or will be identified in such
documents.
Forward-looking
statements are also included in documents incorporated by reference
into this joint proxy statement/prospectus, and are or will be
identified in such documents.
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
Bay Bancorp 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 Bay
Bancorp’s 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 Old Line
Bancshares and Bay Bancorp may be disrupted by the
merger;
●
the ability to
obtain required approval of Old Line Bancshares’ and Bay
Bancorp’s 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 Bay
Bank’s target markets;
●
inflation and
changes in interest rates and monetary policy that could adversely
affect Old Line Bancshares and/or Bay Bancorp;
●
changes in laws or
government regulations or policies affecting financial
institutions, including changes in regulatory fees and capital
requirements;
●
the ability to
retain key Bay 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 Bay Bancorp
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 joint proxy statement/prospectus, in particular
in the “Risk Factors” section of this joint proxy
statement/prospectus;
●
those risks
identified in connection with the forward-looking statements made
in the documents incorporated by reference into this joint proxy
statement/prospectus; and
●
other risk factors
detailed from time to time in filings made by Old Line Bancshares
and Bay Bancorp 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. Neither Old
Line Bancshares nor Bay Bancorp undertake any 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
OLD LINE BANCSHARES SPECIAL MEETING
Date, Time and Place
Old
Line Bancshares will hold a special meeting of its stockholders at
its office located at 1525 Pointer Ridge Place, Bowie, Maryland,
20716, at [____] on [_________].
Purpose of the Special Meeting
At the
special meeting, Old Line Bancshares’ stockholders will be
asked to consider and vote upon proposals to:
1. Approve
the merger of Bay Bancorp with and into Old Line Bancshares, with
Old Line Bancshares as the surviving entity, pursuant to the
Agreement and Plan of Merger, dated as of September 27, 2017, by
and between Old Line Bancshares and Bay Bancorp, as the agreement
may be amended from time to time;
2. Adjourn
the special meeting if more time is needed to solicit additional
proxies; and
3. Transact
any other business that may properly be brought before the special
meeting.
Recommendation of the Board of Directors of Old Line
Bancshares
The Old
Line 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 Old Line
Bancshares’ stockholders, and unanimously recommends that Bay
Bancorp’s stockholders vote “FOR” the approval of the merger in
Proposal 1.
The Old
Line Bancshares board of directors also unanimously recommends that
Old Line Bancshares’ stockholders vote “FOR” the approval of the
adjournment of the special meeting, if necessary, to solicit
additional proxies in Proposal 2.
Record Date; Stockholders Entitled to Vote
Stockholders of
record at the close of business on [________], which the Old Line
Bancshares board of directors has set as the record date, are
entitled to notice of and to vote at the special meeting. As of the
close of business on that date, there were [__________] 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 special
meeting (or [________] shares of Old Line Bancshares common stock)
will be necessary to constitute a quorum for the transaction of
business at the special meeting. Abstentions are counted for
purposes of determining the presence or absence of a quorum for the
transaction of business at the special 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 special meetings. 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.” Since there are no routine items to be voted on
at the special meeting, nominee record holders of Old Line
Bancshares common stock that do not receive voting instructions
from the beneficial owners of such shares will not be able to
return a proxy card with respect to such shares; as a result, these
shares will not be considered present at the special meeting and
will not count towards the satisfaction of a quorum.
Vote Required
Old
Line Bancshares’ articles of incorporation provide that the
approval of certain transactions, including a merger, requires the
vote of a majority of the shares of each class of Old Line
Bancshares’ capital stock entitled to vote thereon, if the
merger has been approved by a majority of its board of directors.
As a result, the proposal at the Old Line Bancshares special
meeting to approve the merger requires the affirmative vote of
holders of a majority of the outstanding shares of Old Line
Bancshares common stock entitled to vote on the proposal. The
affirmative vote of the holders of a majority of the shares of
common stock cast on the matter is required to adjourn the special
meeting to solicit additional proxies, if necessary.
Directors and
executive officers of Old Line Bancshares and their affiliates, who
beneficially own approximately [____]% of Old Line Bancshares
common stock outstanding as of the record date, are expected to
vote for approval of the merger.
Abstentions and Failure to Vote
Because
approval of the merger requires the affirmative vote of the holders
of more than 50% of the outstanding shares of Old Line Bancshares
common stock entitled to vote at the special meeting, abstentions,
the failure to vote and broker non-votes will have the same effect
as votes against this matter. In other words, if you are an Old
Line 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.
Accordingly, the Old Line 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 special
meeting to solicit additional proxies, if necessary, requires the
affirmative vote of at least a majority of all votes cast on the
matter at the special meeting. Abstentions, the failure to vote and
broker non-votes are not included in calculating votes cast with
respect to this proposal and therefore will have no effect on the
outcome of this proposal (assuming a quorum is
present).
Voting of Proxies
The
enclosed proxy with respect to the Old Line Bancshares special
meeting is solicited by the board of directors of Old Line
Bancshares. The board of directors has selected [_______] and
[_______], or either of them, to act as proxies with full power of
substitution.
Whether
or not you plan to attend the special meeting, you may submit a
proxy to vote your shares via Internet, telephone or mail as
outlined below. You will need information from your proxy card or
electronic delivery notice to submit your proxy to vote your shares
by Internet or telephone.
●
By Internet: Go to
www.proxyvote.com and follow the instructions.
●
By Telephone: Call
1-800-690-6903 and follow the voice mail prompts.
●
By Mail: Mark your
vote, 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 approval of the merger;
and
●
FOR approval of the proposal to adjourn
the special meeting to solicit additional proxies, if
necessary.
At the
date hereof, management has no knowledge of any business that will
be presented for consideration at the special meeting and that
would be required to be set forth in this joint proxy
statement/prospectus or in the related Old Line Bancshares proxy
card, other than the matters set forth in the Notice of Special
Meeting of Stockholders of Old Line Bancshares. In accordance with
Maryland law, business transacted at the Old Line Bancshares
special meeting will be limited to those matters set forth in the
notice. Nonetheless, if any other matter is properly presented at
the Old Line Bancshares special meeting for consideration, proxies
will be voted in the discretion of the proxy holder on such matter.
If the special meeting is postponed or adjourned, your Old Line
Bancshares common stock may be voted by the persons named in the
proxy card on the new special meeting date, provided that the new
meeting occurs within 120 days of the record date for the special
meeting, unless you have revoked your proxy.
Your
vote is important. Accordingly, please sign and return the enclosed
proxy card, or indicate your vote by phone or Internet as described
above, as soon as possible whether or not you intend to attend the
Old Line Bancshares special 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. If you
are an Old Line Bancshares stockholder and you do not instruct your
broker on how to vote your shares, your broker may not vote your
shares at the special meeting.
Please
note that you may not vote shares held in street name by returning
a proxy card directly to Old Line 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.
Your
vote is important. Accordingly, please sign and return your
bank’s, broker’s or other nominee’s
instructions.
Revocability of Proxies
You may
revoke your proxy at any time before the vote is taken at the
special meeting. Unless so revoked, the shares represented by
properly executed proxies will be voted at the special meeting and
all adjournments thereof. To revoke your proxy, you must send
written notice to the Secretary, Old Line Bancshares, Inc., 1525
Pointer Ridge Place, Bowie, Maryland 20716, file a later-dated
proxy before your common stock has been voted at the special
meeting or attend the special meeting and vote in person.
Attendance at the special meeting will not in itself constitute
revocation of your proxy.
Solicitation of Proxies
Your
proxy is being solicited by the board of directors of Old Line
Bancshares. Old Line Bancshares will pay the costs of soliciting
proxies. These costs may include reasonable out-of-pocket expenses
in forwarding proxy materials to beneficial owners. Old Line
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 Old
Line Bancshares and obtaining their proxies.
In
addition to solicitation by mail, directors, officers and employees
of Old Line Bancshares may solicit proxies personally, by
telephone, facsimile or electronic mail. Old Line Bancshares will
not specifically compensate these persons for soliciting such
proxies, but may reimburse them for reasonable out-of-pocket
expenses, if any.
THE
BAY BANCORP SPECIAL MEETING
Date, Time and Place
Bay
Bancorp will hold a special meeting of its stockholders at its
office located at 7151 Columbia Gateway Drive, Suite A, Columbia,
Maryland 21046, at [_____] on [________].
Purpose of the Special Meeting
At the
special meeting, Bay Bancorp’s stockholders will be asked to
consider and vote upon the following proposals:
1. To
approve the merger of Bay Bancorp with and into Old Line
Bancshares, with Old Line Bancshares as the surviving entity,
pursuant to the Agreement and Plan of Merger, dated as of September
27, 2017, by and between Old Line Bancshares and Bay Bancorp, as
the agreement may be amended from time to time;
2. To
adopt the following nonbinding advisory resolution approving
“golden parachute compensation” payable to the
President and Chief Financial Officer and Executive Vice President
- Chief Financial Officer of Bay Bancorp:
RESOLVED, that the
stockholders of Bay Bancorp, Inc. approve, on an advisory
(nonbinding) basis, the agreements for and compensation to be paid
to Bay Bancorp, Inc.’s President and Chief Financial Officer
and Executive Vice President - Chief Financial Officer, in
connection with the merger with Old Line Bancshares, Inc., as
disclosed in the section of the joint proxy statement/prospectus
for the merger captioned “The Merger Agreement and the Merger
– Interests of Directors, Officers and Others in the Merger
– Golden Parachute Compensation for Bay Bancorp Named
Executive Officers”;
3. To
approve the adjournment of the special meeting to a later date or
dates, if necessary, to permit the solicitation of additional
proxies in the event that there are not sufficient votes at the
time of the meeting to approve the merger; and
4. To
transact such other business that may properly come before the
special meeting.
Approval of the
“golden parachute” proposal (Proposal 2) is not a
condition to completion of the merger, and the vote with respect to
that proposal is advisory only and will not be binding on Bay
Bancorp or Old Line Bancshares, or their respective board of
directors or compensation committee. Therefore, if the merger is
approved by the stockholders of Old Line Bancshares and Bay Bancorp
and completed, the “golden parachute compensation” will
be paid to Bay Bancorp’s President and Chief Executive
Officer and Executive Vice President - Chief Financial Officer,
subject to the conditions applicable thereto, regardless of the
outcome of this advisory vote. Please see “The Merger
Agreement and the Merger – Interests of Directors, Officers
and Others in the Merger – Golden Parachute Compensation for
Bay Bancorp Named Executive Officers” for a description of
the “golden parachute” payments that are the subject of
the advisory vote.
Recommendation of the Board of Directors of Bay
Bancorp
The Bay
Bancorp board of directors has approved the merger agreement and
the merger, has declared them to be advisable and in the best
interests of Bay Bancorp’s stockholders, and recommends that
Bay Bancorp’s stockholders vote “FOR” the approval of the merger in
Proposal 1.
The Bay
Bancorp board of directors has also approved and declared advisable
the “golden parachute compensation” that may be paid to
Joseph J. Thomas, Bay Bancorp’s President and Chief Executive
Officer, and Larry D. Pickett, Bay Bancorp’s Executive Vice
President - Chief Financial Officer, in connection with the merger
as described in this joint proxy statement/prospectus, and
recommends that stockholders of Bay Bancorp vote
“FOR” the
adoption of the nonbinding advisory resolution approving such
compensation in Proposal 2.
The Bay
Bancorp board of directors also recommends that Bay Bancorp’s
stockholders vote “FOR” the approval of the
adjournment of the special meeting if necessary to solicit
additional proxies in Proposal 3.
Record Date; Outstanding Shares; Number of Votes
The Bay
Bancorp board of directors has fixed the close of business on
[______] as the record date for determining those stockholders who
are entitled to receive notice of and to vote at the special
meeting. As of the record date, [______] shares of Bay Bancorp
common stock, $1.00 par value per share, were outstanding and
entitled to vote, each of which is entitled to one
vote.
Quorum
Pursuant to the
Maryland General Corporation Law, or the “MGCL”, and
Bay Bancorp’s bylaws, the presence, in person or by proxy, of
stockholders entitled to cast a majority of all votes entitled to
be cast at the special meeting (or [________] shares of Bay Bancorp
common stock) will constitute a quorum for the transaction of
business at the special meeting. Abstentions will be counted for
purposes of determining whether a quorum is present.
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 special meetings. 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.” Since there are no routine items to be voted on
at the special meeting, nominee record holders of Bay Bancorp
common stock that do not receive voting instructions from the
beneficial owners of such shares will not be able to return a proxy
card with respect to such shares; as a result, these shares will
not be considered present at the special meeting and will not count
towards the satisfaction of a quorum.
Vote Required
The
approval of the merger requires the affirmative vote of holders of
at least two-thirds of all outstanding shares of Bay Bancorp common
stock entitled to vote on the proposal at the special
meeting.
The
proposal to adopt the nonbinding advisory resolution approving the
“golden parachute compensation” and the proposal to
adjourn the special meeting to solicit additional proxies, if
necessary, require, in each case, the affirmative vote of at least
a majority of the shares of common stock cast on the proposal at
the special meeting.
Directors and the
largest stockholder of Bay Bancorp, who beneficially own in the
aggregate approximately [___]% of Bay Bancorp common stock as of
the record date, have agreed in writing to vote for the approval of
the merger.
Abstentions and Failure to Vote
Because
approval of the merger requires the affirmative vote of the holders
of at least two-thirds of all outstanding shares of Bay Bancorp
common stock entitled to vote at the special meeting, an
abstention, a failure to vote and a broker non-vote will all have
the same effect as a vote against this matter. Accordingly, Bay
Bancorp’s board of directors urges you to vote your shares in
the manner recommended above by completing and submitting your card
or by telephone or through the Internet as instructed in the proxy
card.
As
noted above, (i) the adoption of the nonbinding advisory resolution
approving the “golden parachute compensation” that may
be paid to Joseph J. Thomas, Bay Bancorp’s President and
Chief Executive Officer, and Larry D. Pickett, Bay Bancorp’s
Executive Vice President - Chief Financial Officer, in connection
with the merger and (ii) the adjournment of the special meeting to
solicit additional proxies, if necessary, each requires the
affirmative vote of at least a majority of all votes cast on the
matter at the special meeting. Abstentions, the failure to vote and
broker non-votes are not included in calculating votes cast with
respect to these proposals and, therefore, will have no effect on
their outcome.
Voting of Proxies
The
enclosed proxy with respect to the Bay Bancorp special meeting is
solicited by the board of directors of Bay Bancorp. The board of
directors has selected [_________] and [_________], or either of
them, to act as proxies with full power of
substitution.
Whether
or not you plan to attend the special meeting, you may submit a
proxy to vote your shares. To do so, mark your vote on the enclosed
proxy card, sign your name exactly as it appears on your proxy
card, date your proxy card and return it in the envelope provided.
You may also vote by telephone by calling 1-800-690-6903 and
following the voice mail prompts or through the Internet by
following the instructions at www.proxyvote.com.
The
shares of Bay Bancorp common stock represented by all properly
executed proxy cards received pursuant to this solicitation will be
voted in accordance with the voting instructions given in those
proxy cards. Properly executed, unrevoked proxy cards received by
Bay Bancorp on which no voting instructions have been given by a
stockholder will be voted FOR the approval of the merger (Proposal
1), FOR the adoption of the nonbinding advisory resolution
approving the “golden parachute compensation” that may
be paid to Joseph J. Thomas, Bay Bancorp’s President and
Chief Executive Officer, and Larry D. Pickett, Bay Bancorp’s
Executive Vice President - Chief Financial Officer, by Old Line
Bancshares in connection with the merger (Proposal 2), and FOR the
approval of the proposal to adjourn the special meeting to solicit
additional proxies, if necessary (Proposal 3).
At the
date hereof, management has no knowledge of any business that will
be presented for consideration at the special meeting and that
would be required to be set forth in this joint proxy
statement/prospectus or in the related Bay Bancorp proxy card,
other than the matters set forth in the Notice of Special Meeting
of Stockholders of Bay Bancorp. In accordance with Maryland law,
business transacted at the Bay Bancorp special meeting will be
limited to those matters set forth in the notice. If, however, any
matters not described in this joint proxy statement/prospectus are
properly presented at the special meeting, the persons named in the
proxy card will vote your shares in their discretion. If the
special meeting is postponed or adjourned, your Bay Bancorp common
stock may be voted by the persons named in the proxy card on the
new special meeting date, provided that the new meeting occurs
within 120 days of the record date for the special meeting, unless
you have 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 Bay Bancorp special 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. If you
are a Bay Bancorp stockholder and you do not instruct your broker
on how to vote your shares, your broker may not vote your shares at
the special meeting.
Please
note that if you hold your shares in a stock brokerage account or
if your shares of Bay Bancorp common stock are held by a bank or
other nominee, you may not vote those shares by returning a proxy
card directly to Bay Bancorp or by voting in person at the special
unless you provide a “legal proxy,” which you must
obtain from your bank, broker or other nominee.
Your
vote is important. Accordingly, please sign and return your
bank’s, broker’s or other nominee’s
instructions.
Revocability of Proxies
You may
revoke your proxy at any time prior to its exercise. Unless so
revoked, the shares represented by properly executed proxies will
be voted at the special meeting and all adjournments thereof. You
may revoke your proxy at any time prior to its exercise by (i)
giving written notice of revocation to Bay Bancorp, (ii) executing
and delivering a proxy card to Bay Bancorp bearing a later date, or
(iii) attending the special meeting and voting in person. The
presence of a stockholder at the special meeting will not
automatically revoke such stockholder’s proxy.
Solicitation of Proxies
Your
proxy is being solicited by the board of directors of Bay Bancorp.
Bay Bancorp will bear the cost of soliciting proxies. In addition
to the solicitation of proxies by mail, Bay Bancorp also may
solicit proxies personally or by telephone through its directors,
officers, and regular employees. Bay Bancorp also will request
persons, firms, and corporations holding shares of Bay Bancorp
common stock in their names or in the name of nominees that are
beneficially owned by others to send proxy materials to and obtain
proxies from those beneficial owners and will reimburse the holders
for their reasonable expenses in doing so.
OWNERSHIP
OF OLD LINE BANCSHARES COMMON STOCK
The
following tables set forth, as of April 3, 2017, information with
respect to the beneficial ownership of Old Line Bancshares’
common stock by each of its directors, by its executive officers
and by all of its directors and executive officers as a group, as
well as information regarding each other person that Old Line
Bancshares believes owns in excess of 5% of its outstanding common
stock. Unless otherwise noted below, Old Line Bancshares believes
that each person named in the table has or will have the sole
voting and sole investment power with respect to each of the
securities reported as owned by such person.
DIRECTORS & EXECUTIVE OFFICERS
|
Name of Beneficial Owner
|
|
Shares Owned Pursuant to
Options
|
Total Number
of Shares
Beneficially
Owned (2)
|
Percent of
Class Owned(3)
|
|
|
|
|
|
Joseph E. Burnett(4)
|
54,655
|
42,402
|
97,057
|
0.89%
|
Craig E. Clark(5)
|
195,217
|
2,400
|
197,617
|
1.81%
|
James W. Cornelsen(6)
|
169,341
|
163,567
|
332,908
|
3.04%
|
G. Thomas Daugherty(7)
|
424,536
|
5,800
|
430,336
|
3.93%
|
James
F. Dent
|
65,492
|
7,300
|
72,792
|
0.67%
|
Andre'
J. Gingles
|
55,166
|
1,200
|
56,366
|
0.52%
|
Thomas
H. Graham
|
28,742
|
3,600
|
32,342
|
0.30%
|
William
J. Harnett
|
1,052,837
|
3,600
|
1,056,437
|
9.65%
|
Frank
Lucente
|
148,714
|
7,300
|
156,014
|
1.43%
|
Gail D. Manuel(8)
|
41,295
|
7,300
|
48,595
|
0.44%
|
Carla
Hargrove McGill
|
4,442
|
4,387
|
8,829
|
0.08%
|
M.
John Miller
|
11,073
|
3,600
|
14,673
|
0.13%
|
Gregory S. Proctor, Jr.(9)
|
46,537
|
7,300
|
53,837
|
0.49%
|
Jeffrey
A. Rivest
|
29,557
|
4,800
|
34,357
|
0.31%
|
Mark
A. Semanie
|
11,516
|
11,680
|
23,196
|
0.21%
|
Suhas R. Shah(10)
|
31,251
|
7,300
|
38,551
|
0.35%
|
John M. Suit, II(11)
|
62,994
|
7,300
|
70,294
|
0.64%
|
Frank E. Taylor (12)
|
12,935
|
5,800
|
18,735
|
0.17%
|
All
directors & executive officers
as
a group (18 people)
|
2,446,300
|
296,636
|
2,742,936
|
25.07%
|
|
|
|
|
|
(1)
Indicates number of
shares underlying options exercisable within 60 days of April 3,
2017.
(2)
The total number of
shares beneficially owned includes shares of common stock owned by
the named persons as of the April 3, 2017 and shares of common
stock subject to options held by the named persons that are
exercisable as of, or within 60 days of April 3, 2017.
(3)
The shares of
common stock subject to options are deemed outstanding for the
purpose of computing the percentage ownership of the person holding
the options, but are not deemed outstanding for the purpose of
computing the percentage ownership of any other
person.
(4)
Includes 1,620
shares of common stock held jointly with his spouse.
(5)
Includes 138,214
shares of common stock held jointly with his spouse. Does not
include 17,256 shares of common stock an individual retirement
account owns for the benefit of his spouse and 1,334 shares of
common stock his spouse owns individually. Mr. Clark disclaims
beneficial ownership in such shares.
(6)
Includes 12,122 shares of common stock held jointly with his
spouse.
(7)
Excludes 54,729
shares of common stock his spouse individually owns. Mr. Daugherty,
whose current term of office ends at the 2017 Annual Meeting, has
chosen not to stand for re-election.
(8)
Includes 15,215
shares of common stock owned jointly with her spouse and 6,424
shares of common stock Trinity Memorial Gardens owns. Ms. Manuel is
the owner and a Director of Trinity Memorial Gardens.
(9)
Includes 3,500
shares of common stock held jointly with his spouse.
(10)
Includes 15,922
shares of common stock held jointly with his spouse.
(11)
Includes 28,217
shares of common stock owned by the John M. Suit II Revocable Trust
and 31,512 shares of common stock owned by the Joan Marie Suit
Revocable Trust. Mr. Suit is trustee and beneficiary of these
trusts.
(12)
Includes 5,964
shares of common stock owned jointly with his spouse and 424 shares
of common stock owned with his adult son, 674 shares of common
stock owned with his adult daughter and 674 shares of common stock
owned with another adult daughter.
OTHERS WITH OWNERSHIP IN EXCESS OF 5%
|
Name of Beneficial Owner and Addresses
of 5% Owners
|
|
|
|
|
|
FJ Capital Management, LLC(1)
|
593,851
|
5.43%
|
1313
Dolley Madison Blvd, Ste 306
|
|
|
McLean,
VA 22101
|
|
|
|
|
|
Endeavour Capital Advisors,
Inc.(2)
|
581,046
|
5.31%
|
410
Greenwich Avenue
|
|
|
Greenwich,
CT 06830
|
|
|
(1)
FJ Capital
Management, LLC, a Virginia limited liability company, and Martin
S. Friedman jointly reported in a Schedule 13G/A filed with the
Securities and Exchange Commission on February 14, 2017, that they
have shared voting power of 593,851 shares of common stock and
shared investment power of 178,466 of such shares of common stock,
comprised of (i) 170,225 shares of common stock held by Financial
Opportunity Fund, LLC, and 5,975 shares of common stock held by
Financial Opportunity Long/Short Fund LLC of which FJ Capital
Management LLC is the managing member, (ii) 415,385 shares of
common stock held by Bridge Equities, III, LLC, of which FJ Capital
Management, LLC is the sub-investment advisor, (iii) 2,266 shares
of common stock held by a managed account that FJ Capital
Management, LLC manages, but of which they disclaim beneficial
ownership. Martin S. Friedman in the Managing Member of FJ Capital
Management, LLC.
(2)
Endeavour Capital
Advisors, Inc., a Delaware Corporation, Laurence M. Austin and
Mitchell J. Katz jointly reported in a Schedule 13G/A filed with
the Securities and Exchange Commission on February 14, 2017 that
they share voting and investment power of 581,046 shares of common
stock.
OWNERSHIP
OF BAY BANCORP COMMON STOCK
The
following table sets forth, as of October 31, 2017, certain
information concerning shares of Bay Bancorp common stock
beneficially owned by: (i) each of the “named executive
officers” of Bay Bancorp; (ii) each of the current directors
of Bay Bancorp; (iii) all directors and executive officers of Bay
Bancorp as a group; and (iv) each other person that Bay Bancorp
believes beneficially owns in excess of 5% of the outstanding
shares of Bay Bancorp common stock. Generally, a person
“beneficially owns” shares 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 (such as by exercising
stock options or similar rights). The percentages were calculated
based on 10,717,889 issued and outstanding shares of Bay Bancorp
common stock, plus, for each named person, any shares that such
person may acquire within 60 days of October 31, 2017. Except as
otherwise noted, the address of each person named below is the
address of Bay Bancorp.
|
Amount
and Nature of Beneficial Ownership
|
|
|
Directors
and Named Executive Officers
|
Pierre A.
Abushacra
|
27,695
|
|
*
|
Robert J.
Aumiller
|
19,778
|
(1)
|
*
|
Steven K.
Breeden
|
97,919
|
(2)
|
*
|
Mark M.
Caplan
|
170,077
|
(3)
|
1.6
|
Harold I.
Hackerman
|
22,561
|
|
*
|
Eric D.
Hovde
|
2,987,044
|
(4)
|
27.9
|
Steven D.
Hovde
|
0
|
|
*
|
Charles L. Maskell,
Jr.
|
11,109
|
(5)
|
*
|
Larry D.
Pickett
|
57,457
|
(6)
|
*
|
Joseph J.
Thomas
|
278,840
|
|
2.6
|
|
|
|
|
All
Directors and Officers as a Group (10 persons)
|
3,683,462
|
|
34.4
|
|
|
|
|
Persons Who Beneficially Own More than 5% of the Class
|
|
|
EJF Sidecar Fund,
Series LLC – Series E
|
1,000,000
|
(7)
|
9.3
|
H Bancorp
LLC
|
2,775,690
|
(9)
|
25.9
|
Joel S. Lawson
IV
|
600,000
|
(10)
|
5.6
|
|
|
|
|
Total
|
5,283,462
|
|
49.3
|
Notes:
(1)
Includes 13,733
shares owned jointly with spouse.
(2)
Includes 35,682
shares owned jointly with spouse.
(3)
Includes 10,500
shares owned jointly with spouse and 11,109 shares subject to fully
vested and exercisable options.
(4)
Includes the
2,775,690 shares reported below for H Bancorp LLC (“H
Bancorp”), as Mr. Hovde has sole voting and investment
discretion with respect to such shares.
(5)
Includes 11,109
shares subject to fully vested and exercisable
options.
(6)
Includes 40,000
shares subject to fully vested and exercisable
options.
(7)
Includes 91,024
shares subject to fully vested and exercisable
options.
(8)
The information is
based on the Schedule 13G filed with the SEC on August 18, 2016 by
on behalf of (i) EJF Capital LLC (“EJF Capital”), (ii)
Emanual J. Friedman, and (iii) EJF Sidecar Fund, Series LLC –
Series E (the “Fund”). The Fund is the record owner of
the shares. EJF Capital is the managing member of the Fund, and Mr.
Friedman is the controlling member of EJF Capital. Each of EJF
Capital and Mr. Friedman may be deemed to have indirect beneficial
ownership of the shares of Common Stock based on the relationships
described above. The Fund’s address is 2107 Wilson Boulevard,
Suite 410, Arlington, Virginia 22201.
(9)
The information is
based on the Schedule 13D filed by H Bancorp on July 8, 2014, as
amended on June 9, 2016. Eric D. Hovde is Chairman and CEO of H
Bancorp and, in such capacity, has shared investment and voting
discretion with respect to the securities owned by H Bancorp. H
Bancorp’s address is 2050 Main Street, 3rd Floor, Irvine, CA
92614. The reported shares are also included in the amount shown
for Mr. Hovde.
(10)
The
information is based on the Schedule 13D filed on August 5, 2015 by
Joel S. Lawson IV, which reported his address as 2040 Grubbs Mill
Road, Berwyn, Pennsylvania 19312.
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,
a copy of which is attached to this joint proxy
statement/prospectus as Annex A and incorporated herein by
reference.
The
merger agreement and the summary of its terms in this joint 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 Bay Bancorp 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 Bay Bancorp. 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 joint proxy statement/prospectus, 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 and Bay Bancorp.
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 Bay Bancorp 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 joint proxy
statement/prospectus or incorporated by reference into this joint
proxy statement/prospectus. Please see the sections of this joint
proxy statement/prospectus entitled “Incorporation of Certain
Documents by Reference” and “Where You Can Find More
Information.” Each of Old Line Bancshares and Bay Bancorp
will provide additional disclosures in its public reports to the
extent they become 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:
●
Bay Bancorp will
merge with and into Old Line Bancshares, with Old Line Bancshares
as the surviving corporation;
●
If you are a
stockholder of Bay Bancorp, you will receive, for each share of Bay
Bancorp common stock that you own, that number of shares of Old Line Bancshares
common stock determined by dividing $11.80 by the Average Price,
provided that (i) if the Average Price is $29.16 or more the
exchange ratio will be fixed at 0.4047 and if the Average Price is
$25.65 or less the exchange ratio will be fixed at 0.4600, (ii) the
exchange ratio will be adjusted for the after-tax proceeds
recognized by Bay Bancorp or Bay Bank in the recent settlement of
certain litigation and the resolution of certain loans, and
(iii) 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 September 27, 2017, by and between Old Line Bank and Bay Bank,
Bay 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
●
Eric D. Hovde,
Joseph J. Thomas and another current director of Bay Bancorp will
be elected as members of the Old Line Bancshares and Old Line Bank
boards of directors.
Assuming the
requisite approval of Old Line Bancshares’ stockholders and
Bay Bancorp’s stockholders and the satisfaction of other
conditions to closing, we currently expect the merger to close in
the second quarter of 2018. The merger will result in an
institution with pro forma assets approaching $3.0 billion and,
with 39 full service banking offices serving Baltimore City and 11
Maryland counties, the combined institution will have the
second-most banking locations in Maryland of all independent
Maryland-based commercial banks. Old Line Bancshares expects the
merger to be immediately accretive to its 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.
Bay
Bancorp’s board of directors formally began considering the
possibility of a strategic combination with another financial
institution at its annual strategic planning meeting held on
October 26, 2016, at which Keefe, Bruyette & Woods, Inc.
(“KBW”) made a presentation about the then-current
merger market and potential opportunities. Subsequently, the board
determined to seek additional investment banking advice and
information regarding the current merger market and related matters
from KBW and Hovde Group. Bay Bancorp has long histories of
collaboration with both KBW, who has advised Bay Bancorp on a
variety of matters over the years, and Hovde Group, whose Chief
Executive Officer (Steven Hovde) is also a director of Bay
Bancorp.
Both of
these firms gave presentations to the Bay Bancorp board of
directors on March 29, 2017. KBW was represented by David Lazar and
Adam Tarvin, and Hovde Group was represented by Steven Hovde,
Michael Corso and Jason Blumberg.
At its
meeting held on April 6, 2017, the Bay Bancorp board discussed
these presentations and determined to appoint a special committee
of independent directors (the “Special Committee”) to
further interview investment banking firms and make a
recommendation to the board with respect to the firm that would be
the most appropriate fit for Bay Bancorp.
On
April 13, 2017, the Special Committee held its first meeting,
during which its members discussed the purpose for which the
Special Committee was formed and the objectives and framework for
an evaluation and recommendation of an investment banking firm.
After discussing the presentations provided by KBW and Hovde Group,
the Special Committee concluded that it should interview a third
firm and selected RP Financial as the third candidate.
Following that
meeting, Bay Bancorp’s legal counsel, Andrew Bulgin of Gordon
Feinblatt LLC, contacted James Hennessey of RP Financial for the
purpose of having RP Financial execute a confidentiality agreement.
RP Financial signed and delivered its confidentiality agreement on
April 13, 2017, after which Mr. Bulgin disclosed to Mr. Hennessey
the identity of Bay Bancorp and the reasons for which the Special
Committee desired to interview RP Financial.
On
April 19, 2017, the Special Committee convened a meeting for the
purpose of interviewing RP Financial. Following that interview, the
members of the Special Committee discussed their impressions of the
three investment banking candidates but did not make any formal
recommendation.
The
next meeting of the Special Committee occurred on April 25, 2017.
At that meeting, the three investment banking proposals were again
discussed and, although no formal recommendation was made, the
Special Committee agreed to limit the candidates to KBW and Hovde
Group, subject to some additional investigation of those two
firms.
On
April 26, 2017, the Bay Bancorp board of directors met to discuss
the status of the Special Committee’s investigation and, more
generally, whether moving forward with a strategic transaction at
that time was appropriate. After a thorough discussion of the
then-current stock and merger market conditions, the possibility of
income tax reform and the uncertainty that such reform presented,
and the recent and anticipated financial performance of Bay
Bancorp, the board concluded to delay the process of investigating
a strategic transaction until further notice.
At an
executive session of the Bay Bancorp board of directors held on May
24, 2017, the board resumed its discussion and consideration of the
feasibility of pursuing a strategic transaction. Following that
discussion, it was determined that Bay Bancorp should resume its
exploration efforts.
On June
2, 2017, the Special Committee convened a meeting for the purpose
of further interviewing Hovde Group.
On June
5, 2017, the Special Committee convened a meeting for the purpose
of making a final recommendation to the Bay Bancorp board with
respect to an investment banking firm. At the conclusion of that
meeting, the Special Committee voted to recommend Hovde Group to
the board.
The Bay
Bancorp board of directors met on June 8, 2017 to receive the
Special Committee’s report and recommendation, after which
the board approved the engagement of Hovde Group and authorized
Hovde Group to begin its marketing process.
Hovde
Group provided a draft of its engagement letter to BYBK on June 8,
2017. Between June 12, 2017 and June 22, 2017, Bay Bancorp and
Hovde Group negotiated the final terms of that letter. Bay Bancorp
and Hovde Group entered into the engagement letter on June 22,
2017.
On June
26, 2017, James W. Cornelsen, President and Chief Executive Officer
of Old Line Bancshares, met with Joseph J. Thomas, President and
Chief Executive Officer of Bay Bancorp, at FIG’s Community
Bank Forum in Nashville, Tennessee. During this meeting, Messrs.
Cornelsen and Thomas discussed their respective organizations. At
the conclusion of that meeting, Messrs. Cornelsen and Thomas agreed
that it would be worthwhile to engage in further discussions once a
confidentiality agreement was in place. Later that day, Michael P.
Corso, Managing Director of Hovde Group, provided Mr. Cornelsen
with a confidentiality agreement. Execution of this agreement was a
precondition to Hovde Group sharing a Confidential Information
Memorandum regarding Bay Bancorp.
Between
June 8, 2017 and July 17, 2017, Hovde Group contacted 17 potential
strategic partners on a no-name basis to gauge their interest in a
potential transaction with Bay Bancorp. Bay Bancorp, through Hovde
Group, entered into confidentiality agreements with five other
financial institutions between June 26, 2017 and July 21,
2017.
Between
June 26, 2017 and July 6, 2017, Old Line Bancshares and Hovde Group
negotiated the terms of the non-disclosure agreement.
On July
5, 2017, Mr. Cornelsen informed the Old Line Bancshares/Old Line
Bank executive management team of the possibility of entering into
due diligence of and negotiations with Bay Bancorp for Old Line
Bancshares’ acquisition of Bay Bancorp. The executive
management team is comprised of Joseph Burnett, Executive Vice
President and Chief Lending Officer, Elise Hubbard, Senior Vice
President and Chief Financial Officer, John Miller, Executive Vice
President and Chief Credit Officer, and Mark Semanie, Executive
Vice President and Chief Operating Officer, as well as Mr.
Cornelsen. On the same day, Mr. Cornelsen, on behalf of Old Line
Bancshares, contacted Matthew Veneri of FIG Partners LLC to assist
with the financial analysis and negotiations regarding Bay
Bancorp.
On July
6, 2017, Mr. Cornelsen signed and returned the confidentiality
agreement to Hovde Group. Later that same day, Mr. Corso sent the
Confidential Information Memorandum regarding Bay Bancorp to Mr.
Cornelsen, which contained certain public and non-public financial
information regarding Bay Bancorp and information regarding the
timing and expected terms associated with the submission of any
indications of interest regarding an acquisition of Bay
Bancorp.
On July
26, 2017, FIG presented financial analysis and market reports
regarding a potential Old Line Bancshares/Bay Bancorp merger to the
Old Line Bancshares Strategic Opportunities Committee. Initial
pricing with respect to such a transaction was in the range of
$10.75 to $12.00 per share with a focus on a price of $11.00.
Following these presentations and discussion by the committee along
with FIG, the Strategic Opportunities Committee determined to
continue moving forward with an acquisition of Bay Bancorp at
$11.40 per share.
On July
28, 2017, Mr. Veneri, on behalf of Old Line Bancshares, sent Hovde
Group an initial written indication of interest with respect to Old
Line Bancshares’ acquisition of all of the issued and
outstanding stock of Bay Bancorp. In its letter, Old Line
Bancshares proposed a transaction in which the value assigned to
each share of Bay Bancorp common stock and options to purchase
common stock would be $11.40 per share, for a total purchase price
of approximately $122.6 million, payable in shares of Old Line
Bancshares common stock. Old Line Bancshares also proposed that
three members of the Bay Bancorp board of directors, mutually
selected by Old Line Bancshares and Bay Bancorp, would join the
board of directors of Old Line Bancshares, as well as a 60-day
exclusivity period.
Also on
July 28, 2017, Bay Bancorp, through Hovde Group, received letters
of interest from four of the other institutions with which it had
entered into confidentiality agreements.
On July
28, 2017, Hovde Group communicated the key terms of the five
letters of intent to Eric Hovde (Chairman of the Board of Bay
Bancorp) and Mr. Thomas. On July 31, 2017, Hovde Group discussed
the key terms of the letters of intent with a broader group
including Eric Hovde, Mr. Thomas, Steven Hovde (director of Bay
Bancorp and CEO of Hovde Group), Jason Blumberg, Michael Corso and
Austin Ellert (Hovde Group). On August 3, 2017, Hovde Group
participated in a conference call with Bay Bancorp’s board of
directors to update the board with respect to the process and
review the letters of intent. Following this conference call, the
board recommended that Bay Bancorp enter into exclusive
negotiations with Old Line Bancshares.
On or
about July 31, 2017, Hovde Group notified Old Line Bancshares that
Bay Bancorp desired to explore a possible transaction with Old Line
Bancshares based on its initial letter of intent. Between that date
and August 4, 2017, Bay Bancorp and Old Line Bancshares, together
with their respective legal counsel and financial advisers,
negotiated the final terms of the letter of intent, including the
proposed pricing terms. During that same period, the parties
conducted preliminary due diligence on each other.
On
August 4, 2017, based on the discussions of the parties, Mr.
Veneri, on behalf of Old Line Bancshares, sent Hovde Group a
revised indication of interest with respect to the acquisition of
all of the issued and outstanding shares of capital stock of Bay
Bancorp, which increased the assigned value of the Bay Bancorp
common stock and options to purchase common stock to $11.80 per
share, for a total purchase price of approximately $126.9 million,
and included Old Line Bancshares’ willingness to increase the
merger consideration by the amount of any after-tax income
recognized by Bay Bancorp and Bay Bank, prior to the closing of the
proposed transaction, upon the settlement or other resolution of
certain pending litigation and the resolution of certain loans
classified as Classified Assets as of the date thereof to the
extent such income exceeded the carrying value of such loans, with
certain limitations as further discussed below. The revised
indication of interest also provided that employees of Bay Bancorp
and/or Bay Bank that were not offered employment with Old Line
Bancshares or Old Line Bank after closing of the potential
transaction, or that were involuntarily terminated within six
months thereof, and who were not subject to a change in control
agreement, would receive a severance payment from Old Line
Bancshares or Old Line Bank in accordance with the terms and
conditions of Bay Bank’s severance policy. Finally, the
revised indication of interest reduced the exclusivity period to 45
days.
After
the parties executed the final letter of intent on August 4, 2017,
the parties then began formal due diligence of each
other.
Between
August 8, 2017 and August 25, 2017, Old Line Bancshares, along with
its financial advisers and attorneys, conducted formal due
diligence of Bay Bancorp and Bay Bank. On August 25, 2017, Old Line
Bancshares’ due diligence team met and concluded that no
items arose during the due diligence process that would lead to the
conclusion that negotiations should be terminated or that the
pricing should be revised.
On
September 2, 2017, Old Line Bancshares circulated an initial draft
of the merger agreement to Bay Bancorp for review.
On
September 7, 2017, Old Line Bancshares requested that Bay Bancorp
execute an extension to the exclusivity period contained in its
letter of intent, which was scheduled to expire on September 18,
2017.
In
light of the affiliation of a director of Bay Bancorp (Steven D.
Hovde) with Hovde Group, Bay Bancorp’s board of directors
determined on September 7, 2017 to seek a fairness opinion from an
independent investment banking firm. On that date, Mr. Bulgin
contacted James Hennessey of RP Financial and requested a fairness
opinion proposal. Mr. Hennessey provided such proposal on September
8, 2017. Between September 7, 2017 and September 13, 2017, Mr.
Bulgin and Mr. Thomas engaged in additional discussions with Mr.
Hennessey to request revisions to RP Financial’s fairness
opinion proposal. Mr. Hennessey submitted a first revised proposal
on September 12, 2017. On September 13, 2017, Mr. Hennessey
submitted a second revised proposal to Mr. Thomas, which Bay
Bancorp accepted on that date.
On
September 8, 2017, Hovde Group received an unsolicited revised
letter of intent from one of the other institutions with which it
had entered into a confidentiality agreement. In light of the
exclusivity agreement with Old Line Bancshares, Hovde Group did not
engage in any discussions on Bay Bancorp’s behalf with this
institution.
On
September 11, 2017, Old Line Bancshares’ Strategic
Opportunities Committee met to discuss the progress of
negotiations, updated pricing and discussions regarding Bay
Bancorp’s requests for filling the three board seats that had
been offered.
On
September 11, 2017, the board of directors of Bay Bancorp convened
a meeting for the purpose of discussing the new letter of intent
from the other institution and determining whether, in light of
that letter of intent, to extend the term of the Old Line
Bancshares exclusivity period as requested by Old Line Bancshares
on September 7, 2017. During that meeting, the directors, after
consulting with management and Hovde Group, the board of directors
concluded that the terms and conditions set forth in Old Line
Bancshares’ letter of intent were significantly more
favorable than those set forth in the new letter of intent and that
pursuing a transaction with Old Line Bancshares presented
significantly less execution risk. Accordingly, the board of
directors approved the extension of the term of the Old Line
Bancshares exclusivity period through September 25,
2017.
Beginning September
11, 2017 and concluding on September 25, 2017, Bay Bancorp, along
with its financial advisers and attorneys, conducted due diligence
of Old Line Bancshares and Old Line Bank.
On
September 15, 2017, Old Line Bancshares and FIG formalized their
working agreement by entering into a written agreement with respect
to FIG acting as Old Line Bancshares’ financial advisor with
respect to the merger.
On
September 15, 2017, Hovde Group received another unsolicited letter
of intent from the other financial institution. Hovde Group did not
respond to this institution.
Between
September 2, 2017 and September 27, 2017, Old Line Bancshares and
Bay Bancorp, with the assistance of their respective legal counsel
and financial advisers, continued with their due diligence efforts
and negotiated the final terms of the merger agreement and the
ancillary documents appearing as exhibits to the merger
agreement.
During
its meeting on September 26, 2017, Old Line Bancshares’ board
of directors considered the definitive merger agreement and
ancillary documents, and at which representatives of FIG and Mr.
Bonaventure of Baker Donelson, Old Line Bancshares’ outside
counsel, 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. Veneri of FIG reviewed the financial
aspects of the proposed merger and presented FIG’s fairness
opinion. At the conclusion of these presentations, and discussion
and deliberation among the directors, 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.
On
September 27, 2017, the Bay Bancorp board of directors held a
meeting for the purposes of (i) receiving management’s report
with respect to its due diligence review of Old Line Bancshares and
views regarding the synergies between the two companies and
anticipated benefits of the merger, (ii) receiving a fairness
opinion analysis from each of Hovde Group and RP Financial, (iii)
reviewing the final terms of the merger agreement, and (iv) voting
on the approval of the merger and related transactions. All
directors other than Mark Caplan were present. Also in attendance
were Mr. Bulgin, Mr. Hennessey, who presented RP Financial’s
final fairness opinion, and Jason Blumberg, who presented Hovde
Group’s fairness opinion. Following their delivery of the
fairness opinion analyses by Messrs. Blumberg and Hennessey and
related questions from the board, Mr. Bulgin reviewed each term of
the merger agreement with the board and answered various questions
regarding the merger agreement. Following these presentations and
discussions, and after considering the opinions of RP Financial and
Hovde Group, the directors of Bay Bancorp who were in attendance
unanimously declared the merger and the merger agreement to be
advisable and in the best interests of Bay Bancorp’s
stockholders and approved the merger agreement, the merger and the
related transactions.
The
parties executed the merger agreement on September 27,
2017.
Following the close
of trading markets on September 27, 2017, Bay Bancorp 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, and before and during its
acquisition of DCB in July 2017, Old Line Bancshares has considered
a number of opportunities to expand its presence in its primary
market areas and, as appropriate, areas contiguous to its current
market areas; however management and the Strategic Opportunities
Committee concluded that the acquisition of Bay Bancorp was the
best current opportunity to further this business objective. In
connection with its approval of the merger with Bay Bancorp, Old
Line Bancshares’ board of directors reviewed the terms of the
proposed acquisition and definitive agreements and their potential
impact on 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
Bay Bancorp and Bay Bank represents an attractive opportunity for
Old Line Bank to expand and strengthen its presence in the
Baltimore Metropolitan areas, following its initial entry into
Baltimore County in December 2015 pursuant to its acquisition of
Regal Bancorp, while remaining a community bank;
●
The results of due
diligence of Bay Bancorp and its business operations, including
asset quality;
●
The understanding
of the business operations, management, financial condition, asset
quality, product offerings and prospects of Bay Bancorp 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
is becoming increasingly more important factors for financial
performance and success;
●
The expectation
that the merger would be immediately accretive to earnings
(excluding merger expenses) in light of the potential cost
savings;
●
Bay Bancorp’s
emphasis on personal contact and service with local decision-making
ability and a clear focus on the community and local customers,
which are consistent with Old Line Bancshares’ business
approach;
●
Bay Bancorp’s
focus on serving the small and mid-size business sectors as well as
individuals, which is consistent with Old Line Bancshares’
client focus;
●
The financial
condition, operating results and future prospects of Old Line
Bancshares and Bay Bancorp;
●
Historical pro
forma financial information on the merger, including, among other
things, expectations for pro forma tangible book value and pro
forma earnings per share information, accretion/dilution analysis
for tangible book value per share and earnings per share, pro forma
capital levels and capital impact of the transaction, and pro forma
balance sheet composition, including pro forma loan and deposit
portfolio composition;
●
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; and
●
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.
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
projected earnings increases and/or cost savings will not
materialize or will be less than expected.
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 Bay Bancorp,
considering, among other things, the factors discussed above and
the opinion of FIG discussed below, the Old Line Bancshares board
of directors approved the merger agreement and the merger with Bay
Bancorp 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.”
Bay Bancorp’s Reasons for the Merger and Recommendation of
the Board of Directors
The Bay
Bancorp board of directors concluded that the merger offers Bay
Bancorp’s 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 Bay Bank
will enjoy significant benefits from the merger that they might not
otherwise enjoy if Bay Bank were to remain independent or merge
with another bank.
In
deciding to approve the merger, the Bay Bancorp board of directors
consulted with management, as well as its legal counsel and
financial advisors, and considered numerous factors, including the
following:
●
Information with
respect to the businesses, earnings, operations, financial
condition, prospects, capital levels and asset quality of Bay Bank
and Old Line Bank, both individually and as a combined
company;
●
The perceived risks
and uncertainties attendant to Bay Bank’s operation as an
independent banking organization, including the risks and
uncertainties related to the low interest rate environment,
competition in Bay 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 historical,
current and prospective merger market and the board’s belief,
based on, among other information, Hovde Group’s and RP
Financial’s presentations, that the value to be received by
Bay Bancorp’s stockholders in the merger is compelling and
that future merger opportunities for Bay Bancorp might not be as
favorable as the opportunity presented by Old Line
Bancshares’ offer;
●
The market values
of Bay Bancorp’s common stock and Old Line Bancshares’
common stock prior to the execution of the merger agreement and the
immediate value of the merger to Bay Bancorp’s stockholders
given the merger consideration’s significant premium over the
then-current trading price of the shares of Bay Bancorp’s
common stock;
●
The potential
long-term value to be realized by Bay Bancorp’s stockholders
as a result of the merger as compared to stockholder value
projected for Bay Bancorp 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 Bay Bancorp 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 Bay Bancorp board of
directors believes are complimentary to Bay 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 Bay Bank will be successfully integrated with Old
Line Bank;
●
Old Line
Bank’s commitment to retain as many employees of Bay Bank as
practical, and its agreement to honor Bay Bank’s change in
control severance arrangements and provide severance benefits to
other terminated employees that are consistent with Bay
Bank’s employee severance policy;
●
Bay Bank’s
attractive geographic footprint, strong client relationships,
talented team of associates, diverse loan portfolio, low-cost core
deposits and solid fee-based revenues, all of which the board of
directors believes should complement and strengthen Old Line
Bank’s high-performing franchise; 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 Bay
Bancorp 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 Bay Bancorp 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 Bay Bancorp 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 Bay Bancorp’s
reputation severely damaged;
●
The risk that Bay
Bancorp’s stockholders and the community react negatively to
the loss of the local community bank; and
●
The risk that Bay
Bancorp’s 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 Bay Bancorp’s board of directors, the
potential benefits of the merger outweigh these potential
risks.
The
above discussion of the information and factors considered by Bay
Bancorp’s 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. Bay Bancorp’s 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 Bay
Bancorp.
Opinion of Old Line Bancshares’ Financial
Advisor
Old
Line Bancshares retained FIG by letter agreement dated September
15, 2017, to act as its financial advisor in connection with a
possible business combination with Bay Bancorp. As part of its
engagement, FIG delivered to the board of directors of Old Line
Bancshares its opinion dated September 27, 2017 that, based upon
and subject to the various considerations set forth in its written
opinion, the merger consideration to be paid to the stockholders of
Bay Bancorp is fair to the stockholders of Old Line Bancshares from
a financial point of view. In requesting FIG’s advice and
opinion, no limitations were imposed by Old Line Bancshares upon
FIG with respect to the investigations made or procedures followed
by it in rendering its opinion. The
full text of the opinion of FIG, which describe the procedures
followed, assumptions made, matters considered and limitations on
the review undertaken, is attached hereto as Annex B. Old Line
Bancshares stockholders should read these opinions in their
entirety.
FIG is
a nationally recognized investment banking firm and, as part of its
investment banking business, it values financial institutions in
connection with mergers and acquisitions, private placements and
for other purposes. As a specialist in securities of financial
institutions, FIG has experience in, and knowledge of, banks,
thrifts and bank and thrift holding companies. Old Line
Bancshares’ board of directors selected FIG to act as its
financial advisor in connection with the merger on the basis of the
firm’s reputation and expertise in transactions such as the
merger.
Pursuant to the
engagement letter, Old Line Bancshares paid FIG a non-refundable
fairness opinion fee of $100,000 upon its delivery of the fairness
opinion. Upon the closing of the merger, Old Line Bancshares will
pay FIG a success fee equal to 0.75% of the value of the merger
consideration; upon Old Line Bancshares’ request, the
fairness opinion fee will be credited against the success fee.
Further, Old Line Bancshares has agreed to reimburse FIG’s
out-of-pocket expenses, in an amount not to exceed $10,000,
incurred in connection with its engagement and to indemnify FIG
against any claims or liabilities arising out of FIG’s
engagement by Old Line Bancshares.
As part
of its investment banking business, FIG is routinely engaged in the
valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive
bidding, secondary distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and other
purposes. As specialists in the securities of banking companies,
FIG has experience and knowledge of the valuation of banking
institutions. FIG’s opinion has been reviewed by FIG’s
compliance officer consistent with its internal policy. In the last
two years FIG has not previously provided any services or received
compensation from Old Line Bancshares. FIG has not previously
provided any services or received compensation from Bay
Bancorp.
FIG’s
opinion is directed only to the fairness, from a financial point of
view, of the merger consideration, and, as such, does not
constitute a recommendation to any Old Line Bancshares stockholder
as to how the stockholder should vote at the Old Line Bancshares
special stockholder meeting. The summary of the opinion of FIG set
forth in this joint proxy statement/prospectus is qualified in its
entirety by reference to the full text of the opinion.
The
following is a summary of the analyses performed by FIG in
connection with its fairness opinion. Certain analyses were
confirmed in a presentation to the board of directors of Old Line
Bancshares by FIG. The summary set forth below does not purport to
be a complete description of either the analyses performed by FIG
in rendering its opinion or the presentation delivered by FIG to
the board of directors of Old Line Bancshares, but it does
summarize all of the material analyses performed and presented by
FIG.
The
preparation of a fairness opinion involves various determinations
as to the most appropriate and relevant methods of financial
analyses and the application of those methods to the particular
circumstances. In arriving at its opinion, FIG did not attribute
any particular weight to any analysis or factor considered by it,
but rather made qualitative judgments as to the significance and
relevance of each analysis and factor. FIG may have given various
analyses more or less weight than other analyses. Accordingly, FIG
believes that its analyses and the following summary must be
considered as a whole and that selecting portions of its analyses,
without considering all factors, could create an incomplete view of
the process underlying the analyses set forth in its report to the
board of directors of Old Line Bancshares and its fairness
opinion.
In
performing its analyses, FIG made numerous assumptions with respect
to industry performance, general business and economic conditions
and other matters, many of which are beyond the control of Old Line
Bancshares. The analyses performed by FIG are not necessarily
indicative of actual value or actual future results, which may be
significantly more or less favorable than suggested by such
analyses. Such analyses were prepared solely as part of FIG’s
analysis of the fairness of the transaction consideration, from a
financial point of view, to Old Line Bancshares’
stockholders. The analyses do not purport to be an appraisal or to
reflect the prices at which a company might actually be sold or the
prices at which any securities may trade at the present time or at
any time in the future. FIG’s opinion does not address the
relative merits of the merger as compared to any other business
combination in which Old Line Bancshares might engage. In addition,
as described above, FIG’s opinion was one of many factors
taken into consideration by the board of directors of Old Line
Bancshares in making its determination to approve the merger
agreement.
During
the course of its engagement, and as a basis for arriving at its
opinion, FIG reviewed and analyzed material bearing upon the
financial and operating conditions of Old Line Bancshares and Bay
Bancorp and material prepared in connection with the merger,
including, among other things, the following:
(i)
reviewed the merger
agreement and terms of the merger;
(ii)
reviewed certain
documents filed with the SEC by Old Line Bancshares;
(iii)
reviewed the
audited financial statements for Old Line Bancshares and Bay
Bancorp for the years 2016 and 2015;
(iv)
reviewed certain
historical publicly available business and financial information
concerning Old Line Bancshares and Bay Bancorp including, among
other things, quarterly reports filed by the parties with the FDIC
and the FRB;
(v)
reviewed certain
internal financial statements and other financial and operating
data concerning Old Line Bancshares and Bay Bancorp;
(vi)
reviewed recent
trading activity and the market for Old Line Bancshares common
stock;
(vii)
analyzed certain
financial projections prepared by the management of Bay
Bancorp;
(viii)
held discussions
with members of the senior management of Old Line Bancshares and
Bay Bancorp for the purpose of reviewing the future prospects of
Old Line Bancshares and Bay Bancorp, including the respective
businesses, assets, liabilities and the amount and timing of cost
savings (the “Synergies”) expected to be achieved as a
result of the merger;
(ix)
reviewed the terms
of recent merger and acquisition transactions, to the extent
publicly available, involving banks and bank holding companies that
FIG considered relevant; and
(x)
performed such
other analyses and considered such other factors as it have deemed
appropriate.
FIG
also took into account its assessment of general economic, market
and financial conditions and its experience in other transactions
as well as its knowledge of the banking industry and its general
experience in securities valuation.
In
rendering its opinion, FIG has assumed and relied on, without
independent verification, the accuracy and completeness of the
financial and other information and representations contained in
the financials and other materials provided to, or discussed with,
it by Old Line Bancshares and Bay Bancorp or publicly available,
including median publicly available analyst earnings estimates for
Old Line Bancshares for the years ending December 31, 2017 and
December 31, 2018. In that regard, FIG assumed that the financial
analysis provided to, or discussed with, it by Old Line Bancshares
or made available by Bay Bancorp or derived therefrom, including,
without limitation, the Synergies and other financial forecasts,
have been reasonably prepared on a basis reflecting the best
currently available information and judgments of Old Line
Bancshares and Bay Bancorp. FIG is not an expert in the evaluation
of loan and lease portfolios for purposes of assessing the adequacy
of the allowances for losses with respect thereto and has assumed
that such allowances for Old Line Bancshares and Bay Bancorp are in
the aggregate adequate to cover such losses. FIG was not retained
to and did not conduct a physical inspection of any of the
properties or facilities of Old Line Bancshares or Bay Bancorp. In
addition, FIG has not reviewed individual credit files or made an
independent evaluation or appraisal of the assets and liabilities
of Old Line Bancshares or Bay Bancorp or any of their respective
subsidiaries and was not furnished with any such evaluations or
appraisals.
Comparable Company Analysis
FIG
used publicly available information to compare selected financial
information for Old Line Bancshares and Bay Bancorp to three groups
of financial institutions selected by FIG, using financial
information as of the most recent quarter and market data available
on September 22, 2017. The first peer group consisted of ten Nasdaq
or New York Stock Exchange (“NYSE”) listed U.S.
commercial banks with total assets between $1.0 billion and $2.5
billion.
Old
Line Bancshares, Inc. Peer Group
Company
|
Ticker
|
|
|
|
|
|
Republic First
Bancorp Inc.
|
FRBK
|
$2,043.5
|
10.7%
|
1.46%
|
0.36%
|
3.80%
|
First Community
Bancshares Inc
|
FCBC
|
2,366.6
|
10.9
|
1.38
|
1.06
|
7.45
|
Clifton Bancorp
Inc
|
CSBK
|
1,525.0
|
18.9
|
0.39
|
0.37
|
1.70
|
Peoples Financial
Services
|
PFIS
|
2,064.8
|
9.8
|
0.52
|
1.02
|
7.85
|
American National
Bankshares
|
AMNB
|
1,764.5
|
9.4
|
0.28
|
0.98
|
8.04
|
Summit Financial
Group Inc.
|
SMMF
|
2,095.3
|
8.0
|
3.04
|
0.71
|
7.75
|
Codorus Valley
Bancorp Inc.
|
CVLY
|
1,670.3
|
9.5
|
0.63
|
0.91
|
9.13
|
Chemung Financial
Corp.
|
CHMG
|
1,718.6
|
7.5
|
1.06
|
0.69
|
7.96
|
BCB Bancorp
Inc.
|
BCBP
|
1,815.8
|
6.6
|
2.18
|
0.56
|
7.51
|
ESSA Bancorp
Inc.
|
ESSA
|
1,763.8
|
9.4
|
1.20
|
0.39
|
3.86
|
Median
|
$1,790.2
|
9.5%
|
1.13%
|
0.70%
|
7.63%
|
Old
Line Bancshares Inc.
|
OLBK
|
$1,794.3
|
8.3%
|
0.43%
|
0.93%
|
9.85%
|
(1)
Tangible common
equity as a percentage of tangible assets
(2)
Non-performing
assets as a percentage of total assets
(3)
Return on average
assets over the last twelve months
(4)
Return on average
equity over the last twelve months
Source:
SNL Financial; most recent financial data as of September 22,
2017
The
second group consisted of 18 Nasdaq or NYSE listed U.S. commercial
banks with total assets between $500.0 million and $1.0 billion.
The table below displays selected financial information and pricing
ratios for the individual companies comprising the peer group, and
compares the median values for the peer group with the values for
Bay Bancorp.
Bay
Bancorp Inc. Peer Group
Company
|
Ticker
|
|
|
|
|
|
Marlin Bus.
Services Corp.
|
MRLN
|
$985.1
|
16.5%
|
0.36%
|
1.69%
|
9.49%
|
Prudential Bancorp
Inc.
|
PBIP
|
870.7
|
14.6
|
2.01
|
0.24
|
1.38
|
Two River
Bncp
|
TRCB
|
983.1
|
9.0
|
1.03
|
0.96
|
9.10
|
Old Point Financial
Corp.
|
OPOF
|
952.5
|
10.1
|
1.81
|
0.48
|
4.53
|
Sussex
Bancorp
|
SBBX
|
928.8
|
9.7
|
0.91
|
0.72
|
9.83
|
Select Bancorp
Inc.
|
SLCT
|
906.5
|
11.2
|
0.98
|
0.80
|
6.45
|
CB Financial
Services Inc.
|
CBFV
|
872.4
|
9.7
|
0.88
|
0.84
|
7.84
|
MSB Financial
Corp.
|
MSBF
|
507.1
|
14.8
|
3.18
|
0.46
|
2.78
|
Stewardship
Financial Corp.
|
SSFN
|
913.3
|
7.9
|
0.87
|
0.57
|
8.30
|
Severn Bancorp
Inc.
|
SVBI
|
775.4
|
11.1
|
2.83
|
0.52
|
4.55
|
Faquier Bankshares
Inc.
|
FBSS
|
646.3
|
8.7
|
1.27
|
0.52
|
5.95
|
Elmira Savings
Bank
|
ESBK
|
574.3
|
7.7
|
0.61
|
0.78
|
7.65
|
Pathfinder Bancorp
Inc.
|
PBHC
|
811.2
|
7.0
|
1.21
|
0.47
|
5.96
|
HomeTown Bankshares
Corp.
|
HMTA
|
548.0
|
9.0
|
1.84
|
0.53
|
5.72
|
Bank of the James
Finl Grp Inc.
|
BOTJ
|
595.6
|
8.6
|
0.99
|
0.51
|
5.69
|
Emclair Financial
Corp
|
EMCF
|
736.9
|
6.3
|
0.44
|
0.61
|
7.73
|
Hamilton Bancorp
Inc.
|
HBK
|
515.9
|
10.1
|
0.89
|
-0.04
|
-0.35
|
Carver Bancorp
Inc.
|
CARV
|
698.9
|
0.9
|
2.41
|
-0.28
|
-3.76
|
Median
|
$793.3
|
9.3%
|
1.01%
|
0.53%
|
5.95%
|
Bay
Bancorp Inc.
|
BYBK
|
$645.9
|
10.4%
|
2.17%
|
0.57%
|
5.34%
|
|
|
|
|
|
(1)
Tangible common
equity as a percentage of tangible assets
(2)
Non-performing
assets as a percentage of total assets
(3)
Return on average
assets over the last twelve months
(4)
Return on average
equity over the last twelve months
Source:
SNL Financial; most recent financial data as of September 22,
2017
No
company used as a comparison in the above analysis is identical to
Bay Bancorp. The peer analysis detailed above was used to compare
the operating and financial performance of Bay Bancorp to companies
of similar size and in similar operating markets. Accordingly, an
analysis of these results is not purely mathematical. Rather, it
involves considerations and judgments concerning differences in
financial and operating characteristics of the companies and of the
banking environment at the time of the opinion. Compared to its
U.S. peers, Bay Bancorp’s asset quality ratios and capital
ratios are above the median, while earnings ratios are below the
median. Compared to its regional peers, Bay Bancorp’s
earnings and asset quality ratios are in line with the median,
while capital ratios are above the median.
The
third group consisted of ten Nasdaq or NYSE listed U.S. commercial
banks, headquartered in Washington D.C., Maryland, North Carolina,
Virginia and West Virginia, with total assets between $2.0 billion
and $7.5 billion. The table below displays selected financial
information and pricing ratios for the individual companies
comprising the peer group, and compares the median values for the
peer group with the values for the pro forma
institution.
Pro
Forma Peer Group
Company
|
Ticker
|
|
|
|
|
|
Eagle Bancorp
Inc.
|
EGBN
|
$7,244.5
|
11.2%
|
0.41%
|
1.54%
|
12.37%
|
City Holding
Co.
|
CHCO
|
4,057.4
|
10.4
|
1.16
|
1.48
|
12.75
|
Sandy Spring
Bancorp Inc.
|
SASR
|
5,270.5
|
9.0
|
0.63
|
1.14
|
10.55
|
First
Bancorp
|
FBNC
|
4,528.6
|
8.0
|
1.21
|
0.83
|
7.66
|
Live Oak Bancshares
Inc.
|
LOB
|
2,198.1
|
10.3
|
0.32
|
1.39
|
11.13
|
Access National
Corp.
|
ANCX
|
2,757.0
|
9.0
|
0.49
|
0.81
|
7.18
|
HomeTrust
Bancshares Inc.
|
HTBI
|
3,206.5
|
11.5
|
1.47
|
0.40
|
3.14
|
First Community
Bancshares Inc
|
FCBC
|
2,366.6
|
10.9
|
1.38
|
1.06
|
7.45
|
Southern National
Bncp of VA
|
SONA
|
2,630.8
|
8.4
|
0.39
|
0.36
|
3.03
|
Summit Financial
Group Inc.
|
SMMF
|
2,095.3
|
8.0
|
3.04
|
0.71
|
7.75
|
Median
|
$2,981.8
|
9.7%
|
0.90%
|
0.94%
|
7.70%
|
Old
Line Bancshares Inc. PF
|
OLBK
|
$2,815.4
|
8.3%
|
|
|
|
|
|
|
|
|
(1)
Tangible common
equity as a percentage of tangible assets
(2)
Non-performing
assets as a percentage of total assets
(3)
Return on average
assets over the last twelve months
(4)
Return on average
equity over the last twelve months
Source:
SNL Financial; most recent financial data as of September 22,
2017
Comparable Transaction Analysis
FIG
reviewed three groups of comparable merger transactions. The first
group consisted of transactions announced between June 30, 2016 and
September 13, 2017 that involved target banks headquartered in the
U.S. with total assets between $500 million and $1.0 billion, last
twelve months ROAA greater than 0.25%, a ratio of non-performing
assets to total assets less than 2.5%, and a ratio of tangible
common equity to tangible assets less than 20.0% (the
“Comparable Transactions - National”). All
consideration types were included. The group was limited to targets
that were either bank holding companies, commercial banks or
savings banks/thrifts and transactions in which pricing was
disclosed. This group consisted of the following nine
transactions:
Comparable
Transactions – National
Date
Announced
|
Acquiror
|
Acquiror
State
|
Target
|
Target
State
|
08/23/17
|
Home
Bancorp Inc.
|
LA
|
Saint
Martin Bancshares Inc.
|
LA
|
08/14/17
|
CenterStates
Banks
|
FL
|
Sunshine Bancorp
Inc.
|
FL
|
06/27/17
|
United
Community Banks Inc.
|
GA
|
Four
Oaks Fincorp Inc.
|
NC
|
05/22/17
|
SmartFinancial
Inc.
|
TN
|
Capstone Bancshares
Inc.
|
AL
|
03/13/17
|
First
Busey Corp.
|
IL
|
Mid
Illinois Bancorp Inc.
|
IL
|
01/31/17
|
Bryn
Mawr Bank Corp.
|
PA
|
Royal
Bancshares of PA
|
PA
|
01/26/17
|
Midland
States Bancorp Inc.
|
IL
|
Centrue
Financial Corporation
|
IL
|
11/30/16
|
CenterStates
Banks
|
FL
|
Gateway
Finl Hldgs of FL Inc.
|
FL
|
10/18/16
|
CenterStates
Banks
|
FL
|
Platinum Bank
Holding Co.
|
FL
|
|
|
|
|
|
The
second group consisted of selected transactions that involved
target banks located in the Mid-Atlantic U.S. (Delaware,
Washington, DC, Maryland, New Jersey, New York, Pennsylvania,
Virginia and West Virginia) with total assets between $500.0
million and $5.0 billion, and a ratio of non-performing assets to
total assets of less than 2.5% (the “Comparable Transactions
– Mid-Atlantic”). All consideration types were
included. The group was limited to targets that were either bank
holding companies, commercial banks or savings banks/thrifts and
transactions in which pricing was disclosed. This group consisted
of the following nine transactions:
Comparable
Transactions – Mid-Atlantic
Date
Announce
|
Acquiror
|
Acquiror
State
|
Target
|
Target
State
|
08/15/17
|
Howard
Bancorp Inc.
|
MD
|
1st
Mariner Bank
|
MD
|
06/30/17
|
OceanFirst
Financial Corp.
|
NJ
|
Sun
Bancorp Inc.
|
NJ
|
05/22/17
|
Union
Bkshs Corp.
|
VA
|
Xenith
Bankshares Inc.
|
VA
|
05/16/17
|
Sandy
Spring Bancorp Inc.
|
MD
|
WashingtonFirst
Bankshares Inc
|
VA
|
01/31/17
|
Bryn
Mawr Bank Corp.
|
PA
|
Royal
Bancshares of PA
|
PA
|
10/24/16
|
Access
National Corp.
|
VA
|
Middleburg
Financial Corp.
|
VA
|
08/18/16
|
United
Bankshares Inc.
|
WV
|
Cardinal Financial
Corp.
|
VA
|
11/09/15
|
United
Bankshares Inc.
|
WV
|
Bank of
Georgetown
|
DC
|
06/09/14
|
Eagle
Bancorp Inc
|
MD
|
Virginia Heritage
Bank
|
VA
|
|
|
|
|
|
The
third group consisted of selected transactions that involved target
banks located in the Washington D.C. to Baltimore, Maryland
corridor (the “Comparable Transactions – D.C./Baltimore
Corridor”). All consideration types were included. The group
was limited to targets that were either bank holding companies,
commercial banks or savings banks/thrifts and transactions in which
pricing was disclosed. This group consisted of the following six
transactions:
Comparable
Transactions – D.C./Baltimore Corridor
Date
Announced
|
Acquiror
|
Acquiror
State
|
Target
|
Target
State
|
08/15/17
|
Howard
Bancorp Inc.
|
MD
|
1st
Mariner Bank
|
MD
|
05/22/17
|
Union
Bkshs Corp.
|
VA
|
Xenith
Bankshares Inc.
|
VA
|
05/16/17
|
Sandy
Spring Bancorp Inc.
|
MD
|
WashingtonFirst
Bankshares Inc
|
VA
|
02/01/17
|
Old
Line Bancshares Inc.
|
MD
|
DCB
Bancshares Inc.
|
MD
|
10/24/16
|
Access
National Corp.
|
VA
|
Middleburg
Financial Corp.
|
VA
|
08/18/16
|
United
Bankshares Inc.
|
WV
|
Cardinal Financial
Corp.
|
VA
|
FIG
calculated the medians of the following relevant transaction ratios
in the Comparable Transactions – National Comparable
Transactions – Mid-Atlantic and Comparable Transactions
– D.C./Baltimore Corridor: the multiple of the offer value to
the acquired company’s tangible book value; the multiple of
the offer value to the acquired company’s last twelve months
net income; the multiple of the offer value to the acquired
company’s total assets; and the tangible book value premium
to core deposits. FIG compared these multiples with the
corresponding multiples for the merger, valuing the total
consideration that would be received pursuant to the merger
agreement at approximately $127.96 million, or $11.80 per Bay
Bancorp share. In calculating the multiples for the merger, FIG
used Bay Bancorp’s tangible book value, first half 2017 net
income annualized and total core deposits as of June 30, 2017. The
results of this analysis are as follows:
Dollars in thousands, except per share amounts
|
Comparable
Transactions - National
|
|
|
|
|
|
Valuation
Metric
|
Bay
Bancorp Value
($000s)
|
|
Median
Multiple
|
Aggregate
Value
($000s)
|
Value Per Share(2)
|
|
|
|
|
|
|
Tangible common
equity
|
$66,668
|
|
177.0%
|
$117,996
|
$11.01
|
|
|
|
|
|
|
1H17
Annualized net income
|
$4,364
|
|
20.9x
|
$91,208
|
$8.51
|
|
|
|
|
|
|
Total
assets
|
$645,940
|
|
16.5%
|
$106,516
|
$9.94
|
|
|
|
|
|
|
Core
deposits(1)
|
$484,491
|
|
10.7%
|
$118,412
|
$11.05
|
|
|
|
|
|
|
|
Ranges
of Values:
|
Minimum
|
$91,208
|
$8.51
|
|
Maximum
|
$118,412
|
$11.05
|
|
|
|
|
|
|
|
Midpoint
|
$108,533
|
$10.13
|
(1)
Excludes
certificates of deposits greater than $100,000
(2)
Based on Bay
Bancorp shares outstanding of 10,713,832 as of June 30,
2017
Source:
SNL Financial
Dollars in thousands, except per share amounts
|
Comparable
Transactions – Mid-Atlantic
|
|
|
|
|
|
|
|
Valuation
Metric
|
Bay
Bancorp Value
($000s)
|
|
Median
Multiple
|
Aggregate
Value
($000s)
|
Value Per Share(2)
|
|
|
|
|
|
|
Tangible common
equity
|
$66,668
|
|
205.6%
|
$137,076
|
$12.79
|
|
|
|
|
|
|
1H17
Annualized net income
|
$4,364
|
|
18.1x
|
$79,119
|
$7.38
|
|
|
|
|
|
|
Total
assets
|
$645,940
|
|
21.7%
|
$139,975
|
$13.06
|
|
|
|
|
|
|
Core
deposits(1)
|
$484,491
|
|
20.5%
|
$165,892
|
$15.48
|
|
|
|
|
|
|
|
Ranges
of Values:
|
Minimum
|
$79,119
|
$7.38
|
|
Maximum
|
$165,892
|
$15.48
|
|
|
|
|
|
|
|
Midpoint
|
$130,516
|
$12.18
|
(1)
Excludes
certificates of deposits greater than $100,000
(2)
Based on Bay
Bancorp shares outstanding of 10,713,832 as of June 30,
2017
(3)
Source: SNL
Financial
Dollars in thousands, except per share amounts
|
Comparable
Transactions – D.C./Baltimore Corridor
|
|
|
|
|
|
|
|
Valuation
Metric
|
Bay
Bancorp Value
($000s)
|
|
Median
Multiple
|
Aggregate
Value
($000s)
|
Value Per Share(2)
|
|
|
|
|
|
|
Tangible common
equity
|
$66,668
|
|
185.2%
|
$123,458
|
$11.52
|
|
|
|
|
|
|
1H17
Annualized net income
|
$4,364
|
|
22.9x
|
$100,001
|
$9.33
|
|
|
|
|
|
|
Total
assets
|
$645,940
|
|
21.0%
|
$135,324
|
$12.63
|
|
|
|
|
|
|
Core
deposits(1)
|
$484,491
|
|
20.2%
|
$164,390
|
$15.34
|
|
|
|
|
|
|
|
Ranges
of Values:
|
Minimum
|
$100,001
|
$9.33
|
|
Maximum
|
$164,390
|
$15.34
|
|
|
|
|
|
|
|
Midpoint
|
$130,793
|
$12.21
|
(1)
Excludes
certificates of deposits greater than $100,000
(2)
Based on Bay
Bancorp shares outstanding of 10,713,832 as of June 30,
2017
The
Comparable Transactions – National group suggested a range of
value of $8.51 to $11.05, with a midpoint of $10.13. The Comparable
Transactions – Mid-Atlantic group suggested a range of value
of $7.38 to $15.48, with a midpoint of $12.18. The Comparable
Transactions – D.C./Baltimore Corridor group suggested a
range of value of $9.33 to $15.34, with a midpoint of $12.21. FIG
noted that the merger consideration of $11.80 per share was within
or slightly above the range of values suggested by the comparable
transaction analysis.
Discounted Cash Flow Analysis
FIG
estimated the value of Bay Bancorp common stock by calculating the
present value of its projected future earnings stream and projected
future equity. The analysis was based on Bay Bancorp’s internal
projections, as adjusted by Old Line Bancshares and FIG for net
income of $3.2 million, $5.9 million, $7.0 million, $8.3 million
and $10.1 million for the years 2017, 2018, 2019, 2020 and 2021,
respectively.
Dollars in thousands, except per share amounts
|
|
|
|
|
|
Bay Bancorp Projections
|
|
|
|
|
|
|
|
|
|
|
|
|
2017E
|
2018E
|
2019E
|
2020E
|
2021E
|
|
|
|
|
|
|
Total assets
|
$691,251
|
$739,678
|
$794,479
|
$855,944
|
$923,413
|
|
|
|
|
|
|
Net
income available to common stockholders
|
$3,223
|
$5,929
|
$6,953
|
$8,345
|
$10,100
|
|
|
|
|
|
|
Tangible
equity
|
$69,891
|
$75,820
|
$82,773
|
$91,118
|
$101,218
|
|
|
|
|
|
|
Return
on average assets
|
0.82%
|
0.83%
|
0.91%
|
1.01%
|
1.14%
|
Source:
Bay Bancorp internal projections, as adjusted
FIG
applied a price to tangible book value multiple at ratios ranging
from 180% to 220% of Bay Bancorp’s estimated tangible book
value in 2021 and price to earnings multiple at ratios ranging 22
to 26 times Bay Bancorp’s 2021 estimated earnings to derive
two unique terminal values. The present value of these terminal
amounts were then calculated based on a range of discount rates of
11% to 13%. The discount rates selected by FIG were intended to
reflect different assumptions regarding the required rates of
return for holders of Bay Bancorp common stock. The present value
of the terminal values was then added to the present value of the
earnings stream for 2017 through 2021 to derive a total value based
on discounted cash flows. The two analyses and the underlying
assumptions yielded a range of values for Bay Bancorp
stock.
|
|
Price / Tangible Book Value
Terminal Multiples – Sensitivity Table(1)
|
|
1.80x
|
1.90x
|
2.00x
|
2.10x
|
2.20x
|
Discount Rate
|
11.00%
|
$9.15
|
$9.66
|
$10.17
|
$10.67
|
$11.18
|
|
11.50%
|
$8.97
|
$9.46
|
$9.96
|
$10.46
|
$10.96
|
|
12.00%
|
$8.79
|
$9.28
|
$9.76
|
$10.25
|
$10.74
|
|
12.50%
|
$8.61
|
$9.09
|
$9.57
|
$10.05
|
$10.53
|
|
13.00%
|
$8.44
|
$8.91
|
$9.38
|
$9.85
|
$10.32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Price / Earnings Acquisition
Multiples – Sensitivity Table(1)
|
|
|
22.0x
|
23.0x
|
24.0x
|
25.0x
|
26.0x
|
Discount Rate
|
11.00%
|
$11.16
|
$11.66
|
$12.17
|
$12.68
|
$13.19
|
|
11.50%
|
$10.93
|
$11.43
|
$11.93
|
$12.43
|
$12.92
|
|
12.00%
|
$10.72
|
$11.20
|
$11.69
|
$12.18
|
$12.66
|
|
12.50%
|
$10.50
|
$10.98
|
$11.46
|
$11.94
|
$12.41
|
|
13.00%
|
$10.30
|
$10.76
|
$11.23
|
$11.70
|
$12.17
|
(1)
Based on Bay
Bancorp shares outstanding of 10,713,832 as of June 30,
2017
FIG
assigned the greatest significance to the terminal values
represented by 200% of 2021 estimated tangible book value and 24
times 2021 estimated earnings. The consideration of $11.80 paid by
Old Line Bancshares to Bay Bancorp is above the indicated range on
a tangible book value basis using a terminal multiple of 200% and
within the indicated range using a price to earnings multiple of
24.0 times. When taking into account the full range of discount
rates and multiples, the consideration to be paid to Bay Bancorp
falls within this range.
Pro Forma Financial Impact
FIG
performed a pro forma merger analysis that combined projected
income statement and balance sheet information of Old Line
Bancshares and Bay Bancorp. FIG analyzed the estimated financial
impact of the merger on certain projected financial results for Old
Line Bancshares and Bay Bancorp and financial forecasts and
projections relating to the earnings of Old Line Bancshares, which
were derived by FIG from publicly available consensus estimates,
and Bay Bancorp, which were derived from projections prepared by
Bay Bancorp management and adjusted by Old Line Bancshares and FIG,
and pro forma assumptions (including, without limitation, purchase
accounting adjustments, cost savings and related expenses), which,
in the case of Old Line Bancshares were derived by FIG from
publicly available information and, in the case of Bay Bancorp,
were derived by FIG from information prepared by Old Line
Bancshares management. FIG discussed with Old Line
Bancshares’ management each of the balance sheet estimates of
Bay Bancorp and certain financial forecasts and projections
relating to Bay Bancorp’s earnings. This analysis indicated
that the merger could be accretive to Old Line Bancshares estimated
earnings per share in 2018 and have a less than two -year payback
period for Old Line Bancshares estimated tangible book value per
share. For all of the above analysis, the actual results achieved
by Old Line Bancshares following the merger may vary from the
projected results, and the variations may be material.
As
described above, based upon the foregoing analyses and other
investigations and assumptions set forth in its opinion, without
giving specific weightings to any one factor or comparison, FIG
determined that the merger consideration was fair, from a financial
point of view, to Old Line Bancshares’ stockholders.
FIG’s opinion and presentation to Old Line Bancshares’
board of directors were among the many factors taken into
consideration by Old Line Bancshares board in making its
determination to approve the merger agreement and the merger and to
recommend that Old Line Bancshares stockholders approve the
merger.
Opinion of RP Financial - Bay Bancorp’s Financial
Advisor
Bay
Bancorp retained RP Financial on September 14, 2017 to render an
opinion regarding the fairness from a financial point of view with
respect to the merger consideration to be received by Bay
Bancorp’s stockholders in the merger. In engaging RP
Financial for its fairness opinion, the Bay Bancorp 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 Bay Bancorp its
written opinion, dated September 27, 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 is fair to the Bay Bancorp stockholders from a
financial point of view. The opinion of RP Financial is directed to
the board of directors of Bay Bancorp in its consideration of the
merger agreement, and does not constitute a recommendation to any
stockholder of Bay Bancorp 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 Bay Bancorp
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
C to this joint proxy statement/prospectus, and Bay Bancorp
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.
Bay
Bancorp 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. Pursuant to a letter agreement executed
by Bay Bancorp on September 14, 2017, RP Financial estimates that
it will receive from Bay Bancorp total professional fees of
approximately $85,000, $80,000 of which has been paid to date, plus
reimbursement of certain out-of-pocket expenses, for its services
in connection with the merger.
In
addition, Bay Bancorp 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 Bay Bancorp’s
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 Bay
Bancorp 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 Bay Bancorp to
RP Financial; or (iii) any action or omission to act by Bay
Bancorp, or Bay Bancorp’s respective officers, directors,
employees or agents, which action or omission is willful.
Notwithstanding the foregoing, Bay Bancorp 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 Bay
Bancorp 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,
Bay Bancorp will indemnify RP Financial for all reasonable
expenses.
In
rendering its opinion, RP Financial reviewed the following material
and conducted the following analyses with respect to the merger
agreement and Bay Bancorp:
●
the merger
agreement, as reviewed by the Bay Bancorp board of directors on
September 27, 2017, and certain exhibits;
●
the following
financial information for Bay Bancorp: (i) audited consolidated
financial statements, included in the annual reports for the fiscal
years ended December 31, 2012 through December 31, 2016; (ii)
unaudited consolidated financial data, including stockholder
reports and financial statements through June 30, 2017, (iii)
quarterly financial reports submitted to the FDIC by Bay Bank
through June 30, 2017; (iv) historical publicly-available financial
information as published by S&P Global Market Intelligence; and
(v) internally prepared budget and strategic planning
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 Bay
Bancorp;
●
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 Bay Bancorp;
●
the estimated pro
forma financial benefits of the merger to Bay Bancorp stockholders;
and
●
in person
interviews with senior executive officers of Bay
Bancorp.
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 2012 to 2016, 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, 2016 through June 30, 2017;
●
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 Bay Bancorp 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 Bay Bancorp and Old Line Bancshares as included in
the merger agreement. RP Financial has not been asked to undertake,
and has not undertaken, an independent verification of any of such
information and RP Financial does not assume any responsibility or
liability for the accuracy or completeness thereof. Bay Bancorp 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 (contingent
or otherwise) of Bay Bancorp or Old Line Bancshares, the collateral
securing any such assets or liabilities, 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 Bay
Bancorp or Old Line Bancshares nor did RP Financial review any
individual credit files relating to Bay Bancorp or Old Line
Bancshares.
RP
Financial, with Bay Bancorp’s consent, has relied upon the
advice that Bay Bancorp 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 Bay Bancorp’s or Old
Line Bancshares’ assets, financial condition, results of
operations, business or prospects since the date of the most recent
financial statement that were made available to RP Financial. 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 September 27, 2017. Events occurring after
September 27, 2017 could materially affect the assumptions used in
preparing the opinion. In connection with rendering its opinion
dated September 27, 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 Bay Bancorp 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
Bay Bancorp 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: (i)
based in the states of Maryland, Virginia and Delaware as well as
the District of Columbia announced during the period from September
23, 2015, to September 23, 2017, involving targets with total
assets between $200 million and $1.25 billion at the announcement
date (the “Local Region Transactions”); and (ii) all
Mid-Atlantic transactions announced during the period from
September 23, 2015 to September 23, 2017, involving targets with
total assets between $300 million and $1.25 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
|
Community
Financial Corp.
|
County
First Bank
|
Bank
of McKenney
|
CCB
Bankshares Inc.
|
Sandy
Spring Bancorp Inc.
|
WashingtonFirst
Bankshares Inc
|
Old
Line Bancshares Inc
|
DCB
Bancshares Inc.
|
Southern
National Bncp of VA
|
Eastern
Virginia Bankshares
|
ACNB
Corp.
|
New
Windsor Bancorp Inc.
|
Bay
Banks of Virginia Inc.
|
Virginia
BanCorp Inc.
|
Access
National Corp.
|
Middleburg
Financial Corp.
|
First
Citizens BancShares Inc.
|
Cordia
Bancorp Inc.
|
Revere
Bank
|
Monument
Bank
|
Hampton
Roads Bankshares Inc.
|
Xenith
Bankshares Inc.
|
Bay
Bancorp Inc.
|
Hopkins
Bancorp Inc.
|
TowneBank
|
Monarch
Financial Hldgs
|
United
Bankshares Inc.
|
Bank
of Georgetown
|
Southern
BancShares (NC)
|
Heritage
Bankshares Inc.
|
Revere
Bank
|
BlueRidge
Bank
|
Park
Sterling Corporation
|
First
Capital Bancorp Inc.
|
|
|
Mid-Atlantic
Transactions Group
|
|
|
|
Acquirer
|
Target
|
Howard
Bancorp Inc.
|
1st
Mariner Bank
|
Riverview
Financial Corp.
|
CBT
Financial Corp.
|
Sussex
Bancorp
|
Community
Bk of Bergen County
|
Old
Line Bancshares Inc
|
DCB
Bancshares Inc.
|
Bryn
Mawr Bank Corp.
|
Royal
Bancshares of PA
|
ACNB
Corp.
|
New
Windsor Bancorp Inc.
|
Standard
Financial Corp
|
Allegheny
Valley Bancorp Inc.
|
OceanFirst
Financial Corp.
|
Ocean
Shore Holding Co.
|
Berkshire
Hills Bancorp Inc.
|
First
Choice Bank
|
Revere
Bank
|
Monument
Bank
|
DNB
Financial Corp.
|
East
River Bank
|
Norwood
Financial Corp.
|
Delaware
Bancshares Inc.
|
Univest
Corp. of Pennsylvania
|
Fox
Chase Bancorp Inc.
|
WSFS
Financial Corp.
|
Penn
Liberty Financial Corp.
|
United
Bankshares Inc.
|
Bank
of Georgetown
|
Beneficial
Bancorp Inc
|
Conestoga
Bank
|
The
average and median selected financial data and acquisition pricing
multiples or ratios at announcement for the Local Region
Transactions group and the Mid-Atlantic Transactions group relative
to the Bay Bancorp pricing multiples or ratios based on the merger
consideration are shown below:
Comparable Transactions
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Local
Region Trans. Group
|
|
Mid-Atlantic
Trans. Group
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
Data and Ratios
|
|
|
|
|
|
|
|
|
|
|
Assets
($000)
|
$690,900
|
|
$347,818
|
|
$652,072
|
|
$513,820
|
|
$645,940
|
|
Tangible
Equity/Assets (%)
|
9.46
|
%
|
8.98
|
%
|
8.49
|
%
|
8.70
|
%
|
10.32
|
|
Return
on Average Assets (%)
|
0.53
|
|
0.56
|
|
0.64
|
|
0.65
|
|
0.69
|
|
Return
on Average Equity (%)
|
5.40
|
|
6.14
|
|
6.63
|
|
6.43
|
|
6.47
|
|
Non-Performing
Assets/Assets (%)
|
1.16
|
|
1.06
|
|
1.3
|
|
1.21
|
|
2.17/1.03
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
Deal
Value and Pricing Ratios (4)
|
|
|
|
|
|
|
|
|
|
|
Deal
Value ($ Millions)
|
$116.40
|
|
$50.20
|
|
$97.40
|
|
$65.10
|
|
$127.50
|
|
Price/Tangible
Book (%)
|
151.52
|
%
|
144.14
|
%
|
156.02
|
%
|
158.16
|
%
|
189.60
|
|
Price/Earnings
(x)
|
24.92
|
x
|
25.26
|
x
|
24.89
|
x
|
23.17
|
x
|
28.89
|
x(5)
|
Tang.
Book Premium/Deposits (%)
|
7.75
|
%
|
5.87
|
%
|
7.72
|
%
|
6.97
|
%
|
12.33
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Pricing ratios at announcement.
(2)
Reflects financial data as of or for the trailing 12 months ended
June 30, 2017.
(3)
2.17% reflects the reported figure, 1.03% reflects the NPA/Assets
ratio adjusted to exclude loans marked-to-market in
acquisitions.
(4)
Deal value and
multiples for Bay Bancorp based on the Starting Price as defined in
the merger agreement.
(5)
Based on annualized earnings for the six months ended June 30,
2017.
The
average and median pricing multiples (Price/Tangible Book Value
multiple, Price/Earnings multiple and Core Deposit Premium
multiple) of the Local Region Transactions group and Mid-Atlantic
Transactions group were applied to Bay Bancorp’s actual
financial measures (tangible book value, core earnings and core
deposits) to derive a valuation range before adjustments. The
resulting valuation range was $10.00 to $11.00 per share, which is
below the merger consideration of $11.80 per share as of September
27, 2017.
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 ownership position (i.e.,
non-controlling) of Bay Bancorp 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 Bay Bancorp’s stock based on control premium multiples
paid in comparable transactions.
The
fair market value of Bay Bancorp’s 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 Nasdaq 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 between $300 million and $1 billion and which were
profitable on a trailing 12-month basis through the quarter ended
June 30, 2017. There were a total of 13 institutions included in
the Peer Group as follows:
Ticker
|
|
Headquarters
|
Symbol
|
Peer
Group Company
|
Location
|
CBFV
|
CB
Financial Services, Inc.
|
PA
|
ESBK
|
Elmira
Savings Bank
|
NY
|
EMCF
|
Emclaire
Financial Corp
|
PA
|
ESQ
|
Esquire
Financial Holdings, Inc.
|
NY
|
GLBZ
|
Glen
Burnie Bancorp
|
MD
|
MSBF
|
MSB
Financial Corp.
|
NJ
|
PBHC
|
Pathfinder
Bancorp, Inc.
|
NY
|
PBIP
|
Prudential
Bancorp, Inc.
|
PA
|
SVBI
|
Severn
Bancorp, Inc.
|
MD
|
SSFN
|
Stewardship
Financial Corporation
|
NJ
|
SBBX
|
Sussex
Bancorp
|
NJ
|
TRCB
|
Two
River Bancorp
|
NJ
|
WVFC
|
WVS
Financial Corp.
|
PA
|
RP
Financial compared the financial condition and recent performance
of Bay Bancorp to the median financial conditions and recent
performance measures of the Peer Group, as displayed in the table
on the following below.
Peer
Group
|
|
|
|
|
|
|
|
Financial
Data and Ratios
|
|
|
|
Assets
($000)
|
$706
|
$775
|
$646
|
Tangible
Equity/Assets (%)
|
10.38%
|
9.42%
|
10.32%
|
Return
on Average Assets (%)
|
0.59
|
0.57
|
0.69
|
Return
on Average Equity (%)
|
6.12
|
6.18
|
6.47
|
Non-Performing
Assets/Assets (%)
|
1.15
|
0.91
|
2.17/1.03(2)
|
|
|
|
|
Market
Capitalization and Pricing Ratios (3)
|
|
|
|
Market
Capitalization ($ Millions)
|
$94.50
|
$90.30
|
$83.00
|
Price/Tangible
Book (%)
|
131.01%
|
134.21%
|
124.54%
|
Price/Earnings
(x)
|
19.73x
|
18.77x
|
19.03x
|
1)
Income and earnings related pricing data reflects annualized six
month results through June 30, 2017.
(2)
2.17% reflects the reported figure, 1.03% reflects the NPA/Assets
ratio adjusted to exclude loans marked-to-market in
acquisitions.
(3)
Market capitalization and pricing ratios for Bay Bancorp are based
on the Bay Bancorp’s estimated peer group based trading value
of $8.00 per share which approximated the recent trading of $7.75
per share on Nasdaq.
Relative to the
Peer Group, RP Financial made downward valuation adjustments for
Bay Bancorp’s less favorable credit quality and upward
valuation adjustments for the recent earnings growth trend and
operations in the Baltimore-Washington metropolitan area. RP
Financial concluded with a public equivalent value for Bay Bancorp
equal to $8.00 per share.
Second,
RP Financial conducted a Control Premium Analysis, which involved
applying a control premium to the estimated Peer Group based fair
market value of Bay Bancorp stock RP Financial which equaled $8.00
per share as well as to the actual trading value of Bay Bancorp
stock as of September 22, 2017, which equaled $7.90 per share (Bay
Bancorp’s stock traded on the Nasdaq Market) 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 $250 million and $2 billion that announced a
transaction over the 12-month period ending September 22, 2017). RP
Financial applied a range of control premiums from 33% to 38% to
the range of trading values.
Applying this
premium to the fair market value of Bay Bancorp’s stock that
RP Financial derived and to the actual closing price of Bay
Bancorp’s stock as of September 27, 2017 resulted in a sale
of control valuation range of $10.50 to $11.05 per share, which was
below the value of the merger consideration of $11.80 per share as
of September 27, 2017.
Discounted Cash Flow Analysis
RP
Financial evaluated the value per share of the current offer to the
implied value of Bay Bancorp’s current business plan. In this
regard, RP Financial measured the present value per share of future
dividends and the terminal value to Bay Bancorp’s current
stockholders utilizing Bay Bancorp’s five year strategic plan
which covered the five year period from December 31, 2017, to
December 31, 2022. The discounted cash flow analysis reflected the
strategic plan assumptions as follows:
●
Beginning balance
sheet as of December 31, 2016 was utilized for modeling
purposes;
●
Asset growth in the
range of 7% to 8% annually and loan growth in the range of 9%
annually;
●
The projected
return on average assets was projected to equal 0.86% for the 12
months ended June 30, 2018, to 1.15% for the 12 months ended June
30, 2022; and
●
No dividends or
share repurchases were assumed.
The
discounted cash flow analysis reflected the following valuation
assumptions:
●
Fifth year terminal
value multipliers for earnings per share were in a range of 22 to
26 times earnings per share while the fifth year terminal value
multipliers for tangible book value per share were in a range of
1.40 times to 1.70 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 $9.25 per share to $12.00 per share.
The indicated range of value pursuant to the discounted cash flow
approach was below the merger consideration of $11.80 per share as
of September 27, 2017 at the low end of the range and approximated
the value of the merger consideration at the upper end of the
range.
Pro Forma Impact Analysis
Because
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 approximately 3% dilutive 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 Bay Bancorp, 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 Bay Bancorp’s stockholders, including the potential
for increased liquidity of the stock for Bay Bancorp’s
stockholders given Old Line Bancshares’ larger size, greater
market capitalization, greater number of shares outstanding, and
greater liquidity of Old Line Bancshares’ common stock on a
post-acquisition basis. 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, Bay Bancorp’s stockholders will own
approximately 26% to 28% 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 three directors of Bay
Bancorp 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 Bay Bancorp, the historical
trading activity and trading price of the Bay Bancorp common stock,
and 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 Bay Bancorp board
of directors was one of many factors taken into consideration by
the Bay Bancorp 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 Bay Bancorp board of directors in anticipation of
issuing the September 27, 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 C, which common stockholders of Bay
Bancorp 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.
Opinion of Hovde Group - Bay Bancorp’s Financial
Advisor
The
fairness opinion and a summary of the underlying financial analyses
of Hovde Group are described below. The description contains
projections, estimates and other forward-looking statements about
the future earnings or other measures of the future performance of
Bay Bancorp. The projections were based on numerous variables and
assumptions, which are inherently uncertain, including factors
related to general economic and competitive conditions.
Accordingly, actual results could vary significantly from those set
forth in the projections. You should not rely on any of these
statements as having been made or adopted by Bay Bancorp or Old
Line Bancshares. You should review the copy of the fairness
opinion, which is attached as Annex D.
Hovde
Group is a nationally recognized investment banking firm with
substantial experience in transactions similar to the merger and is
familiar with Bay Bancorp and its operations. As part of its
investment banking business, Hovde Group is continually engaged in
the valuation of businesses and their securities in connection
with, among other things, mergers and acquisitions. Hovde Group has
experience in, and knowledge of, banks, thrifts and their
respective holding companies and is familiar with Bay Bancorp. Bay
Bancorp’s board of directors selected Hovde Group to act as a
financial advisor in connection with the merger on the basis of the
firm’s reputation and expertise in transactions such as the
merger.
Hovde
Group reviewed the financial aspects of the proposed merger with
Bay Bancorp’s board of directors and, on September 27, 2017,
delivered a written opinion to Bay Bancorp’s board of
directors that the per share consideration to be received by the
stockholders of Bay Bancorp in connection with the merger is fair
to the stockholders of Bay Bancorp from a financial point of view.
In requesting Hovde Group’s advice and opinion, no
limitations were imposed by Bay Bancorp upon Hovde Group with
respect to the investigations made or procedures followed by it in
rendering its opinion.
The full text of Hovde
Group’s written opinion is included in this joint proxy
statement/prospectus as Annex D. You are urged to read the opinion
in its entirety for a description of the procedures followed,
assumptions made, matters considered and qualifications and
limitations on the review undertaken by Hovde Group. The summary of
the Hovde Group’s opinion included in this joint proxy
statement/prospectus is qualified in its entirety by reference to
the full text of such opinion. Hovde Group’s opinion was directed to Bay
Bancorp’s board of directors and addresses only the fairness
of the per share consideration to be paid to Bay Bancorp
stockholders in connection with the merger. Hovde Group did not
opine on any individual stock, cash, or other components of
consideration payable in connection with the merger. Hovde
Group’s opinion does not address the underlying business
decision to proceed with the merger and does not constitute a
recommendation to any of the stockholders as to how such
stockholder should vote at the Bay Bancorp special meeting on the
merger or any related matter. Other than as specifically set forth
in the opinion, Hovde Group dos not express any opinion with
respect to the terms and provisions of the merger agreement or the
enforceability of any such terms or provisions.
Bay Bancorp engaged Hovde Group on June 22, 2017
to serve as a financial advisor to Bay Bancorp in connection with
the proposed merger and to issue a fairness opinion to Bay
Bancorp’s board of directors in connection with such proposed
transaction. Pursuant to Bay Bancorp’s engagement
agreement with Hovde Group, Hovde Group will receive from Bay
Bancorp a $100,000 fairness opinion fee that is contingent upon the
delivery to Bay Bancorp’s board of directors of Hovde
Group’s fairness opinion. Additionally, Hovde Group will
receive a completion fee equal to 1.0% of the transaction value
that is contingent upon the consummation of the merger. For this
purpose, the transaction value will include the aggregate merger
consideration plus the aggregate amount of cash paid in exchange
for any Bay Bancorp stock option that remains unexercised as of the
effective time of the merger. The opinion fee will be credited in
full toward the portion of the completion fee that will become
payable to Hovde Group upon the consummation of the merger. In the
event that the merger agreement is terminated and Old Line
Bancshares is obligated to pay the $5,076,000 termination fee to
Bay Bancorp, then Hovde Group will be entitled to $761,400, or 15%
of that termination fee. In addition to Hovde Group’s fees,
and regardless of whether the merger is consummated, Bay Bancorp
has agreed to reimburse Hovde Group for certain of its reasonable
out-of-pocket expenses. Bay Bancorp has also agreed to indemnify
Hovde Group and its affiliates for certain liabilities that may
arise out of the engagement. In the past two years, Hovde Group has
provided investment banking or financial advisory services to Bay
Bancorp and Bay Bank. During the past two years preceding the date
of this opinion, Hovde Group has not provided any investment
banking or financial advisory services to Old Line Bancshares or
Old Line Bank. Hovde Group may in the future provide investment
banking and financial advisory services to Old Line Bancshares or
Old Line Bank and receive compensation for such services, although
to Hovde Group’s knowledge none are expected at this
time.
Since
the Average Price, and the related amounts derived from those
figures, cannot be determined until dates after the date of the
opinion, potential future adjustments to the exchange ratio
attributable to changes in the Average Price as of the actual
determination date, if any, cannot be predicted with precision.
However, Bay Bancorp advised Hovde Group to assume for purposes of
its fairness opinion that the Average Price as of the applicable
determination date would be equal to or greater than $25.65.
Further, the merger agreement provides for a possible increase, but
not a decrease, in the aggregate merger consideration as a result
of after-tax income recognized from the future resolution of
certain contingencies related to litigation and certain loans that
are characterized as Classified Assets as discussed elsewhere in
this joint proxy statement/prospectus. Hovde Group’s opinion
assumes that the merger consideration will not be increased
pursuant to these provisions.
Bay
Bancorp requested Hovde Group’s opinion as to the fairness,
from a financial point of view, of the per share consideration to
the stockholders of Bay Bancorp. This opinion addresses only the
fairness of the per share consideration to be paid in connection
with the merger, and Hovde Group is not opining on any individual
stock, cash, option, or other components of the
consideration.
The
following is a summary of the analyses performed and matters
considered by Hovde Group in connection with its fairness opinion.
The summary set forth below does not purport to be a complete
description of the analyses performed by Hovde Group in rendering
its opinion, but it does summarize all of the material analyses
performed by Hovde Group.
During
the course of its engagement and for the purpose of rendering its
opinion, Hovde Group:
●
reviewed
a draft of the merger agreement dated September 27, 2017, as
provided to Hovde Group by Bay Bancorp;
●
reviewed
unaudited financial statements for Bay Bancorp, Bay Bank, Old Line
Bancshares and Old Line as of and for the six-month period ending
June 30, 2017;
●
reviewed
certain historical annual reports of each of Bay Bancorp, Bay Bank,
Old Line Bancshares and Old Line Bank, including audited annual
reports as of and for the year ending December 31,
2016;
●
reviewed
certain historical publicly available business and financial
information concerning each of Bay Bancorp, Bay Bank, Old Line
Bancshares and Old Line Bank;
●
reviewed
certain internal financial statements and other financial and
operating data of Bay Bancorp and Bay Bank;
●
reviewed
financial projections prepared by certain members of senior
management of Bay Bancorp and Bay Bank;
●
discussed
with certain members of senior management of Bay Bancorp, Bay Bank,
Old Line Bancshares and Old Line Bank, the business, financial
condition, results of operations and future prospects of Bay
Bancorp, Bay Bank, Old Line Bancshares and Old Line Bank; the
history and past and current operations of Bay Bancorp, Bay Bank,
Old Line Bancshares and Old Line Bank; Bay Bancorp’s, Bay
Bank’s, Old Line Bancshares’ and Old Line Bank’s
historical financial performance; and their assessment of the
rationale for the merger;
●
reviewed
and analyzed materials detailing the merger prepared by Bay Bancorp
and Old Line Bancshares and by their respective legal and financial
advisors, including the estimated amount and timing of the cost
savings and related expenses, purchase accounting adjustments and
synergies expected to result from the merger (the “Potential
Income Enhancements”);
●
analyzed
the pro forma financial impact of the merger on the combined
company’s earnings, tangible book value, financial ratios and
other such metrics we deemed relevant, giving effect to the merger
based on assumptions relating to the Potential Income
Enhancements;
●
reviewed
publicly available consensus mean analyst earnings per share
estimates for Old Line Bancshares for the years ending
December 31, 2017, December 31, 2018 and December 31,
2019;
●
assessed
general economic, market and financial conditions;
●
reviewed
the terms of recent merger, acquisition and control investment
transactions, to the extent publicly available, involving financial
institutions and financial institution holding companies that we
considered relevant;
●
taken
into consideration our experience in other similar transactions and
securities valuations as well as our knowledge of the banking and
financial services industry;
●
reviewed
historical market prices and trading volumes of Old Line
Bancshares’ common stock;
●
reviewed
certain publicly available financial and stock market data relating
to selected public companies that we deemed relevant to our
analysis; and
●
performed
such other analyses and considered such other factors as we have
deemed appropriate.
Hovde
Group also took into account its experience in other similar
transactions and securities valuations, as well as its knowledge of
the banking and financial services industry.
Hovde
Group assumed, without investigation, that there have been and from
the date of the opinion through the effective date of the merger
will be no material changes in the financial condition and results
of operations of Bay Bancorp, Bay Bank, Old Line Bancshares or Old
Line Bank since the date of the latest financial information
described above. Hovde Group assumed, without independent
verification, that the representations as well as the financial and
other information provided to Hovde Group by Bay Bancorp and Old
Line Bancshares or included in the merger agreement, which has
formed a substantial basis for this opinion, are true and complete.
Hovde Group relied upon the management of Bay Bancorp and Old Line
Bancshares as to the reasonableness and achievability of the
financial forecasts and projections (and the assumptions and bases
therein) provided to Hovde Group by Bay Bancorp and Old Line
Bancshares, and Hovde Group assumed such forecasts and projections
have been reasonably prepared by Bay Bancorp and Old Line
Bancshares on a basis reflecting the best currently available
information and Bay Bancorp’s and Old Line Bancshares’
judgments and estimates. Hovde Group assumed that such forecasts
and projections would be realized in the amounts and at the times
contemplated thereby, and Hovde Group does not in any respect
assume any responsibility for the accuracy or reasonableness
thereof. Hovde Group has been authorized by Bay Bancorp to rely
upon such forecasts and projections and other information and data,
including without limitation the projections, and Hovde Group
expresses no view as to any such forecasts, projections or other
forward-looking information or data, or the bases or assumptions on
which they were prepared.
In
performing its review, Hovde Group relied upon the accuracy and
completeness of all of the financial and other information that was
available to Hovde Group from public sources, that was provided to
Hovde Group by Bay Bancorp and Old Line Bancshares or their
respective representatives or that was otherwise reviewed by Hovde
Group and assumed such accuracy and completeness for purposes of
rendering its opinion. Hovde Group has further relied on the
assurances of the respective managements of Bay Bancorp and Old
Line Bancshares that they are not aware of any facts or
circumstances that would make any of such information inaccurate or
misleading. Hovde Group has not been asked to and has not
undertaken an independent verification of any of such information,
and Hovde Group does not assume any responsibility or liability for
the accuracy or completeness thereof. Hovde Group assumed that each
party to the merger agreement would advise them promptly if any
information previously provided to them became inaccurate or was
required to be updated during the period of Hovde Group’s
review.
Hovde
Group is not an expert in the evaluation of loan and lease
portfolios for purposes of assessing the adequacy of the allowances
for losses with respect thereto. Hovde Group assumed that such
allowances for Bay Bancorp, Bay Bank, Old Line Bancshares and Old
Line Bank are, in the aggregate, adequate to cover such losses, and
will be adequate on a pro forma basis for the combined entity.
Hovde Group was not requested to make, and did not make, an
independent evaluation, physical inspection or appraisal of the
assets, properties, facilities, or liabilities (contingent or
otherwise) of Bay Bancorp. Bay Bank, Old Line Bancshares and Old
Line Bank, the collateral securing any such assets or liabilities,
or the collectability of any such assets, and Hovde Group was not
furnished with any such evaluations or appraisals nor did Hovde
Group review any loan or credit files of Bay Bancorp, Bay Bank, Old
Line Bancshares or Old Line Bank. Hovde Group did not conduct a
review of any credit mark that may be taken in connection with the
merger nor has it evaluated the adequacy of any contemplated credit
mark to be so taken.
In
arriving at its opinion, Hovde Group did not evaluate the solvency
of Bay Bancorp, Bay Bank, Old
Line Bancshares or Old Line Bank under any state or federal law
relating to bankruptcy, insolvency or similar matters. Accordingly,
its opinion does not address the liquidation value of Bay Bancorp,
Bay Bank, Old Line Bancshares
and Old Line Bank or any other entity. Hovde Group has also assumed
that each of Bay Bancorp, Bay Bank, Old Line Bancshares and Old Line Bank
would remain as a going concern for all periods relevant to its
analysis. Accordingly, Hovde Group expresses no opinion with
respect to the foregoing.
Hovde
Group’s opinion does not consider, include or address: (i)
the legal, tax, accounting, or regulatory consequences of the
merger on Bay Bancorp, or its stockholders; (ii) any advice or
opinions provided by any other advisor to the board of directors or
Bay Bancorp; (iii) any other strategic alternatives that might be
available to Bay Bancorp; or (iv) whether Old Line Bancshares has
sufficient cash or other sources of funds to enable it to pay any
consideration contemplated by the merger
Hovde
Group has assumed that the merger will be consummated substantially
in accordance with the terms set forth in the merger agreement,
without any waiver of material terms or conditions by Bay Bancorp
or any other party to the Agreement and that the final merger
agreement will not differ materially from the draft Hovde Group
reviewed. Hovde Group has assumed that the merger will be
consummated in compliance with all applicable laws and regulations.
Bay Bancorp has advised Hovde Group that Bay Bancorp is not aware
of any factors that would impede any necessary regulatory or
governmental approval of the merger. Hovde Group has assumed that
the necessary regulatory and governmental approvals as granted will
not be subject to any conditions that would be unduly burdensome on
Bay Bancorp and Old Line Bancshares or would have a material
adverse effect on the contemplated benefits of the
merger.
In
performing its analyses, Hovde Group made numerous assumptions with
respect to industry performance, general business, economic, market
and financial conditions and other matters, many of which are
beyond the control of Hovde Group, Bay Bancorp and Old Line
Bancshares. Hovde Group’s opinion was necessarily based on
financial, economic, market and other conditions and circumstances
as they existed on, and on the information made available to Hovde
Group as of, the dates used in its opinion. Any estimates contained
in the analyses performed by Hovde Group are not necessarily
indicative of actual values or future results, which may be
significantly more or less favorable than suggested by these
analyses. Additionally, estimates of the value of businesses or
securities do not purport to be appraisals or to reflect the prices
at which such businesses or securities may be sold or the prices at
which any securities may trade at any time in the future.
Accordingly, these analyses and estimates are inherently subject to
substantial uncertainty. Hovde Group’s opinion does not
address the relative merits of the merger as compared to any other
business combination in which Bay Bancorp might engage. In
addition, Hovde Group’s fairness opinion was among several
factors taken into consideration by Bay Bancorp’s board of
directors in making its determination to approve the merger
agreement and the merger. Consequently, the analyses described
below should not be viewed as solely determinative of the decision
of Bay Bancorp’s board of directors or Bay Bancorp’s
management with respect to the fairness of the merger consideration
to be received by Bay Bancorp’s stockholders in connection
with the merger.
The
following is a summary of the material analyses prepared by Hovde
Group and delivered to Bay Bancorp’s board of directors on
September 27, 2017 in connection with the delivery of its fairness
opinion. This summary is not a complete description of the analyses
underlying the fairness opinion or the presentation prepared by
Hovde Group, but it summarizes the material analyses performed and
presented in connection with such opinion. The preparation of a
fairness opinion is a complex analytical process involving various
determinations as to the most appropriate and relevant methods of
financial analysis and the application of those methods to the
particular circumstances. Therefore, a fairness opinion is not
readily susceptible to partial analysis or summary description. In
arriving at its opinion, Hovde Group did not attribute any
particular weight to any analysis or factor that it considered, but
rather made qualitative judgments as to the significance and
relevance of each analysis and factor. The financial analyses
summarized below include information presented in tabular format.
The analyses and the summary of the analyses must be considered as
a whole and selecting portions of the analyses and factors or
focusing on the information presented below in tabular format,
without considering all analyses and factors or the full narrative
description of the financial analyses, including the methodologies
and assumptions underlying the analyses, could create a misleading
or incomplete view of the process underlying the analyses and
opinion of Hovde Group. The tables alone are not a complete
description of the financial analyses.
Market Approach –
Comparable Transactions. As part of its analysis, Hovde Group reviewed
publicly available information related to two comparable groups (a
“Regional Group” and a “Nationwide Group”)
of select acquisition transactions of banks. The Regional Group
consisted of acquisition transactions where sellers were
headquartered in Delaware, Maryland, New Jersey, New York,
Pennsylvania, Virginia, Washington D.C. and West Virginia announced
since September 1, 2015, in which the sellers’ total assets
were between $400 million and $1.1 billion,
last-twelve-months (“LTM”) return on average assets
(“ROAA”) were between 0.40% and 1.00%, and
non-performing assets (“NPAs”) to total assets were
less than 3.00%. The Nationwide Group consisted of acquisition
transactions of banks in the United States announced since
September 1, 2015, in which the sellers’ total assets were
between $500 million and $1.0 billion, LTM ROAA were between
0.40% and 1.00%, and NPAs to total assets were less than 3.00%. In
each case, for which financial information was available, no
transaction that fit the above selection criteria was excluded.
Information for the target institutions was based on balance sheet
data as of, and income statement data for the twelve months
preceding the most recent quarter prior to announcement of the
transactions. The resulting two groups consisted of the following
transactions (10 transactions for the Regional Group and
17 transactions for the Nationwide Group):
Regional Group:
|
Buyer (State)
|
|
Target (State)
|
Riverview
Financial Corporation (PA)
|
|
CBT
Financial Corporation (PA)
|
Standard
Financial Corp. (PA)
|
|
Allegheny
Valley Bancorp, Inc. (PA)
|
OceanFirst
Financial Corp. (NJ)
|
|
Ocean
Shore Holding Co. (NJ)
|
Summit
Financial Group, Inc. (WV)
|
|
First
Century Bankshares, Inc. (WV)
|
Revere
Bank (MD)
|
|
Monument
Bank (MD)
|
Hampton
Roads Bankshares, Inc. (VA)
|
|
Xenith
Bankshares, Inc. (VA)
|
Univest
Corporation of Pennsylvania (PA)
|
|
Fox
Chase Bancorp, Inc. (PA)
|
WSFS
Financial Corporation (DE)
|
|
Penn
Liberty Financial Corp. (PA)
|
Beneficial
Bancorp, Inc. (PA)
|
|
Conestoga
Bank (PA)
|
Park
Sterling Corporation (NC)
|
|
First
Capital Bancorp, Inc. (VA)
|
|
|
|
Nationwide Group:
|
Buyer (State)
|
|
Target (State)
|
CenterState
Banks, Inc. (FL)
|
|
Sunshine
Bancorp, Inc. (FL)
|
SmartFinancial,
Inc. (TN)
|
|
Capstone
Bancshares, Inc. (AL)
|
Midland
States Bancorp, Inc. (IL)
|
|
Centrue
Financial Corporation (IL)
|
CenterState
Banks, Inc. (FL)
|
|
Gateway
Financial Holdings of FL, Inc. (FL)
|
Enterprise
Financial Services Corp (MO)
|
|
Jefferson
County Bancshares, Inc. (MO)
|
First
Bancorp (NC)
|
|
Carolina
Bank Holdings, Inc. (NC)
|
QCR
Holdings, Inc. (IL)
|
|
Community
State Bank (IA)
|
Revere
Bank (MD)
|
|
Monument
Bank (MD)
|
First
Mid-Illinois Bancshares, Inc. (IL)
|
|
First
Clover Leaf Financial Corp. (IL)
|
Westfield
Financial, Inc. (MA)
|
|
Chicopee
Bancorp, Inc. (MA)
|
Horizon
Bancorp (IN)
|
|
La
Porte Bancorp, Inc. (IN)
|
WSFS
Financial Corporation (DE)
|
|
Penn
Liberty Financial Corp. (PA)
|
BNC
Bancorp (NC)
|
|
High
Point Bank Corporation (NC)
|
Beneficial
Bancorp, Inc. (PA)
|
|
Conestoga
Bank (PA)
|
Park
Sterling Corporation (NC)
|
|
First
Capital Bancorp, Inc. (VA)
|
Pacific
Premier Bancorp, Inc. (CA)
|
|
Security
California Bancorp (CA)
|
Nicolet
Bankshares, Inc. (WI)
|
|
Baylake
Corp. (WI)
|
For
each precedent transaction, Hovde Group compared the implied ratio
of deal value to certain financial characteristics of Bay Bancorp
as follows:
For
each precedent transaction, Hovde Group compared the implied ratio
of deal value to certain financial characteristics of Bay Bancorp
as follows:
|
●
|
|
the
multiple of the purchase consideration to the acquired
company’s tangible common book value (the
“Price-to-Tangible Common Book Value
Multiple”);
|
|
●
|
|
the
multiple of the purchase consideration to the acquired
company’s LTM net earnings per share (the “Price-to-LTM
Earnings Multiple”); and
|
|
●
|
|
the
multiple of the difference between the purchase consideration and
the acquired company’s tangible book value to the acquired
company’s core deposits (the “Premium-to-Core Deposits
Multiple”).
|
The
results of the analysis are set forth in the table below.
Transaction multiples for the merger were derived from the total
deal value of $127,638,810. The total deal value is an aggregate of
the estimated per share purchase price of $11.80, which implies a
merger consideration of $126,461,262, and the implied value of cash
consideration to be paid to holders of Bay Bancorp’s options
to purchase common stock of $1,177,548 based on June 30, 2017
financial results of Bay Bancorp.
|
Price-to-TangibleCommon Book Value Multiple (1)
|
Price-to-LTM Earnings Multiple
(1)(2)
|
Premium-to-Core Deposits Multiple (1)(3)
|
Total
Deal Value
|
191.5%
|
38.6x
|
12.6%
|
Precedent Transactions Regional Group:
|
|
|
|
Median
|
131.8%
|
20.3x
|
6.4%
|
Minimum
|
105.4%
|
15.0x
|
0.7%
|
Maximum
|
199.0%
|
32.3x
|
11.0%
|
Precedent Transactions Nationwide Group:
|
|
|
|
Median
|
147.7%
|
22.5x
|
7.3%
|
Minimum
|
116.1%
|
14.4x
|
4.4%
|
Maximum
|
199.0%
|
32.3x
|
12.6%
|
(1)
Pricing
multiples based on the total deal value of $127,638,810 (i.e. based
on the aggregate of merger consideration value of $126,461,262 and
stock option payment of $1,177,548).
(2)
Price-to-LTM
earnings per share multiples are considered non-meaningful for
values greater than 40.0x.
(3)
Core
deposits are defined as total deposits less foreign deposits and
time deposit accounts greater than $100,000.
Using
publicly available information, Hovde Group compared the financial
performance of Bay Bancorp with that of the median of the precedent
transactions from both the Regional and Nationwide Groups. The
performance highlights are based on June 30, 2017 financial results
of Bay Bancorp.
|
TangibleEquity/TangibleAssets
|
|
|
|
|
|
|
Bay Bancorp(1)
|
10.36%
|
90.40%
|
0.57%
|
5.34%
|
70.13%
|
2.17%
|
28.01%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Precedent Transactions
Regional Group:
|
|
|
|
|
|
|
|
Median
|
9.35%
|
87.14%
|
0.65%
|
6.31%
|
71.38%
|
1.22%
|
68.62%
|
Precedent Transactions
Nationwide Group:
|
|
|
|
|
|
|
|
Median
|
10.14%
|
86.59%
|
0.73%
|
6.75%
|
69.27%
|
1.23%
|
89.31%
|
|
|
|
|
|
|
|
|
(1)
Bay
Bancorp’s financial data as of June 30, 2017.
(2)
Core
deposits exclude foreign deposits and time deposit accounts greater
than $100,000.
(3)
NPAs
as a percentage of total assets (includes restructured loans and
leases).
(4)
Allowance
for loan and lease losses (“ALLL”) as a percentage of
non-performing loans.
No
company or transaction used as a comparison in the above
transaction analyses is identical to Bay Bancorp, and no
transaction was consummated on terms identical to the terms of the
merger agreement. Accordingly, an analysis of these results is not
strictly mathematical. Rather, it involves complex considerations
and judgments concerning differences in financial and operating
characteristics of the companies. The resulting values of the
Precedent Transactions Regional Group indicated an implied
aggregate valuation ranging between $67.0 million and $97.6 million
compared to the proposed merger consideration of $127.6 million.
The resulting values of the Precedent Transactions Nationwide Group
indicated an implied aggregate valuation ranging between $74.4
million and $102.1 million compared to the proposed merger
consideration of $127.6 million.
Income
Approach – Discounted Cash Flow
Analysis. Taking into account various factors including, but
not limited to, Bay Bancorp’s recent performance, the current
banking environment and the local economy in which Bay Bancorp
operates, Hovde Group determined, in consultation with and based on
information provided by management of Bay Bancorp, earnings
estimates for Bay Bancorp over a forward looking six year period,
and in consultation with Bay Bancorp management, developed the
forward-looking projections and key assumptions that formed the
basis for the discounted cash flow analyses. The resulting
projected Bay Bancorp net income numbers used for the analysis were
$5.0 million for 2017, $5.9 million for 2018, $7.0 million for
2019, $7.6 million for 2020, $8.4 million for 2021, and $9.3
million for 2022.
To
determine present values of Bay Bancorp based on these projections,
Hovde Group utilized two discounted cash flow models, each of which
capitalized terminal values using a different methodology: (i)
Terminal Price/Earnings Multiple (“DCF Terminal P/E
Multiple”); and (ii) Terminal Price/Tangible Book Value
Multiple (“DCF Terminal P/TBV Multiple”).
In
the DCF Terminal P/E Multiple analysis, an estimated value of Bay
Bancorp’s common stock was calculated based on the present
value of Bay Bancorp’s after-tax net income based on Bay
Bancorp management’s forward-looking projections. Hovde Group
utilized a terminal value at the end of 2022 by applying a range of
price-to-earnings multiples of 18.3x to 22.3x, with a midpoint of
20.3x, which is based around the median price-to-earnings multiple
derived from transactions in the Regional Group. The present value
of Bay Bancorp’s projected dividends, if any, plus the
terminal value was then calculated assuming a range of discount
rates between 12.25% and 14.25%, with a midpoint of 13.25%
discounted over a period of 5.26 years. This range of discount
rates was chosen to reflect different assumptions regarding the
required rates of return of holders or prospective buyers of Bay
Bancorp’s common stock. The range of discount rates utilized
the buildup method to determine such required rates of return and
was based upon the risk-free interest rate, an equity risk premium,
and industry risk premium, an a size premium. The resulting
aggregate values of Bay Bancorp’s common stock of the DCF
Terminal P/E Multiple ranged between $90.0 million and $118.7
million, with a midpoint of $103.8 million. The resulting per share
values of Bay Bancorp’s common stock of the DCF Terminal P/E
Multiple ranged between $8.34 and $11.01, with a midpoint of
$9.62.
In
the DCF Terminal P/TBV Multiple model, the same earnings estimates
and projected net income were used, however, in arriving at the
terminal value at the end of 2022, Hovde Group applied a range of
price-to-tangible book value multiples of 1.22x to 1.42x with the
midpoint being 1.32x, which is based around the median
price-to-tangible book value multiple derived from transactions in
the Regional Group. The present value of projected dividends, if
any, plus the terminal value, was then calculated assuming a range
of discount rates between 12.25% and 14.25%, with a midpoint of
13.25% discounted over a period of 5.26 years. The resulting
aggregate values of Bay Bancorp’s common stock of the DCF
Terminal P/TBV Multiple ranged between $67.0 million and $84.2
million, with a midpoint of $75.2 million. The resulting per share
values of Bay Bancorp’s common stock of the DCF Terminal
P/TBV Multiple ranged between $6.19 and $7.80, with a midpoint of
$6.96.
These
analyses and their underlying assumptions yielded a range of values
for Bay Bancorp, which are outlined in the table
below:
Implied Value for Bay Bancorp
Based On:
|
Price-to-TangibleBook Value Multiple (1)
|
Price-to-LTMEarnings Multiple (1)(2)
|
Premium-to-CoreDeposits Multiple (1)(3)
|
Total
Deal Value
|
191.5%
|
38.6x
|
12.6%
|
|
|
|
|
DCF Analysis –
Terminal P/E Multiple
(4)
|
|
|
|
Midpoint
|
155.7%
|
31.4x
|
7.7%
|
|
|
|
|
DCF Analysis –
Terminal P/TBV Multiple
(4)
|
|
|
|
Midpoint
|
112.9%
|
22.8x
|
1.8%
|
|
|
|
|
(1)
Pricing
multiples based on the total deal value of $127,638,810 (i.e. based
on aggregate of merger consideration value of $126,461,262 and
stock option payment of $1,177,548).
(2)
Price
to LTM EPS multiples are considered non-meaningful for values
greater than 40.0x.
(3)
Core
deposits are defined as total deposits less foreign deposits and
time deposit accounts greater than $100,000.
(4)
DCF
Analysis utilizes a 13.25% discount rate over a period of 5.26
years.
Hovde
Group noted that while the discounted cash flow present value
analysis is a widely used valuation methodology, it relies on
numerous assumptions, including asset and earnings growth rates,
projected dividend payouts, terminal values and discount rates.
Hovde Group’s analysis does not purport to be indicative of
the actual values or expected values of Bay Bancorp’s common
stock.
Old Line Bancshares Comparable
Companies Analysis: Hovde
Group used publicly available information to compare selected
financial and trading information for Old Line Bancshares and a
group of 10 publicly-traded financial institutions selected by
Hovde Group based on publicly-traded banks headquartered in
Delaware, Maryland, Pennsylvania, Virginia, Washington D.C. and
West Virginia with total assets between $1.3 billion and $3.0
billion and LTM ROAA between 0.80% and 1.20%.
Access
National Corporation
|
|
Codorus
Valley Bancorp, Inc.
|
CNB
Financial Corporation
|
|
Premier
Financial Bancorp, Inc.
|
First
Community Bancshares, Inc.
|
|
C&F
Financial Corporation
|
Peoples
Financial Services Corp.
|
|
Penns
Woods Bancorp, Inc.
|
American
National Bankshares Inc.
|
|
Shore
Bancshares, Inc.
|
The
analysis compared publicly available financial and market trading
information for Old Line Bancshares and the data for the 10
financial institutions identified above as of and for the most
recent twelve-month period which was publicly available. The table
below compares the data for Old Line Bancshares and the median data
for the 10 financial institutions identified above, with pricing
data as of September 26, 2017.
|
|
|
|
|
|
|
|
Old
Line Bancshares
|
$353.2
|
209.8%
|
19.8x
|
18.4x
|
1.13%
|
18.3%
|
81.7%
|
|
|
|
|
|
|
|
|
Comparable Companies:
|
|
|
|
|
|
|
|
Median
|
$301.2
|
179.8%
|
18.1x
|
17.9x
|
2.46%
|
3.0%
|
64.4%
|
|
|
|
|
|
|
|
|
Old
Line Bancshares fell within the range of pricing metrics of
comparable companies. No company used as a comparison in the above
analyses is identical to Old Line Bancshares. Accordingly, an
analysis of these results is not strictly mathematical. Rather, it
involves complex considerations and judgments concerning
differences in financial and operating characteristics of the
companies.
Accretion / Dilution
Analysis: Hovde Group
performed pro forma merger analyses that combined projected income
statement and balance sheet information of Bay Bancorp and Old Line
Bancshares. Assumptions regarding the accounting treatment,
acquisition adjustments and cost savings were used to calculate the
financial impact that the merger would have on certain projected
financial results of Old Line Bancshares. In the course of this
analysis, Hovde Group used the S&P Cap IQ mean of analyst
earnings estimates for Old Line Bancshares for the years ending
December 31, 2017, December 31, 2018, December 31, 2019, and an
earnings growth rate of 8.0% was assumed for December 31, 2020.
Additionally, Hovde Group used earnings estimates provided by Bay
Bancorp’s management for Bay Bancorp for the years ending
December 31, 2017, December 31, 2018, December 31, 2019, and an
earnings growth rate of 10.0% was assumed for December 31, 2020.
This analysis indicated that the merger is expected to be accretive
by $0.11 per share to Old Line Bancshares’ consensus
estimated earnings per share of $1.97 in 2018, accretive by $0.20
per share to Old Line Bancshares’ consensus estimated
earnings per share of $2.19 in 2019, and accretive by $0.20 per
share to Old Line Bancshares’ consensus estimated earnings
per share of $2.37 in 2020. The analysis also indicated that the
merger is expected to be dilutive to tangible book value per share
for Old Line Bancshares by $0.14 per share in 2018, accretive by
$0.06 per share in 2019, and accretive by $0.26 per share in 2020
and that Old Line Bancshares would maintain capital ratios in
excess of those required for Old Line Bancshares to be considered
well-capitalized under existing regulations. For all of the above
analyses, the actual results achieved by Bay Bancorp and Old Line
Bancshares prior to and following the merger may vary from the
projected results, and the variations may be
material.
Other Factors and
Analyses. Hovde Group took into consideration various other
factors and analyses, including but not limited to: current market
environment; merger and acquisition environment; movements in the
common stock valuations of selected publicly-traded banking
companies; and movements in the S&P 500
Index.
Conclusion.
Based upon the foregoing analyses and
other investigations and assumptions set forth in its opinion,
without giving specific weightings to any one factor or comparison,
Hovde Group determined that the per share consideration to be paid
by Old Line Bancshares to the stockholders of Bay Bancorp in
connection with the merger is fair from a financial point of view
to Bay Bancorp’s stockholders. Each Bay Bancorp stockholder is
encouraged to read Hovde Group’s fairness opinion in its
entirety. The full text of this fairness opinion is included as
Annex D to this joint proxy
statement/prospectus.
Terms of the Merger
Effects of the Merger
Upon
completion of the merger, Bay Bancorp will be merged with and into
Old Line Bancshares and the separate legal existence of Bay Bancorp
will cease. All property, rights, powers, duties, obligations and
liabilities of Bay Bancorp 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 Bay Bank, dated as of
September 27, 2017, immediately after the merger Bay 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; What Bay Bancorp
Stockholders Will Receive in the Merger
If the merger is completed, each outstanding share
of common stock of Bay Bancorp will be converted into the right to
receive shares of Old Line Bancshares common stock. The number of
shares of Old Line Bancshares common stock for which shares of Bay Bancorp
common stock will be exchanged in the merger, which we refer to as
the “per share consideration,” will be calculated by
dividing $11.80 by the volume-weighted average closing prices of
Old Line Bancshares common stock for the 20 trading days ending
five trading days before the closing date of the merger, subject to
a minimum Average Price of $25.65 and a maximum average price of
$29.16 and adjustments for the after-tax income recognized by Bay
Bancorp or Bay Bank from the recent settlement of certain
litigation and the resolution of certain loans. As such, the per
share consideration, before adjustments, may be as low as 0.4047
shares of Old Line Bancshares common stock if the Average Price is
$29.16 or more and as high as 0.4600 shares of Old Line Bancshares
common stock if the Average Price is $25.65 or less, before the
litigation and loan resolution adjustments provided for in the
merger agreement.
Initial Calculation
Pursuant to the
merger agreement, each share of Bay Bancorp common stock that you
hold at the effective time of the merger will be automatically
converted into the right to receive shares of Old Line Bancshares
common stock. The number of shares of Old Line Bancshares common
stock for which shares of Bay Bancorp common stock will be
exchanged in the merger, which we refer to as the “per share
consideration,” will vary depending on the volume-weighted
average closing prices of Old Line Bancshares common stock for the
20 trading days prior to the five trading days prior to the closing
date of the merger, which we refer to as the “Average
Price.” Such calculation will be made as
follows:
i.
If the Average
Price is between $25.66 and $29.15, then the per share
consideration will be equal the number of shares of Old Line
Bancshares common stock determined by dividing $11.80 by the
Average Price;
ii.
If the Average
Price is $29.16 or above, then the per share consideration will
equal 0.4047 shares of Old Line Bancshares common stock;
and
iii.
If the Average
Price is $25.65 or below, then the per share consideration will
equal 0.4600 shares of Old Line Bancshares common stock (such
number, in any of (i), (ii) or (iii), is also referred to as the
“exchange ratio”).
Accordingly, based
on the number of shares of Bay Bancorp common stock currently
outstanding and recent trading prices of Old Line Bancshares common
stock, before any adjustments to the exchange ratio (as discussed
immediately below), and absent the exercise of the Walk-Away Cure
Right, as discussed below under “– Bay Bancorp Price
Termination Right,” we expect the value of the shares of Old
Line Bancshares common stock to be issued in the merger would be
approximately $129.4 million and that Old Line Bancshares would
issue between approximately 4,337,529 and 4,930,228 shares of its
common stock in the merger. We refer to the total number of shares
Old Line Bancshares will issue in the merger as the merger
consideration or the aggregate merger consideration.
As set
forth in the table above, changes in the Average Price below $25.65
or above $29.16 will not, 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 Bay Bancorp
common stock in the merger (i.e. the per share consideration),
since at such point the exchange ratio will be fixed. Once the
exchange ratio is fixed, 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. Therefore, to the extent the Average Price
falls below $25.65, the value of the aggregate merger
consideration, prior to the adjustments described below, will be
below $127.6 million, and to the extent the Average Price increases
above $29.16, the value of the aggregate merger consideration will
be above $127.6 million.
Adjustments
As
previously discussed, the aggregate merger consideration and the
exchange ratio are subject to adjustment as a result of the
favorable resolution of certain pending litigation and outstanding
loans as follows:
●
Litigation Adjustment: With respect to
any after-tax income recognized by Bay Bancorp or Bay Bank on or
after August 4, 2017 and prior to the effective time of the merger
from the settlement of the lawsuit captioned Lois F. Lapidus, et al. v. Bay Bank,
FSB, No. RDB 16-03260 (the
“Lawsuit”), in the United States District Court for the
District of Maryland in the United States District Court for the
District of Maryland, (i) the value of the merger consideration
will be increased by such after-tax income and (ii) the exchange
ratio will be increased by an amount determined by (a) dividing
such after-tax income by the number of shares of Bay Bancorp common
stock outstanding immediately prior to the effective date of the
merger, and (b) dividing that amount by the Average
Price.
On
September 26, 2017, Bay Bank received insurance proceeds in the
amount of $1,442,609 in connection with its settlement of the
Lawsuit. Bay Bank expects to recognize $984,750 in after-tax income
related to such settlement prior to the effective date of the
merger and, as a result, we expect the merger consideration and the
exchange ratio to increase. Assuming this amount is correct, and
assuming that there are 10,717,889 shares of Bay Bancorp common
stock outstanding immediately prior to the effective time of the
merger, which is the number of shares of Bay Bancorp common stock
outstanding on the date of this joint proxy statement/prospectus,
and that the Average Price is $29.56 (which is the volume-weighted average closing prices of Old Line
Bancshares common stock for the 20 trading days ending five trading
days before the date of this joint proxy
statement/prospectus), such that (i) the exchange ratio, prior to
any adjustment, is 0.4047 and (ii) the merger consideration, prior
to any adjustment, is 4,337,529 shares of Old Line Bancshares
common stock, with an aggregate value of $129,426,776.72, then (y)
the value of the merger consideration, as adjusted for resolution
of the Lawsuit, would be increased to $130,411,526.72 and (z) the
exchange ratio, as adjusted for resolution of the Lawsuit, would be
increased by 0.0031 to 0.4078.
●
Loan Resolution Adjustment: With
respect to any after-tax income recognized by Bay Bancorp or Bay
Bank on or after August 4, 2017 and prior to the effective time of
the merger as of a result of resolution of one or more certain
problem loans held in Bay Bank’s loan portfolio to the extent
that the amount recovered on any such loan exceeds its carrying
amount at May 31, 2017 (in aggregate, the “Net Loan Recovery
Amount”), (i) the value of the merger consideration will be
increased by the Net Loan Recovery Amount and (ii) the exchange
ratio will be increased by an amount determined by (a) dividing the
Net Loan Recovery Amount by the number of shares of Bay Bancorp
common stock outstanding immediately prior to the effective date of
the merger, and (b) dividing that amount by the Average Price,
provided, however, that if the Bay Bancorp and Bay Bank net loan
and lease charge-offs between August 4, 2017 and the effective date
of the merger exceeds $226,000, the Net Loan Recovery Amount will
be reduced by such excess, and provided further that such reduction
will not exceed $500,000.
Based
on the resolution and anticipated resolution of such problem loans
and net loan and lease charge-offs between August 4, 2017 and
November 14, 2017, the latest practicable date prior to the date of
this joint proxy statement/prospectus, Bay Bancorp estimates that
as of such date the adjusted Net Loan Recovery Amount would be
$587,214. Assuming this amount is correct, and that there are no
additional loan resolutions or net loan and lease charge-offs
through the effective date of the merger, and assuming further that
there are 10,717,889 shares of Bay Bancorp common stock outstanding
immediately prior to the effective time of the merger and the
Average Price is $29.56, such that (i) the exchange ratio, prior to
any adjustment, is 0.4047 and (ii) the merger consideration, prior
to any adjustment, is 4,337,529 shares of Old Line Bancshares
common stock, with an aggregate value of $129,426,776.72, then (y)
the value of the merger consideration, as adjusted for resolution
of the loans, would be increased to $130,013,990.72 and (z) the
exchange ratio, as adjusted for resolution of the loans, would be
increased by 0.0018 to 0.4065.
Combined
Example: Assume that all of the
facts and circumstances set above were to occur. In such case, (i)
the value of the merger consideration, as adjusted for resolutions
of the Lawsuit and the loans, would be increased to
$130,998,741.72 and (ii) the
exchange ratio, as adjusted for resolutions of the Lawsuit and the
loans, would be increased by 0.0049 to 0.4096.
In addition, the number of shares of Old Line
Bancshares common stock that will be exchanged for each outstanding
share of Bay Bancorp 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 “–
Termination”
The exchange ratio is also subject to customary
anti-dilution adjustments in the event of stock splits, stock
dividends, recapitalizations and similar transactions involving Old
Line Bancshares common
stock.
General
Old
Line Bancshares will not issue fractional shares of Old Line
Bancshares common stock to Bay Bancorp 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 the 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 $29.56 and the exchange
ratio was 0.4096, as set forth
in the illustrations above, a Bay Bancorp stockholder who owned 100
shares of Bay Bancorp common stock immediately prior to the
effective time of the merger would have the right to receive in the
merger 40 shares of Old Line Bancshares common stock (which would
have a value of $1,173.60 based on the closing sales price for Old
Line Bancshares common stock of $29.34 on November 21, 2017) and
$28.38 of cash in lieu of a fractional share of Old Line Bancshares
common stock.
Examples of the
potential effects of fluctuations in the Average Price on the
merger consideration (both with and without the assumed adjustment
resolution of the Lawsuit and certain loans) 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 $22.95 or more than $31.05. 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 Old Line
Bancshares or Bay Bancorp special meeting.
Old Line Bancshares, Inc. Acquisition of Bay Bancorp
Inc.
|
Unadjusted
|
Adjusted for Lawsuit and Loan Resolution
|
Structure
|
Average
Price ($000)
|
Exchange
Ratio
|
Old
Line Bancshares Shares Issued
|
Per
Share Purchase Price ($)
|
Merger
Consideration ($000)
|
Aggregate
Per Share Increase
|
Per
Share Incremental Increase (3)
|
Incremental
Exchange Ratio Adjustment
|
Adjusted
Exchange Ratio
|
Adjusted
Per Share Consideration
|
Adj.
Total Consideration
($000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.05
30.78
30.51
30.24
29.97
29.70
29.43
|
0.4047
0.4047
0.4047
0.4047
0.4047
0.4047
0.4047
|
4,337,529
4,337,529
4,337,529
4,337,529
4,337,529
4,337,529
4,337,529
|
12.57
12.46
12.35
12.24
12.13
12.02
11.91
|
135,993
134,803
133,612
132,422
131,231
130,041
128,851
|
1,572
1,572
1,572
1,572
1,572
1,572
1,572
|
0.14
0.14
0.14
0.14
0.14
0.14
0.14
|
0.0046
0.0047
0.0047
0.0048
0.0048
0.0049
0.0049
|
0.4093
0.4094
0.4094
0.4095
0.4095
0.4096
0.4096
|
12.71
12.60
12.49
12.38
12.27
12.16
12.05
|
137,565
136,375
135,184
133,994
132,803
131,613
130,422
|
Ceiling
|
29.16
|
0.4047
|
4,337,529
|
11.80
|
127,649
|
1,572
|
0.14
|
0.0049
|
0.4096
|
11.94
|
129,221
|
|
28.89
28.62
28.35
28.08
27.81
27.54
27.27
27.00
26.73
26.46
26.19
25.92
|
0.4084
0.4123
0.4162
0.4202
0.4243
0.4285
0.4327
0.4370
0.4415
0.4460
0.4506
0.4552
|
4,377,185
4,418,985
4,460,785
4,503,656
4,547,600
4,592,615
4,637,630
4,683,717
4,731,947
4,780,178
4,829,480
4,878,783
|
11.80
11.80
11.80
11.80
11.80
11.80
11.80
11.80
11.80
11.80
11.80
11.80
|
127,649
127,649
127,649
127,649
127,649
127,649
127,649
127,649
127,649
127,649
127,649
127,649
|
1,572
1,572
1,572
1,572
1,572
1,572
1,572
1,572
1,572
1,572
1,572
1,572
|
0.14
0.14
0.14
0.14
0.14
0.14
0.14
0.14
0.14
0.14
0.14
0.14
|
0.0050
0.0050
0.0051
0.0051
0.0052
0.0052
0.0053
0.0053
0.0054
0.0055
0.0055
0.0056
|
0.4134
0.4173
0.4213
0.4253
0.4295
0.4337
0.4380
0.4423
0.4469
0.4515
0.4561
0.4608
|
11.94
11.94
11.94
11.94
11.94
11.94
11.94
11.94
11.94
11.94
11.94
11.94
|
129,221
129,221
129,221
129,221
129,221
129,221
129,221
129,221
129,221
129,221
129,221
129,221
|
Floor
|
25.65
|
0.4600
|
4,930,228
|
11.80
|
127,649
|
1,572
|
0.14
|
0.0056
|
0.4656
|
11.94
|
129,221
|
|
25.38
25.11
24.84
24.57
|
0.4600
0.4600
0.4600
0.4600
|
4,930,228
4,930,228
4,930,228
4,930,228
|
11.67
11.55
11.43
11.30
|
126,285
124,932
123,578
122,225
|
1,572
1,572
1,572
1,572
|
0.14
0.14
0.14
0.14
|
0.0057
0.0057
0.0058
0.0059
|
0.4657
0.4657
0.4658
0.4659
|
11.82
11.69
11.57
11.45
|
127,857
126,504
125,150
123,797
|
1st
Trigger
|
24.30 (1)
|
0.4600
|
4,930,228
|
11.18
|
120,872
|
1,572
|
0.14
|
0.0059
|
0.4659
122,444
|
11.32
|
122,444
|
|
24.03
23.76
23.49
23.22
|
0.4600
0.4600
0.4600
0.4600
|
4,930,228
4,930,228
4,930,228
4,930,228
|
11.05
10.93
10.81
10.68
|
119,519
118,166
116,813
115,4603
|
1,572
1,572
1,572
1,572
|
0.14
0.14
0.14
0.14
|
0.4660
0.0061
0.0061
0.0062
|
0.466
0.4661
0.4662
|
11.20
11.07
10.95
10.83
|
121,091
119,738
118,385
|
2nd
Trigger (Illustrative)
|
22.95
|
(2)
|
0.4600
|
4,930,228
|
10.56
|
114,107
|
1,572
|
0.14
|
0.0063
|
0.4663
|
10.70
|
115,679
|
(1)
1st trigger for walk right - Average Price
declines below $24.30.
(2)
2nd trigger is illustrative – actual
trigger price is determined by a 15% difference in performance
between Old Line Bancshares common stock and the NASDAQ Bank Index,
on the condition that Old Line Bancshares’ stock price
crosses below the 1st trigger
for the walk right.
(3)
Additional per
share purchase price assumes an after-tax gain of $1,571,964 from
Lawsuit and loan recovery.
Options
Options to purchase shares of Bay Bancorp common
stock that are outstanding at the effective time of the merger will
be converted into the right to receive cash in the amount
determined by multiplying (i) the number of shares of Bay Bancorp
common stock issuable upon the exercise of such option by (ii) the
difference between (a) the Average Price multiplied by the per
share consideration and (b) the exercise price per share of Bay
Bancorp common stock issuable upon the exercise of such option.
Based on outstanding options to purchase 186,544 shares of Bay
Bancorp common stock as of November 15, 2017, the latest
practicable date before the date of this joint proxy
statement/prospectus, and assuming an Average Price of $29.56, we
expect that Old Line Bancshares would pay approximately $1.28
million in exchange for the outstanding options to purchase shares
of Bay Bancorp common stock in connection with the merger, assuming
no options are exercised between the date of this joint proxy
statement/prospectus and the effective date of the
merger.
Bay Bancorp Price Termination Right
Bay
Bancorp has the option, but is not required, to terminate the
merger agreement if, at any time during the five trading days
before the effective date of the merger, the volume-weighted
average closing price of Old Line Bancshares common stock during
the 20 prior trading days is less than 90% of $27.00, and the
decrease in such price is more than 15% lower than the change in
the average of Nasdaq Bank Index prices for the 20 consecutive
trading days ending on the trading day prior to the determination
date (the “Final Index Price”) relative to the Nasdaq
Bank Index closing price as September 27, 2017. Old Line
Bancshares, however, would then have the option to increase the per
share consideration (by increasing the exchange ratio, making a
cash payment or a combination of both) so that the per share
consideration is an amount that equals the lesser of (i) the
product of $27.00, 90% and the exchange ratio (which at that point
would be 0.4600, excluding any adjustments) or (ii) (a) the Final
Index Price divided by the Nasdaq Bank Index closing price as of
September 27, 2017, multiplied by (b) 85% and the Old Line
Bancshares 20 day volume-weighted average price, divided by (c) the
quotient of the Old Line Bancshares 20 day volume-weighted average
price divided by $27.00, in which case no termination will take
place (the “Walk-Away Cure Right”).
The
merger agreement does not provide for a resolicitation of Old Line
Bancshares’ or Bay Bancorp’s stockholders in the event
that (i) the conditions above are met and Bay Bancorp chooses to
complete the merger, (ii) the conditions above are met and Bay
Bancorp determines to terminate the merger agreement, or (iii) the
conditions above are met and Bay Bancorp determines to terminate
the merger agreement and Old Line Bancshares determines to exercise
the Walk-Away Cure Right. Bay Bancorp’s board of directors
has made no decision as to whether it would exercise Bay
Bancorp’s right to terminate the merger under these
circumstances, and Old Line Bancshares’ board of directors
has made no decision as to whether, if Bay Bancorp exercised its
right to terminate the merger agreement under the circumstances
described, it would exercise the Walk-Away Cure Right. In
considering whether to exercise Bay Bancorp’s right to
terminate the merger agreement or Old Line Bancshares’ right
to exercise the Walk-Away Cure Right, the applicable
company’s 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 advisors and legal
counsel.
Each of
the fairness opinion received by Old Line Bancshares from FIG and
the fairness opinions received by Bay Bancorp from RP Financial and
Hovde Group is dated as of September 27, 2017, and is based on
conditions in effect on that date. Accordingly, the fairness
opinions do not address the possibilities presented if the
termination provision discussed above is triggered, including the
possibility that Bay Bancorp’s board of directors might elect
to continue with the merger even if Bay Bancorp has the ability to
terminate the merger agreement under that provision or that Old
Line Bancshares may elect to exercise the Walk-Away Cure Right if
Bay Bancorp elects to terminate the merger agreement as discussed
herein. See “– Opinion of Old Line Bancshares’
Financial Advisor” and “– Opinion of Bay
Bancorp’s Financial Advisor.”
Approval of the
merger by Bay Bancorp’s stockholders will confer on Bay
Bancorp’s 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
Bay Bancorp’s stockholders. In addition, approval of the
merger by Old Line Bancshares’ stockholders will confer on
Old Line Bancshares’ board of directors the power to exercise
the Walk-Away Cure Right should Bay Bancorp elect to terminate the
merger agreement under the circumstances discussed herein, without
any further action by or re-solicitation of the votes of Old Line
Bancshares’ stockholders.
Exchange Procedures
If you
are a record holder of Bay Bancorp common stock, a letter of
transmittal for use in surrendering your certificates representing
your shares of Bay Bancorp common stock, or your shares of Bay
Bancorp common stock held in book-entry form, 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 Bay Bancorp stock certificate(s) (or delivering an
“agent’s message” or other appropriate
instructions with respect to shares of Bay Bancorp common stock
held in book-entry form) 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, if your
shares of Bay Bancorp common stock are held in certificated form,
your Bay Bancorp stock certificate(s), to the exchange agent in
order to receive the per share consideration for your shares. The
Bay Bancorp 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 issue to each former
stockholder of Bay Bancorp shares of Old Line Bancshares common
stock, in book-entry form (unless otherwise agreed to by Old Line
Bancshares), and mail 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 Bay Bancorp stock certificates representing
shares of Bay Bancorp common stock held by such former stockholder.
No interest will be paid on any cash payment.
Shares
of Old Line Bancshares common stock that are exchanged for shares
of Bay Bancorp common stock in the merger will be considered issued
as of 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 Bay Bancorp common stock or the
applicable book-entry shares are surrendered for exchange, however,
holders of such certificates or shares of Bay Bancorp common stock
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 or
book-entry shares 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 Bay Bancorp stock
certificates or book-entry shares are surrendered for
exchange.
Until
surrendered, each Bay Bancorp stock certificate or book-entry
share, following the effective date of the merger, is evidence
solely of the right to receive the proportionate amount of the
aggregate per share consideration. In no event will either Old Line
Bancshares or its exchange agent be liable to any former Bay
Bancorp stockholder for any amount paid in good faith to a public
official or agency pursuant to any applicable abandoned property,
escheat or similar law.
As
discussed above, 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 Bay Bancorp 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 Bay
Bancorp may mutually select. By law, however, regulatory and
stockholder approvals cannot be waived. We presently expect to
close the merger on or about February 28, 2018. 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 Bay Bancorp and their respective
subsidiaries;
●
Capital structures
of Old Line Bancshares and Bay Bancorp;
●
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
and of stockholders to complete the merger;
●
Consistency of
financial statements with GAAP;
●
That its
independent registered public accounting firm was independent, has
not resigned, does not intend to resign and has not been dismissed
as a result of or in connection with disagreements on a matter of
accounting principles, practices, financial statement disclosure or
auditing scope or procedure during the periods covered by the
financial statements for which representations were made in the
merger agreement;
●
Absence of material
adverse changes, since June 30, 2017, 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,
claims, actions or governmental investigations or inquiries or
other proceedings, and of facts that could be the basis for any of
the foregoing;
●
Compliance with
applicable laws, rules and regulations;
●
Status of
disclosure controls and procedures and internal control over
financial reporting;
●
Absence of labor or
collective bargaining agreements, union organizing efforts, labor
strikes, labor disputes and similar matters, and absence of pending
or threatened litigation, arbitrations or other 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, and having a valid and enforceable interest
in leased 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 Bay Bancorp for
inclusion in the registration statement, filed under the Securities
Act, of which this joint 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 in its business;
●
Validity and
binding nature of loans reflected as assets in the financial
statements;
●
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 (the “BSA”), USA PATRIOT Act,
anti-money laundering statutes, rules or regulations, and statutes,
rules, regulations and internal policies 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 by
employees and agents with laws related to securities
activities;
●
Disclosure of
related party transactions;
●
Establishment and
maintenance of the allowance for loan losses;
●
Status of
investment securities;
●
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;
●
Conduct of business
as described in the party’s SEC filings;
●
Absence of
undisclosed liabilities;
●
Absence of certain
enumerated changes with respect to Bay Bancorp;
●
With respect to Bay
Bancorp, employment of investment, securities, risk management and
other policies, practices and procedures;
●
With respect to Bay
Bancorp, that no events have occurred since June 30, 2017 that have
had or would reasonably be expected to have a material adverse
effect;
●
With respect to Bay
Bancorp, that it has no debt that is secured by the capital stock
of Bay Bank;
●
With respect to Bay
Bancorp, that its deposits were established and are held in
compliance with applicable policies, practices and procedures of
Bay Bank and applicable law;
●
With respect to Bay
Bancorp, disclosure of brokered deposits;
●
With respect to Bay
Bancorp, absence of option plans and convertible securities other
than as disclosed;
●
With respect to Bay
Bancorp, representations with respect to its risk management
arrangements;
●
With respect to Bay
Bancorp, 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; and
●
With respect to Bay
Bancorp, that it has no subsidiaries required to be registered as a
broker-dealer or that conducts insurance operations requiring a
license from any regulatory authority.
Conduct of Business Pending the Merger
In the
merger agreement, Bay Bancorp agreed to conduct its business and to
engage in transactions only in the 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. Bay Bancorp 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 Bay
Bancorp agreed that, except as permitted by the merger agreement or
required in writing by its regulators (with a copy of such written
document 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;
●
Grant any
severance, retention or termination pay, except as disclosed or in
accordance with policies or agreements with employees, other than
executive officers, in effect on September 27, 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, except as
disclosed to Old Line Bancshares, 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 ordinary course of its
business consistent with past practices, or (ii) routine periodic
pay increases, selective merit pay increases and pay raises in the
ordinary course of business and consistent with past practices,
provided, however, that such aggregate increases in the rate of
compensation and benefits 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, except for employees at the
level of Vice President or below that Bay Bancorp in good faith
determines 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 and for full and fair
consideration actually received, sell, lease, assign, transfer,
mortgage, encumber or otherwise dispose of its assets;
●
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 FHLB
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 consistent with past practice 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 consistent with past practice;
●
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 or tax compliance methods, principles or practices,
except as may be required by GAAP, by applicable law, rule,
regulation, code, administrative or quasi-judicial decision or
award, order, decree, judgment, ruling, consent decree, injunction,
ruling, writ or 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 September 27, 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 or GAAP or at 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 $100,000 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 consistent with past practice and that comply with
applicable Law;
●
Except as required
by applicable 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;
●
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 with respect
to the Lawsuit, settle any material action, suit, claim,
arbitration, investigation, inquiry, grievance or other proceeding
(or basis therefor) pending or, to the knowledge of Bay Bancorp,
threatened, against or affecting Bay Bancorp or any subsidiary or
any of their respective properties or assets, except in the
ordinary course of business consistent with past practice and
involving an amount not in excess of $10,000 (exclusive of any
amounts paid directly or reimbursed to it under any insurance
policy maintained by Bay Bancorp or any subsidiary), provided that
such suit, proceeding, etc., does not arise out of or relate to the
transactions contemplated by the merger agreement, and provided
further 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 Bay Bancorp 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
Bay Bancorp 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 Bay Bancorp
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 or commit to
make any capital expenditure, individually or in the aggregate, of
$100,000 or more;
●
Except in the
ordinary course of business consistent with past practice sell or
acquire any loans (excluding originations) or loan participations
(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;
●
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 consistent with past practice and
in amounts not to exceed $10,000 individually and $50,000 in the
aggregate;
●
Except as already
committed to on September 27, 2017, enter into, grant, approve,
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, except in the
ordinary course of business consistent with past
practice;
●
Except as already
committed to on September 27, 2017, enter into, grant, approve,
modify or extend any loan, credit facility, line of credit or
letter of credit for an owner-occupied residence except in the
ordinary course of business consistent with past
practice;
●
Issue any
communication to any employee of Bay Bancorp, Bay Bank or another
subsidiary of Bay Bancorp relating to post-merger employment
benefits or compensation;
●
Enter into any
interest rate swap, floor or cap or similar agreement or
arrangement, except in the ordinary course of business consistent
with past practice; or
●
Agree to do any of
the foregoing.
Bay
Bancorp also agreed in the merger agreement, among other things,
to:
●
Provide a report to
Old Line Bancshares every two weeks detailing new (i) approvals of
or entry into loans or other credit extensions with principal
balances or commitments of $500,000 or more, (ii) renewals or
extensions of existing loans or other credit extensions of
$1,000,000 or more, or (iii) material amendments or modifications
to loans or other credit extensions with principal balances or
commitments of $1,500,000 or more;
●
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 Bay Bancorp and its
subsidiaries;
●
Dissolve any
non-operating subsidiaries of Bay Bancorp and Bay Bank prior to the
closing of the merger;
●
If requested by Old
Line Bancshares, take all necessary action to terminate any 401(k)
plans of Bay Bancorp or its subsidiaries effective immediately
before the effective time of the merger; and
●
To the extent
requested by Old Line Bancshares, cooperate in good faith with Old
Line Bancshares to amend, freeze, terminate or modify, as of the
effective time of the merger, any of its other benefit
plans.
Old
Line Bancshares and Bay Bancorp 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 joint proxy statement/prospectus is a part,
all applications for required regulatory permits, consents,
approvals, waivers and authorizations (and to comply with the terms
and conditions or all such permits, consents, approvals, waivers
and authorizations), and other necessary filings;
●
To submit the
proposed merger to their stockholders for approval at a special
meeting to be held as soon as practicable, with an approval
recommendation by each company’s board of
directors;
●
That the
information each party provides for inclusion in the registration
statement of which this joint 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 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, Nasdaq, 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 agreed in the merger agreement, among
other things, that (i) it will elect Eric D. Hovde, Joseph J.
Thomas and one other Bay Bancorp director to the Old Line
Bancshares and Old Line Bank boards or directors and (ii) it will
purchase extended period officers’ and directors’
liability insurance for the officers and directors of Bay Bancorp
and Bay Bank and (iii) 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
(with a copy of such written document to Bay Bancorp), without the
consent of Bay Bancorp:
●
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 Bay Bancorp’s obligations to
complete the merger are subject to various conditions, including,
among other things, the following:
●
The merger shall
have been approved by the stockholders of Old Line Bancshares and
the stockholders of Bay Bancorp;
●
All necessary
consents and approvals for the merger shall have been received, all
necessary filings and registrations by Bay Bancorp 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 Bay Bancorp’s 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 Bay Bancorp or
any of its subsidiaries, (b) compel Old Line Bancshares or Bay
Bancorp 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 Bay
Bancorp, or (d) otherwise materially impair the value of Bay
Bancorp to Old Line Bancshares (any such requirement alone, or more
than one such requirement together, a “Burdensome
Condition”); or (ii) so materially and adversely impact the
economic or business benefits of the merger to either Old Line
Bancshares or Bay Bancorp, as applicable, such as to render it
inadvisable. See “– Terms of the Merger –
Regulatory Approvals”;
●
No court or
regulatory authority shall have enacted, issued, promulgated,
enforced or entered any administrative decision or award, decree,
injunction, judgment, order, consent decree, quasi-judicial
decision or award, ruling or writ or taken any other action that
enjoins, prohibits, restricts or makes illegal the completion of
the transactions contemplated by the merger agreement that remains
in effect;
●
No Law shall have
been enacted, entered, promulgated or enforced that restricts or
makes illegal the completion of the transactions contemplated by
the merger agreement;
●
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 Bay Bancorp, 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
September 27, 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 Bay
Bancorp’s or its subsidiaries’ assets, operations and
secured interests, including real property, will not have a
material adverse effect on Bay Bancorp;
●
Holders of no more
than 10% of the outstanding shares of Bay Bancorp common stock as
of the record date for the Bay Bancorp special 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 Bay
Bancorp 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 “– Amendment;
Waiver” immediately below.
Amendment; Waiver
Subject
to applicable Law, at any time prior to the closing of the merger,
Old Line Bancshares and Bay Bancorp 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 approvals, and the requirement
that no Law preventing the transactions contemplated by the merger
agreement has been enacted or issued, 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 Bay Bancorp.
The
merger agreement may also be terminated by either party
if:
●
The merger is not
completed prior to April 30, 2018 or, because of the failure to
obtain any required regulatory approval or consent by such date,
the merger is not completed prior to June 30, 2018, 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.
●
A required
regulatory approval or consent is obtained but contains or would
result in the imposition of a Burdensome Condition and there is no
meaningful possibility that such consent or approval could be
revised prior to June 30, 2018 so as not to contain or result in a
Burdensome Condition.
●
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.
●
The other
party’s board of directors withdraws, changes or modifies its
recommendation to stockholders in a manner adverse to the
terminating party with respect to the merger agreement or the
merger.
●
Old Line
Bancshares’ stockholders or Bay Bancorp’s stockholders
vote on but fail to approve the merger.
●
Any Law permanently
restraining, enjoining or otherwise prohibiting the consummation of
the transactions contemplated by the merger agreement has become
final and nonappealable, provided that the party seeking to
terminate the merger agreement shall have used its reasonable best
efforts to contest, appeal and remove such Law.
In
addition, Bay Bancorp may terminate the merger agreement
if:
●
Bay Bancorp or any
Bay Bancorp subsidiary receives, at any time prior to the Bay
Bancorp special meeting, an acquisition proposal from a third
party, Bay Bancorp’s board of directors determines that such
acquisition proposal the transaction pursuant to such proposal is
more favorable to the stockholders of Bay Bancorp than the merger,
which we refer to a superior Bay Bancorp transaction, and Bay
Bancorp complies with certain conditions applicable to such
termination right (see “Terms of the Merger – No
Solicitation of Other Transactions” on page
94.
●
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 September 27,
2017 do not comprise the majority of the surviving entity’s
board of directors, with any person other than Bay Bancorp, and the
Bay Bancorp board of directors determines, after considering the
advice of counsel and its financial advisors, that such transaction
is not in the best interests of Bay Bancorp’s
stockholders.
●
If at any time
during the five trading days before the effective date of the
merger, the volume-weighted average closing price of Old Line
Bancshares common stock during the 20 prior trading days is less
than 90% of $27.00, and the decrease in such price is more than 15%
lower than the change in the average of Nasdaq Bank Index prices
for the 20 consecutive trading days ending on the trading day prior
to the determination date (the “Final Index Price”)
relative to the Nasdaq Bank Index closing price as of September 27,
2017, provided, however, that Old Line Bancshares would then have
the option to increase the per share consideration (by increasing
the exchange ratio, making a cash payment or a combination of both)
so that the value of the per share consideration is an amount that
equals the lesser of (i) the product of $27.00, 90% and the
exchange ratio (which at that point would be 0.4600) or (ii) (a)
the Final Index Price divided by the Nasdaq Bank Index closing
price as of September 27, 2017, multiplied by (b) 85%, the exchange
ratio (which at that point would be 0.4600) and the Old Line
Bancshares 20 day volume-weighted average price, divided by (c) the
quotient of the Old Line Bancshares 20 day volume-weighted average
price divided by $27.00, in which case no termination will take
place.
Finally, Old Line
Bancshares may terminate the merger agreement if:
●
Bay Bancorp or any
subsidiary of Bay Bancorp 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 Bay Bancorp
transaction.
●
Bay Bancorp’s
board of directors authorizes, recommends or publicly proposes, or
publicly announces an intention to authorize, recommend or propose
an agreement to enter into a superior Bay Bancorp
transaction.
Old Line Bancshares Termination Fee
Old
Line Bancshares must pay Bay Bancorp a termination fee in the
amount of $5,076,000 if the merger agreement is terminated
because:
●
Old Line Bancshares
has materially breached the merger agreement or any representation,
warranty, covenant or other agreement contained therein (provided
that Bay Bancorp is not then in material breach of any
representation, warranty, covenant or other agreement contained in
the merger agreement);
●
The merger failed
to close prior to April 30, 2018 or, if due solely to the need to
obtain a regulatory approval or consent, June 30, 2018, 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 Bay Bancorp is not then
in material breach of any material representation, warranty,
covenant or other agreement contained in the merger agreement);
or
●
The board of
directors of Old Line Bancshares has withdrawn, changed or modified
its recommendation to the stockholders of Old Line Bancshares in a
manner adverse to Bay Bancorp (provided that Bay Bancorp is not
then in material breach of any representation, warranty, covenant
or other agreement contained in the merger agreement).
Bay Bancorp Termination Fee
Bay
Bancorp must pay Old Line Bancshares a termination fee in the
amount of $5,076,000 if the merger agreement is terminated
because:
●
Bay Bancorp 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 prior to April 30, 2018 or, if due solely to the need to
obtain a regulatory approval or consent, June 30, 2018, 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 Bay
Bancorp or Bay 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);
●
Bay Bancorp or any
Bay Bancorp subsidiary has received an acquisition proposal that
constitutes a superior Bay Bancorp transaction; or
●
The board of
directors of Bay Bancorp has withdrawn, changed or modified its
recommendation to the stockholders of Bay Bancorp 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 Bay
Bancorp 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).
No Solicitation of Other Transactions
In the
merger agreement, Bay Bancorp 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
providing assistance) 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, Bay Bancorp or any of
its subsidiaries, or any other business combination involving Bay
Bancorp 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 Bay Bancorp 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
Bay Bancorp 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 Bay
Bancorp 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.
Bay
Bancorp may, however, respond to an inquiry, furnish nonpublic
information regarding Bay Bancorp and its subsidiaries to, or enter
into discussions with, any person in response to an unsolicited
acquisition proposal if (i) Bay Bancorp’s board of directors
determines in good faith, after consultation with and having
considered the advice of its outside legal counsel and its
financial advisers Hovde Group 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 Bay Bancorp than the merger (provided that such transaction is
not conditioned on obtaining financing and would result in the
acquisition of all, but not less than all, of the outstanding
shares of Bay Bancorp’s common stock or all or substantially
all of the assets of Bay Bancorp and its subsidiaries on a
consolidated basis), which we refer to as a superior proposal, (ii)
Bay Bancorp’s board of directors determines in good faith,
after consultation with and based upon the advice of its outside
legal counsel and Hovde Group 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, Bay Bancorp
provides Old Line Bancshares with written notice of the identity of
such person or entity and of Bay Bancorp’s intention to
furnish nonpublic information to, or enter into discussions with,
such person or entity and Bay Bancorp 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 Bay Bancorp and Old Line Bancshares, which
confidentiality agreement shall not provide such person or entity
with any exclusive right to negotiate with Bay Bancorp. Bay Bancorp
has also agreed to promptly provide to Old Line Bancshares any
non-public information regarding Bay Bancorp 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
merger agreement also provides that under certain circumstances as
set forth therein the Bay Bancorp board of directors can approve or
recommend that Bay Bancorp’s 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
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 Hovde Group and RP
Financial.
Bay
Bancorp 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. Bay
Bancorp has further agreed to provide Old Line Bancshares with the
opportunity to present its own proposal to Bay Bancorp’s
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
Bay Bancorp or a subsidiary entering into an alternative
transaction could result in Bay Bancorp being required to pay a
termination fee, see “– Bay Bancorp Termination
Fee.”
Expenses
Each of
Old Line Bancshares and Bay Bancorp will pay all of the costs and
expenses that it incurs in connection with the merger agreement and
the merger, 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 Bay Bancorp as well as the merger
of Old Line Bank and Bay Bank.
Old
Line Bancshares and Bay Bancorp 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 BHC 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 Bay Bancorp 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 Bay Bank or Bay
Bancorp; 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.
OCC Notice. Pursuant to OCC rules,
because Bay Bank is being merged into a state bank, prior OCC
approval of the bank merger is not required. However, Bay Bank must
file a notice advising the OCC of Old Line Bank’s intention
to acquire Bay Bank in the bank merger prior to consummation of the
bank merger.
Applications
Old
Line Bancshares filed applications with the FRB and the Maryland
Commissioner requesting approval of the merger of Bay Bancorp 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 Bay Bank into Old Line Bank, on November 21, 2017. In
addition, Bay Bank notified the OCC of the merger of Bay Bank into
Old Line Bank on November 21, 2017. In general, the applications
and the notice 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 will
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 Joseph J. Thomas, Bay Bancorp’s
President and Chief Executive Officer, Eric D. Hovde, who serves as
Chairman of the boards of directors of both Bay Bancorp and Bay
Bank, and [__________], a current director of Bay Bancorp (or such
replacements as named in a schedule to the merger agreement if
either of Messrs. Thomas, Hovde or [_________] 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 Bay Bancorp or its subsidiaries. As
a result of the merger, some Bay Bancorp positions will be
eliminated. Old Line Bancshares will, however, endeavor to continue
the employment of all employees (as of August 4, 2017) of Bay
Bancorp and its subsidiaries (each a “Bay Employee”),
including Bay Bank, in positions that will contribute to the
successful performance of the combined organization. If a Bay
Employee is not so retained, or Old Line Bancshares elects to
eliminate a position or does not offer a Bay Employee comparable
employment with Old Line Bancshares, Old Line Bank or another
subsidiary of Old Line Bancshares, or a Bay Employee that is
offered and accepts employment with Old Line Bancshares, Old Line
Bank or another subsidiary of Old Line Bancshares but is terminated
without “cause” (as defined in the merger agreement)
within six months after the date that the merger is effective (in
each case, a “Displaced Employee”), then Old Line
Bancshares will make, or cause Old Line Bank or the other
applicable Old Line Bancshares subsidiary to make, a severance
payment to such Displaced Employee as follows:
●
With respect to
non-exempt Displaced Employees, two weeks of severance pay plus one
additional week of severance pay for each full year of employment
with Bay Bancorp or a Bay Bancorp subsidiary, up to a maximum of 12
weeks of severance pay;
●
With respect to
Displaced Employees who are exempt officers or employees of Bay
Bancorp or a Bay Bancorp subsidiary with less than five full years
of employment with Bay Bancorp or a Bay Bancorp subsidiary, six
weeks of severance pay plus one additional week of severance pay
for each full year of employment with Bay Bancorp or a Bay Bancorp
subsidiary, up to a maximum of ten weeks of severance pay;
and
●
With respect to
Displaced Employees who are exempt officers or employees of Bay
Bancorp or a Bay Bancorp subsidiary with at least five full years
of employment with Bay Bancorp or a Bay Bancorp Subsidiary, 12
weeks of severance pay plus two additional weeks of severance pay
for each full year of employment with Bay Bancorp or a Bay Bancorp
subsidiary beyond five years of employment, up to a maximum of 26
weeks of severance pay.
Such
severance payments will be calculated based on the applicable
Displaced Employee’s base salary or other base rate of pay in
effect for such Displaced Employee immediately prior to the
effective time of the merger. Years of employment will be based on
the applicable Displaced Employee’s number of full years
employed with Bay Bancorp or a Bay Bancorp Subsidiary or any
predecessor thereto.
Bay
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
– Golden Parachute Compensation for Bay Bancorp Named
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 Bay
Employee whose employment with Old Line Bancshares or a subsidiary
of Old Line Bancshares is terminated without cause after six 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 Bay
Bancorp or any Bay Bancorp 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 Bay Employee who accepts employment with Old Line
Bancshares or a subsidiary thereof will be entitled to full credit
for each year of service with Bay Bancorp 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
Bay Bancorp or a Bay Bancorp 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 Bay Bancorp benefit plan,
subject to the plan’s provisions and applicable
Law.
Interests of Directors and Officers in the Merger
Certain
members of management of Bay Bancorp and its board of directors may
have interests in the merger in addition to their interests as
stockholders of Bay Bancorp. The Bay Bancorp board of directors was
aware of these factors and considered them, among other factors, in
approving the merger agreement and the merger.
Golden Parachute Compensation for Bay Bancorp Named Executive
Officers
As of
April 14, 2017, prior to any discussions with Old Line Bancshares,
Bay Bank and Bay Bancorp and Joseph J. Thomas, their President and
Chief Executive Officer, entered into an employment agreement with
respect to Mr. Thomas’ service as Bay Bank’s President
and Chief Executive Officer. In addition, Bay Bank and its
Executive Vice President-Chief Financial Officer, Larry D. Pickett,
are parties to an employment agreement dated as of January 2, 2014.
These agreements include change in control severance arrangements,
and the compensation that can be paid under these arrangements
constitute “golden parachute compensation” within the
meaning of Item 402(t) of the SEC’s Regulation S-K. Section
14A of the Exchange Act requires the board of directors of Bay
Bancorp to seek an advisory (nonbinding) vote from its stockholders
with respect to any golden parachute compensation that could be
paid pursuant to any agreement or understanding between Bay Bancorp
and any of its “named executive officers” (within the
meaning of Item 402 of Regulation S-K) in connection with a merger
for which the board is soliciting proxies. Accordingly,
stockholders of Bay Bancorp will be asked at the special meeting to
cast an advisory (nonbinding) vote on the golden parachute
compensation that could be paid to Messrs. Thomas and Pickett under
their employment agreements. See the section of this joint proxy
statement/prospectus entitled “The Bay Bancorp Special
Meeting – Purpose of the Special Meeting.”
Under
his employment agreement, Mr. Thomas will be entitled to a lump sum
cash payment and certain other benefits if (i) his employment is
terminated without Cause, as defined in the agreement, (ii) he
terminates his employment for Good Reason, as defined in the
agreement, or (iii) his employment agreement is not renewed, in
each case within three months before or 12 months after a Change in
Control, as defined in the agreement. In addition, under his
employment agreement, Mr. Pickett is entitled to a lump sum cash
payment if within 180 days of the closing of a transaction that
constitutes a Change in Control, as defined in the agreement, Mr.
Pickett’s employment is terminated Cause (as defined in the
agreement) (including by not renewing his employment agreement at
the end of its term), or he terminates his employment for Good
Reason (as defined in the agreement).
The
merger will constitute a Change in Control for purposes of both Mr.
Thomas’ and Mr. Pickett’s employment agreements, and
Old Line Bancshares agreed in the merger agreement to pay any
amount that may become payable to any Bay Employees under existing
employment agreements in connection with the merger. Accordingly,
if payable, such compensation will be paid by Old Line Bancshares
after consummation of the merger. The following table describes the
golden parachute compensation that could be paid to Messrs. Thomas
and Pickett under their employment agreements.
Golden Parachute Compensation
(subject to stockholder advisory vote)
|
Name
|
|
Perquisites/
Benefits
($) (1)
|
|
Joseph
J. Thomas,
President/CEO
|
630,000
|
19,291
|
649,291
|
Larry
D. Pickett
Executive VP/CFO
|
240,000
|
6,686
|
246,686
|
(1)
Amounts reflect estimated costs of continued coverage under Bay
Bancorp’s health insurance and life insurance plans for 12
months following termination of employment.
Other Payments to Directors and Executive Officers of Bay
Bancorp
As
discussed above, all Bay Employees, including James W. Kirschner,
Senior Vice President and Chief Credit Officer of Bay Bank, and
Deanna L. Lintz, Executive Vice President and Chief Banking Officer
of Bay Bank, who either are not retained by Old Line Bancshares or
Old Line Bank or another Old Line Bancshares subsidiary in the
merger or are retained but are thereafter terminated without
“cause” (as defined in the merger agreement) within six
months of the merger, will receive a severance payment as outlined
in “– Employment; Severance” above.
No Golden Parachute or Other Compensation Payable to Old Line
Bancshares Named Executive Officers
None of
Old Line Bancshares’ executive officers will receive any type
of “golden parachute” or other compensation that is
based on or that otherwise relates to the merger.
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 Bay Bancorp 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 Bay Bancorp or any of its subsidiaries or is
or was serving at the request of Bay Bancorp 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 Bay Bancorp, 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 Bay Bancorp in effect on September 27, 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 Bay Bancorp 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 150% of the
current annual premium attributable to the applicable
officers’ and directors’ liability insurance coverage
in Bay Bancorp’s or Bay Bank’s liability insurance
policy(ies) in effect on September 27, 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, Eric D.
Hovde, Joseph J. Thomas and another current director of Bay Bancorp
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, receives $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, the risk committee, the 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.
In
addition, pursuant to a resolution adopted by Old Line
Bancshares’ board of directors in 2012, directors who retire
from the board with at least seven years of service receive a
payment of $50,000, payable in three annual installments. Board
members are also eligible for equity grants pursuant to Old Line
Bancshares’ equity compensation plans.
Support Agreements
As a
condition to Old Line Bancshares entering into the merger
agreement, all the directors of Bay Bancorp, who in the aggregate
have the power to vote [__]% of shares outstanding on the record
date for Bay Bancorp’s special meeting, entered into an
agreement with Old Line Bancshares, dated as of September 27, 2017,
pursuant to which each such director agreed to vote all of his
shares of Bay Bancorp common stock in favor of the merger. A form
of support agreement is filed as Exhibit 99.3 to Old Line
Bancshares’ Amendment No. 1 to Current Report on Form 8-K
filed on September 28, 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 Bay Bancorp. The following is a brief summary
of the material provisions of the support agreements.
Pursuant to the
support agreements, each director of Bay Bancorp (as well as Bay
Bancorp’s largest stockholder, whose shares are voted by Eric
D. Hovde, Chairman of the Board of Bay Bancorp and Bay Bank)
agreed, among other things:
●
● To vote, or cause
to be voted, at any meeting of Bay Bancorp’s stockholders or
other circumstance in which the vote, consent or other approval of
stockholders is sought, all of the Bay Bancorp common stock as to
which he or it is the record or beneficial owner (a) for approval
of the merger and the execution and delivery by Bay Bancorp of the
merger agreement, (b) against any superior Bay Bancorp 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 its best efforts to cause Bay Bancorp and its
subsidiaries to take the actions set forth in the merger
agreement.
●
To continue to hold
his or its shares of Bay Bancorp common stock until the earlier of
the time the merger is effective or the date the Bay Bancorp
stockholders approve the merger agreement.
●
Not to exercise his
or its appraisal rights.
●
Not to take any
action that could reasonably be expected to have the effect of
preventing or disabling him or it from performing his or its
obligations under the support agreement.
Investment Banking Fees
Steven D. Hovde, a director of Bay Bancorp and Bay
Bank, is also the President and Chief Executive Officer of Hovde
Group, which served as a financial advisor to Bay Bancorp in
connection with the merger and has received and will receive
certain fees in connection with that engagement. Consequently,
Steven D. Hovde has a financial interest in the completion of the
merger. Pursuant to Bay Bancorp’s engagement agreement
with Hovde Group, Hovde Group received from Bay Bancorp a $100,000
fairness opinion fee upon the delivery of Hovde Group’s
fairness opinion to Bay Bancorp’s board of directors.
Additionally, Hovde Group will receive a completion fee equal to
1.0% of the transaction value that is contingent upon the
consummation of the merger. For this purpose, the transaction value
will include the aggregate merger consideration plus the aggregate
amount of cash paid in exchange for any Bay Bancorp stock option
that remains unexercised as of the effective time of the merger.
Bay Bancorp anticipates that the amount of this completion fee will
be between approximately $1.25 million and $1.30 million, although
the exact amount of that fee will depend on the final calculation
of the aggregate merger consideration and the number and terms and
conditions of any Bay Bancorp stock options that remain unexercised
as of the effective time of the merger. The opinion fee will be
credited in full toward the portion of the completion fee that will
become payable to Hovde Group upon the consummation of the merger.
In the event that the merger agreement is terminated and Old Line
Bancshares is obligated to pay the $5,076,000 termination fee to
Bay Bancorp, then Hovde Group will be entitled to $761,400, or 15%
of that termination fee. In addition to Hovde Group’s fees,
and regardless of whether the merger is consummated, Bay Bancorp
has agreed to reimburse Hovde Group for certain of its reasonable
out-of-pocket expenses. Bay Bancorp has also agreed to indemnify
Hovde Group and its affiliates for certain liabilities that may
arise out of the engagement.
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, Bay Bancorp’s 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 Bay
Bancorp’s 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 Bay Bancorp prior to the merger. The
results of operations of Bay Bancorp 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 Bay Bancorp of the opinion
of Gordon Feinblatt, counsel to Bay Bancorp, 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 Bay Bancorp, 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 Bay Bancorp 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 Bay Bancorp common stock.
The discussion is based upon the opinion of Gordon Feinblatt, filed
with the registration statement of which this joint 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 Bay Bancorp 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
Bay Bancorp common stock as part of a straddle, hedge, constructive
sale or conversion transaction; and
●
U.S. holders
who acquired their shares of Bay Bancorp 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 joint 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 joint proxy
statement/prospectus.
Holders
of Bay Bancorp 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 Bay
Bancorp 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 Bay Bancorp 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 Bay Bancorp 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 Bay Bancorp common stock. The tax
basis of the shares of Old Line Bancshares common stock received by
a Bay Bancorp 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
Bay Bancorp 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 Bay Bancorp common stock surrendered in exchange for the
Old Line Bancshares common stock, provided that such shares were
held as capital assets of the Bay Bancorp stockholder at the
effective time of the merger.
Cash in Lieu of Fractional
Shares. A Bay Bancorp
stockholder who holds Bay Bancorp 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 Bay Bancorp as a result of the merger.
Reporting Requirements
Bay
Bancorp stockholders will be required to retain records pertaining
to the merger. Certain Bay Bancorp 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 Bay Bancorp common
stock and other information regarding the merger. Bay Bancorp
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. BAY BANCORP 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.”
No Appraisal Rights
Neither
the holders of Old Line Bancshares common stock nor the holders of
Bay Bancorp common stock have the right to demand and receive the
fair value of their stock from Old Line Bancshares or Bay Bancorp
in connection with the merger and/or to seek an appraisal to
determine such fair value because the common stock of Old Line
Bancshares and the common stock of Bay Bancorp are listed on Nasdaq
and the circumstances surrounding the merger do not satisfy all of
the conditions set forth in Section 3-202(d) of the MGCL that would
trigger such appraisal rights.
BAY
BANCORP – INFORMATION ABOUT DIRECTORS TO BE ELECTED TO OLD
LINE BANCSHARES’ BOARD OF DIRECTORS
As
discussed elsewhere in this joint proxy statement/prospectus, the
merger agreement provides that Eric D. Hovde, Joseph J. Thomas and
one other current director of Bay Bancorp on which Bay Bancorp 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 not yet
selected the third director of Bay Bancorp that will be elected to
serve on the boards of Old Line Bancshares and Old Line Bank
following the merger. Certain information about the Continuing
Directors is provided below. All other information about the
Continuing Directors that is required to be included in this joint
proxy statement/prospectus is incorporated by reference to that
information in the portions of Bay Bancorp’s definitive proxy
statement on Schedule 14A for its 2017 annual meeting of
stockholders, filed with the SEC on April 12, 2017, that are deemed
to be incorporated by reference into Bay Bancorp’s Annual
Report on Form 10-K for the year ended December 31, 2016. See
“Incorporation of Certain Documents By Reference” on
page 112.
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 Bay
Bancorp’s directors and executive officers) with respect to
the Continuing Directors. For this purpose, the term “related
party transaction” is generally defined as any transaction
(or series of related transactions) in which (i) Bay Bancorp or any
of its subsidiaries is a participant, (ii) the amount involved
exceeds the lesser of (a) $120,000 or (b) 1.0% of Bay
Bancorp’s average total assets at year-end for the last two
completed fiscal years, and (iii) any director, director nominee or
executive officer of Bay Bancorp or any person who beneficially
owns more than 5% of its outstanding shares of 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 Bay Bancorp and its
subsidiaries.
Related
party transactions during 2016 and 2015 included payments to H
Bancorp for services rendered to Bay Bancorp and Bay Bank totaling
$144,000 in 2016 and $179,333 in 2015 (Bay Bancorp did not make any
payments to H Bancorp to date during 2017). Eric D. Hovde owns a
61.70% interest in H Bancorp. In addition to the foregoing, during
2017 to date and during 2016 and 2015, Bay Bancorp, through Bay
Bank, had banking transactions in the ordinary course of its
business with Bay Bancorp’s directors, director nominees,
executive officers, 5% or greater stockholders 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 not related
to Bay Bancorp and its subsidiaries. The extensions of credit to
these persons by Bay Bank have not had and do not currently involve
more than the normal risk of collectability or present other
unfavorable features.
Bay
Bancorp uses the following guidelines to determine the impact of a
credit relationship on a director’s independence. It
considers extensions of credit which comply with Regulation O,
promulgated by the Board of Governors of the Federal Reserve
System, to be consistent with director independence. In other
words, Bay Bancorp does not consider normal, arm’s-length
credit relationships entered into in the ordinary course of
business to negate a director’s independence.
Regulation O
requires that loans to directors and executive officers be made on
substantially the same terms, including interest rates and
collateral, and following credit-underwriting procedures that are
no less stringent than those prevailing at the time for comparable
transactions by Bay Bancorp with persons who are not related to Bay
Bancorp or Bay Bank. Such loans also may not involve more than the
normal risk of repayment or present other unfavorable features.
Additionally, no event of default may have occurred (that is, such
loans are not disclosed as non-accrual, past due, restructured, or
potential problems). The audit committee must review and approve
any credit to a director or his or her related interests and submit
such transaction to the full board of directors for
approval.
In
addition, Bay Bancorp does not consider as independent, for the
purpose of voting on any such loans, any director who is also an
executive officer of a company to which Bay Bank has extended
credit unless such credit meets the substantive requirements of
Regulation O. Similarly, Bay Bancorp does not consider independent
any director who is an executive officer of a company that makes
payments to, or receives payments from, Bay Bancorp for property or
services in an amount which, in any fiscal year, is greater than 2%
of such company’s consolidated gross revenues.
There
have been no transactions between Old Line Bancshares or Old Line
Bank and Messrs. Hovde or Thomas.
COMPARISON
OF STOCKHOLDER RIGHTS
Upon
completion of the merger, stockholders of Bay Bancorp 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 Bay
Bancorp’s articles of incorporation and bylaws.
The
following is a summary of material differences in the rights of Old
Line Bancshares stockholders and Bay Bancorp 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 Bay
Bancorp.
Capitalization
Bay Bancorp. The authorized capital
stock of Bay Bancorp consists of:
●
20,000,000 shares
of common stock, $1.00 par value per share; and
●
9,201 shares of
preferred stock, $1.00 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
Bay Bancorp. Bay Bancorp’s
articles of incorporation 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
Bay Bancorp. Bay Bancorp’s
articles of incorporation provide that, in connection with a
potential transaction that would or may involve a change in control
of Bay Bancorp, its board of directors may consider all relevant
factors, including but not limited to: (i) the economic effect on
Bay Bancorp’s stockholders; (ii) the social and economic
effect on the employees, depositors and customers of, and others
dealing with, Bay Bancorp and its subsidiaries and on the
communities in which Bay Bancorp and its subsidiaries operate or
are located; (iii) whether the proposal is acceptable based on Bay
Bancorp’s historical and current operating results or
financial condition; (iv) whether a more favorable price could be
obtained for Bay Bancorp’s stock or other securities in the
future; (v) the reputation and business practices of the offeror
and its management and affiliates as they would affect the
employees of Bay Bancorp and its subsidiaries; (vi) the future
value of Bay Bancorp’s stock or other securities; and (vii)
any antitrust or other legal and regulatory issues that are raised
by the proposal. Further, Bay Bancorp’s articles of
incorporation provide that if its board of directors determines
that any actual or proposed transaction that would or may involve a
change in control should be rejected, it may take any lawful action
to defeat such transaction, including, but not limited to: advising
stockholders not to accept the proposal; instituting litigation
against the party making the proposal; filing complaints with
governmental and regulatory authorities; acquiring the stock or any
of the securities of Bay Bancorp; selling or otherwise issuing
authorized but unissued stock, other securities or treasury stock
or granting options with respect thereto; acquiring a company to
create an antitrust or other regulatory problem for the party
making the proposal; and obtaining a more favorable offer from
another individual or entity.
Old Line Bancshares. Neither Old Line
Bancshares’ articles of incorporation nor bylaws contain any
similar provisions regarding the evaluation of potential changes in
control.
Extraordinary Transactions
Bay Bancorp. Pursuant to the MGCL, a
merger or consolidation of Bay Bancorp with or into another
corporation, or the sale, lease or exchange of all or substantially
all of its assets, requires the approval of (i) its board of
directors and (ii) its stockholders by the affirmative vote of
two-thirds of all the votes entitled to be cast on the
matter.
Old Line Bancshares. Old Line
Bancshares’ articles of incorporation provide that any merger
or consolidation of Old Line Bancshares with or into another
corporation, or the sale, lease or exchange of all or substantially
all of its assets, requires the approval of holders of a majority
of its shares of stock outstanding and entitled to vote thereon
provided that such transaction has been approved by a majority of
the members of its board of directors.
Board of Directors
The
MGCL provides that a Maryland corporation’s board of
directors must consist of at least one director.
Bay Bancorp. Bay Bancorp’s
articles of incorporation provide that it shall have at least one
director, and provide that the number of directors shall be set,
and may be increased or decreased, by its board of directors in
accordance with its bylaws. Bay Bancorp’s bylaws provide that
the number of its directors shall be nine, and that the number of
directors may be increased or decreased by the board of directors
at any meeting thereof, but never to less than one. Bay
Bancorp’s directors are elected annually for one-year terms.
Bay Bancorp currently has nine directors.
Pursuant to Bay
Bancorp’s articles of incorporation, its directors may be
removed, with or without cause, by a majority of the aggregate
number of votes entitled to be cast in the election of
directors.
Under
Bay Bancorp’s bylaws, vacancies that occur on the board of
directors may be filled by the board of directors or the
stockholders.
Bay
Bancorp’s bylaws require, except for directors who were
serving as such on November 1, 2013, that no director who reaches
age 70 may serve as a director beyond the expiration of his or her
current term, and that no person who has attained the age of 70
will be eligible to be elected as a director.
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
special 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.
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.
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.
Neither
Old Line Bancshares’ articles of incorporation or bylaws
provide for an age at which directors are ineligible to run for
re-election as such or at which an individual is ineligible to be
elected as a director. The board of directors has, however, adopted
a resolution providing that no individual may be nominated for
election or re-election to the board of directors who is 75 years
of age or older, unless such person is a founding member of the
board of directors or the board waives this provision with respect
to a specific individual.
Nominations of Directors; Proposal of New Business
Bay Bancorp. Bay Bancorp’s bylaws
provide that nominations of candidates for election as directors at
an annual meeting of stockholders may be made (i) by, or at the
direction of, a majority of the board of directors or (ii) by any
stockholder entitled to vote at such annual meeting. A stockholder
nomination of a director must be made in writing and delivered to
or received by Bay Bancorp not less than 60 days nor more than 90
days prior to the date of the annual meeting; provided, however,
that if less than 70 days’ notice or prior public disclosure
of the date of the scheduled annual meeting is given or made,
notice by the stockholder to be timely must be so delivered or
received not later than the close of business on the 10th day
following the earlier of the day on which such notice of the date
of the scheduled annual meeting was mailed or the day on which such
public disclosure was made. Such stockholder’s notice must
set forth (i) as to each person whom the stockholder proposes to
nominate for election or re-election as a director and as to the
stockholder giving the notice (a) the name, age, business address
and residence address of such person, (b) the principal occupation
or employment of such person, (c) the class and number of shares of
Bay Bancorp stock that are beneficially owned by such person on the
date of such stockholder notice and (d) any other information
relating to such person that is required to be disclosed in
solicitations of proxies with respect to nominees for election as
directors, pursuant to Regulation 14A under the Exchange Act; and
(ii) as to the stockholder giving the notice (a) the name and
address, as they appear on Bay Bancorp’s books, of such
stockholder and any other stockholders known by such stockholder to
be supporting such nominees and (b) the class and number of shares
of Bay Bancorp stock that are beneficially owned by such
stockholder on the date of such stockholder notice and by any other
stockholders known by such stockholder to be supporting such
nominees on the date of such stockholder notice.
Neither
Bay Bancorp’s articles of incorporation nor bylaws include
requirements for the presentation by stockholders of other
proposals at an annual meeting of stockholders. As a result, a
stockholder who desires to present a proposal at an annual meeting
of stockholders of Bay Bancorp must comply with Rule 14a-8 under
the Exchange Act if such stockholder wants the proposal included in
Bay Bancorp’s proxy statement, and Rule 14a-4(c)(1) under the
Exchange Act a stockholder intends to present a proposal for
business to be considered at the annual meeting of stockholders but
does not seek inclusion of the proposal in Bay Bancorp’s
proxy statement for that meeting.
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.
Stockholders of Old
Line Bancshares must also comply with Exchange Act Rule 14a-8 or
14a-4(c)(1), as applicable, in connection with presenting proposals
at an annual meeting of stockholders.
Amendments to the Articles of Incorporation
Bay Bancorp. Under the MGCL, amendments
to Bay Bancorp’s 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,
article SEVENTH with respect to the vote required for certain
business combinations and article FOURTEENTH setting forth the
general voting requirements to amend the articles of incorporation
require the approval of 80% of the total voting power of the
company entitled to vote in the election of directors.
Amendments to Bylaws
Bay Bancorp. Bay Bancorp’s
stockholders and board of directors may alter, amend and repeal the
bylaws, except that the board of directors may not alter or repeal
any bylaws made by stockholders or the provision that allows the
stockholders to alter, amend or repeal 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
Bay Bancorp. Bay Bancorp’s
articles of incorporation provide that its directors and officers
are not personally liable to Bay Bancorp 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; or
●
To the extent that
a judgment or other final adjudication adverse to the 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.
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
Bay Bancorp. Bay Bancorp’s bylaws
provide that it will indemnify its present and former directors and
officers, whether serving or having served Bay Bancorp or at its
request any other entity, to the full extent permissible under
Maryland law.
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.
Bay
Bancorp’s articles of incorporation also provide that
reasonable expenses incurred by a director or officer who is or is
threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, may be paid or reimbursed by Bay
Bancorp, upon the approval of the board of directors, in advance of
the final disposition of the proceeding upon Bay Bancorp’s
receipt of (i) a written affirmation by the party seeking
indemnification that he has a good faith belief that the standard
of conduct necessary for indemnification as set forth above has
been met and (ii) a written undertaking by or on behalf of the
party seeking indemnification to repay the amount if it shall
ultimately be determined that the standard of conduct has not been
met.
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
Bay Bancorp. Special meetings of Bay
Bancorp’s stockholders may be called at any time by its board
of directors or President, and shall be called by its Secretary
upon the written request of the holders of shares entitled to cast
not less than 25% of all of the votes entitled to be cast as such
meeting, unless the request for such meeting is to be called for
the purpose of considering a matter that is substantially the same
as a matter voting on at a special meeting of the stockholders
within the last 12 months, in which case no meeting shall be
called.
Old Line Bancshares. Special 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 its Secretary 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.
EXPERTS
The
consolidated financial statements of Old Line Bancshares, Inc. as
of December 31, 2016 and 2015 and for each of the three years in
the period ended December 31, 2016 and the effectiveness of Old
Line Bancshares, Inc.’s internal control over financial
reporting as of December 31, 2016 have been audited by Dixon Hughes
Goodman LLP, an independent registered public accounting firm, as
set forth in its report appearing in Old Line Bancshares,
Inc.’s Annual Report on Form 10-K for the year ended December
31, 2016 and incorporated in this joint proxy statement/prospectus
by reference. Such consolidated financial statements have been so
incorporated in reliance upon the report of such firm given upon
its authority as experts in accounting and auditing.
The
consolidated financial statements of Bay Bancorp, Inc. as of
December 31, 2016 and 2015 and for each of the years then ended
have been audited by Dixon Hughes Goodman LLP, an independent
registered public accounting firm, as set forth in its report
appearing in Bay Bancorp, Inc.’s Annual Report on Form 10-K
for the year ended December 31, 2016 and incorporated in this joint
proxy statement/prospectus by reference. Such consolidated
financial statements have been so incorporated in reliance upon the
report of such firm given upon its authority 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 Bay
Bancorp by the law firm of Gordon Feinblatt LLC, Baltimore,
Maryland.
Baker
Donelson and Gordon Feinblatt will deliver opinions to Old Line
Bancshares and Bay Bancorp, respectively, as to certain federal
income tax consequences of the merger.
OTHER
MATTERS
As of
the date of this joint proxy statement/prospectus, neither the Old
Line Bancshares board of directors nor the Bay Bancorp board of
directors knows of any matters that will be presented for
consideration at the special meeting of the stockholders of Old
Line Bancshares and Bay Bancorp, respectively, other than as
described in this joint proxy statement/prospectus. If, however,
any other matter shall properly come before the Old Line Bancshares
special meeting or any adjournment or postponement thereof, or the
Bay Bancorp special meeting or any adjournment or postponement
thereof, 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 applicable
notice of special meeting.
INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
The SEC
allows Old Line Bancshares and Bay Bancorp to incorporate certain
information into this joint proxy statement/prospectus by reference
to other information that they have filed with the SEC. The
information incorporated by reference is deemed to be part of this
joint proxy statement/prospectus, except for any information that
is superseded by information in this joint proxy
statement/prospectus. The documents that are incorporated by
reference contain important information about Old Line Bancshares
and Bay Bancorp and you should read this joint proxy
statement/prospectus together with any other documents incorporated
by reference in this joint proxy statement/prospectus.
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;
●
The portions of Old
Line Bancshares’ definitive proxy statement on Schedule 14A
for its 2017 annual meeting of stockholders, filed with the SEC on
April 20, 2017, that are deemed to be incorporated by reference
into Old Line Bancshares’ Annual Report on Form 10-K for the
year ended December 31, 2016;
●
Quarterly Reports
on Form 10-Q for the quarterly periods ended March 31, 2017, June
30, 2017 and September 30, 2017;
●
Current Reports on
Form 8-K filed on February 1, 2017 (as
amended on Forms 8-K/A filed on February 2, 2017 and March 9, 2017,
other than the portions of such Form 8-K, as amended, not deemed to
be filed), February 27, 2017, May 25, 2017 (reporting on Item 5.07
only), June 16, 2017, June 29, 2017, July 14, 2017, July 31, 2017
(as amended on Form 8-K/A filed on August 1, 2017) and September
27, 2017 (as amended on Form 8-K/A filed on September 28, 2017,
other than the portions of such Form 8-K, as amended, not deemed to
be filed); 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 joint 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 later of the date of the Old Line Bancshares special meeting of
stockholders and the Bay Bancorp special 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.
This
document incorporates by reference the following documents that
have previously been filed with the SEC by Bay Bancorp (File No.
000-23090):
●
Annual Report on
Form 10-K for the year ended December 31, 2016;
●
The portions of Bay
Bancorp’s definitive proxy statement on Schedule 14A for its
2017 annual meeting of stockholders, filed with the SEC on April
12, 2017, that are deemed to be incorporated by reference into Bay
Bancorp’s Annual Report on Form 10-K for the year ended
December 31, 2016;
●
Quarterly Reports
on Form 10-Q for the quarterly periods ended March 31, 2017, June
30, 2017 and September 30, 2017;
●
Current Reports on
Form 8-K filed on March 30, 2017, April 14, 2017, May 24, 2017, and
September 27, 2017 (as amended on Form 8-K/A, filed on September
28, 2017, other than the portions of
such Form 8-K, as amended, that are not deemed to be filed);
and
●
Description of the
common stock of Bay Bancorp contained in the Registrant’s
Registration Statement on Form S-4 (No. 33-33027), filed with the
SEC on January 12, 1990, or any description of the common stock
that appears in any prospectus forming a part of any subsequent
registration statement of Bay Bancorp or in any registration
statement filed pursuant to Section 12 of the Exchange Act,
including any amendments or reports filed for the purpose of
updating such description.
In
addition, all documents that Bay
Bancorp files pursuant to Sections 13(a), 13(c), 14 and 15(d) of
the Exchange Act after the date of this joint proxy
statement/prospectus and prior to the later of the date of
the Bay Bancorp special meeting of stockholders and the Old Line
Bancshares special meeting of stockholders, will automatically be
deemed to be incorporated by reference into joint proxy
statement/prospectus. In no event, however, will any of the
information that is “furnished” to the SEC from time to
time by Bay Bancorp in any Current Report on Form 8-K be
incorporated by reference into, or otherwise be included in, joint
proxy statement/prospectus. Any statement contained in a document
incorporated or deemed to be incorporated by reference in joint
proxy statement/prospectus shall be deemed to be modified or
superseded to the extent that a statement contained in joint proxy
statement/prospectus or in a document subsequently filed modifies
or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this joint proxy
statement/prospectus.
2018
ANNUAL MEETINGS
In
order to be included in the proxy materials for Old Line
Bancshares’ 2018 annual meeting of stockholders, stockholder
proposals submitted to Old Line Bancshares in compliance with SEC
Rule 14a-8 (which concerns shareholder proposals that are requested
to be included in a company’s proxy statement) must be
received in written form at Old Line Bancshares’ executive
offices on or before December 21, 2017. In order to curtail
controversy as to compliance with this requirement, stockholders
are urged to submit proposals to the Secretary of Old Line
Bancshares by Certified Mail—Return Receipt
Requested.
Pursuant to the
proxy rules under the Exchange Act, Old Line Bancshares’
stockholders are notified that the notice of any stockholder
proposal to be submitted outside of the Rule 14a-8 process for
consideration at the 2018 annual meeting of stockholders must be
received by its Secretary between February 23, 2018 and March 25,
2018; provided, however, that if the date of the 2018 annual
meeting is advanced more than 30 days prior to May 24, 2018 or is
delayed more than 60 days after such date, then to be timely such
notice must be received by Old Line Bancshares no later than the
later of 70 days prior to the date of the meeting or the 10th day
following the day on which public announcement of the date of the
meeting is made. As to all such matters that Old Line Bancshares
does not have notice on or prior to that date, discretionary
authority to vote on such proposal will be granted to the persons
designated in Old Line Bancshares’ proxy related to the 2018
annual meeting of stockholders.
In
addition to any other applicable requirements, for nominations for
election to the board of directors at an annual meeting of
stockholders outside of the procedures established in the charter
of the Corporate Governance Committee of the board of directors of
Old Line Bancshares and even if the nomination is not to be
included in the proxy statement, pursuant to Old Line
Bancshares’ bylaws, the stockholder must give notice in
writing to the Secretary of Old Line Bancshares not less than 60
days nor more than 90 days prior to the anniversary of the
preceding year’s annual meeting of stockholders; provided,
however, that if the date of the annual meeting is advanced more
than 30 days prior to such anniversary date or is delayed more than
60 days after such anniversary date, then to be timely such notice
must be received by Old Line Bancshares no later than the later of
70 days prior to the date of the meeting or the 10th day following
the day on which public announcement of the date of the meeting was
made.
Please
see Old Line Bancshares’ bylaws for a description of the
information that must be contained in a notice for a stockholder
proposal or director nomination.
Bay
Bancorp will hold a 2018 annual meeting of shareholders only if the
merger is not completed. In that case, a Bay Bancorp stockholder
who desires to present a proposal pursuant to Rule 14a-8 under the
Exchange Act to be included in the proxy statement for and voted on
at Bay Bancorp’s 2018 annual meeting of stockholders must
submit such proposal in writing, including all supporting
materials, to Bay Bancorp at its executive offices no later than
December 22, 2017 (i.e., 120 days prior to the date of mailing of
the proxy statement for that meeting, based on the proxy statement
mailing date for its 2017 annual meeting of stockholders) and meet
all other requirements for inclusion in the proxy statement.
Additionally, pursuant to Rule 14a-4(c)(1) under the Exchange Act,
if a stockholder intends to present a proposal for business to be
considered at the 2018 annual meeting of stockholders but does not
seek inclusion of the proposal in Bay Bancorp’s proxy
statement for that meeting, then Bay Bancorp must receive the
proposal by March 6, 2018 (i.e., 45 days prior to the date of
mailing of the proxy statement for that meeting, based on the proxy
statement mailing date for its 2017 annual meeting of stockholders)
for it to be considered timely received. Rules 14a-8 and
14a-4(c)(1) provide additional time constraints if the date of the
2018 annual meeting of stockholders is changed by more than 30
days. If Bay Bancorp receives a notice of a stockholder proposal
that is not timely as set forth above, then the proxies will be
authorized to exercise discretionary authority with respect to the
proposal.
In
addition to any other applicable requirements for nominations for
election to the board of directors of Bay Bancorp outside of the
procedures established by its Nominating and Corporate Governance
Committee for consideration of director candidates, and even if the
nomination is not to be included in the proxy statement, a
stockholder of Bay Bancorp who is entitled to vote for the election
of directors and who desires to nominate a candidate for election
to be voted on at an annual meeting of stockholders may do so only
in accordance with Section 7 of Article I of Bay Bancorp’s
Bylaws. A stockholder’s notice shall be delivered to, or
mailed to and received at, the principal executive offices of Bay
Bancorp not less than 60 days nor more than 90 days prior to the
date of the annual meeting, as established pursuant to Section 1 of
Article I of the Bay Bancorp Bylaws, regardless of postponements,
deferrals, or adjournments of that meeting to a later date;
provided, however, that if less than 70 days’ notice or prior
public disclosure of the date of the scheduled annual meeting is
given or made, then notice by the stockholder to be timely must be
so delivered or received not later than the close of business on
the 10th day following the earlier of the day on which such notice
of the date of the scheduled annual meeting was mailed or the day
on which such public disclosure was made. A stockholder’s
notice shall set forth (i) as to each person whom the stockholder
proposes to nominate for election or re-election as a director and
as to the stockholder giving the notice (a) the name, age, business
address and residence address of such person, (b) the principal
occupation or employment of such person, (c) the class and number
of shares of Bay Bancorp capital stock which are beneficially owned
by such person on the date of such stockholder notice, and (d) any
other information relating to such person that is required to be
disclosed in solicitations of proxies with respect to nominees for
election as directors, pursuant to Regulation 14A under the
Exchange Act; and (ii) as to the stockholder giving the notice, (a)
the name and address, as they appear on the Bancorp’s books,
of such stockholder and any other stockholders known by such
stockholder to be supporting such nominees and (b) the class and
number of shares of Bay Bancorp capital stock which are
beneficially owned by such stockholder on the date of such
stockholder notice and by any other stockholders known by such
stockholder to be supporting such nominees on the date of such
stockholder notice.
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.
Bay
Bancorp 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 Bay Bancorp’s SEC filings may be accessed there as well.
Further, Bay Bancorp, free of charge through its website,
www.baybankmd.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 offer and issuance of the shares of Old
Line Bancshares common stock that Bay Bancorp stockholders will
receive in the merger. This joint 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 Old Line Bancshares for the Old Line Bancshares
special meeting and a proxy statement of Bay Bancorp for the Bay
Bancorp special meeting.
Neither
Old Line Bancshares nor Bay Bancorp has authorized anyone to give
any information or make any representation about the merger or the
special meetings that is different from, or in addition to, that
contained in this joint proxy statement/prospectus or in any of the
materials that are incorporated by reference into this joint proxy
statement/prospectus. Therefore, if anyone does give you
information of this sort, you should not rely on it. This joint
proxy statement/prospectus does not constitute an offer to sell, or
a solicitation of an offer to purchase, the securities offered by
this joint 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 joint proxy statement/prospectus nor any distribution of
securities pursuant to this joint 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
joint proxy statement/prospectus by reference or in our affairs
since the date of this joint proxy statement/prospectus. The
information contained in this joint proxy statement/prospectus with
respect to Old Line Bancshares was provided by Old Line Bancshares,
and the information contained in this joint proxy
statement/prospectus with respect to Bay Bancorp was provided by
Bay Bancorp. The information contained in this joint proxy
statement/prospectus speaks only as of the date of this joint proxy
statement/ prospectus unless the information specifically indicates
that another date applies.
UNAUDITED
PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS
The
following unaudited pro forma condensed combined financial
statements are based on the separate historical financial
statements of Old Line Bancshares and Bay Bancorp after giving
effect to the merger and the issuance of Old Line Bancshares common
stock in connection therewith, and the assumptions and adjustments
described in the accompanying notes to the unaudited pro forma
condensed combined financial statements. The unaudited pro forma
condensed combined balance sheet as of September 30, 2017 is
presented as if the merger with Bay Bancorp had occurred on
September 30, 2017. The unaudited pro forma condensed combined
income statement for the year ended December 31, 2016 and the
nine months ended September 30, 2017 is presented as if the
merger and Old Line Bancshares’ acquisition of DCB had
occurred on January 1, 2016. The historical consolidated
financial information has been adjusted to reflect factually
supportable items that are directly attributable to the merger and,
with respect to the income statements only, expected to have a
continuing impact on consolidated results of
operations.
The
unaudited pro forma condensed combined financial information has
been prepared using the acquisition method of accounting for
business combinations under accounting principles generally
accepted in the United States. Old Line Bancshares is the acquirer
for accounting purposes. Old Line Bancshares has not had sufficient
time to completely evaluate the significant identifiable long-lived
tangible and identifiable intangible assets of Bay Bancorp.
Accordingly, the unaudited pro forma adjustments, including the
allocations of the purchase price, are preliminary and have been
made solely for the purpose of providing unaudited pro forma
combined consolidated financial information. Certain
reclassifications have been made to the historical financial
statements of Bay Bancorp to conform to the presentation in Old
Line Bancshares’ financial statements.
A
final determination of the acquisition consideration and fair
values of Bay Bancorp’s assets and liabilities, which cannot
be made prior to the completion of the merger, will be based on the
actual net tangible and intangible assets of Bay Bancorp that exist
as of the date of completion of the transaction. Consequently,
amounts preliminarily allocated to goodwill and identifiable
intangibles could change significantly from those allocations used
in the unaudited pro forma condensed combined financial statements
presented below and could result in a material change in
amortization of acquired intangible assets.
In
connection with the plan to integrate the operations of Old Line
Bancshares and Bay Bancorp following the completion of the merger,
Old Line Bancshares anticipates that nonrecurring charges, such as
costs associated with systems implementation, severance, and other
costs related to exit or disposal activities, could be incurred.
Old Line Bancshares is not able to determine the timing, nature and
amount of these charges as of the date of this joint proxy
statement/prospectus. However, these charges could affect the
results of operations of Old Line Bancshares and Bay Bancorp, as
well as those of the combined company following the completion of
the merger, in the period in which they are recorded. The unaudited
pro forma combined consolidated financial statements do not include
the effects of the costs associated with any restructuring or
integration activities resulting from the transaction, as they are
nonrecurring in nature and not factually supportable at the time
that the unaudited pro forma combined consolidated financial
statements were prepared. Additionally, the unaudited pro forma
adjustments do not give effect to any nonrecurring or unusual
restructuring charges that may be incurred as a result of the
integration of the two companies or any anticipated disposition of
assets that may result from such integration. Direct
transaction-related expenses estimated at $9.0 million are not
included in the unaudited pro forma combined consolidated income
statements.
The
actual amounts recorded as of the completion of the merger may
differ materially from the information presented in these unaudited
pro forma condensed combined financial statements as a result
of:
●
changes in the
trading price for Old Line Bancshares’ common
stock;
●
net cash used or
generated in Bay Bancorp’s operations between the signing of
the merger agreement and the completion of the merger;
●
the timing of the
completion of the merger;
●
other changes in
Bay Bancorp’s net assets that occur prior to the completion
of the merger, which could cause material differences in the
information presented below; and
●
changes in the
financial results of the combined company.
The
unaudited pro forma combined consolidated financial statements are
provided for informational purposes only. The unaudited pro forma
combined consolidated financial statements are not necessarily, and
should not be assumed to be, an indication of the results that
would have been achieved had the transaction been completed as of
the dates indicated or that may be achieved in the future. The
preparation of the unaudited pro forma combined consolidated
financial statements and related adjustments required management to
make certain assumptions and estimates. The unaudited pro forma
combined consolidated financial statements should be read together
with:
●
the accompanying
notes to the unaudited pro forma combined consolidated financial
statements;
●
Old Line
Bancshares’ separate audited historical consolidated
financial statements and accompanying notes as of and for the year
ended December 31, 2016, included in Old Line
Bancshares’ Annual Report on Form 10-K for the year
ended December 31, 2016;
●
Old Line
Bancshares’ separate unaudited historical condensed
consolidated financial statements and accompanying notes as of and
for the nine months ended September 30, 2017, included in Old
Line Bancshares’ Quarterly Report on Form 10-Q for the
quarter ended September 30, 2017;
●
Bay Bancorp’s
separate audited historical consolidated financial statements and
accompanying notes as of and for the year ended December 31,
2016, included in Bay Bancorp’s Annual Report on
Form 10-K for the year ended December 31,
2016;
●
Bay Bancorp’s
separate unaudited historical condensed consolidated financial
statements and accompanying notes as of and for the nine months
ended September 30, 2017, included in Bay Bancorp’s
Quarterly Report on Form 10-Q for the quarter ended
September 30, 2017; and
●
other information
pertaining to Old Line Bancshares and Bay Bancorp contained in or
incorporated by reference into this joint proxy
statement/prospectus. See “Selected Financial Data of Old Line
Bancshares” included elsewhere in this joint proxy
statement/prospectus.
The
unaudited pro forma combined consolidated balance sheet as of
September 30, 2017 presents the consolidated financial
position giving pro forma effect to the following transaction as if
it had occurred as of September 30, 2017:
●
the completion of
Old Line Bancshares’ acquisition of Bay Bancorp, including
the issuance of 4,669,584 shares of Old Line Bancshares common
stock (based upon the number of shares outstanding of Bay Bancorp
common stock as of September 30, 2017, certain contingent
consideration and an exchange ratio of 0.4357).
The
unaudited pro forma combined consolidated income statement for the
year ended December 31, 2016 and for the nine months ended
September 30, 2017 presents the consolidated results of
operations giving pro forma effect to the following transactions as
if they had occurred as of January 1,
2016:
●
the full-year
impact of Bay Bancorp’s income statement, including pro forma
amortization and accretion of purchase accounting adjustments on
loans, fixed assets, deposits, other borrowings and intangible
assets;
●
the issuance of an
additional 4,669,584 shares of Old Line Bancshares common stock to
the weighted-average shares outstanding of Old Line Bancshares
shares in determining earnings per share
(“EPS”);
●
the full-year
impact of DCB’s income statement, including pro forma
amortization and accretion of purchase accounting adjustments on
loans, fixed assets, deposits and intangible assets;
and
●
the issuance of an
additional 1,495,090 shares of Old Line Bancshares common stock in
connection with the merger of DCB with and into Old Line
Bancshares, to the weighted-average shares outstanding of Old Line
Bancshares in determining EPS. Shares added for the period ended
September 30, 2017 are allocated for the period from January 1,
2017 to July 28, 2017, the date upon which the merger was completed
and shares were captured in the existing Old Line Bancshares
financial statements.
Old Line Bancshares, Inc. & Subsidiaries
|
Consolidated Proforma Balance Sheets with Bay Bancorp,
Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
Cash and due
from banks
|
$33,063,210
|
$6,697,379
|
$(1,203,732)
|
(1)(2)
|
$38,556,857
|
Interest
bearing accounts
|
1,017,257
|
17,616,815
|
|
|
18,634,072
|
Federal funds
sold
|
383,737
|
15,210,760
|
|
|
15,594,497
|
Total cash and
cash equivalents
|
34,464,204
|
39,524,954
|
(1,203,732)
|
|
72,785,426
|
Time deposits
in other banks
|
-
|
-
|
|
|
-
|
Investment
securities available for sale
|
213,664,343
|
57,883,195
|
|
|
271,547,538
|
Investment
securities held to maturity
|
-
|
1,094,740
|
|
|
1,094,740
|
Loans and
leases held for sale
|
2,729,060
|
401,803
|
|
|
3,130,863
|
Loans, net of
deferred fees and costs
|
1,672,321,355
|
525,261,491
|
(612,041)
|
(4)
|
2,196,970,805
|
Allowance for
loan losses
|
(5,816,187)
|
(4,049,647)
|
4,049,647
|
(4)
|
(5,816,187)
|
Restricted
equity securities at cost
|
7,277,746
|
1,939,795
|
|
|
9,217,541
|
Premises and
equipment
|
42,074,857
|
3,517,788
|
|
|
45,592,645
|
Accrued
interest receivable
|
4,946,823
|
2,018,900
|
|
|
6,965,723
|
Prepaid income
taxes
|
|
841,299
|
|
|
841,299
|
Deferred
income taxes
|
7,774,629
|
2,556,429
|
(2,206,376)
|
(6)
|
8,124,682
|
Bank owned
life insurance
|
41,360,871
|
16,084,188
|
|
|
57,445,059
|
Prepaid
pension costs
|
-
|
-
|
|
|
-
|
Other real
estate owned
|
2,003,998
|
1,077,687
|
(229,000)
|
(5)
|
2,852,685
|
Goodwill
|
25,083,675
|
-
|
54,734,585
|
(1)
|
79,818,260
|
Core deposit
intangible
|
6,615,238
|
2,415,056
|
2,384,944
|
(3)
|
11,415,238
|
Other
assets
|
6,738,434
|
1,016,253
|
|
|
7,754,687
|
Total
assets
|
$2,061,239,046
|
$651,583,931
|
$56,918,027
|
|
$2,769,741,004
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity
|
|
|
|
|
|
Deposits
|
|
|
|
|
|
Non-interest
bearing
|
$436,645,881
|
$129,803,561
|
|
|
$566,449,442
|
Interest
bearing
|
1,217,988,749
|
419,552,205
|
|
|
1,637,540,954
|
Total
deposits
|
1,654,634,630
|
549,355,766
|
-
|
|
2,203,990,396
|
Short term
borrowings
|
152,179,112
|
25,000,000
|
|
|
177,179,112
|
Long term
borrowings
|
38,040,618
|
-
|
|
|
38,040,618
|
Accrued
interest payable
|
867,884
|
40,275
|
|
|
908,159
|
Retirement
plans
|
5,823,391
|
319,595
|
|
|
6,142,986
|
Income taxes
payable
|
864,260
|
-
|
|
|
864,260
|
Other
liabilities
|
5,489,031
|
5,057,911
|
|
|
10,546,942
|
Total
liabilities
|
1,857,898,926
|
579,773,547
|
-
|
|
2,437,672,473
|
Stockholders' Equity
|
|
|
|
|
|
Common
stock
|
124,675
|
10,667,227
|
(10,620,531)
|
(1)(2)
|
171,371
|
Additional
paid-in capital
|
148,351,881
|
41,624,354
|
86,444,388
|
(1)(2)
|
276,420,623
|
Retained
earnings
|
56,198,108
|
18,807,973
|
(18,807,973)
|
(1)(2)
|
56,198,108
|
Accumulated
other comprehensive income
|
(1,334,544)
|
710,830
|
(97,857)
|
(2)
|
(721,571)
|
Total
stockholders' equity
|
203,340,120
|
71,810,384
|
56,918,027
|
|
332,068,531
|
Total
liabilities and stockholders' equity
|
$2,061,239,046
|
$651,583,931
|
$56,918,027
|
|
$2,769,741,004
|
|
|
|
|
|
|
Old Line Bancshares, Inc. & Subsidiaries
|
Consolidated Proforma Statement of income with Bay Bancorp,
Inc.
|
For the Nine Months Ended September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Income
|
Bancshares, Inc. (as reported)
|
Internal Financial Statements
|
|
|
Bancshares, Inc. Pro Forma
|
|
|
|
Loans,
including fees
|
$49,153,228
|
$6,054,380
|
$314,524
|
(13)
|
$55,522,132
|
$19,100,795
|
$(620,795)
|
(4)
|
$74,002,133
|
U.S.
treasury securities
|
18,772
|
—
|
|
|
18,772
|
139,696
|
|
|
158,468
|
U.S.
government agency securities
|
194,549
|
19,446
|
|
|
213,995
|
125,495
|
|
|
339,490
|
Corporate
bonds
|
428,153
|
16,406
|
|
|
444,559
|
176,901
|
|
|
621,460
|
Mortgage
backed securities
|
1,657,619
|
306,167
|
|
|
1,963,786
|
592,250
|
|
|
2,556,036
|
Municipal
securities
|
1,301,582
|
231,028
|
|
|
1,532,610
|
24,192
|
|
|
1,556,802
|
Federal
funds sold
|
5,381
|
167
|
|
|
5,548
|
3,351
|
|
|
8,900
|
Other
|
421,623
|
170,656
|
|
|
592,279
|
331,201
|
|
|
923,480
|
Total
interest income
|
53,180,907
|
6,798,251
|
314,524
|
|
60,293,682
|
20,493,882
|
(620,795)
|
|
80,166,769
|
Interest expense
|
|
|
|
|
|
|
|
|
|
Deposits
|
5,174,640
|
589,146
|
(195,246)
|
(12)
|
5,568,540
|
1,442,131
|
|
|
7,010,671
|
Borrowed
funds
|
3,119,757
|
24,322
|
|
|
3,144,079
|
253,278
|
|
|
3,397,357
|
Total
interest expense
|
8,294,397
|
613,469
|
(195,246)
|
|
8,712,620
|
1,695,409
|
—
|
|
10,408,029
|
Net
interest income
|
44,886,510
|
6,184,782
|
509,770
|
|
51,581,062
|
18,798,473
|
(620,795)
|
|
69,758,740
|
Provision for loan losses
|
855,108
|
—
|
|
|
855,108
|
1,276,806
|
|
|
2,131,914
|
Net
interest income after provision for loan losses
|
44,031,402
|
6,184,782
|
509,770
|
|
50,725,954
|
17,521,667
|
(620,795)
|
|
67,626,826
|
Non-interest income
|
|
|
|
|
|
|
|
|
|
Service
charges on deposit accounts
|
1,389,340
|
165,714
|
|
|
1,555,054
|
644,960
|
|
|
2,200,014
|
Payment
sponsorship fees
|
|
—
|
|
|
—
|
1,862,137
|
|
|
1,862,137
|
Gain
on sales or calls of investment securities
|
35,258
|
—
|
|
|
35,258
|
(59,377)
|
|
|
(24,119)
|
Earnings
on bank owned life insurance
|
861,112
|
49,099
|
|
|
910,211
|
354,886
|
|
|
1,265,097
|
Gain/(loss)
on disposal of assets
|
120,063
|
—
|
|
|
120,063
|
—
|
|
|
120,063
|
Gain
(loss) on sale of loans
|
94,714
|
(83,725)
|
|
|
10,989
|
—
|
|
|
10,989
|
Rental
Income
|
498,961
|
|
|
|
498,961
|
—
|
|
|
498,961
|
Income
on marketable loans
|
1,840,218
|
458,862
|
|
|
2,299,080
|
465,928
|
|
|
2,765,008
|
Other
fees and commissions
|
1,162,058
|
329,400
|
|
|
1,491,458
|
2,068,288
|
|
|
3,559,746
|
Total
non-interest income
|
6,001,724
|
919,349
|
—
|
|
6,921,073
|
5,336,822
|
—
|
|
12,257,895
|
Non-interest expense
|
|
|
|
|
|
|
|
|
|
Salaries
and benefits
|
15,284,057
|
3,407,782
|
|
|
18,691,839
|
8,978,975
|
|
|
27,670,814
|
Occupancy
and equipment
|
5,137,273
|
850,100
|
(20,584)
|
(10)
|
5,966,789
|
2,108,229
|
|
|
8,075,018
|
Data
processing
|
1,161,647
|
374,136
|
|
|
1,535,783
|
865,876
|
|
|
2,401,659
|
FDIC
insurance and State of Maryland assessments
|
799,700
|
102,595
|
|
|
902,295
|
254,950
|
|
|
1,157,245
|
Merger
and integration
|
3,985,514
|
—
|
|
|
3,985,514
|
149,543
|
|
|
4,135,057
|
Core
deposit premium amortization
|
651,613
|
—
|
315,223
|
(11)
|
966,836
|
615,253
|
180,000
|
(3)
|
1,762,089
|
(Gain)/loss
on sales of other real estate owned
|
(13,589)
|
(8,561)
|
|
|
(22,150)
|
(79,219)
|
|
|
(101,369)
|
OREO
expense
|
256,170
|
1,782
|
|
|
257,952
|
252,129
|
|
|
510,081
|
Directors
Fees
|
485,700
|
86,709
|
|
|
572,409
|
108,050
|
|
|
680,459
|
Network
services
|
437,140
|
107,817
|
|
|
544,957
|
147,668
|
|
|
692,625
|
Telephone
|
598,618
|
84,161
|
|
|
682,779
|
114,284
|
|
|
797,063
|
Other
operating
|
5,318,191
|
1,129,494
|
|
|
6,447,685
|
2,170,049
|
|
|
8,617,734
|
Total
non-interest expense
|
34,102,034
|
6,136,015
|
294,639
|
|
40,532,688
|
15,685,787
|
180,000
|
|
56,398,475
|
Income
before income taxes
|
15,931,092
|
968,116
|
215,131
|
|
17,114,339
|
7,172,701
|
(800,795)
|
|
23,486,246
|
Income
tax expense
|
5,824,713
|
310,870
|
84,858
|
(14)
|
6,220,441
|
2,791,700
|
(315,873)
|
(6)
|
8,696,268
|
Net
income
|
10,106,379
|
657,246
|
130,273
|
|
10,893,898
|
4,381,001
|
(484,921)
|
|
14,789,978
|
Less:
Net income attributable to the non-controlling
interest
|
—
|
—
|
—
|
|
—
|
—
|
—
|
|
—
|
Net income available to common stockholders
|
$10,106,379
|
$657,246
|
$130,273
|
|
$10,893,898
|
$4,381,001
|
$(484,921)
|
|
$14,789,978
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per common share
|
$0.90
|
$0.41
|
|
|
$0.88
|
$0.41
|
|
(8)
|
$0.86
|
Diluted
earnings per common share
|
$0.88
|
$0.41
|
|
|
$0.86
|
$0.41
|
|
(8)
|
$0.85
|
Dividend
per common share
|
$0.24
|
$0.04
|
|
|
$0.24
|
$-
|
|
|
$0.24
|
|
|
|
|
|
|
|
|
|
|
Old Line Bancshares, Inc. & Subsidiaries
|
Consolidated Proforma Statement of income with Bay Bancorp,
Inc.
|
For the Year Ended December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Income
|
Old Line Bancshares, Inc.
|
|
|
|
Bancshares, Inc. Pro Forma
|
|
|
|
Loans,
including fees
|
$56,031,146
|
$9,559,086
|
417,469
|
(13)
|
$66,007,701
|
$21,789,071
|
$(830,000)
|
(4)
|
$76,990,217
|
U.S.
treasury securities
|
18,838
|
-
|
|
|
18,838
|
43,676
|
|
|
62,514
|
U.S.
government agency securities
|
266,302
|
58,107
|
|
|
324,409
|
88,181
|
|
|
354,483
|
Corporate
bonds
|
130,374
|
7,422
|
|
|
137,796
|
181,872
|
|
|
312,246
|
Mortgage
backed securities
|
2,060,415
|
529,614
|
|
|
2,590,029
|
577,308
|
|
|
2,637,723
|
Municipal
securities
|
1,586,956
|
439,436
|
|
|
2,026,392
|
40,707
|
|
|
1,627,663
|
Federal
funds sold
|
2,334
|
152
|
|
|
2,486
|
1,968
|
|
|
4,302
|
Other
|
368,175
|
169,403
|
|
|
537,578
|
304,648
|
|
|
672,823
|
Total
interest income
|
60,464,540
|
10,763,220
|
417,469
|
|
71,645,229
|
23,027,431
|
(830,000)
|
|
82,661,971
|
Interest expense
|
|
|
|
|
|
|
|
|
|
Deposits
|
5,508,833
|
1,060,380
|
(287,216)
|
(12)
|
6,281,997
|
1,658,698
|
|
|
7,167,531
|
Borrowed
funds
|
2,016,279
|
20,478
|
|
|
2,036,757
|
191,436
|
|
|
2,207,715
|
Total
interest expense
|
7,525,112
|
1,080,858
|
(287,216)
|
|
8,318,754
|
1,850,134
|
—
|
|
9,375,246
|
Net
interest income
|
52,939,428
|
9,682,362
|
704,685
|
|
63,326,475
|
21,177,297
|
(830,000)
|
|
73,286,725
|
Provision for loan losses
|
1,584,542
|
(800,000)
|
|
|
784,542
|
1,389,533
|
|
|
2,974,075
|
Net
interest income after provision for loan losses
|
51,354,886
|
10,482,362
|
704,685
|
|
62,541,933
|
19,787,764
|
(830,000)
|
|
70,312,650
|
Non-interest income
|
|
|
|
|
|
|
|
|
|
Service
charges on deposit accounts
|
1,728,636
|
320,321
|
|
|
2,048,957
|
598,397
|
|
|
2,327,033
|
Payment
sponsorship fees
|
—
|
-
|
|
|
-
|
2,204,653
|
|
|
2,204,653
|
Gain
on sales or calls of investment securities
|
1,227,915
|
4,152
|
|
|
1,232,067
|
680,982
|
|
|
1,908,897
|
Earnings
on bank owned life insurance
|
1,132,401
|
85,444
|
|
|
1,217,845
|
117,950
|
|
|
1,250,351
|
Gain/(loss)
on disposal of assets
|
(27,176)
|
(6,851)
|
|
|
(34,027)
|
—
|
|
|
(27,176)
|
Bargain
purchase gain
|
—
|
|
|
|
-
|
893,127
|
|
|
893,127
|
Rental
Income
|
738,791
|
-
|
|
|
738,791
|
—
|
|
|
738,791
|
Income
on marketable loans
|
2,317,648
|
773,394
|
|
|
3,091,042
|
832,990
|
|
|
3,150,638
|
Other
fees and commissions
|
1,137,822
|
542,204
|
|
|
1,680,026
|
665,497
|
|
|
1,803,319
|
Total
non-interest income
|
8,256,037
|
1,718,664
|
-
|
|
9,974,701
|
5,993,596
|
—
|
|
14,249,633
|
Non-interest expense
|
|
|
|
|
|
|
|
|
|
Salaries
and benefits
|
20,031,638
|
5,830,550
|
|
|
25,862,188
|
11,301,774
|
|
|
31,333,412
|
Occupancy
and equipment
|
6,788,213
|
1,196,081
|
(29,744)
|
(10)
|
7,954,550
|
3,341,221
|
|
|
10,129,434
|
Data
processing
|
1,549,863
|
877,545
|
|
|
2,427,408
|
1,142,937
|
|
|
2,692,800
|
FDIC
insurance and State of Maryland assessments
|
1,040,507
|
318,561
|
|
|
1,359,068
|
664,546
|
|
|
1,705,053
|
Merger
and integration
|
661,018
|
-
|
|
|
661,018
|
1,758,337
|
|
|
2,419,355
|
Core
deposit premium amortization
|
830,805
|
-
|
449,125
|
(11)
|
1,279,930
|
790,876
|
240,000
|
(3)
|
1,861,681
|
Gain/(loss)
on sales of other real estate owned
|
(77,943)
|
(20,279)
|
|
|
(98,222)
|
(34,940)
|
|
|
(112,883)
|
OREO
expense
|
318,498
|
5,777
|
|
|
324,275
|
509,591
|
|
|
828,089
|
Directors
Fees
|
665,700
|
175,967
|
|
|
841,667
|
181,099
|
|
|
846,799
|
Network
services
|
549,639
|
150,064
|
|
|
699,703
|
70,238
|
|
|
619,877
|
Telephone
|
762,943
|
135,255
|
|
|
898,198
|
149,788
|
|
|
912,731
|
Other
operating
|
6,522,285
|
1,572,289
|
|
|
8,094,574
|
3,310,941
|
|
|
9,833,226
|
Total
non-interest expense
|
39,643,166
|
10,241,810
|
419,381
|
|
50,304,357
|
23,186,408
|
240,000
|
|
63,069,574
|
Income
before income taxes
|
19,967,757
|
1,959,216
|
285,304
|
|
22,212,277
|
2,594,952
|
(1,070,000)
|
|
21,492,709
|
Income
tax expense
|
6,812,598
|
668,885
|
112,538
|
(14)
|
7,594,021
|
1,001,596
|
(422,062)
|
(6)
|
7,392,133
|
Net income from continuing operations, net of taxes
|
13,155,159
|
1,290,331
|
172,766
|
|
14,618,256
|
1,593,356
|
(647,939)
|
|
14,100,577
|
Net
income from discontinued operations, net of taxes
|
-
|
-
|
-
|
|
-
|
366,034
|
(366,034)
|
(7)
|
-
|
Net income
|
13,155,159
|
1,290,331
|
172,766
|
|
14,618,256
|
1,959,390
|
(281,905)
|
|
14,100,577
|
Less:
Net income attributable to the non-controlling
interest
|
62
|
-
|
-
|
|
-
|
199,491
|
|
|
199,553
|
Net income available to common stockholders
|
$13,155,097
|
$1,290,331
|
$172,766
|
|
$14,618,256
|
$1,759,899
|
$(281,905)
|
|
$13,901,024
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per common share
|
$1.21
|
$0.80
|
|
|
$1.19
|
$0.16
|
|
(8)
|
$0.82
|
Diluted
earnings per common share
|
$1.20
|
$0.80
|
|
|
$1.17
|
$0.16
|
|
(8)
|
$0.81
|
Dividend
per common share
|
$0.24
|
$0.08
|
|
|
$0.24
|
$-
|
|
|
$0.24
|
|
|
|
|
|
|
|
|
|
|
NOTES
TO THE UNAUDITED PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET AND
STATEMENT OF INCOME
1.
Old Line Bancshares
will issue shares of its stock (“OLB Shares”) to
stockholders of Bay Bancorp to effect the acquisition. Under the
terms of the merger agreement, each share of Bay Bancorp common
stock (“BYBK Shares”) will be exchanged for a number of
OLB Shares (the “Per Share Consideration”) calculated
by dividing $11.80 by the volume weighted average closing prices of
Old Line Bancshares common stock for the 20 trading days ending
five trading days before the closing date of the Merger (the
“Average Price”), subject to a minimum Average Price of
$25.65 and a maximum Average Price of $29.16 and adjustments for
the proceeds recognized in the recent settlement of certain
litigation and the resolution of certain loans. As such, the Per
Share Consideration may be as low as 0.4047 OLB Shares if the
Average Price is $29.16 or more and as high as 0.4600 OLB Shares if
the Average Price is $25.65 or less, subject to the adjustments
provided for in the merger agreement. The unaudited pro forma
combined consolidated financial information assumes that Old Line
Bancshares issues 4,669,584 shares (assuming an Average Price of
$27.42 per share) of stock in exchange for Bay Bancorp stock
outstanding as of September 30, 2017. The OLB Shares to be issued
includes OLB Shares equal in value to $1,546,490 in contingent
payments for the recent settlement of certain litigation and the
resolution of certain loans. These assumptions result in an
exchange ratio of .4357 (calculated based on the number of shares
of common stock of Bay Bancorp outstanding on September 30, 2017).
The consideration also includes cash of $1,203,732 for the value of
unexercised Bay Bancorp stock options.
It is
anticipated that Bay Bancorp’s stockholders will own
approximately 27.25% of the voting stock of the combined company
after the acquisition. The shares of Old Line Bancshares common
stock illustrated in this pro forma were assumed to be recorded at
$27.42 per share. Old Line Bancshares and Bay Bancorp cannot
predict what the value or price of Old Line Bancshares’ stock
will be at the closing of the transaction or how the value or price
of Old Line Bancshares’ stock may trade at any time,
including the date hereof.
Old
Line Bancshares will determine the final allocation of the purchase
price after it has completed additional analysis to determine the
fair values of Bay Bancorp’s tangible and identifiable
intangible assets and liabilities as of the date of the
acquisition. Changes in the fair value of the net assets of Bay
Bancorp as of the date of the acquisition will likely change the
amount of the purchase price allocable to goodwill. The further
refinement of transaction costs, changes in Bay Bancorp’s
stockholders’ equity including net income between September
30, 2017 and the date of the acquisition will likely change the
amount of goodwill recorded. The final adjustments may be
materially different from the unaudited pro forma adjustments
presented herein. Old Line Bancshares has prepared the pro forma
financial information to include the estimated adjustments
necessary to record the assets and liabilities of Bay Bancorp at
their respective fair values and represents management’s best
estimate based upon the information available at this time. The pro
forma adjustments included herein are subject to change as
additional information becomes available and as we perform
additional analyses. Furthermore, Old Line Bancshares will
determine the final allocation of the acquisition price after we
complete the consolidation. The final acquisition accounting
adjustments may be materially different from the pro forma
adjustment presented herein. Increases or decreases in the fair
value of certain balance sheet amounts including loans, securities,
deposits and related intangibles and debt will result in
adjustments to the balance sheet and statement of operations. Such
adjustments, when compared to the information shown in this
document, may change the amount of the purchase price allocated to
goodwill while changes to other assets and liabilities may impact
the statement of income due to adjustments in the yield and/or
amortization/accretion of the adjusted assets and liabilities. We
have included the unaudited pro forma combined consolidated
financial statements only as of and for the nine months ended
September 30, 2017 and the year ended December 31, 2016. The
unaudited pro forma combined financial information presented herein
does not necessarily provide an indication of the combined results
of operations or the combined financial position that would have
resulted had we actually completed the consolidation as of the
assumed consummation date, nor is it indicative of the results of
operations in future periods or the future financial position of
the combined company.
The
total estimated purchase price for the purpose of this pro forma
financial information is $129.2 million. The following table
provides the calculation and allocation of the purchase price used
in the pro forma financial statements and a reconcilement of pro
forma shares outstanding.
Old Line Bancshares, Inc. & Subsidiaries
|
Summary of Purchase Price Calculation and Goodwill Resulting from
Merger
|
And Reconciliation of Pro Forma Shares Outstanding at September 30,
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Bay
Bancorp, Inc. shares outstanding exchanged for stock
|
10,667,227
|
|
Bay
Bancorp, Inc. Restricted Stock to be vested upon completion of
merger
|
50,662
|
|
Total
Shares to be converted
|
10,717,889
|
|
Purchase
Price per Share
|
$11.80
|
|
Total
Consideration related to Bay Bancorp, Inc. Common
Stock
|
$126,471,090
|
|
Value
of Outstanding options to purchase Bay Bancorp, Inc. Common
Stock
|
1,203,732
|
|
Estimated
Value of Contingent Consideration prescriped in Definitive
Agreement
|
1,546,490
|
|
Total
purchase price
|
|
$129,221,313
|
|
|
|
Bay Bancorp shareholders' equity
|
|
|
Common
stock
|
$10,667,227
|
|
Additional
paid-in capital
|
41,624,354
|
|
Retained
earnings
|
18,807,973
|
|
|
71,099,554
|
|
|
|
|
Estimated adjustments to reflect assets acquired at fair
value:
|
|
|
Loans
|
(612,041)
|
|
Allowance
for loan losses
|
4,049,647
|
|
Core
deposit intangible
|
2,384,944
|
|
Deferred
tax assets
|
(2,206,376)
|
|
Other
real estate owned
|
(229,000)
|
|
|
|
74,486,728
|
Goodwill
resulting from merger
|
|
$54,734,585
|
|
|
|
Reconcilement of Pro Forma Shares Outstanding
|
|
|
Total
Stock Value
|
|
$128,017,581
|
Estimated Average Price of Old Line Bancshares, Inc. Common Stock
at Merger Completion
|
$27.42
|
Old
Line Bancshares to be issued to Bay Bancorp, Inc.
stockholders
|
|
4,669,584
|
Old
Line Bancshares shares outstanding
|
|
12,467,500
|
Pro
forma Old Line Bancshares shares outstanding
|
|
17,137,084
|
Pro
forma % ownership by Bay Bancorp
|
|
27.25%
|
Pro
forma % ownership by legacy Old Line Bancshares
|
|
72.75%
|
|
|
|
2.
Adjustment to
reflect the issuance of shares of Old Line Bancshares common stock
with a $0.01 par value in connection with the merger and the
adjustments to stockholders’ equity for the reclassification
of Bay Bancorp’s historical equity accounts (common stock,
accumulated other comprehensive income and retained earnings) into
additional paid-in capital.
3.
Adjustment of $2.4
million to core deposit intangible to reflect the fair value of
this asset and the related amortization adjustment based upon an
expected life of 10 years and using a straight line method. We
expect the amortization of the core deposit intangible to increase
pro forma before tax non- interest expense by $240 thousand in the
first year following consummation.
4.
Adjustments to
reflect the fair value of loans include:
a.
An adjustment of
$4.0 million to reflect the removal of the allowance for loan
losses in connection with applying acquisition accounting under ASC
805. We will apply this adjustment to loans accounted for within
the scope of ASC 310-30 (ASC 310-30 occurs as a result of the
accounting for the differences between contractual cash flows and
cash flows expected to be collected from an investor’s
initial investment in loans, including those acquired in a business
combination, if those differences are attributable, at least in
part, to credit quality considerations). Old Line Bank’s
management and independent loan review personnel determined this
amount based on a review of Bay Bancorp loans. This review
considered payment history, relevant collateral values, debt
service coverage ratios and other factors. There is no estimated
accretion for this credit quality adjustment in the pro forma
statement ofincome.
b.
An additional
adjustment of $400,000 for loans accounted for within the scope of
ASC 310-30 as outlined above. There is no estimated accretion for
this credit quality adjustment in the pro forma statement of
income.
c.
An adjustment of
$3.8 million for loans accounted for within the scope of ASC 310-20
at acquisition. To determine the fair value of the loans within the
scope of ASC 310-20, Old Line Bank’s management and
independent loan review personnel evaluated Bay Bancorp’s
loan portfolio and considered the risk characteristics within
various pools of loans within the remaining loan portfolio. This
review included payment history, concentrations, quality of
underwriting and economic weaknesses. We anticipate this adjustment
will have no impact on pro forma before tax income.
d.
An adjustment of
$3.6 million to eliminate the deferred fees associated with
acquired loans. We anticipate this adjustment will decrease pro
forma before tax interest income by $830 thousand.
e.
The following table
reconciles the total loan adjustments:
ASC 310-30
(Allowance)
|
$4,049,647
|
ASC
310-30
|
(400,000)
|
ASC
310-20
|
(3,802,092)
|
Deferred
fees
|
3,590,051
|
Total Loan
Adjustments
|
$3,437,606
|
f.
Bay Bancorp has
$3.2 million of credit and fair value marks on $27.7 million of
purchased credit impaired loans acquired in prior merger
transactions. Of this amount $595,000 represents non-accretable
discounts. Loan interest income for Bay Bancorp includes
approximately $1.1 million for the year ended December 31, 2016 and
$888,000 for the nine months ended September 30, 2017. We have not
eliminated these items from the pro forma financial statements
because we believe they represent a fair estimate of the discounts
and accretion expected upon completion of the merger.
5.
An adjustment of
$229,000 to reflect the fair value of other real estate owned,
based on Old Line Bank’s management detailed analysis of
these assets that included site visits where possible and current
tax assessed values. There is no estimated income for this
adjustment in the pro forma statement of income.
6.
Adjustment to
reflect the net deferred tax at a rate of 39.445% related to fair
value adjustments on the balance sheet and a statutory tax rate of
39.445% for book tax expense. We have not taken a tax benefit for
certain merger obligations and cost that we do not consider tax
deductible.
7.
Adjustment to
remove net income from discontinued operations from Bay Bancorp.
This is considered a non-recurring item.
8.
We determine basic
earnings per common share by dividing net income available to
common stockholders by the weighted average number of shares of
common stock outstanding.
a.
We calculate
diluted earnings per common share by including the average dilutive
common stock equivalents outstanding during the period. Dilutive
common equivalent shares consist of stock options, calculated using
the treasury stock method.
b.
For pro forma basic
and diluted earnings per common share we have assumed that the
shares issued at acquisition are outstanding for the entire nine
month or twelve month period, respectively.
|
|
|
Weighted average
number of shares Old Line Bancshares
|
11,286,215
|
10,837,939
|
Shares issued to
DCB Bancshares, Inc. stockholders
|
1,144,593
|
1,495,090
|
Shares issued to
Bay Bancorp, Inc. stockholders
|
4,669,584
|
4,669,584
|
Subtotal average
number of common shares
|
17,100,392
|
17,002,613
|
Dilutive average
number of shares
|
203,332
|
159,546
|
Total average
common shares including dilutive shares
|
17,303,724
|
17,162,159
|
9.
In conjunction with
the merger we expect to incur approximately $9.0 million in
expenses associated with conversion of data processing systems,
severance, facility consolidation, fixed asset disposal, legal,
accounting and consulting fees. Through September 30, 2017, we have
not incurred any expenses associated with the merger.
10.
Estimated reduction
in depreciation related to $1.4 million of fixed asset fair value
adjustments associated with the acquisition of DCB.
11.
Estimated
additional core deposit premium amortization related to $3.7
million of cored deposit premium associated with the acquisition of
DCB.
12.
Estimated accretion
of the $706,000 in fair value adjustments on time deposits
associated with the acquisition of DCB.
13.
Estimated accretion
of the $1.1 million of fair value adjustments on loans associated
with the acquisition of DCB.
14.
Estimated tax
effect of the adjustments listed in notes 9 through
12.
ANNEX
A
AGREEMENT AND PLAN
OF MERGER
By and
between
OLD
LINE BANCSHARES, INC.
And
BAY
BANCORP, INC.
Dated
as of September 27, 2017
TABLE
OF CONTENTS
Page
BACKGROUND
|
7
|
AGREEMENT
|
7
|
ARTICLE I. GENERAL
|
7
|
Section 1.1 Background.
|
7
|
Section 1.2 Definitions.
|
7
|
Section 1.3 The Merger and Related
Transactions.
|
19
|
Section 1.4 The Bank
Merger.
|
20
|
Section 1.5 Additional
Actions.
|
21
|
ARTICLE II. CONSIDERATION; CONVERSION; EXCHANGE
PROCEDURES
|
21
|
Section 2.1 Merger
Consideration.
|
22
|
Section 2.2 OLB Common
Stock.
|
22
|
Section 2.3 Fractional
Shares.
|
22
|
Section 2.4 Objecting BYBK Common
Stockholders.
|
22
|
Section 2.5 Exchange Fund; Exchange
of BYBK Certificates.
|
23
|
Section 2.6 Adjustments.
|
24
|
Section 2.7 Other
Matters.
|
25
|
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF
BYBK
|
26
|
Section
3.1 Organization.
|
26
|
Section
3.2 Capitalization.
|
27
|
Section 3.3 Authority; No Violation;
BYBK Debt.
|
28
|
Section 3.4 Consents; Regulatory
Approvals.
|
30
|
Section 3.5 Financial Statements and
Related Matters.
|
30
|
Section 3.6 No Material Adverse
Effect.
|
30
|
Section 3.7 Taxes.
|
31
|
Section 3.8 Contracts; Certain
Changes.
|
32
|
Section 3.9 Ownership of Personal
Property; Insurance Coverage.
|
34
|
Section 3.10 Legal
Proceedings.
|
36
|
Section 3.11 Compliance with
Applicable Law.
|
36
|
Section 3.12 Labor
Matters.
|
38
|
Section 3.13 ERISA.
|
38
|
Section 3.14 Brokers and
Finders.
|
41
|
Section 3.15 Real Property and
Leases.
|
41
|
Section 3.16 Environmental
Matters.
|
42
|
Section 3.17 Intellectual
Property.
|
43
|
Section 3.18 Information to be
Supplied.
|
44
|
Section 3.19 Related Party
Transactions.
|
44
|
Section 3.20 Loans.
|
45
|
Section 3.21 Allowance for Loan
Losses.
|
46
|
Section 3.22 Community Reinvestment
Act.
|
46
|
Section 3.23 Anti-Money Laundering;
OFAC; Sanctions; and Information Security.
|
47
|
Section 3.24 Securities Activities of
Employees.
|
48
|
Section 3.25 Books and Records;
Internal Control.
|
48
|
Section 3.26 Investment
Securities.
|
49
|
Section
3.27 Reorganization.
|
49
|
Section 3.28 Fairness
Opinion.
|
49
|
Section 3.29 Materials Provided to
Stockholders.
|
49
|
Section 3.30 Absence of Certain
Changes.
|
49
|
Section 3.31 Absence of Undisclosed
Liabilities.
|
50
|
Section 3.32 Option Plans and
Convertible Securities.
|
51
|
Section 3.33 Deposits.
|
51
|
Section 3.34 Risk Management
Instruments.
|
51
|
Section 3.35 Fiduciary
Accounts.
|
51
|
Section 3.36 Credit Card Accounts and
Merchant Processing.
|
51
|
Section 3.37 No Broker-Dealer
Subsidiary.
|
51
|
Section 3.38 No Insurance
Subsidiary.
|
52
|
Section 3.39 Business.
|
52
|
Section 3.40 Anti-takeover
Laws.
|
52
|
Section 3.41 Stockholders’
List.
|
52
|
Section 3.42 Disclosure.
|
52
|
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF
OLB
|
53
|
Section
4.1 Organization.
|
53
|
Section
4.2 Capitalization.
|
54
|
Section 4.3 Authority; No
Violation.
|
55
|
Section 4.4 Consents; Regulatory
Approvals.
|
56
|
Section 4.5 Financial
Statements.
|
56
|
Section 4.6 No Material Adverse
Effect.
|
57
|
Section 4.7 Taxes.
|
57
|
Section 4.8 Contracts; Certain
Changes.
|
58
|
Section 4.9 Ownership of Personal
Property; Insurance Coverage.
|
58
|
Section 4.10 Legal
Proceedings.
|
59
|
Section 4.11 Compliance with
Applicable Law.
|
60
|
Section 4.12 Labor
Matters.
|
61
|
Section 4.13 ERISA.
|
62
|
Section 4.14 Brokers and
Finders.
|
63
|
Section 4.15 Real Property and
Leases.
|
64
|
Section 4.16 Environmental
Matters.
|
64
|
Section 4.17 Information to be
Supplied.
|
55
|
Section 4.18 Related Party
Transactions.
|
65
|
Section 4.19 Loans.
|
65
|
Section 4.20 Allowance for Loan
Losses.
|
66
|
Section 4.21 Community Reinvestment
Act.
|
66
|
Section 4.22 Securities Activities of
Employees.
|
66
|
Section 4.23 Books and Records;
Internal Control.
|
67
|
Section 4.24 Investment
Securities.
|
67
|
Section
4.25 Reorganization.
|
68
|
Section 4.26 Fairness
Opinion.
|
68
|
Section 4.27 Materials Provided to
Stockholders.
|
68
|
Section 4.28 Absence of Undisclosed
Liabilities.
|
68
|
Section 4.29 Anti-Money Laundering,
OFAC and Information Security.
|
69
|
Section 4.30 Intellectual
Property.
|
70
|
Section 4.31 Business.
|
70
|
Section 4.32 Disclosure.
|
70
|
ARTICLE V. COVENANTS OF THE PARTIES
|
71
|
Section 5.1 Conduct of BYBK’s
Business.
|
71
|
Section 5.2 Conduct of OLB’s
Business.
|
74
|
Section 5.3 Access;
Confidentiality.
|
75
|
Section 5.4 Regulatory
Matters.
|
75
|
Section 5.5 Taking of Necessary
Actions.
|
76
|
Section 5.6 Duty to Advise; Duty to
Update of Disclosure Schedules.
|
78
|
Section 5.7 Other Undertakings by OLB
and BYBK.
|
76
|
Section 5.8 Accuracy of the
Registration Statement.
|
84
|
ARTICLE VI. CONDITIONS
|
85
|
Section 6.1 Conditions to
BYBK’s Obligations under this Agreement.
|
85
|
Section 6.2 Conditions to OLB’s
Obligations under this Agreement.
|
86
|
ARTICLE VII. TERMINATION
|
88
|
Section 7.1 Termination.
|
88
|
Section 7.2 Effect of
Termination.
|
91
|
ARTICLE VIII. MISCELLANEOUS
|
91
|
Section 8.1 Expenses and Other
Fees.
|
91
|
Section
8.2 Non-Survival.
|
93
|
Section 8.3 Amendment, Extension and
Waiver.
|
93
|
Section 8.4 Entire
Agreement.
|
93
|
Section 8.5 Binding
Agreement.
|
93
|
Section 8.6 Notices.
|
94
|
Section 8.7 Disclosure
Schedules.
|
95
|
Section 8.8 Tax
Disclosure.
|
95
|
Section 8.9 No
Assignment.
|
95
|
Section 8.10 Captions;
Interpretation.
|
95
|
Section 8.11 Counterparts; Electronic
Signatures.
|
95
|
Section
8.12 Severability.
|
96
|
Section 8.13 Governing Law; Venue; No
Jury Trial.
|
96
|
Section 8.14 Time of
Essence.
|
96
|
Exhibit A – List of
Stockholders to Execute Support Agreements
Exhibit B – Support
Agreement
Exhibit C – Bank Merger
Agreement
Exhibit D – Illustration
of Exchange Ratio and Termination Right Provisions
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER
(“Agreement”), dated as of
September 27, 2017, is made by and between Old Line Bancshares,
Inc., a Maryland corporation (“OLB”), and Bay Bancorp,
Inc., a Maryland corporation (“BYBK”).
BACKGROUND
1.
BYBK owns directly
all of the outstanding capital stock of Bay Bank, FSB, a federal
savings bank (“Bay
Bank”).
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 BYBK desire
for BYBK to merge with and into OLB, with OLB surviving the Merger,
in accordance with the applicable laws of the United States, 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 BYBK 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.
The
Background information is a substantive part of this Agreement and
is incorporated herein and made a part hereof by
reference.
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):
401(k) Plan has the meaning given to
the term in Section 5.7(a)(v) of this Agreement.
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, BYBK or any BYBK Subsidiary, or any other
business combination involving BYBK or any BYBK 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 BYBK Common Stock or the then
outstanding equity securities of any BYBK 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 BYBK and filed with SDAT in
accordance with the MGCL.
Average Closing Price has the meaning
given to the term in Section 7.1(m) of this Agreement.
Average Price has the meaning given to
the term in Section
2.1(a) of this Agreement.
Bank Merger has the meaning given to
the term in Section 1.4 of this
Agreement.
Bank Merger Agreement has the meaning
given to the term in Section 1.4 of this
Agreement.
Bay Bank has the meaning given to the
term in the Background section of this Agreement.
BHC Act means the Bank Holding Company
Act of 1956, as amended.
Books and Records means all files,
ledgers and correspondence, all manuals, reports, texts, notes,
memoranda, invoices, receipts, accounts, accounting records and
books, financial statements and financial working papers and all
other records and documents of any nature or kind whatsoever,
including those recorded, stored, maintained, operated, held or
otherwise wholly or partly dependent on discs, tapes and other
means of storage, including any electronic, magnetic, mechanical,
photographic or optical process, whether computerized or not, and
all software, passwords and other information and means of or for
access thereto, belonging to the applicable Party and its
Subsidiaries or relating to their business.
Business Day(s) means any day or days
other than (i) Saturday, (ii) Sunday or (iii) a day on which Bay
Bank or Old Line is authorized or obligated by applicable Law or
executive order to close.
Burdensome Condition has the meaning
given to the term in Section 5.4(a) of this Agreement.
BYBK has the meaning given to the term
in the Background section of this Agreement.
BYBK Advisers means Hovde Group, LLC
and RP Financial LC.
BYBK 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 BYBK or any other Entity that, together with BYBK, is
treated as a single employer under IRC Sections 414(b), (c), (m) or
(o).
BYBK Certificate means a certificate or book-entry share
registered in the transfer books of BYBK that immediately prior to
the Effective Time represents issued and outstanding shares of BYBK
Common Stock.
BYBK Common Stock has the meaning given
to the term in Section 3.2(a) of this Agreement.
BYBK Common Stockholder is any holder
of record of BYBK Common Stock immediately prior to the Effective
Time.
BYBK Common Stockholders’ Meeting
means the meeting of the holders of BYBK Common Stock to consider
and vote on the Merger, and any postponement or adjournment
thereof.
BYBK Common Stock Options has the
meaning given to the term in Section 2.1(b) of this
Agreement.
BYBK Companies means BYBK, Bay Bank and
any other BYBK Subsidiary, collectively.
BYBK Disclosure Schedule means,
collectively, the disclosure schedules delivered by BYBK 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.
BYBK Employee has the meaning given to
the term in Section 5.7(c)(iii)(A) of this
Agreement.
BYBK ERISA Affiliate means any Entity
that, together with BYBK, is treated as a single employer under IRC
Sections 414(b), (c), (m) or (o).
BYBK Financials means (a) the
consolidated balance sheets, consolidated statements of income,
consolidated statements of comprehensive income, consolidated
statements of stockholders’ equity and consolidated
statements of cash flows for BYBK for the years ended December 31,
2016 and 2015, and the notes thereto, as audited by Dixon Hughes
Goodman LLP and as set forth in BYBK’s Annual Report on Form
10-K for the year ended December 31, 2016, (b) the unaudited
interim financial statements of BYBK and the notes thereto included
in BYBK’s Quarterly Report on Form 10-Q for the quarter ended
June 30, 2017, (c) the consolidated balance sheets, consolidated
statements of income, consolidated statements of comprehensive
income, consolidated statements of stockholders’ equity and
consolidated statements of cash flows for BYBK for the year ending
December 31, 2017 and 2016, and the notes thereto, to be audited by
Dixon Hughes Goodman LLP, and as will be set forth in BYBK’s
Annual Report on Form 10-K for the year ending December 31, 2017,
to be delivered or made available within 90 days of December 31,
2017 provided that the Effective Date is later than such due date,
(d) the unaudited consolidated financial statements of BYBK and the
notes thereto included in BYBK’s Quarterly Reports on Form
10-Q for each calendar quarter commencing with the quarter ending
September 30, 2017, to be delivered within 45 days after the end of
the respective quarter provided that the Effective Date is later
than such due dates, (e) unaudited, internally-prepared
consolidated financial statements for each of July 31, 2017 and
August 31, 2017, and (f) unaudited, internally-prepared
consolidated financial statements for each month commencing with
the month ended September 30, 2017, to be delivered within 20 days
after the end of the respective month provided that the Effective
Date is later than such due dates (the financial statements
described in items (e) and (f) are collectively referred to herein
as the “Internal
BYBK Financials”).
BYBK Governing Documents has the
meaning given to the term in Section 3.1(f) of this
Agreement.
BYBK Intellectual Property has the
meaning given to the term in Section 3.17(a) of this
Agreement.
BYBK IT Assets has the meaning given to
the term in Section 3.17(b) of this Agreement.
BYBK Nominees has the meaning given to
the term in Section 5.7(c)(ii) of this Agreement.
BYBK Permitted Liens has the meaning given
to the term in Section 3.9(a) of this Agreement.
BYBK Real Property has the meaning
given to the term in Section 3.15(a) of this
Agreement.
BYBK Regulatory Agreement has the
meaning given to the term in Section 3.11(e)(iii) of this
Agreement.
BYBK Reports has the meaning given to
the term in Section 3.11(c) of this Agreement.
BYBK SEC Reports has the meaning given
to the term in Section 3.11(c) of this Agreement.
BYBK Returns has the meaning given to
the term in Section 3.7(e) of this Agreement.
BYBK Subsidiaries means the
Subsidiaries of BYBK and Bay Bank as set forth in BYBK Disclosure Schedule
3.1(d).
BYBK Taxes has the meaning given to the
term in Section 3.7(e) of this Agreement.
BYBK Termination Fee has the meaning
given to the term in Section 8.1(b) 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 BYBK, a BYBK Subsidiary, OLB
or an OLB 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 the 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 the 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.
Charge-off Reduction has the meaning
given to the term in Section 2.6(c) of this Agreement.
CIC Agreement has the meaning given to
the term in Section 5.7(c)(iii)(D) of this
Agreement.
CIC Payment has the meaning given to
the term in Section 5.7(c)(iii)(D) of this
Agreement.
Claim has the meaning given to the term
in Section 5.7(c)(v) 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.
Commercial Law Article has the meaning
given the term in Section 3.23(c) of this Agreement.
Commissioner means the Maryland Office
of the Commissioner of Financial Regulation.
Confidentiality Agreement means that
certain Confidentiality Agreement, dated as of June 26, 2017, by
and between OLB and Hovde Group, LLC as representative of
BYBK.
Contract means any written or oral
agreement, arrangement, authorization, commitment, contract,
indenture, instrument, lease, license, obligation, plan, practice,
restriction, understanding or undertaking of any kind or character,
or other document to which any Person is a party or that is binding
on any Person or its capital stock, assets or
business.
Contemplated Transactions means all of
the transactions contemplated by this Agreement, including the (a)
Merger, (b) Bank Merger, and (c) performance by OLB and BYBK of
their respective covenants and obligations under this
Agreement.
Costs has the meaning given to the term
in Section 5.7(c)(v) of 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.
Determination Date has the meaning
given to the term in Section 7.1(m) of this Agreement.
Displaced Employee has the meaning
given to the term in Section 5.7(c)(iii)(A) of this
Agreement.
EDGAR means the SEC’s Electronic
Data Gathering and Retrieval system.
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 Contract 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 manufacture, distribution, use, presence, storage,
handling, recycling, treatment, generation, transportation,
processing, handling, labeling, production, release or threatened
release or disposal or discharge 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(a) of this Agreement.
FDIC means the Federal Deposit
Insurance Corporation.
FHLB means the Federal Home Loan Bank
of Atlanta.
Final Index Price has the meaning given
to the term in Section 7.1(m) of this Agreement.
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.
HOLA means the Home Owners Loan Act of
1933, as amended.
Indemnified Parties has the meaning
given to the term in Section 5.7(c)(v) of this
Agreement.
Indemnifying Party has the meaning
given to the term in Section 5.7(c)(v) of this
Agreement.
Index Group has the meaning given to
the term in Section 7.1(m) of this Agreement.
Index Price has the meaning given to
the term in Section 7.1(m) of this Agreement.
Index Ratio has the meaning given to
the term in Section 7.1(m) of this Agreement.
Insurance Policies means all policies,
contracts and other arrangements by which one or more Persons have
undertaken to indemnify or guarantee one or more other Persons
against a loss arising from a specified contingency or peril,
including, without limitation, contracts of fidelity
insurance.
Insured Person has the meaning given to
the term in Section 5.7(c)(viii) of this Agreement.
Internal BYBK Financials has the
meaning given to the term in the definition of “BYBK
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 BYBK means the actual
knowledge of BYBK’s and Bay Bank’s Chairman of the
Board of Directors, President and Chief Executive Officer, and
Executive Vice President - Chief Financial Officer, Bay
Bank’s Executive Vice President and Chief Banking Officer and
Senior Vice President and Chief Credit Officer, and, for purposes
only of Section 3.12 and Section 3.13 hereof, Lisa Behuncik, Vice
President of Bay Bank or, if no individual is named to any of such
positions, the individual or individuals who perform a similar
function for BYBK or Bay Bank, 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, for
purposes only of Section 4.12 and Section 4.13 hereof, 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 Order, 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.
Lawsuit has the meaning given to the
term in Section 2.6(b) of this Agreement.
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 with respect to any property or property
interest.
Litigation means any legal,
quasi-judicial or administrative action, arbitration, cause of
action, lawsuit, claim (whether asserted or unasserted), complaint,
proceeding, criminal prosecution, governmental or other
examination, inquiry or investigation, audit (other than regular
audits of financial statements by outside auditors), compliance
review, inspection, hearing, administrative or other proceeding
relating to or affecting a Party, its business, its records, its
policies, its practices, its compliance with Law, its actions, its
assets (including Contracts related to it) or the Contemplated
Transactions, but shall not include regular, periodic examinations
of depository institutions and their Affiliates by Regulatory
Authorities.
Loan Recovery Amount has the meaning
given to the term in Section 2.6(c) of this Agreement.
Material Adverse Effect means, with
respect to OLB or BYBK, 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 BYBK and the BYBK Subsidiaries
taken as a whole, respectively, or (b) materially impairs the
ability of either OLB, on the one hand, or BYBK, 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 BYBK 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 BYBK, 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 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 BYBK 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)(viii) 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(a) of this Agreement.
MGCL means the Maryland General
Corporation Law, as amended.
NASDAQ means the NASDAQ Stock Market
LLC.
Net Loan Recovery Amount has the
meaning given to the term in Section 2.6(c) 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 BYBK Shares means any shares
of BYBK 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, assuming that the holders of shares
of BYBK Common Stock have the right to demand and receive payment
of the fair value of their shares of BYBK common stock pursuant to
Section 3-202 of the MGCL.
OCC means the Office of the Comptroller
of the Currency.
OFAC has the meaning given to the term
in Section 3.23(b) of this Agreement.
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 and Contracts 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 Common Stockholders’ Meeting
means the meeting of the holders of OLB Common Stock to consider
and vote on the Merger.
OLB Companies means OLB, Old Line and
any other OLB Subsidiary, collectively.
OLB Disclosure Schedule means,
collectively, the disclosure schedules delivered by OLB to BYBK 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, 2016 and 2015
and the consolidated statements of income, consolidated statements
of comprehensive income, consolidated 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 set forth in OLB’s Annual Report on Form 10-K for the year
ended December 31, 2016, (b) the consolidated balance sheets of OLB
at December 31, 2017 and 2016 and the consolidated statements of
income, the consolidated statements of comprehensive income, the
consolidated statements of changes in stockholders’ equity
and the consolidated statements of cash flows for OLB for the years
ending December 31, 2017, 2016 and 2015, and the notes thereto, to
be audited by Dixon Hughes Goodman LLP and as will be set forth in
OLB’s Annual Report on Form 10-K for the year ending December
31, 2017, to be delivered or made available within 90 days of
December 31, 2017 provided that the Effective Date is later than
such due date, (c) the unaudited interim consolidated financial
statements and notes thereto included in OLB’s Quarterly
Report on Form 10-Q for the quarter ended June 30, 2017, 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 ending September
30, 2017, to be delivered or made available within 45 days after
the end of the respective quarter provided that the Effective Date
is later than such due dates.
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 Permitted Liens has the meaning given
to the term in Section 4.9(a) of this Agreement.
OLB Preferred Stock has the meaning
given to the term in Section 4.2 of this Agreement.
OLB Ratio has the meaning given to the
term in Section 7.1(m) 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(c) of this Agreement.
OLB Returns has the meaning given to
the term in Section 4.7(c) of this Agreement.
OLB SEC Reports has the meaning given
to the term in 4.11(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.
Order means any administrative decision
or award, decree, injunction, judgment, order, consent decree,
quasi-judicial decision or award, ruling or writ of any federal,
state, local or foreign or other court, arbitrator, mediator,
tribunal, administrative agency or Regulatory
Authority.
Ordinary Course means the conduct of
the business of the applicable Party in substantially the same
manner as such business was operated on the date of this Agreement,
including operations in conformance and consistent with the
applicable Party’s practices and procedures prior to and as
of such date. Without limiting the scope of the foregoing, the term
“Ordinary Course” shall include a Party’s
practices and procedures with respect to its past deposit and loan
marketing promotional activities, including the offering of special
interest rates and other terms.
Party means either OLB or BYBK, and
“Parties” means OLB and BYBK.
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(a) of this Agreement.
Permitted Employees means officers and
employees of any of the BYBK 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.
Pool has the meaning given to the term
in Section 3.20(c) 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.
Prospectus/Proxy Statement means the
prospectus/proxy statement, together with any supplements thereto,
to be sent to holders of BYBK Common Stock and holders of OLB
Common Stock in connection with the Merger, the BYBK Common
Stockholders’ Meeting and the OLB 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 BYBK 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 OCC, the FDIC, NASDAQ, and
the respective staffs thereof.
REO means, with respect to the BYBK
Companies and the OLB Companies, real property that the BYBK
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)(ii) of this
Agreement.
Representatives means, with respect to
an Entity, such Entity’s officers, directors or employees, or
any investment bankers, financial or other advisors, attorneys,
accountants, consultants or other representatives or agents engaged
or retained by any of them.
Residential Credit Extension has the
meaning given to the term in Section 5.1(c)(xxvi) of this
Agreement.
Retained Employees has the meaning
given to the term in Section 5.7(c)(iii)(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.
Sanctioned Countries has the meaning
given to the term in Section 3.23(b) of this
Agreement.
Sanctions has the meaning given to the
term in Section 3.23(b) of this Agreement.
SDAT means the Maryland State
Department of Assessments and Taxation.
SEC means the U.S. Securities and
Exchange Commission.
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, the Investment Company Act of 1940, as
amended, and the rules and regulations promulgated thereunder, the
Investment Advisers Act of 1940, as amended, and the rules and
regulations promulgated thereunder, the Trust Indenture Act of
1939, as amended, and the rules and regulations promulgated
thereunder, and any applicable state securities or “blue
sky” laws, collectively.
Starting Date has the meaning given to
the term in Section 7.1(m) of this Agreement.
Starting Price has the meaning given to
the term in Section 7.1(m) 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)(viii) 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
agree otherwise, the closing of the Contemplated Transactions (the
“Closing”) will take place
at the offices of Baker, Donelson, Bearman, Caldwell &
Berkowitz, a professional corporation, located at 100 Light Street,
Baltimore, Maryland, at a time and date after January 1, 2018 to be
reasonably selected by OLB after consultation with BYBK 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.
(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) BYBK shall merge
with and into OLB;
(ii) The
separate existence of BYBK shall cease;
(iii) OLB
shall be the surviving corporation;
(iv) Each
share of BYBK 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 BYBK 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) Board of Directors and
Officers.
(i) Subject to Section
5.7(c)(ii), at the Effective Time, the directors of OLB duly
elected and holding office immediately prior to the Effective Time
shall be the directors of OLB, as the surviving corporation in the
Merger.
(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 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, Bay Bank
shall be merged with and into Old Line and the separate existence
of Bay Bank 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 1.4.
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 BYBK or Bay Bank, or (b) otherwise carry
out the purposes of this Agreement, BYBK, Bay Bank 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,
or under
any of the rights, properties or assets of BYBK 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 BYBK,
Bay Bank or otherwise to take any and all such
action.
ARTICLE
II.
CONSIDERATION; CONVERSION; EXCHANGE
PROCEDURES
Section
2.1 Merger
Consideration.
(a) Subject to Section
2.3 and Section 2.4 hereof, each share of BYBK 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, in exchange for each such share, that
number of shares of OLB Common Stock equal to the Exchange Ratio
(the “Per Share
Consideration”); provided, however, that each share of
BYBK Common Stock issued and outstanding immediately prior to the
Effective Time that is held by any Subsidiary of BYBK, by OLB or
any Subsidiary of OLB (in each case other than shares held in any
BYBK Benefit Plan or OLB Benefit Plan or related trust accounts or
otherwise held in any fiduciary or agency capacity or as a result
of debts previously contracted) shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to
exist, and no payment shall be made with respect
thereto.
Subject
to any adjustments occurring after the date hereof as contemplated
by Section 2.6 below, in the event that the Average Price
is:
(i) between $25.66 and
$29.15, then the Per Share Consideration shall equal the number of
shares of OLB Common Stock determined by dividing $11.80 by the
Average Price;
(ii) $29.16
or above, then the Per Share Consideration shall equal 0.4047
shares of OLB Common Stock; or
(iii) $25.65
or below, then the Per Share Consideration shall equal 0.4600
shares of OLB Common Stock (such ratio in any of (i), (ii) or
(iii), the “Exchange Ratio”).
Exhibit
D hereto is an example of how the Exchange Ratio could be
calculated under various Average Price scenarios. In all cases the
Exchange Ratio will be rounded to the nearest
ten-thousandth.
For
purposes of this Agreement, “Average Price” means the
amount equal to the volume weighted average of the closing prices
of OLB Common Stock as reported on the NASDAQ Capital Market for
the 20 Trading Days ending five Trading Days prior to the Closing
Date.
At
least two Business Days prior to the Closing Date, OLB shall
provide BYBK with its calculation of the Exchange Ratio and any
supporting documentation necessary for BYBK to review such
calculation.
The
aggregate Per Share Consideration is sometimes referred to herein
as the “Merger
Consideration.”
(b) Also at the
Effective Time, each Right in respect of BYBK Common Stock pursuant
to a stock option (collectively, the “BYBK Common Stock
Options”) granted by BYBK that is outstanding at the
Effective Time, whether or not exercisable, shall be terminated by
BYBK and converted into the right to receive cash in an amount
(rounded to the nearest whole cent and without interest) determined
by multiplying (i) the number of shares of BYBK Common Stock
issuable upon the exercise of such BYBK Common Stock Option by (ii)
the difference between (A) the Average Price multiplied by the Per
Share Consideration (after giving effect to Section 2.6 of this
Agreement) and (B) the exercise price per share of BYBK Common
Stock issuable upon the exercise of such BYBK Common Stock Option.
If such amount is a negative number, the BYBK Common Stock Option
shall be terminated without any payment therefor. Prior to the
Effective Time, BYBK shall (i) obtain any necessary consents or
make any necessary amendments to the terms of any outstanding BYBK
Common Stock Options to give effect to the transactions
contemplated by this Section 2.1(b), (ii) take all actions as may
be necessary to terminate (and, except as provided in this Section
2.1(b), ensure that neither BYBK nor Bay Bank remains bound by or
liable for) any outstanding BYBK Common Stock Options or other
Rights to acquire BYBK Common Stock and (iii) ensure that any BYBK
plans, agreements or other arrangements that allow the grant of
BYBK Common Stock Options or other Rights in respect to of BYBK
Stock, if any, will be amended to eliminate the ability to grant
any such BYBK Common Stock Options or other Rights in respect of
BYBK Common Stock effective as of immediately after the Effective
Time. All payments under this Section 2.1(b) shall be made by OLB
at or as soon as administratively practicable (and within 30 days)
after the Effective Time, pursuant to OLB’s ordinary payroll
practices, and shall be subject to any applicable
withholdings.
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.
Notwithstanding anything to the contrary contained herein, no
fractional shares of OLB Common Stock and no scrip, book-entry
shares 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 BYBK 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 BYBK Common Stock owned by
a BYBK Common Stockholder shall be combined so as to calculate the
maximum number of whole shares of OLB Common Stock issuable to such
BYBK Common Stockholder.
Section
2.4
Objecting BYBK
Common Stockholders.
(a) Any Objecting BYBK
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 BYBK 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 BYBK 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 BYBK Shares, if any, will be made by
OLB.
(d) BYBK shall give OLB
prompt (but in any event within two Business Days) written notice
of any demands for appraisal of any shares of BYBK Common Stock and
any withdrawals of such demands, and OLB shall have the right to
participate in and direct all negotiations and proceedings with
respect to such demands. BYBK shall not, except with the prior
written consent of OLB, voluntarily make any payment with respect
to or settle, or offer or agree to settle, any such demand for
payment.
Section
2.5
Exchange Fund;
Exchange of BYBK Certificates.
(a) Subject to the
other provisions of this Article II, on or immediately prior to the
Closing Date, OLB shall deposit, or cause to be deposited, in trust
with or otherwise make available to the Exchange Agent for the
benefit of the BYBK Common Stockholders, for exchange in accordance
with this Agreement, through the Exchange Agent, (i) evidence of
OLB Common Stock in book-entry form issuable pursuant to Section
2.1(a) for shares of OLB Common Stock equal to the aggregate Merger
Consideration to be issued to the BYBK Common Stockholders 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 (collectively, the “Exchange
Fund”).
(b) As a condition to
receiving the Per Share Consideration for each share of BYBK Common
Stock held, each BYBK 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 BYBK 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
BYBK Certificate a Letter of Transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the BYBK
Certificate shall pass, only upon delivery of the BYBK Certificate
to the Exchange Agent) and instructions for use in effecting the
surrender of the BYBK Certificates in exchange for the Merger
Consideration as provided for in this Agreement (such Letter of
Transmittal and instructions to include applicable provisions with
respect to delivery of an “agent’s message” or
other appropriate instructions with respect to BYBK Certificates
that are book-entry shares). Each BYBK Common Stockholder, upon
proper surrender of BYBK Certificates to the Exchange Agent,
accompanied by duly executed Letters of Transmittal, shall be
entitled to receive in exchange therefor (i) the Merger
Consideration to which such BYBK Common Stockholder shall have
become entitled pursuant to the provisions of Section 2.1(a),
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 BYBK Certificate so surrendered shall be cancelled.
Until so surrendered, each BYBK 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 BYBK Common
Stockholder is unable to locate any BYBK 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 occur as soon as practicable following the Exchange
Agent’s receipt of the applicable BYBK Certificate(s) and
duly executed Letters of Transmittal. Unless otherwise agreed to by
OLB, the shares of OLB Common Stock delivered to each BYBK Common
Stockholder pursuant to the Merger shall be in book-entry
form.
(d) No dividends or
other distributions declared with respect to OLB Common Stock with
a record date after the Effective Time shall be paid to the holder
of any unsurrendered BYBK Certificate until the holder thereof
shall surrender such BYBK 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. Subject to
applicable Laws, after the surrender of a BYBK 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 BYBK
Certificate.
(e) At the Effective
Time, the share transfer books of BYBK shall be closed, and
thereafter there shall be no further registration or transfers of
shares of BYBK Common Stock. From and after the Effective Time,
Persons who held shares of BYBK Common Stock immediately prior to
the Effective Time shall cease to have rights with respect to such
shares, except with respect to the right to receive the applicable
portion of the Merger Consideration and as otherwise provided for
herein. On or after the Effective Time, BYBK Certificates presented
to the Exchange Agent or OLB for any reason shall be cancelled and
exchanged for the Merger Consideration as provided in this Article
II.
(f) 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 BYBK 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 BYBK Common Stock in respect of whom such
deduction and withholding were made by the Exchange
Agent.
(g) Any portion of the
Exchange Fund (including any interest and other income received
with respect thereto) that remains unclaimed by the BYBK Common
Stockholders for six months after the Effective Time shall be
delivered by the Exchange Agent to OLB. Any BYBK 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 BYBK
Common Stockholder’s share of the Merger Consideration
deliverable in respect of each share of BYBK Common Stock such BYBK
Common Stockholder holds as determined pursuant to this Agreement,
without any interest thereon.
(h) No Liability. None of OLB, BYBK
or the Exchange Agent, or any employee, officer, director, agent or
Affiliate of any of them, 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 BYBK Certificate shall not have been
surrendered prior to three 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 or their successors, assigns or personal
representatives.
(a) 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, reorganization, recapitalization or similar
transaction with respect to the outstanding OLB Common Stock, and
the record date therefor or the effective date thereof, as
applicable, is prior to the Effective Time, an appropriate
adjustment shall be made to the Exchange Ratio so as to provide the
holders of the BYBK 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, or (c) shares of OLB Common Stock are repurchased by or on
behalf of OLB.
(b) Litigation Adjustment. With
respect to the after-tax income recognized, on or after August 4,
2017 and prior to the Effective Time, by BYBK or Bay Bank from the
settlement of the lawsuit captioned Lois F. Lapidus, et al. v. Bay Bank,
FSB, No. RDB 16-03260 (the
“Lawsuit”), in the United
States District Court for the District of Maryland, (i) the value
of the Merger Consideration shall be increased by such after-tax
income and (ii) the Exchange Ratio shall be increased by an amount
determined by (A) dividing such after-tax income by the number of
shares of BYBK Common Stock that are issued and outstanding
immediately prior to the Effective Date, and (B) dividing the
amount calculated pursuant to the foregoing item (A) by the Average
Price. Any income or other consideration received from settlement
or other resolution of the Lawsuit after the Effective Date will
not be added to the Merger Consideration.
Example 2(b): Assume that there
are 10,717,889 shares of BYBK Common Stock outstanding immediately
prior to the Effective Time and the Average Price is $27.00, such
that (i) the Exchange Ratio, prior to any adjustment pursuant to
Section 2.6 of this Agreement, is 0.4370 and (ii) the Merger
Consideration, prior to any adjustment, is 4,683,717.493 shares of
OLB Common Stock, with an aggregate value of $126,460,372.311.
Assume further that Bay Bank recognizes after-tax income of
$984,750 in connection with the resolution of the Lawsuit prior to
the Effective Time. In such case, (i) the value of the Merger
Consideration, as adjusted pursuant to this Section 2.6(b), would
be increased to $127,445,122.311 and (ii) the Exchange Ratio, as
adjusted pursuant to this Section 2.6(b), would be increased by
0.0034 to 0.4404.
(c) Loan Resolution. In the event
and to extent that BYBK or Bay Bank recognizes, on or after August
4, 2017 and prior to the Effective Time, after-tax income as of a
result of a resolution of one or more of the loans listed on
BYBK Disclosure Schedule
2.6(c) (the “Loan Recovery Amount”)
and such Loan Recovery Amount exceeds the amount listed on
BYBK Disclosure Schedule
2.6(c) as the “5/31/17 Ledger Balance,” (i) the
value of the Merger Consideration shall be increased by the Loan
Recovery Amount (the “Net Loan Recovery
Amount”) and (ii) the Exchange Ratio shall be
increased by an amount determined by (A) dividing the Net Loan
Recovery Amount by the number of shares of BYBK Common Stock that
are issued and outstanding immediately prior to the Effective Date,
and (B) dividing the amount calculated pursuant to the foregoing
item (i) by the Average Price, subject to the following
limitations: (1) if the BYBK and Bay Bank net loan and lease
charge-offs between August 4, 2017 and the Effective Date exceeds
$226,000, the Net Loan Recovery Amount will be reduced by such
excess (the “Charge-off Reduction”);
and (2) in no event will the Charge-off Reduction exceed $500,000.
Any income or other consideration received as a result of
resolution of one or more of the loans listed on BYBK Disclosure Schedule 2.6(c)
after the Effective Date will not be added to the Merger
Consideration.
Example 2(c): Assume that there
are 10,717,889 shares of BYBK Common Stock outstanding immediately
prior to the Effective Time and the Average Price is $27.00, such
that (i) the Exchange Ratio, prior to any adjustment pursuant to
Section 2.6 of this Agreement, is 0.4370 and (ii) the Merger
Consideration, prior to any adjustment, is 4,683,717.493 shares of
OLB Common Stock, with an aggregate value of $126,460,372.311.
Assume further that the resolution of certain loans listed on BYBK
Disclosure Schedule 2.6(c) results in a Loan Recovery Amount of
$750,000, and the amount of Bay Bank’s net loan and lease
charge-offs recognized prior to the Effective Time is equal to
$275,000. In such case, (i) the Charge-Off Reduction would be
$49,000, (ii) the adjusted Net Loan Recovery Amount would be
$701,000, (iii) the value of the Merger Consideration, as adjusted
pursuant to this Section 2.6(c), would be increased to
$127,161,372.311, and (ii) the Exchange Ratio, as adjusted pursuant
to this Section 2.6(c), would be increased by 0.0024 to
0.4394.
Combined Example: Assume that
all of the facts and circumstances set forth in Example 2(b) and
Example 2(c) were to occur. In such case, (i) the value of the
Merger Consideration, as adjusted pursuant to Section 2.6(b) and
Section 2.6(c), would be increased to $128,146,122.311 and (ii) the
Exchange Ratio, as adjusted pursuant to Section 2.6(b) and Section
2.6(c), would be increased by 0.0058 to 0.4428.
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 BYBK or Bay Bank, 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;
(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 OLB shall not take, or permit any OLB Company to take, any of
the foregoing actions pursuant to this Section 2.7 if doing so
would impair the ability of OLB to perform its obligations under
this Agreement and/or consummate the Contemplated Transactions as
and when otherwise required by this Agreement.
ARTICLE
III.
REPRESENTATIONS AND WARRANTIES OF
BYBK
BYBK represents and warrants
to OLB, for itself and with respect to and on behalf of each of the
BYBK Subsidiaries (to the extent applicable), that the statements
contained in this Article III (and as reflected on the BYBK
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 of BYBK contained in this Article III
shall be deemed untrue or incorrect, and BYBK 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 BYBK, 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 3.41, which shall be deemed untrue, incorrect and breached if
they are not true and correct in all material respects (the
“Article III
Standard”).
BYBK has made a good faith
effort to ensure that the disclosure on each schedule of the BYBK
Disclosure Schedules corresponds to the section referenced herein.
For purposes of the BYBK 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.
(a) BYBK is a
corporation duly incorporated, validly existing, and in good
standing under the laws of the State of Maryland. BYBK is a savings
and loan holding company duly registered under HOLA. BYBK has the
corporate power and lawful authority to carry on its business and
operations as now being conducted and to own or lease and operate
all of its properties and assets as presently owned or leased and
operated. BYBK 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 BYBK, and all such licenses, registrations and
qualifications are in full force and effect in all material
respects. BYBK engages in activities and holds properties only of
the types permitted to savings and loan holding companies by HOLA
and the rules and regulations promulgated thereunder.
(b) Bay Bank is a
federal savings bank duly organized, validly existing and in good
standing under the laws of the United States of America. Bay Bank
has the corporate power and lawful authority to carry on its
business and operations as now being conducted and to own or lease
and operate all of its properties and assets as presently owned or
leased and operated. Bay Bank 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 BYBK, and all such licenses,
registrations and qualifications are in full force and effect in
all material respects.
(c) Bay Bank is an
“insured depository institution” as defined in the
Federal Deposit Insurance Act and applicable regulations
thereunder, the deposits of Bay Bank are insured by the FDIC
through the Deposit Insurance Fund 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. No proceedings for the revocation or termination of such
deposit insurance are pending or, to the Knowledge of BYBK,
threatened.
(d) BYBK Disclosure Schedule 3.1(d)
contains a complete and accurate list of all BYBK Subsidiaries.
Each BYBK Subsidiary is duly formed, validly existing and in good
standing under the laws of the state of its formation and has the
power and lawful authority to carry on its business and operations
as now being conducted and to own or lease and operate all of its
properties and assets as presently owned or leased and operated.
Each BYBK 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 BYBK, and all such licenses,
registrations and qualifications are in full force and effect in
all material respects. Other than the equity interests of the BYBK
Subsidiaries listed on BYBK Disclosure Schedule
3.1(d), BYBK 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 BYBK and each BYBK 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 BYBK or the
applicable BYBK Subsidiary.
(f) Prior to the date
of this Agreement, BYBK has delivered or made available to OLB
true, correct and complete copies of the articles of incorporation
and bylaws of BYBK, and the charter documents and bylaws, operating
agreement and/or other governing instrument of each BYBK Subsidiary
and each as in effect on the date hereof (collectively, the
“BYBK Governing
Documents”). The BYBK Governing Documents comply with
applicable Law, except for any failure to be in compliance that
would not reasonably be likely to have, either individually or in
the aggregate, a Material Adverse Effect on BYBK.
(g) BYBK Disclosure Schedule 3.1(g)
contains a complete and accurate list of all BYBK Subsidiaries that
are no longer operational or provide any business function for or
on behalf of BYBK or Bay Bank (the “Non-Operational
Subsidiaries”).
(a) The authorized
capital stock of BYBK consists of (i) 20,000,000 shares of common
stock, $1.00 par value
per share (“BYBK
Common Stock”), of which, as of the date of this
Agreement, 10,717,889 shares are duly and validly issued and
outstanding, including 50,662 shares of restricted BYBK Common
Stock issued under BYBK equity compensation plans, and 176,544
shares were reserved for issuance upon the exercise of outstanding
Rights in respect of BYBK common stock, and (ii) 9,201 shares of
preferred stock, of which, as of the date of this Agreement, no
shares are issued and outstanding. Except as provided in
BYBK Disclosure Schedule
3.2(a), as of the date of this Agreement, there are not
outstanding any bonds, debentures, notes or other indebtedness of
BYBK or any BYBK Subsidiary having the right to vote (or that are
convertible into, or exchangeable for, securities of BYBK having
the right to vote) on any matters on which stockholders of BYBK may
vote, nor are any trust preferred or subordinated debt securities
of BYBK or any BYBK Company issued or outstanding. All of the
issued and outstanding shares of BYBK Common Stock have been duly
authorized and validly issued and are fully paid and nonassessable
under the MGCL, free of preemptive rights, except as may be defined
in BYBK’s articles of incorporation, and were not issued in
violation of the preemptive rights or other rights to subscribe for
or purchase securities of any Person or in violation of any
applicable Laws. Except as set forth in this Section 3.2(a) and
BYBK Disclosure Schedule
3.2(a), BYBK has not issued nor is BYBK or any BYBK
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 BYBK Common Stock or any other security of BYBK
or any securities representing the right to vote, purchase or
otherwise receive any shares of BYBK Common Stock or any other
security of BYBK. Accordingly, as of immediately prior to the
Effective Time no more than 10,894,433 shares of BYBK Common Stock
will be issued and outstanding and no more than 176,544 shares of
BYBK Common Stock will be reserved for issuance upon the exercise
of outstanding BYBK Rights.
(b) Except as disclosed
in BYBK Disclosure
Schedule 3.2(b), BYBK owns, directly or indirectly, all of
the capital stock or other equity ownership interests of the BYBK
Subsidiaries, free and clear of any Liens, Contracts 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. No
capital stock (or other equity interest) of any BYBK Subsidiary is
or may become required to be issued (other than to another BYBK
Company) by reason of any Rights, and there are no Contracts by
which a BYBK Subsidiary is bound to issue (other than to another
BYBK Company) additional shares of its capital stock (or other
equity interests) or Rights or by which any BYBK Company is or may
be bound to transfer any shares of the capital stock (or other
equity interests) of a Subsidiary of BYBK (other than to another
BYBK Company). There are no Contracts relating to the rights of any
BYBK Company to vote or to dispose of any shares of its capital
stock (or other equity interests), or any shares of capital stock
(or other equity interests) of a BYBK Subsidiary.
(c) Except as set forth
on BYBK Disclosure
Schedule 3.2(c), to the Knowledge of BYBK no person or group
is the beneficial owner of five percent or more of the outstanding
shares of BYBK 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) There are no
Contracts pursuant to which BYBK or any BYBK Subsidiary is or could
be required to register shares of BYBK’s capital stock or
other securities under the Securities Act or to issue, deliver,
transfer or sell any shares of capital stock, Rights or other
securities of BYBK or any BYBK Subsidiary. No BYBK Subsidiary owns
any capital stock of BYBK.
(e) BYBK does not have
a dividend reinvestment plan or any stockholders’ rights
plan.
Section
3.3
Authority; No
Violation; BYBK Debt.
(a) BYBK
has the corporate power and authority necessary to execute and
deliver this Agreement and, subject to the receipt of all consents,
waivers and approvals described in BYBK Disclosure Schedule 3.4
and approval of the Merger by the holders of BYBK Common Stock as
required by BYBK’s articles of incorporation and bylaws and
the MGCL, to consummate the Contemplated Transactions and to
otherwise perform its obligations under this Agreement. The
execution and delivery of this Agreement by BYBK and the
consummation by BYBK of the Contemplated Transactions, up to and
including the Merger, have been duly and validly authorized by the
board of directors of BYBK and, except for approval by the holders
of BYBK Common Stock as required by BYBK’s articles of
incorporation and bylaws and the MGCL, no other corporate
proceedings on the part of BYBK are necessary to consummate the
Contemplated Transactions. This Agreement has been duly and validly
executed and delivered by BYBK and, assuming the due authorization,
execution and delivery of this Agreement by OLB, constitutes a
legal, valid and binding obligation of BYBK, enforceable against
BYBK in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, receivership,
conservatorship, moratorium or similar Laws affecting the
enforcement of creditors’ rights generally and except that
the availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before
which any proceeding may be brought.
(b) The execution and
delivery of this Agreement by BYBK, the consummation of the
Contemplated Transactions, and the compliance by BYBK with any of
the terms or provisions hereof, subject to the receipt of all
consents, waivers and approvals described in BYBK Disclosure Schedule 3.4,
the approval of the Merger by the holders of BYBK Common Stock as
required by BYBK’s articles of incorporation and bylaws and
the MGCL, BYBK’s and OLB’s compliance with any
conditions contained in this Agreement, and compliance by BYBK or
any BYBK 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 BYBK Governing
Documents;
(ii) Violate,
or constitute or result in a default under, or require any consent,
waiver, approval or similar action pursuant to, any Law applicable
to BYBK or any BYBK 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 BYBK
Disclosure Schedule 3.3(b) or pursuant to which consent or
notification is required as set forth in BYBK 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 BYBK or any BYBK
Subsidiary under any of the terms or conditions of any note, bond,
mortgage, indenture, license, lease, Contract or other instrument
or obligation to which BYBK or any BYBK 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
BYBK.
(c) Bay Bank 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 BYBK
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 Bay Bank and, other than the approval of the Bank
Merger Agreement by BYBK as the sole stockholder of Bay Bank as
required by Law, no further corporate proceedings of Bay Bank are
needed to execute and deliver the Bank Merger Agreement and
consummate the transactions contemplated thereby. BYBK, as the sole
stockholder of Bay Bank, shall promptly hereafter approve the Bank
Merger Agreement, and the Bank Merger Agreement will be duly
executed by Bay Bank on the date of this Agreement. The Bank Merger
Agreement has been duly authorized and, assuming the due
authorization, execution and delivery of the Bank Merger Agreement
by Old Line, will be a legal, valid and binding agreement of Bay
Bank enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, receivership,
conservatorship, moratorium or similar Laws affecting the
enforcement of creditors’ rights generally and except that
the availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before
which any proceeding may be brought. At the Closing, all other
Contracts, documents and instruments to be executed and delivered
by Bay Bank that are referred to in the Bank Merger Agreement, if
any, will have been duly executed and delivered by Bay Bank and,
assuming due authorization, execution and delivery by the
counterparties thereto, will constitute the legal, valid and
binding obligations of Bay Bank, enforceable against Bay Bank in
accordance with their respective terms and conditions, subject to
applicable bankruptcy, insolvency, reorganization, receivership,
conservatorship, moratorium or similar Laws affecting the
enforcement of creditors’ rights generally and except that
the availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before
which any proceeding may be brought.
(d) The approval of the
Merger by the holders of BYBK Common Stock is the only vote of
holders of any class of BYBK 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 BYBK Common Stock as of the record
date for the BYBK Common Stockholders’ Meeting is required to
approve the Merger under the MGCL and BYBK’s articles of
incorporation and bylaws.
(e) BYBK’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 BYBK and its stockholders, (ii) authorized and
approved this Agreement and the Contemplated Transactions, (iii)
directed that the Merger be submitted for consideration at the BYBK
Common Stockholders’ Meeting, and (iv) recommended that its
stockholders approve the Merger.
(f) BYBK has no debt
that is secured by Bay Bank capital stock.
Section
3.4
Consents;
Regulatory Approvals.
Except as described in
Section 3.3(b) of this Agreement and BYBK 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 BYBK or the consummation of the Contemplated
Transactions by BYBK. BYBK 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 BYBK, no fact or circumstance exists, including any
possible other transaction pending or under consideration by BYBK
or any BYBK 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 and Related Matters.
(a) BYBK has delivered
or made available to OLB the BYBK Financials, except those
pertaining to annual and quarterly periods ending on or after
September 30, 2017 and monthly periods commencing after June 30,
2017, which it will deliver or make available by each respective
delivery date as required by this Agreement. The BYBK Financials
with respect to periods ending prior to the date of this Agreement
(i) are true, accurate and complete in all material respects, and
have been prepared from, and are in accordance with, the Books and
Records of BYBK and the BYBK Subsidiaries and (ii) fairly present,
in all material respects, the consolidated financial position,
results of operations, changes in stockholders’ equity and
cash flows of BYBK as of and for the periods ended on the dates
thereof. The BYBK Financials with respect to periods ended prior to
the date of this Agreement comply in all material respects with
applicable accounting and regulatory requirements and, other than
the Internal BYBK 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.
(b) BYBK did not, as of
the date of the BYBK 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 BYBK 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, 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.
(c) During the periods
covered by the BYBK Financials with respect to periods ended prior
to the date of this Agreement, BYBK’s independent registered
public accounting firm, Dixon Hughes Goodman LLP, was independent
of BYBK and its management. As of the date hereof, BYBK’s
independent registered public accounting firm, Dixon Hughes Goodman
LLP, has not resigned (or informed BYBK that it intends to resign)
or been dismissed as a result of or in connection with any
disagreements with BYBK on a matter of accounting principles or
practices, financial statement disclosure or auditing scope or
procedure.
Section
3.6 No Material
Adverse Effect.
Except as
disclosed on BYBK
Disclosure Schedule 3.6, since June 30, 2017:
(a) no events have
occurred that have had or would be reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on
BYBK;
(b) neither BYBK nor
any BYBK 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, that in the aggregate
has had or is reasonably likely to have a Material Adverse Effect
on the BYBK Companies taken as a whole; and
(c) BYBK and the BYBK
Subsidiaries have carried on their respective businesses only in
the Ordinary Course.
(a) Except as disclosed
in BYBK Disclosure
Schedule 3.7(a), all BYBK Returns required by applicable Law
to have been filed with any Taxing Authority by, or on behalf of,
each of the BYBK Companies have been filed on a timely basis in
accordance with all applicable Laws, and such BYBK Returns are
true, complete and correct in all material respects, or requests
for extensions to file the BYBK 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 BYBK. All BYBK Taxes
shown to be due and payable on the BYBK Returns or on subsequent
assessments with respect thereto have been paid in full or adequate
reserves have been established in the BYBK Financials for the
payment of such BYBK 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
BYBK Companies. Each of the BYBK Companies has timely withheld and
paid over all BYBK 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 BYBK
Companies with respect to BYBK Taxes, other than Liens for BYBK
Taxes not yet due and payable.
(b) Except as disclosed
on BYBK Disclosure
Schedule 3.7(b), no deficiencies for BYBK Taxes have been
claimed, proposed or assessed, with notice to any of the BYBK
Companies, by any taxing or other governmental authority against
the BYBK Companies that have not been settled, closed or reached a
final determination, or that have not been adequately reserved for
in the BYBK 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 BYBK. There are no pending
audits relating to any BYBK Tax liability of which any of the BYBK
Companies has received written notice. Except as disclosed on
BYBK Disclosure Schedule
3.7(b), none of the BYBK Companies is a party to any action
or proceeding for assessment or collection of BYBK Taxes, nor have
such events been asserted or, to the Knowledge of BYBK, threatened
against any of the BYBK Companies or any of their assets. No waiver
or extension of any statute of limitations relating to BYBK Taxes
is in effect with respect to the BYBK Companies. No power of
attorney has been executed by any of the BYBK Companies with
respect to any BYBK Tax matter that is currently in
force.
(c) The BYBK Companies
have disclosed on the federal income tax BYBK 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 BYBK 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 BYBK
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
BYBK Disclosure Schedule
3.7(c), none of the BYBK Companies is a party to any tax
sharing agreement or has any continuing obligations under any prior
tax sharing agreement. None of the BYBK 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 BYBK.
(d) None of the BYBK
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 “BYBK 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 BYBK Companies is required to pay, withhold or collect. As used
in this Agreement, the term “BYBK 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 BYBK 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 BYBK Companies as filed with the IRS for the year ended
December 31, 2015 have been furnished to OLB; true and complete
copies of the federal income tax returns of the BYBK Companies for
the year ended December 31, 2016 will be furnished to OLB within
five Business Days of filing; and, if the Effective Date is later
than the due dates therefor, true and complete copies of the
federal income tax returns of the BYBK Companies for the years
ending after December 31, 2017 will be furnished to OLB within five
Business Days of filing.
(g) True and complete
copies of the state income tax returns of the BYBK Companies as
filed with the State of Maryland for the year ended December 31,
2015 have been furnished to OLB; true and complete copies of the
state income tax returns of the BYBK Companies for the year ended
December 31, 2016 will be furnished to OLB within five Business
Days of filing; and, if the Effective Date is later than the due
dates therefor, true and complete copies of the state income tax
returns of the BYBK Companies for the years ending on or after
December 31, 2017 will be furnished to OLB within five Business
Days of filing.
Section
3.8
Contracts;
Certain Changes.
(a) Except as disclosed
in the BYBK SEC Reports or as described in BYBK Disclosure Schedule
3.8(a), BYBK
Disclosure Schedule 3.11, BYBK Disclosure Schedule
3.13(a), or BYBK
Disclosure Schedule 3.15(a), neither BYBK nor any BYBK
Subsidiary is a party to or subject to:
(i) Any employment,
consulting, severance, “change-in-control,”
indemnification, retirement or termination Contract with or for any
officer, director, employee, independent contractor, agent or other
Person;
(ii) Any
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 BYBK Governing Documents, any Contract 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 BYBK and, to the
Knowledge of BYBK, there are no claims for which any such person
would be entitled to indemnification under BYBK 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 Contract 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 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 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 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 with, or membership in, any local clearing house or
self-regulatory organization;
(xiv) any
Contract (other than this Agreement) 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
Contract that grants any “most favored nation” right,
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 termination fee
of over $100,000; or
(xvii) Any
Contract 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 listed in BYBK Disclosure Schedule
3.8(a), BYBK
Disclosure Schedule 3.11, BYBK Disclosure Schedule
3.13(a), and BYBK
Disclosure Schedule 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 BYBK Companies nor, to the Knowledge
of BYBK, any other party to any such Contracts, has breached any
provision of, or is in default under any term of, any such
Contracts and no party to any such Contracts 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 BYBK Disclosure
Schedule 3.8(c), since December 31, 2016, through and
including the date of this Agreement, none of the BYBK 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, (iii) entered into any
lease of real or personal property requiring annual payments in
excess of $100,000, other than in connection with foreclosed
property or in the Ordinary Course, 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 BYBK Disclosure
Schedule 3.8(d), neither BYBK nor any of the BYBK
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) Each of the BYBK
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 BYBK 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 BYBK
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 for
amounts not yet due or that are being contested in good
faith;
(iii) Statutory
Liens securing payments not yet due or that are being contested in
good faith;
(iv) Liens
for current BYBK 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 or irregularities of title, and other defects of
title that are not reasonably likely to have a Material Adverse
Effect;
(vii) Easements,
rights of way and other similar encumbrances that do not materially
affect the use of the properties or assets subject thereto or
affected thereby or otherwise materially impair business operations
at such properties;
(viii) With
respect to personal property reflected in the balance sheets
contained in the BYBK Financials, (A) dispositions and encumbrances
for adequate consideration in the Ordinary Course since the date of
such balance sheets and/or (B) dispositions of obsolete personal
property since the date of such balance sheets;
(ix) Those
items that are reflected as liabilities in the BYBK Financials;
and
(x) Items of personal
property that are held in any fiduciary or agency capacity
(collectively, “BYBK
Permitted Liens”).
(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
BYBK Companies has the right under valid, binding and existing
leases to use such real and personal property in all material
respects as presently occupied and used. There is not under any
such lease any material existing default by any BYBK Company or, to
the Knowledge of BYBK, any other party thereto, or any event that
with notice or lapse of time would constitute such a material
default and all rent and other sums and charges due and payable
under such leases have been paid.
(c) With respect to all
agreements pursuant to which any of the BYBK 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 BYBK
Companies currently maintains Insurance Policies with reputable
insurers against such risks and in such amounts as the management
of BYBK has reasonably determined to be prudent for such BYBK
Company’s operations and, to the Knowledge of BYBK, such
Insurance Policies are similar in scope and coverage in all
material respects to Insurance Policies maintained by other
similarly-situated businesses. Each of BYBK and each BYBK
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
Insurance Policy is in full force and effect and, except for
Insurance Policies insuring against potential liabilities of
officers, directors and employees of BYBK and the BYBK
Subsidiaries, BYBK or the relevant BYBK Subsidiary is the sole
beneficiary of such Insurance Policies. All premiums and other
payments due under such Insurance Policies have been paid, and all
material notices and claims thereunder have been filed in a due and
timely fashion. BYBK
Disclosure Schedule 3.9(d) identifies all Insurance Policies
maintained by the BYBK Companies.
(e) None of the BYBK
Companies has received notice from any insurance carrier
that:
(i) Any of its
Insurance Policies will be cancelled, terminated or not renewed or
that coverage thereunder will be reduced or eliminated;
or
(ii) Premium
costs with respect to any such Insurance Policy will be
substantially increased.
(f) Except as disclosed
in BYBK Disclosure
Schedule 3.9(f), there are presently no material claims
pending under such Insurance Policies and none of the BYBK
Companies has received any notices under such Insurance Policies.
All such Insurance Policies are valid and enforceable and in full
force and effect. Within the last three years, each of the BYBK
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.
Except as disclosed in the
BYBK SEC Reports or as described in BYBK Disclosure Schedule 3.10,
there is no Litigation now pending or, to the Knowledge of BYBK,
threatened, against any of the BYBK Companies or any of their
properties, or against any current or former officer, director or
employee of a BYBK Company in their capacities as such or a BYBK
Benefit Plan, or against any asset, interest, or right of any of
them, and to the Knowledge of BYBK there are no facts that
reasonably could be expected to be the basis for any such
Litigation. To the Knowledge of BYBK, no pending or threatened
Litigation described in BYBK 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 BYBK Companies to
perform their obligations under this Agreement. Except as described
in BYBK Disclosure
Schedule 3.10, none of the BYBK Companies is in default with
respect to any Order.
Section
3.11
Compliance with
Applicable Law.
Except
as disclosed on BYBK
Disclosure Schedule 3.11:
(a) Each of the BYBK
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 BYBK
Companies has, and since December 31, 2012, has had, 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, and have paid all fees and assessments due and
payable in connection therewith; 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 BYBK, threatened, and to the Knowledge of BYBK 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 BYBK Companies is in default or violation
of any such permits, licenses, authorizations, orders and
approvals. None of the BYBK Companies have been given notice or
been charged with any violation of any Law 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,
2012, each of the BYBK Companies has timely filed all reports,
forms, filings, schedules, information, data, registrations,
submissions, 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 “BYBK Reports”), and has
paid all fees and assessments due and payable in connection
therewith, and each of such reports, forms, filings, etc. were
complete and accurate in all material respects and 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 the BYBK 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; except as disclosed
in BYBK Disclosure
Schedule 3.11, none of the BYBK Reports when filed with the
SEC (the “BYBK 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; there (i) is no unresolved violation, criticism or
exception by any Regulatory Authority with respect to any report or
statement relating to any examinations, inspections or
investigations of BYBK or any BYBK Subsidiary (not including any
supervisory suggestions or recommendations), (ii) are no
outstanding formal or informal inquiries by, or unresolved
disagreements or disputes with, any Regulatory Authority with
respect to the business, operations, policies or procedures of BYBK
or any BYBK Subsidiary, and (iii) are no outstanding comments from
or unresolved issues raised by the SEC, as applicable, with respect
to any of the BYBK SEC Reports; and none of the BYBK 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
BYBK, investigation into the business or operations of the BYBK
Companies that has not been resolved;
(e) Since January 1,
2014, none of the BYBK 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) Except
as disclosed in BYBK
Disclosure Schedule 3.11, 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 BYBK Company
herein referred to as a “BYBK Regulatory
Agreement”);
(f) Other than as
disclosed in BYBK
Disclosure Schedule 3.11, none of the BYBK Companies has
received, consented to or entered into any BYBK Regulatory
Agreement that is currently in effect, nor has any BYBK Company
been advised since January 1, 2013 by any Regulatory Authority that
it is considering issuing, initiating, ordering or requesting any
BYBK 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 BYBK Regulatory Agreement, except to
the extent permitted by such BYBK Regulatory
Agreement;
(h) There is no
settlement, Order or regulatory restriction imposed upon or entered
into by any of the BYBK Companies or upon any of their
assets;
(i) BYBK has designed
and implemented and maintains 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
BYBK Companies is made known to the management of BYBK 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 BYBK SEC
Reports;
(j) Since January 1,
2013, (i) no BYBK Company nor, to the Knowledge of BYBK, any
director, officer, employee, auditor, accountant or other
Representative of any BYBK 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 (ii) no attorney
representing any BYBK 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 its
officers, directors, employees or agents to its board of directors
or any committee thereof or to any director or officer;
and
(k) BYBK has, in all
material respects, (i) properly certified all foreign deposit
accounts and has made all necessary tax withholdings on all of its
deposit accounts, (ii) timely and properly filed and maintained all
requisite Currency Transaction Reports and other related forms,
including any requisite Custom Reports required by any agency of
the U.S. Department of the Treasury, including the IRS, and (iii)
timely filed all Suspicious Activity Reports with the Financial
Crimes Enforcement Network (bureau of the U.S. Department of the
Treasury) required to be filed by it pursuant to applicable
Laws.
(a) There are no labor
or collective bargaining agreements to which any of the BYBK
Companies is a party. There is no union organizing effort pending
or, to the Knowledge of BYBK, threatened, against any of the BYBK
Companies or involving employees of any of the BYBK Companies.
There is no labor strike or labor dispute (other than routine
employee grievances that are not related to union employees), work
slowdown, stoppage, lockout or other job action pending or, to the
Knowledge of BYBK, threatened, against any of the BYBK Companies.
No Litigation asserting that any of the BYBK Companies has
committed an unfair labor practice (within the meaning of the
National Labor Relations Act of 1935 or comparable state law) or
other violation of state or federal labor Law or seeking to compel
any of the BYBK Companies to bargain with any labor organization or
other employee representative as to wages or conditions of
employment is pending or, to the Knowledge of BYBK, threatened,
with respect to any of the BYBK 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 BYBK
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. Except as described in
BYBK Disclosure Schedule
3.12, there is no pending or, to the Knowledge of BYBK,
threatened, Litigation against any of the BYBK Companies under any
applicable labor or employment Law or brought or made by a current
or former employee or applicant for employment.
(b) To BYBK’s
Knowledge, no employee of any BYBK Company is a party to, or is
otherwise bound by, any Contract, including any confidentiality or
non-competition agreement, that in any way adversely affects or
restricts the performance of such employee’s
duties.
(c) All of the BYBK
Companies’ employees are employed in the United States and
are either United States citizens or are legally entitled to work
in the United States under the Immigration Reform and Control Act
of 1986, as amended, other United States immigration Laws and the
Laws related to the employment of non-United States citizens
applicable in the state in which the employees are employed. Each
individual who renders services to any BYBK Company has provided
proof of employment eligibility and is properly classified by BYBK
as having the status of an employee or contractor or other
non-employee status (including for purposes of taxation and tax
reporting and under BYBK Benefit Plans).
(a) BYBK has set forth
in BYBK Disclosure
Schedule 3.13(a) a complete and accurate list of the BYBK
Benefit Plans and made available to OLB a copy of all available
written documents regarding such BYBK Benefit Plans
including:
(i) A copy of each of
the BYBK 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 BYBK 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 BYBK 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 BYBK
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 BYBK Benefit Plans within
the meaning of ERISA Section 3(1) or 3(2).
(b) The BYBK 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 BYBK Disclosure Schedule
3.13(b), no pension plan (within the meaning of ERISA
Section 3(2)) maintained or contributed to by any of the BYBK
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 BYBK, 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
BYBK Disclosure Schedule
3.13(b), no BYBK Benefit Plan is subject to IRC Section 412
or Title IV of ERISA, and as of the Effective Date, to the
Knowledge of BYBK, 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 BYBK Benefit Plan. Except pursuant to Contracts relating
to employment disclosed in BYBK Disclosure Schedule 3.8 or
as disclosed in BYBK
Disclosure Schedule 3.13(b), no BYBK Benefit Plan provides,
and none of the BYBK 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
BYBK, none of the BYBK 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 BYBK 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 BYBK Benefit Plan, and each BYBK 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 BYBK Companies that is
intended to be qualified under Section 401(a) of the IRC is so
qualified, and, to the Knowledge of BYBK, 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 BYBK
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 BYBK 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
BYBK 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 Litigation
(other than routine claims for benefits) has been filed, is pending
or, to the Knowledge of BYBK, is threatened, with respect to any
BYBK Benefit Plan and, to the Knowledge of BYBK, there is no fact
or contemplated event that would give rise to any Litigation (other
than routine claims for benefits) with respect to any BYBK Benefit
Plan. Without limiting the foregoing, to the Knowledge of BYBK, the
following are true:
(i) Each
BYBK 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
BYBK 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 BYBK Benefit Plan, to the Knowledge of BYBK 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 BYBK
Disclosure Schedule 3.13(d)(iv), no BYBK Benefit Plan is an
Employee Stock Ownership Plan as defined in Section 4975(e)(7)
of the IRC;
(v) No BYBK Benefit
Plan is a Qualified Foreign Plan as the term is defined in
Section 404A of the IRC and no BYBK 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 BYBK 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 BYBK 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 BYBK Benefit Plan, BYBK or any BYBK ERISA Affiliate
has the authority to amend or terminate such BYBK Benefit Plan at
any time, subject to the applicable requirements of ERISA and the
IRC and the provisions of the BYBK Benefit Plan.
(e) There is no
existing or, to the Knowledge of BYBK, contemplated, audit of any
BYBK Benefit Plan by the IRS, the U.S. Department of Labor, the
PBGC, any Regulatory Authority or any other governmental authority.
In addition, there is no pending or, to the Knowledge of BYBK,
threatened Litigation by, on behalf of or with respect to any BYBK
Benefit Plan, or by or on behalf of any individual participant or
beneficiary of any BYBK 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), nor, to the
Knowledge of BYBK, is there any basis likely to enable such
Litigation to prevail.
(f) Except as disclosed
on BYBK Disclosure
Schedule 3.13(f), (i) no payment contemplated or required by
or under any BYBK 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 BYBK 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 BYBK Companies.
(g) Except as disclosed
on BYBK Disclosure
Schedule 3.13(g), no BYBK Benefit Plan is a nonqualified
deferred compensation plan within the meaning of Section 409A of
the IRC. Each BYBK Benefit Plan (including employment Contracts 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 BYBK
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 BYBK Benefit
Plan).
Other than the BYBK Advisers,
none of the BYBK Companies and, to the Knowledge of BYBK, no
officer, director, employee, independent contractor, agent or
Affiliate of any BYBK 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) BYBK
Disclosure Schedule 3.15(a) contains a true, correct and
complete list of all street addresses and fee owners of all real
property owned, leased or operated by the BYBK Companies or
otherwise occupied by a BYBK Company or used or held for use by any
BYBK Company, including but not limited to all REO (the
“BYBK Real
Property”). Other than as set forth on BYBK Disclosure Schedule
3.15(a), there are no Persons in possession of any portion
of any of the BYBK Real Property owned or leased by any BYBK
Company other than such BYBK Company, and no Person other than a
BYBK Company has the right to use or occupy for any purpose any
portion of any of the BYBK Real Property owned, leased or licensed
by a BYBK Company. BYBK and the BYBK Subsidiaries own or lease all
properties as are necessary to their operations as now conducted.
True, correct and complete copies of all deeds, surveys, title
insurance policies and leases for the properties listed on
BYBK 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 BYBK possesses such deeds, surveys,
title insurance policies, leases, mortgages, deeds of trust and
security agreements. There are no outstanding options, rights of
first offer or refusal or other pre-emptive rights or purchase
rights with respect to any BYBK Real Property owned by a BYBK
Company, or any portion thereof.
(b) Except as disclosed
in BYBK Disclosure
Schedule 3.15(b), no lease with respect to any BYBK Real
Property and no deed with respect to any BYBK Real Property
contains any restrictive covenant that materially restricts the
use, transferability or value of such BYBK Real Property. Each
lease with respect to any BYBK 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,
reorganization, receivership, conservatorship, moratorium or
similar Laws affecting the enforcement of creditors’ rights
generally and the availability of equitable remedies), and is in
full force and effect. There are no existing defaults by the BYBK
Companies or, to the Knowledge of BYBK, the other party, under any
lease with respect to any BYBK Real Property and, to the Knowledge
of BYBK, there are no allegations or assertions of such defaults by
any party under any lease with respect to any BYBK 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 BYBK 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
BYBK, none of the buildings and structures located on any BYBK 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 BYBK
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 BYBK Disclosure Schedule
3.15(c), no condemnation or eminent domain proceeding is
pending or, to the Knowledge of BYBK, threatened, that would
preclude or materially impair the use of any BYBK Real Property in
the manner in which it is currently being used.
(d) The BYBK Companies
have a valid and enforceable leasehold interest in or, to the
Knowledge of BYBK, based on title insurance owned by it, good and
marketable title to, all BYBK Real Property and all improvements
thereon, subject to no Liens of any kind except (i) as noted in the
BYBK Financials, (ii) statutory Liens securing payments not yet due
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 for amounts not yet due or that are being
contested in good faith, and (v) those assets and properties
disposed of for fair market value in the Ordinary Course since the
date of the BYBK Financials. All BYBK Real Property used in the
business of the BYBK Companies is in adequate condition (ordinary
wear and tear excepted) and, to the Knowledge of BYBK, is free from
defects that could materially interfere with the current or
intended future use of such facilities, provided such future use is
substantially similar to its current use.
(e) Except as listed on
BYBK Disclosure Schedule
3.15(e), there are no Contracts to sell, lease or otherwise
dispose of any of the BYBK Real Property.
With
respect to BYBK and each BYBK 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 BYBK or any BYBK
Subsidiary. To the Knowledge of BYBK, 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 BYBK or any BYBK
Subsidiary by reason of any Environmental Laws. Neither BYBK nor
any BYBK Subsidiary during the past five years has received any
written notice from any Person or Regulatory Authority that BYBK or
any BYBK Subsidiary or the operation or condition of any property
ever owned or operated 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 BYBK or
any BYBK Subsidiary;
(b) There is no
Order or Litigation pending or, to the Knowledge of BYBK
threatened, before any court, governmental agency or other forum
against BYBK or any BYBK Subsidiary (i) for alleged noncompliance
(including by any predecessor) with, or liability under, any
Environmental Law or (ii) relating to the presence, release,
discharge, spillage or disposal into the environment of, any
Hazardous Materials, whether or not occurring at, on, under,
adjacent to or affecting (or potentially affecting) a site
currently or formerly owned, leased or operated by any BYBK Company
or any BYBK Real Property, nor, to the Knowledge of BYBK, is there
any reasonable basis for any such Litigation or Order;
(c) To the Knowledge of
BYBK, (i) there are no underground storage tanks on, in or under
any BYBK Real Property, and (ii) no underground storage tanks have
been closed or removed from any BYBK Real Property except in
compliance with Environmental Laws in all material respects;
and
(d) To the
Knowledge of BYBK, the BYBK 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.
(a) BYBK Disclosure Schedule
3.17(a) sets forth a complete and correct list of all
trademarks, trade dress, trade names, service marks, service names,
brand names, domain names, logos, patents, technology, inventions,
trade secrets, know-how, copyrights, works of authorship and other
intellectual property rights used in the conduct of the existing
business of each of the BYBK Companies for use in its business, and
all registrations, applications, technology rights, licenses or
other Contracts relating thereto and all Contracts relating to
third party intellectual property that it is licensed or authorized
to use in its business, including without limitation any software
licenses (collectively, the “BYBK Intellectual
Property”) other than “shrink wrap,”
“click wrap” or “browser wrap” licenses,
free licenses, open source licenses or force placed software
licenses. To the Knowledge of BYBK, each of the BYBK Companies owns
or possesses valid, binding and assignable licenses and other
rights to use without payment (other than as set forth in the
applicable license) all BYBK Intellectual Property that is used in
the conduct of its existing businesses free and clear of all Liens
(other than BYBK Permitted 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 BYBK Intellectual Property that any of the BYBK
Companies is licensed or authorized to use, the license, sublicense
or Contract covering such item is legal, valid, binding,
enforceable and in full force and effect, and no BYBK Company is in
default under or violation of any of its material BYBK Intellectual
Property licenses. To the Knowledge of BYBK, none of the BYBK
Companies is infringing, diluting, misappropriating or violating
the intellectual property of any other Person, and, except as
disclosed in BYBK
Disclosure Schedule 3.17(a), none of the BYBK Companies has
received any communications alleging that it has infringed,
diluted, misappropriated or violated any such intellectual
property. Except as disclosed in BYBK Disclosure Schedule
3.17(a), none of the BYBK Companies has sent any
communications alleging that any Person has infringed, diluted,
misappropriated or violated any BYBK Intellectual Property and, to
the Knowledge of BYBK, no Person is infringing, diluting,
misappropriating or violating any of the BYBK Intellectual
Property. Subject to any trademark filings required by Law in
connection with the Merger, the validity, continuation and
effectiveness of all licenses and other Contracts relating to
material BYBK Intellectual Property used by any BYBK Company in the
Ordinary Course and the current terms thereof will not be affected
by the Contemplated Transactions, the use of all material
Intellectual Property of each of the BYBK Companies’
trademarks will be transferred to OLB in connection with the
Contemplated Transactions and after the Effective Time, no Person
besides OLB shall have right and title to the “Bay
Bank” or “Bay Bancorp, Inc.” trade names and
trademarks when used in connection with the BYBK Companies’
currently-offered goods and services in the territories in which
they currently operate. For the avoidance of doubt, all third-party
rights used by any of the BYBK Companies pursuant to software
licenses that are not required to be listed in BYBK Disclosure Schedule
3.17(a) are nevertheless within the definition of
“BYBK Intellectual Property.”
(b) Each of the BYBK
Companies has taken commercially reasonable actions to protect and
maintain (a) all material BYBK 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 disabling codes or instructions, spyware,
Trojan horses, worms, viruses or other software or elements that
permit or cause unauthorized access to, or disruption, impairment,
disablement or destruction of, software, data or other materials.
To the Knowledge of BYBK, 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 BYBK Companies (the “BYBK 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 BYBK 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 BYBK, except as disclosed
in BYBK Disclosure
Schedule 3.17(b), no Person has gained unauthorized access
to the BYBK IT Assets. Each of the BYBK Companies has implemented
commercially reasonable backup and disaster recovery policies,
procedures, systems and technology consistent with industry
practices for financial institutions of comparable size and
complexity, and sufficient to reasonably maintain the operation of
the respective businesses of BYBK and each of the BYBK Subsidiaries
in all material respects.
(c) BYBK
Disclosure Schedule 3.17(c) sets forth a complete and
correct list of all Persons, other than directors, officers and
employees of the BYBK Companies, who have access to any of the BYBK
IT Assets.
Section
3.18
Information to
be Supplied.
(a) The information
supplied by BYBK 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 BYBK Common Stock and OLB Common Stock,
and up to and including the date of the BYBK Common
Stockholders’ Meeting and the OLB 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 BYBK board of directors deems material to a vote on 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 BYBK 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 BYBK 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 BYBK Disclosure
Schedule 3.19 or on BYBK Disclosure Schedule
3.20(d), as is disclosed in the BYBK Financials, and/or as
disclosed in the BYBK SEC Reports, neither BYBK nor any BYBK
Subsidiary is a party to any transaction (including any loan or
other credit accommodation but excluding deposits in the Ordinary
Course) with any Affiliate of BYBK or any BYBK Subsidiary, and all
such transactions (i) were made in the Ordinary Course, (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
BYBK or any BYBK Subsidiary, and (iii) did not involve more than
the normal risk of collectability or present other unfavorable
features.
(b) Except as set forth
in BYBK Disclosure
Schedule 3.19, as of the date hereof, no Credit Extension by
any of the BYBK Companies to any BYBK Subsidiary or Affiliate of
BYBK 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 BYBK, 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
in BYBK Disclosure
Schedule 3.20(a), all Credit Extensions reflected as assets
in the BYBK Financials or currently outstanding that will be
reflected as assets in the BYBK Financials arose out of bona fide
arm’s-length transactions, were made for good and valuable
consideration in the Ordinary Course, 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, Contracts 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, receivership,
conservatorship, moratorium or similar Laws affecting the
enforcement of creditors’ rights generally 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 BYBK
Companies of all obligations owed thereto. All Credit Extensions
reflected, or currently outstanding that will be reflected, as
assets in the BYBK Financials were made in accordance in all
material respects with sound banking practices, and to the
Knowledge of BYBK, 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, reorganization, receivership,
conservatorship, moratorium or similar Laws affecting the
enforcement of creditors’ rights generally or by general
principles of equity. The notes or other credit or security
documents with respect to each such outstanding Credit Extension
were in compliance in all material respects with all applicable
Laws at the time of origination or purchase by any BYBK Company and
are complete and correct in all material respects.
(b) To the Knowledge of
BYBK, neither the terms of any Credit Extension by any of the BYBK
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 BYBK 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 BYBK Disclosure
Schedule 3.20(c), none of the Contracts pursuant to which
any of the BYBK 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. Except
as would not be material to the BYBK Companies as a whole, each
Credit Extension included in a pool of Credit Extensions
originated, securitized or, to the Knowledge of BYBK, acquired by
any BYBK Company (a “Pool”) meets all
eligibility requirements (including all applicable requirements for
obtaining mortgage insurance certificates and loan guaranty
certificates) for inclusion in such Pool. All such Pools have been
finally certified or, if required, recertified in accordance with
all applicable Laws, except where the time for certification or
recertification has not yet expired. No Pools have been improperly
certified and, except as would not be material to BYBK and the BYBK
Companies taken as a whole, no Credit Extension has been bought out
of a Pool without all required approvals of the applicable
investors.
(d) BYBK Disclosure Schedule
3.20(d) sets forth a list of all Credit Extensions as of the
date hereof by BYBK or Bay Bank to any directors, executive
officers and principal stockholders (as such terms are defined in
the FRB’s Regulation O) of any of the BYBK Companies. There
are no employee, officer, director or other insider Credit
Extensions by any of the BYBK 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
BYBK, no shares of BYBK Common Stock were purchased with the
proceeds of a loan made by any of the BYBK Companies.
Section
3.21
Allowance for
Loan Losses.
The allowance for loan losses
reflected in reports by the BYBK 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 BYBK Financials has been and will be
established and maintained in accordance with GAAP and applicable
Law and in a manner consistent with Bay Bank’s internal
policies. The allowance for loan losses reflected in such reports
and the allowance for loan losses shown in the BYBK Financials, in
the opinion of management, was or will be adequate as of the dates
thereof. BYBK has disclosed to OLB on BYBK Disclosure Schedule 3.21
all Credit Extensions (including participations) by and all
interest-bearing assets of the BYBK 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 BYBK Companies during the past 12 months of, or has
asserted against any of the BYBK Companies, in each case in
writing, any “lender liability” or similar claim, and,
to the Knowledge of BYBK, each borrower, customer or other party
that has given any of the BYBK Companies any oral notification of,
or orally asserted to or against any of the BYBK 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 BYBK Company or any Regulatory Authority, (g)
to the Knowledge of BYBK, 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 BYBK shall provide an updated BYBK 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 Bay Bank’s
non-performing assets are carried at fair value based on current
independent appraisals or current management
appraisals.
Section
3.22
Community
Reinvestment Act.
Bay Bank is the only BYBK
Company that is subject to the Community Reinvestment Act (12
U.S.C. §§ 2901 et
seq.) (the “CRA”). To the Knowledge
of BYBK, Bay Bank is in compliance in all material respects with
the CRA and all regulations promulgated thereunder. BYBK has
supplied OLB with a copy of Bay Bank’s current CRA Statement,
all letters and written comments received by Bay Bank since
September 16, 2016 pertaining thereto and any responses by Bay Bank
to such comments. Bay Bank has a rating of
“satisfactory” or better as of its most recent CRA
compliance examination and BYBK and Bay Bank have received no
communication from any Regulatory Authority that would lead BYBK to
believe that Bay Bank 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 Bay Bank under the
CRA.
Section
3.23
Anti-Money
Laundering; OFAC; Sanctions; and Information Security.
(a) To the Knowledge of
BYBK, there do not exist any facts or circumstances that would
cause any of the BYBK 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
(“OFAC”), 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 BYBK 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 BYBK Companies.
To the Knowledge of BYBK, 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 BYBK Companies to undertake any
remedial action. The board of directors or other governing body of
each BYBK Company that is subject to Section 326 of the USA PATRIOT
Act and the regulations thereunder has adopted, and each such BYBK
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 BYBK
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) No BYBK Company or,
to the Knowledge of BYBK, any director, officer, agent, employee,
Affiliate or other Person on behalf of any BYBK Company, is (a)
engaged in any services (including financial services), transfers
of goods, software or technology, or any other business activity
related to (i) Cuba, Iran, North Korea, Sudan, Syria or the Crimea
region of Ukraine claimed by Russia (the “Sanctioned Countries”),
(ii) the government of any Sanctioned Country, (iii) any Person
located in, resident in, formed under the laws of, or owned or
controlled by the government of, any Sanctioned Country, or (iv)
any Person made subject of any sanctions administered or enforced
by the United States Government, including, without limitation,
OFAC’s list of Specially Designated Nationals, or by the
United Nations Security Council, the European Union, the United
Kingdom’s Office of Financial Sanctions Implementation (Her
Majesty’s Treasury), or other relevant sanctions authority
(collectively, “Sanctions ”), (b) engaged
in any transfers of goods, technologies or services (including
financial services) that may assist the governments of Sanctioned
Countries or facilitate money laundering or other activities
proscribed by United States Law, (c) is a Person currently the
subject of any Sanctions or (d) located, organized or resident in
any Sanctioned Country.
(c) BYBK Disclosure Schedule
3.23(c) describes any event, circumstance or other
occurrence, and the remedial steps taken by any of the BYBK
Companies with respect thereto, since January 1, 2012, 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 BYBK 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
BYBK Companies, including, without limitation, communications,
regulatory correspondence and reports, documents and data,
information relating to products and services, activities,
strategies and plans, BYBK 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.
(d) Except
as disclosed in BYBK
Disclosure Schedule 3.23(d), BYBK and each of its
Subsidiaries has (i) complied in all material respects with its
published privacy policies and internal privacy policies and
guidelines, including with respect to the collection, storage,
transmission, transfer, disclosure, destruction and use of
personally identifiable information and (ii) taken commercially
reasonable measures to ensure that all personally identifiable
information in its possession or control is reasonably protected
against loss, damage and unauthorized access, use, modification or
other misuse. To BYBK’s Knowledge, there has been no loss,
damage or unauthorized access, use, modification or other misuse of
any such information by BYBK, any of its Subsidiaries or any other
Person.
Section
3.24
Securities
Activities of Employees.
To the Knowledge of BYBK, the
officers, employees and agents of the BYBK 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; Internal Control.
(a) The minute books
and stock ledgers of the BYBK Companies that have been made
available to OLB, its Representatives or its Affiliates constitute
all of the minute books and stock ledgers of the BYBK 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 BYBK
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 BYBK Companies at 7151 Columbia Gateway Drive,
Suite A, Columbia, Maryland 21046.
(b) BYBK 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
by or with the BYBK Companies are executed in accordance with
management’s general or specific authorizations; (ii)
transactions by or with the BYBK Companies 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 the assets of, and the incurrence of
liabilities by, the BYBK Companies is permitted only in accordance
with management’s general or specific authorizations; (iv)
the recorded accountability for assets and liabilities of the BYBK
Companies is compared with existing assets and liabilities of the
BYBK Companies at reasonable intervals and appropriate action is
taken with respect to any differences; and (v) extensions of credit
by and other receivables of the BYBK Companies are recorded
accurately, and proper and adequate procedures are implemented to
effect the collection thereof on a current and timely basis. Except
as disclosed in the BYBK SEC Reports or on BYBK Disclosure Schedule
3.25(b), since December 31, 2012, neither BYBK nor, to
BYBK’s Knowledge, any employee, auditor, accountant or
representative of any BYBK Company, has received or otherwise had
or obtained knowledge of any complaint, allegation, assertion or
claim, whether written or oral, regarding the adequacy of
BYBK’s internal control over financial reporting or integrity
of the BYBK Financials or the accounting or auditing practices,
procedures, methodologies or methods (including with respect to
loan loss reserves, write-downs, charge-offs and accruals) of BYBK
or any of its Subsidiaries or their respective internal accounting
controls, including any complaint, allegation, assertion or claim
that BYBK or any of its Subsidiaries has engaged in questionable
accounting or auditing practices. To the Knowledge of BYBK 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 BYBK’s ability to record, process, summarize
and report financial information. To the Knowledge of BYBK, except
as disclosed on BYBK
Disclosure Schedule 3.25(b), there has occurred no fraud,
whether or not material, that involves management or other
employees who have a significant role in BYBK’s internal
control over financial reporting.
(c) Each of the BYBK
Companies makes and keeps Books and Records 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 and Records have been and are being maintained
in the Ordinary Course in accordance with applicable Law and
accounting requirements. None of the records, systems, controls,
data or information of the BYBK 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 BYBK Companies or their
accountants, except as would not reasonably be expected to have a
Material Adverse Effect. Except as disclosed on BYBK Disclosure Schedule
3.25(b), no attorney representing BYBK or any BYBK
Subsidiary, whether or not employed by BYBK or any BYBK Subsidiary,
has reported evidence of a material violation of Securities Laws,
breach of fiduciary duty or similar violation by BYBK or any of its
officers, directors or employees to the board of directors of BYBK
or any committee thereof or to any director or officer of BYBK. To
BYBK’s Knowledge, except as disclosed on BYBK Disclosure Schedule
3.25(b), there has been no instance of fraud by any BYBK
Company, whether or not material, that occurred during any period
covered by BYBK Financials.
(a) Each of the BYBK
Companies has good and marketable title to all securities that it
owns (except those sold under repurchase agreements or held in any
fiduciary or agency capacity). None of the investment securities
reflected in the BYBK Financials under the headings
“investment securities available for sale” and
“investment securities held to maturity” and, except as
described in BYBK
Disclosure Schedule 3.26, none of the investment securities
that any of the BYBK Companies acquired after June 30, 2017, are
subject to any restrictions, whether contractual or statutory, that
materially impair such BYBK Company’s ability to freely
dispose of such investment securities at any time, and such BYBK
Company was permitted by applicable Law to acquire such investment
securities at the time they were acquired.
(b) BYBK and its
Subsidiaries employ, to the extent applicable, investment,
securities, risk management and other policies, practices and
procedures that BYBK believes are customary and reasonable in the
context of their respective businesses, and BYBK and its
Subsidiaries have, since December 31, 2012, been in compliance with
such policies, practices and procedures in all material
respects.
As of the date hereof, BYBK
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 BYBK 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 BYBK
Companies taken, caused, agreed to take or cause or failed to take
or cause any such action.
BYBK’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 the BYBK Advisers 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 BYBK pursuant to the terms of
this Agreement is fair, from a financial point of view, to the
stockholders of BYBK. 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 BYBK’s stockholders held in
2015, 2016 and 2017, along with any other form of correspondence
between BYBK and its stockholders during those years, including,
without limitation, any annual or quarterly reports provided to
stockholders, either have been filed with the SEC and are publicly
available to OLB via EDGAR or have been provided to
OLB.
Section
3.30
Absence of
Certain Changes.
Except as disclosed in the
BYBK SEC Reports, in BYBK
Disclosure Schedule 3.30, or provided for or contemplated by
this Agreement, since December 31, 2016:
(a) There has not been
any material transaction by any of the BYBK Companies other than in
the Ordinary Course;
(b) There has not been
any acquisition or disposition by any of the BYBK 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
$100,000, other than acquisitions or dispositions, including
acquisitions and dispositions of REO and investment securities,
made in the Ordinary Course;
(c) There has not been
any Lien on any of the properties or assets of the BYBK Companies,
except to secure extensions of credit in the Ordinary Course (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);
(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 BYBK Companies, or any bonus payment,
other than routine increases made in the Ordinary Course, 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 BYBK
Companies has incurred, assumed or taken any property subject to
any liability in excess of $100,000, except for liabilities
incurred or assumed or property taken subsequent to December 31,
2016 in the Ordinary Course;
(f) There has not been
any material alteration in the manner of keeping the Books and
Records of the BYBK 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 BYBK Real
Property;
(i) There has not been
any elimination of a reserve by any BYBK Company where the
liability related to such reserve has remained;
(j) There has not been
any failure by a BYBK Company to depreciate capital assets in
accordance with past practice or to eliminate capital assets that
are no longer used in its business;
(k) There has not been
any extraordinary reduction or deferral by any of the BYBK
Companies of ordinary or necessary expenses; and
(l) No events have
occurred that have had or would be reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on the
BYBK Companies, taken as a whole.
Section
3.31
Absence of
Undisclosed Liabilities.
None of the BYBK 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 BYBK
Financials delivered or made available to OLB prior to the date of
this Agreement, or (b) as contemplated under this Agreement. Except
as disclosed in BYBK
Disclosure Schedule 3.31, since December 31,
2016, none of the BYBK
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 BYBK Financials or
(b) paid in connection with transactions made in the Ordinary
Course consistent with applicable Law.
Section
3.32
Option Plans
and Convertible Securities.
Except as disclosed in
BYBK Disclosure Schedule
3.30, (a) the BYBK Companies do not maintain 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 any of the BYBK Companies, and (b) no Rights
with respect to any equity plan of the BYBK Companies are
outstanding.
(a) All of the deposits
held by Bay Bank (including the records and documentation
pertaining to such deposits) have been established and are held in
compliance in all material respects with (i) all applicable
policies, practices and procedures of Bay Bank, and (ii) all
applicable Laws, including anti-money laundering and anti-terrorism
Laws and embargoed persons requirements.
(b) Except as described
in BYBK Disclosure
Schedule 3.33, none of Bay Bank’s 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 BYBK’s own account or for the account of one or more of
BYBK’s Subsidiaries or their customers (all of which are set
forth in BYBK 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 BYBK each of them constitutes the valid and legally
binding obligation of BYBK or such BYBK Subsidiary, enforceable in
accordance with its terms (except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, receivership,
conservatorship, moratorium or similar Laws affecting the
enforcement of creditors’ rights generally or by general
equity principles), and is in full force and effect. Neither BYBK
nor any BYBK Subsidiary, nor, to the Knowledge of BYBK, any other
party thereto, is in breach of any of its obligations under any
such agreement or arrangement in any material respect.
Except as described in
BYBK Disclosure Schedule
3.35, none of the BYBK 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 BYBK Companies originates, maintains or administers credit card
accounts. Except as described in BYBK Disclosure Schedule 3.36,
none of the BYBK Companies provides, or has provided, merchant
credit card processing services to any merchants.
Section
3.37
No
Broker-Dealer Subsidiary.
Neither
BYBK nor any BYBK Subsidiary is a broker-dealer required to be
registered under the Exchange Act with the SEC.
Neither
BYBK nor any BYBK Subsidiary conducts insurance operations that
require a license from any Regulatory Authority under any
applicable Law.
(a) BYBK and the BYBK
Subsidiaries are engaged in all material respects only in the
business described in the BYBK SEC Reports, and the BYBK SEC
Reports contain a complete and accurate description in all material
respects of the business of BYBK and the BYBK Subsidiaries, taken
as a whole.
(b) The assets
reflected in the most recent BYBK Financial Statements that are
owned or leased by the BYBK Companies, and in combination with the
BYBK Real Property, the BYBK Intellectual Property and contractual
benefits and burdens of the BYBK Companies constitute, as of the
Closing Date, all of the assets, rights and interests necessary to
enable the BYBK Companies to operate consolidated businesses in the
Ordinary Course and as the same is expected to be conducted on the
Closing Date.
The
BYBK 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 BYBK Organizational Documents and the provisions
of any federal or state “anti-takeover,” “fair
price,” “affiliate transaction,” “business
combination,” “moratorium,” “control share
acquisition” or similar Laws.
Attached hereto as
BYBK Disclosure Schedule
3.41 is a list of holders of shares of the BYBK Common Stock
compiled and provided by Computershare, Inc., the registrar and
transfer agent in respect of the BYBK Common Stock, containing
their names, addresses and number of shares held of record. To the
Knowledge of BYBK, such stockholders’ list is complete and
accurate in all material respects.
The schedules delivered by
BYBK 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 BYBK, 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.
(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
corporate power and lawful authority to carry on its business and
operations as now being conducted and to own or lease and operate
all of its properties and assets as presently owned or leased and
operated. 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 corporate power
and lawful authority to carry on its business and operations as now
being conducted and to own or lease and operate all of its
properties and assets as presently owned or leased and operated.
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) Old Line is an
“insured depository institution” as defined in the
Federal Deposit Insurance Act and applicable regulations
thereunder, the deposits of Old Line are insured by the FDIC
through the Deposit Insurance Fund 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. No proceedings for the revocation or termination of such
deposit insurance are pending or, to the Knowledge of OLB,
threatened.
(d) OLB Disclosure Schedule 4.1(d)
contains a complete and accurate list of all OLB Subsidiaries. Each
OLB Subsidiary is duly formed, validly existing and in good
standing under the laws of the state of its formation and has the
power and lawful authority to carry on its business and operations
as now being conducted and to own or lease and operate all of its
properties and assets as presently owned or leased and operated.
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 equity interests 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 BYBK
true, correct and complete 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”).
(a) The authorized
capital stock of OLB consists of (i) 25,000,000 shares of Common
Stock, par value $0.01 per OLB Common Stock”), of
which 12,467,517.5 shares are duly and 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 not outstanding any 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 under the MGCL, free of preemptive
rights, except as may be defined in OLB’s articles of
incorporation, and were not issued in violation o
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
r 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 va validly issued, fully
paid, nonassessable and free of preemptive rights.
(b) Except as disclosed
in OLB Disclosure Schedule
4.2(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, Contracts 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.
(a) OLB
has the corporate power and authority necessary to execute and
deliver this Agreement and, subject to the receipt of all consents,
waivers and approvals described in OLB Disclosure Schedule 4.4 and
approval of the Merger by the holders of OLB Common Stock as
required by OLB’s articles of incorporation and bylaws and
the MGCL, to consummate the Contemplated Transactions and to
otherwise perform 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, except for approval by the holders
of OLB Common Stock as required by OLB’s articles of
incorporation and bylaws and the MGCL, 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 BYBK, constitutes a
legal, valid and binding obligation of OLB, enforceable against OLB
in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, receivership, conservatorship,
moratorium or similar Laws affecting the enforcement of
creditors’ rights generally and except that the availability
of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any
proceeding may be brought.
(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,
the approval of the Merger by the holders of OLB Common Stock as
required by OLB’s articles of incorporation and bylaws and
the MGCL, OLB’s and BYBK’s compliance with any
conditions contained in this Agreement, 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,
or constitute or result in a default under, or require any consent,
waiver, approval or similar action pursuant to, 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, Contract 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, assuming the due
authorization, execution and delivery of the Bank Merger Agreement
by Bay Bank, will be a legal, valid and binding agreement of Old
Line enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, receivership,
conservatorship, moratorium or similar Laws affecting the
enforcement of creditors’ rights generally and except that
the availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before
which any proceeding may be brought. At the Closing, all other
Contracts, 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
applicable bankruptcy, insolvency, reorganization, receivership,
conservatorship, moratorium or similar Laws affecting the
enforcement of creditors’ rights generally and except that
the availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before
which any proceeding may be brought.
(d) The approval of the
Merger by the holders of OLB Common Stock is the only vote of
holders of any class of OLB 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 OLB Common Stock as of the record
date for the OLB Common Stockholders’ Meeting is required to
approve the Merger under the MGCL and OLB’s articles of
incorporation and bylaws.
(e) OLB’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 OLB and its stockholders, (ii) authorized and
approved this Agreement and the Contemplated Transactions, (iii)
directed that the Merger be submitted for consideration at the OLB
Common Stockholders’ Meeting, and (iv) recommended that its
stockholders approve the Merger.
Section
4.4
Consents;
Regulatory Approvals.
Except as described in
Section 4.3(b) of this Agreement and 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.
(a) OLB has delivered
or made available to BYBK the OLB Financials, except those
pertaining to annual and quarterly periods ending on or after
September 30, 2017, which it will deliver or make available by each
respective delivery date as required by this Agreement. The OLB
Financials with respect to periods ending prior to the date of this
Agreement (i) are true, accurate and complete in all material
respects, and have been prepared from, and are in accordance with,
the Books and Records of OLB and the OLB Subsidiaries and (ii)
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 OLB Financials with respect
to periods ended prior to the date of this Agreement 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.
(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, 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.
(c) During the periods
covered by the OLB Financials with respect to periods ended prior
to the date of this Agreement, OLB’s independent registered
public accounting firm, Dixon Hughes Goodman LLP, was independent
of OLB and its management. As of the date hereof, OLB’s
independent registered public accounting firm, Dixon Hughes Goodman
LLP, has not resigned (or informed OLB that it intends to resign)
or been dismissed 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.
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 June 30, 2017, 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
in 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 OLB 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 Contract 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 Contract (other
than this Agreement) 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 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 for
amounts not yet due or that are being contested in good
faith;
(iii) Statutory
Liens securing payments not yet due 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 or irregularities of title, and other defects of
title that are not reasonably likely to have a Material Adverse
Effect;
(vii) Easements,
rights of way and other similar encumbrances that do not materially
affect the use of the properties or assets subject thereto or
affected thereby or otherwise materially impair business operations
at such properties;
(viii) 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 since the date of
such balance sheets and/or (B) dispositions of obsolete personal
property since the date of such balance sheets;
(ix) Those
items that are reflected as liabilities in the OLB Financials;
and
(x) Items of personal
property that are held in any fiduciary or agency capacity
(collectively, “OLB
Permitted Liens”).
(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, binding and existing
leases to use such real and personal property in all material
respects as presently occupied and used. There is not under any
such lease any material existing default by any OLB Company or, to
the Knowledge of OLB, any other party thereto, or any event that
with notice or lapse of time would constitute such a material
default and all rent and other sums and charges due and payable
under such leases have been paid.
(c) Each of the OLB
Companies currently maintains Insurance Policies with reputable
insurers against such risks and in such amounts as the management
of OLB has reasonably determined to be prudent for such OLB
Company’s operations and, to the Knowledge of OLB, such
Insurance Policies are similar in scope and coverage in all
material respects to Insurance Policies 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 Insurance Policy is in
full force and effect and, except for Insurance 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 Insurance Policies. All premiums
and other payments due under such Insurance Policies have been
paid, and all material notices and claims thereunder have been
filed in a due and timely fashion. OLB Disclosure Schedule 4.9(c)
identifies all Insurance Policies maintained by the OLB
Companies.
(d) None of the OLB
Companies has received notice from any insurance carrier
that:
(i) Any of its
Insurance Policies will be cancelled, terminated or not renewed or
that coverage thereunder will be reduced or eliminated;
or
(ii) Premium
costs with respect to any such Insurance Policy will be
substantially increased.
Except as described in
OLB Disclosure Schedule
4.10, there is no Litigation now pending or, to the
Knowledge of OLB, threatened, 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 Litigation. To the Knowledge of OLB, no pending or threatened
Litigation 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 described
in OLB Disclosure Schedule
4.10, none of the OLB Companies is in default with respect
to any Order.
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, and since December 31, 2012, has had, 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, and have paid all fees and assessments due and
payable in connection therewith; 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 is in default or violation
of any such permits, licenses, authorizations, orders and
approvals. None of the OLB Companies have been given notice or been
charged with any violation of any Law 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,
2012, each of the OLB Companies has timely filed all reports,
forms, filings, schedules, information, data, registrations,
submissions, 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 reports, forms, filings, etc. were
complete and accurate in all material respects and 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 the OLB 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 “OLB 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; there (i) is no unresolved
violation, criticism or exception by any Regulatory Authority with
respect to any report or statement relating to any examinations,
inspections or investigations of OLB or any OLB Subsidiary (not
including any supervisory suggestions or recommendations), (ii) are
no outstanding formal or informal inquiries by, or unresolved
disagreements or disputes with, any Regulatory Authority with
respect to the business, operations, policies or procedures of OLB
or any OLB Subsidiary, and (iii) are no outstanding comments from
or unresolved issues raised by the SEC, as applicable, with respect
to any of the OLB SEC Reports; and 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
settlement, Order or regulatory restriction imposed upon or entered
into by any of the OLB Companies or upon any of their
assets;
(i) OLB has designed
and implemented and maintains 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 SEC
Reports;
(j) Since January 1,
2013, (i) 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 (ii) 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 its officers,
directors, employees or agents to its board of directors or any
committee thereof or to any director or officer; and
(k) OLB has, in all
material respects, (i) properly certified all foreign deposit
accounts and has made all necessary tax withholdings on all of its
deposit accounts, (ii) timely and properly filed and maintained all
requisite Currency Transaction Reports and other related forms,
including any requisite Custom Reports required by any agency of
the U.S. Department of the Treasury, including the IRS, and (iii)
timely filed all Suspicious Activity Reports with the Financial
Crimes Enforcement Network (bureau of the U.S. Department of the
Treasury) required to be filed by it pursuant to applicable
Laws.
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 or
involving employees of any of the OLB Companies. There is no labor
strike or labor dispute (other than routine employee grievances
that are not related to union employees), work slowdown, stoppage,
lockout or other job action pending or, to the Knowledge of OLB,
threatened, against any of the OLB Companies. No Litigation
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 comparable state law) or other violation of state or
federal labor Law or seeking to compel any of the OLB Companies to
bargain with any labor organization or other employee
representative 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.
Except as described in OLB
Disclosure Schedule 4.12, there is no pending or, to the
Knowledge of OLB, threatened, Litigation 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 BYBK a copy of all available written
documents regarding such 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 any of 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, any Regulatory Authority or any other governmental authority.
In addition, there is no pending or, to the Knowledge of OLB,
threatened material Litigation 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), nor, to the Knowledge of OLB, is there any basis likely to
enable such Litigation 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 Contracts 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.
Other than Fig Partners, LLC,
none of the OLB Companies and, to the Knowledge of OLB, no officer,
director, employee, independent contractor, agent or Affiliate 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) OLB and the OLB
Subsidiaries own or lease all properties as are necessary to their
operations as now conducted. 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,
reorganization, receivership, conservatorship, moratorium or
similar Laws affecting the enforcement of creditors’ rights
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 or eminent domain 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 securing payments not yet due
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 for amounts not yet due or that are being
contested in good faith, and (v) those assets and properties
disposed of for fair market value in the Ordinary Course 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, provided such future use is
substantially similar to its current use.
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 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
Order or Litigation 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, release, discharge, spillage or
disposal into the environment of, any Hazardous Materials, whether
or not occurring at, on, under, adjacent to or affecting (or
potentially affecting) a site currently or formerly owned, leased
or operated by any OLB Company or any OLB Real Property, nor, to
the Knowledge of OLB, is there any reasonable basis for any such
Litigation or Order;
(c) To the Knowledge of
OLB, (i) there are no underground storage tanks on, in or under any
OLB Real Property, and (ii) no underground storage tanks have been
closed or removed from any OLB Real Property 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 OLB Common Stock and BYBK Common Stock,
and up to and including the date of the OLB Common
Stockholders’ Meeting and the BYBK 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 OLB board of directors deems material to a vote on the
Merger, 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 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 BYBK 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 OLB 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) 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 disclosed
in OLB Disclosure Schedule
4.19, all Credit Extensions reflected as assets in the OLB
Financials or currently outstanding that will be 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, and are evidenced by notes,
Contracts 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,
receivership, conservatorship, moratorium or similar Laws affecting
the enforcement of creditors’ rights generally 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, or currently outstanding that will be 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, reorganization, receivership,
conservatorship, moratorium or similar Laws affecting the
enforcement of creditors’ rights generally 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
BYBK 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 $1.0 million and
have been accelerated during the past 12 months, (b) that are in an
amount of at least $1.0 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 BYBK 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 BYBK with a
copy of Old Line’s current CRA Statement, all letters and
written comments received by Old Line since March 6, 2017
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; Internal Control.
(a) The minute books
and stock ledgers of the OLB Companies that have been made
available to BYBK, 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 BYBK have been made available
to BYBK, its Representatives or its Affiliates.
(b) OLB 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
by or with the OLB Companies are executed in accordance with
management’s general or specific authorizations; (ii)
transactions by or with the OLB Companies 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 the assets of, and the incurrence of
liabilities by, the OLB Companies is permitted only in accordance
with management’s general or specific authorizations; (iv)
the recorded accountability for assets and liabilities of the OLB
Companies is compared with existing assets and liabilities of the
OLB Companies at reasonable intervals and appropriate action is
taken with respect to any differences; and (v) extensions of credit
by and other receivables of the OLB Companies are recorded
accurately, and proper and adequate procedures are implemented to
effect the collection thereof on a current and timely basis. Except
as disclosed in the OLB SEC Reports, since December 31, 2012,
neither OLB nor, to OLB’s Knowledge, any employee, auditor,
accountant or representative of any OLB Company, has received or
otherwise had or obtained knowledge of any complaint, allegation,
assertion or claim, whether written or oral, regarding the adequacy
of OLB’s internal control over financial reporting or
integrity of the OLB Financials or the accounting or auditing
practices, procedures, methodologies or methods (including with
respect to loan loss reserves, write-downs, charge-offs and
accruals) of OLB or any of its Subsidiaries or their respective
internal accounting controls, including any complaint, allegation,
assertion or claim that OLB or any of its Subsidiaries has engaged
in questionable accounting or auditing practices. Except as
disclosed in the OLB 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.
(c) Each of the OLB
Companies makes and keeps Books and Records 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 and Records have been and are being maintained
in the Ordinary Course in accordance with applicable Law and
accounting requirements. None of the records, 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. No attorney representing OLB or any OLB
Subsidiary, whether or not employed by OLB or any OLB Subsidiary,
has reported evidence of a material violation of Securities Laws,
breach of fiduciary duty or similar violation by OLB or any of its
officers, directors or employees to the board of directors of OLB
or any committee thereof or to any director or officer of OLB. To
OLB’s Knowledge, there has been no instance of fraud by any
OLB Company, whether or not material, that occurred during any
period covered by OLB Financials.
Each of the OLB Companies has
good and marketable title to all securities that it owns (except
those sold under repurchase agreements or held in any fiduciary or
agency capacity). 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 June 30, 2017, 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.
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.
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 FIG Partners, LLC,
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 BYBK pursuant to
the terms of this Agreement is 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
2015, 2016 and 2017, along with any other form of correspondence
between OLB and its stockholders during those years, including,
without limitation, any annual or quarterly reports provided to
stockholders, either have been filed with the SEC and are publicly
available to BYBK via EDGAR or have been provided to
BYBK.
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 BYBK prior to the date of
this Agreement, or (b) as contemplated under this Agreement.
Except as disclosed in OLB
Disclosure Schedule 4.28, since December 31, 2016, none of
the OLB 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 OLB
Financials or (b) paid in connection with transactions made in the
Ordinary Course consistent with 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 (i) does not contain
adequate and appropriate customer identification verification
procedures, or (ii) 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, 2012, 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, OLB 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.
(c) OLB and each of its
Subsidiaries has (i) complied in all material respects with its
published privacy policies and internal privacy policies and
guidelines, including with respect to the collection, storage,
transmission, transfer, disclosure, destruction and use of
personally identifiable information, and (ii) taken commercially
reasonable measures to ensure that all personally identifiable
information in its possession or control is reasonably protected
against loss, damage and unauthorized access, use, modification or
other misuse. To OLB’s Knowledge, there has been no loss,
damage, or unauthorized access, use, modification or other misuse
of any such information by OLB, any of its Subsidiaries or any
other Person.
To the Knowledge of OLB, each of the OLB Companies owns or
possesses valid, binding and assignable licenses and other rights
to use without payment (other than as set forth in the applicable
license) all trademarks, trade dress, trade names, service marks,
service names, brand names, domain names, logos, patents,
technology, inventions, trade secrets, know-how, copyrights, works
of authorship and other intellectual property rights used in the
conduct of its existing business, and all registrations,
applications, technology rights, licenses or other Contracts
relating thereto and all Contracts relating to third party
intellectual property that it is licensed or authorized to use in
its business, including without limitation any software licenses
(collectively, the “OLB Intellectual Property”). To the
Knowledge of OLB, all OLB Intellectual Property that is used in the
conduct of the existing businesses of the OLB Companies is free and
clear of all Liens (other than OLB Permitted 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, to the
Knowledge of OLB, the license, sublicense or Contract covering such
item is legal, valid, binding, enforceable and in full force and
effect. No OLB Company is in default under or violation of any of
its material OLB Intellectual Property licenses. 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
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
disabling codes or instructions, spyware, Trojan horses, worms,
viruses or other unauthorized, damaging or corrupting software or
elements that permit or cause unauthorized access to, or
disruption, impairment, disablement or destruction of, software,
data or other materials. 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
policies, procedures, systems and technology consistent with
industry practices for financial institutions of comparable size
and complexity, and sufficient to reasonably maintain the operation
of the respective businesses of the OLB Companies in all material
respects.
(a) OLB and the OLB
Subsidiaries are engaged in all material respects only in the
business described in the OLB SEC Reports, and the OLB 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.
(b) The assets
reflected in the most recent OLB Financial Statements that are
owned or leased by the OLB Companies, and in combination with the
OLB Real Property, the OLB Intellectual Property and contractual
benefits and burdens of the OLB Companies constitute, as of the
Closing Date, all of the assets, rights and interests necessary to
enable the OLB Companies to operate consolidated businesses in the
Ordinary Course and as the same is expected to be conducted on the
Closing Date.
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.
ARTICLE
V.
COVENANTS OF THE
PARTIES
Section
5.1
Conduct of
BYBK’s Business.
(a) Through the
Effective Time, BYBK shall, and shall cause each BYBK Subsidiary
to:
(i) In all material
respects, conduct its businesses and engage in transactions only in
the Ordinary Course, except as otherwise required or contemplated
by this Agreement or with the prior written consent of OLB;
and
(ii) 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 BYBK determines, in good
faith, is necessary to comply with the provisions of this Section
5.1(a), 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.
(b) Beginning on the
date that is two weeks after the date hereof, and every two weeks
thereafter, BYBK shall provide to OLB a report describing all of
the following that has occurred in the prior month: (i) approval of
or entry into new Credit Extensions with principal balances or
commitments of $500,000 or more, (ii) renewals or extensions of
existing Credit Extensions for any Credit Extensions of $1,000,000
or more, or (iii) material amendments or modifications to Credit
Extensions with principal balances or commitments of $1,500,000 or
more.
(c) 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 BYBK shall
immediately provide OLB with a copy of such written document), BYBK
shall not, and shall not permit any BYBK Subsidiary
to:
(i) Change any
provision of the BYBK Governing Documents;
(ii) 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;
(iii) Except
as set forth in BYBK
Disclosure Schedule 5.1(c)(iii), grant any severance,
retention or termination pay, other than pursuant to policies or
Contracts of BYBK or any BYBK Subsidiary in effect on the date
hereof for employees who are not executive officers, or enter into
or amend any employment, consulting, severance, compensation,
“change-in-control” or termination Contract with, any
officer, director, employee, independent contractor, agent or other
Person associated with BYBK or any BYBK Subsidiary;
(iv) Except
as set forth in BYBK
Disclosure Schedule 5.1(c)(iv), grant job promotions or
increase the rate of compensation or benefits of, or pay any bonus
to, any director, officer, employee, independent contractor, agent
or other Person associated with BYBK or any BYBK Subsidiary,
except, with respect to a Permitted Employee, (A) to the extent
such promotion or increase is made by BYBK or a BYBK Subsidiary in
the Ordinary Course, or (B) routine periodic pay increases,
selective merit pay increases and pay raises in the Ordinary
Course, provided, however, that such aggregate increases in the
rate of compensation and benefits 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;
(v) Except in the
Ordinary Course, 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(c)(xxii), and securities,
which are governed by Section 5.1(c)(xvii)), 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 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;
(vi) Except
for FHLB advances with a maturity of six months or less and
deposits taken in the Ordinary Course, 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 and in accordance with the restrictions set forth
in Sections 5.1(c)(xv) and (xvi);
(vii) Sell
or otherwise dispose of any BYBK Real Property except REO in a
reasonably acceptable commercial manner in the Ordinary
Course;
(viii) Take
any action that would result in any of the conditions set forth in
Article VI hereof not being satisfied;
(ix) Change
any method, practice, or principle of accounting or tax compliance,
except as may be required from time to time by Law or changes in
GAAP or by any Regulatory Authority;
(x) Waive, release,
grant or transfer any rights of material value or modify or change
in any material respect any existing material Contract to which it
is a party;
(xi) 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 (A) required by Law or (B) required by its
terms as a result of this Agreement or in connection with the
Contemplated Transactions; provided, however, that amendments to a BYBK Benefit
Plan to modify any of the investment options available thereunder
shall not constitute a breach of this Section
5.1(c)(xi);
(xii) Implement
or adopt any material change in its: (A) 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; (B) investment policies and practices; or (C) other
material banking policies, or otherwise fail to conduct its banking
activities in the Ordinary Course except as may be required by
changes in Law or GAAP or at the direction of a Regulatory
Authority;
(xiii) Change
deposit or loan rates other than in the Ordinary Course, or
otherwise fail to conduct its lending and deposit activities in the
Ordinary Course;
(xiv) Enter
into, modify, amend or renew any Contract under which it is
obligated to pay more than $100,000 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 and that are in compliance with the requirements of
Law;
(xv) Except
as required by Law or at the direction of a Regulatory Authority:
(A) implement or adopt any material change in its interest rate and
other risk management policies, procedures or practices; or (B)
fail to follow its existing policies or practices with respect to
managing its exposure to interest rate and other risk;
(xvi) Take
any action that would give rise to a right of payment to any
individual under any employment Contract except for contractually
required compensation;
(xvii) Purchase
or sell any securities other than in the Ordinary Course, other
than pursuant to redemptions by the issuer thereof;
(xviii) Except
for the Lawsuit and/or the lawsuit captioned Mary Louise Strohman v. Bay Bank, FSB,
pending in the Circuit Court for Baltimore County, Case No.
03-C-17-007139, settle, waive or release or agree or consent to the
issuance of any Order in connection with any Litigation except in
the Ordinary Course and involving an amount not in excess of
$100,000 (exclusive of any amounts paid directly or reimbursed to
BYBK or any BYBK Subsidiary under any insurance policy maintained
by BYBK or any BYBK Subsidiary), pending or, to the Knowledge of
BYBK, threatened, against or affecting BYBK, any BYBK Subsidiary or
any of their respective properties or assets, provided that such
Litigation does not arise out of or relate to the Contemplated
Transactions. 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
BYBK and the BYBK Subsidiaries, taken as a whole;
(xix) 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 BYBK nor any BYBK
Subsidiary shall be required to obtain such a report: (A) where,
after using commercially reasonable efforts, it is unable to gain
access to the property, provided that BYBK 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 (B) 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;
(xx) 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; or 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;
(xxi) Make,
or commit to make, any new capital expenditure, individually or in
the aggregate, of $100,000 or more;
(xxii) Sell
or acquire any loans (excluding originations) or loan
participations, except in the Ordinary Course (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 except in the Ordinary Course;
(xxiii) 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;
(xxiv) Make
any charitable or similar contributions, except consistent with
past practice and in amounts not to exceed $10,000 individually and
$50,000 in the aggregate;
(xxv) Except
for any Non-Residential Credit Extension already committed to by
BYBK or a BYBK Subsidiary on the date of this Agreement and set
forth on BYBK Schedule
5.1(c)(xxv), enter into, grant, approve, modify or extend
any Non-Residential Credit Extension except in the Ordinary
Course;
(xxvi) Except
for any loan, credit facility, line of credit or letter of credit
for an owner-occupied residence (each, a “Residential Credit
Extension”) already committed to by BYBK or a BYBK
Subsidiary and set forth on BYBK Disclosure Schedule
5.1(c)(xxvi), enter into, grant, approve, modify or extend
any Residential Credit Extension except in the Ordinary
Course;
(xxvii) Issue
any communication to any BYBK employee related to post-Closing
employment benefits or compensation without the prior consent of
OLB (which shall not be unreasonably withheld, conditioned or
delayed);
(xxviii) Enter
into any interest rate swap, floor or cap or similar Contract,
except in the Ordinary Course; or
(xxix) Agree
to do any of the foregoing.
Provided, however,
that nothing contained in this Section 5.1(c) shall apply to, or
prohibit or otherwise restrict in any manner, the resolution by
BYBK or Bay Bank, in their sole but reasonable discretion, of any
loan disclosed in BYBK
Disclosure Schedule 2.6(c).
Section
5.2
Conduct of
OLB’s Business.
Through the Effective Time,
except as otherwise consented to in writing by BYBK 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 BYBK 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.
(a) Through the
Effective Time, each Party 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 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 Party 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 Party in
possession or control of such information or contravene any Law or
binding Contract entered into prior to the date of this Agreement.
The Parties will make appropriate substitute disclosure
arrangements under circumstances in which the restrictions of the
previous sentence apply. No investigation by a Party shall affect
the ability of such Party to rely on the representations,
warranties, covenants and Contracts of the other
Party.
(b) BYBK 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.
BYBK 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 agree that such
Confidentiality Agreement shall continue in accordance with its
terms, notwithstanding the termination of this
Agreement.
Through
the Effective Time:
(a) OLB and BYBK 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 BYBK and BYBK’s counsel, to the
extent such Applications are required to be filed by a BYBK
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 and to comply with the terms and
conditions of all such permits, consents, approvals, waivers and
authorizations; provided, however, that in no event shall OLB or
BYBK be required to agree to any prohibition, limitation or other
requirement that would (i) 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 BYBK or any BYBK
Subsidiary, (ii) compel OLB or BYBK to dispose of all or any
material portion of either Party’s business or assets, (iii)
impose a material compliance burden, penalty or obligation on OLB
or BYBK, or (iv) otherwise materially impair the value of BYBK to
OLB (any such requirement alone, or more than one such requirement
together, a “Burdensome
Condition”).
(b) BYBK 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) BYBK 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, BYBK 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 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 BYBK 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
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 BYBK 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, BYBK shall update the BYBK 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, BYBK shall update and deliver to OLB
the BYBK Disclosure
Schedule 3.20(a) and the BYBK Disclosure Schedule 3.21,
and OLB shall update and deliver to BYBK 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 BYBK.
(a) Undertakings of
BYBK.
(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, BYBK shall submit the Merger to its
stockholders for approval at the BYBK Common Stockholders’
Meeting with the recommendation that its stockholders approve the
Merger.
(ii) Acquisition
Proposals. So long as this Agreement remains in effect,
except as otherwise expressly permitted by this Agreement, BYBK
shall not, and it shall not authorize, permit or cause any BYBK
Subsidiary or their respective Representatives to, directly or
indirectly: (A) initiate, solicit, induce or encourage (including
by way of furnishing information or providing assistance), 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 BYBK or any BYBK 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 BYBK or
any BYBK 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 BYBK 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 BYBK or otherwise, shall be deemed to be a
breach of this Agreement by BYBK. BYBK and each BYBK Subsidiary
shall, and shall cause each of its Representatives to, immediately
cease and cause to be terminated any and all existing activities,
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 Merger by BYBK’s
stockholders at the BYBK Common Stockholders’ Meeting, BYBK
may respond to an inquiry, furnish nonpublic information regarding
itself and the BYBK Subsidiaries to, or enter into discussions
with, any Person in response to an unsolicited Acquisition Proposal
that is submitted to BYBK by such Person (and not withdrawn) if:
(A) BYBK’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 the BYBK Advisers, that such
Acquisition Proposal constitutes or is reasonably likely to lead to
a Superior Proposal (as defined below); (B) BYBK has not violated
any of the restrictions set forth in this Section 5.7(a)(ii); (C)
BYBK’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 the BYBK Advisers, 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, BYBK provides OLB with
written notice of the identity of such Person and of BYBK’s
intention to furnish nonpublic information to, or enter into
discussions with, such Person and BYBK 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 BYBK. BYBK shall promptly provide
to OLB any non-public information regarding BYBK or any BYBK
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.
BYBK
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, BYBK, any BYBK 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)).
BYBK 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). BYBK further
agrees that it will provide OLB with the opportunity to present its
own proposal to the BYBK 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 BYBK
board of directors determines in its good faith judgment, after
consultation with and having considered the advice of BYBK’s
outside legal counsel and the BYBK Advisers: (A) would, if
consummated, result in consideration that is more favorable to the
stockholders of BYBK 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 BYBK 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 BYBK Common Stock or
all or substantially all of the assets and liabilities of the BYBK
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 BYBK 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 BYBK to approve the Merger,
or make any statement, filing or release, in connection with the
BYBK Common Stockholders’ Meeting or otherwise, inconsistent
with the recommendation to the stockholders of BYBK to approve 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 BYBK or any
BYBK 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 BYBK to abandon,
terminate or fail to consummate any of the Contemplated
Transactions.
Notwithstanding the
foregoing, prior to the date of the BYBK Common Stockholders’
Meeting, BYBK’s board of directors may approve or recommend
to the stockholders of BYBK 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 BYBK advising OLB that the BYBK 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 BYBK 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 BYBK
proposes to accept and the subsequent notice period shall be three
Business Days) if, but only if, (A) the BYBK 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 the BYBK Advisers, 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 BYBK 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 BYBK Companies’
assets, operations and secured interests, including, but not
limited to, the BYBK Real Properties. For any BYBK Real Property
that is not owned by a BYBK Company, access to such BYBK 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 BYBK Real
Property that is owned by a BYBK Company, such further assessment
shall be subject to prior notice to BYBK. For any BYBK Real
Property that is not owned by a BYBK Company, such further
assessment by OLB shall be conditioned on approval by the property
owner.
(C) OLB agrees to
notify BYBK a reasonable time in advance of any Environmental
Assessments scheduled pursuant to this Section 5.7(a)(iii).
Upon receipt of such notice, BYBK agrees to permit OLB and its
Representatives to (1) conduct such Environmental Assessments, (2)
have access to the properties, facilities, environmental documents
and personnel of the BYBK Companies, and (3) 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 BYBK Companies. Upon request by BYBK, 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, BYBK shall
cause the liquidation and legal dissolution of any and all
Non-Operational Subsidiaries.
(v) 401(k) Plans. If requested by
OLB in a writing delivered to BYBK following the date hereof and
prior to the Closing Date, the BYBK Companies shall take all
necessary action (including without limitation the adoption of
resolutions and plan amendments and the delivery of any required
notices) to terminate, effective immediately prior to the Effective
Time, any BYBK Benefit Plan that is intended to constitute a
tax-qualified defined contribution plan under IRC Section 401(k) (a
“401(k)
Plan”). BYBK shall provide OLB with a copy of the
resolutions, plan amendments, notices and other documents prepared
to effectuate the termination of the 401(k) Plans in advance and
give OLB a reasonable opportunity to comment on such documents
(which comments shall be considered in good faith by BYBK), and
prior to the Closing Date, BYBK shall provide OLB with the final
documentation evidencing the termination of the 401(k) Plans. In
the event of termination of the 401(k) Plan, OLB and BYBK shall use
commercially reasonable efforts to afford participants in the
401(k) Plan who are Retained Employees with outstanding participant
loans under such plan to elect a rollover of the loan balance from
the 401(k) Plan to a 401(k) plan of OLB in connection with an
election by such participant to rollover his or her entire account
in the 401(k) Plan to a 401(k) plan of OLB, subject to the terms
and conditions of the OLB’s 401(k) plan and the requirements
of the OLB’s 401(k) plan record-keeper; provided, that each
such loan satisfies all material legal requirements, is not a
nonexempt “prohibited transaction” under Section 406 of
ERISA or Section 4975 of the IRC and is not in default as of the
date of the rollover. No action taken by BYBK or any of the Bay
Companies pursuant to this Section 5.1(a)(v) at the request of OLB,
and no financial or other effect as a result thereof, whether taken
individually or in the aggregate, shall be deemed to have or
constitute a Material Adverse Effect for any purpose contemplated
by this Agreement.
(vi) Other
BYBK Benefit Plans. To the extent requested by OLB prior to
the Closing Date, the BYBK Companies shall cooperate in good faith
with OLB to amend, freeze, terminate or modify any BYBK Benefit
Plan not covered by subsection (v) of this Section 5.7(a) in
accordance with the terms of such plan or agreement and applicable
Law, to be effective as of the Effective Time (or at such time
mutually agreed to by the Parties), except that the winding up of
any such plan or agreement may be completed following the Closing
Date; provided, however, that none of the Bay Companies shall be
required to take any action to terminate the Carrollton Bank
Retirement Income Plan. BYBK shall provide OLB with a copy of the
resolutions, plan amendments, notices and other documents prepared
to effectuate the actions contemplated by this Section 5.7(a)(vi),
as applicable, and give OLB a reasonable opportunity to comment on
such documents (which comments shall be considered in good faith by
BYBK), and prior to the Closing Date, BYBK shall provide OLB with
the final documentation evidencing that the actions contemplated
herein have been effectuated. No action taken by BYBK or any of the
Bay Companies pursuant to this Section 5.1(a)(vi) at the request of
OLB, and no financial or other effect as a result thereof, whether
taken individually or in the aggregate, shall be deemed to have or
constitute a Material Adverse Effect for any purpose contemplated
by this Agreement.
(b) Undertakings of OLB and
BYBK.
(i) Public
Announcements. OLB and BYBK 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 or
the rules and regulations of any securities exchange.
(ii) Maintenance
of Insurance. OLB and each OLB Subsidiary, and BYBK and each
BYBK Subsidiary, shall maintain Insurance Policies in such amounts
as OLB and BYBK, 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 BYBK
and each BYBK Subsidiary, shall maintain Books 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 BYBK
and each BYBK Subsidiary shall file all BYBK 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 BYBK shall cooperate with each other in
the interest of an orderly, cost-effective consolidation of
operations.
(vi) Delivery
of Financial Statements. OLB and BYBK shall each deliver or
make available to the other, promptly upon their completion, but in
each case by each respective delivery date, financial statements
that (A) are true, accurate and complete in all material respects,
and that have been prepared from, and are in accordance with, the
Books and Records of the applicable Party and its Subsidiaries, (B)
fairly present, in all material respects, the consolidated
financial condition, results of operations, changes in
stockholders’ equity and cash flows of such Party as of and
for the periods ended on the dates thereof, and (C) comply in all
material respects with applicable accounting and regulatory
requirements and, other than the Internal BYBK Financials, are
prepared in accordance with GAAP consistently applied, except for
(1) omission of the notes from the financial statements, applicable
to any interim period, and (2) with respect to any interim period,
normal year-end adjustments and notes thereto.
(vii) Delivery
of Regulatory Filings and Documents. Except where prohibited
by Law, OLB and BYBK shall each deliver to the other copies of all
reports filed with Regulatory Authorities promptly upon the filing
thereof
(c) Undertakings
of OLB.
(i) Stockholder Approval. As
promptly as practicable after the Registration Statement becomes
effective under the Securities Act, in accordance with the Exchange
Act, applicable Law and this Agreement, OLB shall submit the Merger
to its stockholders for approval at the OLB Common
Stockholders’ Meeting with the recommendation that its
stockholders approve the Merger.
(ii) BYBK
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,
(1) Eric D. Hovde, (2) Joseph J. Thomas and (3) one other
individual currently serving on BYBK’s board of directors as
the Parties mutually agree to at a later date (the
“BYBK
Nominees”) or, if applicable, a Replacement Nominee
listed on BYBK Disclosure
Schedule 5.7(c)(ii), 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 BYBK 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 each of the BYBK Nominees (or, in each case, his
Replacement Nominee) for re-election to the OLB board of directors
at the annual meeting of OLB’s stockholders that follows the
Effective Time, with (1) the individual to be selected by the
Parties at a later date (or his Replacement Nominee, if applicable)
to serve for a term of at least one year, (2) Joseph J. Thomas (or
his Replacement Nominee, if applicable) to serve for a term of at
least two years and (3) Eric D. Hovde (or his Replacement Nominee,
if applicable) to serve for a term of at least three years, and (D)
cause the BYBK 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 any of the BYBK Nominees shall be subject to a
Disqualification Event or declines, prior to the Effective Time, to
serve on the OLB board of directors, OLB shall take such actions as
may be necessary to fill the vacancy created with one of the
individual(s) set forth on BYBK Disclosure Schedule
5.7(c)(ii) (each a “Replacement Nominee”),
with the selection being at OLB’s discretion except as
expressly provided otherwise in BYBK Disclosure Schedule
5.7(c)(ii).
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 BYBK Nominees agree to serve as a director of OLB, the
BYBK 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 any of the BYBK Nominees if such BYBK Nominee
shall be subject to a Disqualification Event.
As used
in this Agreement, the term “Disqualification Event”
means, as to the BYBK Nominees, the occurrence of any of the
following events: (A) such nominee shall be prohibited by Law or
otherwise from serving as a director of OLB; (B) such nominee shall
have been charged with or convicted of any felony or a crime of
moral turpitude; (C) 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; (D) 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; (E) 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 (F) such nominee shall
violate any covenant or agreement contained in the Support
Agreement. OLB will (A) 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 BYBK Nominees are not
subject to a Disqualification Event, to nominate the BYBK Nominees
to serve as directors of Old Line during any time, and for the same
term, that the BYBK Nominees serve as directors of OLB, and (B)
will, as the sole stockholder of Old Line, vote to elect the BYBK
Nominee so nominated by Old Line.
(iii) 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 BYBK or a BYBK Subsidiary as of
August 4, 2017 and was continuously an employee of BYBK or a BYBK
Subsidiary until immediately prior to the Effective Time (a
“BYBK
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)(iii), no provision of
this Agreement shall create any obligation of OLB or an OLB
Subsidiary to retain any BYBK Employee or create any third party
benefit except for the Indemnified Parties’ rights under
Section 5.7(c)(v), 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
BYBK Employee is not retained as contemplated and described in this
Section 5.7(c)(iii)(A), or if OLB elects to eliminate a position or
does not offer a BYBK Employee comparable employment with an OLB
Company (i.e., a position of substantially similar job descriptions
or responsibilities at substantially the same salary level), or a
Retained Employee is terminated by an OLB Company without Cause
within six months of the Effective Date (each such BYBK Employee or
Retained Employee, a “Displaced Employee”),
then OLB will make, or cause Old Line or the applicable OLB
Subsidiary to make, severance payments to the Displaced Employee as
set forth in this Section 5.7(c)(iii).
(B) Subject to the
provisions of Section 5.7(c)(iii)(D), OLB will pay, or will cause
Old Line or the applicable OLB Subsidiary to pay, to any Displaced
Employee:
(1) With respect to
non-exempt Displaced Employees, two weeks of severance pay plus one
additional week of severance pay for each full year of employment
with BYBK or a BYBK Subsidiary, up to a maximum of 12 weeks of
severance pay;
(2) With respect to Displaced
Employees who are exempt officers or employees of a BYBK Company
with less than five full years of employment with BYBK or a BYBK
Subsidiary, six weeks of severance pay plus one additional week of
severance pay for each full year of employment with BYBK or a BYBK
Subsidiary, up to a maximum of ten weeks of severance pay;
and
(3) With respect to Displaced
Employees who are exempt officers or employees of a BYBK Company
with at least five full years of employment with BYBK or a BYBK
Subsidiary, 12 weeks of severance pay plus two additional weeks of
severance pay for each full year of employment with BYBK or a BYBK
Subsidiary beyond five years of employment, up to a maximum of 26
weeks of severance pay.
Severance benefits as set
forth in this Section 5.7(c)(iii)(B) will be calculated based on
the applicable Displaced Employee’s base salary or other base
rate of pay in effect for such Displaced Employee immediately prior
to the Effective Time. Years of employment will be based on the
applicable Displaced Employee’s number of full years employed
with BYBK or a BYBK Subsidiary or any predecessor
thereto.
(C) Any Retained
Employee whose employment with OLB or an OLB Subsidiary is
terminated without Cause after six 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
BYBK or any BYBK Subsidiary).
(D) Any BYBK Employee
who has or is party to any employment agreement, severance
agreement, change in control agreement or any other Contract (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)(iii)(A) and (B) but will receive the CIC Payment upon the
occurrence of a triggering event under the CIC Agreement. Any BYBK
Employee who waives and relinquishes his or her right to a CIC
Payment will be eligible for a severance payment as provided in
Sections 5.7(c)(iii)(A) and (B).
(E) OLB and any OLB
Subsidiary’s obligation hereunder to make payments as
provided in this Section 5.7(c)(iii) 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. BYBK will obtain written acknowledgement of
OLB’s obligation hereunder from all BYBK 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
(1) the date it files its application for approval of the Bank
Merger or (2) the date it becomes aware of the need to obtain any
such approval or non-objection.
(iv) Employee
Benefits. As of the Effective Time, each Retained Employee
shall be entitled to full credit for each year of service with BYBK
or any BYBK 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 BYBK or a BYBK Subsidiary in making
these determinations.
(v) Indemnification.
(A) 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 BYBK or a BYBK 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 (“Costs”) in connection
with any claim, action, suit, proceeding or investigation
(“Claim”), 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
BYBK or a BYBK Subsidiary or is or was serving at the request of
BYBK or any BYBK Subsidiary as a director, officer, employee,
trustee or other agent of any other organization or in any capacity
with respect to any BYBK 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
(including, for the avoidance of doubt, reasonable attorneys’
fees) to such Indemnified Party in connection therewith, to the
fullest extent to which such Indemnified Party would be entitled to
the right to advancements of expenses or to be indemnified under
the articles of incorporation and bylaws of BYBK 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)(v) 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.
(B) In the event of any
such Claim (whether arising before or after the Effective Time):
(A) OLB shall have the right to assume the defense thereof and OLB
shall not be liable to any Indemnified Party for any legal expenses
of other counsel or any other expenses subsequently incurred by
such Indemnified Party in connection with the defense thereof,
except that if OLB elects not to assume such defense or independent
legal counsel for the Indemnified Party advises that there are
substantive issues that raise conflicts of interest between OLB and
the Indemnified Party, the Indemnified Party may retain counsel
satisfactory to it, and OLB shall pay all reasonable fees and
expenses of such counsel for the Indemnified Party promptly as
statements therefor are received; provided, that OLB shall be
obligated pursuant to Section 5.7(c)(v) and this Section 5.7(c)(vi)
to pay for only one firm of counsel for all Indemnified Parties and
shall not be liable to any Indemnified Party for any legal expenses
of other counsel or any other expenses subsequently incurred by
such Indemnified Party in connection with the defense thereof; (B)
the Indemnified Party will cooperate in the defense of any such
Claim; and (C) OLB shall not be liable for any settlement effected
without its prior written consent; and provided, further, that OLB
shall not have any obligation hereunder to any Indemnified Party
when and if a court of competent jurisdiction shall determine, and
such determination shall have become final and not subject to
further appeal, that the indemnification of such Indemnified Party
in the manner contemplated hereby is prohibited by applicable Law.
Notwithstanding any provision of this Section 5.7(c)(v) to the
contrary, OLB shall have no obligation to indemnify an Indemnified
Party in respect of a Claim if the Indemnified Party fails to
provide notice of such Claim to OLB promptly after becoming aware
thereof and such failure to provide notice materially prejudices
OLB with respect to such Claim. Any such notice from an Indemnified
Party will be effective if given in accordance with Section 8.6(a)
of this Agreement, provided, however, that such notice must be
provided to OLB at its then-current main office.
(vi) 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.
(vii) Directors’
and Officers’ Liability Insurance. Contemporaneously
with the Closing, OLB shall purchase an extended reporting period
to BYBK’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 150% of the current annual premium
attributable to the applicable officers’ and directors’
liability coverage in BYBK’s and/or Bay Bank’s
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 BYBK’s or Bay
Bank’s officers’ and directors’ liability
Insurance Policy(ies) and any other Insurance Policy(ies) providing
insurance coverage for BYBK’s or Bay Bank’s executive
officers and directors (each such individual, an
“Insured
Person”), 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)(viii) 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 Insurance
Policy having the same or better 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. BYBK 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, BYBK 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 BYBK and OLB shall
mail a Prospectus/Proxy Statement and any required amendment or
supplement to holders of BYBK Common Stock and the OLB Common
Stock, respectively. OLB will provide BYBK 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 BYBK and its counsel with a copy of all such filings
made with the SEC.
ARTICLE
VI.
Section
6.1
Conditions to
BYBK’s Obligations under this Agreement.
The
obligations of BYBK hereunder shall be subject to satisfaction at
or prior to the Closing Date of each of the following conditions,
unless waived by BYBK 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 BYBK 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) BYBK and Bay Bank
shall have received all consents and approvals described in
BYBK Disclosure Schedule
3.4 and all filings and registrations by BYBK and Bay Bank
described in BYBK
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 BYBK, would constitute a
Burdensome Condition or otherwise so materially and adversely
impact the economic or business benefits to BYBK of the
Contemplated Transactions as to render consummation of the Merger
inadvisable.
(d) No Injunction or Restraints. No
court or Regulatory Authority of competent jurisdiction shall have
enacted, issued, promulgated, enforced or entered any Order
(whether temporary, preliminary or permanent) or taken any other
action that enjoins, prohibits, restricts or makes illegal
consummation of the Contemplated Transactions (including the
Merger) that remains in effect.
(e) Officer’s Certificate.
OLB shall have delivered to BYBK 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), (i), (l) and (m)
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. BYBK shall have
received an opinion of Gordon Feinblatt LLC, counsel to BYBK, 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 BYBK, OLB and
others.
(h) Approval by BYBK’s
Stockholders. The Merger shall have been approved by the
stockholders of BYBK by such vote as is required by the MGCL and
the articles of incorporation and bylaws of BYBK.
(i) Approval by OLB’s
Stockholders. The Merger shall have been approved by the
stockholders of OLB by such vote as is required by the MGCL and the
articles of incorporation and bylaws of OLB.
(j) Other Documents. BYBK shall
have received such other certificates, documents or instruments
from OLB or its officers or others as BYBK 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 BYBK may reasonably request.
(k) 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.
(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 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.
(m) 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, BYBK and Bay
Bank 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 BYBK and Bay Bank,
respectively, and OLB shall have received certified copies of the
resolutions evidencing such authorizations.
(b) Covenants; Representations. The
obligations of BYBK and Bay Bank required by this Agreement to be
performed by BYBK and Bay Bank 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 BYBK 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) BYBK and Bay Bank shall have received all
consents and approvals described in BYBK Disclosure Schedule 3.4
and all filings and registrations by BYBK and Bay Bank described in
BYBK 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
court or Regulatory Authority of competent jurisdiction shall have
enacted, issued, promulgated, enforced or entered any Order
(whether temporary, preliminary or permanent) or taken any other
action that enjoins, prohibits, restricts or makes illegal
consummation of the Contemplated Transactions (including the
Merger) that remains in effect.
(e) Officer’s Certificate.
BYBK shall have delivered to OLB 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 (iii) (but only with respect to
waiting periods applicable to BYBK), (d), (h), (m) and (n) 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, a professional corporation, 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 BYBK, OLB and others.
(h) Approval by BYBK’s
Stockholders. The Merger shall have been approved by the
stockholders of BYBK by such vote as is required by the MGCL and
the articles of incorporation and bylaws of BYBK.
(i) Approval by OLB’s
Stockholders. The Merger shall have been approved by the
stockholders of OLB by such vote as is required by the MGCL and the
articles of incorporation and bylaws of OLB.
(j) Limitation on
Objecting BYBK Shares. As of the Effective Date, the holders of no more than ten percent of the shares
of BYBK Common Stock that are
issued and outstanding as of the record date for the BYBK Common
Stockholders’ Meeting shall have taken the actions required
by Section 3-203 of the MGCL to qualify their shares of BYBK
Common Stock as Objecting BYBK Shares.
(k) Other Documents. OLB shall have
received such other certificates, documents or instruments from
BYBK 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.
(l) 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 BYBK. 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(a)(iii) of this Agreement.
(m) 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 BYBK or any of the BYBK Subsidiaries shall
have occurred since the date of this Agreement, and no information
shall have been provided in an updated BYBK 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
BYBK.
(n) 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 Contract to which any of the BYBK 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.
(o) 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.
(p) Nasdaq Listing. To the extent
required, and provided that OLB has complied with its obligations
set forth in Section 5.7(c)(vii) 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 BYBK 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.
Notwithstanding any
other provision of this Agreement, and notwithstanding receipt of
the approval by the stockholders of both BYBK and OLB of the
Merger, this Agreement may be terminated on or at any time prior to
the Closing Date:
(a) By the mutual
written agreement of BYBK and OLB;
(b) By either BYBK 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 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 BYBK or
OLB if the Closing Date shall not have occurred prior to April 30,
2018 (except that if the Closing Date shall not have occurred by
April 30, 2018 because of a failure to obtain any required approval
or consent of a Regulatory Authority, such date shall be June 30,
2018 unless the conditions of any such required regulatory approval
or consent cannot be satisfied by June 30, 2018), except that if
the Closing Date shall not have occurred by such date because of a
material breach of this Agreement by a Party, such breaching Party
shall not be entitled to terminate this Agreement in accordance
with this provision;
(d) By either BYBK 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 BYBK or
OLB if any Regulatory Authority whose approval or consent is
required for consummation of the Contemplated Transactions grants
such consent or approval but such approval or consent contains or
would result in the imposition of a Burdensome Condition and there
is no meaningful possibility that such consent or approval could be
revised prior to June 30, 2018 so as not to contain or result in a
Burdensome Condition;
(f) By either BYBK or
OLB if the holders of OLB Common Stock or the holders of BYBK
Common Stock vote on, but fail to approve, the Merger at the OLB
Common Stockholders’ Meeting or the BYBK Common
Stockholders’ Meeting, respectively;
(g) By OLB if BYBK or
any BYBK 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;
(h) By BYBK if at any
time after the date of this Agreement and prior to obtaining the
approval of the Merger by the holders of BYBK Common Stock at the
BYBK Common Stockholders’ Meeting, BYBK receives a Superior
Proposal; provided, however, that BYBK shall not terminate this
Agreement pursuant to the foregoing clause unless:
(i) BYBK shall have
complied in all material respects with Section 5.7(a)(ii) of this
Agreement;
(ii) BYBK
concurrently pays the BYBK Termination Fee payable pursuant to
Section 8.1(b); and
(iii) the
board of directors of BYBK concurrently approves, and BYBK
concurrently enters into, a definitive agreement with respect to
such Superior Proposal;
(i) By BYBK 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 BYBK, and the BYBK board of directors determines that, after
considering the advice of counsel and the BYBK Advisers, such
transaction is not in the best interests of the BYBK Common
Stockholders; provided, however, that BYBK must exercise the
termination option under this Section 7.1(i) 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;
(j) By OLB if the BYBK
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 BYBK 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;
(k) By BYBK if the OLB
board of directors withdraws, changes or modifies its
recommendation to its stockholders in any manner adverse to BYBK
regarding this Agreement or the Merger;
(l) By either BYBK or
OLB if any Law permanently restraining, enjoining or otherwise
prohibiting the consummation of the Contemplated Transactions shall
have become final and nonappealable, provided that the Party
seeking to terminate this Agreement pursuant to this Section 7.1(l)
shall have used its reasonable best efforts to contest, appeal and
remove such Law; or
(m) By BYBK if, at any
time during the five-day period commencing with the fifth Trading
Day immediately preceding the Effective Date (the
“Determination
Date”), both of the following conditions are
satisfied:
(i) The number obtained
by dividing the average of the daily closing prices for the shares
of OLB Common Stock for the 20 consecutive full trading days on
which such shares are actually traded on NASDAQ (the
“Average Closing
Price”) by the Starting Price (the “OLB Ratio”) shall be less
than 0.90; and
(ii) the
OLB Ratio shall be less than 0.85 of the quotient of (x) the Final
Index Price divided by (y) the Index Price on the Starting Date
(each as defined below) (the “Index
Ratio”);
provided, however,
that if BYBK elects to exercise its termination right pursuant to
this Section 7.1(m), it shall give prompt written notice to OLB
(and provided that such notice of election to terminate may be
withdrawn at any time within the aforementioned five-day period).
During the five-day period commencing with receipt of such notice,
OLB shall have the option to increase the Merger Consideration by
(A) increasing the Exchange Ratio (calculated to the nearest
ten-thousandth) or (B) provided that such payment will not result
in the Merger failing to constitute a reorganization within the
meaning of Section 368(a) of the IRC, making a cash payment of all
or part of the increase so that, in either case, the value of the
Per Share Consideration (calculated on the basis of the Closing
Price) equals the lesser of:
(i) the product of the
Starting Price, 0.90 and the Exchange Ratio (as in effect
immediately prior to any increase in the Exchange Ratio pursuant to
this Section 7.1(m)); and
(ii) an
amount equal to (A) the product of the Index Ratio, 0.85, the
Exchange Ratio (as in effect immediately prior to any increase in
the Exchange Ratio pursuant to this Section 7.1(m)), and the
Average Closing Price, divided by (B) the OLB Ratio.
If OLB so elects
within such five-day period, it shall give prompt written notice to
BYBK of such election and the revised Exchange Ratio whereupon no
termination shall have occurred pursuant to this Section 7.1(m) and
this Agreement shall remain in effect in accordance with its terms,
provided that any references in this Agreement to the
“Exchange Ratio” shall thereafter be deemed to refer to
the Exchange Ratio as increased pursuant to this Section
7.1(m).
For purposes of
this Section 7.1(m), the following terms shall have the meanings
indicated:
“Final Index Price” means
the average of the Index Prices for the 20 consecutive Trading Days
ending on the Trading Day prior to the Determination
Date.
“Index Group” means the
NASDAQ Bank Index.
“Index Price” means the
closing price on such date of the Index Group.
“Starting Date” means
September 26, 2017, the last trading day immediately preceding the
date of the first public announcement of entry into this
Agreement.
“Starting Price” means
$27.00.
If the
outstanding shares of OLB Common Stock or any company belonging to
the Index Group 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 Determination Date, then the Starting
Price, the Average Closing Price and the other amounts in this
Section 7.1(m) shall be appropriately adjusted to reflect such
change.
Exhibit D hereto includes an
example of how this Section 7.1(m) would operate under various
assumptions.
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 BYBK to the
other with respect to the Contemplated Transactions, except for any
liability of OLB or BYBK under such applicable sections of this
Agreement.
ARTICLE
VIII.
(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 BYBK shall be borne by such stockholder and not
borne or reimbursed by BYBK or OLB.
(b) BYBK Termination Fee. In
recognition of the efforts, expenses and other opportunities
foregone by OLB while structuring and pursuing the Merger, BYBK
shall pay to OLB by wire transfer of immediately available funds a
termination fee equal to $5,076,000 (the “BYBK 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 April
30, 2018 or June 30, 2018, as applicable, and such failure resulted
from the knowing, willful and intentional actions or inactions of
BYBK or Bay Bank (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 BYBK or Bay Bank (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(j) (provided that OLB is not then in material
breach of any representation, warranty, covenant or other agreement
contained in this Agreement), then BYBK shall pay the BYBK
Termination Fee as promptly as practicable (but in any event within
three Business Days) after termination of the Agreement;
or
(ii) if OLB or
BYBK terminates this Agreement pursuant to Sections 7.1(g) or
7.1(h), then BYBK shall pay the BYBK Termination Fee at or prior to
the time of such termination.
If
payment of the BYBK Termination Fee is timely made, then OLB will
have no other rights or claims against BYBK and its officers,
directors, attorneys and financial advisors under this Agreement,
it being agreed that the acceptance of the BYBK Termination Fee
under this Section 8.1 will constitute the sole and exclusive
remedy of OLB against BYBK and its officers, directors, attorneys
and financial advisors.
(c) OLB Termination Fee. In
recognition of the efforts, expenses and other opportunities
foregone by BYBK while structuring and pursuing the Merger, OLB
shall pay to BYBK by wire transfer of immediately available funds a
termination fee equal to $5,076,000 (the “OLB Termination Fee”) if
BYBK terminates this Agreement pursuant to: (i) Section 7.1(b);
(ii) Section 7.1(c) because the Closing failed to occur prior to
April 30, 2018 or June 30, 2018, as applicable, and such failure
resulted from the knowing, willful and intentional actions or
inactions of OLB or Old Line (provided that BYBK is not then in
material breach of any representation, warranty, covenant or other
agreement contained in this Agreement); (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 BYBK is not then in material breach of any representation,
warranty, covenant or other agreement contained in this Agreement);
or (iv) Section 7.1(k) (provided that BYBK is not then in material
breach of any representation, warranty, covenant or other agreement
contained in this Agreement). In any such case, OLB shall pay the
OLB Termination Fee as promptly as practicable (but in any event
within three Business Days) after termination of the
Agreement.
If payment of the
OLB Termination Fee is timely made, then BYBK 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 BYBK against OLB
and its officers, directors, attorneys and financial
advisors.
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 1.1, 1.2
1.3(b), 1.3(c), 1.3(d), 1.5, 2.5(b) through (h), 5.3(b) and
5.7(c)(ii) through (vi) and (viii) 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;
(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. Any agreement on the
part of a Party 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.
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
Contracts 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 and their successors; provided,
however, that, except for (a) the Indemnified Parties’ rights
under Section 5.7(c)(v), and (b) the Insured Person’s rights
with respect to the Tail Policy under Section 5.7(c)(viii), 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 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 (which shall not
constitute notice):
Frank
C. Bonaventure, Jr., Esquire
Baker,
Donelson, Bearman, Caldwell & Berkowitz, a professional
corporation
100
Light Street
Baltimore, Maryland
21202
Fax:
(443) 263-7505
(b) If to BYBK,
to:
Joseph
J. Thomas
President and Chief
Executive Officer
Bay
Bancorp, Inc.
7151
Columbia Gateway Drive, Suite A
Columbia, Maryland
21046
E-mail:
jthomas@baybankmd.com
with a
copy to (which shall not
constitute notice):
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 BYBK
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 (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 may assign any of its rights or
obligations hereunder to any other person, without the prior
written consent of the other Party.
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.
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 Howard 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
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.
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.
ATTEST: OLD
LINE BANCSHARES, INC.
By:
By:
Name:
Mark A. Semanie
Name: James W. Cornelsen
Title:
Secretary
Title: President and Chief Executive
Officer
ATTEST: BAY
BANCORP, INC.
By:
By:
Name:
Lori J. Mueller
Name: Joseph J. Thomas
Title:
Secretary
Title: President and Chief Executive
Officer
EXHIBIT INDEX
Exhibit A – List of
Stockholders to Execute Support Agreements
Exhibit B – Support
Agreement
Exhibit C – Bank Merger
Agreement
Exhibit D – Illustration
of Exchange Ratio and Termination Right Provisions
Exhibit A
List of
Stockholders to Execute Support Agreements
Pierre
A. Abushacra
Robert
J. Aumiller
Steven
K. Breeden
Mark M.
Caplan
Harold
“Hal” Hackerman
Eric D.
Hovde
Steven
D. Hovde
Charles
L. Maskell Jr.
Joseph
J. Thomas
H
Bancorp LLC
Exhibit B
Support
Agreement
SUPPORT AGREEMENT
This
Support Agreement, dated as of September 27, 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 Bay Bancorp, Inc. (“BYBK”), a Maryland
corporation and the parent company of Bay Bank, FSB, a federal
savings bank (“Bay
Bank”).
WHEREAS,
concurrently herewith, OLB and BYBK 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, BYBK 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 boards of directors of BYBK and Bay
Bank; and]
WHEREAS, as a
stockholder of BYBK, 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) “BYBK Companies” shall mean
collectively BYBK and any Subsidiaries thereof.
(d) “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.
(e) “Effective Time,” means the time
when the Merger becomes effective in accordance as defined with the
Merger Agreement.
(f) “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 BYBK or Bay Bank 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 BYBK
or Bay Bank 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 BYBK or Bay
Bank.
(g) “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.
(h) “Superior Proposal” shall
have the meaning set forth in the Merger Agreement.
(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, $1.00 par value per share, of
BYBK.
(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 BYBK 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 BYBK 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 BYBK; (2) any change in the
present capitalization of BYBK or any amendment of BYBK’s
articles of incorporation or bylaws; or (3) any other material
change in BYBK’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
BYBK or Bay Bank, 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 BYBK or Bay Bank.
(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 BYBK, 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, receivership,
conservatorship, moratorium or similar Laws affecting the
enforcement of 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 OLB) 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 applicable bankruptcy, insolvency, reorganization,
receivership, conservatorship, moratorium or similar Laws affecting
the enforcement of creditors’ rights generally and except
that the availability of the equitable remedy of specific
performance or injunctive relief is subject to the discretion of
the court before which any proceeding may be brought.
(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. The 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 BYBK 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 BYBK
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(c) of the Merger Agreement as an action of which
the BYBK 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, 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 holders of the Shares approve the Merger, 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 BYBK 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
the 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 bylaws 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 subject to applicable bankruptcy, insolvency,
reorganization, receivership, conservatorship, moratorium or
similar Laws affecting the enforcement of creditors’ rights
generally and except that the availability of the equitable remedy
of specific performance or injunctive relief is subject to the
discretion of the court before which any proceeding may be
brought.
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 BYBK 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 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:
Address
for Notice:
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
AGREEMENT
AND PLAN OF MERGER
THIS
AGREEMENT AND PLAN OF MERGER (the “Agreement”) by and
between Bay Bank (“Bay Bank”) and Old Line
Bank (“Old
Line”) is dated as of September 27, 2017.
RECITALS
WHEREAS, Bay Bank
is a federally chartered savings bank organized and existing under
the Home Owners’ Loan Act of 1933, as amended, with its
principal office at 7151 Columbia Gateway Drive, Suite A, Columbia,
Maryland 21046, with an authorized capitalization of 10,000,000
shares of common stock, $1.00 par value per share
(“Bay Bank Common
Stock”), of which 2,400,000 shares are issued and
outstanding; and
WHEREAS, Bay Bank
is a wholly-owned subsidiary of Bay Bancorp, Inc., a Maryland
corporation with its principal office at 7151 Columbia Gateway
Drive, Suite A, Columbia, Maryland 21046 (“BYBK”);
and
WHEREAS, Old Line
is a trust company with commercial banking powers chartered under
the laws of the State of Maryland with its principal office at 1525
Pointer Ridge Place, Bowie, Maryland 20716, with an authorized
capitalization of 7,000,000 shares, consisting of (i) 5,000,000
shares of common stock, par value $10.00 per share
(“Old Line Common
Stock”), of which
5,856,315 shares are
issued and outstanding, and (ii) 1,000,000 shares of preferred
stock, par value $0.01 per share, none of which are issued and
outstanding; and
WHEREAS, Old Line
is a wholly-owned subsidiary of Old Line Bancshares, Inc., a
Maryland corporation with its principal office at 1525 Pointer
Ridge Place, Bowie, Maryland 20716 (“OLB”); and
WHEREAS,
concurrently herewith, OLB and BYBK are entering into an Agreement
and Plan of Merger dated as of the date hereof (as such agreement
may hereafter be amended or supplemented from time to time, the
“Merger
Agreement”), pursuant to which BYBK will merge with
and into OLB, with OLB being the surviving corporation (the
“Merger”);
and
WHEREAS, the Merger
Agreement contemplates that Bay Bank will be merged with and into
Old Line, with Old Line being the surviving institution,
immediately after the Merger is consummated (the
“Bank
Merger”); and
WHEREAS, each of
the Boards of Directors of BYBK and OLB has determined that the
Bank Merger would be in the best interests of the respective bank
subsidiaries of BYBK and OLB, has approved the Bank Merger and has
authorized Bay Bank and Old Line, respectively, to enter into this
Agreement; and
WHEREAS, the
parties hereto intend that the Bank Merger shall qualify as a
tax-free reorganization under Section 368(a) of the Internal
Revenue Code of 1986, as amended (the “Code”).
NOW, THEREFORE, in
consideration of the premises and mutual covenants and agreements
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:
ARTICLE
I
Subject
to the terms and conditions of this Agreement, Bay Bank shall be
merged with and into Old Line (which shall be the surviving
institution) pursuant to, and shall have the effect provided in and
by, 12 U.S.C. Section 1828(c) and Title 3, Subtitle 7 of the
Financial Institutions Article of the Annotated Code of
Maryland.
ARTICLE
II
The
name of the surviving institution in the Bank Merger (hereinafter
referred to as the “Merged Bank”) shall be
“Old Line Bank.”
ARTICLE
III
The
business of the Merged Bank shall be that of a trust company with
commercial banking powers chartered under the laws of the State of
Maryland. This business shall be conducted by the Merged Bank at
its principal office at 1525 Pointer Ridge Place, Bowie, Maryland
20716, at all duly authorized and operating branches of Old Line
and Bay Bank as of the Effective Time (as hereinafter defined), and
at all other offices and facilities of Old Line and Bay Bank
established as of the Effective Time.
ARTICLE
IV
Section 4.1. At the
Effective Time, the separate existence of Bay Bank shall cease and
the corporate existence of Old Line, as the Merged Bank, shall
continue unaffected and unimpaired by the Bank Merger, and the
Merged Bank shall be deemed to be the same business and corporate
entity as each of Bay Bank and Old Line. At the Effective Time, by
virtue of the Bank Merger and without any further act, deed,
conveyance or other transfer, all of the property, rights, powers
and franchises of Bay Bank and Old Line shall vest in Old Line as
the Merged Bank, and the Merged Bank shall be subject to and be
deemed to have assumed all of the debts, liabilities, obligations
and duties of Bay Bank and Old Line, and to have succeeded to all
of the relationships, fiduciary or otherwise, of Bay Bank and Old
Line as fully and to the same extent as if such property, rights,
powers, franchises, debts, liabilities, obligations, duties and
relationships had been originally acquired, incurred or entered
into by the Merged Bank; provided, however, that the Merged Bank
shall not, through the Bank Merger, acquire power to engage in any
business or to exercise any right, privilege or franchise which is
not conferred on the Merged Bank by the laws of the State of
Maryland or the laws of the United States.
Section 4.2. The Merged
Bank, upon the consummation of the Bank Merger and without any
order or other action on the part of any court or otherwise, shall
hold and enjoy all rights of property, franchises and interests,
including appointments, designations and nominations, and all other
rights and interests as agent, trustee, executor, administrator,
registrar of stocks and bonds, guardian of estates, conservator,
assignee, receiver and committee of estates of incompetents, bailee
or depository of personal property, and in every other fiduciary
and/or custodial capacity, in the same manner and to the same
extent as such rights, franchises and interests were held or
enjoyed by Bay Bank and Old Line immediately prior to the Effective
Time.
ARTICLE
V
Section 5.1. At the
Effective Time, (a) all of the shares of Bay Bank Common Stock
validly issued and outstanding immediately prior to the Effective
Time shall, by virtue of the Bank Merger and without any action on
the part of the holder thereof, be canceled and retired, and no
cash, securities, or other property shall be delivered in exchange
therefor, and (b) the shares of Old Line Common Stock issued and
outstanding immediately prior to the Effective Time shall, at the
Effective Time, continue to be issued and outstanding.
Section 5.2. At and after
the Effective Time, certificates evidencing shares of Bay Bank
Common Stock shall not evidence any interest in Bay Bank or the
Merged Bank.
Section 5.3. The stock
transfer book of Bay Bank shall be closed as of the Effective Time
and, thereafter, no transfer of any shares of Bay Bank Common Stock
shall be recorded therein.
ARTICLE
VI
Section 6.1. Upon the
Effective Time, the Board of Directors of the Merged Bank shall be
comprised of those persons serving as directors of Old Line
immediately prior to the Effective Time and as provided in the
Merger Agreement. Each director of the Merged Bank shall hold
office until the expiration of his term, unless sooner removed,
disqualified or deceased, or unless such director resigns, and
until his successor has been elected and qualified.
Section 6.2. Upon the
Effective Time, the executive officers of the Merged Bank shall be
comprised of those persons serving as executive officers of Old
Line immediately prior to the Effective Time.
ARTICLE
VII
Section 7.1. From and
after the Effective Time, (a) the charter of the Merged Bank shall
be the charter of Old Line in effect immediately prior to the
Effective Time and shall thereafter continue in full force and
effect until further altered, amended or repealed in accordance
with law, and (b) the bylaws of the Merged Bank shall be the Bylaws
of Old Line in effect immediately prior to the Effective Time and
shall thereafter continue in full force and effect until further
altered, amended or repealed in accordance with law.
Section 7.2. In accordance
with Section 5.7(c)(iii) of the Merger Agreement, Old Line
acknowledges that it will be responsible for paying the severance
payments provided for therein with respect to the employees of Bay
Bank that (a) are not offered positions with Old Line or another
subsidiary of OLB, (b) do not accept an offer of employment with
Old Line or another OLB subsidiary because the offer is not for
comparable employment with Old Line or another subsidiary of OLB
(i.e., a position of substantially similar job descriptions or
responsibilities at substantially the same salary level), or (c)
accept employment and but are involuntarily terminated without
Cause, as defined in the Merger Agreement, within six months of the
effective date of the Merger.
ARTICLE
VIII
This
Agreement may be amended by mutual consent of Bay Bank and Old Line
at any time prior to the Effective Time, except that no provision
in Article IX may be amended or waived at any time pursuant to its
terms.
ARTICLE
IX
Section 9.1. This
Agreement and the Bank Merger shall be adopted and approved as
follows: (a) by resolutions of the board of directors of Bay Bank
duly adopted at a meeting thereof; (b) by written consent of BYBK,
as the sole stockholder of Bay Bank, in lieu of a special meeting;
(c) by resolutions of the board of directors of Old Line duly
adopted at a meeting thereof; and (d) by written consent of OLB, as
sole stockholder of Old Line, in lieu of a special
meeting.
Section 9.2. The Bank
Merger shall be effective on the date and time the Articles of
Merger reflecting the Bank Merger are filed with the Maryland
Department of Assessments and Taxation (the “Effective Time”);
provided,
however, that in no
event shall the Effective Time be earlier than, or at the same time
as, the effective date and time of the Merger.
Section 9.3. This
Agreement is subject to approval by the Commissioner, the Federal
Deposit Insurance Corporation, and OLB and BYBK, as the sole
stockholders of Old Line and Bay Bank, respectively. In addition,
the consummation of the Bank Merger is subject to the receipt by
the Office of the Comptroller of the Currency of the notice
required by 12 C.F.R. Section 163.22(b)(1) and (h)(1).
Section
9.4. Notwithstanding any provision of this Agreement to
the contrary, it shall be a condition to the consummation of the
Bank Merger and the parties’ obligations to consummate the
Bank Merger that, immediately prior to the Effective Time, the
Merger shall have been consummated.
ARTICLE
X
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:
if to
Bay Bank:
Joseph
J. Thomas
President and Chief
Executive Officer
Bay
Bank
7151
Columbia Gateway Drive, Suite A
Columbia, Maryland
21046
with a
copy to:
Andrew
D. Bulgin, Esquire
Gordon
Feinblatt LLC
233
East Redwood Street
Baltimore, Maryland
21202
Fax:
(410) 576-4196
if to
Old Line: James W. Cornelsen
President and Chief
Executive Officer
Old
Line Bancshares, Inc.
1525
Pointer Ridge Place
Bowie,
Maryland 20716
Fax:
(301) 430-2531
with a
copy to: Frank C. Bonaventure, Jr., Esquire
Baker,
Donelson, Bearman, Caldwell and Berkowitz, PC
100
Light Street
Baltimore, Maryland
21202
Fax:
(443) 263-7505
or to
such other address as such party may designate by notice to the
others and shall be deemed to have been given upon
receipt.
ARTICLE
XI
From
time to time as and when reasonably requested by the Merged Bank
and to the extent permitted by law and at the expense of the Merged
Bank, the officers and directors of Bay Bank and Old Line last in
office shall execute and deliver such assignments, deeds and other
instruments and shall take or cause to be taken such further or
other action as shall be necessary in order to vest or perfect in
or to confirm of record or otherwise to the Merged Bank title to,
and possession of, all of the property, rights, power and
franchises of Bay Bank and Old Line, including, without limitation,
all rights and interests of Bay Bank and Old Line in any fiduciary
and/or custodial capacity, and otherwise to carry out the purposes
of this Agreement, and the proper officers and directors of the
Merged Bank, as the receiving and surviving entity, are fully
authorized to take any and all such action in the name of Bay Bank
and Old Line or otherwise.
ARTICLE
XII
This
Agreement is binding upon and is for the benefit of Bay Bank and
Old Line and their respective successors and permitted assigns;
provided,
however, that
neither this Agreement nor any rights or obligations hereunder may
be assigned by any party hereto to any other person without the
prior consent in writing of each other party hereto. This Agreement
is not made for the benefit of any person, firm, corporation or
association not a party hereto and no other person, firm,
corporation or association shall acquire or have any right under or
by virtue of this Agreement.
ARTICLE
XIII
Notwithstanding any
other provision of this Agreement, the parties may, by mutual
agreement, terminate this Agreement at any time prior to the
Effective Time. In addition, this Agreement will terminate upon the
termination of the Merger Agreement.
ARTICLE
XIV
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, except to the extent
federal law may be applicable. 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.
ARTICLE
XV
This
Agreement shall constitute a plan of reorganization for the Bank
Merger within the meaning of Section 368 of the Code.
ARTICLE
XVI
Any
term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective only to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the
remaining terms and provisions of this Agreement or affecting the
validity or enforceability of any of the terms or provisions of
this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall
be interpreted to be only as broad as is enforceable.
ARTICLE
XVII
This
Agreement may be executed in several counterparts, each of which
shall be deemed an original, but all of which together shall
constitute one and the same instrument. The exchange of copies of
this Agreement and of signature pages by facsimile transmission or
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 shall be deemed to be their
original signatures for all purposes.
[Signatures appear on the following
page.]
IN
WITNESS WHEREOF, the parties have each caused this Agreement and
Plan of Merger to be executed as of the date first above
written.
ATTEST: OLD
LINE BANK
By:
By:
Name:
Mark A. Semanie
Name: James W. Cornelsen
Title:
Secretary
Title: President and Chief Executive Officer
ATTEST: BAY
BANK
By:
By:
Name: Lori J.
Mueller
Name: Joseph J. Thomas
Title: Secretary
Title: President and Chief Executive Officer
Exhibit D
Illustration of
Exchange Ratio and Termination Right Provisions
[INSERT
MERGER AGREEMENT HERE AND DISCARD THIS PAGE]
[FIG PARTNERS, LLC
LOGO]
September 26,
2017
Old
Line Bancshares, Inc.
1525
Pointer Ridge Place
Bowie,
MD 20716
Members
of the Board of Directors:
You
have requested our opinion as to the fairness, from a financial
point of view, of the Merger Consideration (defined below) to be
paid by Old Line Bancshares, Inc. (“OLBK”), the holding
company for Old Line Bank (“Old Line”), in connection
with the plan of combination and reorganization (the
“Merger”) with Bay Bancorp, Inc., Columbia, Maryland
(“BYBK”), the parent of Bay Bank, FSB
(“Bay”), subject to the terms and conditions of the
Agreement and Plan of Combination and Reorganization dated
September 27, 2017 (the “Agreement”).
Pursuant to the
Agreement, the value of the per share and aggregate merger
consideration will depend on the market price of OLBK common stock
on the closing date of the merger and the applicability and extent
of any adjustments. Assuming no adjustments to the merger
consideration under the terms of the merger agreement and no
changes in the number of shares of common stock of BYBK
outstanding, if the merger is completed OLBK will issue between
approximately 4,337,529 and 4,930,228 shares of Old Line Bancshares
common stock (not including cash in lieu of fractional shares and
in exchange for outstanding options). As of the date of this
opinion and these same assumptions, we expect each share of BYBK
common stock will be exchanged for between approximately 0.4047 and
0.4600 shares of OLBK common stock, or an aggregate of
approximately $127.6 million, depending on the market price of OLBK
common stock at the closing date of the merger (the “Merger
Consideration”). The terms of the Merger are set forth more
fully in the Agreement.
FIG
Partners, LLC ("FIG"), as
part of its investment banking business, is routinely engaged in
the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive
bidding, secondary distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and other
purposes. As specialists in the securities of banking companies, we
have experience and knowledge of, the valuation of banking
institutions. This opinion has been reviewed by FIG’s
compliance officer consistent with internal policy. FIG has not
previously provided any services or received compensation from
OLBK. FIG has not previously provided any services or received
compensation from BYBK or Bay.
We were
retained by OLBK to act as its financial advisor in connection with
the Merger and in rendering this opinion. We will receive
compensation from OLBK in connection with our services and OLBK has
agreed to indemnify us for certain liabilities arising out of our
engagement.
During
the course of our engagement and for the purposes of the opinion
set forth herein, we have:
(ii)
reviewed the
Agreement and terms of the Merger;
(xi)
reviewed certain
documents filed with the Securities and Exchange Commission by OLBK
and BYBK;
(xii)
reviewed the
audited financial statements for OLBK and BYBK for the years 2016
and 2015;
(xiii)
reviewed certain
historical publicly available business and financial information
concerning OLBK and BYBK including, among other things, quarterly
reports filed by the parties with the FDIC and the Federal
Reserve;
(xiv)
reviewed certain
internal financial statements and other financial and operating
data concerning OLBK and BYBK;
(xv)
Reviewed recent
trading activity and the market for OLBK and BYBK common
stock;
(xvi)
Analyzed certain
financial projections prepared by the management BYBK;
(xvii)
held discussions
with members of the senior management of OLBK and BYBK for the
purpose of reviewing the future prospects of OLBK and BYBK,
including the respective businesses, assets, liabilities and the
amount and timing of cost savings (the “Synergies”) expected to be
achieved as a result of the Merger;
(xviii)
reviewed the terms
of recent merger and acquisition transactions, to the extent
publicly available, involving banks and bank holding companies that
we considered relevant; and
(xix)
performed such
other analyses and considered such other factors as we have deemed
appropriate.
We also
took into account our assessment of general economic, market and
financial conditions and our experience in other transactions as
well as our knowledge of the banking industry and our general
experience in securities valuation.
In
rendering this opinion, we have assumed and relied on, without
independent verification, the accuracy and completeness of the
financial and other information and representations contained in
the materials provided to us by OLBK and BYBK. In that regard, we
have assumed that the financial forecasts, including, without
limitation, the Synergies and projections have been reasonably
prepared on a basis reflecting the best currently-available
information and judgments and estimates of OLBK and BYBK, and that
such forecasts will be realized in the amounts and at the times
contemplated thereby. We are not experts in the evaluation of loan
and lease portfolios for purposes of assessing the adequacy of the
allowances for losses with respect thereto and have assumed that
such allowances for OLBK and BYBK are in the aggregate adequate to
cover such losses. We were not retained to and did not conduct a
physical inspection of any of the properties or facilities of OLBK
and BYBK. In addition, we have not reviewed individual credit files
nor have we made an independent evaluation or appraisal of the
assets and liabilities of OLBK and BYBK or any of their respective
subsidiaries and we were not furnished with any such evaluations or
appraisals.
We have
assumed that the Merger will be consummated substantially in
accordance with the terms set forth in the Agreement. We have
further assumed that the Merger will be accounted for as a purchase
under generally accepted accounting principles. We have assumed
that the merger is, and will be, in compliance with all laws and
regulations that are applicable to OLBK and BYBK. In rendering this
opinion, we have been advised by OLBK and BYBK and we have assumed
that there are no factors that would impede any necessary
regulatory or governmental approval of the Merger.
The
opinion is based solely upon the information available to us and
the economic, market and other circumstances, as they exist as of
the date hereof. Events occurring and information that becomes
available after the date hereof could materially affect the
assumptions and analyses used in preparing this opinion. We have
not undertaken to reaffirm or revise this opinion or otherwise
comment upon any events occurring or information that becomes
available after the date hereof, except as otherwise agreed in our
engagement letter.
This
letter is addressed to the Board of Directors of OLBK and is not to
be used, circulated, quoted or otherwise referred to for any other
purpose; provided, however, that we hereby consent to the inclusion
and reference to this letter in any proxy statement, registration
statement or information statement to be delivered to the holders
of OLBK common stock in connection with the Merger if and only if
this letter is quoted in full or attached as an exhibit to such
document and this letter has not been withdrawn prior to the date
of such document.
Subject
to the foregoing and based on our experience as investment bankers,
our activities and assumptions as described above, and other
factors we have deemed relevant, we are of the opinion as of the
date hereof that the Merger Consideration is fair, from a financial
point of view, to the shareholders of OLBK.
Sincerely,
/s/FIG PARTNERS,
LLC
FIG
PARTNERS, LLC
RP® FINANCIAL, LC.
Advisory
| Planning | Valuation
|
ANNEX
C
September 27,
2017
Board
of Directors
Bay
Bancorp, Inc.
7151
Columbia Gateway Drive
Suite
A
Columbia,
Maryland 21046
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
Bay Bancorp, Inc. (“BYBK”), the holding company for Bay
Bank, FSB (“Bay Bank”), Columbia, Maryland of the
consideration to be paid to BYBK shareholders pursuant to the
Agreement and Plan of Merger (the “Agreement”), dated
September 27, 2017, by and between BYBK and Old Line Bancshares,
Inc. (“OLB”), Bowie Maryland. As detailed in the
Agreement, BYBK will merge with and into OLB, and Bay Bank will
merge with and into Old Line Bank, the wholly-owned bank subsidiary
of OLB (the “Merger”). OLB and Old Line Bank will be
the surviving institutions”). 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
At the
Effective Time, by reason of the Merger and without any action on
the part of the holder thereof, each outstanding BYBK common share
shall cease to be outstanding and be automatically cancelled, and
shall be converted into the right to receive, in exchange for each
such share, that number of shares of OLB Common Stock equal to the
Exchange Ratio (the “Per Share Consideration”);
provided, however, that each share of BYBK Common Stock issued and
outstanding immediately prior to the Effective Time that is held by
any Subsidiary of BYBK, by OLB or any Subsidiary of OLB (in each
case other than shares held in any BYBK Benefit Plan or OLB Benefit
Plan or related trust accounts or otherwise held in any fiduciary
or agency capacity or as a result of debts previously contracted),
shall no longer be outstanding and shall automatically be canceled
and retired and shall cease to exist, and no payment shall be made
with respect thereto.
The Per
share Consideration is subject to any adjustments occurring after
the date hereof as contemplated by Section 2.6 of the Agreement. In
the event that the Average Price is:
(i)
between $25.66 and
$29.15, then the Per Share Consideration shall equal the number of
shares of OLB Common Stock determined by dividing $11.80 by the
Average Price;
(ii)
$29.16 or above,
then the Per Share Consideration shall equal 0.4047 shares of OLB
Common Stock; or,
(iii)
$25.65 or below,
then the Per Share Consideration shall equal 0.4600 shares of OLB
Common Stock (such ratio in any of (i), (ii) or (iii), the
“Exchange Ratio”).
The
Merger Consideration may be adjusted as described in Section 2.6 of
the Agreement for the following items.
(i)
Pending Litigation. In the
event and to the extent that BYBK or Bay Bank recognizes, on or
after August 4, 2017 and prior to the Effective Time, any after-tax
income from the settlement, recovery of litigation costs and
expenses from any Insurance Policy, or other resolution of the
lawsuit captioned Lois F. Lapidus,
et al. v. Bay Bank, FSB, No. RDB 16-03260 (the
“Lawsuit”), in the United States District Court for the
District of Maryland, (i) the value of the Merger Consideration
shall be increased by such after-tax income; and, (ii) the Exchange
Ratio shall be increased by an amount determined by: (A) dividing
such after-tax income by the number of shares of BYBK Common Stock
that are issued and outstanding immediately prior to the Effective
Date; and, (B) dividing the amount calculated pursuant to the
foregoing item (A) by the Average Price. Any income or other
consideration received from settlement or other resolution of the
Lawsuit after the Effective Date will not be added to the Merger
Consideration.
(ii)
Loan Resolution. In the event
and to extent that BYBK or Bay Bank recognizes, on or after August
4, 2017 and prior to the Effective Time, after-tax income as of a
result of a resolution of one or more of the loans listed BYBK
Disclosure Schedule 2.6(c) (the “Loan Recovery Amount”)
of the Agreement and such Loan Recovery Amount exceeds the amount
listed on BYBK Disclosure Schedule 2.6(c) as the “5/31/17
Ledger Balance,” (i) the value of the Merger Consideration
shall be increased by the Loan Recovery Amount (the “Net Loan
Recovery Amount”) and (ii) the Exchange Ratio shall be
increased by an amount determined by (A) dividing the Net Loan
Recovery Amount by the number of shares of BYBK Common Stock that
are issued and outstanding immediately prior to the Effective Date,
and (B) dividing the amount calculated pursuant to the foregoing
item (i) by the Average Price, subject to the following
limitations: (1) if the BYBK and Bay Bank net loan and lease
charge-offs between August 4, 2017 and the Effective Date exceed
$226,000, the Net Loan Recovery Amount will be reduced by such
excess (the “Charge-off Reduction”); and (2) in no
event will the Charge-off Reduction exceed $500,000. Any income or
other consideration received as a result of resolution of one or
more of the loans listed on BYBK Disclosure Schedule 2.6(c) after
the Effective Date will not be added to the Merger
Consideration.
Also at
the Effective Time, each Right in respect of BYBK Common Stock
pursuant to the BYBK Common Stock Options granted by BYBK that is
outstanding at the Effective Time, whether or not exercisable,
shall be terminated by BYBK and converted into the right to receive
cash in an amount (rounded to the nearest whole cent and without
interest) determined by multiplying (i) the number of shares of
BYBK Common Stock issuable upon the exercise of such BYBK Common
Stock Option by (ii) the difference between (A) the Average Price
multiplied by the Per Share Consideration (after giving effect to
Section 2.6 of the Agreement) and (B) the exercise price per share
of BYBK Common Stock issuable upon the exercise of such BYBK Common
Stock Option.
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 BYBK Board of Directors on September 27, 2017, including the
exhibits; (2) the following financial information for BYBK –
(a) audited consolidated financial statements, included in the
annual reports for the fiscal years ended December 31, 2012 through
December 31, 2016; (b) unaudited consolidated financial data,
including shareholder reports and financial statements through June
30, 2017, (c) quarterly financial reports submitted to the FDIC by
the Bank through June 30, 2017; (d) historical publicly-available
financial information as published by S&P Global Market
Intelligence; and, (e) internally prepared budget and strategic
planning information; (3) the financial terms of certain other
recently completed and pending acquisitions of financial
institutions headquartered in the Mid-Atlantic region of the United
States with comparable financial characteristics as BYBK; (4) the
financial terms of certain other recently completed and pending
acquisitions of financial institutions headquartered in the states
of Maryland, Virginia and Delaware as well as the District of
Columbia with comparable financial characteristics as BYBK; (5) the
estimated pro forma financial benefits of the Merger to BYBK
shareholders; and (6) in person interviews with senior executive
officers of BYBK.
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 2012 to 2016, as presented in
OLB’s 10K filings; (2) the quarterly call reports submitted
to the FDIC by Old Line Bank for March 31, 2016 through June 30,
2017; (3) internally prepared budget information for OLB for 2017;
(4) the stock price history for OLB during past twelve months; (5)
OLB financial information versus a peer group of comparable
publicly-traded financial institutions; and (6) in person and
telephonic 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 BYBK 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 BYBK 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. BYBK 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 BYBK 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 BYBK or OLB nor have we reviewed any
individual credit files relating to BYBK or OLB.
RP
Financial, with your consent, has relied upon the advice BYBK 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 BYBK 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 BYBK in its consideration of the Agreement, and does not
constitute a recommendation to any shareholder of BYBK 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 BYBK
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. BYBK 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 BYBK or its Board of Directors to the stockholders
of BYBK. It is also understood that this opinion may be included in
its entirety in any regulatory filing by BYBK, and that RP
Financial consents to the summary of this opinion in the proxy
materials of BYBK, 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 BYBK Common Stock, as described in the Agreement, is
fair to such shareholders from a financial point of
view.
Respectfully
submitted,
/s/ RP®
FINANCIAL, LC.
RP® FINANCIAL,
LC.
Washington Headquarters
Three
Ballston Plaza
1100
North Glebe Road, Suite 600 Telephone: (703) 528-1700
Arlington,
VA 22201 Fax No.: (703) 528-1788E-Mail: mail@rpfinancial.com
Toll-Free No.: (866) 723-0594
C-4
ANNEX
D
[HOVDE
GROUP LOGO]
September 27,
2017
Board
of Directors
Bay
Bancorp, Inc.
7151
Columbia Gateway Drive, Suite A
Columbia, MD
21046
Ladies
and Gentlemen:
Hovde
Group, LLC (“we” or
“Hovde”)
understand that Old Line Bancshares, Inc., a Maryland corporation
(“OLB”), and Bay Bancorp,
Inc., a Maryland corporation (“BYBK”), are about to
enter into an Agreement and Plan of Merger to be dated on or about
September 27, 2017 (the “Agreement”). Pursuant and
subject to the terms of the Agreement, BYBK shall merge with and
into OLB (the “Merger”), with OLB being
the surviving corporation. Further, pursuant to the Agreement,
immediately after the Merger, Bay Bank, a federal savings bank and
wholly-owned subsidiary of BYBK (“Bay Bank”), shall be
merged with and into Old Line Bank, a trust company with commercial
banking powers chartered under the laws of the State of Maryland
and a wholly-owned subsidiary of OLB (“Old Line”), and the
separate existence of Bay Bank shall cease (the “Bank Merger”), with Old
Line continuing as the surviving entity. Capitalized terms used
herein that are not otherwise defined shall have the same meanings
attributed to them in the Agreement.
Pursuant and
subject to the terms of the Agreement, at the Effective Time, each
share of BYBK Common Stock issued and outstanding immediately prior
to the Effective Time, shall be converted into the right to
receive, in exchange for each such share, that number of shares of
OLB Common Stock equal to the Exchange Ratio (the
“Per Share
Consideration”).
We note
that, pursuant to the Agreement, in the event that the Average
Price is:
(i) between $25.66 and
$29.15, then the Per Share Consideration shall equal the number of
shares of OLB Common Stock determined by dividing $11.80 by the
Average Price;
(ii) $29.16
or above, then the Per Share Consideration shall equal 0.4047
shares of OLB Common Stock; or
(iii) $25.65
or below, then the Per Share Consideration shall equal 0.4600
shares of OLB Common Stock (such ratio in any of (i), (ii) or
(iii), the “Exchange
Ratio”).
For
purposes of the Agreement, “Average Price” means the
amount equal to the volume weighted average of the closing prices
of OLB Common Stock as reported on the NASDAQ Capital Market for
the 20 Trading Days ending five Trading Days prior to the Closing
Date. The aggregate Per Share Consideration is referred to in the
Agreement as the “Merger
Consideration.”
Since
the Average Price of OLB Common Stock as of the determination date,
and related amounts derived from those figures cannot be determined
until dates after the date of this opinion, potential future
adjustments to the Exchange Ratio attributable to changes in the
Average Price as of the actual determination date, if any, cannot
be predicted with precision. However, you have advised us to assume
for purposes of this opinion that the Average Price as of the
applicable determination date will be equal to or greater than
$25.65. Further, we note that Section 2.6 of the Agreement provides
for a possible increase, but not a decrease, in the Merger
Consideration as a result of the future resolution of certain
contingencies related to litigation and one or more problem loans
or insurance policies as described in the Agreement. We have
assumed that the Merger Consideration will not be increased
pursuant to Section 2.6.
You
have requested our opinion as to the fairness, from a financial
point of view, of the Per Share Consideration to the shareholders of BYBK. This
opinion addresses only the fairness of the Per Share Consideration
to be paid in connection with the Merger, and we are not opining on
any individual stock, cash, option, or other components of the
consideration.
During
the course of our engagement and for the purposes of the opinion
set forth herein, we have:
(i) reviewed a
draft of the Agreement dated September 26, 2017, as provided to
Hovde by BYBK;
(ii)
reviewed unaudited
financial statements for BYBK, Bay Bank, OLB and Old Line as of and
for the six-month period ending June 30, 2017;
(iii)
reviewed certain
historical annual reports of each of BYBK, Bay Bank, OLB and Old
Line, including audited annual reports as of and for the year
ending December 31, 2016;
(iv)
reviewed certain
historical publicly available business and financial information
concerning each of BYBK, Bay Bank, OLB and Old Line;
(v)
reviewed certain
internal financial statements and other financial and operating
data of BYBK and Bay Bank;
(vi)
reviewed financial
projections prepared by certain members of senior management of
BYBK and Bay Bank;
(vii)
discussed with
certain members of senior management of BYBK, Bay Bank, OLB and Old
Line, the business, financial condition, results of operations and
future prospects of BYBK, Bay Bank, OLB and Old Line; the history
and past and current operations of BYBK, Bay Bank, OLB and Old
Line; BYBK’s, Bay Bank’s, OLB’s and Old
Line’s historical financial performance; and their assessment
of the rationale for the Merger;
(viii)
reviewed and
analyzed materials detailing the Merger prepared by BYBK and OLB
and by their respective legal and financial advisors, including the
estimated amount and timing of the cost savings and related
expenses, purchase accounting adjustments and synergies expected to
result from the Merger (the “Synergies”);
(ix)
analyzed the pro
forma financial impact of the Merger on the combined
company’s earnings, tangible book value, financial ratios and
other such metrics we deemed relevant, giving effect to the Merger
based on assumptions relating to the Synergies;
(x)
reviewed publicly
available consensus mean analyst earnings per share estimates for
OLB for the years ending December 31, 2017, December 31,
2018 and December 31, 2019;
(xi)
assessed general
economic, market and financial conditions;
(xii)
reviewed the terms
of recent merger, acquisition and control investment transactions,
to the extent publicly available, involving financial institutions
and financial institution holding companies that we considered
relevant;
(xiii)
taken into
consideration our experience in other similar transactions and
securities valuations as well as our knowledge of the banking and
financial services industry;
(xiv)
reviewed historical
market prices and trading volumes of OLB’s common
stock;
(xv)
reviewed certain
publicly available financial and stock market data relating to
selected public companies that we deemed relevant to our analysis;
and
(xvi)
performed such
other analyses and considered such other factors as we have deemed
appropriate.
We have
assumed, without investigation, that there have been, and from the
date hereof through the Effective Date will be, no material changes
in the financial condition and results of operations of BYBK, Bay
Bank, OLB or Old Line since the date of the latest financial
information described above. We have relied, without independent
verification or investigation, on the assessments of the management
of BYBK, Bay Bank, OLB, and Old Line as to their existing and
future relationships with key employees, partners, clients,
products and services, and we have assumed, with your consent, that
there will be no developments with respect to any such matters that
would affect our analyses or opinion. We have further assumed,
without independent verification, that the representations and
financial and other information included in the Agreement and all
other related documents and instruments that are referred to
therein or otherwise provided to us by BYBK, Bay Bank, OLB and Old
Line are true and complete. We have relied upon the management of
BYBK, Bay Bank, OLB and Old Line as to the reasonableness and
achievability of the financial forecasts, projections and other
forward-looking information (including the Synergies) provided to
Hovde by BYBK, Bay Bank, OLB and Old Line, and we assumed such
forecasts, projections and other forward-looking information
(including the Synergies) have been reasonably prepared by BYBK,
Bay Bank, OLB and Old Line on a basis reflecting the best currently
available information and BYBK’s, Bay Bank’s,
OLB’s and Old Line’s judgments and estimates. We have
assumed that such forecasts, projections and other forward-looking
information (including the Synergies) would be realized in the
amounts and at the times contemplated thereby, and we do not assume
any responsibility for the accuracy or reasonableness thereof. We
have been authorized by BYBK to rely upon such forecasts,
projections and other information and data, and we express no view
as to any such forecasts, projections or other forward-looking
information or data, or the bases or assumptions on which they were
prepared.
In performing our review, we have assumed and
relied upon the accuracy and completeness of all of the financial
and other information that was available to us from public sources,
that was provided to us by BYBK or OLB or their respective
representatives or that was otherwise reviewed by us for purposes
of rendering this opinion. We have further relied on the assurances
of the respective managements of BYBK and OLB that they are not
aware of any facts or circumstances that would make any of such
information inaccurate or misleading. We have not been asked to and
have not undertaken an independent verification of any of such
information, and we do not assume any responsibility or liability
for the accuracy or completeness thereof. We have assumed that each
party to the Agreement would advise us promptly if any
information previously provided to us became inaccurate or was
required to be updated during the period of our
review.
We are
not experts in the evaluation of loan and lease portfolios for
purposes of assessing the adequacy of the allowances for losses
with respect thereto. We have assumed that such allowances for
BYBK, Bay Bank, OLB and Old Line are, in the aggregate, adequate to
cover such losses, and will be adequate on a pro forma basis for
the combined entity. We were not requested to make, and have not
made, an independent evaluation, physical inspection or appraisal
of the assets, properties, facilities, or liabilities (contingent
or otherwise) of BYBK, Bay Bank, OLB . Old Line, the collateral
securing any such assets or liabilities, or the collectability of
any such assets, and we were not furnished with any such
evaluations or appraisals, nor did we review any loan or credit
files of BYBK, Bay Bank, OLB or Old Line. We also did not conduct a
review of any credit mark which may be taken in connection with the
Merger nor have we evaluated the adequacy of any contemplated
credit mark to be so taken.
In
arriving at our opinion, we have not evaluated the solvency of
BYBK, Bay Bank, OLB, or Old Line under any state or federal law
relating to bankruptcy, insolvency or similar matters. Accordingly,
we express no opinion regarding the liquidation value of BYBK, Bay
Bank, OLB, and Old Line or any other entity. We have also assumed
that each of BYBK, Bay Bank, OLB, and Old Line would remain as a
going concern for all periods relevant to our analysis.
Accordingly, we express no opinion with respect to the foregoing.
Further, without limiting the generality of the foregoing, we have
undertaken no independent analysis of any pending or threatened
litigation, regulatory action, possible unasserted claims or other
contingent liabilities to which BYBK, Bay Bank, OLB, and Old Line
is a party or may be subject, and with your consent, our opinion
makes no assumption concerning, and therefore does not consider,
the possible assertion of claims, outcomes or damages arising out
of any such matters. We have also assumed that neither BYBK, Bay
Bank, OLB, and Old Line is party to any material pending
transaction, including without limitation any financing,
recapitalization, acquisition or merger, divestiture or spin-off,
other than the Merger contemplated by the Agreement.
We have
relied upon and assumed with your consent and without independent
verification, that the Merger will be consummated substantially in
accordance with the terms set forth in the Agreement, without any
waiver of material terms or conditions by BYBK, OLB or any other
party to the Agreement and that the final Agreement will not differ
materially from the draft we reviewed. We have assumed that the
Merger will be consummated in compliance with all applicable laws
and regulations. BYBK has advised us that they are not aware of any
factors that would impede any necessary regulatory or governmental
approval of the Merger. We have assumed that the necessary
regulatory and governmental approvals as granted will not be
subject to any conditions that would be unduly burdensome on BYBK
or OLB or would have a material adverse effect on the contemplated
benefits of the Merger.
Our
opinion does not consider, include or address: (i) the legal, tax,
accounting, or regulatory consequences of the Merger on BYBK, or
its shareholders; (ii) any advice or opinions provided by any other
advisor to the Board or BYBK; (iii) any other strategic
alternatives that might be available to BYBK; or (iv) whether OLB
has sufficient cash or other sources of funds to enable it to pay
any consideration contemplated by the Merger.
Our
opinion does not constitute a recommendation to BYBK or OLB as to
whether or not BYBK or OLB should enter into the Agreement or to
any shareholders of BYBK or OLB as to how such shareholders should
vote at any meetings of shareholders called to consider and vote
upon the Merger. Our opinion does not address the underlying
business decision to proceed with the Merger or the fairness of the
amount or nature of the compensation, if any, to be received by any
of the officers, directors or employees of BYBK relative to the
amount of consideration to be paid with respect to the Merger. Our
opinion should not be construed as implying that the Per Share
Consideration is necessarily the highest or best price that could
be obtained in a sale, merger, or combination transaction with a
third party. We do not express any opinion as to the value of
OLB’s common stock following the announcement of the proposed
Merger, or the value of OLB’s common stock following the
consummation of the Merger, or the prices at which shares of
OLB’s common stock may be purchased or sold at any time.
Other than as specifically set forth herein, we are not expressing
any opinion with respect to the terms and provisions of the
Agreement or the enforceability of any such terms or provisions.
Our opinion is not a solvency opinion and does not in any way
address the solvency or financial condition of BYBK or
OLB.
This
opinion was approved by Hovde’s fairness opinion committee.
This letter is directed solely to the board of directors of BYBK
and is not to be used for any other purpose or quoted or referred
to, in whole or in part, in any registration statement, prospectus,
proxy statement, or any other document, except in each case in
accordance with our prior written consent; provided, however, that
we hereby consent to the inclusion and reference to this letter in
any registration statement, proxy statement or information
statement to be delivered to the holders of BYBK’s common
stock in connection with the Merger if, and only if, this letter is
quoted in full or attached as an exhibit to such document, this
letter has not been withdrawn prior to the date of such document,
and any description of or reference to
Hovde or the analyses performed by Hovde or any summary of this
opinion in such filing is in a form acceptable to Hovde and its
counsel in the exercise of their reasonable
judgment.
Our
opinion is based solely upon the information available to us and
described above, and the economic, market and other circumstances
as they exist as of the date hereof. Events occurring and
information that becomes available after the date hereof could
materially affect the assumptions and analyses used in preparing
this opinion. We have not undertaken
to update, revise, reaffirm or withdraw this opinion or otherwise
comment upon events occurring or information that becomes available
after the date hereof.
In
arriving at this opinion, Hovde did not attribute any particular
weight to any analysis or factor considered by it, but rather made
qualitative judgments as to the significance and relevance of each
analysis and factor. Accordingly, Hovde believes that its analyses
must be considered as a whole and that selecting portions of its
analyses, without considering all analyses, would create an
incomplete view of the process underlying this
opinion.
Hovde,
as part of its investment banking business, regularly performs
valuations of businesses and their securities in connection with
mergers and acquisitions and other corporate transactions. In
addition to being retained to render this opinion letter, we were
retained by BYBK and Bay Bank to act as their financial advisor in
connection with the Merger.
In
connection with our services, we will receive from BYBK and Bay
Bank a fairness opinion fee that is contingent upon the issuance of
this opinion letter and a completion fee that is contingent upon
the consummation of the Merger. The opinion fee will be credited in
full towards the portion of the completion fee which will become
payable to Hovde upon the consummation of the Merger. BYBK and Bay
Bank have also agreed to indemnify us and our affiliates for
certain liabilities that may arise out of our engagement. Steven D.
Hovde, a principal executive and owner of Hovde Group, LLC, is
a member of the board of directors of BYBK and the direct or
indirect beneficial owner (as of September 27, 2017)
of approximately 1,050,407 shares 9.8% of common stock
of BYBK. Steven D. Hovde is the brother of Eric D.
Hovde, chairman of the board of directors of BYBK and direct or
indirect beneficial owner (as of September 27, 2017) of
approximately 1,937,962 shares 18.1% of common stock of BYBK.
Eric D. Hovde does not hold any management or ownership interests
in Hovde Group, LLC. Steven D. Hovde did not participate in the
preparation or review of this fairness opinion. In the past two years, Hovde has
provided investment banking or financial advisory services to BYBK
and Bay Bank. During the past two years preceding the date of this
opinion, Hovde has not provided any investment banking or financial
advisory services to OLB or Old Line. Hovde may in the future
provide investment banking and financial advisory services to OLB
or Old Line and receive compensation for such services, although to
our knowledge none are expected at this time. In the ordinary course of its
broker-dealer business and further to certain sales and trading
relationships, Hovde may from time to time purchase securities
from, and sell securities to, BYBK or OLB or their subsidiaries or
affiliates. As a market maker in securities, Hovde may from time to
time have a long or short position in, and buy or sell, debt or
equity securities of BYBK or OLB for its own accounts and for the
accounts of customers. Hovde may also provide securities brokerage
services in the normal course to BYBK or OLD or one or more of
their subsidiaries or affiliates. Except for the foregoing, during
the past two years there have not been, and there are no mutual
understandings contemplating in the future, any material
relationships between Hovde and BYBK and Bay Bank, or OLB and Old
Line.
Based
upon and subject to the foregoing review, assumptions and
limitations, we are of the opinion, as of the date hereof, that the
Per Share Consideration to be paid in connection with the Merger is
fair to the holders of BYBK Common Stock from a financial point of
view.
Sincerely,
/s/Hovde Group,
LLC
HOVDE GROUP,
LLC
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.
|
|
Description of Exhibits
|
|
|
Agreement
and Plan of Merger, dated as of September 27, 2017, by and between
Old Line Bancshares, Inc. and Bay Bancorp, Inc. (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 joint proxy statement/prospectus that is part of
this Registration Statement)
|
|
|
|
|
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
|
|
|
|
|
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
|
|
|
|
|
Agreement
and Plan of Merger, dated as of August 5, 2015, by and between Old
Line Bancshares, Inc. and Regal
Bancorp, Inc.
|
|
|
|
|
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
|
|
|
|
|
Articles
of Amendment and Restatement of Old Line
Bancshares, Inc.
|
|
|
|
|
Articles
of Amendment of Old Line Bancshares, Inc.
|
|
|
|
|
Articles
of Amendment of Old Line Bancshares, Inc.
|
|
|
|
|
Articles
of Amendment of Old Line Bancshares, Inc.
|
|
|
|
|
Amended
and Restated Bylaws of Old Line Bancshares, Inc.
|
|
|
|
|
Amendment
to the Amended and Restated Bylaws of Old Line
Bancshares, Inc.
|
|
|
|
|
Second
Amendment to the Amended and Restated Bylaws of Old Line
Bancshares, Inc.
|
|
|
|
|
Specimen
Stock Certificate for Old Line Bancshares, Inc.
|
|
|
|
|
Opinion
of Baker Donelson, Bearman, Caldwell & Berkowitz, PC, as to the
legality of the Common Stock
|
|
|
|
|
Opinion
of Gordon Feinblatt LLC regarding certain U.S. tax consequences of
the merger
|
|
|
|
|
Second
Amended and Restated Executive Employment Agreement between Old
Line Bank and James W. Cornelsen dated December 10,
2015
|
|
|
|
|
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
|
|
|
|
|
Salary
Continuation Agreement dated January 3, 2006 between Old Line
Bank and James W. Cornelsen
|
|
|
|
|
First
Amendment dated December 31, 2007 to the Salary Continuation
Agreement between Old Line Bank and James W. Cornelsen
|
|
|
|
|
Supplemental
Life Insurance Agreement dated January 3, 2006 between Old
Line Bank and James W. Cornelsen
|
|
|
|
|
First
Amendment dated December 31, 2007 to the Supplemental Life
Insurance Agreement between Old Line Bank and James W.
Cornelsen
|
|
|
|
|
Amended
and Restated Executive Employment Agreement dated January 28,
2011 between Old Line Bank and Joseph Burnett
|
|
|
|
|
Second
Amendment to Amended and Restated Employment Agreement between Old
Line Bank and Joseph Burnett dated as of May 9,
2013
|
|
|
|
|
Salary
Continuation Agreement dated January 3, 2006 between Old Line
Bank and Joseph Burnett
|
|
|
|
|
First
Amendment dated December 31, 2007 to the Salary Continuation
Agreement between Old Line Bank and Joseph Burnett
|
|
|
|
|
Supplemental
Life Insurance Agreement dated January 3, 2006 between Old
Line Bank and Joseph Burnett
|
|
|
|
|
First
Amendment dated December 31, 2007 to the Supplemental Life
Insurance Agreement between Old Line Bank and Joseph
Burnett
|
|
|
|
|
Salary
Continuation Plan Agreement (2014) by and between Old Line Bank and
Mark Semanie dated as of March 27, 2014
|
|
|
|
|
First
Amendment dated December 31, 2007 to the Supplemental Life
Insurance Agreement between Old Line Bank and Christine
Rush
|
|
|
|
|
2004
Equity Incentive Plan
|
|
|
|
|
Form
of Incentive Stock Option Agreement for 2004 Equity Incentive
Plan
|
|
|
|
|
Form
of Nonqualified Stock Option Agreement for 2004 Equity Incentive
Plan
|
|
|
|
|
Form
of Restricted Stock Agreement for the 2004 Equity Incentive
Plan
|
|
|
|
|
Old
Line Bancshares, Inc. and Old Line Bank Director Compensation
Policy
|
|
|
|
|
Incentive
Plan Model and Stock Option Model
|
|
|
|
|
Old
Line Bancshares, Inc. 2010 Equity Incentive Plan
|
|
|
|
|
Form
of Restricted Stock Agreement under 2010 Equity Incentive
Plan
|
|
|
|
|
Form
of Non‑Qualified Stock Option Grant Agreement under 2010
Equity Incentive Plan
|
|
|
|
|
Form
of Incentive Stock Option Grant Agreement under 2010 Equity
Incentive Plan
|
|
|
|
|
Employment
Agreement dated January 28, 2011 between Old Line Bank and
Sandra F. Burnett
|
|
|
|
|
First
Amendment to Amended and Restated Employment Agreement between Old
Line Bank and Sandra F. Burnett dated as of January 1,
2012
|
|
|
|
|
Salary
Continuation Plan Agreement (2010 Plan) by and between Old Line
Bank and Sandra Burnett dated as of February 14,
2011
|
|
|
|
|
Non‑Compete
Agreement by and between Old Line Bancshares, Inc. and G.
Thomas Daugherty dated April 11, 2011
|
|
|
|
|
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)
|
|
|
|
|
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)
|
|
|
|
|
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
|
|
|
|
|
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
|
|
|
|
|
Salary
Continuation Plan Agreement (2010 Plan) by and between Old Line
Bank and James W. Cornelsen dated as of February 26,
2010
|
|
|
|
|
Salary
Continuation Plan Agreement (2010 Plan) by and between Old Line
Bank and Joseph E. Burnett dated as of February 26,
2010
|
|
|
|
|
Employment
Agreement between Old Line Bank and Mark A. Semanie dated as of
May 13, 2013
|
|
|
|
|
Employment
Agreement between Old Line Bank and Martin John Miller dated as of
February 26, 2014
|
|
|
|
|
Subsidiaries
of Registrant
|
|
|
|
|
Consent
of Baker Donelson, Bearman, Caldwell & Berkowitz, PC (to be
contained in the opinion filed as Exhibit 5.1)
|
|
|
|
|
Consent
of Dixon Hughes Goodman LLP with respect to Old Line
Bancshares, Inc.
|
|
|
|
|
Consent
of Dixon Hughes Goodman LLP with respect to Bay Bancorp,
Inc.
|
|
|
|
|
Consent
of Gordon Feinblatt LLC (contained in the opinion filed as Exhibit
8.1)
|
|
|
24.1
|
|
Power
of Attorney (included on signature page)
|
|
|
|
|
Consent
of FIG Partners, LLC
|
|
|
|
|
Consent
of RP® Financial, LC.
|
|
|
|
|
Consent
of Hovde Group, LLC
|
|
|
|
|
Consent
of Eric D. Hovde to be named as a Continuing Director
|
|
|
|
|
Consent
of Joseph J. Thomas to be named as a Continuing
Director
|
|
|
99.6#
|
|
Consent
of [___________] to be named as a Continuing Director
|
|
|
99.7#
|
|
Form
of Old Line Bancshares, Inc. Proxy Card
|
|
|
99.8#
|
|
Form
of Bay Bancorp, Inc. Proxy Card
|
|
|
99.9(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.
# To be filed
by amendment.
(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, 2011,
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 Annual
Report on Form 10-K for the year ended December 31, 2015,
filed on March 11, 2016.
(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 a part of, and incorporated by
reference from, Old Line Bancshares, Inc.’s Quarterly
Report on Form 10-Q for the quarterly period ended September
30, 2017, filed on November 6, 2017.
(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 with the Commission on February 1,
2017.
(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, 2008, filed
on March 27, 2009.
(Y)
Previously filed by
Old Line Bancshares, Inc. as part of, and incorporated by
reference from Old Line Bancshares, Inc.’s Post
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.
(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 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 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.
(c) 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.
(d) 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 registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Bowie, State
of Maryland, on November 21, 2017.
OLD
LINE BANCSHARES, INC.
______________________________
By:
/s/ James W.
Cornelsen
James
W. Cornelsen
President and Chief
Executive Officer
KNOW
ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints James W. Cornelsen as his or
her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and
all amendments (including post-effective amendments) to this
Registration Statement, and to file the same with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and
perform each and every act and thing requisite and necessary to be
done as fully to all intents and purposes as he or she might or
could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute, may lawfully do or
cause to be done by virtue thereof. This power of attorney may be
executed in counterparts.
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
|
|
November 21,
2017
|
James
W. Cornelsen
|
|
Executive
Officer)
|
|
|
|
|
|
|
|
/s/
Elise M.
Hubbard
|
|
Chief
Financial Officer (Principal Accounting and Financial
|
|
November 21,
2017
|
Elise
M. Hubbard
|
|
Officer)
|
|
|
|
|
|
|
|
/s/
Craig E.
Clark
|
|
Director and
Chairman of the Board
|
|
November 21,
2017
|
Craig
E. Clark
|
|
|
|
|
|
|
|
|
|
/s/
James R. Clifford,
Sr.
|
|
Director
|
|
November 21,
2017
|
James
R. Clifford, Sr.
|
|
|
|
|
|
|
|
|
|
/s/
Stephen J.
Deadrick
|
|
Director
|
|
November 21,
2017
|
Stephen
J. Deadrick
|
|
|
|
|
|
|
|
|
|
/s/
James F.
Dent
|
|
Director
|
|
November 21,
2017
|
James
F. Dent
|
|
|
|
|
|
|
|
|
|
/s/
Andre’ J.
Gingles
|
|
Director
|
|
November 21,
2017
|
Andre’ J.
Gingles
|
|
|
|
|
|
|
|
|
|
/s/
Thomas H.
Graham
|
|
Director
|
|
November 21,
2017
|
Thomas
H. Graham
|
|
|
|
|
|
|
|
|
|
|
|
Director
|
|
November [_],
2017
|
Frank
Lucente, Jr.
|
|
|
|
|
|
|
|
|
|
/s/
Gail D.
Manuel
|
|
Director
|
|
November 21,
2017
|
Gail D.
Manuel
|
|
|
|
|
|
|
|
|
|
/s/
Carla Hargrove
McGill
|
|
Director
|
|
November 21,
2017
|
Carla
Hargrove McGill
|
|
|
|
|
|
|
|
|
|
/s/
Gregory S. Proctor,
Jr.
|
|
Director
|
|
November 21,
2017
|
Gregory
S. Proctor, Jr.
|
|
|
|
|
|
|
|
|
|
/s/
Jeffrey A.
Rivest
|
|
Director
|
|
November 21,
2017
|
Jeffrey
A. Rivest
|
|
|
|
|
|
|
|
|
|
/s/
Suhas R.
Shah
|
|
Director
|
|
November 21,
2017
|
Suhas
R. Shah
|
|
|
|
|
|
|
|
|
|
/s/
John M. Suit,
II
|
|
Director
|
|
November 21,
2017
|
John M.
Suit, II
|
|
|
|
|
|
|
|
|
|
/s/
Frank E.
Taylor
|
|
Director
|
|
November 21,
2017
|
Frank
E. Taylor
|
|
|
|
|